6-K - HBM - Equibles

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13A-16 OR 15D-16 OF THE SECURITIES EXCHANGE ACT OF 1934

For the month of February 2023

Commission File Number: 001-34244

HUDBAY MINERALS INC. (Translation of registrant’s name into English)

25 York Street, Suite 800 Toronto, Ontario M5J 2V5, Canada (Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F [ ] Form 40-F [X]

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): [ ]

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): [ ]

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes [ ] No [X]

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- _____________________________

EXPLANATORY NOTE

On February 23, 2023, Hudbay Minerals Inc. (“Hudbay”) filed on the Canadian Securities Administrators’ System for Electronic Document Analysis and Retrieval (SEDAR) website at www.sedar.com the following documents: (1) Audited Consolidated Financial Statements for the year ended December 31, 2022, (2) Management's Discussion and Analysis for the year ended December 31, 2022, (3) News Release dated February 23, 2023.

Copies of the filings are attached to this Form 6-K and incorporated herein by reference, as follows:

Exhibit 99.1 — Audited Consolidated Financial Statements for the year ended December 31, 2022
Exhibit 99.2 — Management's Discussion and Analysis for the year ended December 31, 2022
Exhibit 99.3 — News Release dated February 23, 2023

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

HUDBAY MINERALS INC.
(registrant)
By:	/s/ Eugene Lei
Name:	Eugene Lei
Title:	Senior Vice President and Chief Financial Officer

Date: February 24, 2023

EXHIBIT INDEX

The following exhibits are furnished as part of this Form 6-K:

Exhibit	Description
99.1	Audited Consolidated Financial Statements for the year ended December 31, 2022
99.2	Management's Discussion and Analysis for the year ended December 31, 2022
99.3	News Release dated February 23, 2023

Hudbay Minerals Inc.: Exhibit 99.1 - Filed by newsfilecorp.com

Audited Consolidated Financial Statements

(In US dollars)

HUDBAY MINERALS INC.

Years ended December 31, 2022 and 2021

MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management of Hudbay Minerals Inc. ("Hudbay" or the "Company") is responsible for establishing and maintaining internal control over financial reporting ("ICFR").

Under the supervision of and with the participation of the Chief Executive Officer and the Chief Financial Officer, Hudbay's management assessed the effectiveness of the Company's ICFR as of December 31, 2022 based upon the Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that Hudbay's ICFR was effective as of December 31, 2022.

The effectiveness of the Company's ICFR as of December 31, 2022 has been audited by Deloitte LLP, Independent Registered Public Accounting Firm, as stated in their report immediately preceding the Company's audited consolidated financial statements for the year ended December 31, 2022.

Peter Kukielski	Eugene Lei
President and Chief Executive Officer	Senior Vice President and Chief Financial Officer

Toronto, Canada

February 23, 2023

Deloitte LLP<br>Bay Adelaide East<br>8 Adelaide Street West<br>Suite 200<br>Toronto ON M5H 0A9<br>Canada<br><br>Tel: 416-601-6150<br>Fax: 416-601-6151<br>www.deloitte.ca

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Hudbay Minerals Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Hudbay Minerals Inc. and subsidiaries (the "Company") as of December 31, 2022 and 2021, the related consolidated income statements, consolidated statements of comprehensive profit (loss), changes in equity and cash flows for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and its financial performance and its cash flows for each of the two years in the period ended December 31, 2022, in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 23, 2023, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Impairment - Assessment of Whether Indicators of Impairment or Impairment Reversal Exist in Non-financial Assets - Refer to Note 2d & 3i to the Financial Statements

Critical Audit Matter Description

While there are several inputs that are required to determine whether or not an indicator of impairment or impairment reversal exists, the judgments with the highest degree of subjectivity are the future long-term copper price, inputs to the market capitalization deficiency assessment (specifically control premiums, industry specific factors and company performance), and the discount rate. Auditing these estimates and inputs required a high degree of subjectivity in applying audit procedures and in evaluating the results of those procedures. This resulted in an increased extent of audit effort, including the involvement of fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the future long-term copper price, inputs to the market capitalization deficiency assessment (specifically control premiums, industry specific factors and company performance), and the discount rate in the assessment of indicators of impairment or impairment reversal included the following, among others:

• Evaluated the effectiveness of controls over management's assessment of the indicators of impairment or impairment reversal.

• With the assistance of fair value specialists:

◦ Evaluated the future long-term copper price by comparing management forecasts to third party forecasts,

◦ Performed an assessment of the market capitalization deficiency to the carrying value of the CGUs which included: assessing control premiums, industry specific factors, company performance, and

◦ Evaluated the reasonableness of the discount rate by comparing the key inputs to external data.

Impairment - Identification of Impairment Indicator within Arizona CGU - Refer to Note 2d, 3i, & 12 to the Financial Statements

Critical Audit Matter Description

The Company's determination of whether an indicator of impairment or impairment reversal exists in non-financial assets at the cash generating unit ("CGU") level requires significant management judgment. An impairment loss is recognized if the carrying amount of the CGU exceeds its recoverable amount. The recoverable amount of the CGU is estimated based on the higher of its fair value less cost of disposal and its value in use. An impairment indicator was identified at the Arizona CGU due to the release of the preliminary economic assessment ("PEA") and two-phase mine plan for the Copper Word Complex ("Copper World"). The Company used a discounted cashflow model to determine the recoverable amount of the Arizona CGU which required management to make significant estimates and assumptions related to the future commodity prices, production based on current estimates of recoverable resources, discount rates, and future operating and capital costs.

While there are several inputs that are required to determine the recoverable amount of the Arizona CGU, the estimates and assumptions with the highest degree of subjectivity and judgment uncertainty are the future long-term copper price and the discount rates. Auditing these estimates and assumptions required a high degree of auditor judgment in applying audit procedures and in evaluating the results of those procedures. This resulted in an increased extent of audit effort, including the involvement of fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the future long-term copper price and discount rates used to determine the recoverable amount of the Arizona CGU included the following procedures, among others:

• Evaluated the effectiveness of relevant controls over management's determination of the long-term copper price and the discount rates.

• With the assistance of fair value specialists:

◦ Evaluated the future long-term copper price by comparing management forecasts to third party forecasts, and

◦ Evaluated the reasonableness of the discount rates by testing the source information underlying the determination of the discount rates and developed a range of independent estimates for the discount rates and compared to the discount rates selected by management.

/s/ Deloitte LLP

Chartered Professional Accountants

Licensed Public Accountants

Toronto, Canada

February 23, 2023

We have served as the Company's auditor since 2005.

Deloitte LLP<br>Bay Adelaide East<br>8 Adelaide Street West<br>Suite 200<br>Toronto ON M5H 0A9<br>Canada<br>Tel: 416-601-6150<br>Fax: 416-601-6151<br>www.deloitte.ca

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Hudbay Minerals Inc.

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Hudbay Minerals Inc. and subsidiaries (the "Company") as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2022, of the Company and our report dated February 23, 2023, expressed an unqualified opinion on those financial statements.

Basis for Opinion

The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Deloitte LLP

Chartered Professional Accountants

Licensed Public Accountants

Toronto, Canada

February 23, 2023

HUDBAY MINERALS INC.Consolidated Balance Sheets<br>(in thousands of US dollars)
			Dec. 31,			Dec. 31,
---	---	---	---	---	---	---	---
	Note		2022			2021
Assets
Current assets
Cash	7	$	225,665		$	270,989
Trade and other receivables	8		113,182			204,081
Inventories	9		155,012			158,453
Prepaid expenses and other current assets			20,106			15,338
Other financial assets	10		1,063			7,867
Taxes receivable			9,153			-
			524,181			656,728
Receivables	8		13,329			16,084
Inventories	9		50,725			37,573
Other financial assets	10		9,799			11,158
Intangibles and other assets	11		49,841			20,138
Property, plant and equipment	12		3,552,430			3,740,966
Deferred tax assets	23b		125,638			133,584
		$	4,325,943		$	4,616,231
Liabilities
Current liabilities
Trade and other payables	13	$	211,467		$	207,777
Taxes payable			4,051			15,243
Other liabilities	14		46,806			63,002
Other financial liabilities	15		33,301			29,308
Gold prepayment liability	5, 16		71,208			71,394
Lease liabilities	17		16,156			33,529
Deferred revenue	19		64,658			88,963
			447,647			509,216
Other financial liabilities	15		52,446			52,358
Gold prepayment liability	5, 16		-			68,614
Lease liabilities	17		44,863			44,473
Long-term debt	18		1,184,162			1,180,274
Deferred revenue	19		404,880			426,363
Pension obligations	21		3,262			6,252
Other employee benefits	22		86,340			128,588
Environmental and other provisions	20		279,240			461,501
Deferred tax liabilities	23b		251,294			261,764
			2,754,134			3,139,403
Equity
Share capital	24b		1,780,774			1,778,848
Reserves			26,538			(182	)
Retained earnings			(235,503	)		(301,838	)
			1,571,809			1,476,828
		$	4,325,943		$	4,616,231
Commitments (note 29)
HUDBAY MINERALS INC.Consolidated Income Statements<br>(in thousands of US dollars, except per share amounts)
---
	Note		Year ended December 31,
---	---	---	---	---	---	---	---
			2022			2021
Revenue	6a	$	1,461,440		$	1,501,998
Cost of sales
Mine operating costs	6b		846,937			819,582
Depreciation and amortization	6c		337,615			357,924
Impairment - environmental provision	6i		-			193,473
			1,184,552			1,370,979
Gross profit			276,888			131,019
Selling and administrative expenses			33,986			43,011
Exploration expenses	5		34,511			39,223
Other expenses	5, 6f		32,586			35,119
Re-evaluation adjustment - environmental provision	5, 20		(133,460	)		(4,602	)
Impairment - Arizona	6h		94,956			-
Results from operating activities			214,309			18,268
Net interest expense on long term debt	6g		67,663			74,748
Accretion on streaming arrangements	6g		27,778			42,654
Change in fair value of financial instruments	6g		942			54,514
Other net finance costs	6g		22,111			49,103
Net finance expense			118,494			221,019
Profit (loss) before tax			95,815			(202,751	)
Tax expense	23a		25,433			41,607
Profit (loss) for the year		$	70,382		$	(244,358	)
Profit (loss) per share
Basic		$	0.27		$	(0.93	)
Diluted		$	0.27		$	(0.93	)
Weighted average number of common shares outstanding:
Basic	26		261,858,531			261,462,323
Diluted	26		262,217,528			261,462,323
HUDBAY MINERALS INC.Consolidated Statements of Cash Flows<br>(in thousands of US dollars)
---
			Year ended December 31,
---	---	---	---	---	---	---	---
	Note		2022			2021
Cash generated from operating activities:
Profit (loss) for the year		$	70,382		$	(244,358	)
Tax expense	23a		25,433			41,607
Items not affecting cash:
Depreciation and amortization	6c		339,063			359,767
Share-based compensation	6d		2,064			12,145
Net interest expense on long-term debt	6g		67,663			74,748
Accretion on streaming arrangements	6g		27,778			42,654
Change in fair value of financial instruments	6g		942			54,514
Other net finance costs	6g		22,111			49,103
Inventory adjustments	6b		3,553			3,999
Amortization of deferred revenue and variable consideration	6a		(73,188	)		(73,136	)
Pension and other employee benefit payments, net of accruals			1,545			7,975
Re-evaluation adjustment - environmental obligation	5, 20		(133,460	)		(4,602	)
Impairment - environmental obligation	6i		-			193,473
Impairment - Arizona	6h		94,956			-
Decommissioning and restoration payments	20		(15,460	)		(21,663	)
Other	31a		(2,043	)		7,768
Taxes paid			(39,610	)		(20,132	)
Operating cash flow before precious metals stream deposit and changes in non-cash working capital			391,729			483,862
Precious metals stream deposit	19		-			4,000
Change in non-cash working capital	31b		96,074			(102,791	)
			487,803			385,071
Cash used in investing activities:
Acquisition of property, plant and equipment	5		(308,960	)		(352,177	)
Community agreements	5		(37,491	)		(26,511	)
Net proceeds from disposal of investments			1,919			1,193
Proceeds from disposition of property, plant and equipment			4,101			-
Change in restricted cash			(49	)		(100	)
Interest received			2,810			1,338
			(337,670	)		(376,257	)
Cash used in financing activities:
Issuance of senior unsecured notes, net of transaction costs	18a		-			591,922
Principal repayments	18a		-			(600,000	)
Premium paid on redemption of notes	18a		-			(22,878	)
Interest paid on long-term debt			(63,750	)		(84,435	)
Financing costs			(12,272	)		(19,623	)
Lease payments	17		(35,770	)		(37,719	)
Gold prepayment repayments	16		(71,714	)		-
Deferred Rosemont acquisition payment			(10,000	)		-
Net proceeds from exercise of stock options			1,253			980
Dividends paid	24b		(4,047	)		(4,146	)
			(196,300	)		(175,899	)
Effect of movement in exchange rates on cash			843			(1,061	)
Net decrease in cash			(45,324	)		(168,146	)
Cash, beginning of the year			270,989			439,135
Cash, end of the year		$	225,665		$	270,989
HUDBAY MINERALS INC.Consolidated Statements of Comprehensive Profit (Loss)<br>(in thousands of US dollars)
---
		Year ended December 31,
---	---	---	---	---	---	---
		2022			2021
Profit (loss) for the year	$	70,382		$	(244,358	)
Other comprehensive (loss) income:
Item that will be reclassified subsequently to profit or loss:
Recognized directly in equity:
Net (loss) gain on translation of foreign currency balances		(17,666	)		1,336
		(17,666	)		1,336
Items that will not be reclassified subsequently to profit or loss:
Recognized directly in equity:
Gold prepayment revaluation (note 16)		512			(2,684	)
Tax effect		(135	)		721
Remeasurement - actuarial gain		45,083			29,449
Tax effect		(2,249	)		(6,195	)
		43,211			21,291
Other comprehensive income net of tax, for the year		25,545			22,627
Total comprehensive profit (loss) for the year	$	95,927		$	(221,731	)
HUDBAY MINERALS INC.Consolidated Statements of Changes in Equity<br>(in thousands of US dollars)
---
		Share capital<br>(note 24)		Other capital<br>reserves			Foreign currency<br>translation reserve		Remeasurement<br>reserve			Retained earnings			Total equity
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
Balance, January 1, 2021	$	1,777,340	$	55,937		$	1,571	$	(81,708	)	$	(53,334	)	$	1,699,806
Loss		-		-			-		-			(244,358	)		(244,358	)
Other comprehensive income		-		-			1,336		21,291			-			22,627
Total comprehensive income (loss)		-		-			1,336		21,291			(244,358	)		(221,731	)
Contributions by and distributions to owners:
Dividends (note 24b)		-		-			-		-			(4,146	)		(4,146	)
Stock options (note 6d)		-		1,919			-		-			-			1,919
Issuance of shares related to stock options redeemed		1,508		(528	)		-		-			-			980
Total contributions by and distributions to owners		1,508		1,391			-		-			(4,146	)		(1,247	)
Balance, December 31, 2021	$	1,778,848	$	57,328		$	2,907	$	(60,417	)	$	(301,838	)	$	1,476,828
HUDBAY MINERALS INC.Consolidated Statements of Changes in Equity<br>(in thousands of US dollars)
---
		Share capital<br>(note 24)		Other capital<br>reserves			Foreign currency<br>translation reserve			Remeasurement<br>reserve			Retained earnings			Total equity
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
Balance, January 1, 2022	$	1,778,848	$	57,328		$	2,907		$	(60,417	)	$	(301,838	)	$	1,476,828
Profit		-		-			-			-			70,382			70,382
Other comprehensive (loss) income		-		-			(17,666	)		43,211			-			25,545
Total comprehensive (loss) income		-		-			(17,666	)		43,211			70,382			95,927
Contributions by and distributions to owners:
Dividends (note 24b)		-		-			-			-			(4,047	)		(4,047	)
Stock options (note 6d)		-		1,848			-			-			-			1,848
Issuance of shares related to stock options redeemed		1,926		(673	)		-			-			-			1,253
Total contributions by and distributions to owners		1,926		1,175			-			-			(4,047	)		(946	)
Balance, December 31, 2022	$	1,780,774	$	58,503		$	(14,759	)	$	(17,206	)	$	(235,503	)	$	1,571,809
HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021
---

1. Reporting entity

Hudbay Minerals Inc. ("HMI" or the "Company") is a company existing under the Canada Business Corporations Act. The address of the Company's principal executive office is 25 York Street, Suite 800, Toronto, Ontario. The audited consolidated financial statements ("financial statements") of the Company for the year ended December 31, 2022 and 2021 represent the financial position and the financial performance of the Company and its subsidiaries (together referred to as "Hudbay").

Wholly owned subsidiaries as at December 31, 2022 and 2021 include HudBay Marketing & Sales Inc. ("HMS"), HudBay Peru Inc., HudBay Peru S.A.C. ("Hudbay Peru"), HudBay (BVI) Inc., Hudbay Arizona Inc, Copper World, Inc. ("Copper World") and Mason Resources (US) Inc. ("Mason").

Hudbay is a diversified mining company with long-life assets in North and South America. Huday's operations in Cusco (Peru) produce copper with gold, silver and molybdenum by-products. Hudbay's operations in Manitoba (Canada) produce gold with copper, zinc and silver by-products. Hudbay has an organic pipeline that includes copper development projects in Arizona and Nevada (United States), and a focused growth strategy on exploration, development, operation, and optimization of properties that Hudbay already controls, as well as other mineral assets that Hudbay may acquire that fit the Company's strategic criteria. 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.

2. Basis of preparation

(a) Statement of compliance:

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") effective for the year ended December 31, 2022.

The Board of Directors approved these consolidated financial statements on February 23, 2023.

(b) Functional and presentation currency:

Hudbay's consolidated financial statements are presented in US dollars, which is the Company's and all material subsidiaries' functional currency, except the Company's Manitoba business unit, which has a functional currency of Canadian dollars. All values are rounded to the nearest thousand ($000) except where otherwise indicated. ****

(c) Basis of measurement:

The consolidated financial statements have been prepared on the historical cost basis except for the following items in the consolidated balance sheets:

Derivatives, embedded derivatives, other financial instruments, and financial assets measured at fair value through profit or loss ("FVTPL");
Liabilities for cash-settled share-based compensation arrangements are measured at fair value; and,
A defined benefit liability is recognized as the net total of the plan assets, unrecognized past service costs and unrecognized actuarial losses, less unrecognized actuarial gains and the present value of the defined benefit obligation.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021

(d) Use of judgements and estimates:

The preparation of the consolidated financial statements in conformity with IFRS requires Hudbay to make judgements, estimates and assumptions that affect the application of accounting policies, reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and reported amounts of revenue and expenses during the reporting period. Actual results may differ from these estimates.

Hudbay reviews these estimates and underlying assumptions on an ongoing basis, based on experience and other factors, including expectations of future events that the Company believes to be reasonable under the circumstances. Revisions to accounting estimates are recognized prospectively in the period in which the estimates are revised and in any future periods affected.

The following are critical and significant judgements and estimates impacting the consolidated financial statements:

Indicators and testing of impairment (reversal of impairment) of non-financial assets (notes 3h, 3i and 12) - There are a number of potential indicators that could trigger non-financial asset impairment or reversal of impairment. These indicators may require critical judgements to determine the extent that external and/or internal environmental business changes may impact Hudbay's overall assessment of the recoverability of non-financial assets. Such business changes include changes to the life of mine ("LOM") plan, changes to budget, changes to closure plans, changes to discount rates and changes to long-term commodity prices. If an impairment or impairment reversal indicator is noted then there are also critical estimates involved in the determination of the recoverable amount of cash generating units ("CGU") or below for more specific groups of assets. Recoverable amounts are calculated using discounted after-tax cash flows based on cash flow projections and assumptions in Hudbay's most recent LOM plans. LOM plans are based on optimized mine and processing plans and the assessment of capital expenditure requirements of a mine site. LOM plans incorporate management's best estimates of key assumptions which include future commodity prices, the value of mineral resources not included in the applicable LOM plans, production based on current estimates of recoverable reserves, discount rates, future operating and capital costs and future foreign exchange rates. Most critical to the value of the recoverable amount are the assumptions of future commodity prices and the value of mineral resources not included in the applicable LOM plans. Expected future cash flows used to determine the recoverable amount during impairment testing are inherently uncertain and could materially change over time. Should management's estimate of the future not reflect actual events, impairments may be identified, which could have a material effect on the financial statements. Although it is reasonably possible for a change in key assumptions to occur, the possible effects of a change in any single assumption may not fairly reflect the impact of CGU's fair value as the assumptions are inextricably linked.
Mineral reserves and resources (notes 3g, 3k and 3i) - Hudbay estimates mineral reserves and resources to determine future recoverable mine production based on assessment of geological, engineering and metallurgical analyses, estimates of future production costs, capital costs and reclamation costs, as well as long term commodity prices and foreign exchange rates. There are numerous uncertainties inherent in estimating mineral reserves and resources, including many factors beyond Hudbay's control. The estimates are based on information compiled by appropriately qualified persons relating to the geological data on the size, depth and shape of the ore body and interpreting this data requires complex geological judgements. Changes in assumptions, including economic assumptions such as metals prices and market conditions, could have a material effect on the financial position and results of operations.

Changes in the mineral reserve or resource estimates may affect:

the carrying value of exploration and evaluation assets, capital works in progress, mining properties and plant and equipment;

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021

depreciation expense for assets depreciated either on a unit-of-production basis or on a straight line basis where useful lives are restricted by the life of the related mine plan;
the provision for decommissioning, restoration and similar liabilities;
the carrying value of deferred tax assets; and,
amortization of deferred revenue.
Property plant and equipment (notes 3h and 12) - The carrying amounts of property, plant and equipment and exploration and evaluation assets on Hudbay's consolidated balance sheets are significant and reflect multiple estimates and applications of judgement. Management exercises judgement in determining whether the costs related to exploration and evaluation are eligible for capitalization and whether they are likely to be recoverable by future exploration, which may be based on assumptions about future events and circumstances. Judgement and estimates are used when determining whether exploration and evaluation assets should be transferred to capital works in progress within property, plant and equipment. For mines in the production stage, management applies judgement to determine development costs to be capitalized based on the extent they are incurred in order to access reserves mineable over more than one year. For depreciable property, plant and equipment assets, management makes estimates to determine depreciation. For assets depreciated using the straight line method, residual value and useful lives of the assets or components are estimated. A significant estimate is required to determine the total production basis for units-of-production depreciation. The most currently available reserve and resource report is utilized in determining the basis which has material impacts on the amount of depreciation recorded through inventories and the consolidated income statements. There are numerous uncertainties inherent in estimating mineral reserves, and assumptions that were valid at the reporting date may change when new information becomes available. The actual volume of ore extracted and any changes in these assumptions could affect prospective depreciation rates and carrying values. In determining whether stripping costs incurred during the production phase of a mining property relate to mineral reserves and mineral resources that will be mined in a future period and therefore should be capitalized, Hudbay makes estimates of the proportion of stripping activity which relates to extracting current ore and the proportion which relates to obtaining access to ore reserves which will be mined in the future.
Tax provisions (notes 3m and 23) - Management makes estimates in determining the measurement and recognition of deferred tax assets and liabilities recorded on the consolidated balance sheets. The measurement of deferred tax assets and deferred tax liabilities is based on tax rates that are expected to apply in the period that the asset is realized or liability is settled based on tax rates that have been enacted or substantively enacted by the end of the reporting period. Deferred tax assets, including those arising from unutilized tax losses, require management to assess the likelihood of taxable income in the future periods in order to utilize recognized deferred tax assets. Estimates of future taxable income are based on forecasted cash flows from operations and the application of existing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differ significantly from estimates, the ability to realize the net deferred tax assets recorded at the balance sheet date could be affected. At the end of each reporting period, management reassesses the period that the assets are expected to be realized or liabilities are settled and the likelihood of taxable income in future periods in order to support and adjust the deferred tax assets and deferred tax liabilities recognized on the consolidated balance sheets.

- Assaying utilized to determine revenue and recoverability of inventories (notes 3c and 3f) - Assaying of contained metal is a key estimate in determining the amount of revenues recorded in the consolidated income statements. The estimate is finalized after final surveying is completed, which may extend to six months in certain transactions. Since assays are utilized to determine the value of recorded revenues, significant differences in given assays may result in a material misstatement of revenues on the consolidated income statements. Assay survey results are also a factor utilized to determine if inventories on hand have a net realizable value that exceeds cost. Material differences in assay results may lead to misstatements of inventory balances in the consolidated balance sheets.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021

- Decommissioning and restoration obligations (notes 3k and 20) - Significant judgement and estimates are utilized in the determination of the decommissioning and restoration provisions in the consolidated balance sheets. Judgement is involved in determining the timing and extent of cash outflows required to satisfy constructive obligations based on the timing of site closures in the LOM plans, expected unit costs to determine cash obligations to remediate disturbances and regulatory and constructive requirements, as well as technological changes to determine the extent and timing of the remediation required. The timing of cash outflows and discount rates associated with discounting the provision are also key estimates. Changes in these estimates may result in a change in classification of the provision between non-current and current as well as material differences in the total provision recorded in the consolidated balance sheets.

- Pension and other employee benefit (notes 3j, 21 and 22) - Hudbay's post retirement obligations relate mainly to ongoing health care benefits plans. Hudbay estimates obligations related to the pension and other employee benefits plans using actuarial determinations that incorporate assumptions using management's best estimates of factors including plan performance, salary escalation, retirement dates of employees and drug cost escalation rates. Due to the complexity of the valuation, the underlying assumptions and its long term nature, the defined benefit obligation is highly sensitive to changes in these assumptions. Management reviews all assumptions at each reporting date. In determining the appropriate discount rate, Hudbay considers the interest rates on corporate bonds in the respective currency with at least an AA rating, with extrapolated maturities corresponding to the expected duration of the defined benefit obligation. The mortality rate is based on publicly available mortality tables for the specific country, and Hudbay bases future salary increases and pension increases on expected future inflation rates for the respective country.

(e) Estimation uncertainty:

The Company has assessed the economic impacts of the novel coronavirus ("COVID-19") pandemic, Russia's invasion of Ukraine and heightened social unrest following a change in Peru's political leadership in early December 2022 on its consolidated financial statements. As at December 31, 2022, management has determined that the Company's ability to execute its medium and longer term plans and the economic viability of its assets (including the carrying value of its long-lived assets and inventory valuations) are not materially impacted.

In making this judgment, the Company has assessed various criteria including, but not limited to, existing laws, regulations, orders, disruptions and potential disruptions in our supply chain, disruptions in the markets for our products, commodity prices and foreign exchange prices and the actions that the Company has taken at its operations to protect the health and safety of its workforce and local community.

3. Significant accounting policies

The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements and by all Hudbay's entities.

(a) Basis of consolidation:

Intercompany balances and transactions are eliminated upon consolidation. When a Hudbay entity transacts with an associate or jointly controlled entity of the Company, unrealized profits and losses are eliminated to the extent of Hudbay's interest in the relevant associate or joint venture. The accounting policies of Hudbay's entities are changed when necessary to align them with the policies adopted by the Company.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021

Subsidiaries

A subsidiary is an entity controlled by Hudbay. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

Business combinations and goodwill

Should Hudbay make an acquisition, it first determines whether the assets acquired and liabilities assumed constitute a business, in which case the acquisition requires accounting as a business combination. Management applies judgement in determining whether the acquiree is capable of being conducted and managed for the purpose of providing a return, considering the inputs of the acquiree and processes applied to those inputs that have the ability to create outputs.

Hudbay applies the acquisition method of accounting to business combinations, whereby the goodwill is measured at the acquisition date as the fair value of the consideration transferred including the recognized amount of any non-controlling interests in the acquiree. When the excess is negative, a bargain purchase gain is recognized immediately in the consolidated income statements. The assessment of fair values on acquisition includes those mineral reserves and resources that are able to be reliably measured. In determining these fair values, management must also apply judgement in areas including future cash flows, metal prices, exchange rates and appropriate discount rates. Changes in such estimates and assumptions could result in significant differences in the amount of goodwill recognized.

The consideration transferred is the aggregate of the fair values, at the date of the acquisition, of the sum of the assets transferred, the liabilities incurred or assumed, and the equity instruments issued by the acquirer in exchange for control of the acquiree. Acquisition-related costs are recognized in the consolidated income statements as incurred, unless they relate to issuance of debt or equity securities.

Where applicable, the consideration transferred includes any asset or liability resulting from a contingent consideration arrangement and measured at its acquisition date fair value. Subsequent changes in such fair values are adjusted against the cost of acquisition where they qualify as measurement period adjustments. All other subsequent changes in the fair value of contingent consideration classified as an asset or liability are accounted for in accordance with relevant IFRS. Changes in the fair value of contingent consideration classified as equity are not recognized.

Where a business combination is achieved in stages, the Company's previously held interests in the acquired entity are remeasured to fair value at the acquisition date, which is the date Hudbay attains control, and any resulting gain or loss is recognized in the consolidated income statements. Amounts previously recognized in other comprehensive income ("OCI") related to interests in the acquiree prior to the acquisition date are reclassified to the consolidated income statements, where such treatment would be appropriate if that interest were disposed of.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of Hudbay's CGUs that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Goodwill is allocated to the lowest level at which it is monitored for internal management purposes and is not larger than an operating segment before aggregation. Where goodwill forms part of a CGU and part of the operation within that unit is disposed of, the goodwill associated with the disposed operation is included in the determination of any gain or loss on disposal.

Goodwill is not amortized and is tested for impairment annually and whenever there is an indication of impairment. If any such indication exists, the recoverable amount of the CGU is estimated in order to determine the extent of the impairment, if any. The recoverable amount is determined as the higher of fair value less direct costs to sell and the CGU's value in use. An impairment loss in respect of goodwill is not reversed.

Fair value for mineral interests and related goodwill is generally determined as the present value of the estimated future cash flows expected to arise from the continued use of the asset, including any expansion prospects, and its eventual disposal, using assumptions that an independent market participant may take into account.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021

Value in use is determined as the present value of the estimated future cash flows expected to arise from the continued use of the asset in its present form and its eventual disposal. Value in use is determined by applying assumptions specific to Hudbay's continued use and cannot take into account future development.

The weighted average cost of capital of Hudbay or comparable market participants is used as a starting point for determining the discount rates, with appropriate adjustments for the risk profile of the countries in which the individual CGUs operate and the specific risks related to the development of the project.

Where the asset does not generate cash flows that are independent of other assets, Hudbay estimates the recoverable amount of the CGU to which the asset belongs. If the carrying amount of an asset or CGU exceeds its recoverable amount, the carrying amount of the asset or CGU is reduced to its recoverable amount. An impairment loss is recognized as an expense in the consolidated income statements.

(b) Translation of foreign currencies:

Management determines the functional currency of each Hudbay entity as the currency of the primary economic environment in which the entity operates.

Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of Hudbay's entities at exchange rates in effect at the transaction dates.

At the end of each reporting period, monetary assets and liabilities denominated in foreign currencies are translated to the functional currency using the closing exchange rate. Non-monetary assets and liabilities measured at fair value are translated using the exchange rates at the date when fair value was determined. Non-monetary assets and liabilities measured at historical cost in a foreign currency are translated using exchange rates that were in effect at the transaction dates. The same translations are applied when an entity prepares its financial statements from books and records maintained in a currency other than its functional currency, except revenue and expenses may be translated at monthly average exchange rates that approximate those in effect at the transaction dates.

Foreign currency gains and losses arising on period-end revaluations are recognized in the consolidated income statements, except for a financial liability designated as a hedge of a net investment in a foreign operation, or qualifying cash flow hedges, which are recognized in OCI.

Foreign operations

For the purpose of the consolidated financial statements, assets and liabilities of Hudbay's entities that have functional currencies other than the US dollar are translated to US dollars at the reporting date using the closing exchange rate. Revenue and expenses are translated at monthly average exchange rates that approximate those in effect at the transaction dates. Differences arising from these foreign currency translations are recognized in OCI and presented within equity in the foreign currency translation reserve. When a foreign operation is disposed, the relevant exchange differences accumulated in the foreign currency translation reserve are transferred to the consolidated income statements as part of the profit or loss on disposal. On the partial disposal of a subsidiary that includes a foreign operation, the relevant proportion of such amount is reattributed to non-controlling interests. On disposal of a partial investment in an associate or joint venture that includes a foreign operation while retaining significant influence or joint control, the relevant proportion is reclassified to profit or loss.

Net investment in a foreign operation

Foreign currency gains and losses arising on translation of a monetary item receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur in the foreseeable future are considered to form part of a net investment in the foreign operation. Such gains and losses are recognized in OCI and presented within equity in the foreign currency translation reserve.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021

(c) Revenue recognition:

Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of treatment and refining charges. Revenue from the sale of by-products is included within revenue.

Revenue is recognized when control of the goods sold has been transferred to the customer. Control is deemed to have passed to the customer when significant risk and reward of the product has passed to the customer, Hudbay has a present right to payment, and physical possession of the product has been transferred to the customer. Sales of doré are recorded when a trade confirmation is duly signed and executed between Hudbay and the end purchaser. Sale of concentrate and finished zinc frequently occur under the following terms, and management has assessed these terms in order to determine timing of transfer of control and revenue recognition as generally outlined in the following table.

Incoterms used by Hudbay	Revenue recognized when goods:
Cost, Insurance and Freight (CIF)	Are loaded on board the vessel
Free on Board (FOB)	Are loaded on board the vessel
Delivered at place (DAP)	Arrive at the named place of destination
Delivered at terminal (DAT)	Arrive at the named place of destination
Free Carrier (FCA)	Arrive at the named place of delivery

Sales of copper and zinc concentrate and certain other products are provisionally priced. For these contracts, sales prices are subject to final adjustment at the end of a future period after shipment, based on quoted market prices during the quotational period specified in the contract. Revenue is recognized when the above criteria are achieved, using weight and assay results and forward market prices to estimate the fair value of the total consideration receivable. Therefore, revenue is initially recorded based on an initial provisional invoice. Subsequently, at each reporting date, until the provisionally priced sale is finalized, sales receivables are marked to market, with adjustments (both gains and losses) recorded within revenue separately as "Pricing and volume adjustments" in the notes to the consolidated financial statements and in trade and other receivables on the consolidated balance sheets. As per IFRS 15 Revenue from contracts with customers, variability in price is deemed to be fair value movements on provisionally priced receivables under the scope of IFRS 9 Financial Instruments; variability in quantities is deemed to be variable consideration. The variable consideration from weights and assay changes to quantities has been assessed to be insignificant to warrant precluding revenue being recorded as a result of possible future sales reversals. An annual analysis of the accuracy of our weights and assays is completed, and if the accuracy rate falls below a certain threshold, management then evaluates whether revenue from future sales should be constrained as a result of it being highly probable that there would be a significant revenue reversal in the future.

Hudbay only includes in the transaction price an amount which is not highly likely to be subject to significant subsequent revenue reversal. Within sales contracts with customers, separate performance obligations may arise pertaining to the shipping of goods sold. If applicable, costs and the transaction price are allocated on a relative standalone selling basis to any separate performance obligations and are recognized over the period of time the goods sold are shipped, on a gross basis.

Hudbay recognizes deferred revenue in the event it receives payments from customers before a sale meets criteria for revenue recognition.

Precious metals stream contracts, which at inception of the contract are determined that they can be satisfied through the delivery of Hudbay's own production of non-financial items (i.e. gold and silver credits) rather than cash or other financial assets, are accounted for as deferred revenue. If settlement with Hudbay's own production of gold and silver is not possible, the stream transaction is recognized as a financial liability since settlement may require a cash payment. This would cause a change to the accounting treatment, resulting in the revaluation of the agreement to the fair value through the consolidated income statements on a recurring basis.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021

Deferred revenue associated with precious metals stream contracts are subject to variable consideration and contain a significant financing component since funds were received in advance of the delivery of concentrate. When a significant financing component is recognized, finance expense will be higher and revenues will be higher as the larger deferred revenue balance is amortized to revenues. A market-based discount rate is utilized at the inception of each of the respective stream agreements to determine a discount rate for computing the interest charges for the significant financing component of the deferred revenue balance. As product is delivered, the deferred revenue amount including accreted interest will be drawn down. The draw down rate requires the use of proven and probable reserves and certain resources in the calculation that are beyond proven and probable reserves which management is reasonably confident will be transferable to reserves. Key estimates used in determining the significant financing component include the discount rate and the reserve and resources assumed for conversion.

(d) Cost of sales:

Cost of sales consists of those costs previously included in the measurement of inventory sold during the period, as well as certain costs not included in the measurement of inventory, such as the cost of warehousing and distribution to customers, provisional pricing adjustments related to purchased concentrates, profit sharing, royalty payments, share-based compensation expense and other indirect expenses related to producing operations.

Cost of sales also include non-cash net realizable value adjustments to inventory, one-time adjustments related to overheads incurred when not operating at normal capacity and one-time labour charges related to facilitating the production of inventories for past service pension costs, curtailment gains and severance.

(e) Cash and cash equivalents:

Cash and cash equivalents include cash, demand deposits and short-term, highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value. Cash equivalents have maturities of three months or less at the date of acquisition. Interest earned is included in finance income on the consolidated income statements and in investing activities on the consolidated statements of cash flows.

Amounts that are restricted from being used for at least twelve months after the reporting date are classified as non-current assets and presented in restricted cash on the consolidated balance sheets. Changes in restricted cash balances are classified as investing activities on the consolidated statements of cash flows.

(f) Inventories:

Inventories consist of stockpiles, in-process inventory (concentrates and metals), metal products and supplies. Concentrates, doré, metals and all other saleable products are valued at the lower of cost and estimated net realizable value. Net realizable value represents the estimated selling price for inventories less all estimated direct and indirect costs of completion and costs necessary to make the sale. Where the net realizable value is less than cost, the difference is charged to the consolidated income statements as an impairment charge in cost of sales. Costs associated with stripping activities in an open pit mine are capitalized to inventory and recorded through cost of sales unless the stripping activity can be shown to improve access to further quantities of ore that will be mined in future periods, in which case, the stripping costs are capitalized to property, plant and equipment.

Cost of production of concentrate inventory is determined on a weighted average cost basis and the cost of production of finished metal inventory is determined using the first in first out basis. The cost of production includes direct costs associated with conversion of production inventory based on normal production capacity: material, labour, contractor expenses, purchased concentrates, and an attributable portion of production overheads and depreciation of all property, plant and equipment involved with the mining and production process. Hudbay measures in-process inventories based on assays of material received at metallurgical plants and estimates of recoveries in the production processes. Due to significant uncertainty associated with volume and metal content, immaterial costs are not allocated to routine operating levels of stockpiled ore. Estimates and judgements are required to assess the nature of any significant changes to levels of ore stockpiles and determining whether allocation of costs is required.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021

Supplies are valued at the lower of average cost and net realizable value.

(g) Exploration and evaluation expenditures:

Exploration and evaluation activity begins when Hudbay obtains legal rights to explore a specific area and involves the search for mineral reserves, the determination of technical feasibility, and the assessment of commercial viability of an identified resource. Expenditures incurred in the exploration and evaluation phase include the cost of acquiring interests in mineral rights, licenses and properties and the costs of Hudbay's exploration activities, such as researching and analyzing existing exploration data, gathering data through geological studies, exploratory drilling, trenching, sampling, and certain feasibility studies.

Hudbay expenses the cost of its exploration and evaluation activities and capitalizes the cost of acquiring interests in mineral rights, licenses and properties in business combinations, asset acquisitions or option agreements. Amounts capitalized are recognized as exploration and evaluation assets and presented in property, plant and equipment. Exploration and evaluation assets acquired as a result of an asset acquisition or option agreement are initially recognized at cost, and those acquired in a business combination are recognized at fair value on the acquisition date. They are subsequently carried at cost less accumulated impairment. No depreciation is charged during the exploration and evaluation phase. Hudbay expenses the cost of subsequent exploration and evaluation activity related to acquired exploration and evaluation assets. Cash flows associated with acquiring exploration and evaluation assets are classified as investing activities in the consolidated statements of cash flows; those associated with exploration and evaluation expenses are classified as operating activities.

Judgement is required in determining whether the respective costs are eligible for capitalization where applicable, and whether they are likely to be recoverable, which may be based on assumptions about future events and circumstances. Estimates and assumptions made may change if new information becomes available.

Hudbay monitors exploration and evaluation assets for factors that may indicate their carrying amounts are not recoverable. If such indicators are identified, the Company tests the exploration and evaluation assets or their CGUs, as applicable, for impairment. Hudbay also tests for impairment when assets reach the end of the exploration and evaluation phase.

Exploration and evaluation assets are transferred to capital works in progress within property, plant and equipment once the Company determines that probable future economic benefits will be generated as a result of the expenditures. Hudbay's determination of probable future economic benefit is based on management's evaluation of the technical feasibility and commercial viability of the geological properties of a given ore body based on information obtained through evaluation activities, including metallurgical testing, resource and reserve estimates and the economic assessment of whether the ore body can be mined economically. Tools that may be used to determine this include a preliminary feasibility study, confidence in converting resources into reserves and the probability that the property could be developed into a mine site. At that time, the property is considered to enter the development phase, and subsequent evaluation costs are capitalized.

(h) Property, plant and equipment:

Hudbay measures items of property, plant and equipment at cost less accumulated depreciation and any accumulated impairment losses.

The initial cost of an item of property, plant and equipment includes its purchase price or construction costs, including import duties and non-refundable purchase taxes, any costs directly attributable to bringing the asset into operation, and for qualifying assets, borrowing costs. The initial cost of property, plant and equipment also includes the initial estimate of the cost of dismantling and removing the item and restoring the site on which it is located, the obligation which Hudbay incurs either when the item is acquired or as a consequence of having used the item during a particular period for purposes other than to produce inventories during that period.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021

Capitalization of costs ceases once an asset is in the location and condition necessary for it to be capable of operating in the manner intended by management. At this time, depreciation commences. For a new mine, this occurs upon commencement of commercial production. As a result of the early adoption of the amendments to IAS 16, since January 1, 2021, any revenues less cost to produce, earned prior to commencement of commercial production, are included in the consolidated income statements.

Carrying amounts of property, plant and equipment, including right-of-use ("ROU") assets, are depreciated to their estimated residual value over the estimated useful lives of the assets or the estimated life of the related mine or plant, if shorter. Where components of an asset have different useful lives, depreciation is calculated on each separate component. Components may be physical or non-physical, including the cost of regular major inspections and overhauls required in order to continue operating an item of property, plant and equipment.

Certain items of property, plant and equipment are depreciated on a unit-of-production basis. The unit-of-production method is based on proven and probable tonnes of ore reserves. There are numerous uncertainties inherent in estimating ore reserves, and assumptions that were valid at the reporting date may change when new information becomes available. The actual volume of ore extracted and any changes in these assumptions could affect prospective depreciation rates and carrying values.

The carrying amount of an item of property, plant and equipment is derecognized on disposal or when no future economic benefits are expected from its use or disposal. Upon derecognition of an item of property, plant and equipment, the difference between its carrying value and net sales proceeds, if any, is presented as a gain or loss in other operating income or expense in the consolidated income statements.

i. Capital works in progress:

Capital works in progress consist of items of property, plant and equipment in the course of construction or mineral properties in the course of development, including those transferred upon completion of the exploration and evaluation phase. On completion of construction or development, costs are transferred to plant and equipment and/or mining properties as appropriate. Capital works in progress are not depreciated.

ii. Mining properties:

Mining properties consist of costs transferred from capital works in progress when a mining property reaches commercial production, costs of subsequent mine and exploration development, and acquired mining properties in the production stage.

Mining properties include costs directly attributable to bringing a mineral asset into the state where it is capable of operating in the manner intended by management and includes such costs as the cost of shafts, ramps, track haulage drifts, ancillary drifts, pumps, electrical substations, refuge stations, ventilation raises, permanent manways, and ore and waste pass raises. The determination of development costs to be capitalized during the production stage of a mine operation requires the use of judgements and estimates such as estimates of tonnes of waste to be removed over the life of the mining area and economically recoverable reserves extracted as a result.

A mining property is considered to be capable of operating in a manner intended by management when it commences commercial production based on pre-established criteria. Upon commencement of commercial production, a mining property is depreciated on a unit-of-production method. Unit-of-production depreciation rates are determined based on the related proven and probable mineral reserves and associated future development costs.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021

Subsequent mine development costs are capitalized to the extent they are incurred in order to access reserves mineable over more than one year. Ongoing maintenance and development expenditures are expensed as incurred and included in cost of sales in profit or loss. These include ore stope access drifts, footwall and hangingwall drifts in stopes, drawpoints, drill drifts, sublevels, slots, drill raises, stope manway access raises and definition diamond drilling.

iii. Plant and equipment:

Plant and equipment consists of buildings and fixtures, surface and underground fixed and mobile equipment and assets under lease.

Plant and equipment are depreciated on either unit-of-production or straight-line basis based on factors including the production life of assets and mineable reserves. In general, mining assets are depreciated using a unit-of-production method; equipment is depreciated using the straight-line method, based on the shorter of its useful life and that of the related mine or facility; and plants are depreciated using the straight-line method, with useful lives limited by those of related mining assets.

iv. Right-of-use lease assets:

At inception of a contract, Hudbay assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Company assesses the following criteria in the determination of whether a contract conveys the right to control the use of an identified asset:

• The contract involves the use of an identified asset - this may be specified explicitly or implicitly, and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has substantive substitution rights, then the asset is not identified;

• Hudbay has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and

• Hudbay has the right to direct the use of the asset by means of decision making rights that are most relevant to changing how and for what purpose the asset is used. In the case where decisions about the asset's purpose is predetermined, Hudbay is deemed to have the right to direct the use of the asset if either:

▪ Hudbay has the right to operate the asset; or,

▪ Hudbay designed the asset in a way that predetermines how and for what purpose it will be used.

The Company recognizes a ROU asset and lease liability at the lease commencement date. The initial measurement of the ROU asset is on a present value basis. This is based on the calculated lease liability plus any initial direct costs incurred, an estimate of removal or restoration costs, and any payments made prior to commencement of the lease less any lease incentives received.

The right of use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of the right-of-use assets are determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is measured at the present value of the lease payments that are yet to be paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be easily determined, Hudbay's incremental borrowing rate. Generally, the Company uses its incremental borrowing rate as the discount rate for applicable leases.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021

Lease payments included in the measurement of the lease liability comprise fixed payments including in substance fixed payments and variable payments that depend on an index or rate, amounts expected to be payable under a residual value guarantee and the additional costs Hudbay reasonably expects to incur due to purchase options, extension options and termination options reasonably expected to be exercised.

The lease liability is measured at amortized cost using the effective interest method. It is remeasured when there is a change in the expected future cash flows of a leasing contract either due to a change in index or rate, or due to a change in terms of the contract. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset is zero.

Hudbay has elected not to separate non-lease components and account for the lease and non-lease components as a single lease component for lease contracts of all asset classes.

The Company has elected not to recognize ROU assets and lease liabilities for short-term leases of machinery that have a lease term of 12 months or less and leases of low-value assets. Hudbay recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

Hudbay does not enter into transactions where the Company acts as a lessor.

The incremental borrowing rate used for new ROU leases is a key management judgement.

v. Depreciation rates of major categories of assets:

• Capital works in progress - not depreciated

• Mining properties - unit-of- production

• Mining asset - unit-of- production

• Plant and Equipment

◦ Equipment - straight-line over 1 to 20 years

◦ Other plant assets - straight-line over 1 to 20 years/unit-of-production

• ROU Assets - straight -line over 1 to 20 years

Hudbay reviews its depreciation methods, remaining useful lives and residual values at least annually and accounts for changes in estimates prospectively.

vi. Commercial production:

Commercial production is the level of activities intended by management for a mine, or a mine and mill complex, to be capable of operating in the manner intended by management. Hudbay considers a range of factors when determining the level of activity that represents commercial production for a particular project, including a predetermined percentage of design capacity for the mine and mill; achievement of continuous production, ramp-ups, or other output; or specific factors such as recoveries, grades, or inventory build-ups. In a phased mining approach, management may consider achievement of specific milestones at each phase of completion. In a non-phased mining approach, management considers average actual metrics that are at least 60% of average design capacity or plan over a continuous period. Management assesses the operation's ability to sustain production over a period of approximately one to three months, depending on the complexity related to the stability of continuous operation. Commercial production is considered to have commenced, and depreciation expense is recognized, at the beginning of the month after criteria have been met.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021

vii. Capitalized borrowing costs:

The Company capitalizes borrowing costs that are directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time, generally one year or more, to get ready for their intended use or sale. Capitalization of borrowing costs ceases once the qualifying assets commence commercial production or are otherwise ready for their intended use or sale.

Where funds are borrowed specifically to finance a project, the amount capitalized represents the actual borrowing costs incurred. Where the funds used to finance a project form part of general borrowings, the amount capitalized is calculated using a weighted average of interest rates applicable to relevant general borrowings of Hudbay during the period, to a maximum of actual borrowing costs incurred. Investment income earned by temporarily investing specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization. Capitalization of interest is suspended during extended periods in which active development is interrupted.

All other borrowing costs are recognized in the consolidated income statements in the period in which they are incurred.

viii. Capitalized stripping costs:

Costs associated with stripping activities in an open pit mine are capitalized to inventory and recorded through cost of sales unless the stripping activity can be shown to improve access to further quantities of ore that will be mined in future periods, in which case, the stripping costs are capitalized to property, plant and equipment. Capitalized stripping costs are included in "mining properties" within property, plant and equipment.

Capitalized stripping costs are depreciated using a units-of-production method over the expected reserves within a given phase of mine development.

(i) Impairment of non-financial assets:

At the end of each reporting period, Hudbay reviews the carrying amounts of property, plant and equipment, exploration and evaluation assets and intangible assets - computer software to determine whether there is any indication of impairment. If any such indication exists, the Company estimates the recoverable amount of the asset in order to determine the extent of the impairment loss, if any. Hudbay generally assesses impairment at the level of CGUs, which are the smallest identifiable groups of assets that generate cash inflows that are largely independent of cash inflows from other assets.

Hudbay's CGUs consist of Manitoba, Peru, Arizona and greenfield exploration assets.

The Company allocates near mine exploration and evaluation assets to CGUs based on their operating segment, geographic location and management's intended use for the property. Near mine exploration and evaluation assets are allocated to CGUs separate from those containing producing or development-phase assets, except where such exploration and evaluation assets have the potential to significantly affect the future production of producing or development-phase assets.

Goodwill, if recorded, is tested for impairment annually and whenever there is an indication that the asset may be impaired.

Where an indicator of impairment exists, a formal estimate of the recoverable amount of the asset or CGU is made. The recoverable amount is the higher of the fair value less costs of disposal and value in use:

Fair value less costs of disposal is the amount obtainable from the sale of the asset or CGU in an arm's length transaction between knowledgeable, willing parties, less costs of disposal. Fair value for mineral assets is often determined as the present value of the estimated future cash flows expected to arise from the continued use of the asset, including any expansion prospects, and its eventual disposal, using assumptions that an independent market participant may take into account. These cash flows are discounted by an appropriate discount rate that reflects current market assessments of the time value of money and the risks specific to the asset to arrive at a net present value of the asset.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021

Value in use is determined as the present value of the estimated future cash flows expected to arise from the continued use of the asset or CGU in its present form and its eventual disposal, discounted using a pre-tax rate that reflects current market assessments of the time value of money and risks specific to the asset for which estimates of future cash flows have not been adjusted. Value in use calculations apply assumptions specific to the Company's continued use and cannot take into account future development. These assumptions are different to those used in calculating fair value, and consequently the value in use calculation is likely to give a different result to a fair value calculation.

Hudbay estimates future cash flows based on estimated future recoverable mine production, expected sales prices (considering current and historical commodity prices, price trends and related factors), production levels and cash costs of production, all based on detailed engineering LOM plans. Future recoverable mine production is determined from reserves and resources after taking into account estimated dilution and recoveries during mining, and estimated losses during ore processing and treatment. Estimates of recoverable production from measured, indicated and inferred mineral resources not included in the LOM plan are assessed for economic recoverability and may also be included in the valuation of fair value less costs of disposal. Gains from the expected disposal of assets are not included in estimated future cash flows. Assumptions underlying future cash flow estimates are subject to risks and uncertainties. Changes in estimates may affect the expected recoverability of the Company's investments in mining properties.

If the carrying amount of an asset or CGU exceeds its recoverable amount, the carrying amount is reduced to the recoverable amount, and an impairment loss is recognized in the consolidated income statements in the expense category consistent with the function of the impaired asset or CGU. Hudbay presents impairment losses on the consolidated income statements as part of results from operating activities. Impairment losses recognized in respect of a CGU are allocated first to reduce the carrying amount of any goodwill allocated to the CGU and then to reduce the carrying amounts of other assets in the CGU on a pro-rata basis for depreciable assets.

The Company assesses previously recognized impairment losses each reporting date for any indications that the losses have decreased or no longer exist. Such an impairment loss is reversed, in full or in part, if there have been significant changes with a positive effect on the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized for the asset in prior years. Such reversals of impairment losses are recognized in the consolidated income statements. An impairment loss recognized in relation to goodwill is not reversed for subsequent increases in the recoverable amount.

(j) Pension and other employee benefits:

Hudbay has non-contributory and contributory defined benefit programs for the majority of its Canadian employees. The defined benefit pension benefits are based on years of service and final average salary for the salaried plans and are based on a flat dollar amount combined with years of service for the hourly plans. The Company provides non pension health and other post-employment benefits to certain active employees and pensioners (post-employment benefits) and also provides disability income, health benefits and other post-employment benefits to hourly and salaried disabled employees (other long-term employee benefits).

Hudbay accrues its obligations under the defined benefit plans as the employees render the services necessary to earn the pension and post-employment benefits. The actuarial determination of the accrued benefit obligations for pensions and post-employment benefits uses the projected benefit method pro-rated on service (which incorporates management's best estimate of future salary levels, other cost escalation, retirement ages of employees and other actuarial factors). For other long-term employee benefits, the Company recognizes the full cost of the benefit obligation at the time the employee becomes disabled. Actuarial advice is provided by external consultants.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021

For the funded defined benefit plans, Hudbay recognizes the deficit or excess of the fair value of plan assets over the present value of the defined benefit obligation as a liability or an asset in the consolidated balance sheets. However, the Company recognizes an excess of assets only to the extent that it represents a future economic benefit which is available in the form of refunds from the plan or reductions in future contributions to the plan. When these criteria are not met, it is not recognized but is disclosed in the notes to the consolidated financial statements. Impacts of minimum funding requirements in relation to past service are considered when determining the balance sheet position.

Defined benefit costs are categorized as follows:

Service costs (including current service cost, past service cost, as well as gains and losses on curtailments and settlements and administration costs),
Net interest expense or income; and,
Remeasurement.

The first two components of defined benefit costs shown above are recognized in the consolidated income statements. Past service cost as well as curtailment gains are recognized in the consolidated income statements in the period of a plan amendment. Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset.

Purchases and sales of plan assets are recorded on settlement date.

Remeasurement, comprising actuarial gains and losses, the effect of changes to the asset ceiling (if applicable) and the return on plan assets (excluding interest), is reflected immediately in the consolidated balance sheets with a gain or loss recognized in OCI in the period in which they occur. Remeasurement recognized in OCI is reflected in the remeasurement reserve and will not be reclassified to the consolidated income statements. For the other long-term employee benefits plan, remeasurements are recognized immediately in the consolidated income statements.

Actuarial determinations used in estimating obligations relating to these plans incorporate assumptions using management's best estimates of factors including plan performance, salary escalation, retirement dates of employees and healthcare cost escalation rates. Due to the complexity of the valuation, the underlying assumptions and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date. In determining the appropriate discount rate, management considers the interest rates on corporate bonds in the respective currency with at least an AA rating, with extrapolated maturities corresponding to the expected duration of the defined benefit obligation. The mortality rate is based on publicly available mortality tables for the specific country. Future salary increases and pension increases are based on expected future inflation rates for the respective country.

Hudbay also has defined contribution plans providing pension benefits for certain of its salaried employees and certain of its US employees utilizing 401K plans. The Company recognizes the cost of the defined contribution plans based on the contributions required to be made during each period.

Termination benefits are recognized as an expense when Hudbay is committed demonstrably, without realistic possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. Termination benefits for voluntary redundancies are recognized as an expense if the Company has made an offer of voluntary redundancy, it is probable that the offer will be accepted, and the number of acceptances can be estimated reliably. Benefits that are payable more than one year after the reporting period are discounted to their present value.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021

(k) Environmental and other provisions:

Provisions are recognized when Hudbay has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate can be made. The provisions are recorded as management's best estimate of the amount required to settle an obligation.

Provisions are stated at their present value, which is determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.

Decommissioning, restoration and similar liabilities

Provisions are recorded for legal and constructive obligations associated with the future costs of rehabilitating the Company's current and previous operating and development sites. Such costs are associated with decommissioning and restoration activities such as dismantling and removing structures, rehabilitating mines and tailings, and reclamation and re-vegetation of affected areas.

The present value of estimated costs is recorded in the period in which the asset is installed or the environment is disturbed and a reasonable estimate of future costs and discount rates can be made. The provision is discounted using a risk-free rate, and estimates of future cash flows are adjusted to reflect risk.

Subsequent to the initial measurement, the obligation is adjusted to reflect the passage of time and changes in the estimated future cash flows underlying the obligation. The increase in the provision due to the passage of time is recognized as finance expense, whereas increases and decreases due to changes in the estimated future cash flows, which are not the result of current inventory production, are capitalized and depreciated over the life of the related operating asset. Actual costs incurred upon settlement of the site restoration obligation are charged against the provision to the extent the provision was established for those costs. Upon settlement of the liability, a gain or loss may be recorded. For closed sites, changes to estimated costs are recognized immediately in the consolidated income statements within other expenses.

Hudbay assesses the reasonableness of its estimates and assumptions each year and when conditions change, the estimates are revised accordingly. Judgement is required to determine the scope and timing of future decommissioning and restoration activities, as well as best available estimates and assumptions including discount rates, expected timing of decommissioning and restoration costs, inflationary factors and market risks. Changes in cost estimates, which may arise from changes in technology and pricing of the individual components of the cost may result in offsetting changes to the asset and liability and corresponding changes to the associated depreciation and finance costs. In view of the uncertainties concerning these future obligations, the ultimate timing and cost of reclamation and mine closure may differ materially from these estimates.

If the change in estimate results in a significant increase in the decommissioning liability and therefore an addition to the carrying value of the asset, the Company considers whether this is an indication of impairment of the asset as a whole and, if so, tests for impairment in accordance with IAS 36, Impairment of non-financial assets. If, for mature mines, the revised mine assets net of decommissioning and restoration liabilities exceeds the recoverable value, that portion of the increase is charged directly to expense as an impairment loss, within the gross profit / (loss) line.

In view of the uncertainties concerning environmental remediation, the ultimate cost of decommissioning and restoration liabilities could differ materially from the estimated amounts provided. The estimate of the total liability is subject to change based on amendments to laws and regulations and as new information concerning Hudbay's operations becomes available. Future changes, if any, to the estimated total liability as a result of amended requirements, laws, regulations and operating assumptions, as well as discount rates, may be significant and would be recognized prospectively as a change in accounting estimate, when applicable. Environmental laws, regulations and technology are continually evolving in all regions in which the Company operates. Hudbay is not able to determine the impact, if any, of environmental laws, regulations and technology that may be enacted in the future on its results of operations or financial position due to the uncertainty surrounding the ultimate form that such future laws and regulations may take.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021

Onerous contracts

A contract is considered to be onerous when the unavoidable costs of meeting obligations under the contract exceed the economic benefits expected to be received under it. Hudbay records a provision for any onerous contracts at the lesser of costs to comply with a contract and costs to terminate it.

Restructuring provisions

A provision for restructuring is recognized when management, with appropriate authority within Hudbay, has approved a detailed and formal restructuring plan, and the restructuring has either commenced or has been announced publicly. Future operating costs are not provided for.

(l) Financial instruments:

Non-derivative financial instruments are initially recognized at fair value plus, in the case of a financial asset or financial liability not measured at fair value through profit or loss, directly attributable transaction costs. Measurement in subsequent periods depends on the financial instrument's classification. Hudbay uses trade date accounting for regular way purchases or sales of financial assets. The Company determines the classification of its financial instruments and non-financial derivatives at initial recognition.

Financial assets and liabilities are offset and the net amount presented in the consolidated balance sheets when, and only when, Hudbay has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

The classification of financial assets is based on the results of the contractual characteristics test and the business model assessment which will result in the financial asset being classified as either: amortized cost, fair value through profit or loss ("FVTPL") or fair value through other comprehensive income ("FVTOCI").

i. Non-derivative financial instruments - classification:

Financial assets at fair value through profit or loss

Provisionally priced copper and zinc concentrate sales receivables, warrants and investments in securities of junior mining companies are classified as financial assets at fair value through profit or loss and are measured at fair value. The gains or losses related to changes in fair value are reported in the consolidated income statements.

Amortized cost

Cash, certain receivables, other assets related to agreements with communities near the Peru operations, trade and other payables, long-term debt and restricted cash are classified as and measured at amortized cost and are carried at amortized cost using the effective interest rate method, less impairment losses, if any.

Non-derivative financial liabilities

Accounts payable and senior unsecured notes are initially recognized at fair value and subsequently accounted for at amortized cost, using the effective interest method. The amortization of senior unsecured notes issue costs is calculated using the effective interest rate method.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021

ii. Derivatives:

Derivatives are initially recognized at fair value when Hudbay becomes a party to the derivative contract and are subsequently re-measured to fair value at the end of each reporting period. The resulting gain or loss is recognized in the consolidated income statements immediately unless the derivative is designated and effective as a hedging instrument. Derivatives with positive fair value are recognized as assets; derivatives with negative fair value are recognized as liabilities.

Derivatives contracts that are entered to economically hedge a risk exposure but are not designated as a hedging instrument for hedge accounting purposes, and are physically settled, are initially and subsequently measured at fair value. Subsequent movements in fair value are recognized within the revenue line item in the consolidated income statements.

iii. Embedded derivatives:

Hudbay considers whether a contract contains an embedded derivative when it becomes a party to the contract. Derivatives embedded in other financial liabilities or other non-financial host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of the host contracts and the host contracts are not measured at FVTPL.

iv. Fair value of financial instruments:

The fair value of a financial instrument is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction.

Fair values of financial instruments traded in active markets are determined based on quoted market prices, where available. Bid prices are generally used for assets held or liabilities to be issued; asking prices are generally used for assets to be acquired or liabilities held.

For financial instruments not traded in an active market, fair values are determined based on appropriate valuation techniques. Such techniques may include discounted cash flow analysis, using recent arm's length market transactions, reference to the current fair value of another instrument that is substantially the same, and other valuation models.

The Company applies a hierarchy to classify valuation methods used to measure financial instruments carried at fair value. Levels 1 to 3 are defined based on the degree to which fair value inputs are observable and have a significant effect on the recorded fair value, as follows:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: Valuation techniques use significant observable inputs, either directly (i.e. as prices) or indirectly (i.e. derived from prices), or valuations are based on quoted prices for similar instruments; and,
Level 3: Valuation techniques use significant inputs that are not based on observable market data (unobservable inputs).

An analysis of fair values of financial instruments is provided in note 28.

v. Impairment of financial instruments:

Hudbay recognizes loss allowances for Expected Credit Losses ("ECL") for trade receivables not measured at FVTPL.

Loss allowances for trade receivables are measured at an amount equal to lifetime ECL. ECL is a probability-weighted estimate measured at the present value of all cash shortfalls including the impact of forward-looking information.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021

Hudbay has established a provision based on the Company's historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.

vi. Derecognition of financial instruments:

Hudbay derecognizes financial assets when the contractual rights to the cash flows from the assets expire, or when the Company transfers the rights to receive the contractual cash flows on the financial assets in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in the transferred financial assets that is created or retained by Hudbay is recognized as a separate asset or liability.

Hudbay derecognizes financial liabilities when its contractual obligations are discharged, cancelled or expire or when its terms are modified and the cash flows of the modified liability are substantially different.

(m) Taxation:

Current Tax

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date.

Hudbay is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining the worldwide provision for income taxes due to the complexity of legislation. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Company recognizes liabilities for anticipated tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will affect the income tax and deferred tax provisions in the period in which such determination is made.

Additionally, future changes in tax laws in the jurisdictions in which Hudbay operates could limit the ability of the Company to obtain tax deductions in future periods.

Deferred Tax

Deferred tax is recognized using the balance sheet method in respect of temporary differences at the balance sheet date between the tax basis of assets and liabilities, and their carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognized for all taxable temporary differences, except:

where the deferred income tax liability arises from the initial recognition of goodwill, or the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred income tax assets are recognized for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax assets and unused tax losses can be utilized, except:

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021

where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.

To the extent that it is probable that taxable profit will be available to offset the deductible temporary differences, Hudbay recognizes the deferred tax asset regarding the temporary difference on decommissioning, restoration and similar liabilities and recognizes the corresponding deferred tax liability regarding the temporary difference on the related assets.

The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized. Unrecognized deferred income tax assets are reassessed at each balance sheet date and are recognized to the extent that it has become probable that future taxable profit will be available to allow the deferred tax asset to be recovered.

Judgement is required in determining whether deferred tax assets are recognized on the consolidated balance sheets. Deferred tax assets, including those arising from unutilized tax losses, require management to assess the likelihood of taxable profit in future periods in order to utilize recognized deferred tax assets. Estimates of future taxable income are based on forecast cash flows from operations and the application of existing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differ significantly from estimates, the ability to realize the net deferred tax assets recorded at the balance sheet date could be affected.

Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which the asset is realized or the liability is settled, based on tax rates and tax laws enacted or substantively enacted at the balance sheet date.

Deferred income tax assets and deferred income tax liabilities are offset if a legally enforceable right exists to offset current tax assets against current tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority.

Current and deferred taxes relating to items recognized outside profit or loss (whether in other comprehensive income or directly in equity) are recognized outside profit or loss and not in the consolidated income statements. Mining taxes and royalties are treated and disclosed as current and deferred taxes if they have the characteristics of an income tax.

(n) Share capital and reserves:

Transaction costs

Transaction costs directly attributable to equity transactions are recognized as a deduction from equity.

Other capital reserve

The other capital reserve is used for equity-settled share-based compensation and includes amounts for stocks options granted and not exercised.

Foreign currency translation reserve

The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign operations. Exchange differences arising from the translation of the financial statements of foreign operations form part of the net investment in the foreign operation. Translation gains and losses remain in the reserve until disposal of all or a portion of the foreign operation.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021

(o) Share-based compensation:

Hudbay compensates its employees in part through the use of a Deferred Share Unit ("DSU") plan for non-employee members of the Board of Directors, a Restricted Share Unit ("RSU") plan for employees, a Performance Share Unit ("PSU") plan for employees and a stock option plan for employees. These plans are included in provisions on the consolidated balance sheets and further described in note 25. Changes in the fair value of the liabilities are recorded in the consolidated income statements.

Cash-settled transactions, consisting of DSUs, RSUs and PSUs, are initially measured at fair value and recognized as an obligation at the grant date. The liabilities are remeasured to fair value at each reporting date up to and including the settlement date, with changes in fair value recognized in the consolidated income statements. Hudbay values the liabilities based on the change in the Company's share price. Additional DSUs, RSUs and PSUs are credited to reflect dividends paid on Hudbay common shares over the vesting period. The current portion of the liability reflects those grants that have vested or that are expected to vest within twelve months.

DSUs vest on the grant date and are redeemable when a participant is no longer a member of the Board of Directors. Issue and redemption prices of DSUs are based on the average closing price of the Company's common shares for the five trading days prior to issuance or redemption.

RSUs and PSUs are issued under Hudbay's Long Term Equity Plan ("LTEP Plan") and vest on or before the third anniversary of the grant. RSUs and PSUs granted under the LTEP Plan may be settled in the form of the Company's common shares or, at the option of Hudbay, the cash equivalent based on the market price of the common shares as of the vesting date. Hudbay has historically settled RSUs in cash. Except in specified circumstances, RSUs and PSUs terminate when an employee ceases to be employed by the Company. Valuations of RSUs and PSUs reflect estimated forfeitures.

Equity-settled transactions with employees relate to stock options and are measured by reference to the fair value at the earlier of the grant date and the date that the employee unconditionally became entitled to the award. Fair value is determined using a Black-Scholes option pricing model, which relies on estimates of the future risk-free interest rate, future dividend payments, future share price volatility and the expected average life of the options. Hudbay believes this model adequately captures the substantive features of the option awards and is appropriate to calculate their fair values. The fair value determined at the grant date is recognized over the vesting period in accordance with vesting terms and conditions, with a corresponding increase to other capital reserves. The amount recognized as an expense is adjusted to reflect the number of awards for which the related service and non-market vesting conditions are expected to be met.

(p) Earnings per share:

The Company presents basic and diluted earnings (loss) per share ("EPS") data for its common shares. Basic EPS is calculated by dividing the profit or loss attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to common shareholders and the weighted average number of common shares outstanding for the effects of all dilutive potential common shares, which previously consisted of stock options granted to employees and warrants.

When calculating earnings per share for periods where the Company has a loss, Hudbay's calculation of diluted earnings per share excludes any incremental shares from the assumed conversion of stock options as they would be anti-dilutive.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021

(q) Leases:

Leases, under which substantially all the risks and rewards incidental to ownership of the leased item are transferred to Hudbay, are capitalized as assets at the inception of the lease at the lower of fair value or the present value of the minimum lease payments. Lease payments are apportioned between finance charges and the reduction of the liability so as to achieve a constant periodic rate of interest on the remaining balance of the liability. Finance charges are reflected in the consolidated income statements as finance costs.

Non-ROU lease payments are recognized as an expense in the consolidated income statements on a straight-line basis over the lease term.

(r) Segment reporting:

An operating segment is a component of the Company that engages in business activities from which it may earn revenue and incur expenses and for which discrete financial information is available. Hudbay's chief executive officer regularly reviews the operating results of each operating segment to make decisions about resources to be allocated to the segment and assess its performance. In determining operating segments, Hudbay considers location and decision-making authorities. Refer to note 32.

4. New standards

New standards issued but not yet effective

Amendment to IAS 1 - Presentation of Financial Statements

The amendments to IAS 1 clarify that only covenants with which an entity is required to comply on or before the reporting date affect the classification of a liability as current or non-current. In addition, an entity has to disclose information in the notes that enables users of financial statements to understand the risk that non-current liabilities with covenants could become repayable within twelve months. Classification is unaffected by the expectations that the entity will exercise its right to defer settlement of a liability. Lastly, the amendments clarify that settlement refers to the transfer to the counterparty of cash, equity instruments, other assets. The amendments are effective for annual periods beginning on or after January 1, 2024. Earlier application is permitted. The Company has not yet determined the effect of adoption of this amendment on its consolidated financial statements.

5. Reclassification of comparative amounts

Certain prior period amounts have been reclassified for consistency with the current period presentation. The gold prepayment liability (note 16) has been reclassified to its own financial statement line item within the consolidated balance sheet due to the size of the balance. The balance was previously included in other financial liabilities. Re-evaluation adjustment - environmental provision has been reclassified to its own financial statement line item within the consolidated income statements due to the significant increases in this balance. This balance was previously included in other expenses. Evaluation expense has been reclassified and presented within other expenses on the consolidated income statement. This balance was previously included within exploration and evaluation expenses as well as other expenses (note 6f). Environmental obligation adjustment was previously included within Other in the operating activities section of the consolidated statements of cash flows and has now been reclassified to its own line within operating activities. Community agreement payments were previously included within acquisition of property, plant and equipment in the investing activities section of the consolidated statements of cash flows and has now been reclassified to its own line within investing activities. These reclassifications had no effect on the previous reported net loss and net equity.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021

6. Revenue and expenses

(a) Revenue

Hudbay's revenue by significant product types:

		Year ended December 31,
		2022			2021
Copper	$	838,126		$	873,339
Zinc		223,400			301,086
Gold		325,133			246,562
Silver		24,959			26,932
Molybdenum		54,531			37,487
Other		5,374			7,454
Revenue from contracts		1,471,523			1,492,860
Non-cash streaming arrangement items ^1^
Amortization of deferred revenue - gold		35,994			37,788
Amortization of deferred revenue - silver		36,235			33,731
Amortization of deferred revenue - variable consideration adjustments - prior periods		959			1,617
		73,188			73,136
Pricing and volume adjustments ^2^		(14,335	)		(8,568	)
		1,530,376			1,557,428
Treatment and refining charges		(68,936	)		(55,430	)
	$	1,461,440		$	1,501,998
^1^See note 19.
^2^Pricing and volume adjustments represent mark-to-market adjustments on initial estimate of provisionally priced sales, realized and unrealized changes to fair value for fixed for floating swaps, non-hedge derivative contracts and adjustments to originally invoiced weights and assays.

Consideration from the Company's stream agreements is considered variable (note 19). Gold and silver stream revenue can be subject to cumulative adjustments when the amount of precious metals to be delivered under the contract changes. As a result of changes in the Company's mineral reserve and resource estimate in the first quarter of 2022, the amortization rate by which deferred revenue is drawn down into income was adjusted and, as required, a variable consideration adjustment was made for all prior year stream revenues since the stream agreement inception date. A variable consideration adjustment was also recorded on September 30, 2022 in Manitoba following a revised forecast for 777 in the third quarter of 2022, which indicated that substantially all of 777's precious metals reserves and inventory levels have been depleted. These variable consideration adjustments resulted in an increase of revenue of $959 for the year ended December 31, 2022 (December 31, 2021 - increase of revenue of $1,617). In the second quarter of 2021, the Company finalized an amendment with Wheaton Precious Metals ("Wheaton") related to the Peru stream agreement. The result of the amendment was a revision to the Peru gold and silver deferred revenue amortization rates and the related significant financing component. For further details refer to note 19.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021

(b) Mine operating costs

During the year ended December 31, 2022, Hudbay recognized a recovery of $557 in cost of sales related to adjustments of the carrying value of Peru inventories to net realizable value (year ended December 31, 2021 - recovery of $1,446) and a non-cash write-down of Manitoba materials and supplies inventories of $4,110 (year ended December 31, 2021 - $5,445) (note 9).

During 2022, as a result of the closure of the Flin Flon operations, certain employees retired or left employment with the Company. Upon reflecting the reductions in the number of employees accruing services for both the defined benefit pension and for other employee benefit plans, this resulted in a gain of $2,384 recorded during the fourth quarter of 2022 (note 6e).

During 2021, the Company recognized a past service cost provision adjustment related to pensions for certain Manitoba employees of $4,989 (note 6e).

(c) Depreciation and amortization

Depreciation of PP&E and amortization of intangible assets are reflected in the consolidated income statements as follows:

		Year ended December 31,
		2022		2021
Cost of sales	$	337,615	$	357,924
Selling and administrative expenses		1,448		1,843
	$	339,063	$	359,767

(d) Share-based compensation expenses

Share-based compensation expenses are reflected in the consolidated income statements as follows:

		Cash-settled										Total share-<br>based<br>compensation<br>expense
		RSUs		DSUs			PSUs			Stock<br>options
Year ended December 31, 2022
Cost of sales	$	420	$	-		$	-		$	-	$	420
Selling and administrative		1,541		(849	)		(1,011	)		1,848		1,529
Other expenses		115		-			-			-		115
	$	2,076	$	(849	)	$	(1,011	)	$	1,848	$	2,064
Year ended December 31, 2021
Cost of sales	$	1,347	$	-		$	-		$	-	$	1,347
Selling and administrative		3,668		1,459			3,382			1,919		10,428
Other expenses		370		-			-			-		370
	$	5,385	$	1,459		$	3,382		$	1,919	$	12,145

During the year ended December 31, 2022, the Company granted 602,614 stock options (year ended December 31, 2021 - 509,385). For further details on stock options, see note 25b.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021

(e) Employee benefits expense

This table presents employee benefit expense recognized in the consolidated income statements, including amounts transferred from inventory upon sale of goods:

		Year ended December 31,
		2022			2021
Current employee benefits	$	184,100		$	202,694
Profit-sharing plan expense		22,002			2,708
Share-based compensation (notes 6d, 20, 25)
Equity settled stock options		1,848			1,919
Cash-settled restricted share units		2,076			5,385
Cash-settled deferred share units		(849	)		1,459
Cash-settled performance share units		(1,011	)		3,382
Employee share purchase plan		1,941			1,933
Post-employee pension benefits
Defined benefit plans		9,737			11,433
Defined contribution plans		2,097			2,061
Post-employment plan curtailment (note 6b, 21, 22)		(2,384	)		-
Past service costs (note 6b, 21)		-			4,989
Post-employment plan attribution changes (note 22)		(3,179	)		-
Other post-retirement employee benefits		8,894			7,526
Termination benefits		5,092			470
	$	230,364		$	245,959

Manitoba has a profit sharing plan required by the collective bargaining agreement whereby 10% of Manitoba's after tax profit (excluding provisions or recoveries for deferred income tax and deferred mining tax) for any given fiscal year will be distributed to all eligible employees in the Flin Flon/Snow Lake operations, with the exception of executive officers and key management personnel.

Peru has a profit sharing plan required by Peruvian law whereby 8% of Peru's taxable income will be distributed to all employees within Peru's operations.

The Company has an employee share purchase plan for executives and other eligible employees where participants may contribute between 1% and 10% of their pre-tax base salary to acquire Hudbay shares. The Company makes a matching contribution of 75% of the participant's contribution.

See note 21 for a description of Hudbay's pension plans and note 22 for Hudbay's other employee benefit plans.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021

(f) Other expenses

		Year ended December 31,
		2022			2021
Regional costs	$	4,813		$	3,652
(Gain) loss on disposal of PP&E and non-current assets		(3,312	)		7,038
Amortization of community costs (other assets)		2,720			1,768
Restructuring - Manitoba		10,609			6,947
Care & maintenance - Manitoba		9,040			-
Evaluation costs		7,964			13,293
Insurance recovery		(5,698	)		-
Change in other provisions (non-capital)		5,798			-
Other		652			2,421
	$	32,586		$	35,119

During the year ended December 31, 2022, there were costs incurred related to the restructuring of the Manitoba operations in preparation for the closure of 777 mine, zinc plant and Flin Flon mill of $10,609 (December 31, 2021 - $6,947). These costs were related to activities performed in advance of these closures along with ongoing restructuring, closure and severance costs.

During the year ended December 31, 2022, gains on the disposition of property, plant and equipment and other non-current assets includes the disposition of Mason's Lordsburg property, along with dispositions of non-current assets as a result of the closure of our Flin Flon operations.

During the year ended December 31, 2022, a gain of $5,698 was recorded to reflect the insurance recovery claim proceeds following a shaft incident at 777 in October 2020. As of December 31, 2022, all of the proceeds have been received.

The Flin Flon concentrator and tailings impoundment has been shifted to care and maintenance to provide optionality should another mineral discovery occur in the Flin Flon area. During the year ended December 31, 2022, care & maintenance costs were $9,040.

Evaluation expenses incurred in the first half of 2022 relate primarily to preliminary economic assessment ("PEA") study costs of Arizona's Copper World Complex.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021

(g) Net finance expense ****

		Year ended December 31,
		2022			2021
Net interest expense on long-term debt
Interest expense on long-term debt	$	67,663		$	74,748
Accretion on streaming arrangements (note 19)
Additions		28,718			42,060
Variable consideration adjustments - prior periods		(940	)		594
		27,778			42,654
Change in fair value of financial assets and liabilities at fair value through profit or loss
Embedded derivatives (note 18)		-			49,754
Gold prepayment liability (note 16)		3,426			293
Investments		(2,484	)		4,467
		942			54,514
Other net finance costs
Net foreign exchange (gain) loss		(5,384	)		1,403
Accretion on community agreements measured at amortized cost		3,099			2,811
Accretion on environmental provisions (note 20)		8,498			4,988
Accretion on Wheaton refund liability		879			-
Withholding taxes		6,092			7,727
Premium paid on redemption of notes (note 18)		-			22,878
Write-down of unamortized transaction costs (note 18)		-			2,480
Loss (gain) on disposal of investments		3,648			(968	)
Other finance expense		7,885			8,781
Interest income		(2,606	)		(997	)
		22,111			49,103
Net finance expense	$	118,494		$	221,019

Other finance expense relates primarily to fees on Hudbay's revolving credit facilities and leases.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021

(h) Impairment - Arizona

As a result of the PEA released for the Copper World Complex during the second quarter of 2022, which contemplates the mining of the recently discovered Copper World deposits and the East deposit (formerly referred to as the Rosemont deposit) in a two-phase mine plan, it was determined that certain capitalized costs and assets associated with the previous stand-alone development plan for the East deposit are no longer recoverable. As a result, during the second quarter of 2022, the Company recognized a pre-tax impairment loss of $94,956 related to these assets. The impairment loss was determined based on the specific identification of assets fair value less costs of disposal that are not expected to be recoverable under the Copper World Complex PEA. The Company presented the impairment losses within the Arizona segment in note 32. The fair value measurements used in the determination of impairment charges are categorized as level 2 based on the degree to which inputs are observable and have a significant effect on the recorded fair value.

(i) Impairment - Environmental Provision

During the third quarter and fourth of 2021, an impairment indicator was identified in relation to a revised Flin Flon closure plan. The revised closure plan, reflecting higher cost estimates, led to a large increase in the environmental reclamation provision and a corresponding increase to Flin Flon reclamation assets, which is recorded within PP&E. The increase in Flin Flon PP&E prompted an impairment test of these assets since the Flin Flon operation was expected to close mid-2022. Hudbay recorded an impairment to PP&E by comparing the carrying value of the Flin Flon operation to its recoverable amount using the value-in-use method for future cash flows associated with the operation until closure. The value-in-use recoverable amount is considered a level 3 valuation method incorporating assumptions for commodity prices, foreign exchange rates, remaining reserves, timing of extraction and operating costs. This resulted in an impairment loss of $193,473 for the year ended December 31, 2021.

7. Cash

Cash balances represent demand deposits and deposits with an original maturity date of less than 3 months.

8. Trade and other receivables

		Dec. 31, 2022		Dec. 31, 2021
Current
Trade receivables	$	84,096	$	166,524
Statutory receivables		25,544		31,191
Other receivables		3,542		6,366
		113,182		204,081
Non-current
Taxes receivable		13,329		16,084
	$	126,511	$	220,165

The decrease in trade receivables during the year ended December 31, 2022 primarily relates to the receipt of payment for three shipments in early 2022 which were sold in 2021, representing 30,000 tonnes of copper concentrate.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021

9. Inventories

		Dec. 31, 2022		Dec. 31, 2021
Current
Stockpile	$	26,235	$	12,768
Work in progress		3,092		5,647
Finished goods		64,937		78,958
Materials and supplies		60,748		61,080
		155,012		158,453
Non-current
Stockpile		42,785		34,156
Materials and supplies		7,940		3,417
		50,725		37,573
	$	205,737	$	196,026

The cost of inventories recognized as an expense, including depreciation, and included in cost of sales amounted to $1,062,228 for the year ended December 31, 2022 (year ended December 31, 2021 - $1,069,309).

During the year ended December 31, 2022, Hudbay recognized a recovery of $557 in cost of sales related to adjustments of the carrying value of Peru inventories to net realizable value (year ended December 31, 2021 - recovery of $1,446). Adjustments of the carrying value of inventories to net realizable value were related to changes in commodity prices.

During the year ended December 31, 2022, Hudbay recognized an expense of $4,110 in cost of sales related to adjustments to the carrying value of Manitoba materials and supplies inventories to net realizable value (year ended December 31, 2021 - expense of $5,445).

10. Other financial assets

		Dec. 31, 2022		Dec. 31, 2021
Current
Derivative assets	$	577	$	7,430
Restricted cash		486		437
		1,063		7,867
Non-current
Investments at fair value through profit or loss		9,799		11,158
	$	10,862	$	19,025
HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021
---

11. Intangibles and other assets

Intangibles and other assets of $49,841 (December 31, 2021 - $20,138) includes $45,074 of other assets (December 31, 2021 - $14,240) and $4,767 of intangibles (December 31, 2021 - $5,898).

Other assets represent the carrying value of certain future community costs that relate to agreements with communities near the Peru operations which allow Hudbay to extract or explore minerals over the useful life of Peru operations. The liability remaining for these costs is recorded in agreements with communities recorded at amortized cost (note 15). Amortization of the carrying amount is recorded in the consolidated income statements within other expenses (note 6f) or exploration expenses, depending on the nature of the agreement.

The increase in agreements with communities recorded at amortized cost during the year ended December 31, 2022 primarily relates to the execution of the exploration agreement with the community of Uchucarcco which provides surface rights to the Maria Reyna and Caballito satellite properties located near the Constancia operation, partially offset by amortization of the carrying amount.

Intangibles mainly represent computer software costs. The following table summarizes changes in intangibles:

		Dec. 31, 2022			Dec. 31, 2021
Cost
Balance, beginning of year	$	24,768		$	23,350
Additions		169			968
Disposals		(1,553	)		386
Effects of movement in exchange rates		389			64
Balance, end of year		23,773			24,768
Accumulated amortization
Balance, beginning of year		18,870			17,941
Additions		1,057			872
Disposals		(1,274	)		-
Effects of movement in exchange rates		353			57
Balance, end of year		19,006			18,870
Intangibles, net book value	$	4,767		$	5,898
HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021
---

12. Property, plant and equipment

Dec. 31, 2022	Explorationandevaluationassets			Capitalworks inprogress			Miningproperties			Plant andequipment			Plant andequipment- ROUassets^1^			Total
Balance, Jan. 1, 2022	88,207		$	858,230		$	2,434,000		$	2,983,919		$	259,726		$	6,624,082
Additions	18,386			173,810			3,148			35,953			27,984			259,281
Capitalized stripping and development	-			-			89,262			-			-			89,262
Decommissioning and restoration	-			723			(12,583	)		(25,248	)		-			(37,108	)
Derecognition of assets - cost	-			-			(995,575	)		(422,524	)		(2,950	)		(1,421,049	)
Capitalized accretion and depreciation	-			1,607			-			(2	)		-			1,605
Transfers and other movements	(29,395	)		(154,554	)		3,825			231,444			(51,320	)		-
Disposals	(215	)		(1,091	)		-			(7,691	)		(28,434	)		(37,431	)
Impairment (Note 6h)	-			(94,956	)		-			-			-			(94,956	)
Effects of movements in exchange rates	(1,002	)		(4,918	)		(16,915	)		(53,234	)		(2,569	)		(78,638	)
Balance, Dec. 31, 2022	75,981			778,851			1,505,162			2,742,617			202,437			5,305,048
Accumulated depreciation
Balance, Jan. 1, 2022	-			-			1,284,369			1,445,122			153,625			2,883,116
Depreciation for the year	-			-			155,503			169,096			22,786			347,385
Derecognition of assets - accumulated depreciation	-			-			(995,575	)		(422,524	)		(2,950	)		(1,421,049	)
Transfers and other movements	-			-			5			25,055			(25,060	)		-
Disposals	-			-			-			(4,094	)		(19,516	)		(23,610	)
Effects of movement in exchange rates	-			-			(151	)		(31,446	)		(1,627	)		(33,224	)
Balance, Dec. 31, 2022	-			-			444,151			1,181,209			127,258			1,752,618
Net book value	75,981		$	778,851		$	1,061,011		$	1,561,408		$	75,179		$	3,552,430
1 Includes 5,413 of capital works in progress - ROU assets (costs) that relate to the Arizona business unit (December 31, 2021 - 5,112, related to the Arizona business unit).

All values are in US Dollars.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021
Dec. 31, 2021		Exploration<br>and<br>evaluation<br>assets		Capital<br>works in<br>progress			Mining<br>properties			Plant and<br>equipment			Plant and<br>equipment-<br>ROU<br>assets^1^			Total
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
Balance, Jan. 1, 2021	$	79,059	$	957,162		$	2,217,461		$	2,793,719		$	214,303		$	6,261,704
Additions		9,084		268,090			1,731			17,735			49,695			346,335
Capitalized stripping and development		-		-			79,426			-			-			79,426
Decommissioning and restoration		-		(525	)		4,630			139,911			-			144,016
Transfers and other movements		-		(357,381	)		128,320			229,981			(920	)		-
Impairment (Note 6i)		-		-			(1,054	)		(192,419	)		-			(193,473	)
Disposals		-		(5,941	)		-			(10,803	)		(3,544	)		(20,288	)
Effects of movements in exchange rates		64		(3,175	)		3,486			5,795			192			6,362
Balance, Dec. 31, 2021		88,207		858,230			2,434,000			2,983,919			259,726			6,624,082
Accumulated depreciation
Balance, Jan. 1, 2021		-		-			1,126,274			1,271,581			132,194			2,530,049
Depreciation for the year		-		-			155,878			181,565			24,536			361,979
Disposals		-		-			-			(8,525	)		(3,158	)		(11,683	)
Effects of movement in exchange rates		-		-			2,217			501			53			2,771
Balance, Dec. 31, 2021		-		-			1,284,369			1,445,122			153,625			2,883,116
Net book value	$	88,207	$	858,230		$	1,149,631		$	1,538,797		$	106,101		$	3,740,966

^1^Includes $5,112 of capital works in progress - ROU assets (costs) that relate to the Arizona business unit.

At December 31, 2022, capital works in progress decreased compared to December 31, 2021 as a result of a pre-tax impairment charge of $94,956 related to certain capitalized costs and assets associated with the previous stand-alone development plan for the East deposit that are no longer recoverable (see note 6h).

The closure of the Flin Flon operations in the second quarter of 2022 has led to the derecognition of fully depreciated assets. This resulted in a decrease in both the cost and accumulated depreciation of the Mining Properties and Plant and Equipment categories.

An indicator of impairment was identified in the second quarter of 2022 as a result of the recently released PEA and new mine plan for the Copper World Complex in Arizona. As such, management determined that a detailed impairment evaluation as at June 30, 2022 was required for the Arizona CGU. Management determined that the fair value less cost to dispose exceeded the carrying value of the Arizona CGU, accordingly no impairment was recorded.

During the third and fourth quarter of 2021, an impairment indicator was identified in relation to a revised Flin Flon closure plan. The revised closure plan, reflecting higher cost estimates, led to a large increase in the environmental reclamation provision (note 20) and a corresponding increase to Flin Flon PP&E. The increase in Flin Flon PP&E prompted an impairment test of these assets since the Flin Flon operation was expected to close mid-2022. Hudbay recorded an impairment to PP&E by comparing the carrying value of the Flin Flon operation to its recoverable amount using the value-in-use method for future cash flows associated with the operation until closure. The value-in-use recoverable amount is considered a level 3 valuation method. This resulted in an impairment loss of $193,473 for the year ended December 31, 2021.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021

13. Trade and other payables

		Dec. 31, 2022		Dec. 31, 2021
Trade payables	$	83,824	$	84,279
Accruals and payables		95,540		84,992
Accrued interest		16,279		16,120
Exploration and evaluation payables		229		3,788
Statutory payables		15,595		18,598
	$	211,467	$	207,777

Accruals and payables include operational and capital costs and employee benefit amounts owing.

14. Other liabilities

		Dec. 31, 2022		Dec. 31, 2021
Unearned revenue	$	15,086	$	7,983
Environmental and other provisions (note 20)		24,091		41,017
Pension liability (note 21)		4,146		10,472
Other employee benefits (note 22)		3,483		3,530
	$	46,806	$	63,002

15. Other financial liabilities

		Dec. 31, 2022		Dec. 31, 2021
Current
Derivative liabilities	$	17,995	$	12,451
Deferred Rosemont acquisition consideration		9,713		9,713
Agreements with communities recorded at amortized cost		5,593		7,144
		33,301		29,308
Non-current
Deferred Rosemont acquisition consideration		9,163		17,805
Agreements with communities recorded at amortized cost		36,900		29,129
Wheaton refund liability (note 19)		6,383		5,424
		52,446		52,358
	$	85,747	$	81,666
HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021
---

Agreements with communities recorded at amortized cost relate to agreements with communities near the Constancia operation which allow Hudbay to extract minerals over the useful life of the Constancia operation, carry out exploration and evaluation activities in the area and provide Hudbay with community support to operate in the region. The changes in agreements with communities recorded at amortized cost during the year ended December 31, 2022 primarily relates to the execution of the exploration agreement with the community of Uchucarcco which provides surface rights to the Maria Reyna and Caballito satellite properties located near the Constancia operation, partially offset by disbursements, which was primarily all paid during the year. The changes in agreements with communities recorded at amortized cost during the year ended December 31, 2021 primarily relates to the execution of the remaining land user agreements with certain community members, changes in estimates, the accretion of the liability offset by disbursements.

The following table summarizes changes in agreements with communities recorded at amortized cost:

Balance, January 1, 2021	$	40,787
Net additions		22,796
Disbursements		(26,511	)
Accretion		2,811
Effects of changes in foreign exchange		(3,610	)
Balance, December 31, 2021	$	36,273
Net additions		39,240
Disbursements		(37,491	)
Accretion		3,099
Effects of changes in foreign exchange		1,372
Balance, December 31, 2022	$	42,493
HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021
---

16. Gold prepayment liability

Gold prepayment liabilities are reflected in the consolidated balance sheets as follows:

		Dec. 31, 2022		Dec. 31, 2021
Current	$	71,208	$	71,394
Non-current		-		68,614
	$	71,208	$	140,008

The following table summarizes changes in the gold prepayment liability:

Balance, January 1, 2021	$	137,031
Change in fair value recorded in profit or loss		293
Change in fair value recorded in other comprehensive income		2,684
Balance, December 31, 2021	$	140,008
Change in fair value recorded in income statement (note 6g)		3,426
Change in fair value recorded in other comprehensive income		(512	)
Repayments		(71,714	)
Balance, December 31, 2022	$	71,208

17. Lease liability

Balance, January 1, 2021	63,514
Additional capitalized leases	49,695
Lease payments	(37,719	)
Accretion and other movements 1	2,512
Balance, December 31, 2021	78,002
Additional capitalized leases	27,984
Lease payments	(35,770	)
Derecognized leases	(8,918	)
Accretion and other movements	(279	)
Balance, December 31, 2022	61,019
1 Includes 1,844 of sale lease back additions to ROU leases.

All values are in US Dollars.

Lease liabilities are reflected in the consolidated balance sheets as follows:

		Dec. 31, 2022		Dec. 31, 2021
Current	$	16,156	$	33,529
Non-current		44,863		44,473
	$	61,019	$	78,002
HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021
---

Hudbay has entered into leases which expire between 2023 and 2033. The interest rates on leases which were capitalized have interest rates between 2.50% and 7.43%, per annum. The range of interest rates utilized for discounting varies depending mostly on the Hudbay entity acting as lessee and duration of the lease. For certain leases, Hudbay has the option to purchase the equipment and vehicles leased at the end of the terms of the leases. Hudbay's obligations under these leases are secured by the lessor's title to the leased assets. The present value of applicable lease payments has been recognized as an ROU asset, which was included as a non-cash addition to property, plant and equipment, and a corresponding amount as a lease liability.

There are no restrictions placed on Hudbay by entering into these leases.

The following outlines expenses recognized within the Company's consolidated income statements, relating to leases for which a recognition exemption was applied.

		Year ended December 31,
		2022		2021
Short-term leases	$	25,781	$	38,092
Low value leases		652		407
Variable leases		55,673		58,626
Total	$	82,106	$	97,125

Payments made for short-term, low value and variable leases would mostly be captured as expenses in the consolidated income statements, however, certain amounts may be capitalized to PP&E for the Arizona segment during its development phase and certain amounts may be reported in inventories given the timing of sales. Variable payment leases include equipment used for heavy civil works at Constancia.

18. Long-term debt

Long-term debt is comprised of the following:

		Dec. 31, 2022			Dec. 31, 2021
Senior unsecured notes (a)	$	1,188,132		$	1,185,805
Less: Unamortized transaction costs - revolving credit facilities (b)		(3,970	)		(5,531	)
	$	1,184,162		$	1,180,274
HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021
---

(a) Senior unsecured notes

Balance, January 1, 2021	1,139,695
Addition to Principal, net of 8,078 transaction costs	591,922
Principal repayments	(600,000	)
Write-down of fair value of embedded derivative (prepayment option)	49,754
Write-down of unamortized transaction costs	2,480
Accretion of transaction costs and premiums	1,954
Balance, December 31, 2021	1,185,805
Accretion of transaction costs and premiums	2,327
Balance, December 31, 2022	1,188,132

All values are in US Dollars.

As at December 31, 2022, $1,200,000 aggregate principal amount of senior notes were outstanding in two series: (i) a series of 4.50% senior notes due 2026 in an aggregate principal amount of $600,000 (the "2026 Notes") and (ii) a series of 6.125% senior notes due 2029 in an aggregate principal amount of $600,000 (the "2029 Notes").

2026 Notes

On March 8, 2021, Hudbay completed an offering of $600,000 aggregate principle amount of 4.50% senior unsecured notes due April 2026.

Hudbay used the proceeds of the offering, together with available cash on hand, to satisfy and discharge all of its obligations with respect to its then outstanding $600,000 aggregate principal amount of 7.625% senior unsecured notes due 2025 (the "2025 Notes").

Upon extinguishment of the 2025 Notes, the unamortized transaction costs of $2,480 were expensed in the consolidated income statements (note 6g). The 2025 Notes contained a prepayment option asset, which was previously valued at $49,754 and upon early redemption was written off and expensed in the consolidated income statements (note 6g).

The early redemption of the 2025 Notes also resulted in a call premium of $22,878 payable to the bondholders, which was expensed in the consolidated income statements (note 6g).

2029 Notes

On September 23, 2020, Hudbay completed an offering of $600,000 aggregate principal amount

of 6.125% senior unsecured notes due April 2029

Hudbay used the proceeds of the offering to satisfy and discharge all of its obligations with respect to its then outstanding $400,000 aggregate principal amount of 7.25% senior unsecured notes due 2023.

The senior notes are guaranteed on a senior unsecured basis by substantially all of the Company's subsidiaries, other than HudBay (BVI) Inc. and certain excluded subsidiaries, which include the Company's subsidiaries that own an interest in the Copper World deposit, East deposit and Mason project and any newly formed or acquired subsidiaries that primarily hold or may develop non-producing mineral assets that are in the pre-construction phase of development. Hudbay's revolving credit facilities are secured against substantially all of the Company's assets, other than those associated with the Arizona business unit.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021

(b) Unamortized transaction costs - revolving credit facilities

Balance, January 1, 2021	$	4,020
Accretion of transaction costs		(2,816	)
Transaction costs		4,327
Balance, December 31, 2021	$	5,531
Accretion of transaction costs		(1,761	)
Transaction costs		200
Balance, December 31, 2022 ^1^	$	3,970
^1^ Balance, representing deferred transaction costs, is in an asset position.

As at December 31, 2022, the Peru segment had nil in letters of credit issued under the Peru revolving credit facility to support its reclamation obligations and the Manitoba segment had $25,511 in letters of credit issued under the Canada revolving credit facility to support its reclamation and pension obligations. As at December 31, 2022, there were no cash advances under the credit facilities.

Surety bonds

The Arizona segment had $12,827 in surety bonds issued to support future reclamation and closure obligations. No cash collateral is required to be posted under these surety bonds.

Other letters of credit

The Peru segment had $107,556 in letters of credit issued with various Peruvian financial institutions to support future reclamation and other operating matters. No cash collateral is required to be posted under these letters of credit.

On August 22, 2022, Hudbay closed a C$130.0 million bilateral letter of credit facility ("LC Facility") with a major Canadian financial institution. As at December 31, 2022, the Manitoba segment had $56,735 in letters of credit issued under the LC Facility to support its reclamation and pension obligations.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021

19. Deferred revenue

777 Stream Agreement

For the year ended December 31, 2022, the drawdown rates for the 777 stream agreement for gold and silver were C$1,584 and C$31.28 per ounce, respectively (year ended December 31, 2021 - C$1,578 and C$30.38 per ounce, respectively). As of September 30, 2022 all of 777's precious metals reserves and inventory levels have been depleted and we expect no further drawdown of deferred revenue.

As part of the streaming agreement for the 777 mine, Hudbay must repay, with precious metals credits, the stream deposit by August 1, 2052, the expiry date of the agreement. If the stream deposit is not fully repaid with precious metals credits from 777 production by the expiry date, a payment for the remaining amount will be due at the expiry date of the agreement. As the 777 mine has concluded all mining activities following the depletion of reserves and finalized the sales of produced concentrate, Hudbay concluded that a portion of the stream deposit will not be repaid by means of precious metals credits from 777 production. The repayment amount is recorded as a refund liability (note 15), which is and will be discounted at the 9.0% rate inherent in the original 777 stream agreement and accreted over the remaining term of the agreement.

Peru Stream Agreement

During the second quarter of 2021, an amendment to the Peru gold stream was signed with Wheaton. The amendment eliminates the requirement to deliver 8,020 ounces of gold to Wheaton for not mining four million tonnes of ore from the Pampacancha deposit by June 30, 2021. In consideration for the elimination of this delivery obligation, Hudbay has agreed to increase the fixed gold recoveries that apply to Constancia ore production from 55% to 70% until December 31, 2025, which matches the fixed recovery rate that applies to Pampacancha production. In addition, Wheaton agreed that if Hudbay mined and processed four million tonnes of ore from the Pampacancha deposit by December 31, 2021, it would make an additional deposit payment of $4,000. As such, Hudbay revised its estimate of the remaining number of gold ounces expected to be delivered under the Peru streaming arrangement. Based on the nature of the amendment to the streaming agreement, it was determined that this contract modification should be treated as a termination of the existing contract and creation of a new contract. The accounting for such a modification is fully prospective.

As a result of the contract modification, the transaction price has been redetermined and the discount rate used to compute the significant financing component has been reassessed as of May 1, 2021. Under IFRS 15, the significant financing component is recognized as a financing charge at each reporting period and grosses up the deferred revenue balance to recognize the significant financing element that is inherent in the contract. Discount rates are significantly lower than compared to when the original contract was initiated which has resulted in lower amortized revenues and lower interest accretion expense from the date of modification.

As at December 31, 2021 Hudbay had mined and processed four million tonnes of ore from the Pampacancha deposit and, as such, Hudbay received an additional deposit payment of $4,000 in the fourth quarter of 2021.

For the year ended December 31, 2022, the drawdown rates for the Peru stream agreement for gold and silver were $734 and $14.95 per ounce, respectively (year ended December 31, 2021 - $791 and $17.47 per ounce, respectively).

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021

The following table summarizes changes in deferred revenue:

Balance, January 1, 2021	$	546,684
Amortization of deferred revenue
Liability drawdown		(71,519	)
Variable consideration adjustments - prior periods		(1,617	)
Accretion on streaming arrangements
Current year additions		42,060
Variable consideration adjustments - prior periods		594
Reclass of refund liability (note 15)		(5,424	)
Stream deposit		4,000
Effects of changes in foreign exchange		548
Balance, December 31, 2021	$	515,326
Amortization of deferred revenue (note 6a)
Liability drawdown		(72,229	)
Variable consideration adjustments - prior periods		(959	)
Accretion on streaming arrangements (note 6g)
Current year-to-date additions		28,718
Variable consideration adjustments - prior periods		(940	)
Effects of changes in foreign exchange		(378	)
Balance, December 31, 2022	$	469,538

Consideration from the Company's stream agreement is considered variable. Gold and silver stream revenue can be subject to cumulative adjustments when the number of ounces to be delivered under the contract changes. As a result of changes in the Company's mineral reserve and resource estimate in the first quarter of 2022 the amortization rate by which deferred revenue is drawn down into income was adjusted and, as required, a current period catch up adjustment was made for all prior period stream revenues since the stream agreement inception date. A variable consideration adjustment was also recorded on September 30, 2022 in Manitoba following a revised forecast for 777 in the third quarter of 2022, which indicated that substantially all of 777's precious metals reserves and inventory levels have been depleted. These variable consideration adjustments resulted in an increase in revenue of $959 and a decrease of finance expense of $940 for the year ended December 31, 2022 (December 31, 2021 - increase in revenue of $1,617 and an increase of finance expense of $594).

Deferred revenue is reflected in the consolidated balance sheets as follows:

		Dec. 31, 2022		Dec. 31, 2021
Current	$	64,658	$	88,963
Non-current		404,880		426,363
	$	469,538	$	515,326
HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021
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20. Environmental and other provisions

		Decommissioning,restorationand similarliabilities			Deferredshareunits^3^			Restrictedshareunits^1, 3^ ****			Performanceshareunits^3^			Other^2^			Total
Balance, January 1, 2022	$	467,800		$	8,107		$	10,889		$	5,402		$	10,320		$	502,518
Net additional provisions made		13,440			1,184			3,866			239			3,918			22,647
Disbursements		(15,460	)		-			(6,232	)		(1,115	)		(3,633	)		(26,440	)
Unwinding of discount (note 6g)		8,498			-			-			-			-			8,498
Effect of change in discount rate		(184,508	)		-			-			-			-			(184,508	)
Effect of foreign exchange		(13,368	)		(386	)		(352	)		(287	)		(392	)		(14,785	)
Effect of change in share price		-			(2,033	)		(1,316	)		(1,250	)		-			(4,599	)
Balance, December 31, 2022	$	276,402		$	6,872		$	6,855		$	2,989		$	10,213		$	303,331

^1^Certain amounts relating to the Arizona segment are capitalized.

^2^Relates primarily to restructuring costs and other non-capital provisions.

^3^ Please refer to note 25a for further information.

Provisions are reflected in the consolidated balance sheets as follows:

December 31, 2022		Decommissioning,restorationand similarliabilities		Deferredshare units		Restrictedshareunits^1^ ****		Performanceshareunits		Other		Total
Current (note 14)	$	4,162	$	6,872	$	4,836	$	1,736	$	6,485	$	24,091
Non-current		272,240		-		2,019		1,253		3,728		279,240
	$	276,402	$	6,872	$	6,855	$	2,989	$	10,213	$	303,331
		Decommissioning,<br>restoration<br>and similar<br>liabilities			Deferred<br>share units<br>(note 25a)			Restricted<br>share units^1^(note 25a)			Performance<br>share units<br>(note 25a)			Other^2^			Total
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
Balance, January 1, 2021	$	343,132		$	8,719		$	10,449		$	2,030		$	1,144		$	365,474
Net additional provisions made		172,023			1,233			5,523			2,993			9,182			190,954
Disbursements		(21,663	)		(2,053	)		(6,143	)		-			(5	)		(29,864	)
Unwinding of discount (note 6g)		4,988			-			-			-			-			4,988
Effect of change in estimate to inflation rates^3^		(23,173	)		-			-			-			-			(23,173	)
Effect of change in discount rate		(9,982	)		-			-			-			-			(9,982	)
Effect of foreign exchange		2,475			(18	)		316			(10	)		(1	)		2,762
Effect of change in share price		-			226			744			389			-			1,359
Balance, December 31, 2021	$	467,800		$	8,107		$	10,889		$	5,402		$	10,320		$	502,518

^1^Certain amounts relating to the Arizona segment are capitalized.

^2^Relates primarily to restructuring costs.

^3^Represents changes in estimates of inflation rates applied to expected undiscounted cash flows.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021
December 31, 2021		Decommissioning,<br>restoration<br>and similar<br>liabilities		Deferred<br>share units<br>(note 25a)		Restricted<br>share units^1^(note 25a)		Performance<br>share units<br>(note 25a)		Other		Total
---	---	---	---	---	---	---	---	---	---	---	---	---
Current (note 14)	$	16,759	$	8,107	$	5,061	$	4,622	$	6,468	$	41,017
Non-current		451,041		-		5,828		780		3,852		461,501
	$	467,800	$	8,107	$	10,889	$	5,402	$	10,320	$	502,518

Decommissioning, restoration and similar liabilities are remeasured at each reporting date to reflect changes in discount rates, which can significantly affect the liabilities.

Decommissioning, restoration and similar liabilities ("DRO")

Hudbay's decommissioning, restoration and similar liabilities relate to the rehabilitation and closure of currently operating mines and metallurgical plants, development-phase properties and closed properties. The amount of the provision has been recorded based on estimates and assumptions that management believes are reasonable; however, actual decommissioning and restoration costs may differ from expectations.

DRO are remeasured at each reporting date to reflect changes in discount rates, inflation, exchange rates, and timing and extent of cash outflows which can significantly affect the liabilities. The amount of this provision has been recorded based on estimates and assumptions that management believes are reasonable; however, actual decommissioning and restoration costs may differ from expectations.

During the year ended December 31, 2022, the Company recorded a non-cash gain of $133,460 in the consolidated income statements mainly related to a revaluation adjustment of Flin Flon's environmental reclamation provision. This was primarily caused by a general increase in long term, risk-free discount rates during 2022 based on movements in Canadian bond yields. Typically, an operating site will reflect any revaluation adjustments of its environmental reclamation provision against its reclamation assets. However, since the Flin Flon operations closed in June 2022, the corresponding Flin Flon assets have been fully depreciated and cannot be reduced below their residual value, resulting in the remaining impact being recorded as a non-cash gain in re-evaluation adjustment - environmental provision in the consolidated income statements.

During the third quarter of 2021, following a comprehensive update to the Flin Flon closure plan, additional provisions were recognized to reflect higher estimates for closure activities in Flin Flon through to the year 2122. The increase in the environmental reclamation provision resulted in a corresponding increase in the Flin Flon reclamation asset, which is recorded within PP&E. However, in 2021, as the Flin Flon operation was approaching closure, an impairment indicator was identified in the third and fourth quarter of 2021 which led to an impairment loss of $193,473 for the year ended December 31, 2021 (note 6i).

During the year ended December 31, 2021, additional provisions were recognized mostly as a result of the aforementioned impact in Flin Flon and changes to discount rates.

Hudbay's decommissioning and restoration liabilities relate mainly to its Manitoba operations. Management has placed the remaining Flin Flon assets on care and maintenance. The majority of closure activities will occur once all mining activities in Manitoba are completed. These provisions also reflect estimated post-closure cash flows that extend to the year 2122 for ongoing monitoring and water treatment requirements. Management anticipates most decommissioning and restoration activities for the Constancia operation will occur from 2035 to 2103, which include ongoing monitoring and water treatment requirements.

These estimates have been discounted to their present value at rates ranging from 3.26% to 4.75% per annum (2021 - 0.39% to 1.94%), using pre-tax, risk-free interest rates that reflect the estimated maturity of each specific liability.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021

21. Pension obligations

Hudbay maintains non-contributory and contributory defined benefit pension plans for certain of its employees.

The Company uses a December 31 measurement date for all of its plans. For Hudbay's significant plans, the most recent actuarial valuations filed for funding purposes were performed during 2022 using the latest data available as at December 31, 2021, with the exception of more recently available data related to certain Manitoba plan members impacted by the Flin Flon closure. For these plans, the next actuarial valuation required for funding purposes will be performed during 2023 using the data as of December 31, 2022.

Movements in the present value of the defined benefit obligation in the current and previous years were as follows:

		Year ended
		Dec. 31, 2022			Dec. 31, 2021
Opening defined benefit obligation:	$	216,369		$	240,354
Current service costs		9,392			11,295
Curtailment (note 6b, 6e)		(583	)		-
Past service cost (note 6b, 6e)		-			4,989
Interest cost		5,938			6,172
Benefits paid from plan		(18,637	)		(22,546	)
Benefits paid from employer		(1,787	)		(866	)
Participant contributions		25			34
Effects of movements in exchange rates		(16,883	)		950
Remeasurement actuarial losses/(gains):
Arising from changes in demographic assumptions		-			1,498
Arising from changes in financial assumptions		(48,960	)		(24,663	)
Arising from experience adjustments		255			(848	)
Closing defined benefit obligation	$	145,129		$	216,369

The defined benefit obligation closing balance, by member group, is as follows:

		Dec. 31, 2022		Dec. 31, 2021
Active members	$	112,951	$	176,644
Deferred members		2,439		2,538
Retired members		29,739		37,187
Closing defined benefit obligation	$	145,129	$	216,369
HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021
---

Movements in the fair value of the pension plan assets in the current and previous years were as follows:

		Year ended
		Dec. 31, 2022			Dec. 31, 2021
Opening fair value of plan assets:	$	199,645		$	203,486
Interest income		5,667			5,387
Remeasurement adjustment:
Loss on plan assets (excluding amounts included in net interest expense)		(40,196	)		(306	)
Contributions from the employer		6,063			12,750
Employer direct benefit payments		1,787			866
Contributions from plan participants		25			34
Benefit payment from employer		(1,787	)		(866	)
Administrative expenses paid from plan assets		(80	)		(83	)
Benefits paid		(18,637	)		(22,546	)
Effects of changes in foreign exchange rates		(14,766	)		923
Closing fair value of plan assets	$	137,721		$	199,645

The amount included in the consolidated balance sheets arising from the entity's obligation in respect of its defined benefit plans is as follows:

		Dec. 31, 2022			Dec. 31, 2021
Present value of funded defined benefit obligation	$	131,503		$	197,546
Fair value of plan assets		(137,721	)		(199,645	)
Present value of unfunded defined benefit obligation		13,626			18,823
Net liability arising from defined benefit obligation	$	7,408		$	16,724

Reflected in the consolidated balance sheets as follows:

		Dec. 31, 2022		Dec. 31, 2021
Pension obligation - current (note 14)	$	4,146	$	10,472
Pension obligation - non-current		3,262		6,252
Total pension obligation	$	7,408	$	16,724
HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021
---

Pension expense is as follows:

		Dec. 31, 2022			Dec. 31, 2021
Service costs:
Current service cost	$	9,392		$	11,295
(Curtailment) / past service cost		(583	)		4,989
Total service cost		8,809			16,284
Net interest expense		271			785
Administration cost		80			83
Defined benefit pension expense	$	9,160		$	17,152
Defined contribution pension expense	$	2,097		$	2,061

Remeasurement on the net defined benefit liability:

		Dec. 31, 2022			Dec. 31, 2021
Loss on plan assets (excluding amounts included in net interest expense)	$	40,196		$	306
Actuarial losses arising from changes in demographic assumptions		-			1,498
Actuarial gains arising from changes in financial assumptions		(48,960	)		(24,663	)
Actuarial losses (gains) arising from experience adjustments		255			(848	)
Defined benefit gain related to remeasurement	$	(8,509	)	$	(23,707	)
Total pension cost	$	2,748		$	(4,494	)

Pension amounts recognized include those directly related to production of inventory; such amounts are recognized initially as costs of inventory and are expensed in the consolidated income statements within cost of sales upon sale of the inventory.

The current service cost, the interest cost and administration cost for the year are included in the employee benefits expense. The remeasurement of the net defined benefit liability is included in OCI.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021

The defined benefit pension plans typically expose Hudbay to actuarial risks such as: investment risk, interest rate risk, longevity risk and salary risk.

Investment risk	The present value of the liabilities for the defined benefit plans is calculated using a discount rate determined by reference to high quality corporate bond yields; if the return on plan assets is below this rate, it will create a plan deficit. Hudbay's primary quantitative investment objectives are maximization of the long term real rate of return, subject to an acceptable degree of investment risk and preservation of principal. Risk tolerance is established through consideration of several factors including past performance, current market condition and the funded status of the plan.
Interest risk	A decrease in the bond interest rate will increase the pension plan liabilities; however, this will be partially offset by an increase in the return on the plan's debt investments.
Longevity risk	The present value of the defined benefit plans liabilities is calculated by reference to the best estimate of the mortality of plan participants both during and after their employment. An increase in the life expectancy of the plan participants will increase the pension plans liabilities.
Salary risk	The present value of the defined benefit plans liabilities for some of the pension plans is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the plans' liabilities.

The principal assumptions used for the purposes of the actuarial valuations were as follows:

	2022	2021
Defined benefit cost:
Discount rate - benefit obligations	3.09 %	2.54%
Discount rate - service cost	3.21 %	2.66%
Expected rate of salary increase^1^	2.75 %	2.75%
Average longevity at retirement age for current pensioners (years)^2^ :
Males	20.4	20.3
Females	23.7	23.7
Defined benefit obligation:
Discount rate	5.22 %	3.09%
Expected rate of salary increase^1^	3.50 %	2.75%
Average longevity at retirement age for current pensioners (years)^2^ :
Males	20.4	20.4
Females	23.8	23.7
Average longevity at retirement age for current employees (future pensioners) (years)^2^ :
Males	22.3	22.2
Females	25.5	25.4
^1^ Plus merit and promotional scale based on member's age
^2^ Revised retirement pension plan only - CPM2014 Priv with MI-2017 projection scale with loading of 1.25 and 1.15 for males and females
HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021
---

Hudbay reviews the assumptions used to measure pension costs (including the discount rate) on an annual basis. Economic and market conditions at the measurement date affect these assumptions from year to year. In determining the discount rate, Hudbay considers the duration of the pension plan liabilities.

Significant actuarial assumptions for the determination of the defined benefit obligation are discount rate, expected salary increase and mortality. The sensitivity analysis below has been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting periods, while holding other assumptions constant:

If the discount rate is 50 basis points higher (lower), the defined benefit obligation would decrease by $10,667 (increase by $12,078).
If the expected salary growth increases (decreases) by 1%, the defined benefit obligation would increase by $1,406 (decrease $1,267).
If the life expectancy increases (decreases) by one year for both men and women, the defined benefit obligation would increase by $980 (decrease by $1,018).

The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation liability recognized in the consolidated balance sheets.

The Company's main pension plans are registered federally with the Office of the Superintendent of Financial Institution and with the Canada Revenue Agency. The registered pension plans are governed in accordance with the Pension Benefits Standards Act and the Income Tax Act. The sponsor contributes the amount needed to maintain adequate funding as dictated by the prevailing regulations.

Expected employer contribution to the pension plans for the fiscal year ending December 31, 2022 is $4,847.

The average duration of the pension obligation at December 31, 2022 is 16.2 years (2021 - 19.2 years). This number can be broken down as follows:

Active members: 18.3 years (2021: 21.0 years)
Deferred members: 17.5 years (2021: 23.5 years)
Retired members: 8.2 years (2021: 10.0 years)

Asset-Liability-Matching studies are performed periodically to analyze the investment policies in terms of risk and-return profiles.

The pension plans do not invest directly in either securities or property/real estate of the Company.

With the exception of fixed income investments and certain equity instruments, the plan assets are actively managed by investment managers, with the goal of attaining returns that potentially outperform passively managed investments. Within appropriate limits, the actual composition of the invested funds may vary from the prescribed investment mix.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021

The following is a summary of the fair value classification levels for investment:

December 31, 2022		Level 1		Level 2		Level 3		Total
Investments:
Money market instruments	$	2,270	$	-	$	-	$	2,270
Pooled equity funds		50,107		-		-		50,107
Pooled fixed income funds		-		64,230		-		64,230
Alternative investment funds		-		20,908		-		20,908
Balanced funds		-		206		-		206
	$	52,377	$	85,344	$	-	$	137,721
December 31, 2021		Level 1		Level 2		Level 3		Total
---	---	---	---	---	---	---	---	---
Investments:
Money market instruments	$	2,045	$	-	$	-	$	2,045
Pooled equity funds		78,092		-		-		78,092
Pooled fixed income funds		-		97,229		-		97,229
Alternative investment funds		-		21,983		-		21,983
Balanced funds		-		296		-		296
	$	80,137	$	119,508	$	-	$	199,645
HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021
---

22. Other employee benefits

Hudbay sponsors both other long-term employee benefit plans and non-pension post-employment benefits plans and uses a December 31 measurement date. These obligations relate mainly to commitments for post-retirement health benefits. Information about Hudbay's post-employment and other long-term employee benefits is as follows:

Movements in the present value of the defined benefit obligation in the current and previous years were:

		Year ended
		Dec. 31, 2022			Dec. 31, 2021
Opening defined benefit obligation	$	128,843		$	129,616
Current service cost^1^		4,656			3,861
Past service cost		-			134
Curtailment (note 6e)		(1,801	)		-
Interest cost		3,940			3,531
Attribution period changes (note 6e)		(3,179	)		-
Effects of movements in exchange rates		(6,074	)		639
Remeasurement actuarial losses/(gains):
Arising from changes in demographic assumptions		-			2,601
Arising from changes in financial assumptions		(36,058	)		(7,309	)
Arising from experience adjustments		(516	)		(1,034	)
Benefits paid		(2,595	)		(3,196	)
Closing defined benefit obligation	$	87,216		$	128,843

^1^Includes remeasurement of other long term employee benefits

The defined benefit obligation closing balance, by group member, is as follows:

		Dec. 31, 2022		Dec. 31, 2021
Active members	$	58,482	$	57,775
Inactive members		28,734		71,068
Closing defined benefit obligation	$	87,216	$	128,843

Movements in the fair value of defined benefit amounts in the current and previous years were as follows:

		Dec. 31, 2022			Dec. 31, 2021
Employer contributions	$	2,594		$	3,196
Benefits paid		(2,594	)		(3,196	)
Closing fair value of assets	$	-		$	-

The non-pension employee benefit plan obligations are unfunded.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021

Reconciliation of assets and liabilities recognized in the consolidated balance sheets:

		Dec. 31, 2022		Dec. 31, 2021
Unfunded benefit obligation	$	87,216	$	128,843
Vacation accrual and other - non-current		2,607		3,275
Net liability	$	89,823	$	132,118

Reflected in the consolidated balance sheets as follows:

		Dec. 31, 2022		Dec. 31, 2021
Other employee benefits liability - current (note 14)	$	3,483	$	3,530
Other employee benefits liability - non-current		86,340		128,588
Net liability	$	89,823	$	132,118

Other employee future benefit expense includes the following:

		Dec. 31, 2022		Dec. 31, 2021
Current service cost ^1^	$	2,855	$	3,995
Net interest cost		3,940		3,531
Components recognized in consolidated income statements	$	6,795	$	7,526
^1^ Includes remeasurement of other long term employee benefit and curtailment
		Dec. 31, 2022			Dec. 31, 2021
---	---	---	---	---	---	---
Remeasurement on the net defined benefit liability:
Actuarial losses arising from changes in demographic assumptions	$	-		$	2,601
Actuarial gains arising from changes in financial assumptions		(36,058	)		(7,309	)
Actuarial gains arising from changes experience adjustments		(516	)		(1,034	)
Components recognized in statements of comprehensive income	$	(36,574	)	$	(5,742	)
Total other employee future benefit cost	$	29,779		$	1,784

Other employee benefit amounts recognized include those directly related to production of inventory; such amounts are recognized initially as costs of inventory and are expensed in the consolidated income statements within cost of sales upon sale of the inventory.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021
	Dec. 31, 2022	Dec. 31, 2021
---	---	---
Defined benefit cost:
Discount rate	3.30 %	2.76%
Initial weighted average health care trend rate	6.00 %	5.66%
Ultimate weighted average health care trend rate	4.00 %	4.00%
Average longevity at retirement age for current pensioners (years)^1^:
Males	20.4	20.3
Females	23.7	23.7
	Dec. 31, 2022	Dec. 31, 2021
---	---	---
Defined benefit obligation:
Discount rate	5.27 %	3.30%
Initial weighted average health care trend rate	5.92 %	6.00%
Ultimate weighted average health care trend rate	4.00 %	4.00%
Average longevity at retirement age for current pensioners (years)^1^:
Males	20.4	20.4
Females	23.8	23.7
Average longevity at retirement age for current employees (future pensioners) (years)^1^:
Males	22.3	22.3
Females	25.5	25.4

^1^CPM2014 Priv with CPM-B projection scale

Hudbay reviews the assumptions used to measure other employee benefit costs (including the discount rate) on an annual basis.

The other employee benefit costs typically expose Hudbay to actuarial risks such as: interest rate risk, health care cost inflation risk and longevity risk.

Interest risk	A decrease in the bond interest rate will increase the plan liabilities.
Health care cost inflation risk	The majority of the plan's benefit obligations are linked to health care cost inflation and higher inflation will lead to higher liabilities.
Longevity risk	The majority of the plans' benefit liability is calculated by reference to the best estimate of the mortality of plan participants both during and after their employment. An increase in the life expectancy of the plan participants will increase the plans' liabilities. This is particularly significant for benefits subject to health care cost inflation where increases in inflation result in higher sensitivity to changes in life expectancy.
HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021
---

The sensitivity analyses below have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding other assumptions constant:

If the discount rate is 50 basis points higher (lower), the defined benefit obligation would decrease by $6,070 (increase by $6,843).
If the health care cost assumption increases (decreases) by 1%, the defined benefit obligation would increase by $13,940 (decrease by $11,188).
If the life expectancy increases (decreases) by one year for both men and women, the defined benefit obligations would increase by $2,888 (decrease by $2,885).

The average duration of the non-pension post-employment obligation at December 31, 2022 is 15.0 years (2021: 18.6 years).

This number can be broken down as follows:

Active members: 21.9 years (2021: 25.4 years)
Inactive members: 11.6 years (2021: 13.2 years)

23. Income and mining taxes

(a) Tax recoveries:

The tax expense (recoveries) is applicable as follows:

		Year ended<br>December 31,
		2022			2021
Current:
Income taxes	$	10,940		$	25,570
Mining taxes		10,673			20,830
Adjustments in respect of prior years		(704	)		-
		20,909			46,400
Deferred:
Income tax expense (recoveries) - origination, revaluation and/or reversal of temporary differences		218			(17,772	)
Mining tax expense - origination, revaluation and/or reversal of temporary difference		5,464			4,235
Adjustments in respect of prior years		(1,158	)		8,744
		4,524			(4,793	)
	$	25,433		$	41,607

Adjustments in respect of prior years refers to amounts changing due to the filing of tax returns and assessments from government authorities as well as any change identified that would result in a difference to our current or deferred tax balances as reported in the prior fiscal year end.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021

(b) Deferred tax assets and liabilities as represented on the consolidated balance sheets:

		Dec. 31, 2022			Dec. 31, 2021
Deferred income tax asset	$	125,638		$	133,584
Deferred income tax liability		(233,730	)		(249,638	)
Deferred mining tax liability		(17,564	)		(12,126	)
		(251,294	)		(261,764	)
Net deferred tax liability balance, end of year	$	(125,656	)	$	(128,180	)

(c) Changes in deferred tax assets and liabilities:

		Year ended <br>Dec. 31, 2022			Year ended<br>Dec. 31, 2021
Net deferred tax liability balance, beginning of year	$	(128,180	)	$	(127,534	)
Deferred tax (expense) recovery (note 23a)		(4,524	)		4,793
OCI transactions		(2,384	)		(5,474	)
Foreign currency translation on the deferred tax liability		9,432			35
Net deferred tax liability balance, end of year	$	(125,656	)	$	(128,180	)
HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021
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(d) Reconciliation to statutory tax rate:

As a result of its mining operations, the Company is subject to both income and mining taxes. Generally, most expenditures incurred are deductible in computing income tax, whereas mining tax legislation, although based on a measure of profitability from carrying on mining operations, is more restrictive in respect of the deductions permitted in computing income subject to mining tax. These restrictions include costs unrelated to mining operations as well as deductions for financing expenses, such as interest and royalties. In addition, income unrelated to carrying on mining operations is not subject to mining tax.

A reconciliation between tax expense and the product of accounting profit multiplied by the Company's statutory income tax rate for the years ended December 31, 2022 and 2021 is as follows:

		Year ended December 31,
		2022			2021
Statutory tax rate		26.3%			26.4%
Tax expense (recovery) at statutory rate	$	25,199		$	(53,526	)
Effect of:
Deductions related to mining taxes		(3,249	)		(5,491	)
Adjusted income taxes		21,950			(59,017	)
Mining tax expense		15,959			32,034
		37,909			(26,983	)
Permanent differences related to:
Capital items		(321	)		716
Other income tax permanent differences		3,839			2,775
Impact of remeasurement on decommissioning liability		(38,950	)		33,731
Temporary income tax differences not recognized		(509	)		4,483
Recognition of previously unrecognized deferred tax assets		(3,943	)		-
Impact related to differences in tax rates in foreign operations		15,339			21,201
Impact of changes to statutory tax rates		958			(706	)
Foreign exchange on non-monetary items		13,094			4,593
Impact related to tax assessments and tax return amendments		(1,983	)		1,797
Tax expense	$	25,433		$	41,607
HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021
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(e) Income tax effect of temporary differences - recognized:

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2022 and 2021 are as follows:

		Balance sheet
		Dec. 31, 2022			Dec. 31, 2021
Deferred income tax (liability) asset
Property, plant and equipment	$	(44,029	)	$	(40,491	)
Pension obligation		2,121			4,369
Other employee benefits		25,395			27,191
Decommissioning and restoration provision		20,454			29,870
Non-capital losses		104,481			93,892
Share issuance and debt cost		6,283			17,984
Deferred revenue		1,195			1,661
Other		9,738			(892	)
Deferred income tax asset		125,638			133,584
Deferred income tax liability (asset)
Property, plant and equipment		311,499			322,325
Other employee benefits		(1,024	)		(654	)
Decommissioning and restoration provision		(8,376	)		(9,609	)
Non-capital losses		(71,532	)		(58,777	)
Other		3,163			(3,647	)
Deferred income tax liability		233,730			249,638
Deferred income tax liability	$	(108,092	)	$	(116,054	)

The above reconciling items are disclosed at the tax rates that apply in the jurisdiction where they have arisen.

(f) Income tax temporary differences - not recognized:

The Company has not recognized a deferred tax asset on $44.5 million of non-capital losses (December 31, 2021 - $23.5 million), $154.6 million of capital losses (December 31, 2021 - $170.8 million) and $255.9 million (December 31, 2021 - $586.8 million) of other deductible temporary differences since the realization of any related tax benefit through future taxable profits is not probable. The capital losses have no expiry dates and the other deductible temporary differences do not expire under current tax legislation.

The Canadian non-capital losses were incurred between 2008 and 2022 and have a twenty-year carry forward period. The United States net operating losses were incurred between 2004 and 2022 and have a twenty-year carry forward period.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021

(g) Mining tax effect of temporary differences:

The tax effects of temporary differences that give rise to significant portions of the deferred mining tax assets and liabilities at December 31, 2022 and 2021 are as follows:

Canada		Dec. 31, 2022			Dec. 31, 2021
Property, plant and equipment	$	(4,996	)	$	(278	)
Peru		Dec. 31, 2022			Dec. 31, 2021
Property, plant and equipment	$	(12,568	)	$	(11,848	)

For the year ended December 31, 2022, Hudbay had unrecognized deferred mining tax assets of approximately $10,198 (December 31, 2021 - $18,159).

(h) Unrecognized taxable temporary differences associated with investments:

There are no taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, for which a deferred tax liability has not been recognized.

(i) Taxes receivable/payable:

The timing of payments results in significant variances in period-to-period comparisons of the tax receivable and tax payable balances.

(j) Other disclosure:

The tax rules and regulations applicable to mining companies are highly complex and subject to interpretation. The Company may be subject in the future to a review of its historic income and other tax filings and, in connection with such reviews, disputes can arise with tax authorities over the interpretation or application of certain tax rules and regulations in respect of the Company's business. These reviews may alter the timing or amount of taxable income or deductions. The amount ultimately reassessed upon resolution of issues raised may differ from the amount accrued.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021

24. Share capital

(a) Preference shares:

Authorized: Unlimited preference shares without par value.

Issued and fully paid: Nil.

(b) Common shares:

Authorized: Unlimited common shares without par value.

Issued and fully paid:

	Year ended <br>Dec. 31, 2022			Year ended<br>Dec. 31, 2021
	Commonshares		Amount	Common<br>shares		Amount
Balance, beginning of year	261,598,312	$	1,778,848	261,272,151	$	1,777,340
Exercise of options	421,545		1,926	326,161		1,508
Balance, end of year	262,019,857	$	1,780,774	261,598,312	$	1,778,848

During the year ended December 31, 2022, the Company declared two semi-annual dividends of C$0.01 per share. The Company paid $2,075 and $1,972 in dividends on March 25, 2022 and September 23, 2022 to shareholders of record as of March 8, 2022 and September 2, 2022.

During the year ended December 31, 2021, the Company declared two semi-annual dividends of C$0.01 per share each. The Company paid $2,090 and $2,056 in dividends on March 26, 2021 and September 24, 2021 to shareholders of record as of March 9, 2021 and September 3, 2021.

25. Share-based compensation

(a) Cash-settled share-based compensation:

Hudbay has three cash-settled share-based compensation plans, as described below.

Deferred Share Units (DSU)

At December 31, 2022, the carrying amount and the intrinsic value of the outstanding liability related to the DSU plan was $6,872 (December 31, 2021 - $8,107) (note 20). The following table outlines information related to DSUs granted, expenses recognized and payments made during the year.

		Year ended
		Dec. 31, 2022		Dec. 31, 2021
Granted during the year:
Number of units		238,627		173,929
Weighted average price (C$/unit)	$	6.45	$	8.85
Expenses recognized during the year^1^ (notes 6d)	$	849	$	1,459
Payments made during the year (note 20)	$	-	$	2,053

^1^This expense relates to the grant of DSUs, as well as mark-to-market adjustments, and is presented within selling and administrative expenses on the consolidated income statements.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021

Restricted Share Units (RSU)

RSUs granted under the LTEP Plan may be settled in the form of Hudbay common shares or, at the option of the Company, the cash equivalent based on the market price of the common shares as of the vesting date. RSUs may also be granted under Hudbay's Share Unit Plan, however; the RSUs granted under the Share Unit Plan may only be settled in cash. Hudbay has historically settled all RSUs in cash. The Company has determined that the appropriate accounting treatment is to classify the RSUs as cash settled transactions.

At December 31, 2022, the carrying amount of the outstanding liability related to the RSU plan was $6,855 (December 31, 2021 - $10,889) (note 20). The following table outlines information related to RSUs granted, expenses recognized and payments made in the year.

		Year ended
		Dec. 31, 2022			Dec. 31, 2021
Number of units, beginning of year		2,484,860			2,940.337
Number of units granted during the year		701,050			515,727
Credits for dividends		6,203			6,949
Number of units forfeited during the year		(180,324	)		(133,804	)
Number of units vested		(928,799	)		(844,349	)
Number of units, end of year ^1^		2,082,990			2,484,860
Weighted average price - granted (C$/unit)	$	9.64		$	10.42
Expenses recognized during the year^2^ (note 6d)	$	2,076		$	5,385
Payments made during the year (note 20)	$	6,232		$	6,143

^1^ Includes 778,224 units that have vested as of December 31, 2021; however, are unreleased and unpaid as of December 31, 2021.

^2^This net expense reflects recognition of RSU expense over the service period, as well as mark-to-market adjustments, and is presented mainly within cost of sales and selling and administrative expenses. Certain amounts related to the Arizona segment are capitalized.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021

Performance Share Units (PSU)

PSUs granted under the LTEP Plan may be settled in the form of Hudbay common shares or, at the option of the Company, the cash equivalent based on the market price of the common shares as of the vesting date. Hudbay has historically settled similar share-based compensation units in cash. The Company has determined that the appropriate accounting treatment is to classify the PSUs as cash settled transactions. The PSUs contain a performance based multiplier element which will be computed upon vesting.

At December 31, 2022, the carrying amount of the outstanding liability related to PSU plan was $2,989 (December 31, 2021 - $5,402) (note 20). The following table outlines information related to PSUs granted, expenses recognized and payments made in the year.

		Year ended
		Dec. 31, 2022			Dec. 31, 2021
Number of units, beginning of year		1,506,231			1,095,615
Number of units granted during the year		423,322			406,656
Credits for dividends		4,598			3,960
Number of units forfeited during the year		(285,782	)		-
Number of units vested		(275,306	)		-
Number of units, end of year		1,373,063			1,506,231
Weighted average price - granted (C$/unit)	$	9.82		$	10.42
(Recovery) expense recognized during the year (note 6d)	$	(1,011	)	$	3,382
Payments made during the year (note 20)	$	1,115		$	-

(b) Equity-settled share-based compensation - stock options:

The Company's stock option plan was approved in June 2005 and amended in May 2008 (the "Plan"). Under the amended Plan, the Company may grant to employees, officers, directors or consultants of the Company or its affiliates options to purchase up to a maximum of 13 million common shares of Hudbay. The Company has determined that the appropriate accounting treatment is to classify the stock options as equity settled transactions.

During the year ended December 31, 2022, the Company granted 602,614 stock options (year ended December 31, 2021 - 509,385).

The following table outlines the changes in the number of stock options outstanding:

	Year ended				Year ended
	Dec. 31, 2022				Dec. 31, 2021
	Number ofshares subjectto option			Weighted-averageexercise priceC$	Number of<br>shares subject<br>to option			Weighted<br>average<br>exercise price<br>C$
Balance, beginning of year	1,659,288		$	5.71	1,563,189		$	3.77
Number of units granted during the year	602,614		$	9.77	509,385		$	10.42
Exercised	(421,545	)	$	3.80	(326,161	)	$	3.76
Forfeited	(311,597	)	$	7.94	(87,125	)	$	5.79
Balance, end of year	1,528,760		$	7.38	1,659,288		$	5.71
HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021
---

The following table presents the weighted average fair value assumptions used in the Black-Scholes valuation of these options:

For options granted during the year ended		Dec. 31, 2022		Dec. 31, 2021
Weighted average share price at grant date (CAD)	$	9.77	$	10.42
Risk-free rate		1.81 %		1.02%
Expected dividend yield		0.2 %		0.2%
Expected stock price volatility (based on historical volatility)		55.9 %		60.5%
Expected life of option (months)		84		84
Weighted average per share fair value of stock options granted (CAD)	$	5.45	$	6.06

The following table outlines stock options outstanding and exercisable:

Dec. 31, 2022
Range ofexercise pricesC$	Number ofoptionsoutstanding	Weighted averageremainingcontractual life(years)		Weightedaverageexercise priceC$	Number ofoptionsexercisable		Weightedaverage shareprice at exercisedate C$
$3.76 - $3.92	644,983	4.15	$	3.76	264,553	$	3.76
$3.93 - $9.00	30,283	5.85	$	6.92	9,194	$	7.04
$9.01 - $9.92	487,005	6.16	$	9.92	-	$	-
$9.92 - $10.42	366,489	5.15	$	10.42	122,628	$	10.42
Dec. 31, 2021
---	---	---	---	---	---	---	---
Range of<br>exercise prices<br>C$	Number of<br>options<br>outstanding	Weighted average<br>remaining<br>contractual life<br>(years)		Weighted<br>average exercise<br>price C$	Number of<br>options<br>exercisable		Weighted<br>average share<br>price at exercise<br>date C$
$3.76 - $3.92	1,176,399	5.15	$	3.78	191,651	$	3.79
$10.42 - $10.42	482,889	6.15	$	10.42	-	$	-

Hudbay estimates expected life of options and expected volatility based on historical data, which may differ from actual outcomes.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021

26. Earnings per share

	Year ended December 31,
	2022	2021
Weighted average common shares outstanding
Basic	261,858,531	261,462,323
Plus net incremental shares from:
Assumed conversion: stock options	358,997	-
Diluted weighted average common shares outstanding	262,217,528	261,462,323

For periods where Hudbay records a loss, Hudbay calculates diluted loss per share using the basic weighted average number of shares. If the diluted weighted average number of shares were used, the result would be a reduction in the loss, which would be anti-dilutive.

The determination of the diluted weighted-average number of common shares excludes the impact of 640,089 weighted-average stock options outstanding that were anti-dilutive for the year ended December 31, 2021 as the Company recorded a loss in the financial periods being reported. For the year ended December 31, 2022, Hudbay calculated diluted loss per share using 262,217,528 common shares (for the year ended December 31, 2021 - 261,462,323).

27. Capital management

The Company's definition of capital includes total equity and long-term debt. Hudbay's long-term debt balance as at December 31, 2022 was $1,184,162 (December 31, 2021 - $1,180,274).

The Company's objectives when managing capital are to maintain a strong capital base in order to:

Advance Hudbay's corporate strategies to create long-term value for its stakeholders; and,
Sustain Hudbay's operations and growth throughout metals and materials cycles.

Hudbay monitors its capital and capital structure on an ongoing basis to ensure they are sufficient to achieve the Company's short-term and long-term strategic objectives in a capital intensive industry. Hudbay faces several risks, including volatile metals prices, inflationary pressures on costs, access to capital, and risk of delays and cost escalation associated with major capital projects. The Company continually assesses the adequacy of its capital structure to ensure its objectives are met. Hudbay monitors its cash, which were $225,665 as at December 31, 2022 (2021 - $270,989), together with availability under its committed credit facilities. Hudbay invests its cash primarily in Canadian bankers' acceptances, deposits at major Canadian and Peruvian banks, or treasury bills issued by the federal or provincial governments. In addition to the requirement to maintain sufficient cash balances to fund continuing operations, Hudbay must maintain sufficient cash to fund the interest expense on the long-term debt outstanding (note 18). As part of the Company's capital management activities, Hudbay monitors interest coverage ratios and leverage ratios.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021

28. Financial instruments

(a) Fair value and carrying value of financial instruments:

The following presents the fair value ("FV") and carrying value ("CV") of Hudbay's financial instruments and non-financial derivatives:

	Dec. 31, 2022				Dec. 31, 2021
	FV		CV		FV		CV
Financial assets at amortized cost
Cash1	225,665	$	225,665	$	270,989	$	270,989
Restricted cash1	486		486		437		437
Fair value through profit or loss
Trade and other receivables 1, 2, 3	87,638		87,638		172,890		172,890
Non-hedge derivative assets 4	577		577		7,430		7,430
Investments 5	9,799		9,799		11,158		11,158
Total financial assets	324,165	$	324,165	$	462,904	$	462,904
Financial liabilities at amortized cost
Trade and other payables1, 2	195,872		195,872		189,179		189,179
Deferred Rosemont acquisition consideration 8	18,876		18,876		27,518		27,518
Agreements with communities 6	35,870		42,493		33,947		36,273
Wheaton refund liability10	7,744		6,383		5,424		5,424
Senior unsecured notes 7	1,094,988		1,188,132		1,239,018		1,185,805
Fair value through profit or loss
Gold prepayment liability 9	71,208		71,208		140,008		140,008
Non-hedge derivative liabilities 4	17,995		17,995		12,451		12,451
Total financial liabilities	1,442,553	$	1,540,959	$	1,647,545	$	1,596,658
1 Cash, restricted cash, trade and other receivables and trade and other payables are recorded at carrying value, which approximates fair value due to their short-term nature and generally negligible credit losses.
2 Excludes tax and other statutory amounts.
3 Trade and other receivables contain receivables including provisionally priced receivables classified as FVTPL and various other items at amortized cost. The fair value of provisionally priced receivables is determined using forward metals prices which is a level 2 valuation method.
4 Derivatives are carried at their fair value, which is determined based on internal valuation models that reflect observable forward market commodity prices, currency exchange rates, and discount factors based on market US dollar interest rates adjusted for credit risk.
5 All investments are carried at their fair value, which is determined using quoted market bid prices in active markets for listed shares.
6 These financial liabilities relate to agreements with communities near the Constancia project in Peru (note 15). Fair values have been determined using a discounted cash flow analysis based on expected cash flows and a credit adjusted discount rate.
7 Fair value of the senior unsecured notes (note 18) has been determined using the quoted market price at period end.
8 Discounted value based on a risk adjusted discount rate.
9 The gold prepayment liability (note 16) is designated as fair value through profit or loss under the fair value option. Gains and losses related to the Company's own credit risk have been recorded at fair value through other comprehensive income. The fair value adjustment recorded in other comprehensive income for the year ended December 31, 2022 was a gain of 512 (year ended December 31, 2021 was a loss of 2,684).
10 Discounted value based on a market rate at inception of the applicable Wheaton contract for carrying value (note 19) and current market rate at period end for fair value.

All values are in US Dollars.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021

Fair value hierarchy

The table below provides an analysis by valuation method of financial instruments that are measured at fair value subsequent to recognition as well as financial instruments not measured at fair value but for which a fair value is disclosed. Levels 1 to 3 are defined based on the degree to which fair value inputs are observable and have a significant effect on the recorded fair value, as follows:

Level 1: Quoted prices in active markets for identical assets or liabilities;
Level 2: Valuation techniques use significant observable inputs, either directly or indirectly, or valuations are based on quoted prices for similar instruments; and,
Level 3: Valuation techniques use significant inputs that are not based on observable market data.

December 31, 2022		Level 1		Level 2		Level 3		Total
Financial assets measured at fair value
Financial assets at FVTPL:
Non-hedge derivatives	$	-	$	577	$	-	$	577
Investments		9,799		-		-		9,799
	$	9,799	$	577	$	-	$	10,376
Financial liabilities measured at fair value
Financial liabilities at FVTPL:
Non-hedge derivatives	$	-	$	17,995	$	-	$	17,995
Gold prepayment liability		-		71,208		-		71,208
Financial liabilities at amortized cost:
Agreements with communities		-		-		35,870		35,870
Wheaton refund liability		-		-		7,744		7,744
Senior unsecured notes		1,094,988		-		-		1,094,988
	$	1,094,988	$	89,203	$	43,614	$	1,227,805
December 31, 2021		Level 1		Level 2		Level 3		Total
---	---	---	---	---	---	---	---	---
Financial assets measured at fair value
Financial assets at FVTPL:
Non-hedge derivatives	$	-	$	7,430	$	-	$	7,430
Investments		11,158		-		-		11,158
	$	11,158	$	7,430	$	-	$	18,588
Financial liabilities measured at fair value
Financial liabilities at FVTPL:
Non-hedge derivatives	$	-	$	12,451	$	-	$	12,451
Gold prepayment liability		-		140,008		-		140,008
Financial liabilities at amortized cost:
Agreements with communities		-		-		33,947		33,947
Wheaton refund liability		-		-		5,424		5,424
Senior unsecured notes		1,239,018		-		-		1,239,018
	$	1,239,018	$	152,459	$	39,371	$	1,430,848
HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021
---

The Company's policy is to recognize transfers into and transfers out of fair value hierarchy levels as of the date of the event or change in circumstances that caused the transfer. During the year ended December 31, 2022 and December 31, 2021, Hudbay did not make any such transfers.

The following valuation techniques are used for instruments categorized in Levels 2 and 3:

Non-hedge derivatives (Level 2) - These contracts have been fair valued using observable forward commodity prices corresponding to the maturity of the contract.
Gold prepayment liability (Level 2) - This contract have been fair valued using observable gold forward prices corresponding to the delivery date of gold ounces in the contract along with an estimate of credit risk for similar instruments.
Agreements with communities (Level 3) - These contracts have been fair valued using an applicable credit-risk adjusted discount rate and foreign exchange rates.
Wheaton refund liability (Level 3) - This liability has been fair valued using an applicable credit-risk adjusted discount rate.

Reasonable changes to inputs of financial instruments categorized as Level 3 were insignificant.

(b) Derivatives and hedging:

Copper fixed for floating swaps

Hudbay enters into copper fixed for floating swaps in order to manage the risk associated with provisional pricing terms in copper concentrate sales agreements. As at December 31, 2022, Hudbay had 89.7 million pounds of net copper swaps outstanding at an effective average price of $3.61/lb and settling across January to May 2023. As at December 31, 2021, Hudbay had 72.8 million pounds of net copper swaps outstanding at an effective average price of $4.34/lb and settling across January to April 2022. The aggregate fair value of the transactions at December 31, 2022 was a liability of $17,269 (December 31, 2021 - a liability position of $5,440).

Zinc fixed for floating swaps

Hudbay enters into zinc fixed for floating swaps in order to manage the risk associated with provisional pricing terms in zinc concentrate sales agreements. As at December 31, 2022, Hudbay had 17.5 million pounds of net zinc swaps outstanding at an effective average price of $1.32/lb and settling across January to March 2023. The aggregate fair value of the transactions at December 31, 2022 was a liability of $149. As at December 31, 2021, Hudbay held no zinc fixed for floating swaps.

Transactions involving derivatives are with large multi-national financial institutions that Hudbay believes to be credit worthy.

Non-hedge derivative zinc contracts

In the past, Hudbay entered into future dated fixed price sales contracts with refined zinc customers and, to ensure that the Company continued to receive a floating or unhedged realized zinc price, Hudbay entered into forward zinc purchase contracts that effectively offset the fixed price sales contracts. Hudbay held no forward zinc purchase contracts as at December 31, 2022. As at December 31, 2021, Hudbay held 3.1 million pounds of forward zinc purchase contracts with a price range of $1.44/lb to $1.52/lb. The aggregate fair value of the transactions at December 31, 2022 was nil. The aggregate fair value position at December 31, 2021 was an asset position of $419.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021

(c) Provisionally priced receivables

Changes in fair value of provisionally priced receivables

Hudbay records changes in fair value of provisionally priced receivables related to provisional pricing in concentrate purchase, concentrate sale and certain other sale contracts. Under the terms of these contracts, prices are subject to final adjustment at the end of a future period after title transfers based on quoted market prices during the quotation period specified in the contract. The period between provisional pricing and final pricing is typically up to three months.

Changes in fair value of provisionally priced receivables are presented in trade and other receivables when they relate to sales contracts and in trade and other payables when they relate to purchase contracts. At each reporting date, provisionally priced metals are marked-to-market based on the forward market price for the quotation period stipulated in the contract, with changes in fair value recognized in revenue for sales contracts and in inventory or cost of sales for purchase concentrate contracts. Cash flows related to changes in fair value of provisionally priced receivables are classified in operating activities.

As at December 31, 2022 and 2021, Hudbay's net position consisted of contracts awaiting final pricing which are as indicated below:

Metal inconcentrate		Sales awaiting final pricing		Average YTD price (/unit)
	Unit	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2022
Copper	pounds<br>(in thousands)	79,833	75,681	3.80
Gold	troy ounces	22,079	27,304	1,823
Silver	troy ounces	71,809	125,800	23.91
Zinc <br>Concentrate	pounds<br>(in thousands)	18,145	-	1.35

All values are in US Dollars.

The aggregate fair value of provisionally priced receivables within the copper and zinc concentrate and refined zinc sales contracts at December 31, 2022, was an asset position of $20,285 (December 31, 2021 - an asset position of $6,500).

(d) Other financial liabilities

Gold prepayment liability

The gold prepayment liability (note 16) requires settlement by physical delivery of gold ounces or equivalent gold credits. The fair value of the financial liability at December 31, 2022 was a liability of $71,208 (December 31, 2021 - a liability of $140,008).

(e) Financial risk management

Hudbay's financial risk management activities are governed by Board-approved policies addressing risk identification, hedging authorization procedures and limits and reporting. The Company's policy objective, when hedging activities are undertaken, is to reduce the volatility of future profit and cash flow within the strategic and economic goals of Hudbay. From time to time, the Company employs derivative financial instruments, including forward and option contracts, to manage risk originating from exposures to commodity price risk, foreign exchange risk and interest rate risk. Significant derivative transactions are approved by the Board of Directors, and hedge accounting is applied when certain criteria have been met. Hudbay does not use derivative financial instruments for trading or speculation purposes. The following is a discussion of the Company's risk exposures.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021

(i) Market risk

Market risk is the risk that changes in market prices, including foreign exchange rates, commodity prices, share prices, and interest rates will cause fluctuations in the fair value or future cash flows of a financial instrument.

Foreign currency risk

Hudbay's primary exposure to foreign currency risk arises from:

Translation of Canadian dollar denominated costs and, to a lesser extent, Peruvian soles cost into US dollars. Substantially all of the Company's revenue are denominated in US dollars, while the majority of its operating costs are denominated in either the Canadian dollar or Peruvian sol. Generally, with gross profit, appreciation of the US dollar relative to the Canadian dollar will increase Hudbay's profit.
Translation of foreign currency denominated cash, trade and other receivables, trade and other payables, as well as other financial liabilities. Appreciation of the US dollar relative to a foreign currency will decrease the net asset value of these balances once they have been translated to US dollars, resulting in foreign currency translation losses on foreign currency denominated assets and gains on foreign currency denominated liabilities.

The Manitoba segment's primary financial instrument foreign currency exposure is on US denominated cash, trade and other receivables and other financial liabilities. The Peru segment's primary financial instrument foreign currency exposure is on Peruvian soles cash, trade and other payables and other financial liabilities.

The Company's exposure to foreign currency risk was as follows based on notional financial instrument amounts stated in US equivalent dollars:

	Dec. 31, 2022								Dec. 31, 2021
	CAD^1^			2		PEN^3^			CAD^1^			2		PEN^3^
Cash	9,833		$	26,749	$	11,067		$	10,627		$	34,439	$	6,992
Trade and other receivables	58			20,520		634			595			71,458		36,470
Other financial assets	9,799			-		-			11,158			-		-
Trade and other payables	(5,626	)		(113		(29,587	)		(6,347	)		(3,001		(17,006	)
Other financial liabilities	-			-		(42,493	)		-			-		(36,273	)
	14,064		$	47,156	$	(60,379	)	$	16,033		$	102,896	$	(9,817	)
1 HMI is exposed to foreign currency risk on CAD.
2 The Manitoba segment is exposed to foreign currency risk on .
3 The Peru segment is exposed to foreign currency risk on PEN.

All values are in US Dollars.

The following sensitivity analysis for foreign currency risk relates solely to financial instruments and non-financial derivatives that were outstanding as at the year-end date; each sensitivity calculation assumes all other variables are held constant. This analysis is based on values as at December 31, 2022 and does not reflect the overall effect that changes in market variables would have on the Company's operating results.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021
December 31, 2022	Change of:		Would have changed2022 after-tax profit by:
---	---	---	---	---	---
USD/CAD exchange rate^1^	+ 10%	$	1.5		million
USD/CAD exchange rate^1^	- 10%		(1.8	)	million
USD/PEN exchange rate^2^	+ 10%		3.5		million
USD/PEN exchange rate^2^	- 10%		(4.3	)	million
December 31, 2021	Change of:		Would have changed<br>2021 after-tax profit by:
USD/CAD exchange rate^1^	+ 10%	$	4.8		million
USD/CAD exchange rate^1^	- 10%		(5.7	)	million
USD/PEN exchange rate^2^	+ 10%		0.6		million
USD/PEN exchange rate^2^	- 10%		(0.7	)	million
^1^Effect on profit due to foreign currency remeasurements of balances denominated in a currency different from a Hudbay subsidiary's functional currency.
^2^Effect on profit due to foreign currency remeasurement of balances denominated in Peruvian Sol.

Commodity price risk

Hudbay is exposed to market risk from prices for the commodities the Company produces and sells, such as copper, zinc, gold and silver. From time to time, Hudbay maintains price protection programs and conducts commodity price risk management through the use of derivative contracts. The following sensitivity analysis for commodity price risk relates solely to financial instruments and non-financial derivatives that were outstanding as at the year-end date; each sensitivity calculation assumes all other variables are held constant. This analysis is based on values as at December 31, 2022 and does not reflect the overall effect that changes in market variables would have on the Company's operating results.

December 31, 2022	Change of:
Copper prices ($/lb)^1^	+	0.30	(1.8	)	million
Copper prices ($/lb)^1^	-	0.30	1.8		million
Zinc prices ($/lb)^2^	+	0.10	—		million
Zinc prices ($/lb)^2^	-	0.10	—		million
December 31, 2021	Change of:		Would have changed<br>2021 after-tax profit by:
Copper prices ($/lb)^1^	+	0.30	0.5		million
Copper prices ($/lb)^1^	-	0.30	(0.5	)	million
Zinc prices ($/lb)^2^	+	0.10	0.2		million
Zinc prices ($/lb)^2^	-	0.10	(0.2	)	million

All values are in US Dollars.

^1^ Effect on profit due to provisional pricing derivatives (note 28c) and copper fixed for floating swaps (note 28b).

^2^Effect on profit due to provisional pricing derivatives (note 28c), non-hedge zinc derivatives and zinc fixed for floating swaps (note 28b).

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021

Share price risk

Hudbay is exposed to market risk from share prices of the Company's investments in listed Canadian metals and mining entities. These investments are made to foster strategic relationships, in connection with joint venture agreements and for investment purposes. Management monitors the value of these investments for the purposes of determining whether to add or reduce Hudbay's positions. The following sensitivity analysis of share price risk relates solely to financial instruments that were outstanding as at the year-end date; each sensitivity calculation assumes all other variables are held constant. This analysis is based on values as at December 31, 2022 and does not reflect the overall effect that changes in market variables would have on the Company's finance expenses.

December 31, 2022	Change of:		Would have changed 2022after-tax profit by:
Share prices	+	25%	$	2.4		million
Share prices	-	25%		(2.4	)	million
December 31, 2021	Change of:			Would have changed 2021<br>after-tax profit by:
Share prices	+	25%	$	2.8		million
Share prices	-	25%		(2.8	)	million

Interest rate risk

Hudbay is exposed to the following interest rate risks:

cash flow interest rate risk on its cash and cash equivalents; and,
interest rate risk on its senior secured revolving credit facilities.

The only relevant risks at December 31, 2022 is interest rate risk on cash. The senior secured revolving credit facilities remain undrawn as at December 31, 2022. Neither the 2026 Notes nor the 2029 Notes contain embedded derivatives that require bifurcation from the host contract.

This analysis only quantifies the impact of the interest rate risk on cash based on balances held as at December 31, 2022 and 2021 and does not reflect the overall effect that changes in market variables would have on the Company's finance expenses.

December 31, 2022	Change of:		Would have changed2022 after-tax profit by:
Interest rates	+	2.00%	$	4.5		million
Interest rates	-	2.00%		(4.5	)	million
December 31, 2021	Change of:			Would have changed<br>2021 after-tax profit by:
Interest rates	+	2.00%	$	5.4		million
Interest rates	-	2.00%		(5.4	)	million
HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021
---

(ii) Credit risk

Credit risk is the risk of financial loss to Hudbay if a customer or counterparty to a financial instrument fails to meet its obligations. The Company's maximum exposure to credit risk at the reporting date is represented by the carrying amount, net of any impairment losses recognized, of financial assets and non-financial derivative assets recorded on the consolidated balance sheets. Refer to note 28a.

A large portion of Hudbay's cash are on deposits with major Schedule 1 Canadian banks. Deposits with Schedule 1 Canadian banks represented 64% of total cash as at December 31, 2022 (2021 - 76%). Hudbay's investment policy requires it to comply with a list of approved investments, concentration and maturity limits, as well as credit quality. Credit concentrations in the Company's short-term investments are monitored on an ongoing basis.

Transactions involving derivatives are with counterparties Hudbay believes to be creditworthy.

At December 31, 2022, approximately 86% of Hudbay's trade receivables were insured or payable by letters of credit (2021 - 96% were insured or payable by letters of credit). Insured receivables have a credit insurance deductible of 10%. The deductible and any additional exposure to credit risk is monitored and approved on an ongoing basis. Expected credit losses on trade and other receivables at December 31, 2022 and December 31, 2021, are insignificant.

Two customers accounted for approximately 18% and 14% of total trade receivables as at December 31, 2022 (2021 - two customers accounted for approximately 29% and 23% of total trade receivables). Credit risk for these customers is assessed as medium to low. As at December 31, 2022, none of the Company's trade receivables were aged more than 30 days (2021 - nil).

(iii) Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its obligations associated with financial liabilities. Hudbay's objective is to maintain sufficient liquid resources to meet operational and investing requirements.

The following summarizes the contractual undiscounted cash flows of the Company's non-derivative and derivative financial liabilities, including any interest payments, by remaining contractual maturity and financial assets used to manage liquidity risk. The table includes all instruments held at the reporting date for which payments had been contractually agreed at the reporting date. The undiscounted amounts shown are gross amounts, unless the liabilities will be settled net. Amounts in foreign currency are translated at the closing rate at the reporting date. When a counterparty has a choice of when an amount is paid, the liability is allocated to the earliest possible time period.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021
Dec. 31, 2022		Carryingamount			Contractualcash flows			12 monthsor less			13 - 36months			37 - 60months			More than60 months
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
Assets used to manage liquidity risk
Cash	$	225,665		$	225,665		$	225,665		$	-		$	-		$	-
Restricted cash		486			486			486			-			-			-
Trade and other receivables		87,638			87,638			87,638			-			-			-
Non-hedge derivative assets		577			577			577			-			-			-
	$	314,366		$	314,366		$	314,366		$	-		$	-		$	-
Non-derivative financial liabilities
Trade and other payables, including embedded derivatives	$	(195,872	)	$	(195,872	)	$	(195,872	)	$	-		$	-		$	-
Agreements with communities ^1^		(42,493	)		(67,662	)		(8,421	)		(8,591	)		(7,688	)		(42,962	)
Deferred Rosemont acquisition consideration		(18,876	)		(20,000	)		(10,000	)		(10,000	)		-			-
Long-term debt		1,188,132			(1,541,669	)		(66,692	)		(132,852	)		(687,000	)		(655,125	)
Gold prepayment obligation ^2^		(71,208	)		(71,208	)		(71,208	)		-			-			-
Wheaton refund liability		6,383			(79,232	)		-			-			-			(79,232	)
	$	866,066		$	(1,975,643	)	$	(352,193	)	$	(151,443	)	$	(694,688	)	$	(777,319	)
Derivative financial liabilities
Non hedge derivative contracts	$	(17,995	)	$	(17,995	)	$	(17,995	)	$	-		$	-		$	-
	$	(17,995	)	$	(17,995	)	$	(17,995	)	$	-		$	-		$	-
^1^ Represents the Peru community agreement obligation, excluding interest.
^2^ Discounted.
HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021
---
Dec. 31, 2021		Carrying<br>amount			Contractual<br>cash flows			12 months or<br>less			13 - 36<br>months			37 - 60<br>months			More than 60<br>months
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
Assets used to manage liquidity risk
Cash	$	270,989		$	270,989		$	270,989		$	-		$	-		$	-
Restricted cash		437			437			437
Trade and other receivables		172,890			172,890			172,890			-			-			-
Non-hedge derivative assets		7,430			7,430			7,430			-			-			-
	$	451,746		$	451,746		$	451,746		$	-		$	-		$	-
Non-derivative financial liabilities
Trade and other payables, including embedded derivatives	$	(189,179	)	$	(189,179	)	$	(189,179	)	$	-		$	-		$	-
Agreements with communities ^1^		(36,273	)		(52,497	)		(9,282	)		(9,719	)		(5,220	)		(28,276	)
Deferred Rosemont acquisition consideration		(27,518	)		(30,000	)		(10,000	)		(20,000	)		-			-
Long-term debt, including embedded derivatives		(1,185,805	)		(1,614,686	)		(68,348	)		(136,696	)		(717,767	)		(691,875	)
Gold prepayment obligation ^2^		(140,008	)		(140,008	)		(71,394	)		(68,614	)		-			-
Wheaton refund liability		(5,424	)		(78,500	)		-			-			-			(78,500	)
	$	(1,584,207	)	$	(2,104,870	)	$	(348,203	)	$	(235,029	)	$	(722,987	)	$	(798,651	)
Derivative financial liabilities
Non-hedge derivative contracts	$	(12,451	)	$	(12,451	)	$	(12,451	)	$	-		$	-		$	-
	$	(12,451	)	$	(12,451	)	$	(12,451	)	$	-		$	-		$	-
^1^ Represents the Peru community agreement obligation, excluding interest.
^2^ Discounted.

29. Commitments

(a) Capital commitments

As at December 31, 2022, Hudbay had outstanding capital commitments in Canada of approximately $9,703 of which $8,668 can be terminated, approximately $27,128 in Peru, all of which can be terminated, and approximately $43,093 in Arizona, primarily related to the Copper World Complex, of which approximately $7,180 can be terminated by Hudbay.

(b) Non capitalized lease commitments

Hudbay has entered into various non-capitalized lease commitments for facilities and equipment. The leases expire in periods ranging from one to two years. There are no restrictions placed on the Company by entering into these leases. Future minimum lease payments under such cancellable leases recognized within results from operating activities at December 31 are:

		2022		2021
Within one year	$	21,016	$	19,092
After one year but not more than five years		25,574		2,631
More than five years		4,962		-
	$	51,552	$	21,723
HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021
---

(c) Contingent liabilities

Hudbay is involved in various claims, litigation and other matters arising in the ordinary course and conduct of business. While it is not possible to determine the ultimate outcome of such actions at this time, and inherent uncertainties exist in predicting such outcomes, it is Hudbay's belief that the ultimate resolution of such actions is not reasonably likely to have a material adverse effect on its consolidated financial position or results of operations. The assessment of contingencies inherently involves the exercise of significant judgment and estimates of the outcome of future events. As a result of the assessment, management believes that no significant contingent liabilities exist.

30. Related parties

(a) Group companies

The financial statements include the financial statements of the Company and the following significant subsidiaries:

				Beneficialownership ofultimatecontrollingparty (HudbayMinerals Inc.)
Name	Jurisdiction	Business	Entity's Parent	2022	2021
HudBay Marketing & Sales Inc.	Canada	Marketing and sales	HMI	100%	100%
HudBay Peru Inc.	British Columbia	Holding company	HMI	100%	100%
HudBay Peru S.A.C.	Peru	Exploration/development	HudBay Peru Inc.	100%	100%
HudBay (BVI) Inc.	British Virgin Islands	Precious metals sales	HudBay Peru Inc.	100%	100%
Hudbay Arizona Inc.	British Columbia	Holding company	HMI	100%	100%
Copper World, Inc.	Arizona	Exploration/development	HudBay Arizona (US) Holding Corporation	100%	100%

Transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021

(b) Compensation of key management personnel

The Company's key management includes members of the Board of Directors, Hudbay's Chief Executive Officer, Hudbay's senior vice presidents and vice presidents. Total compensation to key management personnel was as follows:

		Year ended December 31,
		2022		2021
Short-term employee benefits^1^	$	9,915	$	10,283
Post-employment benefits		959		837
Termination benefits		2,287		-
Long-term share-based awards		6,646		6,737
	$	19,807	$	17,857

^1^Such as salaries and social security contributions, paid annual leave and paid sick leave, profit-sharing, termination benefits, bonuses and non-monetary benefits (such as medical care, housing, cars and free or subsidized goods or services) for current employees.

31. Supplementary cash flow information

(a) Other cash (used in) / generated from operating activities:

		Year ended December 31,
		2022			2021
Changes in non-current assets	$	(1,577	)	$	7,038
Amortization of community agreements		5,129			-
Share based compensation paid		(6,647	)		(6,782	)
Restructuring - Manitoba		(4,524	)		6,947
Other		5,576			565
	$	(2,043	)	$	7,768

(b) Change in non-cash working capital:

		Year ended December 31,
		2022			2021
Change in:
Trade and other receivables	$	88,482		$	(60,978	)
Other financial assets/liabilities		11,977			(7,758	)
Inventories		(13,032	)		(32,752	)
Prepaid expenses		(5,377	)		1,663
Trade and other payables		2,449			(11,549	)
Provisions and other liabilities		11,575			8,583
	$	96,074		$	(102,791	)
HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021
---

(c) Non-cash transactions:

During the year ended December 31, 2022 and 2021, Hudbay entered into the following non-cash investing and financing activities which are not reflected in the consolidated statements of cash flows:

Remeasurement of Hudbay's decommissioning and restoration liabilities led to a net decrease in related property, plant and equipment assets of $37,108 (December 31, 2021 - a net increase of $144,016), mainly related to changes to real discount rates associated with remeasurement of the liabilities.
Property, plant and equipment included $27,984 (December 31, 2021 - $49,695) of capital additions related to the recognition of ROU assets. Property, plant and equipment and other assets include $39,240 of capital additions related to agreements with communities (December 31, 2021 - $22,796).

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021

32. Segmented information

Hudbay is an integrated metals producer. When making decisions on expansions, opening or closing mines, as well as day to day operations, management evaluates the results from operating activities of the Company. Hudbay's main mining operations are located in Manitoba and Saskatchewan (Canada) and Cusco (Peru) and are included in the Manitoba segment and Peru segment, respectively. The Manitoba and Peru segments generate Hudbay's revenue. The Manitoba segment sells copper concentrate (containing copper, gold and silver), silver/gold doré, zinc concentrate (containing zinc and gold) and other products. The Peru segment consists of Hudbay's Constancia operation and sells copper concentrate and molybdenum concentrate. Hudbay's Arizona segment consists of the Copper World project located in Arizona. Corporate and other activities include the Company's exploration activities in Chile and Nevada. The exploration entities are not individually significant, as they do not meet the minimum quantitative thresholds. Corporate activities are not considered a segment and are included as a reconciliation to total consolidated results. Accounting policies for each reported segment are the same as those of the Company. Results from operating activities represents the profit earned by each segment without allocation of corporate costs. This is the measure reported to the chief operating decision-maker, Hudbay's President and Chief Executive Officer, for the purposes of resource allocation and the assessment of segment performance. Total assets and liabilities do not reflect intercompany balances, which have been eliminated on consolidation.

Year ended December 31, 2022
		Manitoba			Peru		Arizona			Corporateand otheractivities			Total
Revenue from external customers	$	633,290		$	828,150	$	-		$	-		$	1,461,440
Cost of sales
Mine operating costs		427,402			419,535		-			-			846,937
Depreciation and amortization		126,572			211,043		-			-			337,615
Gross profit		79,316			197,572		-			-			276,888
Selling and administrative expenses		-			-		-			33,986			33,986
Exploration expenses		10,644			13,359		8,657			1,851			34,511
Other expenses (income)		10,981			16,016		6,047			(458	)		32,586
Re-evaluation adjustment - environmental provision		(133,460	)		-		-			-			(133,460	)
Impairment - Arizona		-			-		94,956			-			94,956
Results from operating activities	$	191,151		$	168,197	$	(109,660	)	$	(35,379	)	$	214,309
Net interest expense on long term debt													67,663
Accretion on streaming arrangements													27,778
Change in fair value of financial instruments													942
Other net finance costs													22,111
Profit before tax													95,815
Tax expense													25,433
Profit for the year												$	70,382
HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021
---
Year ended December 31, 2021
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
		Manitoba			Peru		Arizona			Corporate<br>and other<br>activities			Total
Revenue from external customers	$	740,454		$	761,544	$	-		$	-		$	1,501,998
Cost of sales
Mine operating costs		459,399			360,183		-			-			819,582
Depreciation and amortization		163,516			194,408		-			-			357,924
Impairment - environmental provision		193,473			-		-			-			193,473
Gross (loss) profit		(75,934	)		206,953		-			-			131,019
Selling and administrative expenses		-			-		-			43,011			43,011
Exploration expenses		5,031			9,218		24,935			39			39,223
Other expenses (income)		15,960			10,491		13,399			(4,731	)		35,119
Re-evaluation adjustment - environmental provision		(4,602	)		-		-			-			(4,602	)
Results from operating activities	$	(92,323	)	$	187,244	$	(38,334	)	$	(38,319	)	$	18,268
Net interest expense on long term debt													74,748
Accretion on streaming arrangements													42,654
Change in fair value of financial instruments													54,514
Other net finance costs													49,103
Loss before tax													(202,751	)
Tax expense													41,607
Loss for the year												$	(244,358	)
December 31, 2022
---	---	---	---	---	---	---	---	---	---
	Manitoba		Peru		Arizona		Corporateand otheractivities		Total
Total assets	690,403	$	2,532,750	$	713,567	$	389,223	$	4,325,943
Total liabilities	427,107		974,184		36,131		1,316,712		2,754,134
Property, plant and equipment1	691,836		2,115,495		704,472		40,627		3,552,430
1Included in Corporate and Other activities is 27.4 million of property, plant and equipment that is located in Nevada.

All values are in US Dollars.

December 31, 2022
		Manitoba		Peru		Arizona		Corporateand otheractivities		Total
Additions to property, plant and equipment	$	161,849	$	123,288	$	63,238	$	168	$	348,543
HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021
---
December 31, 2021
---	---	---	---	---	---	---	---	---	---	---
		Manitoba		Peru		Arizona		Corporate<br>and other<br>activities		Total
Total assets	$	812,137	$	2,624,251	$	745,371	$	434,472	$	4,616,231
Total liabilities		655,095		1,023,186		75,782		1,385,340		3,139,403
Property, plant and equipment^1^		706,330		2,256,687		735,127		42,822		3,740,966

^1^Included in Corporate and Other activities is $28.3 million of property, plant and equipment that is located in Nevada.

December 31, 2021
		Manitoba		Peru		Arizona		Corporate<br>and other<br>activities		Total
Additions to property, plant and equipment	$	224,300	$	163,604	$	25,982	$	11,875	$	425,761
HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2022 and 2021
---

Geographical Segments

The following tables represent revenue information regarding Hudbay's geographical segments for the years ended December 31, 2022 and 2021:

		2022		2021
Revenue by customer location^1^
Canada	$	593,397	$	515,967
Switzerland		251,963		166,261
China		247,880		349,143
United States		168,470		219,853
Singapore		65,750		80,668
Hong Kong		62,608		-
Philippines		34,389		4,050
Chile		33,557		10,773
United Kingdom		3,356		-
Japan		66		20,524
Peru		-		82,598
Germany		-		37,335
Other		4		14,826
	$	1,461,440	$	1,501,998

^1^Presented based on the ultimate destination of the product if known. If the eventual destination of the product sold through traders is not known then revenue is allocated to the location of the customer's business office and not the ultimate destination of the product.

During the year ended December 31, 2022, five customers accounted for approximately 26%, 11%, 8%, 5%, and 5% respectively, of total revenue during the year. Revenue from these customers has been presented in the Manitoba and Peru operating segments.

During the year ended December 31, 2021, five customers accounted for approximately 28%, 11%, 5%, 5% and 5% respectively, of total revenue during the year. Revenue from these customers has been presented in the Manitoba and Peru operating segments.

Hudbay Minerals Inc.: Exhibit 99.2 - Filed by newsfilecorp.com

Management's Discussion and Analysis of

Results of Operations and Financial Condition

For the year ended

December 31, 2022

February 23, 2023

TABLE OF CONTENTS	Page
Introduction	1
Our Business	1
Strategy	1
Summary of Results	4
Key Financial Results	8
Key Production Results	9
Key Costs Results	10
Recent Developments	10
Peru Operations Review	13
Manitoba Operations Review	18
Outlook	26
Financial Review	34
Liquidity and Capital Resources	44
Financial Risk Management	49
Trend Analysis and Quarterly Review	51
Non-IFRS Financial Performance Measures	54
Accounting Changes	66
Critical Accounting Judgments and Estimates	66
Disclosure Controls and Procedures and Internal Controls Over Financial Reporting	68
Notes to Reader	69
Summary of Historical Results	72

INTRODUCTION

This Management's Discussion and Analysis ("MD&A") dated February 23, 2023 is intended to supplement Hudbay Minerals Inc.'s audited consolidated financial statements and related notes for the year ended December 31, 2022 and 2021 (the "consolidated financial statements"). The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board ("IASB").

References to "Hudbay", the "Company", "we", "us", "our" or similar terms refer to Hudbay Minerals Inc. and its direct and indirect subsidiaries as at December 31, 2022.

Readers should be aware that:

This MD&A contains certain "forward-looking statements" and "forward-looking information" (collectively, "forward-looking information") that are subject to risk factors set out in a cautionary note contained in this MD&A.
This MD&A 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.
We use a number of non-IFRS financial performance measures in this MD&A. Please see the discussion under the "Non-IFRS Financial Performance Measures" section herein.
The technical and scientific information in this MD&A has been approved by qualified persons based on a variety of assumptions and estimates.

For a discussion of each of the above matters, readers are urged to review the "Notes to Reader" discussion beginning on page 69 of this MD&A.

Additional information regarding Hudbay, including the risks related to our business and those that are reasonably likely to affect our consolidated financial statements in the future, is contained in our continuous disclosure materials, including our most recent Annual Information Form ("AIF"), consolidated financial statements and Management Information Circular available on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.

All amounts are in US dollars unless otherwise noted.

OUR BUSINESS

We are a diversified mining company with long-life assets in North and South America. Our Constancia operations in Cusco (Peru) produce copper with gold, silver and molybdenum by-products. Our Snow Lake operations in Manitoba (Canada) produce gold with copper, zinc and silver by-products. We have an organic pipeline that includes the Copper World project in Arizona and the Mason project in Nevada (United States), and our growth strategy is focused on the exploration, development, operation, and optimization of properties we already control, as well as other mineral assets we may acquire that fit our strategic criteria. We are governed by the Canada Business Corporations Act and our shares are listed under the symbol "HBM" on the Toronto Stock Exchange, New York Stock Exchange and Bolsa de Valores de Lima.

STRATEGY

Our mission is to create sustainable value through the 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.

We believe that copper is the commodity with the best long-term supply/demand fundamentals and offers shareholders the greatest opportunity for sustained risk-adjusted returns. Through the discovery and successful development of economic mineral deposits, and through highly efficient low-cost operations to extract the metals, we believe sustainable value will be created for all stakeholders.

Hudbay's successful development, ramp-up and operation of the Constancia open-pit mine in Peru, our long history of underground mining and full life-cycle experience in northern Manitoba, and our track record of reserve expansion through effective exploration, and our organic pipeline of copper development projects including Copper World, Mason and Llaguen, provide us with a competitive advantage relative to other mining companies of similar scale.

Over the past decade, we have built a world-class asset portfolio by executing a consistent long-term growth strategy focused on copper. We continuously work to generate strong free cash flow and optimize the value of our producing assets through exploration, brownfield expansion projects and efficient and safe operations. Furthermore, we intend to sustainably grow Hudbay through the exploration and development of our robust project pipeline, as well as through the acquisition of other properties that fit our stringent strategic criteria.

To ensure that any investment in our existing assets or acquisition of other mineral assets is consistent with our mission and creates sustainable value for stakeholders, we have established a number of criteria for evaluating these opportunities. The criteria include the following:

Sustainability: We are focused on jurisdictions that support responsible mining activity. Our current geographic focus is on select investment grade countries in the Americas, with strong rule of law and respect for human rights consistent with our long-standing focus on environmental, social and governance ("ESG") principles;
Copper Focus: We believe copper is the commodity with the best long-term supply/demand fundamentals. Global copper mine supply is challenged due to declining industry grades, limited exploration success and an insufficient pipeline of development-ready projects while demand will continue to increase through global decarbonization initiatives. We believe this long-term supply/demand gap will create opportunities for increased risk-adjusted returns. While our primary focus is on copper, we recognize the polymetallic nature of copper deposits and, in particular, the counter-cyclical nature of gold in our portfolio;
Quality: We are focused on investing in long-life, low-cost, expandable, high-quality assets that can capture peak pricing of multiple commodity price cycles and can generate free cash flow through the trough of price cycles;
Potential: We consider the full spectrum of acquisition and investment opportunities, from early-stage exploration to producing assets, that offer significant incremental potential for exploration, development, expansion and optimization beyond the stated resources and mine plan;
Process: We develop a clear understanding of how an investment or acquisition can create value through our robust due diligence and capital allocation process that applies our technical, social, operational and project execution expertise;
Operatorship: We believe value is created through leveraging Hudbay's competitive advantages in safe and efficient operations and effective exploration and project development and community relations. While operatorship is a key criterion, we are open to joint venture and partnerships that de-risk our portfolio and increase risk-adjusted returns; and
Capital Allocation: We pursue investments and acquisitions that are accretive to Hudbay on a per share basis. Given that our strategic focus includes allocating capital to assets at various stages of development, when evaluating accretion, we will consider measures such as internal rate of return ("IRR"), return on invested capital ("ROIC"), net asset value per share and the contained value of reserves and resources per share.

Our key objectives for 2023 are to:

Deliver copper and gold production growth with low cash costs driven by efficient operations;
Position Hudbay to unlock its copper development pipeline through generating cash flow, managing discretionary spending, deleveraging and achieving strong returns on invested capital;
De-risk the Copper World project through the completion of pre-feasibility studies, state permitting activities, evaluating a bulk sampling program and a potential joint venture partnership;
Progress Constancia's leading efficiency metrics by applying smart technologies to continuously improve operating performance, including sensor-based ore sorting and the mill recovery improvement project;
Advance plans to drill the prospective Maria Reyna and Caballito properties near Constancia;
Continue to navigate the complex environment in Peru while maintaining aligned and supportive relationships with local communities;
Execute expansion opportunities in Snow Lake with the completion of the Stall mill recovery improvement program and the ramp up beyond 4,650 tonnes per day at Lalor;
Test the down-dip extensions at Lalor where the gold and copper zones remain open at depth and have the potential to expand Snow Lake gold mineralization beyond the current 2.4 million ounces of reserves and 1.7 million ounces of resources;
Investigate opportunities to utilize the operating infrastructure in Snow Lake for potential future tailings reprocessing;
Assess opportunities to reduce greenhouse gas emissions in alignment with our climate change commitments and global decarbonization goals;
Prudently advance the three pre-requisites plan required for Copper World sanctioning; and
Evaluate and execute growth opportunities that meet our stringent strategic criteria and allocate capital to pursue those opportunities that create sustainable value for the company and our stakeholders.

SUMMARY

Fourth Quarter and Full Year Operating and Financial Results

Achieved 2022 consolidated production guidance for all metals and consolidated cash cost and sustaining cash cost guidance.
Full year consolidated copper production of 104,173 tonnes, consolidated gold production of 219,700 ounces and consolidated silver production of 3,161,294 increased by 5%, 13% and 4%, respectively, in 2022 compared to 2021.
The Peru operations delivered strong performance in the fourth quarter with a 21% increase in copper production and a 64% increase in gold production, compared to the third quarter of 2022, as grades and recoveries improved. The fourth quarter of 2022 was a record quarter for gold production in Peru. Peru's cash cost per pound of copper produced, net of by-product credits^1^, improved to $1.34 in the fourth quarter, representing a 20% decline compared to the third quarter of 2022.
The Manitoba operations saw a 6% increase in Lalor's ore production in the fourth quarter compared to the third quarter of 2022, and the Lalor mine continues to ramp up following the transition of Flin Flon employees to Snow Lake. Manitoba's full year gold cash cost per ounce of gold produced, net of by-product credits^1^, was 1% below the low end of the annual guidance range.
Full year consolidated cash cost and sustaining cash cost per pound of copper produced, net of by-product credits^1^, were $0.86 and $2.07, respectively, and similar to 2021 levels, despite inflationary cost pressures which were offset by higher copper production and higher by-product credits.
Fourth quarter net loss and loss per share were $17.4 million and $0.07, respectively. After adjusting for a non-cash loss of $13.5 million related to a quarterly revaluation of the Flin Flon environmental reclamation provision due to changes in real, long-term risk-free discount rates, and an $8.0 million revaluation loss related to the gold prepayment liability, among other items, fourth quarter adjusted earnings^1^ per share were $0.01.
Operating cash flow before change in non-cash working capital was $109.1 million and adjusted EBITDA^1^was $124.7 million in the fourth quarter, an increase of 34% and 26%, respectively, over the third quarter of 2022, benefiting from higher copper sales volumes and higher molybdenum prices and sales volumes, but negatively impacted by a temporary buildup of unsold inventory in Peru.
Constancia continued to operate throughout nation-wide road blockades in Peru in December and while the company was successful in completing two port shipments in December, inventory of approximately 25,000 wet metric tonnes of copper concentrate in Peru was unsold at the end of the quarter.

Executing on Growth Initiatives and Disciplined Capital Allocation

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. The pre-feasibility study for Phase I of Copper World is well-advanced with the main facility engineering completed and metallurgical test work being analyzed as part of the concentrate leaching trade off evaluations.
Reached a community exploration agreement in 2022 to access the Maria Reyna and Caballito satellite properties located north of Constancia in Peru. Completed the surface investigation work needed to support drill permit applications.
Initiated deep drilling at Lalor in January 2023 to test the down-dip gold and copper extensions and potentially unlock further value in Snow Lake.
The Stall recovery improvement program is well-advanced and remains on track for completion in early 2023 with higher gold and copper recoveries expected to commence in the second quarter of 2023.
Reinvigorated focus on free cash flow and delivered on discretionary spending reduction targets by reducing 2022 growth capital and exploration spending by approximately $30 million in Arizona, Manitoba and Peru.
Reduced 2023 discretionary spending by more than $50 million primarily related to the deferral of the Copper World definitive feasibility study and the pebble crusher in Peru.
Repaid approximately 50% of the original gold prepayment liability in 2022 and we remain focused on reducing net debt throughout 2023.
Prudent approach to capital allocation demonstrated with the introduction of three prerequisites for sanctioning Copper World, including a prudent financing strategy with multi-faceted financial targets focused on a minimum cash balance, a stated maximum leverage, limited non-recourse project level debt and committed financial partners.

2023 Annual Guidance and Outlook

Consolidated copper production is forecast to increase by approximately 10%^2^ to 114,000^2^ tonnes in 2023, compared to 2022, with higher grades from the Pampacancha deposit in Peru.
Consolidated gold production is forecast to increase by 30%^2^ to 285,500^2^ ounces, compared to 2022, due to significantly higher gold production in Peru and Manitoba.
Consolidated copper and gold production is expected to further increase in 2024, similar to the previously issued guidance, and 2025 copper and gold production is expected to benefit from an extension of mining activities at Pampacancha into the first half of 2025.
Consolidated cash cost, net of by-product credits^1^, in 2023 is expected to decline by 30%^2^ and be within a range of $0.40 and $0.80 per pound of copper as a result of higher copper production and gold by-product credits.
Approximately $65 million reduction in growth capital expenditures and exploration spending is expected in 2023 compared to 2022.
Total capital expenditures are expected to decline by approximately 13% year-over-year to $300 million in 2023.
Exploration expenditures are expected to decline by approximately 61% in 2023 as activities are focused on areas with high potential for new discovery and mineral reserve and resource expansion.

Summary of Fourth Quarter Results

Cash generated from operating activities in the fourth quarter of 2022 decreased to $86.4 million compared to $97.1 million in the same quarter of 2021. Peru operations were impacted by increasing tensions, protests, and social unrest following a change in political leadership in December 2022. Constancia has continued to operate throughout these disruptions but our ability to steadily receive critical supplies, such as fuel, and to transport concentrates has been impacted. Operating cash flow before change in non-cash working capital was $109.1 million during the fourth quarter of 2022, reflecting a decrease of $47.8 million compared to the same period of 2021. The decrease was primarily the result of lower copper prices, lower zinc and gold sales volumes, inflationary cost pressures on mine operating costs and higher treatment and refining charges, partially offset by higher molybdenum prices and sales volumes and higher copper sales volumes. Zinc and gold sales volumes were lower than the prior year primarily due to the planned closure of the Company's 777 mine in June 2022.

Production in the fourth quarter of 2022 did not include any production from the 777 mine, which closed, as planned, in June 2022. The comparison in this paragraph excludes the production from the 777 mine in the fourth quarter of 2021 to illustrate the comparative performance of our current operations. Consolidated copper production in the fourth quarter of 2022 increased by 14% compared to the same period in 2021 primarily due to higher copper grades in Peru. Consolidated gold production in the fourth quarter of 2022 decreased by 2% compared to the fourth quarter of 2021, due to lower throughput in Manitoba and Peru resulting from planned maintenance programs, partially offset by higher recoveries in Peru, higher Lalor gold grades and higher recoveries at Stall. Consolidated zinc production in the fourth quarter decreased by 55%, versus the comparative 2021 quarter due to the transition of mining toward the gold lenses at Lalor and a corresponding decrease of production from the base metal zones. Consolidated silver production in the fourth quarter decreased by 1% compared to the same period in 2021, due to lower Manitoba and Peru throughput and silver grades at Lalor, partially offset by higher recoveries. For a comprehensive comparison to the prior period (which includes production from the 777 mine), please refer to "Manitoba Operations Review" section.

Net loss and loss per share in the fourth quarter of 2022 were $17.4 million and $0.07, respectively, compared to a net loss and loss per share of $10.5 million and $0.04, respectively, in the fourth quarter of 2021. The 2022 fourth quarter results were negatively impacted by a non-cash loss of $13.5 million related to the quarterly revaluation of our Flin Flon environmental reclamation provision due to changes in real, long-term discount rates, an $8.0 million revaluation loss related to the gold prepayment liability and a $5.8 million loss on changes to other provisions. These costs were offset by a $2.4 million Manitoba post-employment plan curtailment gain.

Adjusted net earnings^1^and adjusted net earnings per share^1^ in the fourth quarter of 2022 were $2.6 million and $0.01 per share, respectively, after adjusting for the non-cash revaluation loss of the environmental reclamation provision and the revaluation loss on the gold prepayment liability, among other items. This compares to adjusted net earnings and adjusted net earnings per share of $32.7 million, and $0.13 in the same period of 2021. Fourth quarter adjusted EBITDA^1^was $124.7 million, compared to $180.8 million in the same period of 2021.

In the fourth quarter of 2022, consolidated cash cost per pound of copper produced, net of by-product credits^1^, was $1.08, compared to $0.51 in the same period in 2021. This increase was a result of lower precious metal by-product credits, inflationary cost pressures on operating costs and higher freight, treatment and refining charges, partially offset by slightly higher copper production. Consolidated sustaining cash cost per pound of copper produced, net of by-product credits^1^, was $2.21 in the fourth quarter of 2022 compared to $1.95 in the same period in 2021. This increase was primarily due to the same reasons outlined above, slightly offset by lower cash sustaining capital expenditures in Peru.

Consolidated all-in sustaining cash cost per pound of copper produced, net of by-product credits^1^, was $2.41 in the fourth quarter of 2022, higher than $2.20 in the same period in 2021, due to the same reasons outlined above partially offset by lower corporate selling and administrative expenses.

As at December 31, 2022, our liquidity includes $225.7 million in cash as well as undrawn availability of $354.3 million under our revolving credit facilities. We expect that our current liquidity combined with cash flow from operations, will be sufficient to meet our liquidity needs for the foreseeable future.

Summary of Full Year Results

We achieved our 2022 consolidated production guidance for all metals. However, production of copper and gold was at the lower end of the guidance range primarily due to lower-than-planned grades in the fourth quarter in Peru caused by short-term mine plan changes that were implemented to mitigate the risks associated with logistical and supply chain disruptions in Peru.

Cash generated from operating activities increased to $487.8 million in 2022 from $385.1 million in 2021. A portion of the increase is due to changes in non-cash working capital caused primarily by timing and changes in provisionally priced receivables and changes to other financial assets, liabilities and inventories. Operating cash flow before changes in non-cash working capital decreased to $391.7 million from $483.9 million in 2021. The decrease is the result of lower copper prices, lower zinc sales volumes and inflationary cost pressures on mine operating costs, partially offset by higher zinc prices and higher gold sales volumes. Zinc sales volumes were lower than the prior year due to the planned closure of the 777 mine in June 2022.

Excluding production from 777, consolidated copper, gold and silver production in the full year 2022 increased by 14%, 36% and 13%, respectively, compared to the same period in 2021 primarily due to higher throughput in Peru and Manitoba as well as higher overall copper and gold grades.

Net earnings and earnings per share for 2022 were $70.4 million and $0.27, respectively, compared to a net loss and loss per share of $244.4 million and $0.93, respectively, in 2021. The prior period results were negatively impacted by a $193.5 million revaluation of our Flin Flon environmental reclamation provision resulting in an impairment charge of the same amount as well as a $66.7 million in mark-to-market loss mostly from $49.8 million of write-offs for a non-cash embedded derivative on the early redemption option associated with our extinguished senior unsecured notes. Full year 2022 net earnings benefited from a non-cash gain of $133.5 million related to the revaluation of our Flin Flon environmental reclamation provision. The full year 2022 financial results were negatively impacted by a $95.0 million pre-tax impairment loss related to certain specific capitalized costs and assets associated with the previous stand-alone development plan for the Rosemont deposit, which were determined to no longer be recoverable.

Consolidated cash costs per pound of copper produced, net of by-product credits, in 2022 was $0.86 compared to $0.74 in 2021 and consolidated sustaining cash cost per pound of copper produced, net of by-product credits, in 2022 remained unchanged from 2021 at $2.07. Both measures remained in line with our 2022 guidance ranges.

* Mining activities at 777 were completed in June 2022

^1^Adjusted net earnings (loss) and adjusted net earnings (loss) per share, adjusted EBITDA, cash cost, sustaining cash cost, all-in sustaining cash cost per pound of copper produced, net of by-product credits, cash cost, sustaining cash cost per ounce of gold produced, net of by-product credits, combined unit cost and net debt are non-IFRS financial performance measures with no standardized definition under IFRS. For further information and a detailed reconciliation, please see the discussion under the "Non-IFRS Financial Performance Measures" section of this MD&A.

^2^ Calculated using the mid-point of the guidance range.

KEY FINANCIAL RESULTS

Financial Condition	Dec. 31, 2022		Dec. 31, 2021
(in thousands)
Cash	225,665	$	270,989
Total long-term debt	1,184,162		1,180,274
Net debt1	958,497		909,285
Working capital2	76,534		147,512
Total assets	4,325,943		4,616,231
Equity	1,571,809		1,476,828
1 Net debt is a non-IFRS financial performance measure with no standardized definition under IFRS. For further information and a detailed reconciliation, please see discussion under the "Non-IFRS Financial Performance Measures" section of this MD&A.
2 Working capital is determined as total current assets less total current liabilities as defined under IFRS and disclosed on the consolidated financial statements.

All values are in US Dollars.

Financial Performance	Three months ended						Year ended
(in thousands, except per share amounts or as noted below)	Dec. 31, 2022			Dec. 31, 2021			Dec. 31, 2022		Dec. 31, 2021
Revenue	321,196		$	425,170		$	1,461,440	$	1,501,998
Cost of sales	251,520			343,426			1,184,552		1,370,979
(Loss) earnings before tax	(14,287	)		(149	)		95,815		(202,751	)
Net (loss) earnings	(17,441	)		(10,453	)		70,382		(244,358	)
Basic and diluted (loss) earnings per share	(0.07	)		(0.04	)		0.27		(0.93	)
Adjusted earnings per share1	0.01			0.13			0.10		0.09
Operating cash flow before changes in non-cash working capital2	109.1			156.9			391.7		483.9
Adjusted EBITDA1,2	124.7			180.8			475.9		547.8
1 Adjusted earnings per share and adjusted EBITDA are non-IFRS financial performance measures with no standardized definition under IFRS. For further information and a detailed reconciliation, please see discussion under the "Non-IFRS Financial Performance Measures" section of this MD&A.
2 In millions.

All values are in US Dollars.

KEY PRODUCTION RESULTS

			Three months ended						Three months ended
		Dec. 31, 2022						Dec. 31, 2021
		Peru		Manitoba		Total		Peru		Manitoba		Total
Contained metal in concentrate and doré produced ^1^
Copper	tonnes		27,047		2,258		29,305		22,856		5,342		28,198
Gold	oz		20,860		33,060		53,920		17,917		46,242		64,159
Silver	oz		655,257		139,758		795,015		578,140		321,573		899,713
Zinc	tonnes		-		6,326		6,326		-		23,207		23,207
Molybdenum	tonnes		344		-		344		275		-		275
Payable metal sold
Copper	tonnes		23,789		1,626		25,415		20,551		4,408		24,959
Gold^2^	oz		15,116		32,140		47,256		16,304		40,623		56,927
Silver^2^	oz		411,129		148,177		559,306		380,712		257,928		638,640
Zinc^3^	tonnes		-		8,230		8,230		-		21,112		21,112
Molybdenum	tonnes		421		-		421		245		-		245
^1^Metal reported in concentrate is prior to deductions associated with smelter contract terms.
^2^ Includes total payable gold and silver in concentrate and in doré sold.
^3^ Includes refined zinc metal and payable zinc in concentrate sold.
			Year ended						Year ended
---	---	---	---	---	---	---	---	---	---	---	---	---	---
		Dec. 31, 2022						Dec. 31, 2021
		Peru		Manitoba		Total		Peru		Manitoba		Total
Contained metal in concentrate produced ^1^
Copper	tonnes		89,395		14,778		104,173		77,813		21,657		99,470
Gold	oz		58,229		161,471		219,700		50,306		143,477		193,783
Silver	oz		2,309,352		851,942		3,161,294		1,972,949		1,072,532		3,045,481
Zinc	tonnes		-		55,381		55,381		-		93,529		93,529
Molybdenum	tonnes		1,377		-		1,377		1,146		-		1,146
Payable metal sold
Copper	tonnes		79,805		14,668		94,473		71,398		20,802		92,200
Gold^2^	oz		49,968		163,447		213,415		41,807		126,551		168,358
Silver^2^	oz		2,045,678		932,807		2,978,485		1,490,651		936,857		2,427,508
Zinc^3^	tonnes		-		59,043		59,043		-		96,435		96,435
Molybdenum	tonnes		1,352		-		1,352		1,098		-		1,098
^1^Metal reported in concentrate is prior to deductions associated with smelter contract terms.
^2^ Includes total payable gold and silver in concentrate and in doré sold.
^3^ Includes refined zinc metal and payable zinc in concentrate sold.

KEY COST RESULTS

		Three months ended		Year ended		Guidance
		Dec. 31, 2022	Dec. 31, <br>2021	Dec. 31, 2022	Dec. 31, <br>2021	Annual<br>2022
Peru cash cost per pound of copper produced
Cash cost ^1^	$/lb	1.34	1.28	1.58	1.54	1.10 - 1.40
Sustaining cash cost ^1^	$/lb	2.09	2.46	2.35	2.46
Manitoba cash cost per ounce of gold produced
Cash cost ^1,2^	$/oz	922	-	297	-	300 - 550
Sustaining cash cost ^1,2^	$/oz	1,795	-	1,091	-
Consolidated cash cost per pound of copper produced
Cash cost ^1^	$/lb	1.08	0.51	0.86	0.74	0.60 - 1.05
Sustaining cash cost ^1^	$/lb	2.21	1.95	2.07	2.07	1.60 - 2.25
All-in sustaining cash cost^1^	$/lb	2.41	2.20	2.26	2.30
^1^Cash cost, sustaining cash cost, all-in sustaining cash cost per pound of copper produced, net of by-product credits, gold cash cost, sustaining cash cost per ounce of gold produced, net of by-product credits, and unit operating cost are non-IFRS financial performance measures with no standardized definition under IFRS. For further information and a detailed reconciliation, please see the discussion under the "Non-IFRS Financial Performance Measures" section of this MD&A.
^2^ Cash cost and sustaining cash cost per ounce of gold produced, net of by-product credits were introduced in 2022 and do not have a published comparative.

RECENT DEVELOPMENTS

Commitment to Climate Change Initiatives

On December 12, 2022, we announced our commitment to achieve net zero greenhouse gas ("GHG") emissions by 2050 and the adoption of interim 2030 GHG reduction targets to support this commitment. We have initiated a roadmap to further identify and manage risks associated with climate change, and opportunities to reduce GHG emissions in alignment with global decarbonization goals.

While our operations are well-positioned in the lower half of the global GHG emissions curve for copper operations, we recognize our role in mitigating climate change. Hudbay's GHG emissions reduction plan includes the following initiatives:

• Pursuing a 50% reduction in absolute Scope 1 and Scope 2 emissions from existing operations by 2030 (compared to 2021)

• Achieving net zero total emissions by 2050

• Reporting on material Scope 3 emissions in the near-term

• Assessing acquisitions and new projects against corporate emissions targets

• Continuing to be transparent with GHG performance data disclosure, including reporting total GHG emissions and GHG intensity

Hudbay's efforts have been focused on improving operating efficiencies to reduce the GHG emissions intensity at our mines through initiatives such as ore sorting and recovery improvement programs. We have identified multiple opportunities to achieve further reductions in emissions, including grid decarbonization in Peru, fleet and heating electrification and fuel switching in mobile equipment. We will continue to monitor and evaluate existing and new technologies as they become financially viable to implement at our operations. We will also consider emissions reduction opportunities in the design of our brownfield and greenfield growth projects. All initiatives will balance emissions and economic targets as part of our disciplined capital allocation strategy.

Advancing Activities to Prudently De-risk Copper World

In 2022, we invested approximately $80 million at Copper World to successfully execute a new strategy focused on a two-phase mine plan with the first phase located on private land claims. This strategy involved significant drilling campaigns to delineate seven newly discovered deposits adjacent to the known East deposit, the expansion of our private land package to over 4,500 acres, and the completion of a robust preliminary economic assessment for Copper World demonstrating a 16-year mine plan for Phase I, requiring only state level permits, and an expansion to a 44 year operation in Phase II with the utilization of federal lands.

Hudbay continues to advance pre-feasibility activities for Phase I of the Copper World project, which is expected to support the conversion of mineral resources to mineral reserves and optimize the layout and sequencing of the mineral processing facilities, in addition to evaluating other upside opportunities. Pre-feasibility level engineering of the main processing facility was completed by year-end together with geotechnical and hydrogeological site investigation activities. Metallurgical test work activities continued into 2023 and the results are being analyzed as part of concentrate leaching trade off evaluations. A pre-feasibility study for Phase I of the Copper World project is expected to be released in the second quarter of 2023.

In late 2022, Hudbay submitted the applications for an Aquifer Protection Permit and an Air Quality Permit to the Arizona Department of Environmental Quality ("ADEQ"). Hudbay continues to expect to receive these two remaining state permits in 2023. The other key state permit, the Mined Land Reclamation Plan, was received in 2022.In January 2023, Hudbay received an approved right-of-way from the State Land Department that will allow for infrastructure, such as roads, pipelines and powerlines, to connect between the properties in our private land package at Copper World.

Upon receipt of the state level permits, the company expects to conduct a bulk sampling program at Copper World to continue to de-risk the project by testing grade continuity, variable cut-off effectiveness and metallurgical strategies. Hudbay also intends to initiate a minority joint venture partner process following receipt of permits, which will allow the potential joint venture partner to participate in and help fund the definitive feasibility study activities in 2024.

Continued Focus on Cost Reductions and Capital Discipline

With a focus on generating positive cash flow, we delivered on our discretionary spending reduction targets by reducing 2022 growth capital and exploration spending by approximately $30 million in Arizona, Manitoba and Peru. We also reduced planned 2023 discretionary spending by more than $50 million primarily related to the deferral of the Copper World definitive feasibility study and the pebble crusher in Peru. Furthermore, planned 2023 growth and exploration expenditures are expected to be approximately $65 million lower than 2022 levels.

As an additional prudent measure intended to ensure positive cash flow generation and continued financial discipline, Hudbay expects to extend its existing quotational period hedging program, to cover approximately 13,000 tonnes of contained copper in the unsold concentrate inventory in Peru to lock in current copper prices.

We expect spending on our Copper World project in 2023 will be limited to de-risking activities, including the completion of the pre-feasibility study and state level permitting. The opportunity to sanction Copper World is not expected until 2025 based on current estimated timelines. This, together with our 2023 discretionary spending reductions, reflects a conservative approach to capital spending at Copper World over the next two years. As part of our disciplined financial planning approach to Copper World, we identified three specific prerequisites that would need to be achieved prior to making an investment decision in the project:

Permits - receipt of all state level permits required for Phase I;
Plan - completion of a definitive feasibility study with an internal rate of return of greater than 15%; and,
Prudent Financing Strategy - multi-faceted financial targets focused on a minimum cash balance, a stated maximum leverage, limited non-recourse project level debt and committed financial partners.

Exploration Update

Peru Regional Exploration

Hudbay controls a large, contiguous block of mineral rights with the potential to host mineral deposits within trucking distance of the Constancia processing facility, including the past producing Caballito property and the highly prospective Maria Reyna property. Following the execution of a surface rights exploration agreement with the community of Uchucarcco in August 2022, the company has commenced early exploration activities at the Maria Reyna and Caballito properties. Surface investigation activities together with baseline environmental and archaeological activities necessary to support drill permit applications for the Maria Reyna and Caballito prospects have been completed. Ground geophysical surveys commenced in the fourth quarter of 2022 and will continue once the Peruvian social situation improves. Field evidence confirms that both Caballito and Maria Reyna host sulfide and oxide rich copper mineralization in skarns, hydrothermal breccias and large porphyry intrusive bodies.

Recent activities at the Llaguen copper-molybdenum porphyry deposit in the Otuzco province in northern Peru have been focused on initiating metallurgical test work.

Manitoba Regional Exploration

Hudbay commenced a winter drill program in January 2023 with four drill rigs testing the down-dip gold and copper extensions of the Lalor deposit, which is the first time we have completed step-out drilling in the deeper zones at Lalor since the initial discovery of the gold and copper-gold zones in 2009 and 2010. One additional drill rig is testing a target located to the north of Lalor.

Arizona Regional Exploration

Recent drilling activities at Copper World have focused on close spaced infill drilling to support potential future bulk sampling programs. This drilling is now completed, and no additional drilling is planned for 2023.

Nevada Regional Exploration

A conductivity-resistivity IP ground survey commenced in the fourth quarter of 2022 on Hudbay's private land claims near the Mason project. This work, in combination with a re-interpretation of geological data from past operating mines and previous exploration data, will be used to finalize a future drill plan to test high grade skarn targets.

Dividend Declared

A semi-annual dividend of C$0.01 per share was declared on February 23, 2023. The dividend will be paid out on March 24, 2023 to shareholders of record as of March 7, 2023.

PERU OPERATIONS REVIEW

	Three months ended				Year ended				Guidance
		Dec. 31, 2021		Dec. 31, 2022		Dec. 31, 2021		Annual
								2022
Constancia ore mined 1	5,614,918		7,742,469		25,840,435		29,714,327
Copper	0.40		0.33		0.35		0.31
Gold	0.04		0.04		0.04		0.04
Silver	3.48		2.81		3.40		2.88
Molybdenum	0.01		0.01		0.01		0.01
Pampacancha ore mined 1	3,771,629		2,107,196		8,319,250		5,141,001
Copper	0.37		0.27		0.33		0.27
Gold	0.29		0.34		0.29		0.30
Silver	3.84		4.26		4.06		4.02
Molybdenum	0.01		0.01		0.01		0.01
Total ore mined	9,386,547		9,849,665		34,159,685		34,855,328
Strip ratio 2	0.97		0.95		1.13		1.02
Ore milled	7,795,735		8,048,925		30,522,294		28,809,755
Copper	0.41		0.33		0.34		0.32
Gold	0.12		0.11		0.09		0.08
Silver	3.93		3.67		3.58		3.35
Molybdenum	0.01		0.01		0.01		0.01
Copper concentrate	117,980		96,123		393,255		335,490
Concentrate grade	22.93		23.78		22.73		23.19
Copper recovery	85.1		86.0		85.0		84.6
Gold recovery	69.6		63.6		63.6		64.6
Silver recovery	66.5		60.8		65.7		63.7
Molybdenum recovery	37.7		26.7		34.8		31.5
Combined unit operating costs 3,4,5	13.64		9.96		12.78		10.70		10.10 - 12.90^6^
1 Reported tonnes and grade for ore mined are estimates based on mine plan assumptions and may not reconcile fully to ore milled.
2 Strip ratio is calculated as waste mined divided by ore mined.
3 Reflects combined mine, mill and general and administrative ("G&A") costs per tonne of ore milled. Reflects the deduction of expected capitalized stripping costs.
4 Combined unit costs is a non-IFRS financial performance measure with no standardized definition under IFRS. For further information and a detailed reconciliation, please see the discussion under the "Non-IFRS Financial Performance Measures" section of this MD&A.
5 Excludes approximately 0.7 million, or 0.09 per tonne and 5.2 million, or 0.17 per tonne, of COVID-19 related costs during the three and twelve months ended December 31, 2022 respectively and 4.1 million, or 0.51 per tonne and 19.8 million or 0.69 per tonne, of COVID-19 related costs during the three and twelve months ended December 31, 2021.
6 Combined unit cost guidance for 2022 excludes COVID-19 related costs.

All values are in US Dollars.

Total ore mined in the fourth quarter of 2022 decreased by 5% compared to the same period in 2021 due, in part, to a short-term change in mine plan where the company prioritized the processing of lower grade stockpiles and shorter haulage distance ore from the Constancia pit in order to ration fuel during a period of nation-wide social unrest and road blockades following a change in Peru's political leadership in early December 2022. This short-term change in mine plan ensured the plant continued to operate uninterrupted.

Ore milled during the fourth quarter of 2022 was 3% lower than the same period in 2021 due to a previously announced plant maintenance program in November 2022. Milled copper grades increased by 24% in the fourth quarter of 2022 compared to the same period in 2021 due to higher head grades from both Pampacancha and Constancia.

Full year 2022 ore mined was 2% lower than the same period in 2021. Full year 2022 copper and gold grades milled were 6% and 13% higher, respectively, than the comparative 2021 period due to higher head grades from both Pampacancha and Constancia.

Copper recoveries in the fourth quarter of 2022 were in line with the comparative 2021 period. Gold and silver recoveries in the fourth quarter were both 9% higher than the comparative 2021 period due to higher milled gold and silver grades. Peru achieved a record quarterly gold recovery of 70% in the fourth quarter of 2022.

Full year 2022 recoveries for copper, gold and silver were relatively consistent with the comparable period of 2021.

Combined mine, mill and G&A unit operating costs in the fourth quarter of 2022 were 37% higher than the same period in 2021 primarily due to incremental costs associated with the fourth quarter planned mill maintenance, higher mining costs associated with mining more ore from Pampacancha, as well as inflationary pressures on fuel, consumables and energy costs. Full year combined mine, mill and G&A unit operating costs for 2022 were 19% higher than the same period in 2021 due to the same factors as the quarterly variance partially offset by higher ore milled.

Contained metal inconcentrateproduced			Three months ended				Year ended				Guidance
		Dec. 31, 2022		Dec. 31, <br>2021		Dec. 31, 2022		Dec. 31, <br>2021		Annual
										2022		2023
Copper	tonnes		27,047		22,856		89,395		77,813		89,000 - 115,000		91,000 - 116,000
Gold	oz		20,860		17,917		58,229		50,306		70,000 - 90,000		83,000 - 108,000
Silver	oz		655,257		578,140		2,309,352		1,972,949		1,620,000 - 2,100,000		2,210,000 - 2,650,000
Molybdenum	tonnes		344		275		1,377		1,146		1,100 - 1,400		1,300 - 1,600

Fourth quarter 2022 production of molybdenum, copper, gold and silver was 25%, 18%, 16% and 13% higher, respectively, than the comparative period in 2021 due to higher copper and precious metal grades and higher precious metal and molybdenum recoveries. The fourth quarter of 2022 was a record quarter for gold production in Peru. Full year 2022 production of copper, gold, silver and molybdenum was 15%, 16%, 17% and 20% higher, respectively, than the comparative period in 2021 due to higher throughput, higher copper and precious metal grades and higher copper, silver and molybdenum recoveries.

Full year 2022 production of copper increased by 15% year-over-year to 89,395 tonnes, within the guidance range. Similarly, full year 2022 production of gold, silver and molybdenum increased by 16%, 17% and 20%, respectively, compared to 2021 due to higher throughput, higher copper and precious metal grades and higher copper, silver and molybdenum recoveries. Molybdenum production was in line with our annual guidance range, whereas silver production exceeded the top end of our annual guidance range by 10%. Gold production fell short of the annual guidance range primarily due to lower-than-planned grades from the Pampacancha pit in the fourth quarter of 2022 as a result of short-term changes in the mine plan.

Peru Cash Cost and Sustaining Cash Cost

		Three months ended				Year ended				Guidance
			Dec. 31, <br>2021		Dec. 31,2022		Dec. 31,<br>2021		Annual<br>2022		Annual<br>2023
Cash cost per pound of copper produced, net of by-product credits^1^	/lb	1.34		1.28		1.58		1.54		1.10 - 1.40		1.05 - 1.30
Sustaining cash cost per pound of copper produced, net of by-product credits^1^	/lb	2.09		2.46		2.35		2.46
^1^Cash cost and sustaining cash costs per pound of copper produced, net of by-product credits, are not recognized under IFRS. For more detail on these non-IFRS financial performance measures, please see the discussion under the "Non-IFRS Financial Performance Measures" section of this MD&A.

All values are in US Dollars.

Cash cost per pound of copper produced, net of by-product credits, in the fourth quarter of 2022 was $1.34, an increase of 5% compared to the same period in 2021 due to inflationary pressures on fuel, consumables and energy costs driving higher mining and milling costs, partially offset by lower general and administrative costs, higher molybdenum by-product credits and higher copper production. However, cash cost per pound of copper produced, net of by-product credits, in the fourth quarter of 2022 was below the run rate for the first nine months of the year primarily due to higher copper, gold and silver grades in the fourth quarter. Full year cash cost per pound of copper produced, net of by-product credits, was $1.58, a slight increase of 3% compared to the same period of 2021. This exceeded the upper end of our 2022 guidance range primarily due to higher mining and milling costs from input cost inflation and lower than expected by-product credits due to lower-than-expected gold grades from Pampacancha in the fourth quarter of 2022, as described above.

Sustaining cash cost per pound of copper produced, net of by-product credits, for the fourth quarter and full year 2022 were 15% and 4% lower, respectively, than the comparative 2021 periods due to lower sustaining capital expenditures and higher copper and gold production, offset, in part, by higher mining and milling costs from input cost inflation.

Metal Sold

			Three months ended				Year ended
		Dec. 31, 2022		Dec. 31, 2021		Dec. 31, 2022		Dec. 31, 2021
Payable metal in concentrate
Copper	tonnes		23,789		20,551		79,805		71,398
Gold	oz		15,116		16,304		49,968		41,807
Silver	oz		411,129		380,712		2,045,678		1,490,651
Molybdenum	tonnes		421		245		1,352		1,098

While we were able to complete two copper concentrate shipments from the Matarani port during December, Peru's copper, gold and silver sales in the fourth quarter of 2022 were impacted by higher-than-normal unsold copper concentrate inventory levels of approximately 25,000 wet metric tonnes as at December 31, 2022, due to the nation-wide road blockades in early December. We have been able to steadily operate the Constancia mill throughout the recent road blockades, and despite completing three copper concentrate shipments from the port in January 2023, Peru's unsold copper concentrate inventory levels reached a peak of approximately 47,000 wet metric tonnes in mid-February when transportation of concentrate resumed with the assistance of the community-based concentrate trucking companies.We expect concentrate inventory levels to normalize over the next several months.

MANITOBA OPERATIONS REVIEW

Mines

			Three months ended				Year ended
		Dec. 31, 2022		Dec. 31, 2021		Dec. 31, 2022		Dec. 31, 2021
Lalor
Ore	tonnes		369,453		422,208		1,516,203		1,593,141
Copper	%		0.73		0.78		0.73		0.71
Zinc	%		2.17		4.19		3.14		4.23
Gold	g/tonne		4.00		3.92		4.00		3.41
Silver	g/tonne		19.37		30.35		21.96		24.66
777
Ore	tonnes		-		266,744		484,355		1,053,710
Copper	%		-		1.13		1.12		1.28
Zinc	%		-		4.16		3.83		3.91
Gold	g/tonne		-		1.80		1.66		2.03
Silver	g/tonne		-		25.02		20.85		25.25
Total Mines
Ore	tonnes		369,453		688,952		2,000,558		2,646,851
Copper	%		0.73		0.91		0.83		0.94
Zinc	%		2.17		4.18		3.31		4.10
Gold	g/tonne		4.00		3.10		3.43		2.86
Silver	g/tonne		19.37		28.29		21.69		24.90
Unit Operating Costs ^1^		Three months ended				Year ended
---	---	---	---	---	---	---	---	---
			Dec. 31, 2021		Dec. 31, 2022		Dec. 31, 2021
Mines
Lalor	C/tonne	140.10		112.34		136.71		114.95
777	C/tonne	-		100.34		87.50		91.12
Total Mines	C/tonne	140.10		107.69		124.80		105.46
^1^ Reflects costs per tonne of ore mined.

All values are in US Dollars.

During the fourth quarter of 2022, the Manitoba team continued to focus on integrating our Flin Flon employees and equipment into the Snow Lake operations in order to significantly reduce our reliance on higher cost contractors. Lalor's ore production during the quarter was impacted by a planned maintenance program to replace surface ore chutes as well as various other pre-winter maintenance activities including the muck circuit, hoist drive and electrical maintenance. We continue to advance several key initiatives to support higher production levels at Lalor, including building longhole inventory, improving stope muck fragmentation, optimizing the development drift size and focusing on shaft availability improvements to enable more ore to be hoisted to surface while reducing inefficient trucking of ore via the ramp.

Ore mined at our Manitoba operations during the fourth quarter of 2022 was 46% lower than the same period in 2021 mainly due to the planned closure of 777 in June 2022 which resulted in a significant decline in ore mined in the fourth quarter compared to the prior year period which benefited from the full contribution of 777 mine production. Excluding 777 production, Lalor mined ore in the fourth quarter was 12% lower than the same period in 2021 due to the above noted transition and the planned maintenance program impacting operations. Gold grades mined during the fourth quarter of 2022 were 2% higher than the same period in 2021. Copper, zinc and silver grades mined at Lalor during the fourth quarter of 2022 were 6%, 48% and 36% lower, respectively, compared to the same period in 2021.

Ore mined at our Manitoba operations for the full year 2022 was 24% lower than 2021 mainly due to the closure of 777 in June 2022 as mentioned above. Ore mined at Lalor for the full year 2022 was 5% lower than 2021 while copper and gold grades mined at Lalor during 2022 were 3% and 17% higher, respectively. The zinc and silver grades at Lalor were 26% and 11% lower, respectively, compared to the same period in 2021, mainly due to an increased focus on mining of gold and copper-gold stopes and a corresponding decrease of production from the base metal zones.

Total mine unit operating costs during the fourth quarter of 2022 increased by 30%, reflecting the standalone cost structure of Lalor compared to the same period in 2021 which included operating costs for both Lalor and the lower cost 777 mine. Operating costs were also impacted by inflationary cost pressures for bulk commodities, fuel, and contractor costs compared to the same period in 2021, in addition to lower ore production volumes as mentioned above.

Total mine unit operating costs during the full year 2022 increased by 18% compared to the same period in 2021 due to the factors mentioned above and higher propane usage early in the year caused by a colder winter.

Processing Facilities

			Three months ended				Year ended
		Dec. 31, 2022		Dec. 31, 2021		Dec. 31, 2022		Dec. 31, 2021
Stall & New Britannia Concentrator Combined
Ore	tonnes		345,492		419,727		1,510,907		1,506,756
Copper	%		0.73		0.75		0.75		0.72
Zinc	%		2.31		4.12		3.30		4.30
Gold	g/tonne		3.98		3.90		4.08		3.42
Silver	g/tonne		20.40		30.07		22.15		24.95
Copper concentrate	tonnes		14,201		17,494		58,276		57,291
Concentrate grade	% Cu		15.90		15.92		17.12		16.43
Zinc concentrate	tonnes		12,706		27,672		77,806		111,370
Concentrate grade	% Zn		49.79		51.02		50.63		50.56
Copper recovery - concentrate	%		89.2		88.7		88.6		86.8
Zinc recovery - concentrate (Stall)	%		90.1		87.4		86.6		88.9
Gold recovery - concentrate	%		58.8		54.6		59.2		54.9
Silver recovery - concentrate	%		56.1		53.9		58.1		54.4
Contained metal in concentrate produced
Copper	tonnes		2,258		2,785		9,977		9,415
Zinc	tonnes		6,326		14,119		39,395		56,310
Gold	oz		25,961		28,720		117,526		90,911
Silver	oz		127,099		218,679		625,145		656,847
Metal in doré produced
Gold	oz		7,099		8,598		28,707		9,002
Silver	oz		12,659		6,519		52,834		6,529
Flin Flon Concentrator
Ore	tonnes		-		262,565		497,344		1,133,516
Copper	%		-		1.12		1.11		1.23
Zinc	%		-		4.16		3.87		3.95
Gold	g/tonne		-		1.78		1.67		2.04
Silver	g/tonne		-		25.04		21.00		24.90
Copper concentrate	tonnes		-		12,554		22,602		56,646
Concentrate grade	% Cu		-		20.37		21.24		21.61
Zinc concentrate	tonnes		-		18,353		31,602		73,974
Concentrate grade	% Zn		-		49.51		50.59		50.31
Copper recovery	%		-		86.7		86.7		87.7
Zinc recovery	%		-		83.1		83.0		83.0
Gold recovery	%		-		59.2		57.1		58.5
Silver recovery	%		-		45.6		51.8		45.1
Contained metal in concentrate produced
Copper	tonnes		-		2,557		4,801		12,242
Zinc	tonnes		-		9,088		15,986		37,219
Gold	oz		-		8,924		15,238		43,564
Silver	oz		-		96,375		173,963		409,156
Unit Operating Costs ^1^ ****		Three months ended				Year ended				Guidance
---	---	---	---	---	---	---	---	---	---	---
			Dec. 31, <br>2021		Dec. 31, 2022		Dec. 31, <br>2021		Annual
									2022
Concentrators
Stall & New Britannia	C/tonne	58.49		47.67		54.16		31.17
Flin Flon	C/tonne	-		30.33		28.14		28.27
Combined mine/mill unit operating costs ^2,3^
Manitoba	C/tonne	241		168		195		154		170 - 185
^1^ Reflects costs per tonne of milled ore.
^2^Reflects combined mine, mill and G&A costs per tonne of milled ore.
^3^Combined unit costs is a non-IFRS financial performance measure with no standardized definition under IFRS. For further information and a detailed reconciliation, please see the discussion under the "Non-IFRS Financial Performance Measures" section of this MD&A.

All values are in US Dollars.

The combined Stall and New Britannia mills processed 18% less ore in the fourth quarter of 2022 compared to the same period in 2021, mainly due to the above noted transition and planned maintenance program impacting Lalor and the milling operations. Stall recoveries were consistent with the metallurgical model for the head grades delivered. Compared to the same period in 2021, unit operating costs at the Stall and New Britannia mills were higher in the fourth quarter of 2022 as a result of higher costs at New Britannia and inflationary cost pressures.

Ore processed at the combined Stall and New Britannia mills during the full year 2022 was in line with the same period in 2021. Stall recoveries were consistent with the metallurgical model for the head grades delivered. Compared to the same period in 2021, unit operating costs at the Stall and New Britannia mills were higher in 2022 for the same reasons outlined in the fourth quarter variance as well as scheduled mill maintenance at New Britannia early in the year and baseline effects as New Britannia was not yet fully operational in the comparative period.

The New Britannia mill continued to achieve consistent production in the fourth quarter, averaging approximately 1,530 tonnes per day. Metal recoveries have now stabilized near our targeted levels for the mill. Additional improvement initiatives will continue to be advanced in the upcoming quarters with a focus on reducing reagent and grinding media consumption that has contributed to higher operating costs than planned. These initiatives require minimal capital expenditures and will further improve overall metal recoveries and copper concentrate grades.

Combined mine, mill and G&A unit operating costs in the fourth quarter of 2022 and full year 2022 increased by 43% and 27%, respectively, compared to the same periods in 2021 reflecting inflationary cost pressures for bulk commodities, fuel, and contractor costs and the standalone cost structure of Lalor compared to the same period in 2021, which included operating costs for both Lalor and the lower cost 777 mine.

		Three months ended		Year ended			Guidance
Contained metal in concentrate produced ^1^		Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2022	Dec. 31, 2021		Annual
						2022		2023
Copper	tonnes	2,258	5,342	14,778	21,657		12,000 - 16,000		9,000 - 12,000
Gold ^2^	oz	25,961	37,644	132,764	134,475		-		-
Silver ^3^	oz	127,099	315,054	799,108	1,066,003		-		-
Zinc	tonnes	6,326	23,207	55,381	93,529		50,000 - 70,000		28,000 - 36,000
Metal in doré produced ^1^
Gold ^2^	oz	7,099	8,598	28,707	9,002		-		-
Silver ^3^	oz	12,659	6,519	52,834	6,529		-		-
Contained metal in concentrate and doré produced
Gold ^2^	oz	33,060	46,242	161,471	143,477		150,000 - 185,000		175,000 - 205,000
Silver ^3^	oz	139,758	321,573	851,942	1,072,532		800,000 - 1,100,000		750,000 - 1,000,000
^1^Metal reported in concentrate is prior to deductions associated with smelter terms.
^2^Gold production guidance includes gold contained in concentrate produced and gold in doré.
^3^Silver production guidance includes silver contained in concentrate produced and silver in doré.

Manitoba's production of copper, gold, silver and zinc in the fourth quarter of 2022 was lower by 58%, 29%, 57% and 73%, respectively, than the comparative 2021 period following the planned closure of the 777 mine in June 2022, partially offset by higher metal recoveries. Full year 2022 metal production was similarly impacted by the planned closure of 777, resulting in a decrease in copper, zinc and silver production, while 2022 gold production increased by 13% as New Britannia ramped up to full production.

Full year production of all metals in Manitoba achieved our 2022 annual guidance ranges.

* Mining activities at 777 were completed in June 2022

Zinc Plant

Zinc Production			Three months ended				Year ended
		Dec. 31, 2022		Dec. 31, 2021		Dec. 31, 2022		Dec. 31, 2021
Zinc Concentrate Treated
Domestic	tonnes		-		45,143		76,223		191,283
Refined Metal Produced
Domestic	tonnes		-		20,783		37,894		89,568
Unit Operating Costs		Three months ended				Year ended
---	---	---	---	---	---	---	---	---
			Dec. 31, <br>2021		Dec. 31, 2022		Dec. 31, <br>2021
Zinc Plant ^1,2^	C/lb	-		0.63		0.60		0.55
^1^ Zinc unit operating costs include G&A costs.<br>^2^ Zinc unit costs is a non-IFRS financial performance measure with no standardized definition under IFRS. For further information and a detailed reconciliation, please see the discussion under the "Non-IFRS Financial Performance Measures" section of this MD&A.

All values are in US Dollars.

The zinc plant ceased operations on June 30, 2022 and, as such, had no production during the second half of 2022. Closure activities commenced in the third quarter of 2022 and progressed safely during the fourth quarter of 2022.

Manitoba Cash Cost and Sustaining Cash Cost

		Three months ended				Year ended				Guidance
									Annual
			Dec. 31, <br>2021		Dec. 31, 2022		Dec. 31, <br>2021		2022		2023
Cost per pound of gold produced
Cash cost per ounce of gold produced, net of by-product credits ^1, 2^	/oz	922		-		297		-		300 - 550		500 - 800
Sustaining cash cost per ounce of gold produced, net of by-product credits ^1, 2^	/oz	1,795		-		1,091		-
^1^ Cash cost and sustaining cash cost per ounce of gold produced, net of by-product credits, are not recognized under IFRS. For more detail on this non-IFRS financial performance measure, please see the discussion under the "Non-IFRS Financial Performance Measures" section of this MD&A.
^2^Cash cost and sustaining cash cost per ounce of gold produced, net of by-product credits were introduced in 2022 and do not have a published comparative.

All values are in US Dollars.

Cash cost per ounce of gold produced, net of by-product credits, in the fourth quarter was $922, higher than the third quarter of 2022, primarily due to lower by-product credits and lower gold production. This was partially offset by lower mining, milling and general and administrative costs as well as lower treatment, refining and freight costs. However, full year 2022 cash cost per ounce of gold produced, net of by-product credits, was $297, 1% below the low end of our 2022 guidance range.

Sustaining cash cost per ounce of gold produced, net of by-product credits, in the fourth quarter was $1,795, higher than the third quarter of 2022, primarily due to the same factors affecting cash cost, partially offset by lower sustaining capital expenditures.

Metal Sold

			Three months ended				Year ended
		Dec. 31, 2022		Dec. 31, 2021		Dec. 31, 2022		Dec. 31, 2021
Payable metal in concentrate and doré
Copper	tonnes		1,626		4,408		14,668		20,802
Gold	oz		32,140		40,623		163,447		126,551
Silver	oz		148,177		257,928		932,807		936,857
Zinc ^1^	tonnes		8,230		21,112		59,043		96,435
^1^Includes refined zinc metal and payable zinc in concentrate sold.

Sales of copper and zinc during the three and twelve months ended December 31, 2022 were lower than the comparable periods in 2021 due to the same factors affecting production noted above. Gold sales during 2022 were 29% higher than 2021 as New Britannia only reached commercial production in September 2021.

OUTLOOK

This outlook includes forward-looking information about our operations and financial expectations based on our expectations and outlook as of February 23, 2023.

This outlook, including expected results and targets, is subject to various risks, uncertainties and assumptions, which may impact future performance and our achievement of the results and targets discussed in this section. For additional information on forward-looking information, refer to the "Forward-Looking Information" section of this MD&A. We may update our outlook depending on changes in metals prices and other factors, as per our "Commodity Markets" and "Sensitivity Analysis" discussions below. In addition to this section, refer to the "Operations Review", "Financial Review" and "Liquidity and Capital Resources" sections for additional details on our outlook for 2023.

Material Assumptions

Our annual production and operating cost guidance, along with our annual capital and exploration expenditure forecasts are discussed in detail below.

Production Guidance

Contained Metal in Concentrate and Doré^1^		2023 Guidance	Year ended<br><br> <br>Dec. 31, 2022	2022 Guidance
Peru
Copper	tonnes	91,000 - 116,000	89,395	89,000 - 115,000
Gold	oz	83,000 - 108,000	58,229	70,000 - 90,000
Silver	oz	2,210,000 - 2,650,000	2,309,352	1,620,000 - 2,100,000
Molybdenum	tonnes	1,300 - 1,600	1,377	1,100 - 1,400
Manitoba
Gold	oz	175,000 - 205,000	161,471	150,000 - 185,000
Zinc	tonnes	28,000 - 36,000	55,381	50,000 - 70,000
Copper	tonnes	9,000 - 12,000	14,778	12,000 - 16,000
Silver	oz	750,000 - 1,000,000	851,942	800,000 - 1,100,000
Total
Copper	tonnes	100,000 - 128,000	104,173	101,000 - 131,000
Gold	oz	258,000 - 313,000	219,700	220,000 - 275,000
Zinc	tonnes	28,000 - 36,000	55,381	50,000 - 70,000
Silver	oz	2,960,000 - 3,650,000	3,161,294	2,420,000 - 3,200,000
Molybdenum	tonnes	1,300 - 1,600	1,377	1,100 - 1,400
^1^ Metal reported in concentrate and doré is prior to refining losses or deductions associated with smelter terms.

On a consolidated basis, we met 2022 production guidance for all metals. Consolidated copper and gold production was on the lower end of the guidance range primarily due to lower-than-planned grades in the fourth quarter of 2022 in Peru due to short-term mine plan changes that were implemented to mitigate the risks associated with logistical and supply chain disruptions in Peru.

In 2023, consolidated copper production is forecast to increase to 114,000^1^ tonnes, an increase of approximately 10%^1^ compared to 2022 levels, primarily as a result of higher expected copper production in Peru, with higher planned copper grades from the Pampacancha pit more than offsetting lower copper production in Manitoba. Consolidated gold production in 2023 is expected to increase by 30%^1^ to 285,500^1^ ounces year-over-year, due to significantly higher gold production in both Peru and Manitoba.

In early 2023, the mine plan for Peru was adjusted to prioritize the processing of lower grade stockpiles and shorter haulage distance ore to manage through the regional logistical challenges and ensure steady operation of the plant. This is expected to result in more ore being mined from the Constancia pit and less from the Pampacancha pit in the early part of the year, as well as lower recoveries due to the varying ore types present in the stockpiles. Despite these mine plan changes, 2023 copper and gold production in Peru is expected to be 103,500^1^ tonnes and 95,500^1^ ounces, representing year-over-year increases of 16%^1^ and 64%^1^, respectively. The revised mine plan for 2023 reflects a period of higher stripping activities in the Pampacancha pit from March to June with significantly higher copper and gold grades expected to be mined in the second half of 2023. Peru's production guidance also reflects regularly scheduled semi-annual mill maintenance shutdowns at Constancia during the second and fourth quarters of 2023.

In Manitoba, 2023 gold production is expected to increase by 18%^1^to 190,000^1^ ounces compared to 2022 due to higher gold grades and a 10% increase in ore throughput at the Lalor mine. The 2023 mine plan at Lalor reflects higher production from the gold and copper-gold zones as those zones are expected to be prioritized over the base metal zones. The production guidance reflects a 10% increase in New Britannia mill throughput in 2023 given the mill has been consistently operating above its 1,500 tonnes per day nameplate capacity. The 2023 mine plan achieves gold production levels consistent with the most recent mine plan for Snow Lake but without the full ramp up to 5,300 tonnes per day as it maximizes value per tonne of ore at Lalor by prioritizing the mining of the gold-rich zones over the zinc-rich base metal zones and reflects higher throughput at the New Britannia mill. Year-over-year zinc production is expected to decline by 42%^1^ primarily as a result of the closure of the 777 mine in June 2022 and prioritizing the mining of the gold-rich zones over the zinc-rich base metal zones at Lalor. Manitoba's production guidance reflects regularly scheduled maintenance programs at the Lalor mine during the second and fourth quarters of 2023.

Given the short-term mine plan changes implemented at Constancia in early 2023 and the Lalor ramp-up strategy, as mentioned above, the company is examining the potential impact of these changes to 2024 and 2025 production. We expect our 2024 production guidance to be similar to the previously issued guidance on February 23, 2022, reflecting a further increase in copper production in Peru and gold production in Manitoba from 2023 levels. As a result of the 2023 mine plan changes in Peru, we now expect mining activities at the Pampacancha deposit to continue into the first half of 2025, which is expected to result in higher copper and gold production from Peru in 2025 beyond the levels shown in the most recent technical report for Constancia, dated March 29, 2021. We expect to release our new three-year production outlook together with our annual mineral reserve and resource update at the end of March 2023.

Capital Expenditure Guidance

Capital Expenditures1(in millions)	Year ended<br>Dec. 31, 2022	2022 Guidance
Sustaining capital
Peru2	101.4	105.0
Manitoba	125.1	115.0
Total sustaining capital	226.5	220.0
Growth capital
Peru	4.3	10.0
Manitoba	33.4	50.0
Arizona5	36.2	40.0
Total growth capital	73.9	100.0
Capitalized exploration	42.3	40.0
Total	342.7	360.0
1 Excludes capitalized costs not considered to be sustaining or growth capital expenditures.
2 Includes capitalized stripping costs.
3 2023 capital expenditure guidance excludes right-of-use lease additions.
4 2023 capital expenditure guidance is converted into U.S. dollars using an exchange rate of 1.35 C/US.
5 2022 guidance reflects revised Arizona spending guidance issued on June 8, 2022, which includes 5 million in additional growth expenditures and 15 million in additional capitalized exploration related to Copper World.

All values are in US Dollars.

2022 total capital expenditures were 5% below guidance expectations as a result of the discretionary capital reductions across the business, partially offset by higher sustaining capital expenditures in Manitoba primarily due inflationary cost pressures and lease additions that were not originally contemplated in guidance.

We expect to continue to reduce discretionary spending with an approximately 13% year-over-year decline in total capital expenditures to $300 million in 2023, primarily due to lower discretionary growth spending and capitalized exploration in 2023.

Peru's sustaining capital expenditures in 2023 are expected to increase from 2022 levels primarily due to higher costs associated with heavy civil works for the completion of a tailings dam raise in 2023 and higher capitalized stripping costs as a result of the mine plan resequencing in 2023. Peru's growth capital spending of $10 million in 2023 includes costs associated with mill recovery improvement initiatives targeted to increase copper and molybdenum recoveries.

Manitoba's sustaining capital expenditures in 2023 are expected to be lower than 2022 primarily due to lower equipment spending at Lalor and in the mills after the Snow Lake transition and ramp up period in 2022. Manitoba's growth capital spending of $15 million in 2023 relates to the costs for the completion of the Stall mill recovery improvement project, which is expected to involve several flow sheet enhancements to increase gold and copper recoveries starting in the second quarter of 2023. These low-capital brownfield growth projects are expected to generate attractive returns and are part of our continuous improvement efforts.

The Manitoba spending guidance excludes approximately $20 million of annual care and maintenance costs related to the Flin Flon facilities in 2023, which are expected to be recorded as other operating expenses.

Arizona's growth capital spending of $30 million includes approximately $20 million in annual carrying and permitting costs for the Copper World and Mason projects and approximately $10 million for economic studies and site works in 2023.

Exploration Guidance

(in millions)	Year ended
	Dec. 31, 2022	2022 Guidance
Peru	25.1	25.0
Manitoba	14.2	15.0
Arizona and other 2	37.5	40.0
Total exploration expenditures	76.8	80.0
Capitalized spending	(42.3)	(40.0)
Total exploration expense	34.5	40.0
1 2023 exploration guidance excludes 5 million of non-cash amortization of community agreements for exploration properties.
2 2022 guidance reflects an additional 15 million in capitalized exploration at Copper World announced on June 8, 2022.

All values are in US Dollars.

Total expected exploration expenditures of $30 million in 2023 are 61% lower than 2022 levels due to our continued focus on discretionary spending reductions. 2023 exploration activities are focused on areas with high potential for new discovery and mineral reserve and resource expansion.

In Peru, 2023 exploration activities will focus on permitting and drill preparation for the Maria Reyna and Caballito properties near Constancia. We also expect to complete a limited drill program at Pampacancha in 2023 to test the potential to add an incremental phase at depth to the reserve pit. In Manitoba, we have initiated a winter drill program focused on testing the deep extensions of the gold and copper zones at Lalor and a target to the north of Lalor.

Cash Cost Guidance

Copper remains the primary revenue contributor on a consolidated basis, and therefore, consolidated cost guidance has been presented as cash cost per pound of copper produced. We have also provided cash cost guidance for each of our operations based on their respective primary metal contributors. We expect combined unit operating costs in both Peru and Manitoba to trend lower in 2023, as we no longer plan to issue combined unit operating cost guidance, as we believe cash cost is a more common metric used to measure operating performance.

Cash cost 1	2023 Guidance	Year ended<br><br> <br>Dec. 31, 2022	2022 Guidance
Peru cash cost per pound of copper2	1.05 - 1.30	1.58	1.10 - 1.40
Manitoba cash cost per ounce of gold3	500 - 800	297	300-550
Consolidated cash cost per pound of copper2	0.40 - 0.80	0.86	0.60 - 1.05
Consolidated sustaining cash cost per pound of copper2	1.35 - 2.05	2.07	1.60 - 2.25
1 Cash cost, net of by-product credits, per pound of copper produced is a non-IFRS financial performance measure with no standardized definition under IFRS. For further information and a detailed reconciliation, please see the discussion under the "Non-IFRS Financial Reporting Measures" section of this MD&A.
2 Peru and consolidated cash cost, net of by-product credits, per pound of copper contained in concentrate and by-product credits are calculated using the gold and silver deferred revenue drawdown rates for the streamed ounces in Peru in effect on December 31, 2022 and the following commodity prices: 1,800 per ounce gold, 21.00 per ounce silver and 25.00 per pound molybdenum, 1.40 per pound zinc and an exchange rate of 1.35 C/US.
3 Manitoba cash cost, net of by-product credits, per ounce of gold contained in concentrate and doré and by-product credits are calculated using the following commodity prices: 3.75 per pound copper, 21.00 per ounce silver, 1.40 per pound zinc and an exchange rate of 1.35 C/US.

All values are in US Dollars.

Copper cash cost in Peru is expected to decline by 26%^1^ in 2023 versus 2022, primarily due to higher gold by-product credits and higher copper production.

Gold cash cost in Manitoba is expected to increase in 2023 compared to 2022 as a result of the transition to a primary gold operation with lower by-product credits after the closure of the 777 mine in June 2022.

Consolidated copper cash cost in 2023 is expected to decline by 30%^1^ compared to 2022 levels due to the expected increase in copper production and higher expected gold by-product credits from the increase in annual gold production. Consolidated sustaining cash cost in 2023 is expected to be 18%^1^ lower than 2022 levels due to the same factors affecting consolidated cash cost, partially offset by slightly higher sustaining capital expenditures.

Metal production in any given quarter may vary from the annual guidance rate based on variations in grades and recoveries due to mine sequencing in the quarter, the timing of planned maintenance, and other factors. Cash cost and sustaining cash cost in any particular quarter can vary from the annual guidance ranges based on a variety of factors, including the scheduling of maintenance events, the prevailing commodity prices affecting by-product credits, the impact of social and political tensions in Peru, and seasonal heating requirements, particularly in Manitoba.

^1^ Year-over-year forecast changes assume the mid-point of the respective guidance range is achieved.

Commodity Markets

Our 2023 operational and financial performance will be influenced by a number of factors. At the macro-level, the general performance of the Chinese, North American and global economies will influence the demand for copper and zinc, while interest rates, inflation, the performance of financial markets and the level of economic uncertainty will influence the investment demand for gold. The recent relaxation of China's zero COVID policy has improved market sentiment and recent metal prices and may continue to provide commodity price tailwind should demand from China surprise to the upside. However, hawkish comments from the US Federal Reserve have contributed to a less dramatic price response to China's reopening. Recently, Peru has experienced heightened tensions and social unrest following a change in the country's political leadership which has contributed to reductions in the country's copper production, while inventory levels of many base metals are already low by historical standards. Challenges remain from the macro-economic and political side for both supply and demand which is likely to result in future price volatility for metal prices as we look ahead to 2023. However, the combination of China reopening and global supply challenges represents a net positive for global metal market fundamentals.

The realized prices we achieve in the commodity markets significantly affect our financial performance. Our general expectations regarding metals prices and foreign exchange rates are included below and in the "Sensitivity Analysis" section of this MD&A.

In addition to our production volumes, our financial performance is directly affected by a number of factors, including metals prices, foreign exchange rates, and input costs, including energy prices. Copper and zinc prices were under pressure in 2022, trending downward during the second half of the year. At the start of 2022, prices for copper and zinc remained well above the 10-year trailing average due to a strong rebound in demand for physical metal and lingering supply issues related to COVID-19. However, in the second half of the year, prices trended downwards amid growing recession fears in many parts of the world driven by central bank rate increases and the war in the Ukraine.

We have developed the following market analysis from various information sources including analyst and industry experts and our own market intelligence.

Copper

In 2022, the London Metal Exchange ("LME") copper price averaged approximately $4.00 per pound, ranging from an all-time high of $4.87 in March 2022 to a low of $3.18 per pound at the start of the second half of the year. Copper prices slowly recovered during the fourth quarter of 2022 ending the year at $3.80 per pound.

Copper prices faced headwinds during 2022 primarily due to growing recession fears and measures taken to tackle rising inflation. During the fourth quarter of 2022, following China's easing of pandemic related restrictions, prices started to recover.

Copper consumption grew by approximately 1% in 2022, approximating the growth in refined production and keeping the physical market relatively balanced and stocks at historically low levels.

Volatility in the short-term for copper is expected, however, strong future demand for copper will necessitate the development of intrinsically higher cost greenfield mines from the world's existing inventory of undeveloped deposits, at a time when existing mines are seeing significant cost inflation due to higher energy costs, consumables costs and taxes. This combination of market factors will likely result in significantly higher long term copper prices.

Improving prices of late are also an indication that investors are seeing beyond potential short term price volatility, to the structural copper metal deficit emerging mid-decade.

Zinc

In 2022, the LME zinc price averaged $1.58 per pound, with prices ranging from $1.22 per pound to $2.05 per pound. Zinc demand fell by 1.4% in 2022 after surging by 6.2% in 2021. The decrease in demand was primarily due to growing recession fears and policies aimed at controlling a resurgence in COVID-19. This lower demand growth was more than offset by reduced zinc supply, such that 2022 represented another year of metal deficits reducing already depleted global inventories.

The 2023 zinc metal market is projected to be the third consecutive year of global deficits. Supply chain inventories, as reflected by extreme metal premiums, are already critically low. Consequently, 2023 prices are expected to be supported by constructive supply/demand fundamentals.

Gold

In 2022, the London Gold Bullion Market price for gold averaged $1,803 per ounce, which remained relatively consistent with the average gold price of $1,799 per ounce in 2021. Gold prices traded between $1,622 per ounce and $2,051 per ounce during the year responding primarily to changing market sentiments on the direction of inflation and interest rates and the projected impact of the COVID-19 pandemic on the world economy.

The physical supply and demand for gold is not an arbitrator of future prices as it is with base metals because most of the gold ever mined is stored in bank vaults. Gold is an investment that has traditionally provided a safe haven for investors during uncertain economic times, as well as a hedge against inflation, future currency devaluation and declining values of other riskier asset classes. Concerns regarding the effect of COVID-19 on the global economic growth as governments taper monetary stimulus combined with record-high inflation and political instability in many regions of the world bodes well for the price of gold price in 2023. However, market expectations for increases in interest rates and a stronger US dollar may keep gold range bound between $1,800 and $1,900 per ounce.

Treatment Charges, Refining Charges, Zinc Metal Premiums and Freight Costs

Hudbay's operating margins are affected by a variety of marketing related costs and premiums related to the products that we produce. For the copper, zinc and molybdenum concentrates that we produce, we pay freight costs to deliver these products from our facilities to our customers and depending on the destination, we incur various combinations of truck, rail or ocean freight costs along with warehousing and loading fees. We also pay treatment and refining charges ("TC/RCs") to our customers who process our concentrates. For precious metal doré we produce, we incur transportation costs to ship to our customers.

A significant portion of our copper concentrate sales are made under multiyear contracts with an annual benchmark reference for TC/RCs. The annual benchmark for 2023 was established earlier this year at $88/8.8¢, compared to $65/6.5¢ in 2022. However since the benchmark was established, the global concentrate market has tightened, reflecting various mine production challenges in Central and South America.

Hudbay was also exposed to zinc concentrate treatment charges this year due to the closure of the Flin Flon smelter mid-year. The 2023 zinc concentrate benchmark has not yet been established, but will likely be agreed within the next 45 days. This year's benchmark is expected to exceed 2022's level of $230/dmt. However smelter curtailments in Europe are expected to be reversed to a degree this year, reducing the level of concentrate surplus previously anticipated.

Zinc metal premiums, applicable to metal sold from the Flin Flon zinc plant prior to its mid-year closure, reached record levels in North America, with spot premiums exceeding 30 cents. Power induced zinc smelter closures in Europe contributed to the market tightness in North America. Hudbay's combination of long term and spot sales resulted in record realizations prior to closure.

Bulk ocean freight rates were volatile in 2022, but remained elevated by historical standards. Hudbay's exposure to this market dynamic was limited due to previously agreed multiyear Contracts of Affreightment ("COA"), which covered the majority of our ocean freight requirements. Toward the end of 2022, spot ocean freights corrected, approaching $55/wmt for shipments from Peru to China. This afforded Hudbay, and other miners globally, an opportunity to enter into new COA's for production post 2022.

Container rates, which spiked more dramatically than bulk rates prior to the start of 2022, fell even more significantly in 2022, ending the year at approximately half the rates that prevailed at the start of the year for certain routes. This will positively impact shipment costs of molybdenum concentrate.

Sensitivity Analysis

The following table displays the estimated impact of changes in metals prices and foreign exchange rates on our 2023 net profit, earnings per share and operating cash flow, assuming that our operational performance is consistent with the mid-point of our guidance for 2023. The effects of a given change in an assumption are calculated in isolation.

	Change of 10%	Impact on	Impact on	Impact on Operating CF
	represented by:	Profit	EPS^1^	before WC changes
Metals Prices
Copper price2	+/- $0.38/lb	+/- $49M	+/- $0.19	+/- $77M
Zinc price	+/- $0.14/lb	+/- $5M	+/- $0.02	+/- $8M
Gold price3	+/- $180/oz	+/- $23M	+/- $0.09	+/- $38M
Exchange Rates 4
C/US	+/-0.14	+/- $26M	+/- $0.10	+/- $32M
1 Based on 262.0 million common shares outstanding as at December 31, 2022.
2 Quotational period hedging program neutralizes provisional pricing adjustments.
3 Gold price sensitivity also includes an impact of a +/- 10% change in the silver price (2023 assumption: 21.00/oz of silver).
4 Change in profit from operational performance only, does not include change in profit arising from translation of balance sheet accounts.

All values are in US Dollars.

FINANCIAL REVIEW

Financial Results

In the fourth quarter of 2022, we recorded a net loss of $17.4 million compared to a net loss of $10.5 million in the fourth quarter of 2021, representing an increase in loss of $6.9 million. For the full year, we recorded a net profit of $70.4 million compared to a net loss of $244.4 million for the same period in 2021, representing an increase in profit of $314.8 million.

The following table provides further details on these variances:

(in $ millions)	Three months ended <br>December 31, 2022		Year ended <br>December 31, 2022
Increase (decrease) in components of profit or loss:
Revenues	(104.0	)	(40.6	)
Cost of sales
Mine operating costs	35.2		(27.3	)
Depreciation and amortization	10.5		20.3
Impairment - environmental obligation	46.2		193.5
Selling and administrative expenses	3.7		9.0
Exploration expenses	7.8		4.7
Re-evaluation adjustment - environmental obligation	(13.2	)	128.9
Other expenses	(2.2	)	2.6
Impairment loss	-		(95.0	)
Net finance expense	1.9		102.5
Tax expense	7.2		16.2
(Increase in loss) / increase in profit for the period	(6.9	)	314.8

Revenue

Revenue for the fourth quarter of 2022 was $321.2 million, $104.0 million lower than the same period in 2021, primarily as a result of lower copper prices, lower zinc and gold sales volumes, higher treatment and refining charges, partially offset by higher molybdenum prices and sales volumes and higher copper sales volumes. Zinc and gold sales volumes were lower than prior year due to the planned closure of 777 in June 2022.

Full year revenue in 2022 was $1,461.4 million, $40.6 million lower than the same period in 2021, mainly due to lower zinc sales, due to the same reasons as the quarter-to-date variances described above, and lower copper and precious metal prices. Offsetting these decreases were higher realized zinc and molybdenum prices as well as higher copper, precious metal and molybdenum sales volumes.

The following table provides further details on these variances:

(in $ millions)	Three months ended <br>December 31, 2022		Year ended <br>December 31, 2022
Metals prices^1^ ****
Lower copper prices	(40.7	)	(51.3	)
(Lower) higher zinc prices	(4.9	)	38.6
Lower gold prices	(6.4	)	(14.1	)
Lower silver prices	(3.6	)	(13.1	)
Sales volumes
Higher copper sales volumes	4.3		21.0
Lower zinc sales volumes	(44.7	)	(116.7	)
(Lower) higher gold sales volumes	(17.0	)	77.6
(Lower) higher silver sales volumes	(1.8	)	14.0
Other
Change in derivative mark-to-market on zinc	(0.2	)	(0.2	)
Molybdenum and other volume and pricing differences	17.2		17.7
Variable consideration adjustments	-		(0.6	)
Effect of higher treatment and refining charges	(6.2	)	(13.5	)
Decrease in revenue in 2022 compared to 2021	(104.0	)	(40.6	)
^1^ See discussion below for further information regarding metals prices.

Our revenue by significant product type is summarized below:

	Three months ended				Year ended
(in $ millions)	Dec. 31, 2022		Dec. 31, 2021		Dec. 31, 2022		Dec. 31, 2021
Copper	203.6		247.8		838.1		873.3
Zinc	24.1		73.9		223.4		301.1
Gold	67.4		84.5		325.1		246.6
Silver	2.8		7.3		24.9		26.9
Molybdenum	17.6		10.6		54.5		37.5
Other metals	0.7		1.4		5.4		7.5
Revenue from contracts	316.2		425.5		1,471.4		1,492.9
Amortization of deferred revenue - gold	4.4		10.1		36.0		37.8
Amortization of deferred revenue - silver	6.0		7.2		36.2		33.7
Amortization of deferred revenue - variable consideration adjustments - prior periods	-		-		1.0		1.6
Pricing and volume adjustments^1^	14.5		(3.9	)	(14.3	)	(8.6	)
Treatment and refining charges	(19.9	)	(13.7	)	(68.9	)	(55.4	)
Revenue	321.2		425.2		1,461.4		1,502.0
^1^Pricing and volume adjustments represents mark-to-market adjustments on provisionally prices sales, realized and unrealized changes to fair value for non-hedge derivative contracts and adjustments to originally invoiced weights and assays.

For further detail on variable consideration adjustments, refer to note 19 of our consolidated financial statements.

Realized sales prices

This measure is intended to enable management and investors to understand the average realized price of metals sold to third parties in each reporting period. The average realized price per unit sold does not have any standardized meaning prescribed by IFRS, is unlikely to be comparable to similar measures presented by other issuers and should not be considered in isolation or a substitute for measures of performance prepared in accordance with IFRS.

For sales of copper, zinc, gold and silver we may enter into non-hedge derivatives ("QP hedges") which are intended to manage the provisional pricing risk arising from quotational period terms in concentrate sales agreements. The gains and losses on QP hedges are included in the calculation of realized prices. We expect that gains and losses on QP hedges will offset provisional pricing adjustments on concentrate sales contracts.

Our realized prices for the fourth quarter and full year 2022 and 2021, respectively, are summarized below:

			Realized prices^1^ for the		LME YTD<br>2022^2^	Realized prices^1^ for the
				Year ended
		LME QTD<br>2022^2^	Dec. 31, 2022	Dec. 31, <br>2021		Dec. 31, 2022	Dec. 31, <br>2021
Prices
Copper	/lb	3.63	3.61	4.34	4.00	3.94	4.19
Zinc^3^	/lb	1.36	1.36	1.60	1.57	1.72	1.42
Gold^4^	/oz		1,615	1,752		1,656	1,722
Silver^4^	/oz		16.99	23.26		20.88	25.29
^1^Realized prices exclude refining and treatment charges and are on the sale of finished metal or metal in concentrate. Realized prices include the effect of provisional pricing adjustments on prior period sales.
^2^ London Metal Exchange average for copper and zinc prices.
^3^ Includes sales of cast zinc metal and zinc concentrate. Zinc realized prices include premiums paid by customers for delivery of refined zinc metal, but exclude unrealized gains and losses related to non-hedge derivative contracts that are included in zinc revenues. Realized prices include the effect of provisional pricing adjustments on zinc concentrate.
^4^Sales of gold and silver from our 777 and Constancia mines are subject to our precious metals stream agreement with Wheaton, pursuant to which we recognize deferred revenue for precious metals deliveries and also receive cash payments. Stream sales are included within realized prices and their respective deferred revenue and cash payment rates can be found on page 39 of this MD&A.

All values are in US Dollars.

The following tables provide a reconciliation of average realized price per unit sold, by metal, to revenues as shown in the consolidated financial statements.

Three months ended December 31, 2022
(in millions) 1		Zinc	Gold		Silver	Molybdenum	Other	Total
Revenue from contracts 2		24.1	67.4		2.8	17.6	0.7	316.2
Amortization of deferred revenue		-	4.4		6.0	-	-	10.4
Pricing and volume adjustments 3	)	0.6	4.5		0.7	10.1	-	14.5
By-product credits 4		24.7	76.3		9.5	27.7	0.7	341.1
Derivative mark-to-market 5		-	-		-	-	-	-
Revenue, excluding mark-to-market on non-QP hedges		24.7	76.3		9.5	27.7	0.7	341.1
Payable metal in concentrate sold 6		8,230	47,256		559,306	421	-	-
Realized price 7		3,001	1,615		16.99	-	-	-
Realized price 8		1.36	-		-	-	-	-
Twelve months ended December 31, 2022
(in millions) 1		Zinc	Gold		Silver	Molybdenum	Other	Total
Revenue from contracts 2		223.4	325.1		24.9	54.5	5.4	1,471.4
Amortization of deferred revenue		-	36.0		36.2	-	-	72.2
Pricing and volume adjustments 3	)	0.6	(7.6	)	1.1	8.6	-	(14.3	)
By-product credits 4		224.0	353.5		62.2	63.1	5.4	1,529.3
Derivative mark-to-market 5		0.4	-		-	-	-	0.4
Revenue, excluding mark-to-market on non-QP hedges		224.4	353.5		62.2	63.1	5.4	1,529.7
Payable metal in concentrate sold 6		59,043	213,415		2,978,485	1,352	-	-
Realized price 7		3,801	1,656		20.88	-	-	-
Realized price 8		1.72	-		-	-	-	-
1 Average realized price per unit sold may not calculate based on amounts presented in this table due to rounding.
2 As per financial statements.
3 Pricing and volume adjustments represents mark-to-market adjustments on provisionally priced sales, realized and unrealized changes to fair value for non-hedge derivative contracts and adjustments to originally invoiced weights and assays.
4 By-product credits subtotal is used in the calculated of cash cost per pound of copper and zinc produced, net of by-product credits. Cash cost per pound of copper and per ounce of gold produced, net of by-product 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 the "Non-IFRS Financial Performance Measures" section of this MD&A.
5 Derivative mark-to-market excludes mark-to-market on QP hedges.
6 Copper, zinc and molybdenum shown in metric tonnes and gold and silver shown in ounces.
7 Realized price for copper, zinc and molybdenum in /metric tonne and realized price for gold and silver in /oz.
8 Realized price for copper and zinc in /lb.

All values are in US Dollars.

The price, quantity and mix of metals sold, affect our revenue, operating cash flow and profit. Revenue from metals sales can vary from quarter to quarter due to production levels, shipping volumes and transfer of risk and title to customers.

Three months ended December 31, 2021
(in millions) 1		Zinc		Gold	Silver	Molybdenum		Other	Total
Revenue from contracts 2		73.9		84.5	7.3	10.6		1.4	425.5
Amortization of deferred revenue		-		10.1	7.2	-		-	17.3
Pricing and volume adjustments 3	)	0.6		5.1	0.4	(0.8	)	-	(3.9	)
By-product credits 4		74.5		99.7	14.9	9.8		1.4	438.9
Derivative mark-to-market 5		(0.2	)	-	-	-		-	(0.2	)
Revenue, excluding mark-to-market on non-QP hedges		74.3		99.7	14.9	9.8		1.4	438.7
Payable metal in concentrate sold 6		21,112		56,927	638,640	245		-	-
Realized price 7		3,523		1,752	23.26	-		-	-
Realized price 8		1.60		-	-	-		-	-
Twelve months ended December 31, 2021
(in millions) 1		Zinc		Gold	Silver	Molybdenum		Other	Total
Revenue from contracts 2		301.1		246.6	26.9	37.5		7.5	1,492.9
Amortization of deferred revenue		-		37.8	33.7	-		-	71.5
Pricing and volume adjustments 3	)	1.2		5.6	0.7	5.8		-	(8.6	)
By-product credits 4		302.3		290.0	61.3	43.3		7.5	1,555.8
Derivative mark-to-market 5		0.2		-	-	-		-	0.2
Revenue, excluding mark-to-market on non-QP hedges		302.5		290.0	61.3	43.3		7.5	1,556.0
Payable metal in concentrate sold 6		96,435		168,358	2,427,508	1,099		-	-
Realized price 7		3,137		1,722	25.29	-		-	-
Realized price 8		1.42		-	-	-		-	-
1 Average realized price per unit sold may not calculate based on amounts presented in this table due to rounding.
2 As per financial statements.
3 Pricing and volume adjustments represents mark-to-market adjustments on provisionally priced sales, realized and unrealized changes to fair value for non-hedge derivative contracts and adjustments to originally invoiced weights and assays.
4 By-product credits subtotal is used in the calculated of cash cost per pound of copper and zinc produced, net of by-product credits. Cash cost per pound of copper and per ounce of gold produced, net of by-product 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 the "Non-IFRS Financial Performance Measures" section of this MD&A.
5 Derivative mark-to-market excludes mark-to-market on QP hedges.
6 Copper, zinc and molybdenum shown in metric tonnes and gold and silver shown in ounces.
7 Realized price for copper, zinc and molybdenum in /metric tonne and realized price for gold and silver in /oz.
8 Realized price for copper and zinc in /lb.

All values are in US Dollars.

Stream Sales

The following table shows stream sales included within realized prices and their respective deferred revenue and cash payment rates:

		Three months ended		Year ended
		Dec. 31, 2022		Dec. 31, 2022
		Manitoba	Peru ^4^	Manitoba	Peru ^4^
Gold	oz	-	6,013	11,115	30,275
Silver	oz	-	402,883	235,626	2,038,748
Gold deferred revenue drawdown rate^1,2^	$/oz	-	734	1,238	734
Gold cash rate^3^	$/oz	-	416	430	414
Total gold stream realized price	$/oz	-	1,150	1,668	1,148
Silver deferred revenue drawdown rate^1,2^	$/oz	-	14.95	24.43	14.95
Silver cash rate^3^	$/oz	-	6.14	6.34	6.11
Total silver stream realized price	$/oz	-	21.09	30.77	21.06
	Three months ended				Year ended
---	---	---	---	---	---	---	---
				Dec. 31, 2021
		Peru		Manitoba		Peru ^4^
Gold	4,290		6,196		18,441		18,352
Silver	69,472		351,004		326,056		1,476,537
Gold deferred revenue drawdown rate1,2	1,253		762		1,262		791
Gold cash rate 3	429		412		426		410
Total gold stream realized price	1,682		1,174		1,688		1,201
Silver deferred revenue drawdown rate1,2	24.14		15.64		24.32		17.47
Silver cash rate 3	6.33		6.08		6.29		6.05
Total silver stream realized price	30.47		21.72		30.61		23.52
1Subsequent to the variable consideration adjustment recorded on January 1, 2022, the deferred revenue amortization is recorded in Manitoba at C1,584/oz gold and C31.28/oz silver (December 31, 2021 - C1,578/oz gold and C30.38/oz silver) and converted to US dollars at the exchange rate in effect at the time of revenue recognition. A variable consideration adjustment was recorded on September 30, 2022 in Manitoba following a revised forecast for 777 in the third quarter of 2022, which indicated that substantially all of 777's precious metals reserves and inventory levels have been depleted.
2 Deferred revenue drawdown rates for gold and silver do not include variable consideration adjustments.
3 The gold and silver cash rate for Manitoba increased by 1% from 400/oz and 5.90/oz effective August 1, 2015. Subsequently every year, on August 1, the cash rate will increase by 1% compounded. The weighted average cash rate is disclosed. The gold and silver cash rate for Peru increased by 1% from 400/oz and 5.90/oz effective August 4, 2019. Subsequently every year, on August 4, the cash rate will increase by 1% compounded. The weighted average cash rate is disclosed.
4 Subsequent to the variable consideration adjustment recorded on January 1, 2022, the deferred revenue amortization is recorded in Peru at 734/oz gold and 14.95/oz silver. Effective May 1, 2021, the drawdown rate for the Peru stream agreement for gold was 762/oz and prior to May 1, 2021, the drawdown rate for Peru gold was 990/oz. Effective May 1, 2021, the drawdown rate for the Peru stream agreement for silver was 15.64/oz and prior to May 1, 2021 the drawdown rate for Peru silver was 21.86/oz.

All values are in US Dollars.

Cost of Sales

Our detailed cost of sales is summarized as follows:

(in $ thousands)	Three months ended				Year ended
	Dec. 31, 2022		Dec. 31,<br>2021		Dec. 31, 2022		Dec. 31,<br>2021
Peru
Mining	41,647		27,756		137,546		98,200
Milling	50,723		40,121		195,152		168,477
Changes in product inventory	(15,685	)	(4,507	)	(31,348	)	(13,743	)
Depreciation and amortization	58,256		54,078		211,043		194,408
G&A	14,912		18,496		63,092		63,876
Inventory adjustments	-		-		(558	)	(1,446	)
Freight, royalties and other charges	17,263		12,371		55,651		44,819
Total Peru cost of sales	167,116		148,315		630,578		554,591
Manitoba
Mining	38,112		58,891		192,704		222,660
Milling	14,868		22,193		73,903		62,995
Zinc plant	-		19,008		32,755		72,392
Changes in product inventory	(740	)	(11,740	)	28,223		(4,437	)
Depreciation and amortization	21,152		35,849		126,572		163,516
Inventory adjustments	7		-		4,111		5,445
G&A	6,847		14,345		62,782		54,063
Post-employment plan (curtailment) / past service cost	(2,384	)	737		(2,384	)	4,965
Freight, royalties and other charges	6,542		9,660		35,308		41,316
Total Manitoba cost of sales	84,404		148,943		553,974		622,915
Cost of sales	251,520		297,258		1,184,552		1,177,506

Total cost of sales for the fourth quarter of 2022 was $251.5 million, reflecting a decrease of $45.7 million from the fourth quarter of 2021. Peru cost of sales increased by $18.8 million in the fourth quarter of 2022, compared to the same period of 2021 as a result of increases in mining, milling, depreciation and freight costs. The increases in mining and milling costs were mainly driven by a higher strip ratio as well as higher power prices and consumable costs. The increase to depreciation in the fourth quarter of 2022 was mainly driven by higher contained metal compared to the same quarter in 2021. These increases were partially offset by a buildup of copper concentrate inventory caused by logistics and supply chain disruptions from protests and social unrest in the southern Peru mining corridor. Manitoba cost of sales decreased by $64.5 million in the fourth quarter of 2022, compared to the same period of 2021 as a result of the closure of the zinc plant in June 2022, decreases in the mining, milling and depreciation costs due to the planned closure of 777 and the Flin Flon mill, a reduction of general and administrative and freight costs, a post-employment curtailment and favourable movements in the foreign exchange rate as Manitoba's costs are primarily denominated in Canadian dollars. These decreases were partially offset by a significant drawdown of copper concentrate product inventory.

Total cost of sales for 2022 was $1,184.6 million, reflecting an increase of $7.0 million from 2021. Peru cost of sales increased by $76.0 million primarily due to the same reasons outlined above for the fourth quarter variance. Manitoba cost of sales decreased by $69.0 million compared to the same period of 2021 as a result of the closure of the zinc plant in June 2022, decreases in the mining costs and depreciation due to the closure of 777, a reduction of freight costs, a post-employment curtailment gain and favourable movements in the foreign exchange rate as Manitoba's costs are primarily denominated in Canadian dollars. These decreases were partially offset by a significant drawdown of copper concentrate product inventory and increases in milling and general and administrative costs, mostly related to inflationary pressures on consumables and higher volumes of ore milled at New Britannia as well as increases in accrued employee profit sharing.

For details on unit operating costs, refer to the respective tables in the "Operations Review" section of this MD&A.

For the fourth quarter of 2022, other significant variances in expenses from operations, compared to the same period in 2021, include the following:

- A comparative period impairment - environmental provision of $46.2 million related to a prior period increase in the valuation of the environmental reclamation provision due to lower long-term discount rates for Flin Flon operation, which was expensed in the prior period as the site was scheduled to close in 2022. No such charge occurred in 2022.

- Re-evaluation adjustment - environmental provision increased by $13.2 million due to the relative revaluation of the environmental reclamation provision on our Manitoba non-producing sites from changes in long term risk-free discount rates and inflation rates.

Given the long term nature of the reclamation cash flows, the related environmental reclamation provision is highly sensitive to changes in inflation rates and long-term risk-free discount rates and, as such, we may continue to experience significant quarterly closure cost provision revaluations.

- Exploration expenses decreased by $7.8 million compared to 2021, as previously expensed Copper World drilling costs are now capitalized.

For the year-to-date 2022, other significant variances in expenses from operations, compared to 2021, include the following:

- A comparative period impairment - environmental provision of $193.5 million related to a revised Flin Flon closure plan reflecting higher cost estimates, leading to an increase in the environmental reclamation provision which was expensed in the prior period as the site was scheduled to close in 2022. No such charge occurred in 2022.

- Re-evaluation adjustment - environmental provision decreased by $128.9 million due to the relative revaluation of the environmental reclamation provision on our Manitoba non-producing sites from changes in long term risk-free discount rates and inflation rates.

- Impairment loss of $95.0 million during 2022 for certain capitalized costs and assets associated with the previous stand-alone development plan for the Rosemont deposit, which were determined to no longer be recoverable. No such charge occurred in 2021.

- Exploration expenses decreased by $4.7 million compared to 2021, as previously expensed Copper World costs are now capitalized.

- Selling and administrative expenses decreased by $9.0 million compared to 2021. The decrease was primarily due to lower share based compensation expense as a result of the revaluation of previously issued share units to lower share prices during the current year compared to the prior year.

Net finance expense

(in $ thousands)	Three months ended			Year ended
	Dec. 31, 2022	Dec. 31, <br>2021		Dec. 31, 2022	Dec. 31,<br>2021
Finance costs - accrued or payable:
Interest expense on long-term debt	16,933	16,911		67,663	74,748
Withholding taxes	1,528	1,846		6,092	7,727
Tender premium on senior unsecured notes	-	-		-	22,878
Loss (gain) on disposal of investments	516	(453	)	3,648	(968	)
Other accrued/payable costs ^1^	663	1,724		5,279	7,784
Total finance costs - accrued or payable	19,640	20,028		82,682	112,169
Finance costs - non-cash:
Accretion on streaming agreements^2^	7,018	8,295		27,778	42,654
Change in fair value of financial assets and liabilities at fair value through profit or loss	6,830	6,779		942	54,514
Write off unamortized transaction costs	-	-		-	2,480
Other non-cash costs^3^	3,240	3,545		7,092	9,202
Total finance costs - non-cash	17,088	18,619		35,812	108,850
Net finance expense	36,728	38,647		118,494	221,019
^1^Includes interest income and other finance expense.
^2^Includes variable consideration adjustment (prior periods).
^3^Includes accretion on community agreements, accretion on Wheaton refund liability, unwinding of discount on provisions, and net foreign exchange losses (gains).

Net finance expense during the fourth quarter ended December 31, 2022, decreased by $1.9 million compared to the fourth quarter of 2021 due to a $0.4 million decrease in accrued finance costs and a $1.5 million decrease in non-cash finance costs.

The overall decrease was primarily driven by a $1.3 million reduction in the accretion on streaming arrangements due to the planned closure of 777 in June 2022 and an increase of interest income.

Net finance expense during the year ended 2022, decreased by $102.5 million compared to year ended 2021 due to a $29.5 million decrease in accrued finance costs and a $73.0 million decrease in non-cash finance costs.

The reduction in net finance expense was primarily driven by the refinancing of senior unsecured notes in the third quarter of 2021. The prior year refinancing included a $49.8 million write-off of a non-cash embedded derivative on the early redemption option associated with our extinguished senior unsecured notes as well as a call premium of $22.9 million, with no corresponding charges recorded in 2022. In addition, we also incurred a $14.9 million reduction in the accretion on streaming arrangements due to a lower interest rate following the amended Peru streaming arrangement in the second quarter of 2021 and the closure of 777 in 2022, a reduction in interest expense of $7.1 million mainly due to lower interest rates on our long term debt, a decrease of $6.9 million in revaluation losses on our equity investments and a $6.8 million relative gain on foreign exchange. Partially offsetting these increases was a $4.6 million increase in losses on the disposal of certain public investments, a $3.5 million increase in accretion on environmental provisions and a $3.1 million increase in finance expense from a change in the relative revaluation of the gold prepayment liability.

Tax Expense (Recovery)

For the three months and year ended December 31, 2022, tax expense decreased by $7.2 million and $16.2 million, respectively, compared to the same periods in 2021. The following table provides further details:

				Year ended
		Dec. 31, 2021		Dec. 31, 2022		Dec. 31, 2021
(in thousands)
Deferred tax recovery - income tax 1	)	(7,161	)	(1,193	)	(15,995	)
Deferred tax (recovery) expense - mining tax 1	)	2,179		5,717		11,202
Total deferred tax (recovery) expense	)	(4,982	)	4,524		(4,793	)
Current tax expense - income tax		11,503		10,667		25,570
Current tax expense - mining tax		3,783		10,242		20,830
Total current tax expense		15,286		20,909		46,400
Tax expense		10,304		25,433		41,607
1 Deferred tax expense (recovery) represents our draw down/increase of non-cash deferred income and mining tax assets/liabilities.

All values are in US Dollars.

Income Tax Expense/Recovery

Applying the estimated Canadian statutory income tax rate of 26.3% to our profit before taxes of $95.8 million for the year-to-date of 2022 would have resulted in a tax expense of approximately $25.2 million; however, we recorded an income tax expense of $9.5 million. The significant items causing our effective income tax rate to be different than the 26.3% estimated Canadian statutory income tax rate include:

Deductible temporary differences with respect to Peru and Manitoba, relating to the decommissioning and restoration liabilities, were recognized as we have determined that it is probable that we will realize the recovery of these deferred tax assets based on the timing of the reversals of the deductible temporary differences and the future projected taxable profit of the Manitoba and Peru operations. This resulted in a combined deferred tax recovery of $39.0 million.
Temporary income tax differences recognized as we have determined that it is probable that we will realize the recovery of these deferred tax assets. This resulted in a deferred tax recovery of $0.5 million.
Foreign exchange on the translation of deferred tax balances to group currency resulted in a deferred tax expense of $13.1 million.
The tax expense with respect to our foreign operations are recorded using an income tax rate other than the Canadian statutory income tax rate of 26.3%, resulting in a tax expense of $15.3 million.
The recognition of previously unrecognized deferred tax assets resulted in a deferred tax recovery of $3.9 million.

Mining Tax Expense

Applying the estimated Manitoba mining tax rate of 10.0% to our profit before taxes of $95.8 million for the fourth quarter of 2022 would have resulted in a tax expense of approximately $9.6 million; however, we recorded a mining tax expense of $15.9 million. Effective mining tax rates can vary significantly based on the composition of our earnings and the expected amount of mining taxable profits. Corporate costs and other costs not related to mining operations are not deductible in computing mining profits. A brief description of how mining taxes are calculated in our various business units is discussed below.

Manitoba

The Province of Manitoba imposes mining tax on profit related to the sale of mineral products mined in the Province of Manitoba (mining taxable profit) at the following rates:

10% of total mining taxable profit if mining profit is C$50 million or less;
Between mining profit of C$50 and $C55 million, mining tax is equal to a minimum of C$5 million plus mining profit less C$50 million multiplied by 65%;
15% of total mining taxable profit if mining profits are between C$55 million and C$100 million;
Between mining profit of C$100 million and C$105 million, mining tax is equal to a minimum of C$15 million plus mining profit less C$100 million multiplied by 57%; and
17% of total mining taxable profit if mining profits exceed C$105 million.

We estimate that the tax rate that will be applicable when temporary differences reverse will be approximately 10.0%.

Peru

The Peruvian government imposes two parallel mining tax regimes, the Special Mining Tax and the Modified Royalty, on companies' operating mining income on a sliding scale, with progressive rates ranging from 2.0% to 8.4% and 1.0% to 12.0%, respectively. Based on financial forecasts, we have recorded a deferred tax liability as at December 31, 2022, at the tax rate we expect to apply when temporary differences reverse.

LIQUIDITY AND CAPITAL RESOURCES

As at December 31, 2022, our liquidity includes $225.7 million in cash as well as undrawn total availability of $354.3 million under our revolving credit facilities.

Senior Unsecured Notes

We have $600.0 million aggregate principal amount of 4.5% senior notes due April 2026 and $600.0 million aggregate principal amount of 6.125% senior notes due April 2029.

Senior Secured Revolving Credit Facilities

We have two senior secured revolving credit facilities with total commitments of $450 million ("the Credit Facilities") for our Canadian and Peruvian businesses and substantially similar terms and conditions. As at December 31, 2022, we were in compliance with our covenants under the Credit Facilities and had drawn $25.5 million in letters of credit under the Credit Facilities.

C$130 Million Bilateral Letter of Credit Facility

On August 22, 2022, we closed a C$130.0 million bilateral letter of credit facility ("LC Facility") with a major Canadian financial institution. The LC Facility enables the Company to issue up to C$130.0 million of letters of credit to beneficiaries on an unsecured basis at attractive rates, with a further C$30.0 million sub-limit for financial letters of credit. This new facility was permitted under the existing terms the Credit Facilities and has no financial covenants. As at December 31, 2022, the Manitoba business unit had drawn $56.7 million in letters of credit under the LC Facility.

Surety Bonds

As at December 31, 2022, the Arizona business unit had $12.8 million in surety bonds issued to support future reclamation and closure obligations. The Peru business unit also had $107.6 million in letters of credit issued with various Peruvian financial institutions to support future reclamation and other operating matters. No cash collateral is required to be posted under these letters of credit or surety bonds.

Gold Prepay

During the fourth quarter of 2020, we entered into a gold forward sale and prepay transaction which generated $115.0 million in cash proceeds to pre-fund the expected capital requirements for the New Britannia gold mill refurbishment project. The transaction valued the future gold ounce delivery obligation for 79,954 gold ounces in 2022 and 2023 at forward curve prices averaging approximately $1,682 per ounce. The gold delivery obligation is expected to be satisfied with a monthly delivery of 3,331 gold ounces over a 24-month period from January 2022 to December 2023. The fair value of the financial liability at December 31, 2022 was $71,208.

Financial Condition

Financial Condition as at December 31, 2022 compared to December 31, 2021

Cash decreased by $45.3 million during the year to $225.7 million as at December 31, 2022. This decrease was mainly the result of investing and financing cash outflows of $346.5 million from capital investments and community agreements primarily at our Peru and Manitoba operations, partial repayment of our gold prepayment liability of $71.7 million, interest payments of $63.8 million, lease payments of $35.8 million, $10.0 million for a scheduled payment related to the Rosemont acquisition, other finance payments of $12.3 million as well as dividends of $4.0 million. Offsetting these outflows were cash inflows from operating activities of $487.8 million. We hold the majority of our cash in low-risk, liquid investments with major Canadian and Peruvian financial institutions.

Working capital decreased by $71.0 million to $76.5 million from December 31, 2021 to December 31, 2022, primarily due to a decrease in trade and other receivables of $90.9 million mainly due to timing and changes in provisionally priced receivables, a decrease in cash of $45.3 million and changes to other financial assets and liabilities of $10.8 million due to the revaluation of our non-hedge derivatives. Offsetting these items was a decrease in deferred revenue liabilities of $24.3 million due to the closure of 777 in June 2022, a decrease in net taxes payable of $20.3 million, a decrease in lease liabilities of $17.4 million, a decrease in other liabilities of $16.2 million mainly due to changes in decommissioning and restoration liabilities and an increase in prepaid expenses of $4.8 million.

Cash Flows

The following table summarizes our cash flows for the year ended months ended December 31, 2022 and December 31, 2021:

(in $ thousands)	Three months ended				Year ended
	Dec. 31, 2022		Dec. 31, <br>2021		Dec. 31, 2022		Dec. 31,<br>2021
Operating cash flow before change in non-cash working capital	109,148		156,917		391,729		483,862
Precious metals stream deposit	-		4,000		-		4,000
Change in non-cash working capital	(22,766	)	(63,813	)	96,074		(102,791	)
Cash generated from operating activities	86,382		97,104		487,803		385,071
Cash used in investing activities	(89,114	)	(105,603	)	(337,670	)	(376,257	)
Cash used in financing activities	(58,580	)	(18,513	)	(196,300	)	(175,899	)
Effect of movement in exchange rates on cash	860		550		843		(1,061	)
Decrease in cash	(60,452	)	(26,462	)	(45,324	)	(168,146	)

Cash Flow from Operating Activities

Cash generated from operating activities was $86.4 million during the fourth quarter of 2022, a decrease of $10.7 million compared with the same period in 2021. Operating cash flow before change in non-cash working capital was $109.1 million during the fourth quarter of 2022, reflecting a decrease of $47.8 million compared to the fourth quarter of 2021. The decrease in operating cash flows before changes in working capital is mostly attributable to lower prices for all metals, lower gold sales volumes due to a temporary deferral of Pampacancha mining operations in the quarter, lower zinc sales volumes primarily due to the planned closure of 777 in June 2022, higher mine operating costs due to inflationary pressures on input costs, partially offset by higher molybdenum prices and sales volumes.

Cash generated from operating activities for the full year 2022 was $487.8 million in 2022, an increase of $102.7 million compared to 2021. Operating cash flow before changes in non-cash working capital for 2022 was $391.7 million, a decrease of $92.1 million compared to 2021. The decrease in operating cash flow before changes in working capital is mostly attributable to the timing of current tax payments, which increased by $19.5 million compared to 2021, higher mine operating costs due to inflationary pressures on input costs, lower copper and precious metal prices and lower zinc sales volumes partially offset by higher copper and precious metal sales volumes and higher zinc prices.

Cash Flow from Investing and Financing Activities

During the fourth quarter of 2022, we spent $147.7 million in investing and financing activities, primarily driven by $88.8 million in capital expenditures, $3.9 million in community agreements, $31.9 million of interest payments, $17.4 million in partial settlement of our gold prepayment liability, $6.5 million in capitalized lease payments and $3.1 million in other finance payments.

Year-to-date, we used $534.0 million of cash in investing and financing activities, primarily driven by $309.0 million of capital expenditures, $37.5 million in community agreements, $71.7 million in partial settlement of our gold prepayment liability, $63.8 million of interest payments, $35.8 million in capitalized lease payments, $12.3 million of financing costs mainly related to withholding taxes on our debt obligations and our revolving credit facilities, $10.0 million for a scheduled payment related to the Rosemont acquisition and $4.0 million in dividend payments.

Capital Expenditures

The following summarizes accrued and cash additions to capital assets for the periods indicated:

				Year ended				Guidance
		Dec. 31, <br>2021		Dec. 31, 2022		Dec. 31, <br>2021		Annual
(in millions)								2022	2023^3^
Manitoba sustaining capital expenditures		22.5		125.1		100.4		115.0	75.0
Peru sustaining capital expenditures 1		45.0		101.4		128.9		105.0	160.0
Total sustaining capital expenditures		67.5		226.5		229.3		220.0	235.0
Arizona capitalized costs 2		9.7		36.2		22.9		40.0	30.0
Peru growth capitalized expenditures		-		4.3		22.8		10.0	10.0
Manitoba growth capitalized expenditures		22.0		33.4		119.2		50.0	15.0
Other capitalized costs		1.7		5.8		18.2		-	-
Capitalized exploration 2		9.9		42.3		13.3		40.0	10.0
Total other capitalized expenditures		43.3		122.0		196.4
Total capital additions		110.8		348.5		425.7
Reconciliation to cash capital additions:
Right-of-use asset additions	)	(17.2	)	(28.0	)	(49.7	)
Community agreement additions, net		(0.9	)	(3.5	)	(24.2	)
Change in capital accruals and other	)	10.0		(8.0	)	0.4
Acquisition of property, plant & equipment - cash		102.7		309.0		352.2
1 Peru sustaining capital expenditures includes capitalized stripping costs.
2 In August 2022 Arizona capital expenditure guidance has increased by 20 million, which includes an additional 15 million in capitalized exploration and 5 million in capitalized costs.
3 Capital expenditure guidance in 2023 excludes right-of-use lease additions..

All values are in US Dollars.

For the three months and year ended December 31, 2022, total capital additions declined by 17% and 18%, respectively, compared to the same periods in 2021 as a result of lower sustaining capital expenditures in Peru and mostly lower growth spending at our operations, partially offset by higher sustaining capital expenditures in Manitoba and higher capitalized exploration and growth spending in Arizona.

Sustaining capital expenditures in Manitoba for the three months and year ended December 31, 2022 were $26.1 million and $125.1 million, respectively, representing increases of $3.6 million and $24.7 million compared to the same period in 2021. The increase in year-to-date sustaining capital expenditures was mainly due to higher planned capital development at Lalor, additional spending for tailings management and lease additions related to the Snow Lake operations, partially offset by the cessation of capitalizing development costs at 777.

Sustaining capital expenditures in Peru for the three months and year ended December 31, 2022 were $24.4 million and $101.4 million, respectively, representing a decrease of $20.6 million and $27.5 million compared to the same period in 2021. The decreased expenditures mainly relate to lower spending for the tailings management facility expansion partially offset by increased capitalized stripping at Pampacancha.

Growth capital spending in Manitoba for the three months and year ended December 31, 2022 were $9.0 million and $33.4 million, respectively, reflecting expenditures for the Lalor expansion and recovery improvement projects at both New Britannia and Stall. Compared to the same periods in 2021, growth capital expenditures decreased by $13.0 million and $85.8 million for the three months and year ended December 31, 2022, respectively, as the comparative periods included significant costs related to the New Britannia refurbishment project, which was completed in the fourth quarter of 2021.

Growth capital expenditures in Peru for the twelve months ended December 31, 2022 were $4.3 million, representing a decrease of $18.5 million compared to the same period in 2021. This decrease was caused by costs incurred in the comparative period to bring Pampacancha into commercial production during 2021.

Arizona's growth capital expenditures for the three months and year ended December 31, 2022 were $9.1 million and $36.2 million, respectively, and relate primarily to the infill drilling at Copper World to upgrade resources to reserves and the pre-feasibility study costs.

Other capitalized costs for the three months and year ended December 31, 2022 were $2.0 million and $5.8 million, respectively, and mainly consist of changes in estimates for certain Peru community agreements.

Consolidated sustaining and growth capital expenditures in 2022 were below our full year combined guidance. This reflects discretionary growth capital reductions of approximately $25 million across the business, partially offset by approximately $10 million in higher sustaining capital expenditures in Manitoba due to inflationary cost pressures and lease additions that were not originally contemplated in guidance.

Capital Commitments

As at December 31, 2022, we had outstanding capital commitments in Canada of approximately $9.7 million, of which $8.7 million can be terminated, approximately $27.1 million in Peru primarily related to exploration option agreements, all of which can be terminated, and approximately $43.1 million in Arizona, primarily related to our Copper World project, of which approximately $7.2 million can be terminated.

Contractual Obligations

The following table summarizes our significant contractual obligations as at December 31, 2022:

		Less than<br>12 months	13 - 36<br>months	37 - 60<br>months	More than<br>60 months
Payment Schedule (in $ millions)	Total
Long-term debt obligations^1^	1,541.7	66.7	132.9	687.0	655.1
Gold prepayment obligation^2^	71.2	71.1	0.1	-	-
Lease obligations	127.6	43.7	50.3	14.0	19.6
Purchase obligation - capital commitments	80.0	27.2	16.3	36.5	-
Purchase obligation - other commitments^3^	959.2	343.2	357.4	111.7	146.9
Pension and other employee future benefits obligations^2^	95.1	8.3	10.5	8.3	68.0
Community agreement obligations^4, 5^	67.7	8.4	8.6	7.7	43.0
Decommissioning and restoration obligations^5^	411.3	8.4	9.1	7.4	386.4
Total	3,353.8	577.0	585.2	872.6	1,319.0
^1^Long-term debt obligations include scheduled interest payments, as well as principal repayments.
^2^Discounted.
^3^ Primarily made up of long-term agreements with operational suppliers, obligations for power purchase, concentrate handling, fleet and port services, as well as deferred consideration arising from the acquisition of Rosemont's minority interest.
^4^Represents community agreement obligations and various finalized land user agreements, including Pampacancha.
^5^ Undiscounted before inflation.

In addition to the contractual obligations included in the above payment schedule, we also have the following commitments which impact our financial position:

A profit-sharing plan with most Manitoba employees;
A profit-sharing plan with all Peru employees;
Wheaton precious metals stream agreements for 777 and the Constancia mines; and,
Government royalty payments related to the Constancia mines.

Outstanding Share Data

As of February 22, 2023, the final trading day prior to the date of this MD&A, there were 262,025,681 common shares of Hudbay issued and outstanding. In addition, there were 1,512,070 stock options outstanding.

FINANCIAL RISK MANAGEMENT

The risks relating to Hudbay and our business include those risks described under the heading "Risk Factors" in our most recent Annual Information Form, which section has been incorporated by reference into this MD&A and should be reviewed by readers. In addition to those risks, we have identified the following other risks which may affect our financial statements in the future.

Political and Social Risks

On December 7, 2022, the former President of Peru, Pedro Castillo, was removed from office and replaced by Peru's former Vice President, Dina Boluarte. Following these political developments, Peru faced increasing tensions, protests, and social unrest. Protests have continued into early 2023 and the civil unrest has caused disruptions to commerce and supply chains. Constancia's operations have not been significantly impacted but our ability to steadily receive fuel and other key inputs and to deliver concentrates to port have been disrupted. Any prolonged disruption could cause us to temporarily shut down our operations, which could have an adverse effect on our financial results and cash flows. Hudbay continues to monitor the situation and mitigate the risks caused by the challenges with a focus on employee safety and site security. Given the uncertainty and future extent of these protests, our 2023 production and cost guidance are subject to higher than normal degree of uncertainty.

A change in government, government policy, the declaration of a state of emergency or the implementation of new, or the modification of existing, laws and regulations affecting our operations and other mineral properties could have a material adverse impact on us and our projects. We are at a heightened risk of having this occur whenever there is a change in government in the countries or regions in which we operate, as is currently the case in Peru.

Carrying Values and Mine Plan Updates

At the end of each reporting period, Hudbay reviews its groups of non-financial assets to determine whether there are any indicators of impairment or impairment reversal. If any such indicator exists, the Company estimates the recoverable amount of the non-financial asset group in order to determine the extent of the impairment loss or reversal, if any. At December 31, 2022, the Company assessed whether there were impairment or impairment reversal indicators associated with the general business environment and known changes to business planning. Other than an impairment indicator related to the PEA of the Copper World Complex, which contemplates the mining of Copper World deposits and the East deposit (formerly referred to as the Rosemont deposit) in a two-phase mine plan, there were no other impairment or impairment reversal indicators.

There are a number of potential indicators that could trigger non-financial asset impairment or reversal of impairment in the future. One such potential indicator is a change to the life of mine ("LOM") plan for an asset. LOM plans incorporate management's best estimates of key assumptions which include future commodity prices, the value of mineral resources not included in the LOM plan, production based on current estimates of recoverable reserves, discount rates, future operating and capital costs and future foreign exchange rates.

There is a risk that certain assumptions in the updated LOM plans for Constancia planned to be completed by the end of March 2023 could give rise to an indicator of impairment or impairment reversal and cause an adjustment to the carrying value of the relevant assets and/or impact our financial statements.

A pre-feasibility study for Phase I of the Copper World project is expected to be completed in 2023. There is a risk that certain assumptions in the pre-feasibility study could give rise to an indicator of impairment and/or impairment reversal and cause an adjustment to the carrying value of the relevant assets and/or impact our financial statements.

Metals Price Strategic Risk Management

From time to time, we maintain price protection programs and conduct commodity price risk management in line with Board-approved policies to reduce risk through the use of financial instruments.

Commodity prices are a key driver of our financial and operational results. Our strategic objective is to provide our investors with exposure to base metals prices, unless a reason exists to implement a hedging arrangement.

In the normal course, we typically consider metal price hedging to manage the risk associated with provisional pricing terms in concentrate sales agreements and in connection with stream delivery obligations. We may also occasionally consider metal price hedging in accordance with Board approved policies to achieve strategic objectives, including: locking in favourable metal prices to ensure a minimum cash flow during or after the construction of a mine or during a period of reduced liquidity, to maintain profitable production of shorter life/higher cost operations or as part of a financing arrangement.

During 2022, we entered into copper and zinc hedging transactions intended to manage the risk associated with provisional pricing terms in concentrate sales agreements.

As at December 31, 2022, we had 89.7 million pounds of net copper fixed for floating swaps outstanding at an average fixed receivable price of $3.61/lb associated with provisional pricing risk in concentrate sales agreements. These swaps settle across January to May 2023.

As at December 31, 2022, we had 17.5 million pounds of net zinc fixed for floating swaps outstanding at an average fixed receivable price of $1.32/lb associated with provisional pricing risk in concentrate sales agreements. These swaps settle across January to March 2023.

From time to time, we enter into gold and silver forward sales contracts to hedge the commodity price risk associated with the future settlement of provisionally priced deliveries. We are generally obligated to deliver gold and silver to Wheaton prior to the determination of final settlement prices. These forward sales contracts are entered into at the time we deliver gold and silver to Wheaton, and are intended to mitigate the risk of subsequent adverse gold and silver price changes. Gains and losses resulting from the settlement of these derivatives are recorded directly to revenue, as the forward sales contracts do not achieve hedge accounting, and the associated cash flows are classified in operating activities. Our swap agreements are with counterparties we believe to be creditworthy and do not require us to provide collateral.

During the fourth quarter of 2020, we entered into a gold forward sale and prepay transaction which generated $115.0 million in cash proceeds to pre-fund the expected capital requirements for the New Britannia gold mill refurbishment project. The transaction valued the future gold ounce delivery obligation for 79,954 gold ounces in 2022 and 2023 at forward curve prices averaging approximately $1,682 per ounce. The gold delivery obligation is expected to be satisfied with a monthly delivery of 3,331 gold ounces over a 24-month period from January 2022 to December 2023. The New Britannia gold mill achieved commercial production in the fourth quarter of 2021. The fair value of the financial liability at December 31, 2022 was $71,208.

Interest Rate and Foreign Exchange Risk Management

To the extent that we incur indebtedness at variable interest rates to fund our growth objectives, we may enter into interest rate hedging arrangements to manage our exposure to short-term interest rates. To the extent that we make commitments to capital expenditures denominated in foreign currencies, we may enter into foreign exchange forwards or acquire foreign currency outright, which may result in foreign exchange gains or losses in our consolidated income statements.

At December 31, 2022, approximately $189.4 million of our cash was held in US dollars, approximately $25.2 million of our cash was held in Canadian dollars, and approximately $11.1 million of our cash was held in Peruvian soles.

TREND ANALYSIS AND QUARTERLY REVIEW

A detailed quarterly and annual summary of financial and operating performance can be found in the "Summary of Results" section at the end of this MD&A. The following table sets forth selected consolidated financial information for each of our eight most recently completed quarters:

(in millions, except per share amounts,production on a copper equivalent basisand average realized copper price)				2021

	Q3	Q2	Q1	Q4	Q3^3^	Q2	Q1
Production on a copper equivalent basis (tonnes)	42,099	46,332	45,085	50,685	42,243	39,289	43,246
Average realized copper price (/lb)	3.47	4.28	4.53	4.34	4.26	4.40	3.69
Revenue	346.2	415.5	378.6	425.2	359.0	404.2	313.6
Gross profit (loss) 4	32.4	89.5	85.3	81.7	(85.4)	82.2	52.5
Profit (loss) before tax	(0.3)	21.5	88.9	(0.2)	(147.8)	14.8	(69.6)
Profit (loss)	(8.1)	32.1	63.8	(10.5)	(170.4)	(3.4)	(60.1)
Adjusted net earnings (loss)1,3	(12.4)	30.5	5.2	32.7	0.9	5.4	(16.1)
Earnings (loss) per share:
Basic and diluted	(0.03)	0.12	0.24	(0.04)	(0.65)	(0.01)	(0.23)
Adjusted net earnings (loss)1,3<br> per share	(0.05)	0.12	0.02	0.13	0.00	0.02	(0.06)
Operating cash flow2	81.6	123.9	77.1	156.9	103.5	132.8	90.7
Adjusted EBITDA1	99.3	141.4	110.2	180.8	119.2	143.2	104.2
1 Adjusted net earnings (loss), adjusted net earnings (loss) per share, and adjusted EBITDA are non-IFRS financial performance measure with no standardized definition under IFRS. For further information and a detailed reconciliation, please see the discussion under the "Non-IFRS Financial Performance Measures" section of this MD&A.
2 Operating cash flow before changes in non-cash working capital and precious metals stream deposit.
3 The adjusted net earnings (loss) and adjusted net earnings (loss) per share in respect of the fourth quarter of 2021 were adjusted in our management's discussion and analysis of financial results for the year ended December 31, 2021 due to a change in the computed tax effect on certain adjustments. The adjusted net earnings changed from 38.2 million to an adjusted net earnings of 0.9 million and the adjusted net earnings per share changed from 0.15/share to an adjusted net earnings per share of 0.00/share.
4 Gross profit (loss) includes 147.3 million and 46.2 million, respectively, of impairment losses related to environmental reclamation provision for the now closed Flin Flon operation for the three months ended September 30, 2021 and December 31, 2021.

All values are in US Dollars.

The easing of domestic COVID measures by China during the fourth quarter of 2022 resulted in a rebound of most industrial commodity prices. However, late in the quarter, Peru experienced heightened tensions and social unrest following a change in the country's political leadership. Inflationary pressures on fuel, consumables and energy costs have persisted globally negatively impacting our production costs and margins.

Fourth quarter revenues were negatively impacted by lower production due to planned maintenance programs at Lalor and Constancia, the planned closure of 777 earlier in the year, short-term changes in the mine plan in Peru and a build up of product inventory in Peru due to the aforementioned social unrest. The revenue impact of lower throughput was partially offset by higher commodity prices. Additionally, the fourth quarter results were impacted by a non-cash loss of $13.5 million related to the quarterly revaluation of our Flin Flon environmental reclamation provision due to changes in real, long-term discount rates.

Commodity prices declined during the third quarter of 2022 while growing inflationary pressures have contributed to higher mine operating costs resulting in declines in our key financial metrics during the quarter. Third quarter results were also impacted by lower production due to the closure of 777 in the second quarter of 2022 and the commencement of care and maintenance activities, which will continue for the next several years. Relatively small movements in real, long-term discount rates will continue to impact the revaluation of our environmental reclamation provisions for closed sites in Manitoba and these movements will be reflected through the income statement.

The second quarter results for 2022 were impacted by a revaluation gain of $60.7 million pertaining mostly to the environmental reclamation provision on our Flin Flon site due to increases in long-term risk-free interest rates. A pre-tax impairment loss of $95.0 million was recorded following the release of the Copper World Preliminary Economic Assessment in June 2022 as certain assets associated with the previous, stand-alone development plan for the Rosemont deposit are no longer expected to be recoverable.

Results in the first quarter of 2022 benefited from a trend of higher realized base metal prices, but were also impacted by rising operating costs caused by inflation. While we achieved increased gold production from the higher grade Pampacancha deposit and the higher recovery New Britannia gold mill, we experienced increased levels of COVID-19 related absenteeism in the workforce, impacting production, and also experienced limited availability of rail cars leading to reduced sales and an inventory build-up. The first quarter results were also impacted by a revaluation gain of $78.2 million pertaining mostly to the environmental reclamation provision on our Flin Flon site and $1.7 million for our non-producing sites in Manitoba caused by an increase in long-term risk-free interest rates.

Results for the fourth quarter of 2021 benefited from higher realized metal prices. This strength in commodity prices combined with higher gold production following the commencement of commercial production at New Britannia and improving copper recoveries led to record revenue of $425.2 million during the quarter. Adjusted EBITDA and operating cash flow both reached record highs. Notwithstanding these records, continued inflationary pressures along with lower copper grades caused operating costs to climb and put pressure on gross margins, compared to earlier quarters. A revaluation of our environmental reclamation provision for the Flin Flon closure plan resulted in a $46.2 million non-cash charge, which negatively impacted net income for the quarter.

During the third quarter of 2021, increasing base metal prices contributed to strong revenues and operating cash flow. Mining at Pampacancha continued to ramp-up, contributing significantly to gold production during the quarter. As a result of the planned closure of Flin Flon operations in mid-2022 and an updated Flin Flon closure plan, non-cash charges totaling $156.3 million were incurred, which negatively impacted gross profit for the quarter. In Peru, ongoing COVID-19 costs, along with lower copper grades, put pressure on operating costs.

Financial results in the second quarter of 2021 benefited from initial production at the Pampacancha pit but were negatively impacted by higher operating costs in Peru and lower Manitoba metal production caused by COVID-19 related impacts as well as lower copper and zinc grades and lower precious metal recoveries.

The first quarter of 2021 saw lower revenues compared to the fourth quarter of 2020 due to a delayed Peru shipment for which revenue could not be recognized, and lower sales volumes from Manitoba related to a buildup of finished goods inventory during the quarter as a result of a lack of rail car availability. First quarter results were negatively impacted by $75.2 million of various finance expenses related to the refinancing of our senior notes.

The following table sets forth selected consolidated financial information for each of the three most recently completed years:

(in millions, except for earnings (loss) per share, dividends declared per share, production on a copper equivalent basis and average realized copper price)	2021		2020
Production on a copper equivalent basis (tonnes)	175,463		184,084
Average realized copper price (/lb)	4.19		2.86
Revenue	1,502.0		1,092.4
Gross profit 5	131.0		39.0
(Loss) profit before tax	(202.8	)	(179.1	)
(Loss) profit	(244.4	)	(144.6	)
Adjusted net earnings (loss) 1	23.1		(121.0	)
(Loss) earnings per share:
Basic and diluted	(0.93	)	(0.55	)
Adjusted net earnings (loss)1 per share	0.09		(0.46	)
Total assets	4,616.2		4,666.6
Operating cash flow2	483.9		241.9
Adjusted EBITDA1	547.8		306.7
Total non-current financial liabilities3	1,345.7		1,360.1
Dividends declared per share - C4	0.02		0.02
1 Adjusted net earnings (loss), adjusted net earnings (loss) per share, and adjusted EBITDA are non-IFRS financial performance measure with no standardized definition under IFRS. For further information and a detailed reconciliation, please see the discussion under the "Non-IFRS Financial Reporting Measures" section of this MD&A.
2 Operating cash flow before change in non-cash working capital and precious metals stream deposit.
3 Total non-current financial liabilities consists of non-current other financial liabilities, lease liabilities and long-term debt.
4 Dividend paid during March and September of each year.
5 Gross profit includes 193.5 million of impairment losses related to environmental reclamation provision for the now closed Flin Flon operation for the year ended December 31, 2021.

All values are in US Dollars.

Copper equivalent 2022 production was substantially inline with the past two years while sales volumes of copper and gold increased 2% and 27%, respectively, from 2021. Zinc sales volumes fell 39% in 2022 following the planned closure of 777 and the zinc plant in the second quarter of 2022 in Manitoba. Additionally, the ramp up of the New Britannia mill in Manitoba and mining operations at Pampacancha in Peru have contributed to higher gold production in 2022. As a result, gold has overtaken zinc as the second largest source of Hudbay's revenue. Realized copper and gold prices have fallen in 2022 resulting in a decline in full year revenues compared to 2021. A profit of $70.4 million was recognized in 2022 and included a $133.5 million pre-tax revaluation gain of our Flin Flon environmental reclamation provision. Our 2022 results were negatively impacted by a $95.0 million pre-tax impairment loss related to certain specific capitalized costs and assets associated with the previous stand-alone development plan for the Rosemont deposit, which were determined to no longer be recoverable.

Gold production in 2021 climbed 55% compared to 2020 following the start of operations at our high-grade Pampacancha deposit and our New Britannia gold mill in the third and fourth quarter of 2021, respectively. The increased production of gold allowed us to capitalize on continued strength in gold prices. In addition, consistent throughput from Peru with improved copper recoveries and a nearly 50% increase in realized copper prices compared to 2020 was a significant factor in revenues climbing 37% to a record-high $1,502.0 million for the full year. From a cost perspective, global inflationary pressures increased substantially, contributing to a 20% and a 17% increase in 2021 combined unit costs in Peru and Manitoba, respectively, compared to 2020. Despite these cost pressures, the increases in copper and gold production and realized base metal prices resulted in the 2021 operating cash flow increasing by 100% from 2020. Net losses in 2021 were $70.4 million and reflect a pre-tax, non-cash impairment charge of $193.5 million related to an updated Flin Flon closure plan, among other items.

Although 2020 realized prices for copper and gold rose by 5% and 24%, respectively, compared to 2019, 2020 revenues declined by 12% due to lower sales volumes of copper. Sales volumes of copper declined by 31% in 2020 as compared to 2019 as a result of the temporary suspension of Constancia operations. Gross profit declined by 74% in 2020 as compared to 2019 as we expensed certain fixed overhead production costs of $31.9 million during the temporary suspension of operations at Constancia and $11.7 million during the production interruption at 777. Adjusted net loss in 2020 increased to $121.0 million compared to 2019, as a result of the same factors described above.

NON-IFRS FINANCIAL PERFORMANCE MEASURES

Adjusted net earnings (loss), adjusted net earnings (loss) per share, adjusted EBITDA, net debt, cash cost, sustaining and all-in sustaining cash cost per pound of copper produced, cash cost and sustaining cash cost per ounce of gold produced and combined unit cost are non-IFRS performance measures. These measures do not have a meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers. These measures should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS and are not necessarily indicative of operating profit or cash flow from operations as determined under IFRS. Other companies may calculate these measures differently.

Management believes adjusted net earnings (loss) and adjusted net earnings (loss) per share provides an alternate measure of the Company's performance for the current period and gives insight into its expected performance in future periods. These measures are used internally by the Company to evaluate the performance of its underlying operations and to assist with its planning and forecasting of future operating results. As such, the Company believes these measures are useful to investors in assessing the Company's underlying performance. We provide adjusted EBITDA to help users analyze our results and to provide additional information about our ongoing cash generating potential in order to assess our capacity to service and repay debt, carry out investments and cover working capital needs. Net debt is shown because it is a performance measure used by the Company to assess our financial position. Cash cost, sustaining and all-in sustaining cash cost per pound of copper produced are shown because we believe they help investors and management assess the performance of our operations, including the margin generated by the operations and the Company. Cash cost and sustaining cash cost per ounce of gold produced are shown because we believe they help investors and management assess the performance of our Manitoba operations. Combined unit cost is shown because we believe it helps investors and management assess our cost structure and margins that are not impacted by variability in by-product commodity prices.

During 2021 and 2022, there were non-recurring adjustments for Arizona and Manitoba operations, including severance, past service pension costs, disposals of certain non-current assets, and inventory supplies write-downs as well as non-cash impairment charges related to an updated Flin Flon closure plan and lower long-term discount rates in the fourth quarter of 2021, none of which management believes are indicative of ongoing operating performance and therefore are adjusting items in the calculations of adjusted net earnings (loss) and adjusted EBITDA.

Cash cost and sustaining cash cost per pound of zinc produced was a previously disclosed non-IFRS measure, most recently published in our MD&A for the year ended December 31, 2021, dated February 23, 2022. With the closure of 777 and Flin Flon operations, including the zinc plant, in the second quarter of 2022, the production profile of Manitoba has shifted from zinc to gold and therefore we have ceased providing this measure on a go forward basis.

During 2022, we recorded a non-cash gain of $133.5 million, mostly related to the quarterly revaluation of our Flin Flon environmental reclamation provision, which was impacted by rising long-term risk-free discount rates. With the closure of 777 and Flin Flon operations in the second quarter of 2022 and given the long-term nature of the reclamation cash flows, quarterly revaluation of the corresponding environmental reclamation provision remains highly sensitive to changes in real, long-term risk-free discount rates and, as such, we expect to continue to experience quarterly environmental reclamation provision revaluations, which is not indicative of our ongoing operating performance. This item has been included prospectively in our calculation of adjusted earnings.

Adjusted Net Earnings (Loss)

Adjusted net earnings (loss) represents net earnings (loss) excluding certain impacts, net of taxes, such as mark-to-market adjustments, impairment charges and reversal of impairment charges, write-down of assets, and foreign exchange (gain) loss. These measures are not necessarily indicative of net earnings (loss) or cash flows as determined under IFRS.

The following table provides a reconciliation of earnings (loss) per the consolidated income statements, to adjusted net earnings (loss) for the year ended months ended December 31, 2022 and 2021.

	Three months ended				Year ended
(in $ millions)	Dec. 31, 2022		Dec. 31, <br>2021		Dec. 31, 2022		Dec. 31,<br>2021
(Loss) profit for the period	(17.4	)	(10.5	)	70.4		(244.4	)
Tax expense	3.1		10.3		25.4		41.6
(Loss) profit before tax	(14.3	)	(0.2	)	95.8		(202.8	)
Adjusting items:
Mark-to-market adjustments ^1^	10.7		13.3		3.0		66.7
Foreign exchange loss (gain)	0.2		1.1		(5.4	)	1.5
Inventory adjustments	-		-		3.6		4.0
Variable consideration adjustment - stream revenue and accretion	-		-		(1.9	)	(1.0	)
Impairment losses	-		46.2		95.0		193.5
Re-evaluation adjustment - environmental provision ^2^	13.5		-		(133.5	)	-
Evaluation expenses	0.1		-		7.9		-
Insurance recovery	-		-		(5.7	)	-
Write-down of unamortized transaction costs	-		-		-		2.5
Premium paid on redemption of notes	-		-		-		22.9
Restructuring charges - Manitoba ^3^	1.0		3.4		10.6		7.0
Loss on disposal of investments	0.5		-		3.6		-
Post-employment plan (curtailment) / past service cost adjustment	(2.4	)	0.7		(2.4	)	5.0
Loss (gain) on disposal of plant and equipment and non-current assets - Manitoba & Arizona	0.4		2.4		(6.3	)	7.8
Changes in other provisions (non-capital) ^4^	5.8		-		5.8		-
Adjusted earnings before income taxes	15.5		66.9		70.1		107.1
Tax expense	(3.1	)	(10.3	)	(25.4	)	(41.6	)
Tax impact of adjusting items	(9.8	)	(23.9	)	(18.3	)	(42.4	)
Adjusted net earnings	2.6		32.7		26.4		23.1
Adjusted net earnings ($/share)	0.01		0.13		0.10		0.09
Basic weighted average number of common shares outstanding (millions)	262.0		261.6		261.9		261.5
^1^ Includes changes in fair value of the gold prepayment liability, Canadian junior mining investments, other financial assets and liabilities at fair value through profit or loss and share-based compensation (recoveries) expenses.
^2^ Changes from movements to environmental reclamation provisions are primarily related to the Flin Flon operations, which were fully depreciated as of June 30, 2022, as well as other Manitoba non-operating sites.
^3^ Includes closure costs for Flin Flon operations.
^4^ Includes changes in other provisions including corporate restructuring and costs which do not pertaining to operation of the business.

After adjusting reported net earnings for those items not considered representative of the Company's core business or indicative of future operations, the Company had an adjusted net loss in the fourth quarter of 2022 of $2.6 million or $0.01 earnings per share.

Adjusted EBITDA

Adjusted EBITDA is profit or loss before net finance expense/income, tax expense/recoveries, depreciation and amortization of property, plant and equipment and deferred revenue, as well as certain other adjustments. We calculate adjusted EBITDA by excluding certain adjustments included within our adjusted net earnings measure which we believe reflects the underlying performance of our core operating activities. The measure also removes the impact of non-cash items and financing costs that are not associated with measuring the underlying performance of our operations. However, our adjusted EBITDA is not the measure defined as EBITDA under our senior notes or revolving credit facilities and may not be comparable with performance measures with the same name reported by other companies. Adjusted EBITDA should not be considered as a substitute for profit or loss or as a better measure of liquidity than operating cash flow, which are calculated in accordance with IFRS. We provide adjusted EBITDA to help users analyze our results and to provide additional information about our ongoing cash generating potential in order to assess our capacity to service and repay debt, carry out investments and cover working capital needs.

The following table presents the reconciliation of earnings (loss) per the consolidated income statements, to adjusted EBITDA for the year ended months ended December 31, 2022 and 2021:

	Three months ended				Year ended
(in $ millions)	Dec. 31, 2022		Dec. 31, <br>2021		Dec. 31, 2022		Dec. 31, <br>2021
(Loss) profit for the period	(17.4	)	(10.5	)	70.4		(244.4	)
Add back:
Tax expense	3.1		10.3		25.4		41.6
Net finance expense	36.7		38.6		118.5		221.0
Other expense	18.5		16.3		32.6		35.1
Depreciation and amortization	79.4		89.9		337.6		357.9
Amortization of deferred revenue and variable consideration adjustment	(10.4	)	(17.3	)	(73.2	)	(73.1	)
	109.9		127.3		511.3		338.1
Adjusting items (pre-tax):
Impairment losses	-		46.2		95.0		193.5
Re-evaluation adjustment - environmental provision ^1^	13.5		0.3		(133.5	)	(4.6	)
Inventory adjustments	-		-		3.6		4.0
Post-employment plan (curtailment) / past service cost adjustment	(2.4	)	0.7		(2.4	)	5.0
Share-based compensation expense ^2^	3.7		6.3		1.9		11.8
Adjusted EBITDA	124.7		180.8		475.9		547.8
^1^Environmental reclamation provision adjustments were presented within other expense for 2021 periods.
^2^ Share-based compensation expenses reflected in cost of sales and selling and administrative expenses.

Net Debt

The following table presents our calculation of net debt as at December 31, 2022 and December 31, 2021:

(in $ thousands)	Dec. 31, 2022		Dec. 31, <br>2021
Total long-term debt	1,184,162		1,180,274
Cash	(225,665	)	(270,989	)
Net debt	958,497		909,285

Cash Cost, Sustaining and All-in Sustaining Cash Cost (Copper Basis)

Cash cost per pound of copper produced ("cash cost") is a non-IFRS measure that management uses as a key performance indicator to assess the performance of our operations. Our calculation designates copper as our primary metal of production as it has been the largest component of revenues. The calculation is presented in four manners:

Cash cost, before by-product credits - This measure is gross of by-product revenues and is a function of the efforts and costs incurred to mine and process all ore mined. However, the measure divides this aggregate cost over only pounds of copper produced, our primary metal of production. This measure is generally less volatile from period to period, as it is not affected by changes in the price received for by-product metals. It is, however, significantly affected by the relative mix of copper concentrate and finished zinc production, where the sale of the zinc will occur later, and an increase in production of zinc metal will tend to result in an increase in cash cost under this measure.
Cash cost, net of by-product credits - In order to calculate the net cost to produce and sell copper, the net of by-product credits measure subtracts the revenues realized from the sale of the metals other than copper. The by-product revenues from zinc, gold, and silver are significant and are integral to the economics of our operations. The economics that support our decision to produce and sell copper would be different if we did not receive revenues from the other significant metals being extracted and processed. This measure provides management and investors with an indication of the minimum copper price consistent with positive operating margins, assuming realized by-product metal prices are consistent with those prevailing during the reporting period. It also serves as an important operating statistic that management and investors utilize to measure our operating performance versus that of our competitors. However, it is important to understand that if by-product metal prices decline alongside copper prices, the cash cost net of by-product credits would increase, requiring a higher copper price than that reported to maintain positive cash flows and operating margins.
Sustaining cash cost, net of by-product credits - This measure is an extension of cash cost that includes cash sustaining capital expenditures, including payments on capitalized leases, capitalized sustaining exploration, net smelter returns royalties, payments on certain long-term community agreements, as well as accretion and amortization for expected decommissioning activities for producing assets. It does not include corporate selling and administrative expenses. It provides a more fulsome measurement of the cost of sustaining production than cash cost, which is focused on operating costs only.

- All-in sustaining cash cost, net of by-product credits - This measure is an extension of sustaining cash cost that includes corporate G&A, regional costs, accretion and amortization for community agreements relating to current operations, and accretion for expected decommissioning activities for non-producing sites. Due to the inclusion of corporate selling and administrative expenses, all-in sustaining cash cost is presented on a consolidated basis only.

The tables below present a detailed build-up of cash cost and sustaining cash cost, net of by-product credits, by business unit in addition to consolidated all-in sustaining cash cost, net of by-product credits, and reconciliations between cash cost, net of by-product credits, to the most comparable IFRS measures of cost of sales for the year ended months ended December 31, 2022 and 2021. Cash cost, net of by-product credits may not calculate exactly based on amounts presented in the tables below due to rounding.

Consolidated	Three months ended		Year ended
Net pounds of copper produced^1^
(in thousands)	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2022	Dec. 31, 2021
Peru	59,628	50,389	197,082	171,548
Manitoba	4,978	11,777	32,580	47,745
Net pounds of copper produced	64,606	62,166	229,662	219,293
^1^ Contained copper in concentrate.
Consolidated	Three months ended				Year ended
---	---	---	---	---	---	---	---	---
	Dec. 31, 2022		Dec. 31, 2021		Dec. 31, 2022		Dec. 31, 2021
Cash cost per pound of copper produced	000s	/lb	000s	/lb	000s	/lb	000s	/lb
Cash cost, before by-product credits	208,642	3.23	232,224	3.73	906,265	3.94	867,607	3.95
By-product credits	(138,990	(2.15	(200,306	(3.22	(708,334	(3.08	(704,345	(3.21
Cash cost, net of by-product credits	69,652	1.08	31,918	0.51	197,931	0.86	163,262	0.74

All values are in US Dollars.

Consolidated				Year ended
		Dec. 31, 2021		Dec. 31, 2022		Dec. 31, 2021
Supplementary cash cost information	$/lb ^1^	000s	$/lb ^1^	000s	$/lb ^1^	000s	$/lb ^1^
By-product credits2:
Zinc	0.38	74,585	1.20	224,043	0.98	302,301	1.38
Gold 3	1.18	99,728	1.60	353,478	1.53	289,981	1.32
Silver 3	0.15	14,853	0.24	62,252	0.27	61,388	0.28
Molybdenum & other	0.44	11,140	0.18	68,561	0.30	50,675	0.23
Total by-product credits	2.15	200,306	3.22	708,334	3.08	704,345	3.21
Reconciliation to IFRS:
Cash cost, net of by-product credits		31,918		197,931		163,262
By-product credits		200,306		708,334		704,345
Treatment and refining charges		(13,721		(68,936		(55,430
Inventory adjustments		-		3,553		3,999
Share-based compensation expense		744		420		1,347
Past service pension/Curtailment		737		(2,384		4,965
Change in product inventory		(16,247		(3,125		(18,180
Royalties		3,594		11,144		15,274
Depreciation and amortization4		89,927		337,615		357,924
Cost of sales5		297,258		1,184,552		1,177,506
1 Per pound of copper produced.
2 By-product credits are computed as revenue per financial statements, including amortization of deferred revenue and pricing and volume adjustments. For more information, please see the realized price reconciliation table on page 37 of this MD&A for these figures.
3 Gold and silver by-product credits do not include variable consideration adjustments with respect to stream arrangements. Variable consideration adjustments are cumulative adjustments to gold and silver stream deferred revenue primarily associated with the net change in mineral reserves and resources or amendments to the mine plan that would change the total expected deliverable ounces under the precious metal streaming arrangement. For the three and twelve months ended December 31, 2022 the variable consideration adjustments amounted income of nil and 959, respectively (three and twelve months ended December 31, 2021 - income of nil and 1,617).
4 Depreciation is based on concentrate sold.
5 As per IFRS financial statements, excluding impairment adjustments.

All values are in US Dollars.

Peru	Three months ended		Year ended
(in thousands)	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2022	Dec. 31, 2021
Net pounds of copper produced^1^	59,628	50,389	197,082	171,548
^1^Contained copper in concentrate.
Peru	Three months ended				Year ended
---	---	---	---	---	---	---	---	---
	Dec. 31, 2022		Dec. 31, 2021		Dec. 31, 2022		Dec. 31, 2021
Cash cost per pound of copper produced	000s	/lb	000s	/lb	000s	/lb	000s	/lb
Mining	41,647	0.70	27,756	0.55	137,546	0.70	98,200	0.57
Milling	50,723	0.85	40,121	0.80	195,152	0.99	168,477	0.99
G&A	14,817	0.25	18,351	0.36	63,015	0.32	63,629	0.37
Onsite costs	107,187	1.80	86,228	1.71	395,713	2.01	330,306	1.93
Treatment & refining	11,962	0.20	8,636	0.17	39,587	0.20	32,365	0.19
Freight & other	15,607	0.26	11,609	0.23	50,284	0.25	41,316	0.24
Cash cost, before by-product credits	134,756	2.26	106,473	2.11	485,584	2.46	403,987	2.36
By-product credits	(54,563	(0.92	(41,900	(0.83	(173,488	(0.88	(139,885	(0.82
Cash cost, net of by-product credits	80,193	1.34	64,573	1.28	312,096	1.58	264,102	1.54

All values are in US Dollars.

Peru	Three months ended				Year ended
	Dec. 31, 2022		Dec. 31, 2021		Dec. 31, 2022		Dec. 31, 2021
Supplementary cash cost information	000s	$/lb ^1^	000s	$/lb ^1^	000s	$/lb ^1^	000s	$/lb ^1^
By-product credits^2^:
Gold^3^	19,934	0.33	24,325	0.49	68,630	0.35	61,510	0.37
Silver^3^	7,025	0.12	7,793	0.15	41,671	0.21	35,154	0.20
Molybdenum	27,604	0.47	9,782	0.19	63,187	0.32	43,221	0.25
Total by-product credits	54,563	0.92	41,900	0.83	173,488	0.88	139,885	0.82
Reconciliation to IFRS:
Cash cost, net of by-product credits	80,193		64,573		312,096		264,102
By-product credits	54,563		41,900		173,488		139,885
Treatment and refining charges	(11,962		(8,636		(39,587		(32,365
Inventory adjustments	-		-		(558		(1,446
Share-based compensation expenses	95		145		77		247
Change in product inventory	(15,685		(4,507		(31,348		(13,743
Royalties	1,656		762		5,367		3,503
Depreciation and amortization^4^	58,256		54,078		211,043		194,408
Cost of sales^5^	167,116		148,315		630,578		554,591
^1^Per pound of copper produced.
^2^By-product credits are computed as revenue per financial statements, including amortization of deferred revenue and pricing and volume adjustments. For more information, please see the realized price reconciliation table on page 37 of this MD&A.
^3^Gold and silver by-product credits do not include variable consideration adjustments with respect to stream arrangements.
^4^Depreciation is based on concentrate sold.
^5^ As per IFRS financial statements, excluding impairment adjustments.

All values are in US Dollars.

Consolidated	Three months ended				Year ended
	Dec. 31, 2022		Dec. 31, 2021		Dec. 31, 2022		Dec. 31, 2021
All-in sustaining cash cost per pound of copper produced	000s	$/lb	000s	$/lb	000s	$/lb	000s	$/lb
Cash cost, net of by-product credits	69,652	1.08	31,918	0.51	197,931	0.86	163,262	0.74
Cash sustaining capital expenditures	60,002	0.92	77,539	1.25	255,725	1.11	268,190	1.22
Capitalized exploration	11,500	0.18	8,000	0.13	11,500	0.05	8,000	0.04
Royalties	1,750	0.03	3,594	0.06	11,144	0.05	15,274	0.07
Sustaining cash cost, net of by-product credits	142,904	2.21	121,051	1.95	476,300	2.07	454,726	2.07
Corporate selling and administrative expenses & regional costs	11,876	0.19	14,729	0.24	38,799	0.17	46,663	0.21
Accretion and amortization of decommissioning and community agreements^1^	722	0.01	894	0.01	4,416	0.02	2,830	0.01
All-in sustaining cash cost, net of by-product credits	155,502	2.41	136,674	2.20	519,515	2.26	504,219	2.30
Reconciliation to property, plant and equipment additions:
Property, plant and equipment additions	76,933		91,432		259,281		346,335
Capitalized stripping net additions	15,169		19,201		89,262		79,426
Total accrued capital additions	92,102		110,633		348,543		425,761
Less other non-sustaining capital costs^2^	41,585		43,176		122,054		196,435
Total sustaining capital costs	50,517		67,457		226,489		229,326
Right of use leased assets	(265		(6,714		(25,695		(26,685
Capitalized lease cash payments - operating sites	5,848		9,099		33,271		35,071
Community agreement cash payments	2,854		1,266		9,486		1,691
Accretion and amortization of decommissioning and restoration obligations ^3^	1,048		6,431		12,174		28,987
Cash sustaining capital expenditures	60,002		77,539		255,725		268,390
^1^ Includes accretion of decommissioning relating to non-productive sites, and accretion and amortization of amortization of production related community agreements capitalized to Other assets.
^2^Other non-sustaining capital costs include Arizona capitalized costs, capitalized interest, capitalized exploration, and growth capital expenditures.
^3^Includes amortization of decommissioning and restoration PP&E assets and accretion of decommissioning and restoration liabilities related to producing sites.

All values are in US Dollars.

Peru	Three months ended				Year ended
	Dec. 31, 2022		Dec. 31, 2021		Dec. 31, 2022		Dec. 31, 2021
Sustaining cash cost per pound of copper produced	$000s	$/lb	$000s	$/lb	$000s	$/lb	$000s	$/lb
Cash cost, net of by-product credits	80,193	1.34	64,573	1.28	312,096	1.58	264,102	1.54
Cash sustaining capital expenditures	31,240	0.53	50,423	1.00	133,313	0.68	146,044	0.85
Capitalized exploration^1^	11,500	0.19	8,000	0.16	11,500	0.06	8,000	0.05
Royalties	1,656	0.03	762	0.02	5,367	0.03	3,503	0.02
Sustaining cash cost per pound of copper produced	124,589	2.09	123,758	2.46	462,276	2.35	421,649	2.46
^1^Only includes exploration costs incurred for locations near to existing mine operations.

Gold Cash Cost and Gold Sustaining Cash Cost

Cash cost per ounce of gold produced ("gold cash cost") is a non-IFRS measure that management uses as a key performance indicator to assess the performance of our Manitoba operations. This alternative cash cost calculation designates gold as the primary metal of production as it represents a substantial component of revenues for our Manitoba business unit and should therefore be less volatile over time than Manitoba cash cost per pound of copper. The calculation is presented in three manners:

Gold cash cost, before by-product credits - This measure is gross of by-product revenues and is a function of the efforts and costs incurred to mine and process all ore mined. However, the measure divides this aggregate cost over only ounces of gold produced, the assumed primary metal of production. This measure is generally less volatile from period to period, as it is not affected by changes in the price received for by-product metals.
Gold cash cost, net of by-product credits - In order to calculate the net cost to produce and sell gold, the net of by-product credits measure subtracts the revenues realized from the sale of the metals other than gold. The by-product revenues from copper, zinc, and silver are significant and are integral to the economics of our Manitoba operation. The economics that support our decision to produce and sell gold would be different if we did not receive revenues from the other significant metals being extracted and processed. This measure provides management and investors with an indication of the minimum gold price consistent with positive operating margins, assuming realized by-product metal prices are consistent with those prevailing during the reporting period. It also serves as an important operating statistic that management and investors utilize to measure our operating performance at our Manitoba operation versus that of our competitors. However, it is important to understand that if by-product metal prices decline alongside gold prices, the gold cash cost net of by-product credits would increase, requiring a higher gold price than that reported to maintain positive cash flows and operating margins.
Gold sustaining cash cost, net of by-product credits - This measure is an extension of gold cash cost that includes cash sustaining capital expenditures, capitalized exploration, net smelter returns royalties, as well as accretion and amortization for expected decommissioning activities for producing assets. It does not include corporate selling and administrative expenses. It provides a more fulsome measurement of the cost of sustaining production than gold cash cost, which is focused on operating costs only.

The tables below present a detailed build-up of gold cash cost and gold sustaining cash cost, net of by-product credits, for the Manitoba business unit, and reconciliations between gold cash cost, net of by-product credits, to the most comparable IFRS measures of cost of sales for the year ended months ended December 31, 2022. The introduction of gold cash cost was made in 2022, as gold replaced zinc as the major output within Manitoba's production profile. No comparatives have been disclosed for this metric as Manitoba gold production in 2021 was not considered meaningful. Gold cash cost, net of by-product credits, may not calculate exactly based on amounts presented in the tables below due to rounding.

Manitoba	Three months ended	Year ended
(in thousands)	Dec. 31, 2022	Dec. 31, 2022
Net ounces of gold produced^1^	33,060	161,471
^1^ Contained gold in concentrate and doré.
Manitoba	Three months ended		Year ended
---	---	---	---	---
	Dec. 31, 2022		Dec. 31, 2022
Cash cost per ounce of gold produced	000s	/oz1	000s	/oz1
Mining	38,112	1,153	192,704	1,193
Milling	14,868	450	73,903	458
Refining (zinc)	-	-	32,755	203
G&A	6,452	195	62,439	387
Onsite costs	59,432	1,798	361,801	2,241
Treatment & refining	8,006	242	29,349	181
Freight & other	6,448	195	29,531	183
Cash cost, before by-product credits	73,886	2,235	420,681	2,605
By-product credits	(43,407	(1,313	(372,783	(2,308
Gold cash cost, net of by-product credits	30,479	922	47,898	297

All values are in US Dollars.

Manitoba	Three months ended		Year ended
	Dec. 31, 2022		Dec. 31, 2022
Supplementary cash cost information	000s	$/oz ^1^	000s	$/oz^1^
By-product credits^2^:
Copper	15,382	465	122,785	760
Zinc	24,744	748	224,043	1,388
Silver^3^	2,567	78	20,581	127
Other	714	22	5,374	33
Total by-product credits	43,407	1,313	372,783	2,308
Reconciliation to IFRS:
Cash cost, net of by-product credits	30,479		47,898
By-product credits	43,407		372,783
Treatment and refining charges	(8,006		(29,349
Past service pension/curtailment	(2,384		(2,384
Share-based compensation expenses	395		343
Inventory adjustments	7		4,111
Change in product inventory	(740		28,223
Royalties	94		5,777
Depreciation and amortization^4^	21,152		126,572
Cost of sales^5^	84,404		553,974
^1^ Per ounce of gold produced.
^2^By-product credits are computed as revenue per financial statements, amortization of deferred revenue and pricing and volume adjustments. For more information, please see the realized price reconciliation table on page 37 of this MD&A.
^3^ Silver by-product credits do not include variable consideration adjustments with respect to stream arrangements.
^4^Depreciation is based on concentrate sold.
^5^ As per IFRS financial statements, excluding impairment adjustments.

All values are in US Dollars.

Manitoba	Three months ended		Year ended
	Dec. 31, 2022		Dec. 31, 2022
Sustaining cash cost per ounce of gold produced	$000s	$/oz	$000s	$/oz
Gold cash cost, net of by-product credits	30,479	922	47,898	297
Cash sustaining capital expenditures	28,762	870	122,412	758
Royalties	94	3	5,777	36
Sustaining cash cost per ounce of gold produced	59,335	1,795	176,087	1,091

Combined Unit Cost and Zinc Plant Unit Cost Reconciliation

Combined unit cost ("unit cost") and zinc plant unit cost is a non-IFRS measure that management uses as a key performance indicator to assess the performance of our mining and milling operations. Combined unit cost and zinc plant unit cost are calculated by dividing the cost of sales by mill throughput and refined zinc metal produced, respectively. This measure is utilized by management and investors to assess our cost structure and margins and compare it to similar information provided by other companies in our industry. Unlike cash cost, this measure is not impacted by variability in by-product commodity prices since there are no by-product deductions; costs associated with profit-sharing and similar costs are excluded because of their correlation to external metal prices. In addition, the unit costs are reported in the functional currency of the operation which minimizes the impact of foreign currency fluctuations. In all, the unit cost measures provide an alternative perspective on operating cost performance with minimal impact from external market prices.

The tables below present a detailed combined unit cost and zinc plant unit costs for the Manitoba business unit and combined unit cost for the Peru business unit, and reconciliations between these measures to the most comparable IFRS measures of cost of sales for the year ended months ended December 31, 2022 and 2021.

Peru	Three months ended				Year ended
(in thousands except unit cost per tonne)	Dec. 31, 2022		Dec. 31, <br>2021		Dec. 31, 2022		Dec. 31, <br>2021
Combined unit cost per tonne processed
Mining	41,647		27,756		137,546		98,200
Milling	50,723		40,121		195,152		168,477
G&A ^1^	14,817		18,351		63,015		63,629
Other G&A ^2^	(152	)	(1,937	)	(414	)	(2,152	)
	107,035		84,291		395,299		328,154
Less: COVID-19 related costs	689		4,041		5,214		19,760
Unit cost	106,346		80,250		390,085		308,394
Tonnes ore milled	7,796		8,049		30,522		28,810
Combined unit cost per tonne	13.64		9.96		12.78		10.70
Reconciliation to IFRS:
Unit cost	106,346		80,250		390,085		308,394
Freight & other	15,607		11,609		50,284		41,316
COVID-19 related costs	689		4,041		5,214		19,760
Other G&A	152		1,937		414		2,152
Share-based compensation expenses	95		145		77		247
Inventory adjustments	-		-		(558	)	(1,446	)
Change in product inventory	(15,685	)	(4,507	)	(31,348	)	(13,743	)
Royalties	1,656		762		5,367		3,503
Depreciation and amortization	58,256		54,078		211,043		194,408
Cost of sales^3^	167,116		148,315		630,578		554,591
^1^ G&A as per cash cost reconciliation above.
^2^ Other G&A primarily includes profit sharing costs
^3^ As per IFRS financial statements, excluding impairment adjustments.
Manitoba	Three months ended				Year ended
---	---	---	---	---	---	---	---	---
(in thousands except tonnes ore milled and unit cost per tonne)	Dec. 31,2022		Dec. 31, <br>2021		Dec. 31,2022		Dec. 31,<br>2021
Combined unit cost per tonne processed
Mining	38,112		58,891		192,704		222,660
Milling	14,868		22,193		73,903		62,995
G&A ^1^	6,452		13,746		62,439		52,963
Less: G&A allocated to zinc metal production and other areas	-		(3,762	)	(6,523	)	(14,656	)
Less: Other G&A related to profit sharing costs	1,939		-		(20,075	)	-
Unit cost	61,371		91,068		302,448		323,962
USD/CAD implicit exchange rate	1.36		1.26		1.30		1.25
Unit cost - C$	83,363		114,751		391,782		406,164
Tonnes ore milled	345,492		682,292		2,008,251		2,640,272
Combined unit cost per tonne - C$	241		168		195		154
Reconciliation to IFRS:
Unit cost	61,371		91,068		302,448		323,962
Freight & other	6,448		6,828		29,531		29,545
Refined (zinc)	-		19,008		32,755		72,392
G&A allocated to zinc metal production	-		3,762		6,523		14,656
Other G&A related to profit sharing	(1,939	)	-		20,075		-
Share-based compensation expenses	395		599		343		1,100
Inventory adjustments	7		-		4,111		5,445
Past service pension/Curtailment	(2,384	)	737		(2,384	)	4,965
Change in product inventory	(740	)	(11,740	)	28,223		(4,437	)
Royalties	94		2,832		5,777		11,771
Depreciation and amortization	21,152		35,849		126,572		163,516
Cost of sales^2^	84,404		148,943		553,974		622,915
^1^ G&A as per cash cost reconciliation above.
^2^ As per IFRS financial statements, excluding impairment adjustments.
Manitoba	Three months ended				Year ended
---	---	---	---	---	---	---	---	---
(in thousands except zinc plant unit cost per pound)	December 31, 2022		December <br>31, 2021		December31, 2022		December<br>31, 2021
Zinc plant unit cost
Zinc plant costs	-		19,008		32,755		72,392
G&A ^1^	6,452		13,746		62,439		52,963
Less: G&A allocated to other areas	(8,391	)	(9,984	)	(35,841	)	(38,307	)
Less: Other G&A related to profit sharing	1,939		-		(20,075	)	-
Zinc plant unit cost	-		22,770		39,278		87,048
USD/CAD implicit exchange rate	-		1.26		1.27		1.25
Zinc plant unit cost - C$	-		28,690		50,036		109,062
Refined metal produced (in pounds)	-		45,819		83,542		197,461
Zinc plant unit cost per pound - C$	-		0.63		0.60		0.55
Reconciliation to IFRS:
Zinc plant unit cost	-		22,770		39,278		87,048
Freight & other	6,448		6,828		29,531		29,545
Mining	38,112		58,891		192,704		222,660
Milling	14,868		22,193		73,903		62,995
G&A allocated to other areas	8,391		9,984		35,841		38,307
Other G&A related to profit sharing	(1,939	)	-		20,075		-
Share-based payment	395		599		343		1,100
Inventory adjustments	7		-		4,111		5,445
Past service pension/Curtailment	(2,384	)	737		(2,384	)	4,965
Change in product inventory	(740	)	(11,740	)	28,223		(4,437	)
Royalties	94		2,832		5,777		11,771
Depreciation and amortization	21,152		35,849		126,572		163,516
Cost of sales^2^	84,404		148,943		553,974		622,915
^1^ G&A as per cash cost reconciliation above.
^2^ As per IFRS financial statements, excluding impairment adjustments.

ACCOUNTING CHANGES

New standards and interpretations not yet adopted

For information on new standards and interpretations not yet adopted, refer to note 4 of our audited consolidated financial statements for the year ended December 31, 2022.

CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES

The preparation of the consolidated financial statements in conformity with IFRS requires us to make judgements, estimates and assumptions that affect the application of accounting policies, reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and reported amounts of revenue and expenses during the reporting period. Actual results may differ from these estimates.

We review these estimates and underlying assumptions on an ongoing basis based on our experience and other factors, including expectations of future events that we believe to be reasonable under the circumstances. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Certain accounting estimates and judgements have been identified as being "critical" to the presentation of our financial condition and results of operations because they require us to make subjective and/or complex judgments about matters that are inherently uncertain; or there is a reasonable likelihood that materially different amounts could be reported under different conditions or using different assumptions and estimates.

The following are significant judgements and estimates impacting the consolidated financial statements:

Judgements and estimates that affect multiple areas of the consolidated financial statements:
Mineral reserves and resources which form the basis of life of mine plans which are utilized in impairment testing, timing of payments related to decommissioning obligations and depreciation of capital assets. We estimate our mineral reserves and resources based on information compiled by qualified persons as defined in accordance with NI 43-101;
Income and mining taxes, including estimates of future taxable profit which impacts the ability to realize deferred tax assets on our balance sheet; and
In respect of the outcome of uncertain future events as it concerns recognizing contingent liabilities.
Judgements and estimates that relate mainly to assets (these judgements may also affect other areas of the consolidated financial statements):
Property, plant and equipment:
Cost allocations for mine development;
Mining properties expenditures capitalized;
Classification of supply costs as related to capital development or inventory acquisition;
Determining when exploration and evaluation assets should be transferred to capital works in progress within property, plant and equipment;
Determination of when an asset or group of assets is in the condition and location to be ready for use as intended by management for the purposes of commencing depreciation;
Componentization;
Assessment of impairment, including determination of cash generating units and assessing for indicators of impairment;
Recoverability of exploration and evaluation assets, including determination of cash generating units and assessing for indications of impairment;
Units of production depreciation;
Plant and equipment estimated useful lives and residual values;
Capitalized stripping costs; and
Finite life intangible assets.
Impairment (and reversal of impairment) of non-financial assets:
Future production levels and timing;
Operating and capital costs;
Future commodity prices;
Foreign exchange rates; and
Risk adjusted discount rates; and
In process inventory quantities, inventory cost allocations and inventory valuation.
Judgements and estimates that relate mainly to liabilities (these judgements may also affect other areas of the consolidated financial statements):
Determination of deferred revenue per unit related to the precious metals stream transactions and determination of current portion of deferred revenue, which is based on timing of future sales, and adjustments of the expected conversion of resource to reserves;
Pensions and other employee benefits; and
Decommissioning, restoration and similar liabilities including estimated future costs and timing of spending.
Estimates that relate mainly to the consolidated income statements:
Assaying used to determine revenues and recoverability of inventories.

For more information on judgements and estimates, refer to note 2 of our consolidated financial statements for the year ended December 31, 2022.

DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROL OVER FINANCIAL REPORTING

Disclosure controls and procedures ("DC&P")

Management is responsible for establishing and maintaining adequate DC&P. As of December 31, 2022, we have evaluated the effectiveness of the design and operation of our DC&P in accordance with requirements of National Instrument 52-109 of the Canadian Securities Commission ("NI 52-109") and the Sarbanes Oxley Act of 2002 (as adopted by the US Securities and Exchange Commission). Our Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO") supervised and participated in this evaluation.

As of December 31, 2022, based on management's evaluation, our CEO and CFO concluded that our DC&P were effective to ensure that information required to be disclosed by us in reports we file or submit is recorded, processed, summarized and reported within the time periods specified in securities legislation and is accumulated and communicated to our management, including our CEO and CFO, to allow timely decisions regarding required disclosure.

Internal control over financial reporting ("ICFR")

Management of Hudbay is responsible for establishing and maintaining adequate ICFR. Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our ICFR as of December 31, 2022 based upon the Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on management's evaluation, our CEO and CFO concluded that our ICFR was effective as of December 31, 2022.

The effectiveness of the Company's ICFR as of December 31, 2022 has been audited by Deloitte LLP, Independent Registered Public Accounting Firm as stated in their report immediately preceding the Company's audited consolidated financial statements for the year ended December 31, 2022.

Changes in ICFR

We did not make any changes to ICFR during the year ended December 31, 2022 that materially affected, or are reasonably likely to materially affect, our ICFR.

Inherent limitations of controls and procedures

All internal control systems, no matter how well designed, have inherent limitations. As a result, even systems determined to be effective may not prevent or detect misstatements on a timely basis, as systems can provide only reasonable assurance that the objectives of the control system are met. In addition, projections of any evaluation of the effectiveness of ICFR to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may change.

NOTES TO READER

Forward-Looking Information

This MD&A contains forward-looking information within the meaning of applicable Canadian and United States securities legislation. All information contained in this MD&A, 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 MD&A is qualified by this cautionary note.

Forward-looking information includes, but is not limited to, statements regarding our production, cost and capital and exploration expenditure guidance, the anticipated timing of our issuance of new three-year production outlook, expectations regarding reductions in discretionary spending, capital expenditures and net debt, expectations regarding the impact of inflationary pressures on our cost of operations, financial condition and prospects, expectations regarding our cash balance and liquidity for 2023, expectations regarding the Copper World project, including with respect to our plans for a pre-feasibility study and the estimated timelines and pre-requisites for sanctioning the project, expectations regarding the permitting requirements for the Copper World project and permitting related litigation, our ability to increase the mining rate at Lalor beyond 4,650 tonnes per day, the anticipated timing for completing the Stall recovery improvement program, expectations regarding the ability to conduct exploration work on the Maria Reyna and Caballito properties and to advance related drill plans, expectations regarding the duration and potential impact of short-term mine plan changes implemented at Constancia, expectations regarding the ability for the company to reduce greenhouse gas emissions, the company's evaluation of opportunities to reprocess tailings, expectations regarding the prospective nature of the Maria Reyna and Caballito properties, the anticipated impact of brownfield growth projects on our performance, anticipated expansion opportunities in Snow Lake, anticipated drill programs, anticipated mine plans, anticipated metals prices and the anticipated sensitivity of our financial performance to metals prices, events that may affect our operations and development projects, 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, 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, inherently are 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 ability to achieve production and cost guidance;
the ability to achieve discretionary spending reductions without impacting operations;
no significant interruptions to our operations due to social or political unrest in the regions Hudbay operates, including the navigation of the complex environment in Peru;
no interruptions to our plans for advancing the Copper World project;
the ability to ramp up exploration in respect of the Maria Reyna and Caballito properties and to advance related drill plans;
the ability to ramp up the Lalor mine beyond 4,650 tonnes per day;
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 and ongoing employee relations;
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 neighbouring Indigenous communities and local governments;
no significant unanticipated challenges with stakeholders at our various projects;
no significant unanticipated events or changes relating to regulatory, environmental, health and safety matters;
no contests over title to our properties, including as a result of rights or claimed rights of Indigenous peoples or challenges to the validity of our unpatented mining claims;
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, changes in taxation policies 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, political and social risks in the regions the company operates, including the uncertainty with respect to the political and social environment in Peru and its potential impact on our mining operations (as further described below), risks generally associated with the mining industry and the current geopolitical environment, including future commodity prices, currency and interest rate fluctuations, energy and consumable prices, supply chain constraints and general cost escalation in the current inflationary environment, uncertainties related to the development and operation of our projects, risks related to the Copper World project, including in relation to permitting, litigation, project delivery and financing risks, risks related to the new Lalor mine plan, including the ability to convert inferred mineral resource estimates to higher confidence categories, dependence on key personnel and employee and union relations, risks related to political or social instability, unrest or change, risks in respect of Indigenous and community relations, rights and title claims, operational risks and hazards, including the cost of maintaining and upgrading our tailings management facilities and any 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 and interest rates 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 most recent Annual Information Form.

Additionally, as a result of the heightened tensions, protests and social unrest in Peru following a recent change in the country's political leadership, the company has experienced intermittent disruptions to commerce and supply chains, including the ability to steadily receive critical supplies, and transport and sell concentrates. A prolonged disruption of logistics and supply chains may adversely impact operations at our Constancia mine. Given the uncertainty of the duration and extent of the social and political tensions in Peru, and the relative contribution of our Peru operations on our overall output, the 2023 production and cost guidance is subject to a higher-than-normal degree of uncertainty.

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 MD&A 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 MD&A has been prepared in accordance with the requirements of the securities laws in effect in Canada, which may differ materially from the requirements of United States securities laws applicable to U.S. issuers.

Qualified Person and NI 43-101

The technical and scientific information in this MD&A related to our material mineral projects has been approved by Olivier Tavchandjian, P. Geo, our Vice President, Exploration and Technical Services. Mr. Tavchandjian is a qualified person pursuant to National Instrument 43-101 - Standards of Disclosure for Mineral Projects ("NI 43-101").

For a description of the key assumptions, parameters and methods used to estimate mineral reserves and resources at Hudbay's material properties, 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, sociopolitical, marketing or other relevant factors, please see the technical reports for our material properties as filed by us on SEDAR at www.sedar.com.

SUMMARY OF RESULTS

The following unaudited tables set out a summary of quarterly and annual results for the Company.

	2022 ^4^	Q4 2022	Q3 2022	Q2 2022	Q1 2022	2021 ^4^	Q4 2021	Q3 2021^5^	Q2 2021	Q1 2021	2020 ^4^	Q4 2020
Consolidated Financial Condition (000s)
Cash	$ 225,665	$ 225,665	$286,117	$258,556	$213,359	$270,989	$270,989	$297,451	$294,287	$310,564	$439,135	$439,135
Total long-term debt	1,184,162	1,184,162	1,183,237	1,182,143	1,181,119	1,180,274	1,180,274	1,182,612	1,181,195	1,180,798	1,135,675	1,135,675
Net debt1	958,497	958,497	897,120	923,587	967,760	909,285	909,285	885,161	886,908	870,234	696,540	696,540
Consolidated Financial Performance (000s except per share amounts)
Revenue	$ 1,461,440	$ 321,196	$346,171	$415,454	$378,619	$1,501,998	$425,170	$358,961	$404,242	$313,624	$1,092,418	$322,290
Cost of sales	1,184,552	251,520	313,741	325,940	293,351	1,370,979	343,426	444,379	322,060	261,112	1,053,418	287,923
Earnings (loss) before tax	95,815	(14,287)	(263)	21,504	88,861	(202,751)	(149)	(147,830)	14,819	(69,592)	(179,089)	911
Earnings (loss)	70,382	(17,441)	(8,135)	32,143	63,815	(244,358)	(10,453)	(170,411)	(3,395)	(60,102)	(144,584)	7,406
Basic and diluted earnings (loss) per share	$ 0.27	$ (0.07)	$(0.03)	$0.12	$0.24	$(0.93)	$(0.04)	$(0.65)	$(0.01)	$(0.23)	$(0.55)	$0.03
Adjusted earnings (loss) per share 1	$ 0.10	$ 0.01	$(0.05)	$0.12	$0.02	$0.09	$0.13	$-	$0.02	$(0.06)	$(0.46)	$(0.06)
Operating cash flow before change in non-cash working capital	391,729	109,148	81,617	123,911	77,053	483,862	156,917	103,509	132,786	90,656	241,863	86,071
Adjusted EBITDA (in millions) 1	475.9	124.7	99.3	141.4	110.2	547.8	180.8	119.2	143.2	104.2	306.7	106.9
Consolidated Operational Performance
Contained metal in concentrate and doré produced 2
Copper	104,173	29,305	24,498	25,668	24,702	99,470	28,198	23,245	23,474	24,553	95,333	27,278
Gold	219,700	53,920	53,179	58,645	53,956	193,783	64,159	54,276	39,848	35,500	124,622	32,376
Silver	3,161,294	795,015	717,069	864,853	784,357	3,045,481	899,713	763,177	685,916	696,673	2,750,873	730,679
Zinc	55,381	6,326	9,750	17,053	22,252	93,529	23,207	20,844	21,538	27,940	118,130	25,843
Molybdenum	1,377	344	437	390	207	1,146	275	282	295	294	1,204	333
Payable metal in concentrate and doré sold
Copper	94,473	25,415	24,799	23,650	20,609	92,200	24,959	21,136	25,176	20,929	88,888	22,963
Gold	213,415	47,256	66,932	50,884	48,343	168,358	56,927	47,843	38,205	25,383	122,949	35,179
Silver	2,978,485	559,306	816,416	738,171	864,591	2,427,508	638,640	701,601	577,507	509,760	2,585,586	762,384
Zinc 3	59,043	8,230	12,714	20,793	17,306	96,435	21,112	21,619	25,361	28,343	109,347	28,431
Molybdenum	1,352	421	511	208	213	1,098	245	304	265	284	1,321	457
Cash cost 1	$ 0.86	$ 1.08	$0.58	$0.65	$1.11	$0.74	$0.51	$0.62	$0.84	$1.04	$0.60	$0.43
Sustaining cash cost	$ 2.07	$ 2.21	$1.91	$1.87	$2.29	$2.07	$1.95	$1.97	$2.25	$2.16	$1.93	$1.97
All-in sustaining cash cost 1	$ 2.26	$ 2.41	$2.16	$1.93	$2.54	$2.30	$2.20	$2.18	$2.48	$2.37	$2.16	$2.24

All values are in US Dollars.

^1^Net debt, adjusted earnings (loss) per share, adjusted EBITDA, cash cost, sustaining cash cost and all-in sustaining cash cost per pound of copper produced, net of by-product credits, are non-IFRS financial performance measures with no standardized definition under IFRS. For further information and a detailed reconciliation, please see discussion under the "Non-IFRS Financial Performance Measures" section of this MD&A. The above table sets forth selected non-IFRS financial performance measures for each of our nine most recently completed quarters and three most recently completed years; detailed reconciliations for non-comparable prior periods can be found in our MD&A for these prior periods in the "Non-IFRS Financial Performance Measures" section of these documents.

^2^ Metal reported in concentrate is prior to deductions associated with smelter contract terms.

^3^ Includes refined zinc metal sold.

^4^Annual consolidated results may not calculate based on amounts presented in this table due to rounding. ^5^The Q3 2021 adjusted net earnings (loss) and adjusted net earnings (loss) per share have been adjusted for changes made in the computation of tax impacts on certain adjusting items. The adjusted net earnings per share changed from $ 0.15/share to adjusted net earnings of $0.00/share. See the "Trend Analysis and Quarterly Review" section of this MD&A for further details.

		2022 ^5^	Q4 2022	Q3 2022	Q2 2022	Q1 2022	2021 ^5^	Q4 2021	Q3 2021	Q2 2021	Q1 2021	2020 ^5^	Q4 2020
Peru Operations
Constancia ore mined^1^	tonnes	25,840,435	5,614,918	6,300,252	7,017,114	6,908,151	29,714,327	7,742,469	6,208,019	8,016,373	7,747,466	27,529,950	9,313,784
Copper	%	0.35	0.40	0.36	0.33	0.32	0.31	0.33	0.30	0.30	0.30	0.32	0.31
Gold	g/tonne	0.04	0.04	0.05	0.04	0.04	0.04	0.04	0.04	0.04	0.04	0.03	0.03
Silver	g/tonne	3.40	3.48	3.38	3.53	3.22	2.88	2.81	2.76	3.02	2.90	2.75	2.61
Molybdenum	%	0.01	0.01	0.01	0.01	0.01	0.01	0.01	0.01	0.01	0.01	0.02	0.01
Pampacancha ore mined^1^	tonnes	8,319,250	3,771,629	2,488,928	1,211,387	847,306	5,141,001	2,107,196	2,050,813	982,992	-	-	-
Copper	%	0.33	0.37	0.29	0.29	0.27	0.27	0.27	0.27	0.26	-	-	-
Gold	g/tonne	0.29	0.29	0.23	0.28	0.43	0.30	0.34	0.27	0.27	-	-	-
Silver	g/tonne	4.06	3.84	4.30	4.25	4.06	4.02	4.26	3.58	4.43	-	-	-
Molybdenum	%	0.01	0.01	0.01	0.01	0.01	0.01	0.01	0.01	0.01	-	-	-
Ore milled	tonnes	30,522,294	7,795,735	7,742,020	7,770,706	7,213,833	28,809,755	8,048,925	6,985,035	7,413,043	6,362,752	26,297,318	7,741,714
Copper	%	0.34	0.41	0.34	0.32	0.31	0.32	0.33	0.30	0.31	0.33	0.34	0.33
Gold	g/tonne	0.09	0.12	0.08	0.09	0.08	0.08	0.11	0.11	0.07	0.04	0.03	0.03
Silver	g/tonne	3.58	3.93	3.48	3.64	3.26	3.35	3.67	3.93	2.88	2.84	2.87	2.74
Molybdenum	%	0.01	0.01	0.01	0.01	0.01	0.01	0.01	0.01	0.01	0.01	0.02	0.02
Copper recovery	%	85.0	85.1	84.5	85.0	85.3	84.6	86.0	84.9	83.3	84.1	83.0	85.3
Gold recovery	%	63.6	69.6	61.9	60.3	59.8	64.6	63.6	71.9	62.2	52.0	49.8	52.7
Silver recovery	%	65.7	66.5	65.2	64.2	66.9	63.7	60.8	59.1	68.2	69.9	66.9	70.1
Molybdenum recovery	%	34.8	37.7	41.0	38.8	21.1	31.5	26.7	33.5	33.3	33.4	29.4	28.4
Contained metal in concentrate
Copper	tonnes	89,395	27,047	22,302	20,880	19,166	77,813	22,856	18,072	19,058	17,827	73,150	21,554
Gold	ounces	58,229	20,860	12,722	13,858	10,789	50,306	17,917	17,531	10,220	4,638	12,395	3,689
Silver	ounces	2,309,352	655,257	564,299	584,228	505,568	1,972,949	578,140	521,036	468,057	405,714	1,622,972	477,775
Molybdenum	tonnes	1,377	344	437	390	207	1,146	275	282	295	294	1,204	333
Payable metal sold
Copper	tonnes	79,805	23,789	20,718	18,473	16,825	71,398	20,551	16,065	19,946	14,836	68,506	18,583
Gold	ounces	49,968	15,116	11,970	8,430	14,452	41,807	16,304	16,902	5,638	2,963	10,986	3,297
Silver	ounces	2,045,678	411,129	513,470	484,946	636,133	1,490,651	380,712	457,263	315,064	337,612	1,518,548	480,843
Molybdenum	tonnes	1,352	421	511	208	213	1,098	245	304	265	284	1,321	457
Peru combined unit operating cost ^2,3,4^	$/tonne	$ 12.78	$ 13.64	$13.06	$12.02	$12.37	$10.70	$9.96	$10.93	$10.40	$11.74	$9.46	$10.17
Peru cash cost^3^	$/lb	$ 1.58	$ 1.34	$1.68	$1.82	$1.54	$1.54	$1.28	$1.26	$1.85	$1.82	$1.45	$1.47
Peru sustaining cash cost^3^	$/lb	$ 2.35	$ 2.09	$2.46	$2.62	$2.27	$2.46	$2.46	$2.31	$2.69	$2.36	$2.20	$2.58
^1^ Reported tonnes and grade for ore mined are estimates based on mine plan assumptions and may not fully reconcile to ore milled.
^2^Reflects combined mine, mill and general and administrative ("G&A") costs per tonne of ore milled. Reflects the deduction of expected capitalized stripping costs.
^3^Combined unit costs, cash cost, and sustaining cash cost per pound of copper produced, net of by-product 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 the "Non-IFRS Financial Performance Measures" section of this MD&A. The above table sets forth selected non-IFRS financial performance measures for each of our nine most recently completed quarters and three most recently completed years; detailed reconciliations for non-comparable prior periods can be found in our MD&A for these prior periods in the "Non-IFRS Financial Performance Measures" section of these documents.
^4^ 2022 and 2021 combined unit costs exclude COVID-19 related costs.
^5^Annual consolidated results may not calculate based on amounts presented in this table due to rounding.
		2022 ^1^	Q4 2022	Q3 2022	Q2 2022	Q1 2022	2021 ^1^	Q4 2021	Q3 2021	Q2 2021	Q1 2021	2020 ^1^	Q4 2020
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Manitoba Operations
Lalor ore mined	tonnes	1,516,203	369,453	347,345	412,653	386,752	1,593,141	422,208	392,380	356,951	421,602	1,654,240	468,101
Copper	%	0.73	0.73	0.71	0.70	0.80	0.71	0.78	0.86	0.64	0.57	0.74	0.80
Zinc	%	3.14	2.17	3.27	3.06	4.06	4.23	4.19	3.60	3.81	5.20	5.73	5.54
Gold	g/tonne	4.00	4.00	4.57	3.73	3.76	3.41	3.92	3.85	3.19	2.67	2.51	2.79
Silver	g/tonne	21.96	19.37	21.27	23.95	22.94	24.66	30.35	22.13	22.98	22.75	25.31	24.96
777 ore mined	tonnes	484,355	-	-	226,286	258,069	1,053,710	266,744	256,536	255,170	275,260	991,576	164,856
Copper	%	1.12	-	-	1.03	1.19	1.28	1.13	1.06	0.82	2.06	1.40	1.89
Zinc	%	3.83	-	-	3.51	4.12	3.91	4.16	3.88	3.57	4.00	3.88	2.98
Gold	g/tonne	1.66	-	-	1.62	1.69	2.03	1.80	1.96	1.97	2.39	1.90	1.85
Silver	g/tonne	20.85	-	-	20.63	21.05	25.25	25.02	22.99	23.35	29.32	24.13	21.64
Stall & New Britannia Concentrator Combined:
Ore milled	tonnes	1,510,907	345,492	362,108	406,006	397,301	1,506,756	419,727	408,201	317,484	361,344	1,412,751	372,624
Copper	%	0.75	0.73	0.69	0.73	0.82	0.72	0.75	0.82	0.68	0.60	0.73	0.79
Zinc	%	3.30	2.31	3.33	3.20	4.24	4.30	4.12	3.58	4.06	5.53	5.76	5.47
Gold	g/tonne	4.08	3.98	4.60	3.93	3.87	3.42	3.90	3.84	3.19	2.57	2.55	2.88
Silver	g/tonne	22.15	20.40	20.66	23.98	23.16	24.95	30.07	23.32	22.02	23.40	25.37	24.43
Copper recovery	%	88.6	89.2	88.3	89.5	87.5	86.8	88.7	84.3	88.8	85.7	86.2	87.1
Zinc recovery	%	79.0	79.4	80.9	75.5	85.7	88.9	87.4	88.2	88.1	91.1	91.9	90.9
Gold recovery	%	59.2	58.8	60.9	58.8	58.4	54.9	54.6	53.4	55.5	57.5	60.0	59.5
Silver recovery	%	58.1	56.1	57.6	58.1	60.0	54.4	53.9	52.7	55.1	56.2	60.4	60.3
Flin Flon Concentrator:
Ore milled	tonnes	497,344	-	-	243,312	254,032	1,133,516	262,565	258,062	329,503	283,386	1,205,314	225,663
Copper	%	1.11	-	-	1.02	1.20	1.23	1.12	1.06	0.89	1.88	1.28	1.59
Zinc	%	3.87	-	-	3.60	4.13	3.95	4.16	3.86	3.65	4.20	4.21	3.87
Gold	g/tonne	1.67	-	-	1.64	1.70	2.04	1.78	1.96	2.06	2.34	1.96	1.99
Silver	g/tonne	21.00	-	-	20.76	21.23	24.90	25.04	22.93	23.65	28.01	24.26	22.65
Copper recovery	%	86.7	-	-	85.5	87.6	87.7	86.7	85.2	84.8	91.3	86.0	88.1
Zinc recovery	%	83.0	-	-	82.9	83.2	83.0	83.1	82.2	84.8	81.8	85.5	83.9
Gold recovery	%	57.1	-	-	56.4	57.7	58.5	59.2	58.1	52.9	64.0	56.0	56.6
Silver recovery	%	51.8	-	-	51.0	52.5	45.1	45.6	42.4	37.5	54.1	45.9	46.5
^1^Annual consolidated results may not calculate based on amounts presented in this table due to rounding.
		2022 ^4^	Q4 2022	Q3 2022	Q2 2022	Q1 2022	2021 ^4^	Q4 2021	Q3 2021	Q2 2021	Q1 2021	2020 ^4^	Q4 2020
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Manitoba Operations (continued)
Total Manitoba contained metal in concentrate produced
Copper	tonnes	14,778	2,258	2,196	4,788	5,536	21,657	5,342	5,173	4,416	6,726	22,183	5,724
Zinc	tonnes	55,381	6,326	9,750	17,053	22,252	93,529	23,207	20,844	21,538	27,940	118,130	25,843
Gold	ounces	132,764	25,961	32,570	37,346	36,887	134,475	37,644	36,341	29,628	30,862	112,227	28,687
Silver	ounces	799,108	127,099	138,615	264,651	268,743	1,066,003	315,054	242,131	217,859	290,959	1,127,901	252,904
Precious metal in doré produced
Gold	ounces	28,707	7,099	7,887	7,441	6,280	9,002	8,598	404	-	-	-	-
Silver	ounces	52,834	12,659	14,155	15,974	10,046	6,529	6,519	10	-	-	-	-
Total Manitoba payable metal sold and doré
Copper	tonnes	14,668	1,626	4,081	5,177	3,784	20,802	4,408	5,071	5,230	6,093	20,382	4,380
Zinc^1^	tonnes	59,043	8,230	12,714	20,793	17,306	96,435	21,112	21,619	25,361	28,343	109,347	28,431
Gold	ounces	163,447	32,140	54,962	42,454	33,891	126,551	40,623	30,941	32,567	22,420	111,963	31,882
Silver	ounces	932,807	148,177	302,946	253,225	228,458	936,857	257,928	244,338	262,443	172,148	1,067,038	281,541
Manitoba combined unit operating cost^2,3^	C$/tonne	195	$ 241	$235	168	176	$154	$168	$147	$148	$151	$132	$140
Manitoba gold cash cost ^3, 5^	$/oz	$ 297	$ 922	$216	(207)	416	$-	$-	$-	$-	$-	$-	$-
Manitoba sustaining gold cash cost ^3,5^	$/oz	$ 1,091	$ 1,795	$1,045	519	1,187	$-	$-	$-	$-	$-	$-	$-
^1^ Includes refined zinc metal sold.
^2^ Reflects combined mine, mill and G&A costs per tonne of milled ore.
^3^ Combined unit costs, cash cost, and sustaining cash cost per pound of copper produced, cash cost, and sustaining cash cost per ounce of gold produced, net of by-product 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 the "Non-IFRS Financial Performance Measures" section of this MD&A. The above table sets forth selected non-IFRS financial performance measures for each of our nine most recently completed quarters and three most recently completed years; detailed reconciliations for non-comparable prior periods can be found in our MD&A for these prior periods in the "Non-IFRS Financial Performance Measures" section of these documents.
^4^Annual consolidated results may not calculate based on amounts presented in this table due to rounding.
^5^ Cash cost and sustaining cash cost per ounce of gold produced, net of by-product credits were introduced in 2022 and do not have a published comparative.

Hudbay Minerals Inc.: Exhibit 99.3 - Filed by newsfilecorp.com

TSX, NYSE - HBM<br><br> <br>2023 No. 2
25 York Street, Suite 800<br>Toronto, Ontario<br>Canada M5J 2V5<br>tel 416 362-8181<br>fax 416 362-7844<br>hudbay.com	News Release
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Hudbay Announces Fourth Quarter and Full Year 2022 Results and Provides Annual Guidance

Toronto, Ontario, February 23, 2023 - Hudbay Minerals Inc. ("Hudbay" or the "company") (TSX, NYSE:HBM) today released its fourth quarter and full year 2022 financial results and annual production and cost guidance. All amounts are in U.S. dollars, unless otherwise noted.

Fourth Quarter and Full Year Operating and Financial Results

Achieved 2022 consolidated production guidance for all metals and consolidated cash cost and sustaining cash cost guidance.
Full year consolidated copper production of 104,173 tonnes, consolidated gold production of 219,700 ounces and consolidated silver production of 3,161,294 increased by 5%, 13% and 4%, respectively, in 2022 compared to 2021.
The Peru operations delivered strong performance in the fourth quarter with a 21% increase in copper production and a 64% increase in gold production, compared to the third quarter of 2022, as grades and recoveries improved. The fourth quarter of 2022 was a record quarter for gold production in Peru. Peru's cash cost per pound of copper produced, net of by-product credits^i^, improved to $1.34 in the fourth quarter, representing a 20% decline compared to the third quarter of 2022.
The Manitoba operations saw a 6% increase in Lalor's ore production in the fourth quarter compared to the third quarter of 2022, and the Lalor mine continues to ramp up following the transition of Flin Flon employees to Snow Lake. Manitoba's full year gold cash cost per ounce of gold produced, net of by-product credits^i^, was 1% below the low end of the annual guidance range.
Full year consolidated cash cost and sustaining cash cost per pound of copper produced, net of by-product credits^i^, were $0.86 and $2.07, respectively, and similar to 2021 levels, despite inflationary cost pressures which were offset by higher copper production and higher by-product credits.
Fourth quarter net loss and loss per share were $17.4 million and $0.07, respectively. After adjusting for a non-cash loss of $13.5 million related to a quarterly revaluation of the Flin Flon environmental reclamation provision due to changes in real, long-term risk-free discount rates, and an $8.0 million revaluation loss related to the gold prepayment liability, among other items, fourth quarter adjusted earnings^i^ per share were $0.01.
Operating cash flow before change in non-cash working capital was $109.1 million and adjusted EBITDA^i^ was $124.7 million in the fourth quarter, an increase of 34% and 26%, respectively, over the third quarter of 2022, benefiting from higher copper sales volumes and higher molybdenum prices and sales volumes, but negatively impacted by a temporary buildup of unsold inventory in Peru.
Constancia continued to operate throughout nation-wide road blockades in Peru in December, and while the company was successful in completing two port shipments in December, inventory of approximately 25,000 wet metric tonnes of copper concentrate in Peru was unsold at the end of the quarter.

TSX, NYSE - HBM<br><br> <br>2023 No. 2

Executing on Growth Initiatives and Disciplined Capital Allocation

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. The pre-feasibility study for Phase I of Copper World is well-advanced with the main facility engineering completed and metallurgical test work being analyzed as part of the concentrate leaching trade off evaluations.
Reached a community exploration agreement in 2022 to access the Maria Reyna and Caballito satellite properties located north of Constancia in Peru. Completed the surface investigation work needed to support drill permit applications.
Initiated deep drilling at Lalor in January 2023 to test the down-dip gold and copper extensions and potentially unlock further value in Snow Lake.
The Stall recovery improvement program is well-advanced and remains on track for completion in early 2023 with higher gold and copper recoveries expected to commence in the second quarter of 2023.
Reinvigorated focus on free cash flow and delivered on discretionary spending reduction targets by reducing 2022 growth capital and exploration spending by approximately $30 million in Arizona, Manitoba and Peru.
Reduced 2023 discretionary spending by more than $50 million primarily related to the deferral of the Copper World definitive feasibility study and the pebble crusher in Peru.
Repaid approximately 50% of the original gold prepayment liability in 2022 and the company remains focused on reducing net debt throughout 2023.
Prudent approach to capital allocation demonstrated with the introduction of three prerequisites for sanctioning Copper World, including a prudent financing strategy with multi-faceted financial targets focused on a minimum cash balance, a stated maximum leverage, limited non-recourse project level debt and committed financial partners.

"We delivered on our plan for higher copper production in Peru and higher gold production in Manitoba in 2022, as a result of the successful completion of approximately $250 million in brownfield investments," said Peter Kukielski, President and Chief Executive Officer. "We are proud to have achieved consolidated production guidance as the team successfully managed the regional logistics and supply chain challenges in Peru at the end of the year and we benefitted from the ongoing optimization efforts at our Snow Lake operations. Our focus for 2023 is to generate free cash flow through continued increases in copper and gold production and remain disciplined with capital allocation as we de-risk the Copper World project in Arizona and unlock value from our exciting pipeline of organic growth opportunities."

2023 Annual Guidance and Outlook

Consolidated copper production is forecast to increase by 10%^ii^ to 114,000^ii^ tonnes in 2023, compared to 2022, with higher grades from the Pampacancha deposit in Peru.
Consolidated gold production is forecast to increase by 30%^ii^ to 285,500^ii^ ounces, compared to 2022, due to significantly higher gold production in Peru and Manitoba.
Consolidated copper and gold production is expected to further increase in 2024, similar to the previously issued guidance, and 2025 copper and gold production is expected to benefit from an extension of mining activities at Pampacancha into the first half of 2025.
Consolidated cash cost, net of by-product credits^i^, in 2023 is expected to decline by 30%^ii^ and be within a range of $0.40 and $0.80 per pound of copper as a result of higher copper production and gold by-product credits.
Approximately $65 million reduction in growth capital expenditures and exploration spending is expected in 2023 compared to 2022.
Total capital expenditures are expected to decline by 13% year-over-year to $300 million in 2023.

TSX, NYSE - HBM<br><br> <br>2023 No. 2

Exploration expenditures are expected to decline by 61% in 2023 as activities are focused on areas with high potential for new discovery and mineral reserve and resource expansion.

Summary of Fourth Quarter Results

Consolidated copper production in the fourth quarter of 2022 was 29,305 tonnes, an increase of 20% compared to the third quarter of 2022, primarily due to higher copper grades in Peru. Consolidated gold production in the fourth quarter of 2022 was 53,920 ounces, a slight increase from the third quarter of 2022 as higher gold grades in Peru partially offset lower Lalor gold grades in Manitoba.

Consolidated cash cost per pound of copper produced, net of by-product credits^i^, was $1.08 in the fourth quarter of 2022, compared to $0.58 in the third quarter of 2022. This increase was a result of lower zinc and precious metal sales volumes and continued inflationary cost pressures, partially offset by higher copper production. Consolidated sustaining cash cost per pound of copper produced, net of by-product credits^i^, was $2.21 in the fourth quarter of 2022 compared to $1.91 in the third quarter of 2022. This increase was primarily due to the same reasons outlined above and higher capitalized exploration, slightly offset by lower sustaining capital expenditures. Consolidated all-in sustaining cash cost per pound of copper produced, net of by-product credits^i^, was $2.41 in the fourth quarter of 2022, higher than $2.16 in the third quarter of 2022, due to the same reasons outlined above.

Cash generated from operating activities in the fourth quarter of 2022 decreased to $86.4 million compared to $172.5 million in the third quarter of 2022, primarily due to a decrease in changes in non-cash working capital. Peru operations were impacted by increasing social unrest following a change in political leadership in December 2022, which resulted in lower-than-planned grades in the fourth quarter. Constancia continued to operate throughout these disruptions with the continued strong support from the local communities and the company's local workforce. Operating cash flow before change in non-cash working capital was $109.1 million during the fourth quarter of 2022, reflecting an increase from $81.6 million in the third quarter of 2022, primarily as a result of higher copper, gold and molybdenum prices and higher copper sales volumes.

Net loss and loss per share in the fourth quarter of 2022 were $17.4 million and $0.07, respectively, compared to a net loss and loss per share of $8.1 million and $0.03, respectively, in the third quarter of 2022. The 2022 fourth quarter results were negatively impacted by a non-cash loss of $13.5 million related to the quarterly revaluation of the Flin Flon environmental reclamation provision due to changes in real, long-term discount rates, an $8.0 million revaluation loss related to the gold prepayment liability and a $5.8 million loss on changes to other provisions. These costs were offset by a $2.4 million Manitoba post-employment plan curtailment gain.

Adjusted net earnings^i^ and adjusted net earnings per share^i^ in the fourth quarter of 2022 were $2.6 million and $0.01 per share, respectively, after adjusting for the non-cash revaluation loss of the environmental reclamation provision and the revaluation loss related to the gold prepayment liability, among other items. This compares to adjusted net loss^i^ and adjusted net loss per share^i^ of $12.4 million, and $0.05 in the third quarter of 2022. Fourth quarter adjusted EBITDA^i^ was $124.7 million, an increase of 26% from $99.3 million in the third quarter of 2022.

As at December 31, 2022, the company's liquidity includes $225.7 million in cash as well as undrawn availability of $354.3 million under its revolving credit facilities. Hudbay expects that its current liquidity combined with cash flow from operations, will be sufficient to meet the company's liquidity needs for the foreseeable future.

TSX, NYSE - HBM<br><br> <br>2023 No. 2

Summary of Full Year Results

Hudbay achieved its 2022 consolidated production guidance for all metals. However, production of copper and gold was at the lower end of the guidance range primarily due to lower-than-planned grades in the fourth quarter in Peru caused by short-term mine plan changes that were implemented to mitigate the risks associated with logistical and supply chain disruptions in Peru.

Consolidated cash costs per pound of copper produced, net of by-product credits^i^, in 2022 was $0.86 compared to $0.74 in 2021 and consolidated sustaining cash cost per pound of copper produced, net of by-product credits^i^, in 2022 remained substantially unchanged from 2021 at $2.07. Both measures remained in line with the 2022 guidance ranges.

Net earnings and earnings per share for 2022 were $70.4 million and $0.27, respectively, compared to a net loss and loss per share of $244.4 million and $0.93, respectively, in 2021. The prior period results were negatively impacted by a $193.5 million revaluation of the Flin Flon environmental reclamation provision resulting in an impairment charge of the same amount as well as a $66.7 million in mark-to-market loss mostly from $49.8 million of write-offs for a non-cash embedded derivative on the early redemption option associated with the company's extinguished senior unsecured notes. Full year 2022 net earnings benefited from a non-cash gain of $133.5 million related to the revaluation of the Flin Flon environmental reclamation provision. The full year 2022 financial results were negatively impacted by a $95.0 million pre-tax impairment loss related to certain specific capitalized costs and assets associated with the previous stand-alone development plan for the Rosemont deposit, which were determined to no longer be recoverable.

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Financial Condition ($000s)	Dec. 31, 2022	Sep. 30, 2022	Dec. 31, 2021
---	---	---	---
Cash and cash equivalents	225,665	286,117	270,989
Total long-term debt	1,184,162	1,183,237	1,180,274
Net debt^1^	958,497	897,120	909,285
Working capital^2^	76,534	99,807	147,512
Total assets	4,325,943	4,287,794	4,616,231
Equity	1,571,809	1,570,889	1,476,828

^1^ Net debt is a non-IFRS financial performance measure with no standardized definition under IFRS. For further information, please see the "Non-IFRS Financial Reporting Measures" section of this news release.

^2^ Working capital is determined as total current assets less total current liabilities as defined under IFRS and disclosed on the consolidated financial statements.

Financial Performance	****	Three Months Ended
	****	Dec. 31, 2022	Sep. 30, 2022		Dec. 31, 2021
Revenue	$000s	321,196	346,171		425,170
Cost of sales	$000s	251,520	313,741		343,426
(Loss) earnings before tax	$000s	(14,287)	(263)		(149)
Net (loss) earnings	$000s	(17,441)	(8,135)		(10,453)
Basic and diluted (loss) earnings per share	$/share	(0.07)	(0.03)		(0.04)
Adjusted earnings (loss) per share^1^	$/share	0.01	(0.05)		0.13
Operating cash flow before change in non-cash working capital	$ millions	109.1	81.6		156.9
Adjusted EBITDA^1^	$ millions	124.7	99.3		180.8
		Year Ended
		Dec. 31, 2022		Dec. 31, 2021
Revenue	$000s	1,461,440		1,501,998
Cost of sales	$000s	1,184,552		1,370,979
Earnings (loss) before tax	$000s	95,815		(202,751)
Net earnings (loss)	$000s	70,382		(244,358)
Basic and diluted (loss) earnings per share	$/share	0.27		(0.93)
Adjusted earnings per share^1^	$/share	0.10		0.09
Operating cash flow before change in non-cash working capital	$ millions	391.7		483.9
Adjusted EBITDA^1^	$ millions	475.9		547.8
^1^ Adjusted earnings (loss) per share and adjusted EBITDA are non-IFRS financial performance measures with no standardized definition under IFRS. For further information, please see the "Non-IFRS Financial Reporting Measures" section of this news release.
TSX, NYSE - HBM<br><br> <br>2023 No. 2
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Consolidated Production and Cost Performance		Three Months Ended
---	---	---	---	---	---
	******	Dec. 31, 2022	Sep. 30, 2022		Dec. 31, 2021
Contained metal in concentrate and doré produced^1^		****
Copper	tonnes	29,305	24,498		28,198
Gold	ounces	53,920	53,179		64,159
Silver	ounces	795,015	717,069		899,713
Zinc	tonnes	6,326	9,750		23,207
Molybdenum	tonnes	344	437		275
Payable metal sold		****
Copper	tonnes	25,415	24,799		24,959
Gold^2^	ounces	47,256	66,932		56,927
Silver^2^	ounces	559,306	816,416		638,640
Zinc^3^	tonnes	8,230	12,714		21,112
Molybdenum	tonnes	421	511		245
Consolidated cash cost per pound of copper produced^4^
Cash cost	$/lb	1.08	0.58		0.51
Sustaining cash cost	$/lb	2.21	1.91		1.95
All-in sustaining cash cost	$/lb	2.41	2.16		2.20
		Year Ended
		Dec. 31, 2022		Dec. 31, 2021
Contained metal in concentrate and doré produced^1^		****
Copper	tonnes	104,173		99,470
Gold	ounces	219,700		193,783
Silver	ounces	3,161,294		3,045,481
Zinc	tonnes	55,381		93,529
Molybdenum	tonnes	1,377		1,146
Payable metal sold		****
Copper	tonnes	94,473		92,200
Gold^2^	ounces	213,415		168,358
Silver^2^	ounces	2,978,485		2,427,508
Zinc^3^	tonnes	59,043		96,435
Molybdenum	tonnes	1,352		1,098
Consolidated cash cost per pound of copper produced^4^
Cash cost	$/lb	0.86		0.74
Sustaining cash cost	$/lb	2.07		2.07
All-in sustaining cash cost	$/lb	2.26		2.30

^1^ Metal reported in concentrate is prior to deductions associated with smelter contract terms.

^2^Includes total payable gold and silver in concentrate and in doré sold.

^3^ Includes refined zinc metal sold and payable zinc in concentrate sold.

^4^ Cash cost, sustaining cash cost and all-in sustaining cash cost per pound of copper produced, net of by-product credits, are non-IFRS financial performance measures with no standardized definition under IFRS. For further information, please see the "Non-IFRS Financial Reporting Measures" section of this news release.

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Peru Operations Review

Peru Operations		Three Months Ended			Year Ended
	******	Dec. 31,2022	Sep. 30,2022	Dec. 31,2021	Dec. 31,2022	Dec. 31,2021
Constancia ore mined^1^	tonnes	5,614,918	6,300,252	7,742,469	25,840,435	29,714,327
Copper	%	0.40	0.36	0.33	0.35	0.31
Gold	g/tonne	0.04	0.05	0.04	0.04	0.04
Silver	g/tonne	3.48	3.38	2.81	3.40	2.88
Molybdenum	%	0.01	0.01	0.01	0.01	0.01
Pampacancha ore mined^1^	tonnes	3,771,629	2,488,928	2,107,196	8,319,250	5,141,001
Copper	%	0.37	0.29	0.27	0.33	0.27
Gold	g/tonne	0.29	0.23	0.34	0.29	0.30
Silver	g/tonne	3.84	4.30	4.26	4.06	4.02
Molybdenum	%	0.01	0.01	0.01	0.01	0.01
Total ore mined	tonnes	9,386,547	8,789,180	9,849,665	34,159,685	34,855,328
Strip Ratio^2^		0.97	1.26	0.95	1.13	1.02
Ore milled	tonnes	7,795,735	7,742,020	8,048,925	30,522,294	28,809,755
Copper	%	0.41	0.34	0.33	0.34	0.32
Gold	g/tonne	0.12	0.08	0.11	0.09	0.08
Silver	g/tonne	3.93	3.48	3.67	3.58	3.35
Molybdenum	%	0.01	0.01	0.01	0.01	0.01
Copper recovery	%	85.1	84.5	86.0	85.0	84.6
Gold recovery	%	69.6	61.9	63.6	63.6	64.6
Silver recovery	%	66.5	65.2	60.8	65.7	63.7
Molybdenum recovery	%	37.7	41.0	26.7	34.8	31.5
Contained metal in concentrate		****			****
Copper	tonnes	27,047	22,302	22,856	89,395	77,813
Gold	ounces	20,860	12,722	17,917	58,229	50,306
Silver	ounces	655,257	564,299	578,140	2,309,352	1,972,949
Molybdenum	tonnes	344	437	275	1,377	1,146
Payable metal sold		****			****
Copper	tonnes	23,789	20,718	20,551	79,805	71,398
Gold	ounces	15,116	11,970	16,304	49,968	41,807
Silver	ounces	411,129	513,470	380,712	2,045,678	1,490,651
Molybdenum	tonnes	421	511	245	1,352	1,098
Combined unit operating cost^3^^,^^4^^,^^5^	$/tonne	13.64	13.06	9.96	12.78	10.70
Cash cost^4,5^	$/lb	1.34	1.68	1.28	1.58	1.54
Sustaining cash cost^4,5^	$/lb	2.09	2.46	2.46	2.35	2.46

^1^ Reported tonnes and grade for ore mined are estimates based on mine plan assumptions and may not reconcile fully to ore milled.

^2^ Strip ratio is calculated as waste mined divided by ore mined.

^3^ Reflects combined mine, mill and general and administrative ("G&A") costs per tonne of ore milled. Reflects the deduction of expected capitalized stripping costs.

^4^ Combined unit cost, cash cost and sustaining cash cost per pound of copper produced, net of by-product 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 the "Non-IFRS Financial Reporting Measures" section of this news release.

^5^ Excludes approximately $0.7 million, or $0.09 per tonne, of COVID-19 related costs during the three months ended December 31, 2022, $0.9 million, or $0.12 per tonne, of COVID-19 related costs during the three months ended September 30, 2022 and $4.1 million, or $0.51 per tonne, during the three months ended December 31, 2021.Excludes approximately $5.2 million, or $0.17 per tonne, of COVID-19 related costs during the twelve months ended December 31, 2022 and $19.8 million or $0.69 per tonne, of COVID-19 related costs during the twelve months ended December 31, 2021.

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During the fourth quarter of 2022, the Constancia operations produced 27,047 tonnes of copper, 20,860 ounces of gold, 655,257 ounces of silver and 344 tonnes of molybdenum. Production of copper, gold and silver was 21%, 64% and 16% higher than the third quarter of 2022 due to higher grades and recoveries, partially offset by a planned mill maintenance shutdown in November. The fourth quarter of 2022 was a record quarter for gold production in Peru.

Full year 2022 production of copper increased by 15% year-over-year to 89,395 tonnes, within the guidance range. Similarly, full year 2022 production of gold, silver and molybdenum increased by 16%, 17% and 20%, respectively, compared to 2021 due to higher throughput, higher copper and precious metal grades and higher copper, silver and molybdenum recoveries. Molybdenum production was in line with annual guidance range, whereas silver production exceeded the top end of the annual guidance range by 10%. Gold production fell short of the annual guidance range primarily due to lower-than-planned grades from the Pampacancha pit in the fourth quarter of 2022 as a result of short-term changes in the mine plan, as described below.

Total ore mined in the fourth quarter of 2022 increased by 7% compared to the third quarter of 2022, despite a short-term change in the mine plan that prioritized the processing of lower grade stockpiles and shorter haulage distance ore from the Constancia pit. These changes were implemented to ration fuel during a period of nation-wide social unrest and road blockades following a change in Peru's political leadership in early December 2022, and ensured the plant continued to operate uninterrupted. Despite impacts on the ability to steadily receive fuel and transport concentrates, the Constancia mill continued to operate throughout these disruptions as the company implemented plans to mitigate the risk to its operations with strong support from the local communities, the company's local workforce and the community-owned concentrate transportation companies.

Ore milled during the fourth quarter of 2022 was slightly higher than the third quarter of 2022 despite the impact of the planned mill maintenance program in November. Milled copper grades increased by 21% in the fourth quarter of 2022 compared to the third quarter due to higher head grades from both Pampacancha and Constancia. Copper, gold and silver recoveries in the fourth quarter of 2022 were higher than the third quarter of 2022 due to higher milled grades, and the fourth quarter achieved a record quarterly gold recovery rate of 70%.

Combined mine, mill and G&A unit operating costs^i^ in the fourth quarter of 2022 were 4% higher than the third quarter of 2022, primarily due to higher mining costs from continued inflationary pressures. Full year combined mine, mill and G&A unit operating costs for 2022 were 19% higher than the same period in 2021 due to a higher strip ratio, higher mining costs and inflationary pressures on fuel, consumables and energy costs, partially offset by higher ore milled.

Peru's cash cost per pound of copper produced, net of by-product credits^i^, in the fourth quarter of 2022 declined by 20% to $1.34, compared to $1.68 in the third quarter, primarily due to higher copper production and higher by-product credits resulting from higher grades in the fourth quarter. Peru's full year cash cost per pound of copper produced, net of by-product credits^i^, was $1.58, a slight increase of 3% compared to the same period of 2021. This exceeded the upper end of the 2022 guidance range primarily due to higher mining and milling costs from input cost inflation and lower than expected by-product credits due to lower-than-expected gold grades from Pampacancha in the fourth quarter of 2022, as described above.

Peru's sustaining cash cost per pound of copper produced, net of by-product credits^i^, in the fourth quarter of 2022 declined by 15% to $2.09, compared to $2.46 in the third quarter, primarily due to the same factors affecting cash cost and lower sustaining capital expenditures, partially offset by higher capitalized exploration. Peru's full year sustaining cash cost per pound of copper produced, net of by-product credits^i^, declined by 4% compared to 2021, due to lower sustaining capital expenditures and higher copper and gold production, offset, in part, by higher mining and milling costs from input cost inflation.

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While Hudbay was able to complete two copper concentrate shipments from the Matarani port during December, Peru's copper, gold and silver sales in the fourth quarter of 2022 were impacted by higher-than-normal unsold copper concentrate inventory levels of approximately 25,000 wet metric tonnes as at December 31, 2022, due to the nation-wide road blockades in early December. Hudbay has been able to steadily operate the Constancia mill throughout the recent road blockades, and despite completing three copper concentrate shipments from the port in January, Peru's copper concentrate inventory levels at site reached a peak of approximately 47,000 wet metric tonnes in mid-February when transportation of concentrate resumed with the assistance of the community-based concentrate trucking companies. Hudbay expects concentrate inventory levels to normalize over the next several months.

Manitoba Operations Review

Manitoba Operations		Three Months Ended			Year Ended
	******	Dec. 31, 2022	Sep. 30, 2022	Dec. 31,2021	Dec. 31, 2022	Dec. 31, 2021
Lalor ore mined	tonnes	369,453	347,345	422,208	1,516,203	1,593,141
Copper	%	0.73	0.71	0.78	0.73	0.71
Zinc	%	2.17	3.27	4.19	3.14	4.23
Gold	g/tonne	4.00	4.57	3.92	4.00	3.41
Silver	g/tonne	19.37	21.27	30.35	21.96	24.66
777 ore mined	tonnes	-	-	266,744	484,355	1,053,710
Copper	%	-	-	1.13	1.12	1.28
Zinc	%	-	-	4.16	3.83	3.91
Gold	g/tonne	-	-	1.80	1.66	2.03
Silver	g/tonne	-	-	25.02	20.85	25.25
Stall Concentrator & New Britannia Mill:
Ore milled	tonnes	345,492	362,108	419,727	1,510,907	1,506,756
Copper	%	0.73	0.69	0.75	0.75	0.72
Zinc	%	2.31	3.33	4.12	3.30	4.30
Gold	g/tonne	3.98	4.60	3.90	4.08	3.42
Silver	g/tonne	20.40	20.66	30.07	22.15	24.95
Copper recovery - concentrate	%	89.2	88.3	88.7	88.6	86.8
Zinc recovery - concentrate (Stall)	%	90.1	88.0	87.4	86.6	88.9
Gold recovery - concentrate	%	58.8	60.9	54.6	59.2	54.9
Silver recovery - concentrate	%	56.1	57.6	53.9	58.1	54.4
Flin Flon Concentrator:		****			****
Ore milled	tonnes	-	-	262,565	497,344	1,133,516
Copper	%	-	-	1.12	1.11	1.23
Zinc	%	-	-	4.16	3.87	3.95
Gold	g/tonne	-	-	1.78	1.67	2.04
Silver	g/tonne	-	-	25.04	21.00	24.90
Copper recovery	%	-	-	86.7	86.7	87.7
Zinc recovery	%	-	-	83.1	83.0	83.0
Gold recovery	%	-	-	59.2	57.1	58.5
Silver recovery	%	-	-	45.6	51.8	45.1
TSX, NYSE - HBM<br><br> <br>2023 No. 2
---
Total contained metal in concentrate and doré
---	---	---	---	---	---	---
Copper	tonnes	2,258	2,196	5,342	14,778	21,657
Zinc	tonnes	6,326	9,750	23,207	55,381	93,529
Gold	ounces	33,060	40,457	46,242	161,471	143,477
Silver	ounces	139,758	152,770	321,573	851,942	1,072,532
Total payable metal sold		****			****
Copper	tonnes	1,626	4,081	4,408	14,668	20,802
Zinc^1^	tonnes	8,230	12,714	21,112	59,043	96,435
Gold^2^	ounces	32,140	54,962	40,623	163,447	126,551
Silver^2^	ounces	148,177	302,946	257,928	932,807	936,857
Combined unit operating cost^3,4^	C$/tonne	241	235	168	195	154
Gold cash cost^4^^,^^5^	$/oz	922	216	-	297	-
Gold sustaining cash cost^4^^,^^5^	$/oz	1,795	1,045	-	1,091	-

^1^ Includes refined zinc metal sold and payable zinc in concentrate sold.

^2^ Includes total payable precious metals in concentrate and in doré sold.

^3^ Reflects combined mine, mill and G&A costs per tonne of ore milled.

^4^ Combined unit cost, cash cost, sustaining cash cost per ounce of gold produced, net of by-product credits, are non-IFRS financial performance measures with no standardized definition under IFRS. For further information, please see the "Non-IFRS Financial Reporting Measures" section of this news release.

^5^ Cash cost and sustaining cash cost per ounce of gold produced, net of by-product credits, were introduced in 2022 and do not have a published comparative for 2021.

During the fourth quarter of 2022, the Manitoba operations produced 33,060 ounces of gold, 2,258 tonnes of copper, 6,326 tonnes of zinc and 139,758 ounces of silver. Gold, zinc and silver production was lower than the third quarter of 2022 primarily as a result of lower grades at Lalor, in line with the mine plan. Year-over-year metal production was impacted by the planned closure of 777 in June 2022, resulting in a decrease in copper, zinc and silver production, while full year gold production increased by 13%, compared to the prior year, as New Britannia ramped up to full production. Full year production of all metals in Manitoba achieved the 2022 annual guidance ranges.

During the fourth quarter of 2022, the Manitoba team continued to focus on integrating the Flin Flon employees and equipment into the Snow Lake operations and reducing reliance on higher cost contractors. Lalor's ore production during the quarter was impacted by a planned maintenance program to replace surface ore chutes as well as various other pre-winter maintenance activities including the muck circuit, hoist drive and electrical maintenance. The company continues to advance several key initiatives to support higher production levels at Lalor, including building longhole inventory, improving stope muck fragmentation, optimizing the development drift size and focusing on shaft availability improvements to enable more ore to be hoisted to surface while reducing inefficient trucking of ore via the ramp.

Ore mined at Lalor increased by 6% in the fourth quarter of 2022, compared to the third quarter of 2022, mainly due to the higher production initiatives and the integration of the Flin Flon employees and equipment, partially offset by the planned maintenance program mentioned above. Gold, zinc and silver grades mined during the fourth quarter of 2022 were lower than the third quarter and copper grades were higher.

The combined Snow Lake mills processed 5% less ore in the fourth quarter of 2022 compared to the third quarter of 2022, mainly due to the above noted transition and planned maintenance program impacting Lalor and the milling operations. Stall recoveries were consistent with the metallurgical model for the head grades delivered. The New Britannia mill continued to achieve consistent production in the fourth quarter, averaging approximately 1,530 tonnes per day. Metal recoveries have now stabilized near targeted levels for the mill. Additional improvement initiatives will continue to be advanced in the upcoming quarters with a focus on reducing reagent and grinding media consumption, which has contributed to higher operating costs than planned. These initiatives require minimal capital expenditures and will further improve overall metal recoveries and copper concentrate grades.

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Combined mine, mill and G&A unit operating costs^i^ in the fourth quarter of 2022 were at similar levels compared to the third quarter of 2022. Full year 2022 combined unit operating costs increased by 27% compared to 2021, reflecting the standalone higher cost structure of Snow Lake after the closure of the 777 mine and the Flin Flon operations in mid-2022. As previously disclosed, combined unit operating costs for 2022 have exceeded the upper end of the guidance range by 5% due to ongoing inflationary cost pressures and the Snow Lake transition.

Manitoba's cash cost per ounce of gold produced, net of by-product credits^i^, in the fourth quarter of 2022 was $922, higher than the third quarter of 2022, primarily due to lower by-product credits and lower gold production. This was partially offset by lower mining, milling and general and administrative costs as well as lower treatment, refining and freight costs. However, full year 2022 cash cost per ounce of gold produced, net of by-product credits^i^, was $297, 1% below the low end of the 2022 guidance range.

Manitoba's sustaining cash cost per ounce of gold produced, net of by-product credits^i^, in the fourth quarter was $1,795, higher than the third quarter of 2022, primarily due to the same factors affecting cash cost, partially offset by lower sustaining capital expenditures.

Commitment to Climate Change Initiatives

On December 12, 2022, Hudbay announced its commitment to achieve net zero greenhouse gas ("GHG") emissions by 2050 and the adoption of interim 2030 GHG reduction targets to support this commitment. The company initiated a roadmap to further identify and manage risks associated with climate change, and opportunities to reduce GHG emissions in alignment with global decarbonization goals.

While Hudbay's operations are well-positioned in the lower half of the global GHG emissions curve for copper operations, the company recognizes its role in mitigating climate change. Hudbay's GHG emissions reduction plan includes the following initiatives:

Pursuing a 50% reduction in absolute Scope 1 and Scope 2 emissions from existing operations by 2030 (compared to 2021)
Achieving net zero total emissions by 2050
Reporting on material Scope 3 emissions in the near-term
Assessing acquisitions and new projects against corporate emissions targets
Continuing to be transparent with GHG performance data disclosure, including reporting total GHG emissions and GHG intensity

Hudbay's efforts have been focused on improving operating efficiencies to reduce the GHG emissions intensity at its mines through initiatives such as ore sorting and recovery improvement programs. The company has identified multiple opportunities to achieve further reductions in emissions, including grid decarbonization in Peru, fleet and heating electrification and fuel switching in mobile equipment. Hudbay will continue to monitor and evaluate existing and new technologies as they become financially viable to implement at the company's operations. The company will also consider emissions reduction opportunities in the design of its brownfield and greenfield growth projects. All initiatives will balance emissions and economic targets as part of the company's disciplined capital allocation strategy.

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Advancing Activities to Prudently De-risk Copper World

In 2022, Hudbay invested approximately $80 million at Copper World to successfully execute a new strategy focused on a two-phase mine plan with the first phase located on private land claims. This strategy involved significant drilling campaigns to delineate seven newly discovered deposits adjacent to the known East deposit, the expansion of the company's private land package to over 4,500 acres, and the completion of a robust preliminary economic assessment for Copper World demonstrating a 16-year mine plan for Phase I, requiring only state level permits, and an expansion to a 44-year operation in Phase II with the utilization of federal lands.

In late 2022, Hudbay submitted the applications for an Aquifer Protection Permit and an Air Quality Permit to the Arizona Department of Environmental Quality ("ADEQ"). Hudbay continues to expect to receive these two remaining state permits in 2023. The other key state permit, the Mined Land Reclamation Plan, was received in 2022. In January 2023, Hudbay received an approved right-of-way from the State Land Department that will allow for infrastructure, such as roads, pipelines and powerlines, to connect between the properties in the company's private land package at Copper World.

Continued Focus on Cost Reductions and Capital Discipline

With a focus on generating positive cash flow, Hudbay delivered on its discretionary spending reduction targets by reducing 2022 growth capital and exploration spending by approximately $30 million in Arizona, Manitoba and Peru. The company also reduced planned 2023 discretionary spending by more than $50 million primarily related to the deferral of the Copper World definitive feasibility study and the pebble crusher in Peru. Furthermore, planned 2023 growth and exploration expenditures are expected to be approximately $65 million lower than 2022 levels.

As an additional prudent measure intended to ensure positive cash flow generation and continued financial discipline, Hudbay expects to extend its existing quotational period hedging program to cover approximately 13,000 tonnes of contained copper in the unsold concentrate inventory in Peru to lock in current copper prices.

The company expects spending on its Copper World project in 2023 will be limited to de-risking activities, including the completion of the pre-feasibility study and state level permitting. The opportunity to sanction Copper World is not expected until 2025 based on current estimated timelines. This, together with the company's 2023 discretionary spending reductions, reflects a conservative approach to capital spending at Copper World over the next two years. As part of Hudbay's disciplined financial planning approach to Copper World, the company identified three specific prerequisites that would need to be achieved prior to making an investment decision in the project:

Permits - receipt of all state level permits required for Phase I;
Plan - completion of a definitive feasibility study with an internal rate of return of greater than 15%; and

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Prudent Financing Strategy - multi-faceted financial targets focused on a minimum cash balance, a stated maximum leverage, limited non-recourse project level debt and committed financial partners.

Exploration Update

Peru Regional Exploration

Recent activities at the Llaguen copper-molybdenum porphyry deposit in the Otuzco province in northern Peru have been focused on initiating metallurgical test work.

Manitoba Regional Exploration

Hudbay commenced a winter drill program in January 2023 with four drill rigs testing the down-dip gold and copper extensions of the Lalor deposit, which is the first time the company has completed step-out drilling in the deeper zones at Lalor since the initial discovery of the gold and copper-gold zones in 2009 and 2010. One additional drill rig is testing a target located to the north of Lalor.

Arizona Regional Exploration

Nevada Regional Exploration

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2023 Key Objectives and Annual Guidance

Hudbay's key objectives for 2023 are to:

Deliver copper and gold production growth with low cash costs driven by efficient operations;
Position Hudbay to unlock its copper development pipeline through generating cash flow, managing discretionary spending, deleveraging and achieving strong returns on invested capital;
De-risk the Copper World project through the completion of pre-feasibility studies, state permitting activities, evaluating a bulk sampling program and a potential joint venture partnership;
Progress Constancia's leading efficiency metrics by applying smart technologies to continuously improve operating performance, including sensor-based ore sorting and the mill recovery improvement project;
Advance plans to drill the prospective Maria Reyna and Caballito properties near Constancia;
Continue to navigate the complex environment in Peru while maintaining aligned and supportive relationships with local communities;
Execute expansion opportunities in Snow Lake with the completion of the Stall mill recovery improvement program and the ramp up beyond 4,650 tonnes per day at Lalor;
Test the down-dip extensions at Lalor where the gold and copper zones remain open at depth and have the potential to expand Snow Lake gold mineralization beyond the current 2.4 million ounces of reserves and 1.7 million ounces of resources;
Investigate opportunities to utilize the operating infrastructure in Snow Lake for potential future tailings reprocessing;
Assess opportunities to reduce greenhouse gas emissions in alignment with the company's climate change commitments and global decarbonization goals;
Prudently advance the three pre-requisites plan required for Copper World sanctioning; and
Evaluate and execute growth opportunities that meet the company's stringent strategic criteria and allocate capital to pursue those opportunities that create sustainable value for the company and its stakeholders.

Hudbay's annual production and operating cost guidance, along with its annual capital and exploration expenditure forecasts are discussed in detail below.

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Production Guidance

Contained Metal in Concentrate and Doré^1^		2023 Guidance	Year Ended<br>Dec. 31, 2022	2022 Guidance
Peru
Copper	tonnes	91,000 - 116,000	89,395	89,000 - 115,000
Gold	ounces	83,000 - 108,000	58,229	70,000 - 90,000
Silver	ounces	2,210,000 - 2,650,000	2,309,352	1,620,000 - 2,100,000
Molybdenum	tonnes	1,300 - 1,600	1,377	1,100 - 1,400
Manitoba		****
Gold	ounces	175,000 - 205,000	161,471	150,000 - 185,000
Zinc	tonnes	28,000 - 36,000	55,381	50,000 - 70,000
Copper	tonnes	9,000 - 12,000	14,778	12,000 - 16,000
Silver	ounces	750,000 - 1,000,000	851,942	800,000 - 1,100,000
Total		****
Copper	tonnes	100,000 - 128,000	104,173	101,000 - 131,000
Gold	ounces	258,000 - 313,000	219,700	220,000 - 275,000
Zinc	tonnes	28,000 - 36,000	55,381	50,000 - 70,000
Silver	ounces	2,960,000 - 3,650,000	3,161,294	2,420,000 - 3,200,000
Molybdenum	tonnes	1,300 - 1,600	1,377	1,100 - 1,400
^1^Metal reported in concentrate and doré is prior to refining losses or deductions associated with smelter terms.

On a consolidated basis, Hudbay met 2022 production guidance for all metals. Consolidated copper and gold production was on the lower end of the guidance range primarily due to lower-than-planned grades in the fourth quarter of 2022 in Peru due to short-term mine plan changes that were implemented to mitigate the risks associated with logistical and supply chain disruptions in Peru.

In 2023, consolidated copper production is forecast to increase to 114,000^ii^ tonnes, an increase of approximately 10%^ii^ compared to 2022 levels, primarily as a result of higher expected copper production in Peru, with higher planned copper grades from the Pampacancha pit more than offsetting lower copper production in Manitoba. Consolidated gold production in 2023 is expected to increase by 30%^ii^ to 285,500^ii^ ounces year-over-year, due to significantly higher gold production in both Peru and Manitoba.

In early 2023, the mine plan for Peru was adjusted to prioritize the processing of lower grade stockpiles and shorter haulage distance ore to manage through the regional logistical challenges and ensure steady operation of the plant. This is expected to result in more ore being mined from the Constancia pit and less from the Pampacancha pit in the early part of the year, as well as lower recoveries due to the varying ore types present in the stockpiles. Despite these mine plan changes, 2023 copper and gold production in Peru is expected to be 103,500^ii^ tonnes and 95,500^ii^ ounces, representing year-over-year increases of 16%^ii^ and 64%^ii^, respectively. The revised mine plan for 2023 reflects a period of higher stripping activities in the Pampacancha pit from March to June with significantly higher copper and gold grades expected to be mined in the second half of 2023. Peru's production guidance also reflects regularly scheduled semi-annual mill maintenance shutdowns at Constancia during the second and fourth quarters of 2023.

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In Manitoba, 2023 gold production is expected to increase by 18%^ii^ to 190,000^ii^ ounces compared to 2022 due to higher gold grades and a 10% increase in ore throughput at the Lalor mine. The 2023 mine plan at Lalor reflects higher production from the gold and copper-gold zones as those zones are expected to be prioritized over the base metal zones. The production guidance reflects a 10% increase in New Britannia mill throughput in 2023 given the mill has been consistently operating above its 1,500 tonnes per day nameplate capacity. The 2023 mine plan achieves gold production levels consistent with the most recent mine plan for Snow Lake but without the full ramp up to 5,300 tonnes per day as it maximizes value per tonne of ore at Lalor by prioritizing the mining of the gold-rich zones over the zinc-rich base metal zones and reflects higher throughput at the New Britannia mill. Year-over-year zinc production is expected to decline by 42%^ii^ primarily as a result of the closure of the 777 mine in June 2022 and prioritizing the mining of the gold-rich zones over the zinc-rich base metal zones at Lalor. Manitoba's production guidance reflects regularly scheduled maintenance programs at the Lalor mine during the second and fourth quarters of 2023.

Given the short-term mine plan changes implemented at Constancia in early 2023 and the Lalor ramp-up strategy, as mentioned above, the company is examining the potential impact of these changes to 2024 and 2025 production. Hudbay expects its 2024 production guidance to be similar to the previously issued guidance on February 23, 2022, reflecting a further increase in copper production in Peru and gold production in Manitoba from 2023 levels. As a result of the 2023 mine plan changes in Peru, the company now expects mining activities at the Pampacancha deposit to continue into the first half of 2025, which is expected to result in higher copper and gold production from Peru in 2025 beyond the levels shown in the most recent technical report for Constancia, dated March 29, 2021. Hudbay expects to release its new three-year production outlook together with its annual mineral reserve and resource update at the end of March 2023.

Capital Expenditure Guidance

Capital Expenditures1<br> (in millions)	Year Ended<br><br> <br>Dec. 31, 2022	2022 Guidance
Sustaining capital	****	****
Peru3	102	105
Manitoba4	125	115
Total sustaining capital	227	220
Growth capital
Peru	4	10
Manitoba4	34	50
Arizona5	36	40
Total growth capital	74	100
Capitalized exploration5	42	40
Total capital expenditures	343	360
1 Excludes capitalized costs not considered to be sustaining or growth capital expenditures.<br> 2 2023 capital expenditure guidance excludes right-of-use lease additions.<br> 3 Includes capitalized stripping costs.<br> 4 2023 capital expenditures are converted into U.S. dollars using an exchange rate of 1.35 Canadian dollars.<br> 5 2022 guidance reflects revised Arizona spending guidance issued on June 8, 2022, which includes 5 million in additional growth expenditures and 15 million in additional capitalized exploration related to Copper World.

All values are in US Dollars.

2022 total capital expenditures were 5% below guidance expectations as a result of the discretionary capital reductions across the business, partially offset by higher sustaining capital expenditures in Manitoba primarily due to inflationary cost pressures and lease additions that were not originally contemplated in guidance.

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Hudbay expects to continue to reduce discretionary spending with an expected 13% year-over-year decline in total capital expenditures to $300 million in 2023, primarily due to lower discretionary growth spending and capitalized exploration in 2023.

Exploration Guidance

Exploration Expenditures<br><br> <br>(in $ millions)	2023 Guidance^1^	Year Ended<br><br> <br>Dec. 31, 2022	2022 Guidance
Peru	15	25	25
Manitoba	15	14	15
Arizona and other^2^	0	38	40
Total exploration expenditures	30	77	80
Capitalized spending^2^	(10)	(42)	(40)
Total exploration expense	20	35	40

^1^ 2023 exploration guidance excludes $5 million of non-cash amortization of community agreements for exploration properties.

^2^ 2022 guidance reflects an additional $15 million in capitalized exploration at Copper World announced on June 8, 2022.

Total expected exploration expenditures of $30 million in 2023 are 61% lower than 2022 levels due to Hudbay's continued focus on discretionary spending reductions. The company's 2023 exploration activities are focused on areas with high potential for new discovery and mineral reserve and resource expansion.

In Peru, 2023 exploration activities will focus on permitting and drill preparation for the Maria Reyna and Caballito properties near Constancia. The company also expects to complete a limited drill program at Pampacancha in 2023 to test the potential to add an incremental phase at depth to the reserve pit. In Manitoba, the company has initiated a winter drill program focused on testing the deep extensions of the gold and copper zones at Lalor and a target to the north of Lalor.

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Cash Cost Guidance

Copper remains the primary revenue contributor on a consolidated basis, and therefore, consolidated cost guidance has been presented as cash cost per pound of copper produced. The company has also provided cash cost guidance for each of its operations based on their respective primary metal contributors. While Hudbay expects combined unit operating costs in both Peru and Manitoba to trend lower in 2023, the company no longer plans to issue combined unit operating cost guidance, as it believes cash cost is a more common metric used to measure operating performance.

Cash cost^1^		2023 Guidance	Year EndedDec. 31, 2022	2022 Guidance
Peru cash cost per pound of copper^2^	$/lb	1.05 - 1.30	1.58	1.10 - 1.40
Manitoba cash cost per ounce of gold^3^	$/oz	500 - 800	297	300 - 550
Consolidated cash cost per pound of copper^2^	$/lb	0.40 - 0.80	0.86	0.60 - 1.05
Consolidated sustaining cash cost per pound of copper^2^	$/lb	1.35 - 2.05	2.07	1.60 - 2.25

^1^ Cash cost and sustaining cash cost per pound of copper produced, net of by-product credits, and cash cost per ounce of gold produced, net of by-product credits, are non-IFRS financial performance measures with no standardized definition under IFRS. For further information, please see the "Non-IFRS Financial Reporting Measures" section of this news release.

^2^ Peru cash cost per pound of copper and consolidated copper cash cost per pound of copper contained in concentrate assumes by-product credits are calculated using the gold and silver deferred revenue drawdown rates in effect on December 31, 2022 for the streamed ounces in Peru and the following commodity prices: $1,800 per ounce gold, $21.00 per ounce silver, $25.00 per pound molybdenum, $1.40 per pound zinc and an exchange rate of 1.35 C$/US$.

^3^ Manitoba gold cash cost per ounce of gold contained in concentrate and doré assumes by-product credits are calculated using the following commodity prices: $1.40 per pound zinc, $21.00 per ounce silver, $3.75 per pound copper and an exchange rate of 1.35 C$/US$.

Copper cash cost in Peru is expected to decline by 26%^ii^ in 2023 versus 2022, primarily due to higher gold by-product credits and higher copper production.

Consolidated copper cash cost in 2023 is expected to decline by 30%^ii^ compared to 2022 levels due to the expected increase in copper production and higher expected gold by-product credits from the increase in annual gold production. Consolidated sustaining cash cost in 2023 is expected to be 18%^ii^ lower than 2022 levels due to the same factors affecting consolidated cash cost, partially offset by slightly higher sustaining capital expenditures.

Dividend Declared

A semi-annual dividend of C$0.01 per share was declared on February 23, 2023. The dividend will be paid out on March 24, 2023 to shareholders of record as of March 7, 2023.

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Website Links

Hudbay:

www.hudbay.com

Management's Discussion and Analysis:

https://hudbayminerals.com/MDA224

Financial Statements:

https://hudbayminerals.com/FS224

Conference Call and Webcast

Date:	Friday, February 24, 2023
Time:	8:30 a.m. ET
Webcast:	www.hudbay.com
Dial in:	1-416-915-3239 or 1-800-319-4610

Qualified Person and NI 43-101

The technical and scientific information in this news release related to the company's material mineral projects has been approved by Olivier Tavchandjian, P. Geo, Vice President, Exploration and Technical Services. Mr. Tavchandjian is a qualified person pursuant to NI 43-101 - Standards of Disclosure for Mineral Projects ("NI 43-101").

For a description of the key assumptions, parameters and methods used to estimate mineral reserves and resources at Hudbay's material properties, 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, sociopolitical, marketing or other relevant factors, please see the technical reports for the company's material properties as filed by Hudbay on SEDAR at www.sedar.com.

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Non-IFRS Financial Performance Measures

Management believes adjusted net earnings (loss) and adjusted net earnings (loss) per share provides an alternate measure of the company's performance for the current period and gives insight into its expected performance in future periods. These measures are used internally by the company to evaluate the performance of its underlying operations and to assist with its planning and forecasting of future operating results. As such, the company believes these measures are useful to investors in assessing the company's underlying performance. Hudbay provides adjusted EBITDA to help users analyze the company's results and to provide additional information about its ongoing cash generating potential in order to assess its capacity to service and repay debt, carry out investments and cover working capital needs. Net debt is shown because it is a performance measure used by the company to assess its financial position. Cash cost, sustaining and all-in sustaining cash cost per pound of copper produced are shown because the company believes they help investors and management assess the performance of its operations, including the margin generated by the operations and the company. Cash cost and sustaining cash cost per ounce of gold produced are shown because the company believes they help investors and management assess the performance of its Manitoba operations. Combined unit cost is shown because Hudbay believes it helps investors and management assess the company's cost structure and margins that are not impacted by variability in by-product commodity prices.

During 2022, Hudbay recorded a non-cash gain of $133.5 million, mostly related to the quarterly revaluation of its Flin Flon environmental reclamation provision, which was impacted by rising long-term risk-free discount rates. With the closure of 777 and Flin Flon operations in the second quarter of 2022 and given the long-term nature of the reclamation cash flows, quarterly revaluation of the corresponding environmental reclamation provision remains highly sensitive to changes in real, long-term risk-free discount rates and, as such, the company expects to continue to experience quarterly environmental reclamation provision revaluations, which is not indicative of the company's ongoing operating performance. This item has been included prospectively in the calculation of adjusted earnings.

The following tables provide detailed reconciliations to the most comparable IFRS measures.

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Adjusted Net Earnings (Loss) Reconciliation

	Three Months Ended
(in $ millions)	Dec. 31, 2022		Sep. 30, 2022		Dec. 31, 2021
(Loss) profit for the period	(17.4	)	(8.1	)	(10.5	)
Tax expense (recovery)	3.1		7.8		10.3
(Loss) profit before tax	(14.3	)	(0.3	)	(0.2	)
Adjusting items:	****
Mark-to-market adjustments^1^	10.7		(4.2	)	13.3
Foreign exchange loss (gain)	0.2		(4.8	)	1.1
Inventory adjustments	-		2.1		-
Variable consideration adjustment - stream revenue and accretion	-		3.9		-
Impairment loss	-		-		46.2
Re-evaluation adjustment - environmental provision^2^	13.5		(6.4	)	-
Evaluation expenses	0.1		0.1		-
Insurance recovery	-		-		-
Restructuring charges - Manitoba^3^	1.0		5.1		3.4
Loss on disposal of investments	0.5		-		-
Post-employment plan (curtailment) / past service cost adjustment	(2.4	)	-		0.7
Loss (gain) on disposal of plant and equipment and non-current assets - Manitoba & Arizona	0.4		(6.0	)	2.4
Changes in other provisions (non-capital)^4^	5.8		-		-
Adjusted earnings (loss) before income taxes	15.5		(10.5	)	66.9
Tax expense	(3.1	)	(7.8	)	(10.3	)
Tax impact on adjusting items	(9.8	)	5.9		(23.9	)
Adjusted net earnings (loss)	2.6		(12.4	)	32.7
Adjusted net earnings (loss) ($/share)	0.01		(0.05	)	0.13
Basic weighted average number of common shares outstanding (millions)	262.0		261.9		261.6

^1^Includes changes in fair value of the gold prepayment liability, Canadian junior mining investments, other financial assets and liabilities at fair value through profit or loss and share-based compensation expenses.

^2^Changes from movements to environmental reclamation provisions are primarily related to the Flin Flon operations, which were fully depreciated as of June 30, 2022, as well as other Manitoba non-operating sites.

^3^ Includes closure cost (severance and site preparation costs) for Flin Flon operations.

^4^ Includes changes in other provisions related to corporate restructuring costs and costs which do not pertain to operations.

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	Year Ended
---	---	---	---	---
(in $ millions)	Dec. 31, 2022		Dec. 31, 2021
Profit (loss) for the period	70.4		(244.4	)
Tax expense	25.4		41.6
Profit (loss) before tax	95.8		(202.8	)
Adjusting items:
Mark-to-market adjustments^1^	3.0		66.7
Foreign exchange (gain) loss	(5.4	)	1.5
Inventory adjustments	3.6		4.0
Variable consideration adjustment - stream revenue and accretion	(1.9	)	(1.0	)
Impairment loss	95.0		193.5
Re-evaluation adjustment - environmental provision^2^	(133.5	)	-
Evaluation expenses	7.9		-
Insurance recovery	(5.7	)	-
Restructuring charges - Manitoba^3^	10.6		7.0
Loss on disposal of investments	3.6		-
Write-down of unamortized transaction costs	-		2.5
Premium paid on redemption of notes	-		22.9
Post-employment plan (curtailment) / past service cost adjustment	(2.4	)	5.0
(Gain) loss on disposal of plant and equipment and non-current assets - Manitoba & Arizona	(6.3	)	7.8
Changes in other provisions (non-capital)^4^	5.8		-
Adjusted earnings before income taxes	70.1		107.1
Tax expense	(25.4	)	(41.6	)
Tax impact on adjusting items	(18.3	)	(42.4	)
Adjusted net earnings	26.4		23.1
Adjusted net earnings ($/share)	0.10		0.09
Basic weighted average number of common shares outstanding (millions)	261.9		261.5

^3^ Includes closure cost (severance and site preparation costs) for Flin Flon operations.

^4^ Includes changes in other provisions related to corporate restructuring costs and costs which do not pertain to operations.

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Adjusted EBITDA Reconciliation

	Three Months Ended
(in $ millions)	Dec. 31, 2022		Sep. 30, 2022		Dec. 31, 2021
(Loss) profit for the period	(17.4	)	(8.1	)	(10.5	)
Add back: Tax expense	3.1		7.8		10.3
Add back: Net finance expense	36.7		20.6		38.6
Add back: Other expense	18.5		6.3		16.3
Add back: Depreciation and amortization	79.4		89.8		89.9
Add back: Amortization of deferred revenue and variable consideration adjustment	(10.4	)	(15.3	)	(17.3	)
	109.9		101.1		127.3
Adjusting items (pre-tax):
Re-evaluation adjustment - environmental provision^1^	13.5		(6.4	)	0.3
Impairment losses	-		-		46.2
Inventory adjustments	-		2.1		-
Post-employment plan (curtailment) / past service cost adjustment	(2.4	)	-		0.7
Share-based compensation expenses^2^	3.7		2.5		6.3
Adjusted EBITDA	124.7		99.3		180.8

^1^ Environmental reclamation provision adjustments were presented within other expense for 2021 periods.

^2^ Share-based compensation expenses reflected in cost of sales and selling and administrative expenses.

	Year Ended
(in $ millions)	Dec. 31, 2022		Dec. 31, 2021
Profit (loss) for the period	70.4		(244.4	)
Add back: Tax expense	25.4		41.6
Add back: Net finance expense	118.5		221.0
Add back: Other expense	32.6		35.1
Add back: Depreciation and amortization	337.6		357.9
Add back: Amortization of deferred revenue and variable consideration adjustment	(73.2	)	(73.1	)
	511.3		338.1
Adjusting items (pre-tax):
Re-evaluation adjustment - environmental provision^1^	(133.5	)	(4.6	)
Impairment losses	95.0		193.5
Inventory adjustments	3.6		4.0
Post-employment plan (curtailment) / past service cost adjustment	(2.4	)	5.0
Share-based compensation expenses^2^	1.9		11.8
Adjusted EBITDA	475.9		547.8

^1^ Environmental reclamation provision adjustments were presented within other expense for 2021 periods.

^2^ Share-based compensation expenses reflected in cost of sales and selling and administrative expenses.

Net Debt Reconciliation

(in $ thousands)	Dec. 31, 2022	Sep. 30, 2022	Dec. 31, 2021
Total long-term debt	1,184,162	1,183,237	1,180,274
Less: Cash	225,665	286,117	270,989
Net debt	958,497	897,120	909,285
TSX, NYSE - HBM<br><br> <br>2023 No. 2
---

Copper Cash Cost Reconciliation

Consolidated	Three Months Ended
Net pounds of copper produced^1^
(in thousands)	Dec. 31, 2022	Sep. 30, 2022	Dec. 31, 2021
Peru	59,628	49,167	50,389
Manitoba	4,978	4,841	11,777
Net pounds of copper produced	64,606	54,008	62,166

^1^Contained copper in concentrate.

Consolidated	Year Ended
Net pounds of copper produced^1^
(in thousands)	Dec. 31, 2022	Dec. 31, 2021
Peru	197,082	171,548
Manitoba	32,580	47,745
Net pounds of copper produced	229,662	219,293

^1^Contained copper in concentrate.

Consolidated	Three Months Ended
	Dec. 31, 2022		Sep. 30, 2022		Dec. 31, 2021
Cash cost per pound of copper produced	000s	/lb	000s	/lb	000s	/lb
Cash cost, before by-product credits	208,642	3.23	211,664	3.92	232,224	3.73
By-product credits	(138,990	(2.15	(180,464	(3.34	(200,306	(3.22
Cash cost, net of by-product credits	69,652	1.08	31,200	0.58	31,918	0.51

All values are in US Dollars.

Consolidated	Year Ended
	Dec. 31, 2022		Dec. 31, 2021
Cash cost per pound of copper produced	000s	/lb	000s	/lb
Cash cost, before by-product credits	906,265	3.94	867,607	3.95
By-product credits	(708,334	(3.08	(704,345	(3.21
Cash cost, net of by-product credits	197,931	0.86	163,262	0.74

All values are in US Dollars.

TSX, NYSE - HBM<br><br> <br>2023 No. 2
Consolidated	Three Months Ended
---	---	---	---	---	---	---
******	Dec. 31, 2022		Sep. 30, 2022		Dec. 31, 2021
Supplementary cash cost information	000s	$/lb^1^	000s	$/lb^1^	000s	$/lb^1^
By-product credits^2^:		******		******		******
Zinc	24,744	0.38	43,606	0.81	74,585	1.20
Gold^3^	76,336	1.18	101,650	1.88	99,728	1.60
Silver^3^	9,592	0.15	16,066	0.30	14,853	0.24
Molybdenum & other	28,318	0.44	19,142	0.35	11,140	0.18
Total by-product credits	138,990	2.15	180,464	3.34	200,306	3.22
Reconciliation to IFRS:		******				******
Cash cost, net of by-product credits	69,652	******	31,200		31,918	******
By-product credits	138,990	******	180,464		200,306	******
Treatment and refining charges	(19,968	******	(21,852		(13,721	******
Share-based compensation expense	490	******	114		744	******
Inventory adjustments	7	******	2,074		-	******
(Curtailment) / past service pension	(2,384	******	-		737	******
Change in product inventory	(16,425	******	29,726		(16,247	******
Royalties	1,750	******	2,204		3,594	******
Depreciation and amortization^4^	79,408	******	89,811		89,927	******
Cost of sales^5^	251,520	******	313,741		297,258	******

All values are in US Dollars.

^1^Per pound of copper produced.

^2^By-product credits are computed as revenue per financial statements, including amortization of deferred revenue and pricing and volume adjustments.

^3^ Gold and silver by-product credits do not include variable consideration adjustments with respect to stream arrangements. Variable consideration adjustments are cumulative adjustments to gold and silver stream deferred revenue primarily associated with the net change in mineral reserves and resources or amendments to the mine plan that would change the total expected deliverable ounces under the precious metal streaming arrangement. For the three months ended December 31, 2022 the variable consideration adjustments amounted to expense of $nil, the three months ended September 30, 2022 - $2,286, and for the three months ended December 31, 2021 - $nil. Excludes approximately $5.2 million, or $0.17 per tonne, of COVID-19 related costs during the twelve months ended December 31, 2022 and $19.8 million or $0.69 per tonne, of COVID-19 related costs during the twelve months ended December 31, 2021.

^4^Depreciation is based on concentrate sold.

^5^As per IFRS financial statements, excluding impairment adjustments.

TSX, NYSE - HBM<br><br> <br>2023 No. 2
Consolidated	Year Ended
---	---	---	---	---
******	Dec. 31, 2022		Dec. 31, 2021
Supplementary cash cost information	000s	$/lb^1^	000s	$/lb^1^
By-product credits^2^:		******		******
Zinc	224,043	0.98	302,301	1.38
Gold^3^	353,478	1.53	289,981	1.32
Silver^3^	62,252	0.27	61,388	0.28
Molybdenum & other	68,561	0.30	50,675	0.23
Total by-product credits	708,334	3.08	704,345	3.21
Reconciliation to IFRS:		******		******
Cash cost, net of by-product credits	197,931	******	163,262	******
By-product credits	708,334	******	704,345	******
Treatment and refining charges	(68,936	******	(55,430	******
Share-based compensation expense	420	******	1,347	******
Inventory adjustments	3,553	******	3,999	******
(Curtailment) / past service pension	(2,384	******	4,965	******
Change in product inventory	(3,125	******	(18,180	******
Royalties	11,144	******	15,274	******
Depreciation and amortization^4^	337,615	******	357,924	******
Cost of sales^5^	1,184,552	******	1,177,506	******

All values are in US Dollars.

^1^Per pound of copper produced.

^2^By-product credits are computed as revenue per financial statements, including amortization of deferred revenue and pricing and volume adjustments.

^4^Depreciation is based on concentrate sold.

^5^As per IFRS financial statements, excluding impairment adjustments.

TSX, NYSE - HBM<br><br> <br>2023 No. 2
Peru	Three Months Ended
---	---	---	---
(in thousands)	Dec. 31, 2022	Sep. 30, 2022	Dec. 31, 2021
Net pounds of copper produced^1^	59,628	49,167	50,389

^1^Contained copper in concentrate.

Peru	Year Ended
(in thousands)	Dec. 31, 2022	Dec. 31, 2021
Net pounds of copper produced^1^	197,082	171,548

^1^Contained copper in concentrate.

Peru	Three Months Ended
	Dec. 31, 2022		Sep. 30, 2022		Dec. 31, 2021
Cash cost per pound of copper produced	000s	/lb	000s	/lb	000s	/lb
Mining	41,647	0.70	35,197	0.72	27,756	0.55
Milling	50,723	0.85	52,043	1.06	40,121	0.80
G&A	14,817	0.25	13,421	0.27	18,351	0.36
Onsite costs	107,187	1.80	100,661	2.05	86,228	1.71
Treatment & refining	11,962	0.20	10,814	0.22	8,636	0.17
Freight & other	15,607	0.26	12,905	0.26	11,609	0.23
Cash cost, before by-product credits	134,756	2.26	124,380	2.53	106,473	2.11
By-product credits	(54,563	(0.92	(41,659	(0.85	(41,900	(0.83
Cash cost, net of by-product credits	80,193	1.34	82,721	1.68	64,573	1.28

All values are in US Dollars.

Peru	Year Ended
	Dec. 31, 2022		Dec. 31, 2021
Cash cost per pound of copper produced	000s	/lb	000s	/lb
Mining	137,546	0.70	98,200	0.57
Milling	195,152	0.99	168,477	0.99
G&A	63,015	0.32	63,629	0.37
Onsite costs	395,713	2.01	330,306	1.93
Treatment & refining	39,587	0.20	32,365	0.19
Freight & other	50,284	0.25	41,316	0.24
Cash cost, before by-product credits	485,584	2.46	403,987	2.36
By-product credits	(173,488	(0.88	(139,885	(0.82
Cash cost, net of by-product credits	312,096	1.58	264,102	1.54

All values are in US Dollars.

TSX, NYSE - HBM<br><br> <br>2023 No. 2
Peru	Three Months Ended
---	---	---	---	---	---	---
	Dec. 31, 2022		Sep. 30, 2022		Dec. 31, 2021
Supplementary cash cost information	000s	$/lb^1^	000s	$/lb^1^	000s	$/lb^1^
By-product credits^2^:
Gold^3^	19,934	0.33	12,793	0.26	24,325	0.49
Silver^3^	7,025	0.12	9,967	0.20	7,793	0.15
Molybdenum	27,604	0.47	18,899	0.39	9,782	0.19
Total by-product credits	54,563	0.92	41,659	0.85	41,900	0.83
Reconciliation to IFRS:
Cash cost, net of by-product credits	80,193		82,721		64,573
By-product credits	54,563		41,659		41,900
Treatment and refining charges	(11,962		(10,814		(8,636
Share-based compensation expenses	95		(16		145
Change in product inventory	(15,685		(2,497		(4,507
Royalties	1,656		1,740		762
Depreciation and amortization^4^	58,256		56,614		54,078
Cost of sales^5^	167,116		169,407		148,315

All values are in US Dollars.

^1^Per pound of copper produced.

^2^By-product credits are computed as revenue per financial statements, including amortization of deferred revenue and pricing and volume adjustments.

^3^Gold and silver by-product credits do not include variable consideration adjustments with respect to stream arrangements.

^4^Depreciation is based on concentrate sold.

^5^As per IFRS financial statements, excluding impairment adjustments.

Peru	Year Ended
	Dec. 31, 2022		Dec. 31, 2021
Supplementary cash cost information	000s	$/lb^1^	000s	$/lb^1^
By-product credits^2^:		****
Gold^3^	68,630	0.35	61,510	0.37
Silver^3^	41,671	0.21	35,154	0.20
Molybdenum	63,187	0.32	43,221	0.25
Total by-product credits	173,488	0.88	139,885	0.82
Reconciliation to IFRS:		****
Cash cost, net of by-product credits	312,096	****	264,102
By-product credits	173,488	****	139,885
Treatment and refining charges	(39,587	****	(32,365
Inventory adjustments	(558	****	(1,446
Share-based compensation expenses	77	****	247
Change in product inventory	(31,348	****	(13,743
Royalties	5,367	****	3,503
Depreciation and amortization^4^	211,043	****	194,408
Cost of sales^5^	630,578	****	554,591

All values are in US Dollars.

^1^Per pound of copper produced.

^2^By-product credits are computed as revenue per financial statements, including amortization of deferred revenue and pricing and volume adjustments.

^3^Gold and silver by-product credits do not include variable consideration adjustments with respect to stream arrangements.

^4^Depreciation is based on concentrate sold.

^5^As per IFRS financial statements, excluding impairment adjustments.

TSX, NYSE - HBM<br><br> <br>2023 No. 2

Copper Sustaining and All-in Sustaining Cash Cost Reconciliation

Consolidated	Three Months Ended
	Dec. 31, 2022		Sep. 30, 2022		Dec. 31, 2021
All-in sustaining cash cost per pound of copper produced	000s	$/lb	000s	$/lb	000s	$/lb
Cash cost, net of by-product credits	69,652	1.08	31,200	0.58	31,918	0.51
Cash sustaining capital expenditures	60,002	0.92	69,588	1.29	77,539	1.25
Capitalized exploration	11,500	0.18	-	-	8,000	0.13
Royalties	1,750	0.03	2,204	0.04	3,594	0.06
Sustaining cash cost, net of by-product credits	142,904	2.21	102,992	1.91	121,051	1.95
Corporate selling and administrative expenses & regional costs	11,876	0.19	11,384	0.21	14,729	0.24
Accretion and amortization of decommissioning and community agreements^1^	722	0.01	2,099	0.04	894	0.01
All-in sustaining cash cost, net of by-product credits	155,502	2.41	116,475	2.16	136,674	2.20
Reconciliation to property, plant and equipment additions:
Property, plant and equipment additions	76,933		72,237		91,432
Capitalized stripping net additions	15,169		22,645		19,201
Total accrued capital additions	92,102		94,882		110,633
Less other non-sustaining capital costs^2^	41,585		34,649		43,176
Total sustaining capital costs	50,517		60,233		67,457
Right of use leased assets	(265		(5,158		(6,714
Capitalized lease cash payments - operating sites	5,848		8,852		9,099
Community agreement cash payments	2,854		2,491		1,266
Accretion and amortization of decommissioning and restoration obligations	1,048		3,170		6,431
Cash sustaining capital expenditures	60,002		69,588		77,539

All values are in US Dollars.

^1^Includes accretion of decommissioning relating to non-productive sites, and accretion and amortization of current community agreements.

^2^Other non-sustaining capital costs include Arizona capitalized costs, capitalized interest, capitalized exploration and growth capital expenditures.

TSX, NYSE - HBM<br><br> <br>2023 No. 2
Consolidated	Year Ended
---	---	---	---	---
	Dec. 31, 2022		Dec. 31, 2021
All-in sustaining cash cost per pound of copper produced	000s	$/lb	000s	$/lb
Cash cost, net of by-product credits	197,931	0.86	163,262	0.74
Cash sustaining capital expenditures	255,725	1.11	268,190	1.22
Capitalized exploration	11,500	0.05	8,000	0.04
Royalties	11,144	0.05	15,274	0.07
Sustaining cash cost, net of by-product credits	476,300	2.07	454,726	2.07
Corporate selling and administrative expenses & regional costs	38,799	0.17	46,663	0.21
Accretion and amortization of decommissioning and community agreements^1^	4,416	0.02	2,830	0.01
All-in sustaining cash cost, net of by-product credits	519,515	2.26	504,219	2.30
Reconciliation to property, plant and equipment additions:		******
Property, plant and equipment additions	259,281	******	346,335
Capitalized stripping net additions	89,262	******	79,426
Total accrued capital additions	348,543	******	425,761
Less other non-sustaining capital costs^2^	122,054	******	196,435
Total sustaining capital costs	226,489	******	229,326
Right of use leased assets	(25,695	******	(26,685
Capitalized lease cash payments - operating sites	33,271	******	35,071
Community agreement cash payments	9,486	******	1,691
Accretion and amortization of decommissioning and restoration obligations	12,174	******	28,987
Cash sustaining capital expenditures	255,725	******	268,390

All values are in US Dollars.

^1^Includes accretion of decommissioning relating to non-productive sites, and accretion and amortization of current community agreements.

^2^Other non-sustaining capital costs include Arizona capitalized costs, capitalized interest, capitalized exploration and growth capital expenditures.

Peru	Three Months Ended
	Dec. 31, 2022		Sep. 30, 2022		Dec. 31, 2021
Sustaining cash cost per pound of copper produced	$000s	$/lb	$000s	$/lb	$000s	$/lb
Cash cost, net of by-product credits	80,193	1.34	82,721	1.68	64,573	1.28
Cash sustaining capital expenditures	31,240	0.53	36,507	0.74	50,423	1.00
Capitalized exploration^1^	11,500	0.19	-	-	8,000	0.16
Royalties	1,656	0.03	1,740	0.04	762	0.02
Sustaining cash cost per pound of copper produced	124,589	2.09	120,968	2.46	123,758	2.46

^1^Only includes exploration costs incurred for locations near to existing mine operations.

Peru	Year Ended
	Dec. 31, 2022		Dec. 31, 2021
Sustaining cash cost per pound of copper produced	$000s	$/lb	$000s	$/lb
Cash cost, net of by-product credits	312,096	1.58	264,102	1.54
Cash sustaining capital expenditures	133,313	0.68	146,044	0.85
Capitalized exploration^1^	11,500	0.06	8,000	0.05
Royalties	5,367	0.03	3,503	0.02
Sustaining cash cost per pound of copper produced	462,276	2.35	421,649	2.46

^1^Only includes exploration costs incurred for locations near to existing mine operations.

TSX, NYSE - HBM<br><br> <br>2023 No. 2

Gold cash cost and sustaining cash cost reconciliation

Manitoba	Three Months Ended		Year Ended
(in thousands)	Dec. 31, 2022	Sep. 30, 2022	Dec. 31, 2022
Net ounces of gold produced^1^	33,060	40,457	161,471

^1^Contained gold in concentrate and doré.

Manitoba	Three Months Ended
	Dec. 31, 2022		Sep. 30, 2022
Cash cost per ounce of gold produced	000s	/oz	000s	/oz
Mining	38,112	1,153	40,659	1,005
Milling	14,868	450	16,573	410
Refining (zinc)	-	-	-	-
G&A	6,452	195	9,841	243
Onsite costs	59,432	1,798	67,073	1,658
Treatment & refining	8,006	242	11,038	273
Freight & other	6,448	195	9,173	226
Cash cost, before by-product credits	73,886	2,235	87,284	2,157
By-product credits	(43,407	(1,313	(78,565	(1,941
Gold cash cost, net of by-product credits	30,479	922	8,719	216

All values are in US Dollars.

Manitoba	Year Ended
	Dec. 31, 2022
Cash cost per ounce of gold produced	000s	/oz
Mining	192,704	1,193
Milling	73,903	458
Refining (zinc)	32,755	203
G&A	62,439	387
Onsite costs	361,801	2,241
Treatment & refining	29,349	181
Freight & other	29,531	183
Cash cost, before by-product credits	420,681	2,605
By-product credits	(372,783	(2,308
Gold cash cost, net of by-product credits	47,898	297

All values are in US Dollars.

Manitoba	Three Months Ended
******	Dec. 31, 2022		Sep. 30, 2022
Supplementary cash cost information	000s	$/oz^1^	000s	$/oz^1^
By-product credits^2^:		******		******
Copper	15,382	465	28,617	707
Zinc	24,744	748	43,606	1,077
Silver^3^	2,567	78	6,099	151
Other	714	22	243	6
Total by-product credits	43,407	1,313	78,565	1,941
Reconciliation to IFRS:		******		******
Cash cost, net of by-product credits	30,479	******	8,719	******
By-product credits	43,407	******	78,565	******
Treatment and refining charges	(8,006	******	(11,038	******
(Curtailment) / past service pension	(2,384	******	-	******

All values are in US Dollars.

TSX, NYSE - HBM<br><br> <br>2023 No. 2
Share-based compensation expenses	395		130
---	---	---	---
Inventory adjustments	7		2,074
Change in product inventory	(740	)	32,223
Royalties	94		464
Depreciation and amortization^4^	21,152		33,197
Cost of sales^5^	84,404		144,334

^1^Per ounce of gold produced.

^2^By-product credits are computed as revenue per financial statements, amortization of deferred revenue and pricing and volume adjustments.

^3^Silver by-product credits do not include variable consideration adjustments with respect to stream arrangements.

^4^Depreciation is based on concentrate sold.

^5^ As per IFRS financial statements, excluding impairment adjustments.

Manitoba	Year Ended
******	Dec. 31, 2022
Supplementary cash cost information	000s	$/oz^1^
By-product credits^2^:		******
Copper	122,785	760
Zinc	224,043	1,388
Silver^3^	20,581	127
Other	5,374	33
Total by-product credits	372,783	2,308
Reconciliation to IFRS:		******
Cash cost, net of by-product credits	47,898	******
By-product credits	372,783	******
Treatment and refining charges	(29,349	******
(Curtailment) / past service pension	(2,384	******
Share-based compensation expenses	343	******
Inventory adjustments	4,111	******
Change in product inventory	28,223	******
Royalties	5,777	******
Depreciation and amortization^4^	126,572	******
Cost of sales^5^	553,974	******

All values are in US Dollars.

^1^Per ounce of gold produced.

^2^By-product credits are computed as revenue per financial statements, amortization of deferred revenue and pricing and volume adjustments.

^3^Silver by-product credits do not include variable consideration adjustments with respect to stream arrangements.

^4^Depreciation is based on concentrate sold.

^5^ As per IFRS financial statements, excluding impairment adjustments.

Manitoba	Three Months Ended
	Dec. 31, 2022		Sep. 30, 2022
Sustaining cash cost per ounce of gold produced	$000s	$/oz	$000s	$/oz
Gold cash cost, net of by-product credits	30,479	922	8,719	216
Cash sustaining capital expenditures	28,762	870	33,081	818
Royalties	94	3	464	11
Sustaining cash cost per ounce of gold produced	59,335	1,795	42,264	1,045
Manitoba	Year Ended
---	---	---
	Dec. 31, 2022
Sustaining cash cost per ounce of gold produced	$000s	$/oz
Gold cash cost, net of by-product credits	47,898	297
Cash sustaining capital expenditures	122,412	758
Royalties	5,777	36
Sustaining cash cost per ounce of gold produced	176,087	1,091
TSX, NYSE - HBM<br><br> <br>2023 No. 2
---

Combined Unit Cost Reconciliation

Peru	Three Months Ended
(in thousands except ore tonnes milled and unit cost per tonne)
Combined unit cost per tonne processed	Dec. 31, 2022		Sep. 30, 2022		Dec. 31, 2021
Mining	41,647		35,197		27,756
Milling	50,723		52,043		40,121
G&A^1^	14,817		13,421		18,351
Other G&A^2^	(152	)	1,342		(1,937	)
	107,035		102,003		84,291
Less: Covid related costs	689		929		4,041
Unit cost	106,346		101,074		80,250
Tonnes ore milled	7,796		7,742		8,049
Combined unit cost per tonne	13.64		13.06		9.96
Reconciliation to IFRS:	****
Unit cost	106,346		101,074		80,250
Freight & other	15,607		12,905		11,609
Covid related costs	689		929		4,041
Other G&A	152		(1,342	)	1,937
Share-based compensation expenses	95		(16	)	145
Change in product inventory	(15,685	)	(2,497	)	(4,507	)
Royalties	1,656		1,740		762
Depreciation and amortization	58,256		56,614		54,078
Cost of sales^3^	167,116		169,407		148,315

^1^G&A as per cash cost reconciliation above.

^2^Other G&A primarily includes profit sharing costs.

^3^As per IFRS financial statements, excluding impairment adjustments.

Peru	Year Ended
(in thousands except ore tonnes milled and unit cost per tonne)
Combined unit cost per tonne processed	Dec. 31, 2022		Dec. 31, 2021
Mining	137,546		98,200
Milling	195,152		168,477
G&A^1^	63,015		63,629
Other G&A^2^	(414	)	(2,152	)
	395,299		328,154
Less: Covid related costs	5,214		19,760
Unit cost	390,085		308,394
Tonnes ore milled	30,522		28,810
Combined unit cost per tonne	12.78		10.70
Reconciliation to IFRS:	****
Unit cost	390,085		308,394
Freight & other	50,284		41,316
Covid related costs	5,214		19,760
Other G&A	414		2,152
Share-based compensation expenses	77		247
Inventory adjustments	(558	)	(1,446	)
Change in product inventory	(31,348	)	(13,743	)
Royalties	5,367		3,503
Depreciation and amortization	211,043		194,408
Cost of sales^3^	630,578		554,591
TSX, NYSE - HBM<br><br> <br>2023 No. 2
---

^1^G&A as per cash cost reconciliation above.

^2^Other G&A primarily includes profit sharing costs.

^3^As per IFRS financial statements, excluding impairment adjustments.

Manitoba	Three Months Ended
(in thousands except tonnes ore milled and unit cost per tonne)
Combined unit cost per tonne processed	Dec. 31, 2022		Sep. 30, 2022		Dec. 31, 2021
Mining	38,112		40,659		58,891
Milling	14,868		16,573		22,193
G&A^1^	6,452		9,841		13,746
Less: G&A allocated to zinc metal production	-		-		(3,762	)
Less: Other G&A related to profit sharing costs	1,939		(1,784	)	-
Unit cost	61,371		65,289		91,068
USD/CAD implicit exchange rate	1.36		1.31		1.26
Unit cost - C$	83,363		85,225		114,751
Tonnes ore milled	345,492		362,108		682,292
Combined unit cost per tonne - C$	241		235		168
Reconciliation to IFRS:	****
Unit cost	61,371		65,289		91,068
Freight & other	6,448		9,173		6,828
Refined zinc	-		-		19,008
G&A allocated to zinc metal production	-		-		3,762
Other G&A related to profit sharing	(1,939	)	1,784		-
Share-based compensation expenses	395		130		599
Inventory adjustments	7		2,074		-
(Curtailment) / past service pension	(2,384	)	-		737
Change in product inventory	(740	)	32,22		(11,740	)
Royalties	94		464		2,832
Depreciation and amortization	21,152		33,197		35,849
Cost of sales^2^	84,404		144,334		148,943

^1^G&A as per cash cost reconciliation above.

^2^ As per IFRS financial statements, excluding impairment adjustments.

Manitoba	Year Ended
(in thousands except tonnes ore milled and unit cost per tonne)
Combined unit cost per tonne processed	Dec. 31, 2022		Dec. 31, 2021
Mining	192,704		222,660
Milling	73,903		62,995
G&A^1^	62,439		52,963
Less: G&A allocated to zinc metal production and other areas	(6,523	)	(14,656	)
Less: Other G&A related to profit sharing costs	(20,075	)	-
Unit cost	302,448		323,962
USD/CAD implicit exchange rate	1.30		1.25
Unit cost - C$	391,782		406,164
Tonnes ore milled	2,008,251		2,640,272
Combined unit cost per tonne - C$	195		154
Reconciliation to IFRS:	****
TSX, NYSE - HBM<br><br> <br>2023 No. 2
---
Unit cost	302,448		323,962
---	---	---	---	---
Freight & other	29,531		29,545
Refined zinc	32,755		72,392
G&A allocated to zinc metal production	6,523		14,656
Other G&A related to profit sharing	20,075		-
Share-based compensation expenses	343		1,100
Inventory adjustments	4,111		5,445
(Curtailment) / past service pension	(2,384	)	4,965
Change in product inventory	28,223		(4,437	)
Royalties	5,777		11,771
Depreciation and amortization	126,572		163,516
Cost of sales^2^	553,974		622,915

^1^G&A as per cash cost reconciliation above.

^2^ As per IFRS financial statements, excluding impairment adjustments.

TSX, NYSE - HBM<br><br> <br>2023 No. 2

Forward-Looking Information

This news release contains forward-looking information within the meaning of applicable Canadian and United States securities legislation. All information contained in this news release, 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 news release is qualified by this cautionary note.

Forward-looking information includes, but is not limited to, statements regarding the company's production, cost and capital and exploration expenditure guidance, the anticipated timing of the company's issuance of new three-year production outlook, expectations regarding reductions in discretionary spending, capital expenditures and net debt, expectations regarding the impact of inflationary pressures on the company's cost of operations, financial condition and prospects, expectations regarding the company's cash balance and liquidity for 2023, expectations regarding the Copper World project, including with respect to the company's plans for a pre-feasibility study and the estimated timelines and pre-requisites for sanctioning the project, expectations regarding the permitting requirements for the Copper World project and permitting related litigation, the company's ability to increase the mining rate at Lalor beyond 4,650 tonnes per day, the anticipated timing for completing the Stall recovery improvement program, expectations regarding the ability to conduct exploration work on the Maria Reyna and Caballito properties and to advance related drill plans, expectations regarding the duration and potential impact of short-term mine plan changes implemented at Constancia, expectations regarding the ability for the company to reduce greenhouse gas emissions, the company's evaluation of opportunities to reprocess tailings, expectations regarding the prospective nature of the Maria Reyna and Caballito properties, the anticipated impact of brownfield growth projects on the company's performance, anticipated expansion opportunities in Snow Lake, anticipated drill programs, anticipated mine plans, anticipated metals prices and the anticipated sensitivity of the company's financial performance to metals prices, events that may affect its operations and development projects, 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, 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 the company at the date the forward-looking information is provided, inherently are subject to significant risks, uncertainties, contingencies and other factors that may cause actual results and events to be materially different from those expressed or implied by the forward-looking information.

The material factors or assumptions that Hudbay has identified and were applied in drawing conclusions or making forecasts or projections set out in the forward-looking information include, but are not limited to:

the ability to achieve production and cost guidance;
the ability to achieve discretionary spending reductions without impacting operations;
no significant interruptions to operations due to social or political unrest in the regions Hudbay operates, including the navigation of the complex environment in Peru;
no interruptions to the company's plans for advancing the Copper World project;
the ability to ramp up exploration in respect of the Maria Reyna and Caballito properties and to advance related drill plans;
the ability to ramp up the Lalor mine beyond 4,650 tonnes per day;
the success of mining, processing, exploration and development activities;

TSX, NYSE - HBM<br><br> <br>2023 No. 2

the scheduled maintenance and availability of the company's processing facilities;
the accuracy of geological, mining and metallurgical estimates;
anticipated metals prices and the costs of production;
the supply and demand for metals the company produces;
the supply and availability of all forms of energy and fuels at reasonable prices;
no significant unanticipated operational or technical difficulties;
the execution of the company's business and growth strategies, including the success of its 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 the company's ability to develop its projects;
the timing and receipt of various regulatory and governmental approvals;
the availability of personnel for the company's exploration, development and operational projects and ongoing employee relations;
maintaining good relations with the labour unions that represent certain of the company's employees in Manitoba and Peru;
maintaining good relations with the communities in which the company operates, including the neighbouring Indigenous communities and local governments;
no significant unanticipated challenges with stakeholders at the company's various projects;
no significant unanticipated events or changes relating to regulatory, environmental, health and safety matters;
no contests over title to the company's properties, including as a result of rights or claimed rights of Indigenous peoples or challenges to the validity of the company's unpatented mining claims;
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, changes in taxation policies 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, political and social risks in the regions Hudbay operates, including the uncertainty with respect to the political and social environment in Peru and its potential impact on the company's mining operations (as further described below), risks generally associated with the mining industry and the current geopolitical environment, including future commodity prices, currency and interest rate fluctuations, energy and consumable prices, supply chain constraints and general cost escalation in the current inflationary environment, uncertainties related to the development and operation of the company's projects, risks related to the Copper World project, including in relation to permitting, litigation, project delivery and financing risks, risks related to the new Lalor mine plan, including the ability to convert inferred mineral resource estimates to higher confidence categories, dependence on key personnel and employee and union relations, risks related to political or social instability, unrest or change, risks in respect of Indigenous and community relations, rights and title claims, operational risks and hazards, including the cost of maintaining and upgrading the company's tailings management facilities and any 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 the company's reserves, volatile financial markets and interest rates that may affect the company's 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, the company's ability to comply with its pension and other post-retirement obligations, the company's ability to abide by the covenants in its debt instruments and other material contracts, tax refunds, hedging transactions, as well as the risks discussed under the heading "Risk Factors" in the company's most recent Annual Information Form and under the heading "Financial Risk Management" in the company's management's discussion and analysis for the year ended December 31, 2022.

TSX, NYSE - HBM<br><br> <br>2023 No. 2

Additionally, as a result of the heightened tensions, protests and social unrest in Peru following a recent change in the country's political leadership, the company has experienced intermittent disruptions to commerce and supply chains, including the ability to steadily receive critical supplies, and transport and sell concentrates. A prolonged disruption of logistics and supply chains may adversely impact operations at Hudbay's Constancia mine. Given the uncertainty of the duration and extent of the social and political tensions in Peru, and the relative contribution of the company's Peru operations to its overall output, Hudbay's 2023 production and cost guidance is subject to a higher-than-normal degree of uncertainty.

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. Hudbay does not assume any obligation to update or revise any forward-looking information after the date of this news release 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 news release has been prepared in accordance with the requirements of the securities laws in effect in Canada, which may differ materially from the requirements of United States securities laws applicable to U.S. issuers.

About Hudbay

Hudbay (TSX, NYSE: HBM) is a diversified mining company with long-life assets in North and South America. The company's Constancia operations in Cusco (Peru) produce copper with gold, silver and molybdenum by-products. Its Snow Lake operations in Manitoba (Canada) produce gold with copper, zinc and silver by-products. Hudbay has an organic pipeline that includes the Copper World project in Arizona and the Mason project in Nevada (United States), and its growth strategy is focused on the exploration, development, operation, and optimization of properties it already controls, as well as other mineral assets it may acquire that fit its strategic criteria. Hudbay's mission is to create sustainable value through the 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 the company operates benefit from its presence. Further information about Hudbay can be found on www.hudbay.com.

For further information, please contact:

Candace Brûlé

Vice President, Investor Relations

(416) 814-4387

[email protected]

________________________

^i^ Adjusted net earnings and adjusted net earnings per share; adjusted EBITDA; cash cost, sustaining cash cost and all-in sustaining cash cost per pound of copper produced, net of by-product credits; cash cost and sustaining cash cost per ounce of gold produced, net of by-product credits; net debt and unit operating cost per tonne are non-IFRS financial performance measures with no standardized definition under IFRS. For further information, please see the "Non-IFRS Financial Performance Measures" section of this news release.

TSX, NYSE - HBM<br><br> <br>2023 No. 2

^ii^ Calculated using the mid-point of the guidance range.