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 2022

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, 2022, 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 period ended December 31, 2021, (2) Management's Discussion and Analysis for the period ended December 31, 2021, (3) News Release dated February 23, 2022.

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 period ended December 31, 2021
Exhibit 99.2 — Management's Discussion and Analysis for the period ended December 31, 2021
Exhibit 99.3 — News Release dated February 23, 2022

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/ Steve Douglas
Name:	Steve Douglas
Title:	Senior Vice President and Chief Financial Officer

Date: February 24, 2022

EXHIBIT INDEX

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

Exhibit	Description
99.1	Audited Consolidated Financial Statements for the period ended December 31, 2021
99.2	Management's Discussion and Analysis for the period ended December 31, 2021
99.3	News Release dated February 23, 2022

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

Audited Consolidated Financial Statements

(In US dollars)

HUDBAY MINERALS INC.

Years ended December 31, 2021 and 2020

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, 2021 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, 2021.

The effectiveness of the Company's ICFR as of December 31, 2021 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, 2021.

Peter Kukielski	Steve Douglas
President and Chief Executive Officer	Senior Vice President and Chief Financial Officer

Toronto, Canada

February 23, 2022

Deloitte Canada<br><br> <br>Bay Adelaide Centre<br><br> <br>8 Adelaide Street West<br><br> <br>Suite 200<br><br> <br>Toronto, ON. M5H 0A9<br><br> <br>Canada<br><br> <br>Tel: +1 (416) 601 6150<br><br> <br>Fax: +1 (416) 601 6151<br><br> <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, 2021 and 2020, the related consolidated income statements, consolidated statements of comprehensive loss, changes in equity and cash flows for each of the two years in the period ended December 31, 2021, 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, 2021 and 2020, and its financial performance and its cash flows for each of the two years in the period ended December 31, 2021, 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, 2021, 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, 2022, 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 these 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, 3j and 11 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.

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 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 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, and

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

Decommissioning and Restoration Obligation ("DRO") - Valuation of the Flin Flon Metallurgical Complex ("FFMC") - Refer to Note 2d, 3m and 18 to the Financial Statements

Critical Audit Matter Description

The Company records provisions for legal and constructive obligations associated with the future costs of rehabilitating the Company's current and previous operating and development sites. 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 can be made. The Company applied significant judgment and estimation in the determination of the estimated future cash flows associated with the FFMC closure plan. The provision is discounted using a risk-free rate and estimates of future cash flows are adjusted to reflect risk.

While there are many considerations required to estimate future cash flows associated with the FFMC closure plan, the estimate with the highest degree of judgment and subjectivity involves forecasting the decommissioning costs throughout the DRO period. Performing audit procedures to evaluate the reasonableness of this estimate required a high degree of auditor judgment and an increased extent of audit effort, including the involvement of environmental specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the decommissioning costs used by management to estimate the DRO of the FFMC included the following procedures, among others:

• Evaluated the effectiveness of controls over management's determination of the expected decommissioning costs used in the measurement of the DRO related to the FFMC closure plan.

• With the assistance of environmental specialists, evaluated a sample of management's decommissioning cost cash flows by evaluating management's costing methodologies, obtaining an understanding of the DRO activities, performing an assessment of technical feasibilities, and conducting an examination of project documents.

/s/ Deloitte LLP

Chartered Professional Accountants

Licensed Public Accountants

Toronto, Canada

February 23, 2022

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

Deloitte Canada<br><br> <br>Bay Adelaide Centre<br><br> <br>8 Adelaide Street West<br><br> <br>Suite 200<br><br> <br>Toronto, ON. M5H 0A9<br><br> <br>Canada<br><br> <br>Tel: +1 (416) 601 6150<br><br> <br>Fax: +1 (416) 601 6151<br><br> <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, 2021, 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, 2021, 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, 2021, of the Company and our report dated February 23, 2022, 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, 2022

**HUDBAY MINERALS INC.**Consolidated Balance Sheets (in thousands of US dollars)

			Dec. 31,			Dec. 31,
	Note		2021			2020
Assets
Current assets
Cash	6	$	270,989		$	439,135
Trade and other receivables	7		204,081			141,199
Inventories	8		158,453			143,105
Prepaid expenses and other current assets			15,338			16,717
Other financial assets	9		7,867			3,073
Taxes receivable			-			12,446
			656,728			755,675
Receivables	7		16,084			18,568
Inventories	8		37,573			22,006
Other financial assets	9		11,158			15,669
Intangibles and other assets	10		20,138			21,173
Property, plant and equipment	11		3,740,966			3,731,655
Deferred tax assets	21b		133,584			101,899
		$	4,616,231		$	4,666,645
Liabilities
Current liabilities
Trade and other payables	12	$	207,777		$	233,147
Taxes payable			15,243			2,701
Other liabilities	13		63,002			51,971
Other financial liabilities	14		100,702			24,713
Lease liabilities	15		33,529			33,473
Deferred revenue	17		88,963			102,782
			509,216			448,787
Other financial liabilities	14		120,972			194,378
Lease liabilities	15		44,473			30,041
Long-term debt	16		1,180,274			1,135,675
Deferred revenue	17		426,363			443,902
Pension obligations	19		6,252			23,316
Other employee benefits	20		128,588			129,508
Environmental and other provisions	18		461,501			331,799
Deferred tax liabilities	21b		261,764			229,433
			3,139,403			2,966,839
Equity
Share capital	22b		1,778,848			1,777,340
Reserves			(182	)		(24,200	)
Retained earnings			(301,838	)		(53,334	)
			1,476,828			1,699,806
		$	4,616,231		$	4,666,645
Commitments (note 27)

**HUDBAY MINERALS INC.**Consolidated Income Statements (in thousands of US dollars)

	Note		Year ended December 31,
			2021			2020
Revenue	5a	$	1,501,998		$	1,092,418
Cost of sales
Mine operating costs	5b		819,582			691,591
Depreciation and amortization	5c		357,924			361,827
Impairment - environmental obligation	5h		193,473			-
			1,370,979			1,053,418
Gross profit			131,019			39,000
Selling and administrative expenses			43,011			41,408
Exploration and evaluation expenses			39,961			17,196
Other expenses	5f		29,779			17,583
Results from operating activities			18,268			(37,187	)
Net interest expense on long term debt	5g		74,748			82,712
Accretion on streaming arrangements	5g		42,654			56,670
Change in fair value of financial instruments	5g		54,514			(29,370	)
Other net finance costs	5g		49,103			31,890
Net finance expense			221,019			141,902
Loss before tax			(202,751	)		(179,089	)
Tax expense (recovery)	21a		41,607			(34,505	)
Loss for the year		$	(244,358	)	$	(144,584	)
Loss per share
Basic and diluted		$	(0.93	)	$	(0.55	)
Weighted average number of common shares outstanding:
Basic and diluted	24		261,462,323			261,272,151

**HUDBAY MINERALS INC.**Consolidated Statements of Cash Flows (in thousands of US dollars)

	Note		Year ended December 31,
			2021			2020
Cash generated from operating activities:
Loss for the year		$	(244,358	)	$	(144,584	)
Tax expense (recovery)	21a		41,607			(34,505	)
Items not affecting cash:
Depreciation and amortization	5c		359,767			363,603
Share-based compensation	5d		12,145			15,008
Net interest expense on long term debt	5g		74,748			82,712
Accretion on streaming arrangements	5g		42,654			56,670
Change in fair value of financial instruments	5g		54,514			(29,370	)
Other net finance costs	5g		49,103			31,890
Inventory adjustments	8		3,999			2,302
Amortization of deferred revenue and variable consideration	5a		(73,136	)		(73,931	)
Pension and other employee benefit payments, net of accruals			7,975			3,043
Impairment - environmental obligation	5h		193,473			-
Decommissioning and restoration payments	18		(21,663	)		(18,737	)
Other	29a		3,166			403
Taxes paid			(20,132	)		(12,641	)
Operating cash flow before precious metals stream deposit and changes in non-cash working capital			483,862			241,863
Precious metals stream deposit	17		4,000			-
Change in non-cash working capital	29b		(104,046	)		(2,383	)
			383,816			239,480
Cash used in investing activities:
Acquisition of property, plant and equipment			(377,433	)		(361,185	)
Proceeds from disposal of investments			1,193			-
Change in restricted cash			(100	)		-
Interest received			1,338			2,167
			(375,002	)		(359,018	)
Cash (used in)/generated from financing activities:
Issuance of senior unsecured notes, net of transaction costs	16a		591,922			591,824
Principal repayments	16a		(600,000	)		(400,000	)
Premium paid on redemption of notes	16a		(22,878	)		(7,252	)
Interest paid on long-term debt			(84,435	)		(81,517	)
Financing costs			(19,623	)		(16,204	)
Lease payments	15		(37,719	)		(35,980	)
Gold prepayment proceeds	14		-			115,005
Net proceeds from exercise of stock options			980			-
Dividends paid	22b		(4,146	)		(3,783	)
			(175,899	)		162,093
Effect of movement in exchange rates on cash			(1,061	)		434
Net (decrease) increase in cash			(168,146	)		42,989
Cash, beginning of the year			439,135			396,146
Cash, end of the year		$	270,989		$	439,135

**HUDBAY MINERALS INC.**Consolidated Statements of Comprehensive Loss (in thousands of US dollars)

		Year ended December 31,
		2021			2020
Loss for the year	$	(244,358	)	$	(144,584	)
Other comprehensive income:
Item that will be reclassified subsequently to profit or loss:
Recognized directly in equity:
Net gain on translation of foreign currency balances		1,336			4,170
		1,336			4,170
Items that will not be reclassified subsequently to profit or loss:
Recognized directly in equity:
Gold prepayment revaluation (note 26a)		(2,684	)		(1,885	)
Tax effect (note 21c)		721			506
Remeasurement - actuarial gain (loss)		29,449			(2,598	)
Tax effect (note 21c)		(6,195	)		(1,265	)
		21,291			(5,242	)
Other comprehensive income (loss) net of tax, for the year		22,627			(1,072	)
Total comprehensive loss for the year	$	(221,731	)	$	(145,656	)

**HUDBAY MINERALS INC.**Consolidated Statements of Changes in Equity (in thousands of US dollars)

		Share capital<br>(note 22)		Other capital <br>reserves		Foreign currency <br>translation reserve			Remeasurement <br>reserve			Retained earnings			Total equity
Balance, January 1, 2020	$	1,777,340	$	54,815	$	(2,599	)	$	(76,466	)	$	95,033		$	1,848,123
Loss		-		-		-			-			(144,584	)		(144,584	)
Other comprehensive income (loss)		-		-		4,170			(5,242	)		-			(1,072	)
Total comprehensive income (loss)		-		-		4,170			(5,242	)		(144,584	)		(145,656	)
Contributions by and distributions to owners:
Dividends (note 22b)		-		-		-			-			(3,783	)		(3,783	)
Stock options (note 5d)		-		1,122		-			-			-			1,122
Total contributions by and distributions to owners		-		1,122		-			-			(3,783	)		(2,661	)
Balance, December 31, 2020	$	1,777,340	$	55,937	$	1,571		$	(81,708	)	$	(53,334	)	$	1,699,806

**HUDBAY MINERALS INC.**Consolidated Statements of Changes in Equity (in thousands of US dollars)

		Share capital<br>(note 22)		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 22b)		-		-			-		-			(4,146	)		(4,146	)
Stock options (note 5d)		-		1,919			-		-			-			1,919
Transfer to share capital related to stock options redeemed		528		(528	)		-		-			-			-
Issuance of shares related to stock options redeemed		980		-			-		-			-			980
Total contributions by and distributions<br>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.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2021 and 2020
---

1. Reporting entity

On January 1, 2017, Hudbay Minerals Inc. amalgamated under the Canada Business Corporations Act with its subsidiaries Hudson Bay Mining and Smelting Co., Limited and Hudson Bay Exploration and Development Company Limited to form Hudbay Minerals Inc. ("HMI" or the "Company"). 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, 2021 and 2020 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, 2021 and 2020 include HudBay Marketing & Sales Inc. ("HMS"), HudBay Peru Inc., HudBay Peru S.A.C. ("Hudbay Peru"), HudBay (BVI) Inc., Hudbay Arizona Inc, Rosemont Copper Company ("Rosemont") and Mason Resources (US) Inc. ("Mason").

Hudbay is an integrated mining company primarily producing copper concentrate (containing copper, gold and silver), silver/gold doré, molybdenum concentrate and zinc metal. With assets in North and South America, Hudbay is focused on the discovery, production and marketing of base and precious metals. Directly and through its subsidiaries, Hudbay owns three polymetallic mines, four ore concentrators and a zinc production facility in northern Manitoba and Saskatchewan (Canada) and Cusco (Peru) and copper projects in Arizona and Nevada (United States). Hudbay also has equity investments in a number of junior exploration companies. 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, 2021.

The Board of Directors approved these consolidated financial statements on February 23, 2022.

(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, 2021 and 2020

(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 3i, 3j and 11) - 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 Constancia and Arizona LOM plan, 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 Constancia and Arizona LOM plan. 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 Hudbay's consolidated 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.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2021 and 2020

IFRS 15 - Revenue- stream transactions (note 17) - Hudbay has determined that the precious metals stream contracts are subject to variable consideration and contain a significant financing component. As such, Hudbay recognizes a financing charge at each reporting period and grosses up the deferred revenue balance to recognize the significant financing element that is part of these contracts. Significant judgement was required in determining if the stream transactions were to be accounted for as deferred revenue. Management has determined that these stream transactions are not derivatives since obligations will be satisfied through the delivery of non-financial items (i.e., gold and silver credits) rather than cash or financial assets. It is management's intention to settle the obligations under the stream transactions through its own production and if this is not possible, this would lead to the stream transactions becoming a financial instrument since a cash settlement payment may be required. This would cause a change to the accounting treatment, resulting in the revaluation of the fair value of the agreement through the consolidated income statements on a recurring basis. Management must evaluate the possibility that the Company will not be able to mine and deliver enough metal to satisfy the obligation and therefore must consider bifurcating the portion of the deferred revenue that is repayable in cash. To make this determination, both the extent and timing of processing of reserves and convertible resources must be considered in the Company's expectation, along with future expected precious metal prices. In addition, the rate at which the deferred revenue liability balance is drawn down is dependent on the extent and timing of processing of reserves and convertible resources and the amount of metal value that may not be available to satisfy the obligation.
Mineral reserves and resources (notes 3i, 3m and 3o) - 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;
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.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2021 and 2020

Property plant and equipment (notes 3i and 11) - 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 3o and 21) - 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, 2021 and 2020

- Decommissioning and restoration obligations (notes 3m and 18) - 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 3l, 19 and 20) - 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) COVID-19 estimation uncertainty:

The Company has assessed the economic impacts of the novel coronavirus ("COVID-19") pandemic on its consolidated financial statements. As at December 31, 2021, 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.

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.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2021 and 2020

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, 2021 and 2020

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, 2021 and 2020

(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 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. There is a significant financing component associated with the Company's precious metal streaming arrangements 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.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2021 and 2020

(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 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.

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

(g) Intangible assets:

Computer software is measured at cost less accumulated amortization and accumulated impairment losses. Costs include all directly attributable costs necessary to create, produce and prepare the asset to be capable of operating it in the manner intended by management.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2021 and 2020

Amortization methods, useful lives, and residual values if any, are reviewed at each year end and adjusted prospectively, if required. When an intangible asset is disposed of, or when no further economic benefits are expected, the asset is derecognized, and any resulting gain or loss is recorded in the consolidated income statements.

Currently, the Company's intangible assets relate primarily to enterprise resource planning ("ERP") information systems, which are amortized over their estimated useful lives.

(h) 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.

(i) 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, 2021 and 2020

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. Up to and including December 31, 2020, any revenue, less cost to produce, earned in the process of preparing an asset to be capable of operating in the manner intended by management is included in the cost of the constructed asset. Any other incidental revenue earned prior to commencement of commercial production is recognized in the consolidated income statements. 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, 2021 and 2020

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, 2021 and 2020

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, 2021 and 2020

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.

(j) 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 and evaluation 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, 2021 and 2020

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.

(k) Assets held for sale:

The Company classifies non-current assets, or disposal groups consisting of assets and liabilities, as held for sale when it expects to recover their carrying amounts primarily through sale rather than through continuing use. To meet criteria to be held for sale, the sale must be highly probable, and the assets or disposal groups must be available for immediate sale in their present condition. Hudbay must be committed to a plan to sell the assets or disposal group, and the sale should be expected to qualify for recognition as a completed sale within one year from the date of classification.

The Company measures assets or disposal groups at the lower of their carrying amount and fair value less costs of disposal. Impairment losses on initial classification as held for sale and subsequent gains and losses on remeasurement are recognized in the consolidated income statements; however, gains are not recognized in excess of any cumulative impairment loss. Any impairment loss on a disposal group first is allocated to goodwill, and then to remaining assets and liabilities on pro rata basis, except that no loss is allocated to inventories, financial assets, deferred tax assets, employee benefit assets or investment property. Upon classifying assets or disposal groups as held for sale, Hudbay presents the assets separately as a single amount and the liabilities separately as a single amount on the consolidated balance sheets. When an asset no longer meets the criteria for classification as an asset held for sale, the Company records the asset at the lower of its recoverable amount and the carrying amount before the asset was classified as held for sale.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2021 and 2020

(l) 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.

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 is 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.

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 MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2021 and 2020

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.

(m) 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.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2021 and 2020

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.

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.

(n) 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 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 unrealized gains or losses related to changes in fair value are reported in other finance income/expense in 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, 2021 and 2020

Amortized cost

Cash, certain receivables, payables 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.

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.

Contracts to buy or sell non-financial items that meet the definition of a derivative but were entered into and are held in accordance with the Company's expected purchase, sale or usage requirements are not recognized as derivatives. Such contracts are recorded as non-derivative purchases and sales.

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 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 26.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2021 and 2020

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 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.

The loss allowance is presented as a deduction to trade receivables in the balance sheets.

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.

(o) 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

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2021 and 2020

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:

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.

(p) Share capital and reserves:

Transaction costs

Transaction costs directly attributable to equity transactions are recognized as a deduction from 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, 2021 and 2020

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.

(q) 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 23. 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 December 31st of the third calendar year after the year in which the services corresponding to such share unit award were performed. 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.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2021 and 2020

(r) 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.

(s) 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.

(t) 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 30.

(u) Statement of cash flows:

Hudbay presents interest paid and dividends paid as financing activities, except if the interest is related to capitalized borrowing costs, and interest received is presented as an investing activity in the consolidated statement of cash flow. Hudbay presents the consolidated statement of cash flows using the indirect 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, 2021 and 2020

4. New standards

New standards and interpretations adopted

(a) Amendment to IAS 16 - Property, Plant and Equipment

The amendments to IAS 16 prohibit deducting from the cost of property, plant and equipment the proceeds from selling items produced while bringing the assets to the location and condition necessary for them to be capable of operating in the manner intended by management. Instead, a company will recognize such sales proceeds and related cost in profit or loss. This amendment is in effect January 1, 2022 with early adoption permitted.

Hudbay has early adopted this amendment as of January 1, 2021 with retrospective application only to items of property, plant and equipment that were brought to the location and condition necessary for them to be capable of operating in the manner intended by management on or after January 1, 2020. No restatement of prior periods was required on adoption given the comparable periods contained no items would have been impacted by this accounting amendment.

(b) Interest Rate Benchmark Reform - Phase II - Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16

These amendments require companies to determine if there is a significant change in the basis of determining contractual cash flows as a result of interest rate benchmark reform / IBOR reform. A company will be required to determine if the replacement of an existing interest rate benchmark with an alternative rate benchmark results in contractual cash flows that are significantly different for financial instruments, lease payments, insurance contracts and/or items that use hedge accounting. If IBOR reform result in a transition on an economically equivalent basis with no value transfer having occurred, the changes to the standard allow the contractual cash flow changes to be applied prospectively, similar to a change in a market rate. For Hudbay, these amendments have been in effect since January 1, 2021 and have not resulted in material changes to the financial statements.

As at December 31, 2021, Hudbay has not entered into any new contracts or contract modifications that are dependent on the LIBOR rate and that are impacted by these amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16.

New standards and interpretations not yet adopted

(c) Amendment to IAS 1 - Presentation of Financial Statements

The amendments to IAS 1 promote consistency in applying the requirements by helping companies determine whether, in the statement of financial position, debt and other liabilities with an uncertain settlement date should be classified as current (due to potentially due to be settled within one year) or non-current. This amendment is in effect January 1, 2023 with early adoption permitted.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2021 and 2020

5. Revenue and expenses

(a) Revenue

Hudbay's revenue by significant product types:

		Year ended<br>December 31,
		2021			2020
Copper	$	873,339		$	563,910
Zinc		301,086			264,106
Gold		246,562			180,949
Silver		26,932			25,986
Molybdenum		37,487			25,627
Other		7,454			5,619
Revenue from contracts		1,492,860			1,066,197
Non-cash streaming arrangement items ^1^
Amortization of deferred revenue - gold		37,788			27,854
Amortization of deferred revenue - silver		33,731			39,409
Amortization of deferred revenue - variable<br> consideration adjustments - prior periods		1,617			6,668
		73,136			73,931
Pricing and volume adjustments ^2^		(8,568	)		9,178
		1,557,428			1,149,306
Treatment and refining charges		(55,430	)		(56,888	)
	$	1,501,998		$	1,092,418

^1^See note 17.

^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 non-hedge derivative contracts and adjustments to originally invoiced weights and assays.

Consideration from the Company's stream agreements is considered variable (note 17). 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 2021, the amortization rate by which deferred revenue is drawn down into income was adjusted and, as required, a catch up adjustment was made for all prior year stream revenues since the stream agreement inception date. This variable consideration adjustment resulted in an increase of revenue of $1,617 for the year ended December 31, 2021.

The variable consideration adjustment for the year ended December 31, 2020 resulted in an increase of revenue of $6,668. This increase in revenue was primarily the result of updates to the 777 mine plan resulting in the mining of fewer inferred resources than what was planned previously.

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 17.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2021 and 2020

(b) Mine operating costs

During the year ended December 31, 2021, Hudbay recognized a recovery of $1,446 in cost of sales related to adjustments of the carrying value of Peru inventories to net realizable value and a non-cash write-down of materials and supplies inventories of $5,445 (year ended December 31, 2020 - $2,302 net expense) (note 8).

In addition, the Company recognized a past service cost provision adjustment related to pensions for certain Manitoba employees of $4,989 (note 5e).

(c) Depreciation and amortization

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

		Year ended<br>December 31,
		2021		2020
Cost of sales	$	357,924	$	361,827
Selling and administrative expenses		1,843		1,776
	$	359,767	$	363,603

Effective January 1, 2021, the Company made a change in estimate in Peru for certain mineral property PP&E assets to utilize contained metal in the depreciation calculation. This better reflects the systematic allocation of costs to inventory given the change in grade profile following the recently published NI 43-101. For the year ended December 31, 2021, depreciation expense is higher by $4,835, compared to the result under the previous depreciation calculation. Since the change is in response to an updated life-of-mine plan, it is being treated as a change in estimate and applied prospectively. Please see note 11 for further details.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2021 and 2020

(d) Share-based compensation expenses

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

		Cash-settled								Total share-based<br>compensation expense
		RSUs		DSUs		PSUs		Stock options
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
Year ended December 31, 2020
Cost of sales	$	1,400	$	-	$	-	$	-	$	1,400
Selling and administrative		4,872		5,149		1,987	$	1,122		13,130
Other expenses		478		-		-		-		478
	$	6,750	$	5,149	$	1,987	$	1,122	$	15,008

During the year ended December 31, 2021, the Company granted 509,385 stock options (year ended December 31, 2020 - 1,581,385). For further details on stock options, see note 23b.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2021 and 2020

(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,
		2021		2020
Current employee benefits	$	205,402	$	179,486
Share-based compensation (notes 5d, 18, 23)
Equity settled stock options		1,919		1,122
Cash-settled restricted share units		5,385		6,750
Cash-settled deferred share units		1,459		5,149
Cash-settled performance share units		3,382		1,987
Employee share purchase plan		1,933		1,783
Post-employee pension benefits
Defined benefit plans		11,433		11,671
Defined contribution plans		2,061		1,774
Past service costs (note 19)		4,989		-
Other post-retirement employee benefits		7,526		9,305
Termination benefits		470		582
	$	245,959	$	219,609

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 19 for a description of Hudbay's pension plans and note 20 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, 2021 and 2020

(f) Other expenses

		Year ended December 31,
		2021			2020
Regional costs	$	3,652		$	3,602
Loss on disposal of property, plant and equipment		7,038			5,088
Closure cost adjustment - non-producing properties		(4,602	)		2,721
Allocation of community costs		1,768			2,880
Restructuring - Manitoba		6,947			-
Copper World Preliminary Economic Assessment ("PEA") study costs		12,555			-
Other		2,421			3,292
	$	29,779		$	17,583

Due to rising risk-free interest rates during the first quarter of 2021, the discount rates used in the normal course revaluation of the DRO increased correspondingly, resulting in a reduction in the associated liabilities. For certain closed sites with such reclamation obligations, the revaluation of the corresponding liability is recorded through the consolidated income statements, resulting in a gain of $4,602 for the year ended December 31, 2021.

During 2021, there were costs incurred related to the restructuring of the Manitoba operations in preparation for the closure of 777 mine of $6,947. These costs were primarily related to severance packages for unionized and certain salaried employees.

Copper World PEA study costs primarily relate to Copper World project costs that are not associated with Rosemont.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2021 and 2020

(g) Net finance expense ****

		Year ended December 31,
		2021			2020
Net interest expense on long-term debt
Interest expense on long-term debt	$	74,748		$	82,712
Accretion on streaming arrangements (note 17)
Additions		42,060			60,362
Variable consideration adjustments - prior periods		594			(3,692	)
		42,654			56,670
Change in fair value of financial assets and liabilities at fair value through profit or loss
Embedded derivatives (note 16)		49,754			(45,387	)
Gold prepayment liability		293			20,141
Investments		4,467			(4,124	)
		54,514			(29,370	)
Other net finance costs
Net foreign exchange losses (gains)		1,403			(1,644	)
Accretion on community agreements measured at amortized cost		2,811			3,641
Accretion on environmental provisions		4,988			3,543
Withholding taxes		7,727			8,267
Premium paid on redemption of notes (note 16)		22,878			7,252
Write-down of unamortized transaction costs (note 16)		2,480			3,817
Other finance expense		7,813			8,826
Interest income		(997	)		(1,812	)
		49,103			31,890
Net finance expense	$	221,019		$	141,902

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, 2021 and 2020

(h) Impairment - Environmental Obligation

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 obligation (note 18) 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 is 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 and incorporating assumptions for commodity prices, foreign exchange rates, remaining reserves, timing of extraction and operating costs. No discount rate was applied given the operating life of the asset is less than one year. This resulted in an impairment loss of $193,473 for the year ended December 31, 2021. Given the closure is expected to occur in less than 12 months, future adjustments to the Flin Flon environmental provision from fair value adjustments, or otherwise, may lead to future impairment tests of the Flin Flon operation and any resulting impairments or impairment reversals will be recognized in the consolidated income statements.

6. Cash

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

7. Trade and other receivables

		Dec. 31, 2021		Dec. 31, 2020
Current
Trade receivables	$	166,524	$	107,787
Statutory receivables		31,191		28,445
Other receivables		6,366		4,967
		204,081		141,199
Non-current
Taxes receivable		16,084		16,941
Other receivables		-		1,627
		16,084		18,568
	$	220,165	$	159,767

The increase in trade receivables during the year ended December 31, 2021 primarily relates to three shipments, representing approximately 30,000 tonnes of copper, which occurred late in the fiscal year and received revenue recognition but for which timing of cash receipts occur in 2022.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2021 and 2020

8. Inventories

		Dec. 31, 2021		Dec. 31, 2020
Current
Stockpile	$	12,768	$	13,906
Work in progress		5,647		6,364
Finished goods		78,958		72,923
Materials and supplies		61,080		49,912
		158,453		143,105
Non-current
Stockpile		34,156		16,704
Materials and supplies		3,417		5,302
		37,573		22,006
	$	196,026	$	165,111

The cost of inventories recognized as an expense, including depreciation, and included in cost of sales amounted to $1,069,309 for the year ended December 31, 2021 (year ended December 31, 2020 - $921,895).

During the year ended December 31, 2021, Hudbay recognized a recovery of $1,446 in cost of sales related to adjustments of the carrying value of Peru inventories to net realizable value (year ended December 31, 2020 - $2,302 net expense). Adjustments to the carrying value of inventories to net realizable value were related to changes in commodity prices.

Due to the upcoming closure of the Flin Flon operation, certain long term inventory supplies which are not expected to be utilized were written down and $5,445 was charged to mine operating costs for the year ended December 31, 2021 (note 5b).

Effective January 1, 2021, following a new NI 43-101 technical report for Peru, which reflects an updated mine plan with a new grade and ore tonnage profile, the Company changed its method of estimation of applying mining costs to stockpile and finished goods inventory. Prior to this change, mining costs were allocated using tonnes of ore mined. Starting January 1, 2021, Peru mining costs have been allocated to inventories using contained metal, incorporating tonnes of ore mined and expected mined grades. Since the change is in response to an updated life-of-mine plan, it is being treated in accordance with a change in estimate and will be applied prospectively. For the year ended December 31, 2021, as a result of the change in allocation, stockpile inventories have declined by $6,784 and finished goods inventories have increased by $756.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2021 and 2020

9. Other financial assets

		Dec. 31, 2021		Dec. 31, 2020
Current
Derivative assets	$	7,430	$	2,736
Restricted cash		437		337
		7,867		3,073
Non-current
Investments at fair value through profit or loss		11,158		15,669
	$	19,025	$	18,742

The derivative assets include derivative and hedging transactions. Derivative assets are carried at their fair value with changes in fair value recorded to the consolidated income statements. The fair value adjustments for hedging type derivatives are recorded in revenue.

Investments at fair value through profit or loss consist of securities in Canadian metals and mining companies, all of which are publicly traded. The change in investments at fair value through profit or loss is mostly attributed to fluctuations in market price and foreign exchange impact.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2021 and 2020

10. Intangibles and other assets

Intangibles and other assets of $20,138 (December 31, 2020 - $21,173) includes $14,240 of other assets (December 31, 2020 - $15,764) and $5,898 of intangibles (December 31, 2020 - $5,409).

Other assets represent the carrying value of certain future community costs that relate to original agreements with communities for the Constancia operation which allow Hudbay to extract minerals over the useful life of the Constancia operation. The liability remaining for these costs is recorded in agreements with communities recorded at amortized cost (note 14). Amortization of the carrying amount is recorded in the consolidated income statements within other expenses (note 5f) or exploration expense, depending on the nature of the agreement.

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

		Dec. 31, 2021		Dec. 31, 2020
Cost
Balance, beginning of year	$	23,350	$	21,538
Additions		968		1,466
Disposals		-		-
Transfers		386		-
Effects of movement in exchange rates		64		346
Balance, end of year		24,768		23,350
Accumulated amortization
Balance, beginning of year		17,941		16,511
Additions		872		1,138
Disposals		-		-
Effects of movement in exchange rates		57		292
Balance, end of year		18,870		17,941
Intangibles, net book value	$	5,898	$	5,409
HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2021 and 2020
---

11. Property, plant and equipment

Dec. 31, 2021		Exploration and evaluation assets		Capital works in progress			Mining properties			Plant and equipment			Plant and equipment- ROU 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	)		-
Disposals		-		(5,941	)		-			(10,803	)		(3,544	)		(20,288	)
Impairment		-		-			(1,054	)		(192,419	)		-			(193,473	)
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 (December 31, 2020 - $4,777, related to the Arizona and Manitoba 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, 2021 and 2020
Dec. 31, 2020		Exploration and evaluation assets		Capital works in progress			Mining properties			Plant and equipment			Plant and equipment- ROU assets^1^			Total
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
Balance, January 1, 2020	$	69,903	$	733,874		$	2,146,583		$	2,653,752		$	201,972		$	5,806,084
Additions		809		256,251			311			28,523			17,759			303,653
Capitalized stripping and development		-		-			83,137			-			-			83,137
Decommissioning and restoration		-		263			6,849			39,680			-			46,792
Transfers and other movements		8,040		(36,668	)		(41,256	)		70,777			(893	)		-
Disposals		-		-			-			(19,681	)		(5,884	)		(25,565	)
Effects of movements in exchange rates		307		3,442			21,837			20,668			1,349			47,603
Balance, Dec. 31, 2020		79,059		957,162			2,217,461			2,793,719			214,303			6,261,704
Accumulated depreciation
Balance, January 1, 2020		-		-			963,530			1,069,687			110,308			2,143,525
Depreciation for the year		-		-			146,113			200,632			23,351			370,096
Disposals		-		-			-			(14,038	)		(2,475	)		(16,513	)
Effects of movement in exchange rates		-		-			16,631			15,300			1,010			32,941
Balance, Dec. 31, 2020		-		-			1,126,274			1,271,581			132,194			2,530,049
Net book value	$	79,059	$	957,162		$	1,091,187		$	1,522,138		$	82,109		$	3,731,655

During the third 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 obligation (note 18) 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 is 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 $147,305.

During the fourth quarter, as a result of declines in risk-free discount rates and with the Flin Flon operation being near closure, the same recoverability of assets test was performed. This resulted in an impairment loss of $46,168. Given the closure is expected to occur in less than 12 months, the impairment was charged to the consolidated income statements. For more information see note 5h.

Given the closure is expected to occur in less than 12 months, future adjustments to the Flin Flon environmental provision from fair value adjustments, or otherwise, may lead to future impairment tests of the Flin Flon operation and any resulting impairments or impairment reversals will be charged to the consolidated income statements.

Effective January 1, 2021, following a new NI 43-101 technical report for Peru, the Company made a change in estimate for the depreciation calculation of certain mineral property PP&E assets in Peru to utilize contained metal. This better reflects the systematic allocation of costs to inventory given the change in grade profile following the recently published NI 43-101. Since the change is in response to an updated life-of-mine plan, it is being treated in accordance with a change in estimate and will be applied prospectively. For the year ended December 31, 2021, depreciation expense is higher by $4,835 compared to the result under the previous depreciation calculation.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2021 and 2020

12. Trade and other payables

		Dec. 31, 2021		Dec. 31, 2020
Trade payables	$	84,279	$	104,598
Accruals and payables		84,992		72,698
Accrued interest		16,120		30,766
Exploration and evaluation payables		3,788		1,351
Statutory payables		18,598		23,734
	$	207,777	$	233,147

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

13. Other liabilities

		Dec. 31, 2021		Dec. 31, 2020
Current
Environmental and other provisions (note 18)	$	41,017	$	33,675
Pension liability (note 19)		10,472		13,552
Other employee benefits (note 20)		3,530		3,154
Unearned revenue		7,983		1,590
	$	63,002	$	51,971

14. Other financial liabilities

		Dec. 31, 2021		Dec. 31, 2020
Current
Derivative liabilities	$	12,451	$	15,312
Deferred Rosemont acquisition consideration		9,713		-
Gold prepayment liability		71,394		-
Agreements with communities recorded at amortized cost		7,144		9,401
		100,702		24,713
Non-current
Deferred Rosemont acquisition consideration		17,805		25,961
Gold prepayment liability		68,614		137,031
Wheaton refund liability (note 17)		5,424		-
Agreements with communities recorded at amortized cost		29,129		31,386
		120,972		194,378
	$	221,674	$	219,091

The derivative liabilities include derivative and hedging transactions. Derivative liabilities are carried at their fair value with changes in fair value recorded to the consolidated income statements. The fair value adjustments for hedging type derivatives are recorded in revenue. Fair value adjustments for embedded derivatives are recorded within net finance expense.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2021 and 2020

As part of the streaming agreement for the 777 mine, Hudbay must repay, with precious metals credits, the 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. Given revised resource estimates and the planned closure of the 777 mine in 2022, Hudbay believes such a payment is expected and as such, as at December 31, 2021 the estimated repayment amount was reclassified to a refund liability. This is and will be discounted at the 9.0% rate inherent in the original agreement and accreted over the remaining term of the agreement.

On May 7, 2020, the Company entered into a gold prepayment transaction and received $115,005 in exchange for the delivery of 79,954 gold ounces starting January 2022 and ending in December 2023, which were valued at gold forward curve prices averaging $1,682 per ounce at the time of the transaction. The agreement has been assessed as a financial liability that has been designated as fair value through profit or loss within change in fair value of financial instruments, with a component of the fair value related to the fluctuation in the Company's own credit risk being recorded to other comprehensive income. The pre-tax fair value adjustment recorded in profit or loss and other comprehensive income for the year ended December 31, 2021 totaled a net loss of $2,977 (year ended December 31, 2020 - net losses of $22,026).

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, 2021 primarily relates to the execution of the remaining land user agreements with certain community members, partially offset by disbursements.

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

Balance, January 1, 2020	$	24,000
Net additions		116,233
Disbursements		(98,375	)
Accretion		3,641
Effects of changes in foreign exchange		(4,712	)
Balance, December 31, 2020	$	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
HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2021 and 2020
---

15. Lease liability

Balance, January 1, 2020	$	81,947
Additional capitalized leases		17,759
Lease payments		(35,980	)
Accretion and other movements		(212	)
Balance, December 31, 2020	$	63,514
Additional capitalized leases		49,695
Lease payments		(37,719	)
Accretion and other movements ^1^		2,512
Balance, December 31, 2021	$	78,002

^1^ Includes $1,844 of sale lease back additions to ROU leases.

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

		Dec. 31, 2021		Dec. 31, 2020
Current	$	33,529	$	33,473
Non-current		44,473		30,041
	$	78,002	$	63,514

Hudbay has entered into leases for its Peru, Manitoba and Arizona business units which expire between 2022 and 2043. The interest rates on leases which were capitalized have interest rates between 2.50% to 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 for the years ended December 31, 2021 and December 31, 2020, relating to leases for which a recognition exemption was applied.

		Year ended December 31,
		2021		2020
Short-term leases	$	38,092	$	40,253
Low value leases		407		353
Variable leases		58,626		57,389
Total	$	97,125	$	97,995

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 business unit during its development phase and certain amounts may be reported in inventories given the timing of sales. Variable consideration leases include equipment used for heavy civil works at Constancia.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2021 and 2020

16. Long-term debt

Long-term debt is comprised of the following:

		Dec. 31, 2021			Dec. 31, 2020
Senior unsecured notes (a)	$	1,185,805		$	1,139,695
Less: Unamortized transaction costs -<br> revolving credit facilities (b)		(5,531	)		(4,020	)
	$	1,180,274		$	1,135,675

(a) Senior unsecured notes

Balance, January 1, 2020	991,558
Addition to Principal, net of 8,176 transaction costs	591,824
Principal repayments	(400,000	)
Change in fair value of embedded derivative (prepayment option)	(47,169	)
Write-down of unamortized transaction costs	2,315
Accretion of transaction costs and premiums	1,167
Balance, December 31, 2020	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

All values are in US Dollars.

As at December 31, 2021, $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 5g). The 2025 Notes contained a prepayment option asset (note 26d), which was previously valued at $49,754 and upon early redemption was written off and expensed in the consolidated income statements (note 5g)

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 5g).

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2021 and 2020

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 (the "2029 Notes").

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 "2023 Notes").

In 2020, the unamortized transaction costs of $2,315 were expensed upon extinguishment of the 2023 Notes. The early redemption of these notes resulted in a call premium of $7,252, payable to the bondholders, which was expensed in the consolidated income statements (note 5g).

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 Rosemont, Copper World and Mason projects 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.

(b) Unamortized transaction costs - revolving credit facilities

Balance, January 1, 2020	$	6,303
Accretion of transaction costs		(3,062	)
Write-down of unamortized transaction costs		(1,502	)
Transaction costs		2,281
Balance, December 31, 2020	$	4,020
Accretion of transaction costs		(2,816	)
Transaction costs		4,327
Balance, December 31, 2021 ^1^	$	5,531

^1^ Balance, representing deferred transaction costs, is in an asset position.

On October 26, 2021, the Company amended and restated its senior secured revolving credit facilities to increase the total amount of available borrowings from $400 million to $450 million, eliminate certain financial covenants and amend others to increase its financial flexibility, reduce the effective interest rate and extend the maturity to October 26, 2025.

On August 31, 2020, Hudbay completed a restructuring of its two senior secured credit facilities. The total available credit was reduced from $550,000 to $400,000 and various financial covenants were amended. The unamortized transaction costs of $1,502 were expensed upon restructuring of the credit facilities.

As at December 31, 2021, the Peru business unit had $11,470 in letters of credit issued under the Peru revolving credit facility to support its reclamation obligations and the Manitoba business unit had $91,583 in letters of credit issued under the Canada revolving credit facility to support its reclamation and pension obligations. As at December 31, 2021, there were no cash advances under the credit facilities.

Surety bonds

The Arizona business unit had $28,291 in surety bonds issued to support future reclamation and closure obligations. No cash collateral is required to be posted under these surety bonds.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2021 and 2020

Other letters of credit

The Peru business unit had $87,091 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.

17. Deferred revenue

On August 8, 2012 and November 4, 2013, Hudbay entered into precious metals stream transactions with Wheaton whereby Hudbay has received aggregate deposit payments of $455,100 against delivery of (i) 100% of payable gold and silver from the 777 mine until the end of 2016, and delivery of 50% of payable gold and 100% of payable silver for the remainder of the 777 mine life; and aggregate deposit payments of $429,900 against the delivery of (ii) 100% of payable silver and 50% of payable gold from Peru's production.

In addition to the aggregate deposit payments of $885,000, as gold and silver is delivered under the stream agreements, Hudbay receives cash payments equal to the lesser of (i) the market price and (ii) $400 per ounce (for gold) and $5.90 per ounce (for silver), subject to 1% annual escalation after three years, from the inception of the agreement.

Hudbay recorded the deposits received as deferred revenue and recognizes amounts in revenue as gold and silver are delivered under the stream agreements. Hudbay determines the amortization of deferred revenue to the consolidated income statements on a per unit basis using the estimated total number of gold and silver ounces expected to be delivered under the stream agreements over the life of the 777 and Constancia/Pampacancha life-of-mine plans. Hudbay estimates the current portion of deferred revenue based on deliveries anticipated over the next twelve months.

Hudbay has determined that precious metals stream contracts are subject to variable consideration and contain a significant financing component. As such, the Company recognizes a financing charge at each reporting period and will gross up the deferred revenue balance to recognize the significant financing element that is part of these contracts. Hudbay's streaming arrangements are secured against the mining properties and other business unit assets associated with the applicable stream.

777 Stream Agreement

For the year ended December 31, 2021, the drawdown rates for the 777 stream agreement for gold and silver were CA$1,578 and CA$30.38 per ounce, respectively (year ended December 31, 2020 - CA$1,589 and CA$30.63 per ounce, respectively).

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. Given the remaining mine life is less than 12 months, Hudbay estimates that a portion of the stream deposit will not be repaid by means of precious metals credits from 777 production. As at December 31, 2021, the estimated repayment amount was reclassified to a refund liability (note 14), 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.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2021 and 2020

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.

Effective May 1, 2021, the drawdown rate for the Peru stream agreement for gold was $762 per ounce and prior to May 1, 2021 the drawdown rate for gold was $990 per ounce (year ended December 31, 2020 - $976 per ounce). Effective May 1, 2021 the drawdown rate for the Peru stream agreement for silver was $15.64 per ounce and prior to May 1, 2021 the drawdown rate for silver was $21.86 per ounce (year ended December 31, 2020 - $21.52 per ounce).

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.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2021 and 2020

The following table summarizes changes in deferred revenue:

Balance, January 1, 2020	$	563,756
Amortization of deferred revenue
Liability drawdown		(67,263	)
Variable consideration adjustments - prior periods		(6,668	)
Accretion on streaming arrangements
Current year additions		60,362
Variable consideration adjustments - prior periods		(3,692	)
Effects of changes in foreign exchange		189
Balance, December 31, 2020	$	546,684
Amortization of deferred revenue
Liability drawdown		(71,519	)
Variable consideration adjustments - prior periods		(1,617	)
Accretion on streaming arrangements (note 5g)
Current year-to-date additions		42,060
Variable consideration adjustments - prior periods		594
Reclass of refund liability (note 14)		(5,424	)
Stream deposit		4,000
Effects of changes in foreign exchange		548
Balance, December 31, 2021	$	515,326

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 2021, the amortization rate by which deferred revenue is drawn down into income was adjusted and, as required, a current period catch up adjustment is made for all prior period stream revenues since the stream agreement inception date. This variable consideration adjustment resulted in an increase in revenue of $1,617 and an increase of finance expense of $594 for the year ended December 31, 2021.

During the year ended December 31, 2020, the Company recognized an adjustment to gold and silver revenue and finance costs due to a net increase in the Company's mineral reserve and resources estimates coupled with a change to the 777 mine plan. This variable consideration adjustment resulted in an increase in revenue of $6,668 and reversal of finance expense of $3,692 for the year ended December 31, 2020.

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

		Dec. 31, 2021		Dec. 31, 2020
Current	$	88,963	$	102,782
Non-current		426,363		443,902
	$	515,326	$	546,684
HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2021 and 2020
---

18. Environmental and other provisions

		Decommis-sioning, restoration and similar liabilities			Deferred share units (note 23a)			Restricted share units^1^ (note 23a)			Performan-ce share units (note 23a)			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 5g)		4,988			-			-			-			-			4,988
Effect of change in estimate to <br>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.

Provisions are reflected in the consolidated balance sheets as follows:

December 31, 2021		Decommis-sioning, restoration and similar liabilities		Deferred share units (note 23a)		Restricted share units^1^ (note 23a)		Performan-ce share units (note 23a)		Other		Total
Current (note 13)	$	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
		Decommis-sioning, restoration and similar liabilities			Deferred share units (note 23a)			Restricted share units^1^ (note 23a)			Performan-ce share units (note 23a)		Other			Total
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
Balance, January 1, 2020	$	302,116		$	3,876		$	5,477		$	-	$	2,956		$	314,425
Net additional provisions made		5,868			1,628			3,642			1,257		15			12,410
Disbursements		(18,737	)		(497	)		(2,646	)		-		(1,824	)		(23,704	)
Unwinding of discount (note 5g)		3,543			-			-			-		-			3,543
Effect of change in discount rate		43,180			-			-			-		-			43,180
Effect of foreign exchange		7,162			191			116			43		(3	)		7,509
Effect of change in share price		-			3,521			3,860			730		-			8,111
Balance, December 31, 2020	$	343,132		$	8,719		$	10,449		$	2,030	$	1,144		$	365,474

^1^Certain amounts relating 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, 2021 and 2020
December 31, 2020		Decommis-sioning, restoration and similar liabilities		Deferred share units (note 23a)		Restricted share units^1^ (note 23a)		Performan-ce share units (note 23a)		Other		Total
---	---	---	---	---	---	---	---	---	---	---	---	---
Current (note 13)	$	20,308	$	8,719	$	4,648	$	-	$	-	$	33,675
Non-current		322,824		-		5,801		2,030		1,144		331,799
	$	343,132	$	8,719	$	10,449	$	2,030	$	1,144	$	365,474

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, 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 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 obligation resulted in a corresponding increase in the Flin Flon PP&E. However, as the closure of Flin Flon is expected to commence within 12 months, 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 5h).

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 anticipates that most of the assets in Flin Flon will be placed on care and maintenance once mining activities are completed at the 777 mine in order to maintain optionality for restart should a new mine be found in the Flin Flon area. 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 2070, which include ongoing monitoring and water treatment requirements.

These estimates have been discounted to their present value at rates ranging from 0.39% to 1.94% per annum (2020 - 0.12% to 1.65%), 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, 2021 and 2020

19. 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 2021 using data as at December 31, 2020. For these plans, the next actuarial valuation required for funding purposes will be performed during 2022 using data as of December 31, 2021.

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

		Year ended
		Dec. 31, 2021			Dec. 31, 2020
Opening defined benefit obligation:	$	240,354		$	243,733
Current service costs		11,295			11,044
Past service cost (note 5e)		4,989			-
Interest cost		6,172			6,569
Benefits paid from plan		(22,546	)		(35,384	)
Benefits paid from employer		(866	)		(1,317	)
Participant contributions		34			48
Effects of movements in exchange rates		950			2,780
Remeasurement actuarial losses/(gains):
Arising from changes in demographic assumptions		1,498			(1,461	)
Arising from changes in financial assumptions		(24,663	)		16,967
Arising from experience adjustments		(848	)		(2,625	)
Closing defined benefit obligation	$	216,369		$	240,354

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

		Dec. 31, 2021		Dec. 31, 2020
Active members	$	176,644	$	211,861
Deferred members		2,538		2,198
Retired members		37,187		26,295
Closing defined benefit obligation	$	216,369	$	240,354
HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2021 and 2020
---

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

		Year ended
		Dec. 31, 2021			Dec. 31, 2020
Opening fair value of plan assets:	$	203,486		$	202,119
Interest income		5,387			5,695
Remeasurement adjustment:
(Loss) return on plan assets (excluding amounts included in net interest expense)		(306	)		15,377
Contributions from the employer		12,750			12,987
Employer direct benefit payments		866			1,317
Contributions from plan participants		34			48
Benefit payment from employer		(866	)		(1,317	)
Administrative expenses paid from plan assets		(83	)		(77	)
Benefits paid		(22,546	)		(35,384	)
Effects of changes in foreign exchange rates		923			2,721
Closing fair value of plan assets	$	199,645		$	203,486

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, 2021			Dec. 31, 2020
Present value of funded defined benefit obligation	$	197,546		$	220,210
Fair value of plan assets		(199,645	)		(203,486	)
Present value of unfunded defined benefit obligation		18,823			20,144
Net liability arising from defined benefit obligation	$	16,724		$	36,868

Reflected in the consolidated balance sheets as follows:

		Dec. 31, 2021		Dec. 31, 2020
Pension obligation - current (note 13)	$	10,472	$	13,552
Pension obligation - non-current		6,252		23,316
Total pension obligation	$	16,724	$	36,868
HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2021 and 2020
---

Pension expense is as follows:

		Dec. 31, 2021		Dec. 31, 2020
Service costs:
Current service cost	$	11,295	$	11,044
Past service cost		4,989		-
Total service cost		16,284		11,044
Net interest expense		785		874
Administration cost		83		77
Defined benefit pension expense	$	17,152	$	11,995
Defined contribution pension expense	$	2,061	$	1,791

Remeasurement on the net defined benefit liability:

		Dec. 31, 2021			Dec. 31, 2020
Loss (return) on plan assets (excluding amounts included in net interest expense)	$	306		$	(15,377	)
Actuarial losses (gains) arising from changes in demographic assumptions		1,498			(1,461	)
Actuarial (gains) losses arising from changes in financial assumptions		(24,663	)		16,967
Actuarial gains arising from experience adjustments		(848	)		(2,625	)
Defined benefit gain related to remeasurement	$	(23,707	)	$	(2,496	)
Total pension cost	$	(4,494	)	$	11,290

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, 2021 and 2020

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:

	2021	2020
Defined benefit cost:
Discount rate - benefit obligations	2.54 %	3.08%
Discount rate - service cost	2.66 %	3.10%
Expected rate of salary increase^1^	2.75 %	2.75%
Average longevity at retirement age for current pensioners (years)^2^ :
Males	20.3	20.3
Females	23.7	23.7
Defined benefit obligation:
Discount rate	3.09 %	2.54%
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
Average longevity at retirement age for current employees (future pensioners) (years)^2^ :
Males	22.2	22.2
Females	25.4	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, 2021 and 2020
---

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 $18,774 (increase by $21,539).
If the expected salary growth increases (decreases) by 1%, the defined benefit obligation would increase by $2,824 (decrease $2,522).
If the life expectancy increases (decreases) by one year for both men and women, the defined benefit obligation would increase by $1,795 (decrease by $1,847).

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, 2021 is $12,477.

The average duration of the pension obligation at December 31, 2021 is 19.2 years (2020 - 21.2 years). This number can be broken down as follows:

Active members: 21.0 years (2020: 22.3 years)
Deferred members: 23.5 years (2020: 21.9 years)
Retired members: 10.0 years (2020: 12.0 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, 2021 and 2020

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

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
December 31, 2020		Level 1		Level 2		Level 3		Total
---	---	---	---	---	---	---	---	---
Investments:
Money market instruments	$	4,766	$	-	$	-	$	4,766
Pooled equity funds		68,926		-		-		68,926
Pooled fixed income funds		-		98,922		-		98,922
Alternative investment funds		-		30,323		-		30,323
Balanced funds		-		549		-		549
	$	73,692	$	129,794	$	-	$	203,486
HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2021 and 2020
---

20. 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, 2021			Dec. 31, 2020
Opening defined benefit obligation	$	129,616		$	116,696
Current service cost^1^		3,861			4,140
Past service cost		134			-
Interest cost		3,531			3,478
Effects of movements in exchange rates		639			2,423
Remeasurement actuarial losses/(gains):
Arising from changes in demographic assumptions		2,601			(4,460	)
Arising from changes in financial assumptions		(7,309	)		10,043
Arising from experience adjustments		(1,034	)		(489	)
Benefits paid		(3,196	)		(2,215	)
Closing defined benefit obligation	$	128,843		$	129,616

^1^Includes remeasurement of other long term employee benefits

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

		Dec. 31, 2021		Dec. 31, 2020
Active members	$	57,775	$	68,983
Inactive members		71,068		60,633
Closing defined benefit obligation	$	128,843	$	129,616

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

		Dec. 31, 2021			Dec. 31, 2020
Employer contributions	$	3,196		$	2,215
Benefits paid		(3,196	)		(2,215	)
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, 2021 and 2020

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

		Dec. 31, 2021		Dec. 31, 2020
Unfunded benefit obligation	$	128,843	$	129,616
Vacation accrual and other - non-current		3,275		3,046
Net liability	$	132,118	$	132,662

Reflected in the consolidated balance sheets as follows:

		Dec. 31, 2021		Dec. 31, 2020
Other employee benefits liability - current (note 13)	$	3,530	$	3,154
Other employee benefits liability - non-current		128,588		129,508
Net liability	$	132,118	$	132,662

Other employee future benefit expense includes the following:

		Dec. 31, 2021		Dec. 31, 2020
Current service cost ^1^	$	3,995	$	4,140
Net interest cost		3,531		3,478
Components recognized in consolidated income statements	$	7,526	$	7,618

^1^ Includes remeasurement of other long term employee benefit

		Dec. 31, 2021			Dec. 31, 2020
Remeasurement on the net defined benefit liability:
Actuarial losses/(gains) arising from changes in demographic assumptions	$	2,601		$	(4,460	)
Actuarial (gains)/losses arising from changes in financial assumptions		(7,309	)		10,043
Actuarial gains arising from changes experience adjustments		(1,034	)		(489	)
Components recognized in statements of comprehensive income	$	(5,742	)	$	5,094
Total other employee future benefit cost	$	1,784		$	12,712

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, 2021 and 2020
	Dec. 31, 2021	Dec. 31, 2020
---	---	---
Defined benefit cost:
Discount rate	2.76 %	3.17%
Initial weighted average health care trend rate	5.66 %	5.68%
Ultimate weighted average health care trend rate	4.00 %	4.00%
Average longevity at retirement age for current pensioners (years)^1^:
Males	20.3	21.2
Females	23.7	23.9
	Dec. 31, 2021	Dec. 31, 2020
---	---	---
Defined benefit obligation:
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
Average longevity at retirement age for current employees (future pensioners) (years)^1^:
Males	22.3	22.2
Females	25.4	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, 2021 and 2020
---

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 $11,124 (increase by $12,821).
If the health care cost assumption increases (decreases) by 1%, the defined benefit obligation would increase by $25,894 (decrease by $19,987).
If the life expectancy increases (decreases) by one year for both men and women, the defined benefit obligations would increase by $5,088 (decrease by $5,147).

The average duration of the non-pension post-employment obligation at December 31, 2021 is 18.6 years (2020: 19.4 years).

This number can be broken down as follows:

Active members: 25.4 years (2020: 24.6 years)
Inactive members: 13.2 years (2020: 13.6 years)

21. Income and mining taxes

(a) Tax recoveries:

The tax expense (recoveries) is applicable as follows:

		Year ended<br>December 31,
		2021			2020
Current:
Income taxes	$	25,570		$	4,458
Mining taxes		20,830			4,671
Adjustments in respect of prior years		-			(398	)
		46,400			8,731
Deferred:
Income tax recoveries - origination, revaluation and/or reversal of temporary differences		(17,772	)		(39,411	)
Mining tax expense (recoveries) - origination, revaluation and/or reversal of temporary difference		4,235			(3,331	)
Adjustments in respect of prior years		8,744			(494	)
		(4,793	)		(43,236	)
	$	41,607		$	(34,505	)

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, 2021 and 2020

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

		Dec. 31, 2021			Dec. 31, 2020
Deferred income tax asset	$	133,584		$	94,070
Deferred mining tax asset		-			7,829
		133,584			101,899
Deferred income tax liability		(249,638	)		(220,568	)
Deferred mining tax liability		(12,126	)		(8,865	)
		(261,764	)		(229,433	)
Net deferred tax liability balance, end of year	$	(128,180	)	$	(127,534	)

(c) Changes in deferred tax assets and liabilities:

		Year ended<br>Dec. 31, 2021			Year ended<br>Dec. 31, 2020
Net deferred tax liability balance, beginning of year	$	(127,534	)	$	(167,882	)
Deferred tax expense		4,793			43,236
OCI transactions		(5,474	)		(759	)
Foreign currency translation on the deferred tax liability		35			(2,129	)
Net deferred tax liability balance, end of year	$	(128,180	)	$	(127,534	)
HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2021 and 2020
---

(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, 2021 and 2020 is as follows:

		Year ended December 31,
		2021			2020
Statutory tax rate		26.4%			26.3%
Tax recovery at statutory rate	$	(53,526	)	$	(47,047	)
Effect of:
Deductions related to mining taxes		(5,491	)		(1,369	)
Adjusted income taxes		(59,017	)		(48,416	)
Mining tax expense		32,034			1,291
		(26,983	)		(47,125	)
Permanent differences related to:
Capital items		716			(160	)
Other income tax permanent differences		2,775			(1,165	)
Impact of remeasurement on decommissioning liability		33,731			7,094
Temporary income tax differences not recognized		4,483			1,100
Impact related to differences in tax rates in foreign operations		21,201			5,534
Impact of changes to statutory tax rates		(706	)		2,412
Foreign exchange on non-monetary items		4,593			(3,628	)
Impact related to tax assessments and tax return amendments		1,797			1,433
Tax expense (recovery)	$	41,607		$	(34,505	)
HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2021 and 2020
---

(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, 2021 and 2020 are as follows:

		Balance sheet
		Dec. 31, <br>2021			Dec. 31,<br>2020
Deferred income tax (liability) asset
Property, plant and equipment	$	(40,491	)	$	(88,368	)
Pension obligation		4,369			9,467
Other employee benefits		27,191			25,687
Decommissioning and restoration obligation		29,870			37,902
Non-capital losses		93,892			110,374
Share issuance and debt cost		17,984			8,972
Embedded derivative (prepayment option)		-			(13,137	)
Deferred revenue		1,661			(809	)
Other		(892	)		3,982
Deferred income tax asset		133,584			94,070
Deferred income tax liability (asset)
Property, plant and equipment		322,325			292,858
Other employee benefits		(654	)		203
Asset retirement obligations		(9,609	)		(1,588	)
Non-capital losses		(58,777	)		(78,607	)
Other		(3,647	)		7,702
Deferred income tax liability		249,638			220,568
Deferred income tax liability	$	(116,054	)	$	(126,498	)

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 $23.5 million of non-capital losses (December 31, 2020 - $115.9 million), $170.8 million of capital losses (December 31, 2020 - $166.2 million) and $586.8 million (December 31, 2020 - $291.9 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 2006 and 2021 and have a twenty-year carry forward period. The United States net operating losses were incurred between 2004 and 2021 and have a twenty-year carry forward period. Peruvian net operating losses were incurred in 2021 and may be carried forward and set off against 50% of future profits without any time restrictions.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2021 and 2020

(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, 2021 and 2020 are as follows:

Canada		Dec. 31, 2021			Dec. 31, 2020
Property, plant and equipment	$	(278	)	$	7,829
Peru		Dec. 31, 2021			Dec. 31, 2020
Property, plant and equipment	$	(11,848	)	$	(8,865	)

For the year ended December 31, 2021, Hudbay had unrecognized deferred mining tax assets of approximately $18,159 (December 31, 2020 - $7,544).

(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, 2021 and 2020

22. 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>December 31, 2021			Year ended<br>Dec. 31, 2020
	Common shares		Amount	Common shares		Amount
Balance, beginning of year	261,272,151	$	1,777,340	261,272,151	$	1,777,340
Exercise of options	326,161		1,508	-		-
Balance, end of year	261,598,312	$	1,778,848	261,272,151	$	1,777,340

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.

During the year ended December 31, 2020, the Company paid $1,804 and $1,979 in dividends on March 27, 2020 and September 25, 2020 to shareholders of record as of March 10, 2020 and September 4, 2020.

23. 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, 2021, the carrying amount and the intrinsic value of the outstanding liability related to the DSU plan was $8,107 (December 31, 2020 - $8,719) (note 18). The following table outlines information related to DSUs granted, expenses recognized and payments made during the year.

		Year ended
		Dec. 31, 2021		Dec. 31, 2020
Granted during the year:
Number of units		173,929		465,889
Weighted average price (C$/unit)	$	8.85	$	4.10
Expenses recognized during the year^1^ (notes 5d)	$	1,459	$	5,149
Payments made during the year (note 18)	$	2,053	$	497

^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, 2021 and 2020

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, 2021, the carrying amount of the outstanding liability related to the RSU plan was $10,889 (December 31, 2020 - $10,449) (note 18). The following table outlines information related to RSUs granted, expenses recognized and payments made in the year.

		Year ended
		Dec. 31, 2021			Dec. 31, 2020
Number of units, beginning of year		2,940,337			2,223.999
Number of units granted during the year		515,727			1,388,786
Credits for dividends		6,949			17,587
Number of units forfeited during the year		(133,804	)		(44,678	)
Number of units vested		(844,349	)		(645,357	)
Number of units, end of year ^1^		2,484,860			2,940,337
Weighted average price - granted (C$/unit)	$	10.42		$	3.98
Expenses recognized during the year^2^ (note 5d)	$	5,385		$	6,750
Payments made during the year (note 18)	$	6,143		$	2,646

^1^ Includes 778,224 and 738,002 units that have vested; however, are unreleased and unpaid as of December 31, 2021 and December 31, 2020 respectively.

^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, 2021 and 2020

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, 2021, the carrying amount of the outstanding liability related to PSU plan was $5,402 (December 31, 2020 - $2,030) (note 18). The following table outlines information related to PSUs granted, expenses recognized and payments made in the year.

		Year ended
		Dec. 31, 2021		Dec. 31, 2020
Number of units, beginning of year		1,095,615		-
Number of units granted during the year		406,656		1,089,569
Credits for dividends		3,960		6,046
Number of units, end of year		1,506,231		1,095,615
Weighted average price - granted (C$/unit)	$	10.42	$	3.97
Expenses recognized during the year (note 5d)	$	3,382	$	1,987
Payments made during the year (note 18)	$	-	$	-

(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, 2021, the Company granted 509,385 stock options (year ended December 31, 2020 - 1,581,385).

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

	Year ended				Year ended
	Dec. 31, 2021				Dec. 31, 2020
	Number of shares subject to option			Weighted-average exercise price C$	Number of shares subject to option			Weighted average exercise price C$
Balance, beginning of year	1,563,189		$	3.77	-
Number of units granted during the year	509,385		$	10.42	1,581,385		$	3.77
Exercised	(326,161	)	$	3.76	-		$	-
Forfeited	(87,125	)	$	5.79	(18,196	)	$	3.76
Balance, end of year	1,659,288		$	5.71	1,563,189		$	3.77
HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2021 and 2020
---

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, 2021		Dec. 31, 2020
Weighted average share price at grant date (CAD)	$	10.42	$	3.77
Risk-free rate		1.02 %		1.14%
Expected dividend yield		0.2 %		0.5%
Expected stock price volatility (based on historical volatility)		60.5 %		57.0%
Expected life of option (months)		84		84
Weighted average per share fair value of stock options granted (CAD)	$	6.06	$	2.02

The following table outlines stock options outstanding and exercisable:

Dec. 31, 2021
Range of exercise prices C$	Number of options outstanding	Weighted average remaining contractual life (years)		Weighted average exercise price C$	Number of options exercisable		Weighted average share price at exercise 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	-	$	-
Dec. 31, 2020
---	---	---	---	---	---	---	---
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 <br>C$	Number of <br>options <br>exercisable		Weighted <br>average share <br>price at exercise <br>date C$
$3.76 - $3.92	1,156,189	6.15	$	3.77	-	$	-

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, 2021 and 2020

24. Earnings per share

	Year ended
	Dec. 31, 2021	Dec. 31, 2020
Basic and diluted weighted average common shares outstanding	261,462,323	261,272,151

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 (year ended December 31, 2020 - 1,292,840) as the Company recorded a loss in the financial periods being reported. For the year ended December 31, 2021, Hudbay calculated diluted loss per share using 261,462,323 (for the year ended December 31, 2020 - 261,272,151 common shares).

25. 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, 2021 was $1,180,274 (December 31, 2020 - $1,135,675).

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, 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 and cash equivalents, which were $270,989 as at December 31, 2021 (2020 - $439,135), together with availability under its committed credit facilities. Hudbay invests its cash and cash equivalents 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 16). 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, 2021 and 2020

26. 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, 2021				Dec. 31, 2020
		FV		CV		FV		CV
Financial assets at amortized cost
Cash^1^	$	270,989	$	270,989	$	439,135	$	439,135
Restricted cash^1^		437		437		337		337
Fair value through profit or loss
Trade and other receivables ^1,^ ^2, 3^		172,890		172,890		114,381		114,381
Non-hedge derivative assets ^4^		7,430		7,430		2,736		2,736
Investments ^5^		11,158		11,158		15,669		15,669
Total financial assets	$	462,904	$	462,904	$	572,258	$	572,258
Financial liabilities at amortized cost
Trade and other payables^1,^ ^2^		189,179		189,179		209,413		209,413
Deferred Rosemont acquisition consideration ^8^		27,518		27,518		25,961		25,961
Agreements with communities ^6^		33,947		36,273		41,912		40,787
Wheaton refund liability^10^		5,424		5,424		-		-
Senior unsecured notes ^7^		1,239,018		1,185,805		1,277,124		1,139,695
Fair value through profit or loss
Gold prepayment liability ^9^		140,008		140,008		137,031		137,031
Non-hedge derivative liabilities ^4^		12,451		12,451		15,312		15,312
Total financial liabilities	$	1,647,545	$	1,596,658	$	1,706,753	$	1,568,199

^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 14). 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 16) has been determined using the quoted market price at the period end. Fair value incorporates the fair value of the prepayment option embedded derivative. The carrying value of this embedded derivative is at FVTPL (2021: nil; 2020: $49,754) and has been determined using a binomial tree/lattice approach based on the Hull-White single factor interest rate term structure model.

^8^Discounted value based on a risk adjusted discount rate.

^9^The gold prepayment liability (note 14) 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, 2021 was a loss of $2,684 (year ended December 31, 2020 was a loss of $1,885). ^10^ Discounted value based on a market rate at inception of the applicable Wheaton contract (note 17).

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2021 and 2020

Fair value hierarchy

The table below provides an analysis by valuation method of financial instruments that are measured at fair value subsequent to recognition. 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, 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
December 31, 2020		Level 1		Level 2		Level 3		Total
---	---	---	---	---	---	---	---	---
Financial assets measured at fair value
Financial assets at FVTPL:
Non-hedge derivatives	$	-	$	2,736	$	-	$	2,736
Investments		15,669		-		-		15,669
	$	15,669	$	2,736	$	-	$	18,405
Financial liabilities measured at fair value
Financial liabilities at FVTPL:
Non-hedge derivatives	$	-	$	15,312	$	-	$	15,312
Gold prepayment liability		-		137,031		-		137,031
Financial liabilities at amortized cost:
Agreements with communities		-		-		41,912		41,912
Senior unsecured notes		1,277,124		-		-		1,277,124
	$	1,277,124	$	152,343	$	41,912	$	1,471,379
HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2021 and 2020
---

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, 2021 and year ended December 31, 2020, 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 777 reserve and resources estimates which management believes will be converted to reserves, future commodity price estimates, estimated timing of deliveries of precious metals to Wheaton and a 9.0% discount rate inherent in the original stream agreement.

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, 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. As at December 31, 2020, Hudbay had 43.4 million pounds of net copper swaps outstanding at an effective average price of $3.22/lb and settling across January to April 2021. The aggregate fair value of the transactions at December 31, 2021 was a liability of $5,440 (December 31, 2020 - a liability position of $13,198).

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

Non-hedge derivative zinc contracts

Hudbay enters into future dated fixed price sales contracts with zinc customers and, to ensure that the Company continues to receive a floating or unhedged realized zinc price, Hudbay enters into forward zinc purchase contracts that effectively offset the fixed price sales contracts. At December 31, 2021, Hudbay held contracts for forward zinc purchased of 3.1 million pounds (December 31, 2020 - 3.5 million pounds) that related to forward customer sales of zinc. Prices range from $1.44/lb to $1.52/lb (December 31, 2020 - $0.87/lb to $1.30/lb) and settlement dates extend to June 2022. The aggregate fair value of the transactions at December 31, 2021 was a net asset position of $419 (December 31, 2020 - a net asset position of $622).

(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.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2021 and 2020

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, 2021 and December 31, 2020, Hudbay's net position consisted of contracts awaiting final pricing which are as indicated below:

Metal in concentrate		Sales awaiting final pricing		Average YTD price (/unit)
	Unit	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2021
Copper	pounds<br>(in thousands)	75,681	47,901	4.42
Gold	oz	27,304	18,106	1,828
Silver	oz	125,800	123,380	23.33

All values are in US Dollars.

The aggregate fair value of provisionally priced receivables within the copper and zinc concentrate sales contracts at December 31, 2021, was an asset position of $6,500 (December 31, 2020 - an asset position of $21,295).

(d) Embedded derivatives

Prepayment option embedded derivative

The senior unsecured notes (note 16) may contain prepayment options, which represent embedded derivatives that may require bifurcation from the host contract. When bifurcation is required, the embedded derivatives are measured at fair value, with changes in the fair value being recognized as change in fair value of financial instruments on the consolidated income statements (note 5g). Neither the 2026 Notes nor the 2029 Notes contain embedded derivatives that require bifurcation from the host contract. The fair value of the embedded derivative at December 31, 2021 was nil (December 31, 2020 - $49,754).

(e) Other financial liabilities

Gold prepayment liability

The gold prepayment liability (note 14) requires settlement by physical delivery of gold ounces or equivalent gold credits. The fair value of the financial liability at December 31, 2021 was a liability of $140,008 (December 31, 2020 - $137,031).

(f) 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, 2021 and 2020

(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 and cash equivalents, 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 and cash equivalents, trade and other receivables and other financial liabilities. The Peru segment's primary financial instrument foreign currency exposure is on Peruvian soles cash and cash equivalents, 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, 2021								Dec. 31, 2020
		CAD^1^			2		PEN^3^			CAD^1^			2		PEN^3^
Cash	$	10,627		$	34,439	$	6,992		$	7,791		$	3,895	$	4,141
Trade and other receivables		595			71,458		36,470			31			43,316		36,951
Other financial assets		11,158			-		-			15,669			-		-
Trade and other payables		(6,347	)		(3,001		(17,006	)		(6,104	)		(1,419		(34,622	)
Other financial liabilities		-			-		(36,273	)		-			-		(40,787	)
	$	16,033		$	102,896	$	(9,817	)	$	17,387		$	45,792	$	(34,317	)

All values are in US Dollars.

^1^HMI is exposed to foreign currency risk on CAD.

^2^The Manitoba segment is exposed to foreign currency risk on USD.

^3^The Peru segment is exposed to foreign currency risk on PEN.

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, 2021 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, 2021 and 2020
December 31, 2021	Change of:		Would have changed2021 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
December 31, 2020	Change of:		Would have changed <br>2020 after-tax profit by:
USD/CAD exchange rate^1^	+ 10%	$	1.1		million
USD/CAD exchange rate^1^	- 10%		(1.4	)	million
USD/PEN exchange rate^2^	+ 10%		2.0		million
USD/PEN exchange rate^2^	- 10%		(2.5	)	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, 2021 and does not reflect the overall effect that changes in market variables would have on the Company's operating results.

December 31, 2021	Change of:	Would have changed 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
December 31, 2020	Change of:	Would have changed <br>2020 after-tax profit by:
Copper prices ($/lb)^1^	+ 0.30	(1.4	)	million
Copper prices ($/lb)^1^	- 0.30	1.4		million
Zinc prices ($/lb)^2^	+ 0.10	0.3		million
Zinc prices ($/lb)^2^	- 0.10	(0.3	)	million

All values are in US Dollars.

^1^ Effect on profit due to provisional pricing derivatives (note 26c) and copper fixed for floating swaps (note 26b). ^2^Effect on non-hedge zinc derivatives (note 26b).

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2021 and 2020

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, 2021 and does not reflect the overall effect that changes in market variables would have on the Company's finance expenses.

December 31, 2021	Change of:		Would have changed 2021after-tax profit by:
Share prices	+ 25%	$	2.8		million
Share prices	- 25%		(2.8	)	million
December 31, 2020	Change of:		Would have changed 2020 <br>after-tax profit by:
Share prices	+ 25%	$	3.9		million
Share prices	- 25%		(3.9	)	million

Interest rate risk

Hudbay is exposed to the following interest rate risks:

cash flow interest rate risk on its cash and cash equivalents;
fair value interest rate risk on any embedded derivative associated with its senior notes; and,
interest rate risk on its senior secured revolving credit facilities.

The only relevant risks at December 31, 2021 is interest rate risk on its cash and cash equivalents. The senior secured revolving credit facilities remain undrawn as at December 31, 2021. Neither the 2026 Notes nor the 2029 Notes contain embedded derivatives that require bifurcation from the host contract.

The only material of these risks at December 31, 2020 was the embedded derivative associated with the 2025 Notes.

This analysis only quantifies the impact of the embedded derivative on the senior notes and the interest rate risk on cash based on values as at December 31, 2021 and 2020 and does not reflect the overall effect that changes in market variables would have on the Company's finance expenses.

December 31, 2021	Change of:		Would have changed 2021 after-tax profit by:
Interest rates	+ 2.00%	$	5.4		million
Interest rates	- 2.00%		(5.4	)	million
December 31, 2020	Change of:		Would have changed <br>2020 after-tax profit by:
Interest rates	+ 2.00%	$	(29.2	)	million
Interest rates	- 2.00%		39.7		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, 2021 and 2020
---

(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 26a.

A large portion of Hudbay's cash are on deposits with major Schedule 1 Canadian banks. Deposits with Schedule 1 Canadian banks represented 76% of total cash as at December 31, 2021 (2020 - 90%). 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.

Management has a credit policy in place that requires the Company to obtain credit insurance from an investment grade credit insurance provider to mitigate exposure to credit risk in its receivables. At December 31, 2021, approximately 96% of Hudbay's trade receivables were insured or payable by letters of credit (2020 - 95% 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.

Two customers accounted for approximately 29% and 23% of total trade receivables as at December 31, 2021 (2020 - two customers accounted for approximately 40% and 16% of total trade receivables). Credit risk for these customers is assessed as medium to low. As at December 31, 2021, none of the Company's trade receivables were aged more than 30 days (2020 - 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, 2021 and 2020
Dec. 31, 2021		Carrying amount			Contractual cash flows			12 months or less			13 - 36months			37 - 60months			More than 60 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		(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.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2021 and 2020
Dec. 31, 2020		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	$	439,135		$	439,135		$	439,135		$	-		$	-		$	-
Restricted cash		337			337			337
Trade and other receivables		114,381			114,381			114,381			-			-			-
Non-hedge derivative assets		2,736			2,736			2,736			-			-			-
	$	556,589		$	556,589		$	556,589		$	-		$	-		$	-
Non-derivative financial liabilities
Trade and other payables, including embedded derivatives	$	(209,413	)	$	(209,413	)	$	(209,413	)	$	-		$	-		$	-
Agreements with communities ^1^		(40,787	)	$	(58,837	)		(12,097	)		(9,483	)		(6,578	)		(30,679	)
Deferred Rosemont acquisition consideration		(25,961	)	$	(30,000	)		-			(20,000	)		(10,000	)		-
Long-term debt, including embedded derivatives		(1,139,695	)	$	(1,726,904	)		(87,966	)		(168,188	)		(742,125	)		(728,625	)
Gold prepayment obligation ^2^		(137,031	)		(137,031	)		-			(137,031	)		-			-
	$	(1,552,887	)	$	(2,162,185	)	$	(309,476	)	$	(334,702	)	$	(758,703	)	$	(759,304	)
Derivative financial liabilities
Non-hedge derivative contracts	$	(15,312	)	$	(15,312	)	$	(15,312	)	$	-		$	-		$	-
	$	(15,312	)	$	(15,312	)	$	(15,312	)	$	-		$	-		$	-

^1^ Represents the Peru community agreement obligation, excluding interest. ^2^ Discounted.

27. Commitments and contingencies

(a) 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:

		2021		2020
Within one year	$	19,092	$	58,173
After one year but not more than five years		2,631		2,192
More than five years		-		-
	$	21,723	$	60,365

(b) Capital commitments

As at December 31, 2021, Hudbay had outstanding capital commitments in Canada of approximately $37,476 of which $32,709 can be terminated, approximately $31,918 in Peru, all of which can be terminated, and approximately $180,441 in Arizona, primarily related to the Rosemont project, of which approximately $87,928 can be terminated by Hudbay.

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2021 and 2020

(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, no significant contingent liabilities have been recorded in these consolidated financial statements.

28. Related parties

(a) Group companies

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

				Beneficial ownership of ultimate controlling party (Hudbay Minerals Inc.)
Name	Jurisdiction	Business	Entity's Parent	2021	2020
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	Peru Inc.	100%	100%
HudBay (BVI) Inc.	British Virgin Islands	Precious metals sales	Peru Inc.	100%	100%
Hudbay Arizona Inc.	British Columbia	Holding company	HMI	100%	100%
Rosemont Copper Company	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, 2021 and 2020

(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:

		2021		2020
Short-term employee benefits^1^	$	10,283	$	7,951
Post-employment benefits		837		639
Long-term share-based awards		6,737		6,381
	$	17,857	$	14,971

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

29. Supplementary cash flow information

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

		Year ended<br>December 31,
		2021			2020
Loss on disposal of property, plant & equipment (note 5f)	$	7,038		$	5,088
Closure cost adjustment - non-producing properties (note 5f)		(4,602	)		2,721
Share based compensation paid		(6,782	)		(3,143	)
Pampacancha delivery obligation paid		-			(10,856	)
Restructuring - Manitoba (note 5f)		6,947			-
Other		565			6,593
	$	3,166		$	403

(b) Change in non-cash working capital:

		Year ended<br>December 31,
		2021			2020
Change in:
Trade and other receivables	$	(60,978	)	$	(37,720	)
Other financial assets/liabilities		(7,758	)		4,077
Inventories		(32,752	)		(2,867	)
Prepaid expenses		1,663			(3,722	)
Trade and other payables		(11,549	)		36,247
Provisions and other liabilities		7,328			1,602
	$	(104,046	)	$	(2,383	)
HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2021 and 2020
---

(c) Non-cash transactions:

During the year ended December 31, 2021 and 2020, 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 for the year ended December 31, 2021 led to an increase in related property, plant and equipment assets of $144,016 (year ended December 31, 2020 - a net increase of $46,792) mostly related to changes to estimated cash flows in the Manitoba business unit following an updated closure plan and changes to discount rates associated with remeasurement of the liabilities.
Property, plant and equipment included $49,695 (year ended December 31, 2020 - $17,759) of capital additions related to the recognition of ROU assets. Property, plant and equipment and other assets include $22,796 of capital additions related to agreements with communities (year ended December 31, 2020 - $116,233).

HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2021 and 2020

30. 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 profitability of the overall operation 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 metal 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 Rosemont and Copper World projects 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, 2021
		Manitoba			Peru		Arizona			Corporate and other 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 obligation		193,473			-		-			-			193,473
Gross (loss) profit		(75,934	)		206,953		-			-			131,019
Selling and administrative expenses		-			-		-			43,011			43,011
Exploration and evaluation expenses		5,769			9,218		24,935			39			39,961
Other expenses (income)		10,620			10,491		13,399			(4,731	)		29,779
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	)
HUDBAY MINERALS INC.Notes to Audited Consolidated Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>Years ended December 31, 2021 and 2020
---
Year ended December 31, 2020
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
		Manitoba		Peru			Arizona			Corporate <br>and other <br>activities			Total
Revenue from external customers	$	615,699	$	476,719		$	-		$	-		$	1,092,418
Cost of sales
Mine operating costs		391,504		300,087			-			-			691,591
Depreciation and amortization		177,552		184,275			-			-			361,827
Gross profit (loss)		46,643		(7,643	)		-			-			39,000
Selling and administrative expenses		-		-			-			41,408			41,408
Exploration and evaluation expenses		6,491		6,295			3,870			540			17,196
Other expenses		8,382		4,901			2,066			2,234			17,583
Results from operating activities	$	31,770	$	(18,839	)	$	(5,936	)	$	(44,182	)	$	(37,187	)
Net interest expense on long term debt													82,712
Accretion on streaming arrangements													56,670
Change in fair value of financial instruments													(29,370	)
Other net finance costs													31,890
Loss before tax													(179,089	)
Tax recovery													(34,505	)
Loss for the year												$	(144,584	)
December 31, 2021
---	---	---	---	---	---	---	---	---	---	---
		Manitoba		Peru		Arizona		Corporateand other 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 and other 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, 2021 and 2020
---
December 31, 2020
---	---	---	---	---	---	---	---	---	---	---
		Manitoba		Peru		Arizona		Corporate<br>and other <br>activities		Total
Total assets	$	801,691	$	2,535,939	$	718,982	$	610,033	$	4,666,645
Total liabilities		562,013		973,756		76,926		1,354,144		2,966,839
Property, plant and equipment^1^		699,884		2,290,097		709,939		31,735		3,731,655

^1^Included in Corporate and Other activities is $27.5 million of property, plant and equipment that is located in Nevada.

December 31, 2020
		Manitoba		Peru		Arizona		Corporate <br>and other <br>activities		Total
Additions to property, plant and equipment	$	159,313	$	208,805	$	18,640	$	32	$	386,790

Geographical Segments

The following tables represent revenue information regarding Hudbay's geographical segments for the years ended December 31, 2021 and 2020:

		2021		2020
Revenue by customer location^1^
Canada	$	515,967	$	422,403
China		349,143		215,278
United States		219,853		206,906
Switzerland		166,261		55,703
Peru		82,598		56,437
Singapore		80,668		29,314
Germany		37,335		11,725
Japan		20,524		-
Chile		10,773		9,967
Philippines		4,050		77,575
Other		14,826		7,110
	$	1,501,998	$	1,092,418

^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, 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.

During the year ended December 31, 2020, eight customers accounted for approximately 36%, 17%, 13%, 7%, 7%, 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, 2021

February 23, 2022

TABLE OF CONTENTS	Page
Introduction	1
Our Business	1
Strategy	2
Summary of Results	4
Key Financial Results	8
Key Production Results	9
Key Costs Results	10
Recent Developments	11
Peru Operations Review	13
Manitoba Operations Review	18
Outlook	26
Financial Review	36
Liquidity and Capital Resources	47
Financial Risk Management	52
Trend Analysis and Quarterly Review	54
Non-IFRS Financial Performance Measures	58
Accounting Changes	74
Critical Accounting Judgments and Estimates	74
Disclosure Controls and Procedures and Internal Control Over Financial Reporting	76
Notes to Reader	77
Summary of Historical Results	80

INTRODUCTION

This Management's Discussion and Analysis ("MD&A") dated February 23, 2022 is intended to supplement Hudbay Minerals Inc.'s audited consolidated financial statements and related notes for the year ended December 31, 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, 2021.

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 our MD&A. Please also refer to the risks discussed under the heading "Financial Risk Management" 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 our MD&A.
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 74 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 primarily producing copper concentrate (containing copper, gold, and silver), gold/silver doré, molybdenum concentrate and zinc metal. Directly and through our subsidiaries, we own three polymetallic mines, four ore concentrators and a zinc production facility in northern Manitoba and Saskatchewan (Canada) and Cusco (Peru), and copper projects in Arizona and Nevada (United States). 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 has the best long-term supply/demand fundamentals in the mining industry 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 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 base by executing a consistent long-term copper growth strategy. 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 has the best long-term supply/demand fundamentals in the mining industry as global copper mine supply will be unable to meet demand from global decarbonization initiatives. While our primary focus is on copper, we appreciate the polymetallic nature of deposits and, in particular, the counter-cyclical nature of gold production in our portfolio;
Quality: We are focused on investing in long-life, low-cost 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 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 real value is created through leveraging Hudbay's leadership to drive safe and efficient operations and effective project exploration and development 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 2022 are to:

Deliver meaningful copper and gold production growth to generate positive cash flow and strong returns on invested capital;
Accelerate drilling, economic studies and permitting activities for the recently discovered Copper World deposits and identify synergies with Rosemont to unlock value;
Execute the third phase of our Snow Lake gold strategy by optimizing the New Britannia mill, preparing for the ramp up to 5,300 tonnes per day at Lalor and initiating the Stall mill recovery improvement program;
Progress Constancia's leading efficiency metrics by applying smart technologies to continuously improve operating performance, including sensor-based ore sorting and milling flowsheet enhancements;
Reach a community agreement to explore the prospective properties near Constancia;
Transition the Flin Flon operations through orderly closure while further exploring the potential to reprocess tailings in Flin Flon;
Conduct brownfield and greenfield exploration programs in the Snow Lake region, Peru, Arizona, Nevada and Chile for new mineral discoveries;
Define greenhouse gas emissions reduction targets to further enhance our ESG objectives; and,
Evaluate 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

Consolidated copper production of 99,470 tonnes and consolidated gold production of 193,783 ounces increased by 4% and 55%, respectively, in 2021 as compared to 2020.
Achieved 2021 consolidated copper, gold and silver production guidance while zinc production fell short of the 2021 guidance range.
Peru copper production met 2021 guidance with strong operating performance in the fourth quarter, aided by the continued ramp up of Pampacancha. Manitoba zinc production was below 2021 guidance primarily due to higher dilution and mine plan limitations at the 777 mine as it approaches closure.
Record quarterly consolidated gold production of 64,159 ounces in the fourth quarter, an increase of 18% compared to the third quarter of 2021, due to higher grades at Pampacancha and the commissioning of the New Britannia mill.
Generated record quarterly revenue of $425.2 million. Operating cash flow before change in non-cash working capital was $156.9 million and adjusted EBITDA^1^was $180.3 million in the fourth quarter of 2021, due to higher realized base metals prices and higher gold and copper sales volumes, partially offset by lower zinc sales volumes.
Fourth quarter net loss and loss per share were $10.5 million and $0.04, respectively. After adjusting for an impairment charge related to a revaluation of our Flin Flon environmental obligation due to lower long term discount rates in the fourth quarter, amongst other items, fourth quarter adjusted net earnings^1^ per share was $0.13.
Full year, consolidated cash cost and sustaining cash cost per pound of copper produced, net of by-product credits^1^, of $0.74 and $2.07, respectively, achieved 2021 guidance as inflationary cost pressures were offset by strong by-product credits.
Consolidated cash cost and sustaining cash cost per pound of copper produced, net of by-product credits^1^, for the fourth quarter of 2021 were $0.51 and $1.95, respectively, a decrease of 18% and an increase of 1%, respectively, compared to the third quarter of 2021.

Executing on Growth Initiatives

New Britannia achieved commercial production on November 30, 2021. December mill throughput averaged 1,200 tonnes per day with gold and silver recoveries in line with metallurgical models. Throughput and recoveries are expected to achieve design rates in the second quarter of 2022.
Published an initial mineral resource estimate for Copper World on December 15, 2021, which contained a higher-grade, near-surface zone that has the potential to be mined earlier in the mine life and is composed of both sulphide and oxide mineralogy. The Company remains on track to complete a preliminary economic assessment of Copper World in the first half of 2022.
Results from the Constancia Norte underground scoping study are expected to be incorporated into the annual mineral reserve and resource update for Constancia in March 2022.
Commenced a winter drilling program in Manitoba in January 2022 to test high-priority targets near Lalor and 1901 for potential reserve and resource expansion and support the completion of a preliminary economic assessment of the Flin Flon tailings reprocessing opportunity.

2022 Annual Guidance and Outlook

Consolidated copper production is forecast to increase by 17% to 116,000^2^ tonnes in 2022 and by 34% to 133,500^2^ tonnes in 2024, compared to 2021, with higher copper grades expected from the Pampacancha deposit in Peru.
Consolidated gold production is forecast to increase by 28% to 247,500^2^ ounces in 2022 and by 59% to 307,500^2^ ounces in 2024, compared to 2021, due to higher production from the New Britannia mill and Pampacancha.
Introduced 2022 cash cost guidance by business unit with Peru cash cost of $1.10 to $1.40 per pound of copper produced, net of by-product credits^1^, and Manitoba cash cost of $300 to $550 per ounce of gold produced, net of by-product credits^1^.
2022 unit operating costs are expected to increase by approximately 7%^2^ in Peru and 15%^2^ in Manitoba, compared to 2021, as a result of expected higher input costs due to industry wide inflation in each region and the transition of operations in Manitoba.
Consolidated cash cost guidance of $0.60 to $1.05^1^ and consolidated sustaining cash cost guidance of $1.60 to $2.25^2^, in each case, per pound of copper produced, net of by-product credits, is expected in 2022.
Total capital expenditures are expected to decline by 17% year-over-year as major growth investment programs in Peru and Manitoba were completed in 2021 and lower sustaining capital spending is expected in Peru, offset by higher growth spending on technical and economic studies for Copper World.
Exploration spending of approximately $65.0 million in 2022 reflects plans to continue drilling activities at Copper World and test promising targets in Peru, Manitoba, Nevada and Chile.

Summary of Fourth Quarter Results

Cash generated from operating activities in the fourth quarter of 2021 decreased to $95.8 million compared to $121.1 million in the same quarter of 2020. Operating cash flow before change in non-cash working capital was $156.9 million during the fourth quarter of 2021, reflecting an increase of $70.8 million compared to the same period of 2020. The increase in operating cash flow is primarily the result of higher realized base metal prices and higher gold and copper sales volumes, partially offset by lower zinc sales volumes.

Consolidated copper production in the fourth quarter of 2021 increased by 3% compared to the same period in 2020 primarily as a result of higher throughput in Peru and Manitoba, partially offset by lower grades in Manitoba. Consolidated gold production in the fourth quarter of 2021 increased by 98% compared to the fourth quarter of 2020, due to higher gold grades from Pampacancha and higher gold recoveries in Peru, along with significantly higher gold grades at Lalor. Consolidated zinc production in the quarter decreased by 10%, versus the comparative quarter in 2020, primarily 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 increased by 23% compared to the same period in 2020, as a result of higher grades in Manitoba and Peru offset by lower recoveries in Peru.

Net loss and loss per share in the fourth quarter of 2021 were $10.5 million and $0.04, respectively, compared to a net earnings and earnings per share of $7.4 million and $0.03, respectively, in the fourth quarter of 2020. Fourth quarter results were negatively impacted by a revaluation of our environmental obligation due to lower long term discount rates since the middle of the year and a corresponding increase to Flin Flon's property plant and equipment ("PP&E"). As the closure of the 777 mine and Flin Flon operations is expected to commence within several months, an impairment charge was made to PP&E resulting in a loss of $46.2 million. The quarterly financial results were also negatively impacted by $13.3 million in mark-to-market net losses arising from the revaluation of the gold prepayment liability, revaluation of certain other financial instruments, share-based compensation, and a $3.4 million Flin Flon restructuring charge.

Adjusted net earnings^1^and adjusted net earnings per share^1^ in the fourth quarter of 2021 were $32.7 million and $0.13 per share, respectively, after adjusting for the impairment charge related to the revaluation of our environmental obligation in Flin Flon, among other items. This compares to an adjusted net loss and adjusted net loss per share of $16.4 million, and $0.06 per share in the same period of 2020. Fourth quarter adjusted EBITDA^1^was $180.3 million, compared to $106.9 million in the same period of 2020.

In the fourth quarter of 2021, consolidated cash cost per pound of copper produced, net of by-product credits^1^, was $0.51, compared to $0.43 in the same period in 2020. This increase was a result of higher operating costs in Peru and Manitoba, partially offset by higher gold by-product credits and higher copper production.

As at December 31, 2021, our liquidity includes $271.0 million in cash as well as undrawn availability of $346.9 million under our revolving credit facilities. The Company's liquidity position was further enhanced in October 2021 through the renegotiation of our credit facilities to increase available borrowings to $450.0 million and extend the maturity to 2025.

Summary of Full Year Results

Cash generated from operating activities increased to $383.8 million in 2021 from $239.5 million in 2020. Operating cash flow before change in non-cash working capital increased to $483.9 million from $241.9 million in 2020. The increase is the result of higher realized base metal and molybdenum prices and higher sales volumes of gold and copper, partially offset by lower zinc sales volumes.

On a consolidated basis, our copper, gold and silver production met 2021 guidance; however, production of zinc and molybdenum fell short of our 2021 guidance ranges. Production of gold in Peru exceeded the top end of the guidance range due to strong gold grades from Pampacancha. Production of gold and silver in Manitoba fell below our 2021 guidance range primarily due to higher than expected grade dilution at the 777 mine during the fourth quarter and prioritizing base metal rich zones in the fourth quarter at Lalor while deferring some gold-rich ore for future processing at New Britannia to achieve higher gold recoveries. Zinc production was impacted by higher dilution and mine plan limitations as the 777 mine approaches the end of life.

Net loss and loss per share for 2021 were $244.4 million and $0.93, respectively, compared to a net loss and loss per share of $144.6 million and $0.55, respectively, in 2020. Contributing to the 2021 net loss was an impairment charge of $193.5 million related to an updated closure plan reflecting higher estimates for closure activities in Flin Flon. Full year results were also negatively impacted by charges related to the refinancing of the 2025 senior notes, including a write off of the non-cash embedded derivative of $49.8 million connected with the exercise of the redemption option and a call premium payment of $22.9 million, as well as a $12.4 million Flin Flon restructuring charge.

Consolidated cash costs per pound of copper produced, net of by-product credits^1^, for 2021 increased to $0.74 from $0.60 in 2020 and consolidated sustaining cash cost per pound of copper produced, net of by-product credits^1^, for 2021 increased to $2.07 from $1.93 in 2020, in line with our 2021 guidance range.

^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 per ounce of gold produced, net of by-product credits, 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 Reporting Measures" section of this MD&A.

^2^ Assumes the mid-point of the guidance range is achieved.

KEY FINANCIAL RESULTS

Financial Condition	Dec. 31, 2020
(in thousands)
Cash	$ 439,135
Total long-term debt	1,135,675
Net debt1	696,540
Working capital2	306,888
Total assets	4,666,645
Equity	1,699,806

All values are in US Dollars.

^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 Reporting 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.

Financial Performance	Three months ended		Year ended
(in $ thousands, except per share amounts)	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2021	Dec. 31, 2020
Revenue	$ 425,170	$ 322,290	$ 1,501,998	$ 1,092,418
Cost of sales	343,426	287,923	1,370,979	1,053,418
(Loss) earnings before tax	(149)	911	(202,751)	(179,089)
Net (loss) earnings	(10,453)	7,406	(244,358)	(144,584)
Basic and diluted (loss) earnings per share	(0.04)	0.03	(0.93)	(0.55)
Adjusted earnings (loss) per share^1^	0.13	(0.06)	0.09	(0.46)
Operating cash flow before precious metal stream deposit and changes in non-cash working capital^2^	156.9	86.1	483.9	241.9
Adjusted EBITDA^1,2^	180.3	106.9	547.1	306.7

^1^ Adjusted earnings (loss) 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 Reporting Measures" section of this MD&A.

^2^ In millions.

KEY PRODUCTION RESULTS

		Three months ended			Three months ended
	Dec. 31, 2021			Dec. 31, 2020
	Peru	Manitoba	Total	Peru	Manitoba	Total
Contained metal in concentrate and doré produced ^1^
Copper	tonnes	22,856	5,342	28,198	21,554	5,724	27,278
Gold	oz	17,917	46,242	64,159	3,689	28,687	32,376
Silver	oz	578,140	321,573	899,713	477,775	252,904	730,679
Zinc	tonnes	-	23,207	23,207	-	25,843	25,843
Molybdenum	tonnes	275	-	275	333	-	333
Payable metal sold
Copper	tonnes	20,551	4,408	24,959	18,583	4,380	22,963
Gold^2^	oz	16,304	40,623	56,927	3,297	31,882	35,179
Silver^2^	oz	380,712	257,928	638,640	480,843	281,541	762,384
Zinc^3^	tonnes	-	21,112	21,112	-	28,431	28,431
Molybdenum	tonnes	245	-	245	457	-	457

^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.

		Year ended			Year ended
	Dec. 31, 2021			Dec. 31, 2020
	Peru	Manitoba	Total	Peru	Manitoba	Total
Contained metal in concentrate and doré produced ^1^
Copper	tonnes	77,813	21,657	99,470	73,150	22,183	95,333
Gold	oz	50,306	143,477	193,783	12,395	112,227	124,622
Silver	oz	1,972,949	1,072,532	3,045,481	1,622,972	1,127,901	2,750,873
Zinc	tonnes	-	93,529	93,529	-	118,130	118,130
Molybdenum	tonnes	1,146	-	1,146	1,204	-	1,204
Payable metal sold
Copper	tonnes	71,398	20,802	92,200	68,506	20,382	88,888
Gold^2^	oz	41,807	126,551	168,358	10,986	111,963	122,949
Silver^2^	oz	1,490,651	936,857	2,427,508	1,518,548	1,067,038	2,585,586
Zinc^3^	tonnes	-	96,435	96,435	-	109,347	109,347
Molybdenum	tonnes	1,098	-	1,098	1,321	-	1,321

^1^Metal reported in concentrate and doré 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.

KEY COST RESULTS

		Three months ended		Year ended		Guidance
		Dec. 31, 2021	Dec. 31, <br>2020	Dec. 31,2021	Dec. 31, <br>2020	Annual<br><br> <br>2021
Consolidated cash cost per pound of copper produced^1^
Cash cost ^1^	$/lb	0.51	0.43	0.74	0.60	0.65 - 0.80
Peru	$/lb	1.28	1.47	1.54	1.45
Manitoba	$/lb	(2.77)	(3.48)	(2.11)	(2.20)
Sustaining cash cost ^1^	$/lb	1.95	1.97	2.07	1.93	2.05 - 2.30
Peru	$/lb	2.46	2.58	2.46	2.20
Manitoba	$/lb	(0.23)	(0.36)	0.69	1.02
All-in sustaining cash cost^1^	$/lb	2.20	2.24	2.30	2.16
Combined mine/mill unit operating cost per tonne of copper processed^1,2^
Peru ^3^	$/tonne	10.47	10.17	11.39	9.46	8.90 - 10.90
Manitoba	C$/tonne	168	140	154	132	145 - 155
Zinc Plant unit operating cost per tonne of zinc processed^1,4^
Unit operating costs	C$/lb	0.63	0.45	0.55	0.47	0.50 - 0.55

^1^Cash cost, sustaining cash cost, all-in sustaining cash cost per pound of copper 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 Reporting Measures" section of this MD&A. ^2^Reflects combined mine, mill and G&A costs per tonne of milled ore. Peru costs reflect the deduction of expected capitalized stripping costs. ^3^ Includes approximately $4.1 million, or $0.51 per tonne, of COVID-related costs during the three months ended December 31, 2021 and $19.8 million, or $0.69 per tonne during the year ended December 31, 2021. ^4^ Zinc plant unit operating costs include G&A costs per pound of zinc processed.

RECENT DEVELOPMENTS

COVID-19 Business Update

We are maintaining COVID-19 measures and controls to ensure the safety of our workforce, partners and communities. This has contributed to increased operating costs beyond levels initially budgeted for 2021. Despite the maintenance of these stringent measures, we continue to experience intermittent operational supply chain, travel, labour and shipping disruptions with periodic waves of COVID-19 cases.

New Britannia Commercial Production Achieved

The construction of a new copper flotation facility at New Britannia was completed in October 2021, followed by a brief commissioning period that was completed ahead of schedule. The New Britannia mill achieved commercial production on November 30, 2021 after reaching the required recoveries and throughput in the copper and gold circuits. The ramp up of throughput, recoveries and metal production at New Britannia achieved best-in-class timelines as represented by widely recognized ramp-up curves.

The New Britannia mill is expected to average 1,500 tonnes per day in 2022 with continued ramp-up activities and rod mill liner maintenance scheduled during the first quarter. Full design throughput rates and recoveries are expected to be achieved in the second quarter of 2022, a mere six months after commissioning.

Average annual gold production from Lalor and the Snow Lake operations is expected to increase to over 180,000 ounces at an average cash cost and sustaining cash cost, net of by-product credits, of $412 and $788 per ounce of gold, respectively, during the first six full years of New Britannia's operation.

Advancing the Copper World Discovery

On December 15, 2021, we released a National Instrument 43-101 ("NI 43-101") initial mineral resource estimate for the recently discovered Copper World deposits in Arizona. The 100% owned Copper World project is located in close proximity to the 100% owned Rosemont deposit, with mineralization closer to surface than Rosemont. The Copper World project consists of seven deposits extending over seven kilometres, including Bolsa, Broad Top Butte, Copper World, Peach, Elgin, South Limb and North Limb.

Copper World's initial mineral resource estimate includes global indicated mineral resources of 272 million tonnes at 0.36% copper and inferred mineral resources of 142 million tonnes at 0.36% copper. The global resource estimate includes near surface, higher grade indicated mineral resources of 96 million tonnes at 0.57% copper and inferred mineral resources of 31 million tonnes at 0.71% copper, with the potential for this higher grade resource to be mined earlier in the mine life. Resources comprise both sulphide and oxide mineralogy and are potentially amenable to flotation and heap leach processing methods, respectively.

We have increased the number of drill rigs at site to six to conduct infill drilling and to support future economic studies. The technical studies for Copper World are well-advanced and the results will be incorporated into a Preliminary Economic Assessment ("PEA") contemplating the development of the Copper World deposits in conjunction with the Rosemont deposit. The PEA is also expected to reflect preliminary expectations of potential synergies between Copper World and Rosemont. We are on track to publish the PEA results in a NI 43-101 Technical Report in the first half of 2022.

We continue to await a decision from the U.S. Court of Appeals for the Ninth Circuit relating to the appeal of the unprecedented Rosemont court decision.

Other Exploration Updates

Peru Regional Exploration

We continue drilling and scoping studies to evaluate the underground potential at Constancia Norte, and the results are expected to be incorporated into the annual mineral reserve and resource update for Constancia in March 2022. We also continue to progress exploration agreement discussions with nearby communities on prospective properties near Constancia.

Drilling continues at the Llaguen copper porphyry target in northern Peru, near the city of Trujillo and in close proximity to existing infrastructure. The confirmatory phase of the drill program has totaled over 7,000 metres in 16 holes with two drill rigs presently turning at site. Assay results have been received for five holes with all holes intersecting mineralization. Pending positive results from this initial drilling phase, a second phase of the project will aim at defining an initial inferred mineral resource estimate for Llaguen to be completed in the third quarter of 2022.

Snow Lake Regional Exploration

The Company is actively conducting surface and underground winter drilling activities in the Snow Lake area, primarily focused on testing down-plunge extensions of the copper-gold rich feeder zone at the 1901 deposit, the drilling gap between 1901 and lens 17 at Lalor, and a high-priority geophysical target located immediately north of Lalor. In addition, we continue to compile drilling results from the 2021 program at Lalor and 1901, which are expected to be incorporated into the annual mineral reserve and resource estimates to be published at the end of March 2022.

Flin Flon Reclamation Obligations and Tailings Reprocessing Opportunity

In early January 2022, we commenced a confirmatory drill program on the tailings facility in Flin Flon to support the completion of a PEA on the tailings reprocessing opportunity by the first quarter of 2023. The company is also conducting engineering and test work throughout 2022 to support the PEA. This opportunity could utilize the Flin Flon concentrator, with modifications, after the closure of the 777 mine, creating operating and economic benefits to the Flin Flon community. It could also provide the opportunity to redesign the closure plans, increase metal production, defer or reduce certain closure costs and reduce the environmental footprint of the tailings facility.

Dividend Declared

A semi-annual dividend of C$0.01 per share was declared on February 23, 2022. The dividend will be paid out on March 25, 2022 to shareholders of record as of March 8, 2022.

PERU OPERATIONS REVIEW

		Three months ended		Year ended		Guidance
	Dec. 31, 2021	Dec. 31,<br>2020	Dec. 31, 2021	Dec. 31, <br>2020	Annual
					2021	2022
Constancia ore mined ^1^	tonnes	7,742,469	9,313,784	29,714,327	27,529,950
Copper	%	0.33	0.31	0.31	0.32
Gold	g/tonne	0.04	0.03	0.04	0.03
Silver	g/tonne	2.81	2.61	2.88	2.75
Molybdenum	%	0.01	0.01	0.01	0.02
Pampacancha ore mined ^1^	tonnes	2,107,196	-	5,141,001	-
Copper	%	0.27	-	0.27	-
Gold	g/tonne	0.34	-	0.30	-
Silver	g/tonne	4.26	-	4.02	-
Molybdenum	%	0.01	-	0.01	-
Ore milled	tonnes	8,048,925	7,741,714	28,809,755	26,297,318
Copper	%	0.33	0.33	0.32	0.34
Gold	g/tonne	0.11	0.03	0.08	0.03
Silver	g/tonne	3.67	2.74	3.35	2.87
Molybdenum	%	0.01	0.02	0.01	0.02
Copper concentrate	tonnes	96,123	94,552	335,490	321,395
Concentrate grade	% Cu	23.78	22.80	23.19	22.76
Copper recovery	%	86.0	85.3	84.6	83.0
Gold recovery	%	63.6	52.7	64.6	49.8
Silver recovery	%	60.8	70.1	63.7	66.9
Molybdenum recovery	%	26.7	28.4	31.5	29.4
Combined unit operating costs^2.3,4^	$/tonne	10.47	10.17	11.39	9.46	8.90 - 10.90	10.10 - 12.90^5^

^1^Reported tonnes and grade for ore mined are estimates based on mine plan assumptions and may not reconcile fully 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 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.

^4^Includes approximately $4.1 million, or $0.51 per tonne, of COVID-related costs during the three months ended December 31, 2021 and $19.8 million, or $0.69 per tonne during the year ended December 31, 2021.

^5^ Combined unit cost guidance for 2022 excludes COVID-19 related costs.

Peru has experienced notable improvements in COVID-19 health statistics throughout 2021. Our Peru operations did not encounter any major COVID-19 interruptions during the year; however, with the recent emergence of the Omicron variant in Peru, we continue to maintain stringent COVID-19 measures and controls to ensure the safety of our workforce and this has contributed to elevated unit operating costs during 2021.

Total ore mined during the fourth quarter of 2021 increased by 6% from the comparative 2020 period as mining operations at the higher grade Pampacancha deposit have fully ramped up. Ore mined at Pampacancha in 2021 was 5.1 million tonnes, exceeding the four million tonne threshold required to receive an additional $4 million deposit from Wheaton Precious Metals ("Wheaton") under the amended Constancia streaming agreement. The proceeds of this deposit were received in December 2021 and were accounted for as an increase in our deferred revenue balance.

Ore milled during the fourth quarter of 2021 was 4% higher than the same period in 2020. Milled copper grades in the fourth quarter of 2021 remained consistent compared to the same period in 2020, but have improved relative to the second and third quarter of 2021. Gold grades mined at Pampacancha were significantly higher than in previous quarters, which contributed to gold production exceeding the upper end of the 2021 guidance range.

Copper recoveries in the fourth quarter sightly increased over the comparative 2020 period due to lower oxide levels in the Constancia ore. Recoveries of gold in the fourth quarter of 2021 were significantly above the comparative 2020 period, mainly due to higher grades from Pampacancha, while silver recoveries decreased due to less favorable metallurgical characteristics of the earlier ores from Pampacancha. Recently completed metallurgical test work indicates that Pampacancha silver recoveries should increase to normal levels in 2022 with some sections of the deposit remaining at risk of lower recoveries due to the presence of certain contaminants.

Combined unit operating costs in the fourth quarter of 2021 were 3% higher than the same period in 2020 primarily due to inflationary pressures on consumable and energy costs offset in part by additional tonnes milled. More specifically, costs were higher in the fourth quarter of 2021 as a result of increased ore hardness, higher steel prices affecting grinding media costs, higher fuel prices affecting mining costs, higher community costs and lower capitalized stripping. Full year combined unit operating costs were 20% higher than the same period in 2020 due to the same factors as described above for the quarter-over-quarter variance as well as increases in material moved and higher COVID-19 expenditures.

COVID-related costs in Peru were $4.1 million in the fourth quarter of 2021. Combined unit operating costs in the fourth quarter were $9.96 per tonne excluding these COVID-related costs. COVID-related costs in 2021 were $19.8 million, $13.6 million of which were not budgeted. Excluding these unbudgeted COVID-related costs, combined unit operating costs for the full year 2021 were $10.92 per tonne, slightly above the upper end of our 2021 combined unit cost guidance.

Contained metal in concentrate produced		Three months ended			Year ended			Guidance
	Dec. 31, 2021	Dec. 31, <br>2020		Dec. 31,2021	Dec. 31, <br>2020		Annual
							2021	2022
Copper	tonnes	22,856	21,554		77,813	73,150		72,000 - 88,000	89,000 - 115,000
Gold	oz	17,917	3,689		50,306	12,395		40,000 - 50,000	70,000 - 90,000
Silver	oz	578,140	477,775		1,972,949	1,622,972		1,800,000 - 2,170,000	1,620,000 - 2,100,000
Molybdenum	tonnes	275	333		1,146	1,204		1,400 - 1,700	1,100 - 1,400

Copper production was higher in the fourth quarter of 2021 due to an increase in throughput and recovery compared to the same period in 2020. Gold and silver production was also higher in the fourth quarter of 2021 compared to the same period in 2020 due to significantly higher gold and silver head grades from Pampacancha and higher gold recoveries.

Full year 2021 copper production increased by 6% year-over-year to 77,813 tonnes, within the annual guidance range. Full year 2021 gold production increased by 306% year-over-year to 50,306 ounces and exceeded the 2021 guidance range due to increased throughput, higher grades from Pampacancha and higher gold recoveries. Full year 2021 production guidance was met for all metals except molybdenum, which was in line with our mine plan published in March 2021.

Peru Cash Cost and Sustaining Cash Cost

		Three months ended				Year ended			Guidance^2^
	Dec. 31, 2021		Dec. 31, <br>2020		Dec. 31, 2021		Dec. 31, <br>2020	Annual<br><br> <br>2022
Cash cost per pound of copper produced, net of by-product credits^1^	$/lb	1.28		1.47		1.54		1.45	1.10 - 1.40
Sustaining cash cost per pound of copper produced, net of by-product credits^1^	$/lb	2.46		2.58		2.46		2.20

^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. ^2^ Peru cash cost guidance was introduced in 2022.

Cash cost per pound of copper produced, net of by-product credits, for the fourth quarter and full year ended December 31, 2021 were $1.28 and $1.54, respectively. The cash costs in the fourth quarter of 2021 decreased 13% compared to the same period in 2020 due to higher copper production and higher by-product credits from gold, partially offset by higher overall mining and general and administrative costs.

Full year 2021 cash costs increased 6% compared to the same period in 2020 due to comparatively higher mining, milling, general and administrative costs in 2021 as a result of lower capitalized stripping, increased ore hardness, higher steel and fuel prices, and higher COVID-19 related expenditures, partially offset by higher by-product credits from gold and higher copper production.

Sustaining cash cost per pound of copper produced, net of by-product credits for the fourth quarter of 2021 was $2.46, which decreased by 5% compared to the same period of 2020 mainly due to the same factors affecting cash costs noted above partially offset by expenditures related to several new projects contributing to higher sustaining costs. Full year 2021 sustaining cash cost per pound of copper produced, net of by-product credits increased by 12% to $2.46, compared to the same period of 2020, mainly due to the same factors affecting full year 2021 cash costs noted above, as well as higher sustaining capital expenditures on a comparative basis due to lower expenditures incurred during the eight-week COVID-related suspension of operations in 2020.

Metal Sold

		Three months ended				Year ended
	Dec. 31, 2021		Dec. 31, <br>2020		Dec. 31, 2021		Dec. 31, <br>2020
Payable metal in concentrate
Copper	tonnes	20,551		18,583		71,398		68,506
Gold	oz	16,304		3,297		41,807		10,986
Silver	oz	380,712		480,843		1,490,651		1,518,548
Molybdenum	tonnes	245		457		1,098		1,321

Quantities of payable metal sold for the year ended December 31, 2021 were primarily affected by the same factors as contained metal production.

MANITOBA OPERATIONS REVIEW

Mines

		Three months ended			Year ended
	Dec. 31, 2021	Dec. 31, 2020		Dec. 31, 2021	Dec. 31, 2020
Lalor
Ore	tonnes	422,208	468,101		1,593,141	1,654,240
Copper	%	0.78	0.80		0.71	0.74
Zinc	%	4.19	5.54		4.23	5.73
Gold	g/tonne	3.92	2.79		3.41	2.51
Silver	g/tonne	30.35	24.96		24.66	25.31
777
Ore	tonnes	266,744	164,856		1,053,710	991,576
Copper	%	1.13	1.89		1.28	1.40
Zinc	%	4.16	2.98		3.91	3.88
Gold	g/tonne	1.80	1.85		2.03	1.90
Silver	g/tonne	25.02	21.64		25.25	24.13
Total Mines
Ore	tonnes	688,952	632,957		2,646,851	2,645,816
Copper	%	0.91	1.08		0.94	0.98
Zinc	%	4.18	4.87		4.10	5.04
Gold	g/tonne	3.10	2.55		2.86	2.29
Silver	g/tonne	28.29	24.10		24.90	24.87
Unit Operating Costs^1,2^		Three months ended			Year ended
---	---	---	---	---	---	---
	Dec. 31, 2021	Dec. 31, 2020		Dec. 31, 2021	Dec. 31, 2020
Mines
Lalor	C$/tonne	112.34	98.74		114.95	96.51
777	C$/tonne	100.34	87.17		91.12	79.94
Total Mines	C$/tonne	107.69	95.73		105.46	90.30

^1^ Reflects costs per tonne of ore mined.

^2^ 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 Reporting Measures" section of this MD&A.

Ore mined at our Manitoba operations during the fourth quarter of 2021 was 9% higher than the same period in 2020 mainly due to a temporary closure of 777 in the prior year caused by a shaft incident that resulted in a six-week suspension of hoisting operations. Gold and silver grades mined during the fourth quarter of 2021 were 22% and 17% higher, respectively, compared to the same period in 2020, mainly due to increased mining of gold and copper-gold stopes at Lalor, in line with the mine plan. Copper and zinc grades mined during the fourth quarter of 2021 were 16% and 14% lower than the same period in 2020 as mining of the gold zones at Lalor to feed the New Britannia mill displaced production from the base metal zones in the quarter.

Lalor production processes to separate gold and base metal ores are now fully established to optimally provide feed for both the New Britannia and Stall mills. At the end of 2021, Snow Lake ore stockpiles were at normalized levels with approximately 26,000 tonnes of gold ore and approximately 24,000 tonnes of base metal ore on surface. A production ramp-up strategy to achieve 5,300 tonnes per day at Lalor by the end of 2022 is underway that includes advancing development for new mining fronts, additions to the mine equipment fleet, transition of workforce from the 777 mine upon closure, and expansion of change house and office facilities.

The 777 mine is within months of closure and the focus continues to be on mining out the remaining reserves by completing the necessary ground rehabilitation to access remnant and pillar stoping blocks. Challenging ground conditions have caused delays in the production sequence and resulted in higher dilution than planned. These challenges are expected to continue until the end of mine life in June 2022. Pre-closure activities are underway in mined out areas to decommission stationary equipment of value for redeployment at Lalor.

Total mine unit operating costs for the mines during the fourth quarter of 2021 increased by 12% compared to the same period in 2020 mainly due to lower capitalized development at 777 as all costs are now operating in nature and higher contractor, camp and COVID-19 related expenses at Lalor. Full year 2021 total mine unit operating costs in Manitoba were 17% higher as compared to the same period in 2020 due to the same factors as the fourth quarter variances as well as lower capitalized development at Lalor.

Processing Facilities

		Three months ended			Year ended
	Dec. 31, 2021	Dec. 31, 2020		Dec. 31, 2021	Dec. 31, 2020
Stall & New Britannia Concentrator Combined
Ore	tonnes	419,727	372,624		1,506,756	1,412,751
Copper	%	0.75	0.79		0.72	0.73
Zinc	%	4.12	5.47		4.30	5.76
Gold	g/tonne	3.90	2.88		3.42	2.55
Silver	g/tonne	30.07	24.43		24.95	25.37
Copper concentrate	tonnes	17,494	14,271		57,291	47,680
Concentrate grade	% Cu	15.92	18.03		16.43	18.74
Zinc concentrate	tonnes	27,672	36,395		111,370	147,862
Concentrate grade	% Zn	51.02	50.89		50.56	50.57
Copper recovery	%	88.7	87.1		86.8	86.2
Zinc recovery	%	87.4	90.9		88.9	91.9
Gold recovery - concentrate	%	54.6	59.5		54.9	60.0
Silver recovery - concentrate	%	53.9	60.3		54.4	60.4
Contained metal in concentrate produced
Copper	tonnes	2,785	2,572		9,415	8,934
Zinc	tonnes	14,119	18,520		56,310	74,776
Gold	oz	28,720	20,507		90,911	69,657
Silver	oz	218,679	176,534		656,847	696,425
Metal in doré produced
Gold	oz	8,598	-		9,002	-
Silver	oz	6,519	-		6,529	-
Flin Flon Concentrator
Ore	tonnes	262,565	225,663		1,133,516	1,205,314
Copper	%	1.12	1.59		1.23	1.28
Zinc	%	4.16	3.87		3.95	4.21
Gold	g/tonne	1.78	1.99		2.04	1.96
Silver	g/tonne	25.04	22.65		24.90	24.26
Copper concentrate	tonnes	12,554	13,900		56,646	57,658
Concentrate grade	% Cu	20.37	22.68		21.61	22.98
Zinc concentrate	tonnes	18,353	14,078		73,974	85,232
Concentrate grade	% Zn	49.51	52.02		50.31	50.87
Copper recovery	%	86.7	88.1		87.7	86.0
Zinc recovery	%	83.1	83.9		83.0	85.5
Gold recovery	%	59.2	56.6		58.5	56.0
Silver recovery	%	45.6	46.5		45.1	45.9
Contained metal in concentrate produced
Copper	tonnes	2,557	3,152		12,242	13,249
Zinc	tonnes	9,088	7,323		37,219	43,354
Gold	oz	8,924	8,180		43,564	42,570
Silver	oz	96,375	76,370		409,156	431,476
Unit Operating Costs^1^ ****		Three months ended			Year ended			Guidance
---	---	---	---	---	---	---	---	---	---
	Dec. 31, 2021	Dec. 31, <br>2020		Dec. 31, 2021	Dec. 31, <br>2020		Annual
							2021	2022
Concentrators
Stall & New Britannia	C$/tonne	47.67	23.52		31.17	23.56
Flin Flon	C$/tonne	30.33	25.31		28.27	23.59
Combined mine/mill unit operating costs ^2,3^
Manitoba	C$/tonne	168	140		154	132		145 - 155	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 Reporting Measures" section of this MD&A.

During the fourth quarter of 2021, the New Britannia mill continued to ramp up with the flotation circuit starting in October. New Britannia processed 109,242 tonnes of ore during the fourth quarter and achieved commercial production in November, triggering the start of depreciation for the mill. In December, New Britannia throughput averaged 1,200 tonnes per day with gold and silver recoveries in line with the metallurgical model. A number of optimization initiatives are underway to improve the mechanical availability of grinding, leaching and tailings circuits. It is anticipated that the throughput and recoveries will achieve full design rates in the second quarter of 2022.

Although there was less feed to the Stall concentrator in the fourth quarter as gold ore was directed to New Britannia, the combined Snow Lake mills processed a significantly higher volume of ore in the fourth quarter of 2021 compared to the same period in 2020. Stall recoveries were consistent with the metallurgical model for the head grades delivered. New Britannia recoveries continued ramping up during the fourth quarter. Compared to the same periods in 2020, unit operating costs at the Snow Lake mills were higher for the fourth quarter and full year ended December 31, 2021 as a result of the higher costs at New Britannia. Unit operating costs at the Stall and New Britannia mills are expected to normalize in the second quarter of 2022 once the plant initiatives described above are implemented.

The Flin Flon concentrator consumed the available ore feed from the 777 mine in the fourth quarter of 2021. Recoveries were consistent with the metallurgical model for the head grades delivered. Unit operating costs at the Flin Flon concentrator increased by 20% during the fourth quarter compared to the same period in 2020 primarily as a result of increased tailings management costs and increased grinding media used to fulfill paste fill requirements at 777 mine.

Full year 2021 ore processed at Snow Lake increased by 7% versus the comparative period in 2020 due to the commencement of operations at the New Britannia mill in August 2021. Full year ore processed at the Flin Flon mill was 6% lower than the comparative 2020 period as excess ore mined at Lalor stopped being milled in Flin Flon in May 2021.

Combined unit operating costs in the fourth quarter of 2021 increased by 20% compared to the same period in 2020, due to higher overall operating costs for the reasons described above partially offset by higher ore milled. Full year combined mine, mill and G&A unit operating costs were 17% higher than the prior year due to the same factors as the fourth quarter variances. Full year combined unit operating cost was within the 2021 guidance range.

		Three months ended		Year ended			Guidance
Contained metal in concentrate produced^1^		Dec. 31, 2021	Dec. 31, <br>2020	Dec. 31, 2021	Dec. 31, <br>2020		Annual
						2021	2022
Copper	tonnes	5,342	5,724	21,657	22,183		20,000 - 24,000	12,000 - 16,000
Gold^2^	oz	37,644	28,687	134,475	112,227		-	-
Silver^3^	oz	315,054	252,904	1,066,003	1,127,901		-	-
Zinc	tonnes	23,207	25,843	93,529	118,130		96,000 - 107,000	50,000 - 70,000
Metal in doré produced^1^
Gold^2^	oz	8,598	-	9,002	-		-	-
Silver^3^	oz	6,519	-	6,529	-		-	-
Contained metal in concentrate and doré produced
Gold^2^	oz	46,242	28,687	143,477	112,227		150,000 - 165,000	150,000 - 185,000
Silver^3^	oz	321,573	252,904	1,072,532	1,127,901		1,200,000 - 1,400,000	800,000 - 1,100,000

^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.

Compared to the same period in 2020, gold and silver production in the fourth quarter of 2021 increased by 61% and 27%, respectively. These increases were primarily due to the processing of higher grade precious metal ore from the Lalor mine and the start of operations at New Britannia which contributed to higher overall throughput at Snow Lake. Copper and zinc production decreased 7% and 10% in the fourth quarter of 2021 compared to the same period in 2020 as Lalor mining transitioned to gold lenses and away from base metal zones and 777 mine stope sequencing delays due to challenging ground conditions and higher than anticipated dilution.

Gold production increased by 28% during 2021 versus the comparative period mainly due to higher gold grades at Lalor mine, offset by lower recoveries at Stall mill. Full year 2021 production of copper, silver and zinc declined by 2%, 5% and 21%, respectively, compared to the same period in 2020, primarily due the transition of mining toward the gold lenses at Lalor and a corresponding decrease of production from the base metal zones and higher than anticipated dilution at 777 mine.

Full year copper production achieved our 2021 guidance; however, zinc, gold and silver production for the year fell short of our guidance ranges. Zinc production was predominantly impacted by higher than planned dilution at the 777 mine as it nears the end of life. Gold and silver production were below guidance due to higher dilution at the 777 mine in the fourth quarter and the deferral of some higher gold content ore for future processing at New Britannia to achieve higher gold recoveries.

Zinc Plant

Zinc Production		Three months ended			Year ended				Guidance
	Dec. 31, 2021	Dec. 31, <br>2020		Dec. 31, 2021		Dec. 31, <br>2020		Annual
								2021
Zinc Concentrate Treated
Domestic	tonnes	45,143	61,395		191,283		241,089
Refined Metal Produced
Domestic	tonnes	20,783	28,818		89,568		111,637		96,000 - 103,000
Unit Operating Costs		Three months ended			Year ended				Guidance
---	---	---	---	---	---	---	---	---	---
	Dec. 31, 2021	Dec. 31, <br>2020		Dec. 31, 2021		Dec. 31, <br>2020		Annual
								2021
Zinc Plant ^1,2^	C$/lb	0.63	0.45		0.55		0.47		0.50 - 0.55

^1^ Zinc unit operating costs include G&A costs.

^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 Reporting Measures" section of this MD&A.

The zinc plant production was constrained by the availability of concentrate for processing, resulting from Lalor transitioning production to the gold lenses, and the mine plan limitations at 777 as it nears closure. The zinc plant is within several months of closure and it is anticipated that the plant will continue to be concentrate constrained through to closure. Unit operating costs per pound of zinc metal produced for the fourth quarter and full year of 2021 was considerably higher over the same 2020 period primarily due to lower production. Full year 2021 refined zinc metal production decreased by 20% compared to the same period of 2020 due to the same factors.

Due to Lalor mine transitioning from base metal lenses to gold lenses as New Britannia ramps up and the challenging ground conditions experienced at 777 mine, the full year production of cast zinc did not meet 2021 guidance. As a result, zinc plant unit operating costs finished the year at the top end of the 2021 guidance range.

Manitoba Cash Cost and Sustaining Cash Cost

		Three months ended				Year ended
	Dec. 31, 2021		Dec. 31, 2020		Dec. 31, 2021		Dec. 31, 2020
Cost per pound of copper produced
Cash cost per pound of copper produced, net of by-product credits ^1^	$/lb	(2.77)		(3.48)		(2.11)		(2.20)
Sustaining cash cost per pound of copper produced, net of by-product credits ^1^	$/lb	(0.23)		(0.36)		0.69		1.02
Cost per pound of zinc produced
Cash cost per pound of zinc produced, net of by-product credits ^1^	$/lb	(0.07)		(0.02)		-		0.10
Sustaining cash cost per pound of zinc produced, net of by-product credits ^1^	$/lb	0.52		0.67		0.65		0.71

^1^ Cash cost and sustaining cash cost per pound of copper & zinc 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.

Cash cost per pound of copper produced, net of by-product credits, in the fourth quarter of 2021 was negative $2.77. These costs were higher compared to the same period in 2020, as a result of higher mining, milling and G&A costs and lower copper production, partially offset by higher by-product revenues. Cash cost per pound of copper produced, net of by-product credits, for the full year 2021 was higher compared to the same period in 2020, primarily due to the same factors.

Sustaining cash cost per pound of copper produced, net of by-product credits, in the fourth quarter of 2021 was negative $0.23. These costs were higher compared to the same period in 2020, primarily due to the reasons listed above partially offset by lower sustaining capital expenditures compared to the same period in 2020. Sustaining cash cost per pound of copper produced, net of by-product credits, for the full year 2021 were lower compared to the same period in 2020 due to lower sustaining capital expenditures and higher by-product revenues partially offset by higher mining, milling and G&A costs and lower copper production.

Cash cost per pound of zinc produced, net of by-product credits, in the fourth quarter of 2021 and year-to-date were generally in line with the same periods in the prior year despite zinc production being considerably lower in 2021. This was due to higher by-product credits being mostly offset by lower zinc production and higher operating costs. Sustaining cash costs for the fourth quarter of 2021 and year-to-date were lower than the same periods in 2020 due to significantly lower sustaining capital expenditures.

Starting in the first quarter of 2022, the company intends to disclose cash cost per ounce of gold produced, net of by-product credits, as gold revenue grows to become the most significant contributor to total Manitoba revenue for the foreseeable future.

Metal Sold

		Three months ended				Year ended
	Dec. 31, 2021		Dec. 31, 2020		Dec. 31, 2021		Dec. 31, 2020
Payable metal in concentrate and doré
Copper	tonnes	4,408		4,380		20,802		20,382
Gold	oz	40,623		31,882		126,551		111,963
Silver	oz	257,928		281,541		936,857		1,067,038
Refined zinc	tonnes	21,112		28,431		96,435		109,347

Quantities of payable copper and gold sold for the fourth quarter and full year of 2021 were higher than each of the comparable periods in 2020 due to the same reasons as contained metal production. Refined zinc sales and payable silver sales were lower than each of the comparable periods in 2020 primarily due to lower head grades.

OUTLOOK

This outlook includes forward-looking information about our operations and financial expectations based on our expectations and outlook as of February 23, 2022. As a result of the COVID-19 global pandemic, we have experienced intermittent operational, supply chain, travel, labour and shipping disruptions, and we may continue to experience similar disruptions in the future. Given the uncertainty of the duration and magnitude of the impact of COVID-19, the social and political tensions in Peru, and the mine plan limitations at the 777 mine given its pending closure, our 2022 production and cost guidance are subject to a higher-than-normal degree of uncertainty. The guidance below does not reflect any potential for unforeseen suspensions or other significant disruption to our operations.

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 2022.

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^		2022 Guidance	Year ended<br><br> <br>Dec. 31, 2021	2021 Guidance
Peru
Copper	tonnes	89,000 - 115,000	77,813	72,000 - 88,000
Gold	oz	70,000 - 90,000	50,306	40,000 - 50,000
Silver	oz	1,620,000 - 2,100,000	1,972,949	1,800,000 - 2,170,000
Molybdenum	tonnes	1,100 - 1,400	1,146	1,400 - 1,700
Manitoba
Gold	oz	150,000 - 185,000	143,477	150,000 - 165,000
Zinc	tonnes	50,000 - 70,000	93,529	96,000 - 107,000
Copper	tonnes	12,000 - 16,000	21,657	20,000 - 24,000
Silver	oz	800,000 - 1,100,000	1,072,532	1,200,000 - 1,400,000
Total
Copper	tonnes	101,000 - 131,000	99,470	92,000 - 112,000
Gold	oz	220,000 - 275,000	193,783	190,000 - 215,000
Zinc	tonnes	50,000 - 70,000	93,529	96,000 - 107,000
Silver	oz	2,420,000 - 3,200,000	3,045,481	3,000,000 - 3,570,000
Molybdenum	tonnes	1,100 - 1,400	1,146	1,400 - 1,700
^1^ Metal reported in concentrate and doré is prior to refining losses or deductions associated with smelter terms.

On a consolidated basis, we met 2021 production guidance for copper, gold and silver, and Peru's gold production exceeded the top end of the guidance range due to strong gold grades from the Pampacancha satellite deposit. Zinc production was below the guidance range primarily due to higher grade dilution and mine plan limitations experienced at the 777 mine in Manitoba late in the year as the mine approaches the end of its life. Molybdenum production was below guidance but was consistent with the range published in our Constancia mine plan released in March 2021.

In 2022, consolidated copper production is forecast to increase by 17%^1^ compared to 2021 levels primarily as a result of higher expected copper production in Peru, with higher planned copper grades from both the Constancia and Pampacancha pits more than offsetting lower copper production in Manitoba. Consolidated gold production in 2022 is expected to increase by 28%^1^ year-over-year due to significantly higher gold grades and recoveries expected in both Manitoba and Peru. In Manitoba, gold production is expected to increase by 17%^1^ in 2022 due to the first full year of production at the recently refurbished New Britannia gold mill. In Peru, gold production is expected to increase by 59%^1^ in 2022 as we incorporate the first full year of Pampacancha. Year-over-year zinc production is expected to decline by 36%^1^ as a result of the expected closure of the 777 mine in June 2022 and the mining of the gold-rich zones at Lalor in connection with the startup of the New Britannia mill, which will result in mining less of the zinc-rich base metal zones at Lalor.

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

Peru's 2022 production guidance assumes copper grades remain consistent with the higher grades seen in the fourth quarter of 2021 for a majority of the year before significantly increasing in the fourth quarter of 2022. Peru's production guidance reflects regularly scheduled semi-annual mill maintenance shutdowns at Constancia during the first and third quarters of 2022. The guidance also assumes mining continues in the harder ore areas of the pits in 2022, with slight impacts on mill throughput, but improving ore hardness is expected in 2023 and beyond.

Manitoba's 2022 production guidance reflects continued strong production from the Lalor mine, operating at a throughput rate of 4,650 tonnes per day and ramping up to 5,300 tonnes per day by 2023. The New Britannia mill is expected to average 1,500 tonnes per day in 2022 with continued ramp-up activities and rod mill liner maintenance scheduled during the first quarter and full design rates expected to be achieved in the second quarter. 2022 production assumes lower mining rates at the 777 mine as the mine approaches closure in June 2022. The low end of the production guidance ranges reflects reduced output from the 777 mine to capture the potential for higher dilution and increased variability in the remnant stopes. The 2022 and 2023 guidance contained in this MD&A replaces the company's previously issued guidance for these years.

3-Year Production Outlook<br><br> <br>Contained Metal in Concentrate and Doré^1^		2022 Guidance	2023 Guidance	2024 Guidance
Peru
Copper	tonnes	89,000 - 115,000	110,000 - 134,000	111,000 - 136,000
Gold	oz	70,000 - 90,000	100,000 - 125,000	110,000 - 135,000
Silver	oz	1,620,000 - 2,100,000	2,300,000 - 2,800,000	2,900,000 - 3,500,000
Molybdenum	tonnes	1,100 - 1,400	2,000 - 2,400	1,700 - 2,100
Manitoba^2^
Gold	oz	150,000 - 185,000	160,000 - 195,000	170,000 - 200,000
Zinc	tonnes	50,000 - 70,000	36,000 - 44,000	36,000 - 44,000
Copper	tonnes	12,000 - 16,000	10,000 - 12,000	9,000 - 11,000
Silver	oz	800,000 - 1,100,000	1,000,000 - 1,200,000	1,000,000 - 1,200,000
Total
Copper	tonnes	101,000 - 131,000	120,000 - 146,000	120,000 - 147,000
Gold	oz	220,000 - 275,000	260,000 - 320,000	280,000 - 335,000
Zinc	tonnes	50,000 - 70,000	36,000 - 44,000	36,000 - 44,000
Silver	oz	2,420,000 - 3,200,000	3,300,000 - 4,000,000	3,900,000 - 4,700,000
Molybdenum	tonnes	1,100 - 1,400	2,000 - 2,400	1,700 - 2,100
^1^ Metal reported in concentrate and doré is prior to treatment or refining losses or deductions associated with smelter terms.
^2^ Manitoba production guidance assumes the 777 mine is depleted at the end of the second quarter of 2022, resulting in lower copper and zinc production after its closure.

Consolidated copper and gold production are expected to increase to 133,500^1^ tonnes and 307,500^1^ ounces, respectively, in 2024, which represents an increase of 34%^1^ and 59%^1^, respectively, from 2021 levels, which demonstrates the continued growth from our recent brownfield growth projects. These growth projects are expected to more than offset the lost copper and gold production from 777 after its closure in mid-2022.

Peru's three-year production guidance reflects the incorporation of Pampacancha into the mine plan with higher copper and gold grades from 2022 and beyond. The mine plan has been re-sequenced since the publication of the March 2021 Constancia technical report, resulting in higher gold grade areas in the Pampacancha pit being moved from 2022 to 2023, which is expected to lead to a 41%^1^ increase in gold production in 2023 from 2022 levels.

Manitoba's three-year production guidance reflects an increase in Lalor's mine throughput from 4,650 tonnes per day in 2022 to 5,300 tonnes per day starting in 2023 due to technical and operational improvements and the allocation of mining resources from the 777 mine after its closure in 2022. The low end of the 2023 production guidance range reflects a more conservative project start and ramp up of the Stall recovery improvement program. The production numbers exclude the impact of upside opportunities, such as the potential to operate New Britannia above design capacity.

Capital Expenditure Guidance

Capital Expenditures^1^(in $ millions)	2022 Guidance	Year ended Dec. 31, 2021	2021 Guidance
Sustaining capital
Peru^2^	105.0	128.9	135.0
Manitoba^3^	115.0	100.4	90.0
Total sustaining capital	220.0	229.3	225.0
Growth capital
Peru	10.0	22.8	25.0
Manitoba^3^	50.0	119.2	105.0
Arizona^4^	35.0	22.9	20.0
Total growth capital	95.0	164.9	150.0
Capitalized exploration	25.0	13.3	15.0
Total	340.0	407.5	390.0
^1^ Excludes capitalized costs not considered to be sustaining or growth capital expenditures.
^2^ Includes capitalized stripping costs.
^3^ Capital expenditures are converted into U.S. dollars using an exchange rate of 1.27 Canadian dollars.
^4^Arizona spending includes capitalized costs associated with the Copper World and Rosemont projects.

Total capital expenditures are expected to decline by 17% year-over-year primarily due to lower expected sustaining capital in Peru and lower growth spending in Manitoba in 2022.

Sustaining capital expenditures in Peru are expected to decrease from 2021 levels primarily due to lower costs associated with heavy civil works after completion of a tailings dam raise in 2021. This is expected to be partially offset by higher capitalized stripping expenditures in 2022 due to changes in the sequencing of mining phases in 2021 and the deferral of some capitalized stripping costs into 2022. Sustaining capital expenditures in Manitoba are expected to be higher than 2021 primarily due to accelerated underground development and equipment spending at Lalor in connection with the ramp up to 5,300 tonnes per day and the introduction of New Britannia sustaining costs, partially offset by lower capital development at 777 as the mine approaches closure.

Peru's growth capital spending of $10.0 million in 2022 includes costs associated with mill recovery improvement initiatives targeted to increase copper and molybdenum recoveries starting in 2023. These low-capital brownfield growth projects are expected to generate attractive returns and are part of our continuous improvement efforts.

Manitoba's growth capital spending of $50.0 million in 2022 includes approximately $25.0 million for the completion of the Stall mill recovery improvement project, which is expected to involve several flow sheet enhancements to increase copper, gold and silver recoveries starting in 2023. Approximately $15.0 million is budgeted for the expansion of the surface facilities in Snow Lake to support the transition to 5,300 tonnes per day at Lalor by 2023. Approximately $5.0 million has been allocated to engineering studies to advance the development of the 1901 deposit ahead of the current 2026 production-start timeline.

The spending guidance excludes approximately $20.0 million of tailings investments in Manitoba as we complete the improvements on the legacy Flin Flon tailings impoundment area in 2022, a program that was initiated in 2019, to ensure compliance with higher industry-wide standards for tailings dam safety. These expenditures are associated with the decommissioning and restoration liability and, therefore, will be accounted for as a drawdown of the liability through operating cash flow, rather than sustaining capital expenditures.

Arizona's growth capital spending of $35.0 million includes approximately $25.0 million for annual carrying costs for Rosemont and Copper World and approximately $10.0 million on anticipated Copper World permitting and economic studies in the first half of 2022.

Exploration Guidance

(in millions)	Year ended
	Dec. 31, 2021	2021 Guidance
Peru	17.3	20.0
Manitoba	10.5	10.0
Arizona and other	25.5	34.0
Total exploration expenditures	53.3	64.0
Capitalized spending	(13.3)	(15.0)
Total exploration expense	40.0	49.0

All values are in US Dollars.

Our total expected exploration expenditures of $65.0 million in 2022 are higher than 2021 levels due to continued exploration activities at our Copper World discovery in Arizona and additional drilling activities in Peru and Manitoba.

In Peru, 2022 drilling activities will focus on three greenfield projects, including the Llaguen project in northern Peru and in-mine exploration at Constancia and Pampacancha. We also expect to advance community relations and permitting activities on the regional satellite properties in Peru during 2022. In Manitoba, we expect to complete a winter drill program focused on testing targets in the Chisel Basin, drilling targets identified at 1901 and the Lalor mine and drilling the Flin Flon tailings area. In Arizona, 2022 exploration expenditures include further infill drilling at the Copper World deposits, continued exploration drilling between the known deposits at Copper World and a planned initial drill program at the Mason Valley skarn properties in late 2022.

Unit Cost and Cash Cost Guidance

We are introducing cash cost guidance in 2022 for each of our operations. Copper remains the primary metal produced in our Peru operations and therefore we have presented cash cost per pound of copper produced. In Manitoba, we recognize that with the New Britannia mill operating at full capacity, the primary metal produced is gold and, therefore, we have included guidance for cash cost per ounce of gold produced. We continue to provide combined mine/mill unit operating cost guidance by site and consolidated copper cash cost and sustaining cash cost guidance given copper remains the primary revenue contributor on a consolidated basis.

Peru Operating Costs		2022 Guidance	Year ended Dec. 31, 2021	2021 Guidance^3^
Combined mine/mill unit operating cost (excluding COVID-19 costs) ^1,2^	$/tonne	10.10 - 12.90	10.70	-
Combined mine/mill unit operating cost (including COVID-19 costs) ^1,2^	$/tonne	-	11.39	8.90 - 10.90
Cash cost per pound of copper^2,3^	$/lb	1.10 - 1.40	1.54	-

^1^ Reflects combined mine, mill and G&A costs per tonne of milled ore. Peru costs reflect the deduction of expected capitalized stripping costs. Unit operating cost guidance in 2022 excludes estimated COVID-19 related costs of approximately $18.0 million. 2021 actual COVID-19 costs incurred was $19.8 million, which was higher than budgeted in 2021.

^2^ Combined unit costs and cash costs per pound of copper produced 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 MD&A.

^3^Cash cost, net of by-product credits, per pound of copper contained in concentrate. By-product credits are calculated using the gold and silver deferred revenue drawdown rates in effect on December 31, 2021 and the following commodity prices:, $1,800 per ounce gold, $24.00 per ounce silver, $1.25 per pound zinc (excludes premium), $13.00 per pound molybdenum and an exchange rate of 1.27 C$/US$. Peru cash cost guidance was introduced in 2022 and is not available for 2021.

Combined unit costs for Peru in 2022 are approximately 7%^1^higher than 2021 as a result of higher consumable costs, including grinding media and fuel, higher mill maintenance costs due to general cost pressures seen in the industry, payments relating to community agreements and the impact of processing harder ore in the Constancia pit.

Copper cash costs in Peru are expected to decline by 19%^1^ in 2022 versus 2021, primarily due to higher gold by-product credits and higher copper production.

Manitoba Operating Costs		2022 Guidance	Year ended Dec. 31, 2021	2021 Guidance
Combined mine/mill unit operating cost ^1,2^	C$/tonne	170 - 185	154	145-155
Cash cost per ounce of gold^2,3^	$/oz	300 - 550	-	-

^1^ Reflects combined mine, mill and G&A costs per tonne of milled ore.

^2^ Combined unit costs and cash cost per ounce of gold produced 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 MD&A.

^3^Cash cost, net of by-product credits, per ounce of gold contained in concentrate and doré. By-product credits are calculated using the silver deferred revenue drawdown rate in effect on December 31, 2021 and the following commodity prices: $4.00 per pound copper, $24.00 per ounce silver, $1.25 per pound zinc (excludes premium), $13.00 per pound molybdenum and an exchange rate of 1.27 C$/US$. Manitoba cash cost guidance was introduced in 2022 and is not available for 2021. Similarly, reported actual cash cost per ounce of gold for Manitoba will be introduced in 2022 and is not available for 2021.

Combined unit costs for Manitoba in 2022 are forecast to be approximately 15%^1^ higher than 2021 levels primarily due to expected cost inflation on materials and consumables and the inclusion of the New Britannia mill, which is expected to result in higher milling unit costs compared to the Flin Flon and Stall mills as disclosed in our Snow Lake operations mine plan released in March 2021. Manitoba unit costs also reflect the closure of the 777 mine in June 2022 and the transition of a portion of the workforce to Snow Lake.

Gold cash costs in Manitoba are expected to be $300 to $550 per ounce of gold in 2022 as gold production increases year-over-year and the operations transition to becoming a majority gold producer.

Consolidated Copper Cash Cost^1,2^		2022 Guidance	Year ended<br><br> <br>Dec. 31, 2021	2021 Guidance
Cash cost	$/lb	0.60 - 1.05	0.74	0.65 - 0.80
Sustaining cash cost	$/lb	1.60 - 2.25	2.07	2.05 - 2.30

^1^ Cash cost and sustaining cash cost, net of by-product credits, per pound of copper contained in concentrate. By-product credits are calculated using the gold and silver deferred revenue drawdown rates in effect on December 31, 2021 and the following commodity prices: $1,800 per ounce gold, $24.00 per ounce silver, $1.25 per pound zinc (excludes premium), $13.00 per pound molybdenum and an exchange rate of 1.27 C$/US$.

^2^ Cash cost and sustaining cash 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 Reporting Measures" section of this MD&A.

The mid-point of the guidance range for consolidated cash cost per pound of copper produced, net of by-product credits, is higher than 2021 levels due to the expected increase in unit costs as described above, partially offset by expected higher copper production and higher gold by-product credits. The mid-point of the guidance range for consolidated sustaining cash cost per pound of copper produced, net of by-product credits, is lower than 2021 levels due to lower sustaining capital expenditures and higher copper production, partially offset by the increase in unit costs.

Metal production in any particular quarter may vary from the implied annual guidance rate based on variations in grades and recoveries due to the areas mined in that quarter, the timing of planned maintenance, and other factors. Mining and processing costs in any particular quarter can vary from the annual guidance range above based on a variety of factors, including the scheduling of maintenance events, the impact of COVID-19 related interruptions, and seasonal heating requirements, particularly in Manitoba. Cash cost and sustaining cash cost may also vary based on changes in commodity prices affecting by-product credits.

Commodity Markets

Our 2022 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 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. Average prices for copper and zinc during 2021 remained well above the 10-year trailing average due to a strong rebound in demand for physical metal, lingering supply issues related to COVID-19 and consistent speculative interest from the investor community. Copper prices breached the $4 per pound barrier for the first time in many years in February 2021, rising as high as $4.86 per pound in the year and zinc prices broke above $1.25 per pound in February and rose above $1.70 per pound in the fourth quarter due to the temporary idling of some zinc smelting capacity in Europe and China as a result of substantial increases in power prices.

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

Copper

In 2021, the London Metal Exchange ("LME") copper price averaged $4.23 per pound, ranging from a low of $3.52 per pound at the beginning of the year to an all-time high of $4.86 per pound in May. Prices drifted lower during the summer due to negative sentiment surrounding the announcement of sales from China's strategic copper stockpile and due to the typical seasonal reduction in demand before spiking higher again in October due to a technical squeeze made possible by low metal exchange stocks.

Copper consumption grew at an unexpectedly high rate of 4% in 2021, outstripping the growth in refined production and keeping the physical market relatively balanced and stocks at historically low levels. This market backdrop combined with very positive sentiment for future copper demand growth underpinned by the global move towards renewable energy sources (wind, hydro, solar), carbon neutrality and the adoption of electric vehicles resulted in an average price that was 51% higher than the prior year.

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.

Zinc

In 2021, the LME zinc price averaged $1.36 per pound, with prices ranging from $1.15 per pound to $1.73 per pound. Zinc demand surged by 7.1% during the year after declining by 4.5% in 2020 due to the effects related to COVID-19. This strong demand growth, combined with the lowest supply growth in the past decade, returned the market to a deficit position of 320 thousand tonnes in 2021 after it recorded a surplus of 472 thousand tonnes in the prior year.

Exchange stocks dropped to historically low levels in the second half of 2021 as zinc production in Europe and China was constrained by higher electricity prices. This sudden supply shock resulted in a spike in zinc prices in the fourth quarter of the year and the development of a significant backwardation in zinc futures markets.

The annual zinc metal market deficit is expected to increase again in 2022 to over 400 thousand tonnes as refined supply grows only marginally due to the continued idling of some smelter capacity in Europe as a result of electricity prices that are almost three times higher than they were in 2020. Consensus estimates for LME prices over the next several years are in excess of $1.60 per pound in response to continued market deficits and price spikes to even higher level could occur due to chronically low exchange stocks.

Gold

In 2021, the London Gold Bullion Market price for gold averaged $1,799 per ounce, compared with an average of $1,772 per ounce in 2020. Gold prices traded between $1,684 per ounce and $1,950 per ounce during the year responding primarily to changing market sentiments on future direction of inflation and interest rate hikes and on the projected effect 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 2022. However, market expectations for increases in interest rates and a stronger US dollar may keep gold range bound between $1,700 and $1,800 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 zinc metal and precious metal doré we produce, we incur truck and/or rail freight costs as well as warehousing costs to ship to our customers and receive a premium to the LME price on our zinc metal sales.

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 2022 was established earlier this year at $65/6.5¢ compared to $59.5/5.95¢ in 2021 which represented a low point of a multiyear cycle. The annual benchmark treatment charge for 2022 zinc concentrates has yet to be established but in 2021 it was $159/mt. Hudbay will be exposed to zinc treatment charges for the first time in 2022 because our Flin Flon zinc plant is expected to close mid-year with the closure of 777 mine, from which point we will be selling zinc concentrate instead of refined zinc metal.

Zinc metal premiums in 2021 averaged approximately $0.07 per pound which was close to the North American average for annual sales. In 2022, annual zinc premiums in North America and the rest of the world are expected to be dramatically higher due to the tightness in the European zinc metal market as the result of temporary smelter closures and higher power costs.

Ocean freight rates for shipments of both bulk commodities and containers saw a dramatic increase in early 2021 as a result of imbalances in supply chains and port disruptions due to closures and restrictions related to COVID-19 and the swift recovery of industrial and consumer demand for freight services in 2021. Spot rates for bulk shipments of copper and zinc concentrates spend most of the year at levels that were between two and two-and-a-half times higher than rates in 2020 and spot container rates for shipments of molybdenum concentrates were over five times higher over the same period. Hudbay locks in the majority of its direct ocean freight exposure under multiyear Contracts of Affreightment ("COAs") and was not exposed in any substantial way to the higher spot terms in 2021. In 2022, Hudbay still has substantial COA coverage for its bulk ocean shipments and, in addition, spot rates for the Peru-to-China shipping corridor have dropped from $80/wmt to $90/wmt to approximately $50/wmt at the present time.

In 2021, Hudbay signed a multiyear agreement with the Royal Canadian Mint to refine precious metal doré production from our recently refurbished New Britannia mill.

Sensitivity Analysis

The following table displays the estimated impact of changes in metals prices and foreign exchange rates on our 2022 net profit, earnings per share and operating cash flow, assuming that our operational performance is consistent with the mid-point of our guidance for 2022. The effects of a given change in an assumption are calculated in isolation.

	2022	Change of 10%	Impact on	Impact on	Impact on Operating CF
	Base	represented by:	Profit	EPS^1^	before WC changes
Metals Prices
Copper price^2^	$4.00/lb	+/- $0.40/lb	+/- $69M	+/- $0.26	+/- $87M
Zinc price	$1.25/lb	+/- $0.13/lb	+/- $12M	+/- $0.05	+/- $16M
Gold price^3^	$1,800/oz	+/- $180/oz	+/- $24M	+/- $0.09	+/- $33M
Exchange Rates ^4^
C$/US$	1.27	+/- 0.13	+/- $42M	+/- $0.16	+/- $43M

^1^ Based on 261.6 million common shares outstanding as at December 31, 2021.

^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 (2022 assumption: $24.00/oz of silver).

^4^ Change in profit from operational performance only, does not include change in profit arising from translation of balance sheet accounts.

FINANCIAL REVIEW

Financial Results

In the fourth quarter of 2021, we recorded a net loss of $10.5 million compared to a net profit of $7.4 million for the same period in 2020, representing a decrease in profit of $17.9 million. For the full year, we recorded a net loss of $244.4 million compared to a net loss of $144.6 million for the same period in 2020, representing an increase in losses of $99.8 million.

The following table provides further details on these variances:

(in $ millions)	Three months ended<br><br> <br>December 31, 2021	Year ended<br><br> <br>December 31, 2021
Increase (decrease) in components of profit or loss:
Revenues	102.9	409.6
Cost of sales
Mine operating costs	(18.0)	(128.0)
Depreciation and amortization	8.7	4.0
Impairment - environmental obligation	(46.2)	(193.5)
Selling and administrative expenses	1.0	(1.6)
Exploration and evaluation expenses	(6.9)	(22.8)
Other expenses	(10.2)	(12.3)
Net finance expense	(32.4)	(79.1)
Tax	(16.8)	(76.1)
Increase in loss for the period	(17.9)	(99.8)

Revenue

Revenue for the fourth quarter of 2021 was $425.2 million, $102.9 million higher than the same period in 2020, primarily as a result of higher realized base metal prices as well as higher sales volumes of gold and copper. Offsetting this increase were lower zinc metal volumes due to lower zinc grades at Lalor and lower zinc recoveries at the Stall concentrator.

Full year revenue in 2021 was $1,502.0 million, $409.6 million higher than the same period in 2020, primarily as a result of higher realized base metal and molybdenum prices as well as higher sales volumes of copper and gold. Offsetting these increases were lower realized gold prices and lower sales volumes of zinc due to lower Manitoba zinc grades and recoveries. The significantly increased sales volumes of gold is mainly the result of the commencement of operations at the high-grade Pampacancha deposit in the second quarter of 2021 as well as comparatively lower production in the prior year period due to the temporary suspension of Constancia operations following a government declared state of emergency.

The following table provides further details on these variances:

(in $ millions)	Three months ended<br><br> <br>December 31, 2021	Year ended<br><br> <br>December 31, 2021
Metals prices^1^ ****
Higher copper prices	57.7	270.7
Higher zinc prices	16.5	69.3
Higher (lower) gold prices	1.0	(10.3)
Lower silver prices	(2.4)	(1.9)
Sales volumes
Higher copper sales volumes	14.5	21.0
Lower zinc sales volumes	(20.0)	(31.2)
Higher gold sales volumes	37.7	81.0
Lower silver sales volumes	(3.3)	(4.1)
Other
Change in derivative mark-to-market on zinc	0.4	(0.9)
Molybdenum and other volume and pricing differences	(0.2)	19.6
Variable consideration adjustments	-	(5.1)
Effect of lower treatment and refining charges	1.0	1.5
Increase in revenue in 2021 compared to 2020	102.9	409.6
^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, 2021	Dec. 31,<br>2020	Dec. 31,2021	Dec. 31, <br>2020
Copper	247.8	167.0	873.3	563.9
Zinc	73.9	76.6	301.1	264.1
Gold	84.5	49.2	246.6	181.0
Silver	7.3	8.0	26.9	26.0
Molybdenum	10.6	8.8	37.5	25.6
Other metals	1.4	1.6	7.5	5.6
Revenue from contracts	425.5	311.2	1,492.9	1,066.2
Amortization of deferred revenue - gold	10.1	8.4	37.8	27.9
Amortization of deferred revenue - silver	7.2	11.7	33.7	39.4
Amortization of deferred revenue - variable consideration adjustments - prior periods	-	-	1.6	6.7
Pricing and volume adjustments^1^	(3.9)	5.7	(8.6)	9.1
Treatment and refining charges	(13.7)	(14.7)	(55.4)	(56.9)
Revenue	425.2	322.3	1,502.0	1,092.4

^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 17 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, 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 QP hedges are not removed from 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 2021 and 2020, respectively, are summarized below:

		Realized prices^1^ for the		LME YTD<br><br> <br>2021^2^	Realized prices^1^ for the
	Three months ended	Year ended
		Dec. 31, 2021	Dec. 31, <br>2020		Dec. 31, 2021	Dec. 31, <br>2020
Prices
Copper	/lb	4.34	3.29	4.23	4.19	2.86
Zinc^3^	/lb	1.60	1.24	1.36	1.42	1.10
Gold^4^	/oz	1,752	1,734		1,722	1,783
Silver^4^	/oz	23.26	27.05		25.29	26.04

All values are in US Dollars.

^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^ All sales for the three months and year ended December 31, 2021 and 2020 were cast zinc metal. 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.

^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 40.

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, 2021
(in $ millions) ^1^	Copper	Zinc	Gold	Silver	Molybdenum	Other	Total
Revenue from contracts ^2^	247.8	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^	(9.2)	0.6	5.1	0.4	(0.8)	-	(3.9)
By-product credits ^4^	238.6	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	238.6	74.3	99.7	14.9	9.8	1.4	438.7
Payable metal in concentrate sold^6^	24,959	21,112	56,927	638,640	245	-	-
Realized price^7^	9,559	3,523	1,752	23.26	-	-	-
Realized price ^8^	4.34	1.60	-	-	-	-	-
Year ended December 31, 2021
(in $ millions) ^1^	Copper	Zinc	Gold	Silver	Molybdenum	Other	Total
Revenue from contracts ^2^	873.3	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^	(21.9)	1.2	5.6	0.7	5.8	-	(8.6)
By-product credits ^4^	851.4	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	851.4	302.5	290.0	61.3	43.3	7.5	1,556.0
Payable metal in concentrate sold^6^	92,200	96,435	168,358	2,427,508	1,099	-	-
Realized price^7^	9,235	3,137	1,722	25.29	-	-	-
Realized price ^8^	4.19	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 zinc 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 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 and zinc in $/metric tonne and realized price for gold and silver in $/oz.

^8^Realized price for copper and zinc in $/lb.

Three months ended December 31, 2020
(in $ millions) ^1^	Copper	Zinc	Gold	Silver	Molybdenum	Other	Total
Revenue from contracts ^2^	167.0	76.6	49.2	8.0	8.8	1.6	311.2
Amortization of deferred revenue	-	-	8.4	11.7	-	-	20.1
Pricing and volume adjustments^3^	(0.6)	1.0	3.4	0.9	1.0	-	5.7
By-product credits ^4^	166.4	77.6	61.0	20.6	9.8	1.6	337.0
Derivative mark-to-market ^5^	-	0.2	-	-	-	-	0.2
Revenue, excluding mark-to-market on non-QP hedges	166.4	77.8	61.0	20.6	9.8	1.6	337.2
Payable metal in concentrate sold^6^	22,963	28,431	35,179	762,384	457	-	-
Realized price^7^	7,245	2,737	1,734	27.05	-	-	-
Realized price ^8^	3.29	1.24	-	-	-	-	-
Year ended December 31, 2020
(in $ millions) ^1^	Copper	Zinc	Gold	Silver	Molybdenum	Other	Total
Revenue from contracts ^2^	563.9	264.1	181.0	26.0	25.6	5.6	1,066.2
Amortization of deferred revenue	-	-	27.9	39.4	-	-	67.3
Pricing and volume adjustments^3^	(4.2)	1.0	10.4	1.9	-	-	9.1
By-product credits ^4^	559.7	265.1	219.3	67.3	25.6	5.6	1,142.6
Derivative mark-to-market^5^	-	(0.7)	-	-	-	-	(0.7)
Revenue, excluding mark-to-market on non-QP hedges	559.7	264.4	219.3	67.3	25.6	5.6	1,141.9
Payable metal in concentrate sold^6^	88,888	109,347	122,949	2,585,586	1,321	-	-
Realized price^7^	6,297	2,418	1,783	26.04	-	-	-
Realized price ^8^	2.86	1.10	-	-	-	-	-

^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.

^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 and zinc in $/metric tonne and realized price for gold and silver in $/oz.

^8^Realized price for copper and zinc in $/lb.

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.

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, 2021		Dec. 31, 2021
		Manitoba	Peru ^4^	Manitoba	Peru ^4^
Gold	oz	4,290	6,196	18,441	18,352
Silver	oz	69,472	351,004	326,056	1,476,537
Gold deferred revenue drawdown rate^1,2^	$/oz	1,253	762	1,262	791
Gold cash rate^3^	$/oz	429	412	426	410
Total gold stream realized price	$/oz	1,682	1,174	1,688	1,201
Silver deferred revenue drawdown rate^1,2^	$/oz	24.14	15.64	24.32	17.47
Silver cash rate^3^	$/oz	6.33	6.08	6.29	6.05
Total silver stream realized price	$/oz	30.47	21.72	30.61	23.52
		Three months ended		Year ended
	Dec. 31, 2020		Dec. 31, 2020
	Manitoba	Peru	Manitoba	Peru
Gold	oz	5,435	1,848	18,503	6,299
Silver	oz	92,834	442,199	355,318	1,460,886
Gold deferred revenue drawdown rate^1,2^	$/oz	1,217	976	1,173	976
Gold cash rate ^3^	$/oz	424	408	422	406
Total gold stream realized price	$/oz	1,641	1,384	1,595	1,382
Silver deferred revenue drawdown rate^1,2^	$/oz	23.47	21.52	22.43	21.52
Silver cash rate ^3^	$/oz	6.26	6.02	6.23	5.99
Total silver stream realized price	$/oz	29.73	27.54	28.66	27.51

^1^Subsequent to the variable consideration adjustment recorded on January 1, 2021, the deferred revenue amortization is recorded in Manitoba at C$1,578/oz gold and C$30.38/oz silver (for the three months and year ended December 31, 2020- C$1,589/oz gold and C$30.63/oz silver) and converted to US dollars at the exchange rate in effect at the time of revenue recognition.

^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 July 1, 2019. Subsequently every year, on July 1, the cash rate will increase by 1% compounded. The weighted average cash rate is disclosed.

^4^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 gold was $21.86/oz.

Cost of Sales

Our detailed cost of sales is summarized as follows:

(in $ thousands)	Three months ended		Year ended
	Dec. 31,2021	Dec. 31, <br>2020	Dec. 31, 2021	Dec. 31, <br>2020
Peru
Mining	27,756	24,967	98,200	70,724
Milling	40,121	39,219	168,477	134,096
Changes in product inventory	(4,507)	(6,550)	(13,743)	(3,883)
Depreciation and amortization - DRO assets	1,213	1,322	4,631	4,592
Depreciation and amortization - Other PP&E^1^	52,865	49,539	189,777	179,683
G&A	18,496	14,540	63,876	43,393
Overhead costs related to suspension of activities (cash)	-	-	-	15,810
Inventory adjustments	-	(2,188)	(1,446)	32
Freight, royalties and other charges	12,371	11,388	44,819	39,915
Total Peru cost of sales	148,315	132,237	554,591	484,362
Manitoba
Mining	58,891	46,598	222,660	178,308
Milling	22,193	11,147	62,995	46,057
Zinc plant	19,008	18,736	72,392	71,799
Changes in product inventory	(11,740)	2,029	(4,437)	2,054
Depreciation and amortization - DRO assets	3,384	12,424	19,534	44,953
Depreciation and amortization - Other PP&E^1^	32,465	35,298	143,982	132,599
G&A	14,345	10,604	54,063	48,042
Overhead costs related to suspension of activities (cash)	-	8,232	-	8,232
Inventory adjustments	-	2,270	5,445	2,270
Past service pension cost	737	-	4,965	-
Freight, royalties and other charges	9,660	8,348	41,316	34,742
Total Manitoba cost of sales	148,943	155,686	622,915	569,056
Cost of sales	297,258	287,923	1,177,506	1,053,418

^1^Includes depreciation and amortization from property, plant, and equipment, excluding decommissioning and restoration assets.

Total cost of sales for the fourth quarter of 2021 was $297.3 million, reflecting an increase of $9.3 million from the fourth quarter of 2020. Peru cost of sales increased by $16.1 million in the fourth quarter of 2021, compared to the same period of 2020. This increase is mainly related to higher overall mining, milling and general and administrative costs, as well as higher depreciation and lower relative buildup in product inventory. The increase was also caused, in part, by a $2.2 million inventory adjustment in the fourth quarter of 2020 which did not occur again in the fourth quarter of 2021. Manitoba cost of sales decreased by $6.7 million in the fourth quarter of 2021, compared to the same period of 2020, mainly due to a larger relative buildup in product inventory caused by an increase in concentrate inventories and lower depreciation, partially offset by higher overall mining, milling and general administrative costs. The prior period also included an inventory adjustment for certain materials and supplies inventories in Flin Flon, as well as overhead costs related to the suspension of activities at 777 mine, neither of which occurred again in the fourth quarter of 2021.

Total cost of sales for the full year in 2021 was $1,177.5 million, reflecting an increase of $124.1 million compared to 2020. In Peru, costs increased by $70.2 million, largely due to higher overall mining, milling, general and administrative costs, higher depreciation and freight costs, partially offset by a higher relative buildup in product inventory caused by an increase in ore stockpiles. There was also a $31.9 million fixed overhead charge (cash: $15.8 million, non-cash: $16.1 million included in depreciation) being recorded in the comparative 2020 period with no corresponding charges recorded in 2021. In Manitoba, year-to-date cost of sales increased by $53.9 million compared to 2020 largely due to higher overall mining, milling and general administrative costs, and higher past service pension costs, inventory adjustments and freight costs. The increase was partially offset by a higher relative buildup of product inventory and lower depreciation.

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 2021, other significant variances in expenses from operations, compared to the same period in 2020, include the following:

Exploration and evaluation expenses increased by $6.9 million, as the Copper World drilling program and related metallurgical studies continued during the fourth quarter of 2021.
Other expenses increased by $10.2 million, mostly related to $7.6 million in Copper World PEA study costs and a $3.4 million restructuring charge in Manitoba for severance related to the closure of the Flin Flon operations.
Impairment charge of $46.2 million related to an increase in the valuation of the environmental obligation due to lower long-term discount rates for the Flin Flon operation, which was expensed in the current quarter since the site will no longer be operational past 2022.

For the full year of 2021, other significant variances in expenses from operations, compared to 2020, include the following:

Exploration and evaluation expenses increased by $22.8 million compared to 2020 for the same reason as noted above.
Other expenses increased by $12.2 million, for the same reasons as above offset by a relative gain on the revaluation of the DRO liability on non-producing properties in Manitoba.
Impairment charge of $193.5 million in relation to a revised Flin Flon closure plan reflecting higher cost estimates, leading to an increase in the environmental obligation which was expensed in the current year since the site will no longer be operational past 2022.

Net finance expense

(in $ thousands)	Three months ended		Year ended
	Dec. 31, 2021	Dec. 31, <br>2020	Dec. 31, 2021	Dec. 31, <br>2020
Finance costs - accrued or payable:
Interest expense on long-term debt	16,911	21,610	74,748	82,712
Withholding taxes	1,846	2,095	7,727	8,267
Tender premium on senior unsecured notes	-	-	22,878	7,252
Other accrued/payable costs (income)^1^	1,271	2,225	6,816	7,014
Total finance costs - accrued or payable	20,028	25,930	112,169	105,245
Finance costs - non-cash:
Accretion on streaming agreements^2^	8,295	13,854	42,654	56,670
Change in fair value of financial assets and liabilities at fair value through profit or loss	6,779	(37,520)	54,514	(29,370)
Write off unamortized transaction costs	-	-	2,480	3,817
Other non-cash costs^3^	3,545	4,004	9,202	5,540
Total finance costs - non-cash	18,619	(19,662)	108,850	36,657
Net finance expense	38,647	6,268	221,019	141,902

^1^Includes interest income and other finance expense.

^2^Includes variable consideration adjustment (prior periods).

^3^Includes accretion on community agreements, unwinding of discount on provisions, and net foreign exchange losses (gains).

During the quarter ended December 31, 2021, net finance expense increased by $32.4 million compared to the same period in 2020 due to a $38.3 million increase in non-cash finance costs partially offset by a $6.0 million decrease in payable finance costs.

The increase was primarily driven by changes in fair value of financial instruments, including a $40.3 million relative reduction in revaluation gains on an embedded derivative on the early redemption option associated with our senior unsecured notes due in 2025 in the fourth quarter of 2020 and a higher non-cash loss of $3.2 million on the revaluation of the gold prepayment liability. Offsetting these increases in net finance expense were $4.7 million reduction in interest expense on long-term debt as a result of refinancing of our senior notes at lower interest rates during the third quarter of 2020 and first quarter of 2021 and a $5.6 million reduction of the accretion of streaming agreements arising from a lower interest rate on the amended Peru streaming agreement.

During the year ended December 31, 2021, net finance expense increased by $79.1 million compared to the same period in 2020 due to a $72.2 million increase in non-cash finance costs as well as a $6.9 million increase in accrued finance costs.

These increases were primarily related to the refinancing of our 2025 senior notes in the first quarter of 2021. The early redemption of these notes resulted in a $49.8 million write off of the non-cash embedded derivative related to the exercise of the prepayment option, compared to the net gains of $45.4 million in the prior year. Also, in connection with the refinancing of our 2025 notes compared to the refinancing of our 2029 notes, we expensed an additional $15.6 million in call premiums compared to prior year. We also incurred an increase of $8.6 million in revaluation losses on our investments consisting of securities in Canadian metals and mining companies. Offsetting these increases in net finance expense was a reduction in interest expense of $8.0 million, a $19.8 million reduction in non-cash losses on the revaluation of the gold prepayment liability and an $14.0 million decrease in accretion on streaming arrangements, for the same reasons as described above.

Tax Expense

For the three months and year ended December 31, 2021, tax expense increased by $16.8 million and $76.1 million respectively, compared to the same period in 2020. The following table provides further details:

		Year ended
	Dec. 31, <br>2020	Dec. 31, 2021	Dec. 31, <br>2020
(in thousands)
Deferred tax expense (recovery) - income tax 1	(11,711)	(15,995)	(39,904)
Deferred tax (recovery) expense - mining tax 1	(256)	11,202	(3,332)
Total deferred tax expense (recovery)	(11,967)	(4,793)	(43,236)
Current tax expense - income tax	3,749	25,570	4,109
Current tax expense - mining tax	1,723	20,830	4,622
Total current tax expense	5,472	46,400	8,731
Tax expense (recovery)	(6,495)	41,607	(34,505)

All values are in US Dollars.

^1^Deferred tax expense (recovery) represents our draw down/increase of non-cash deferred income and mining tax assets/liabilities.

Income Tax Expense

Applying the estimated Canadian statutory income tax rate of 26.4% to our loss before taxes of $202.8 million for the year-to-date period in 2021 would have resulted in a tax recovery of approximately $53.5 million; however, we recorded an income tax expense of $9.6 million. The significant items causing our effective income tax rate to be different than the 26.4% estimated Canadian statutory income tax rate include:

Deductible temporary differences with respect to Peru, 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 Peruvian operations. This has resulted in a deferred tax recovery of $6.3 million.
Deductible temporary differences with respect to Manitoba, and relating to the decommissioning and restoration liabilities, were not recognized as we have determined that it is not 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 operations. This resulted in a deferred tax expense of $40.0 million.
Temporary income tax differences not recognized as we have determined that it is not probable that we will realize the recovery of these deferred tax assets. This resulted in a deferred tax expense of $4.5 million.
Foreign exchange on the translation of deferred tax balances to group currency resulted in a deferred tax expense of $4.6 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 26.4%, resulting in a tax expense of $21.2 million.

Mining Tax Expense

Applying the estimated Manitoba mining tax rate of 10.0% to our loss before taxes of $202.8 million for the year-to-date period in 2021 would have resulted in a tax recovery of approximately $20.3 million; however, we recorded a mining tax expense of $32.0 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, 2021, at the tax rate we expect to apply when temporary differences reverse.

LIQUIDITY AND CAPITAL RESOURCES

Senior Unsecured Notes

Following our recent bond refinancings, we now 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.

Extension and Amendment of Senior Secured Revolving Credit Facilities

We have two senior secured revolving credit facilities ("the Credit Facilities") for our Canadian and Peruvian businesses, with combined total availability of $450 million and substantially similar terms and conditions. As at December 31, 2021, our liquidity includes $271.0 million in cash as well as undrawn availability of $346.9 million under our Credit Facilities. As at December 31, 2021, we were in compliance with our covenants under the Credit Facilities and had drawn $103.1 million in letters of credit under the Credit Facilities. Due to the recently updated Flin Flon closure plan finalized in the third quarter of 2021, we expect the letters of credit issued under the Credit Facilities to increase in the near future to support the higher estimated closure costs.

As at December 31, 2021, the Arizona business unit had $28.3 million in surety bonds issued to support future reclamation and closure obligations. The Peru business unit also had $87.1 million in letters of credit issued with various Peruvian financial institutions. No cash collateral is required to be posted under these letters of credit or surety bonds.

Financial Condition

Financial Condition as at December 31, 2021 compared to December 31, 2020

Cash decreased by $168.1 million during the year to $271.0 million as at December 31, 2021. This decrease was mainly the result of $377.4 million of capital investments primarily at our Peru and Manitoba operations, interest payments of $84.4 million, lease payments of $37.7 million, note redemption premium and transaction costs of $31.0 million and other financing payments of $19.6 million, as well as paid dividends of $4.1 million. Offsetting these cash outflows was cash flow from operating activities of $383.8 million. We hold the majority of our cash in low-risk, liquid investments with major Canadian and Peruvian financial institutions.

Working capital decreased by $159.4 million to $147.5 million from December 31, 2020 to December 31, 2021, primarily due to the cash decrease of $168.1 million, an increase of $76.0 million in other financial liabilities as approximately half of the gold prepayment liability was reclassified to current. Offsetting these items was an increase in trade and other receivables of $62.9 million due to timing of contract deliveries, a decrease in trade and other payables of $25.4 million arising mainly from timing of payments and an increase in inventories of $15.4 million mainly due to a rise in materials and supplies.

Cash Flows

The following table summarizes our cash flows for the three months and year ended December 31, 2021 and December 31, 2020:

(in $ thousands)	Three months ended		Year ended
	Dec. 31, 2021	Dec. 31, <br>2020	Dec. 31, 2021	Dec. 31, <br>2020
Operating cash flow before precious metals stream deposit and changes in non-cash working capital	156,917	86,071	483,862	241,863
Precious metals stream deposit	4,000	-	4,000	-
Change in non-cash working capital	(65,068)	35,019	(104,046)	(2,383)
Cash generated from operating activities	95,849	121,090	383,816	239,480
Cash used in investing activities	(104,348)	(117,498)	(375,002)	(359,018)
Cash (used in) generated from financing activities	(18,513)	(13,192)	(175,899)	162,093
Effect of movement in exchange rates on cash	550	(279)	(1,061)	434
(Decrease) increase in cash	(26,462)	(9,879)	(168,146)	42,989

Cash Flow from Operating Activities

Cash generated from operating activities was $95.8 million during the fourth quarter of 2021, a decrease of $25.2 million compared with the same period in 2020. Operating cash flow before precious metals stream deposit and changes in non-cash working capital was $156.9 million during the fourth quarter of 2021, reflecting an increase of $70.8 million compared to the fourth quarter of 2020. The increase in operating cash flow is primarily the result of higher realized base metal prices, and higher gold and copper sales volumes. This was partially offset by lower sales volumes of zinc metal compared to the fourth quarter of 2020.

Cash generated from operating activities for the full year in 2021 was $383.8 million, representing an increase of $144.3 million compared to 2020. Operating cash flow before precious metals stream deposit and changes in non-cash working capital was $483.9 million for the year ended 2021, compared to $241.9 million for the same period in 2020. The full year increase in operating cash flow is due to the same factors described above for the quarter-over-quarter variance as well as higher comparative molybdenum prices and the impact of the Constancia shut-down that occurred in the comparative 2020 period.

Cash Flow from Investing and Financing Activities

During the fourth quarter of 2021, we spent $122.9 million in investing and financing activities, primarily driven by $104.8 million in capital expenditures, $9.4 million in capitalized lease payments and $9.4 million in other financing payments.

For the full year, we spent $550.9 million in investing and financing activities, driven by $377.4 million in capital expenditures, $84.4 million in interest payments, $50.6 million in other financing payments and transaction costs, $37.7 million in capitalized lease payments and $4.1 million in dividends paid.

Capital Expenditures

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

		Year ended		Guidance
	Dec. 31, <br>2020	Dec. 31, 2021	Dec. 31,<br>2020	Annual
(in millions)				2021	2022
Manitoba sustaining capital expenditures	21.7	100.4	94.3	90.0	115.0
Peru sustaining capital expenditures 1	37.0	128.9	91.1	135.0	105.0
Total sustaining capital expenditures	58.7	229.3	185.4	225.0	220.0
Arizona capitalized costs	5.9	22.9	15.6	20.0	35.0
Peru growth capitalized expenditures 2	11.3	22.8	107.0	25.0	10.0
Manitoba growth capitalized expenditures 3	30.4	119.2	61.4	105.0	50.0
Other capitalized costs 4	5.8	(31.2)	52.3	-	-
Capitalized exploration	8.6	13.3	11.9	15.0	25.0
Total other capitalized expenditures	62.0	147.0	248.2
Total capital additions	120.7	376.3	433.6
Reconciliation to cash capital additions:
Decommissioning and restoration obligation	(3.6)	49.4	(46.8)
Right-of-use asset additions	(0.3)	(49.7)	(17.8)
Change in community agreement accruals	0.6	1.0	(6.7)
Change in capital accruals and other	0.5	0.4	(2.1)
Total cash capital additions	117.9	377.4	360.2

All values are in US Dollars.

^1^Peru sustaining capital expenditures includes capitalized stripping costs.

^2^ Hudbay's revised growth capital guidance for Peru of $25.0 million includes the cost of individual land user agreements.

^3^Hudbay's revised growth capital guidance for Manitoba of $105.0 million was revised in August 2021.

^4^Other capitalized costs include decommissioning and restoration adjustments.

Total capital additions declined by 13% in 2021 compared to 2020 as a result of lower growth spending in Peru, partially offset by higher sustaining capital expenditures in both Peru and Manitoba.

Sustaining capital expenditures in Manitoba for the fourth quarter and year ended December 31, 2021 were $22.5 million and $100.4 million, respectively, representing increases of $0.8 million and $6.1 million compared to the same periods in 2020. The increases are due to higher expenditures for Lalor capital development and higher expenditures for the Anderson tailings facility, partially offset by the cessation of capitalizing development costs at 777 given its upcoming closure.

Sustaining capital expenditures in Peru for the fourth quarter and year ended December 31, 2021 were $45.0 million and $128.9 million, respectively, representing increases of $8.0 million and $37.8 million compared to the same periods in 2020. The increases were mainly due to curtailed spending in the full year 2020 period arising from an eight-week suspension of Constancia operations, a tailings management facility expansion, the construction of a tailings discharge line and an increase in leased assets.

Manitoba's full year growth capital of $119.2 million relates primarily to capital spending to complete the New Britannia refurbishment project. The project was completed in October and achieved commercial production on November 30, 2021. Also contributing to the higher growth capital in 2021 was Lalor camp expansion costs, additional leases entered into for the 1901 deposit and Stall recovery initiatives. Growth capital spending in Manitoba was higher than expected in the fourth quarter primarily due to additional leases entered into for the future development of the 1901 deposit and additional costs to complete the New Britannia mill refurbishment project, which caused us to exceed our full year 2021 guidance.

Peru's full year growth capital of $22.8 million, incurred mainly in the first quarter, includes costs associated with the remaining land user agreements as well as civil works related to the development of Pampacancha before reaching commercial production in April.

Arizona's full year growth capital of $22.9 million relates primarily to land acquisition costs, permitting and other costs associated with Copper World and Rosemont.

Other capitalized costs for the year ended December 31, 2021 were $1.1 million and negative $31.2 million, respectively. These relate primarily to the remeasurement of previously recognized decommissioning and restoration liabilities at our Manitoba and Peru operations as a result of changing real discount rates.

Capital Commitments

As at December 31, 2021, we had outstanding capital commitments in Canada of approximately $37.5 million of which $32.7 million can be terminated, approximately $31.9 million in Peru primarily related to exploration option agreements, all of which can be terminated, and approximately $180.4 million in Arizona, primarily related to our Rosemont project, of which approximately $87.9 million can be terminated.

Contractual Obligations

The following table summarizes our significant contractual obligations as at December 31, 2021:

		Less than<br><br> <br>12 months	13 - 36<br><br> <br>months	37 - 60<br><br> <br>months	More than<br><br> <br>60 months
Payment Schedule (in $ millions)	Total
Long-term debt obligations^1^	1,614.7	68.3	136.7	717.8	691.9
Gold prepayment obligation^2^	140.0	71.4	68.6	-	-
Lease obligations	112.6	53.2	32.4	10.5	16.5
Purchase obligation - capital commitments	249.8	56.2	15.0	26.1	152.5
Purchase obligation - other commitments^3^	822.9	335.6	245.7	107.2	134.4
Pension and other employee future benefits obligations^2^	145.6	14.0	13.9	8.4	109.3
Community agreement obligations^4^	52.5	9.3	9.7	5.2	28.3
Decommissioning and restoration obligations^5^	435.7	17.1	7.6	8.3	402.7
Total	3,573.8	625.1	529.6	883.5	1,535.6

^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 the 777 mine and Constancia mines;
A net smelter returns royalty agreement related to the 777 mine; and,
Government royalty payments related to the Constancia mine.

Outstanding Share Data

As of February 22, 2022, there were 261,601,784 common shares of Hudbay issued and outstanding. In addition, there were 1,529,227 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.

Impact of COVID-19

Despite implementing measures to minimize the spread of COVID-19, we continue experience intermittent operational, supply chain, travel, labour and shipping disruptions, that may continue for the foreseeable future. As a result, our financial results may remain volatile as COVID-19 continues to affect production, operating costs and the prices we receive for our products. The resumption of normal operating activities is expected to be gradual and dependent on the global response to COVID-19. We expect that our current liquidity together with cash flows from operations will be sufficient to meet our liquidity needs in 2022.

Given the uncertainty of the duration and magnitude of the impact of COVID-19, our 2022 production and cost guidance are subject to a higher than normal degree of uncertainty.

Political and Social Risks

In June 2021 Peru held a presidential election resulting in the election of Pedro Castillo. 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. The risk exists that further government limitations, restrictions or requirements, not presently foreseen, will be implemented. In addition, changes in policy that alter laws regulating the mining industry could have a material adverse effect on us. 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 particularly in the current COVID-19 environment.

Political or social unrest in Peru or instability could adversely affect our ability to operate the Constancia mine and the Pampacancha satellite deposit. Such adverse effects could result from positions or actions that may be taken by the national government or at the regional, community or local levels by government or non-government actors, including demanding payments, encroaching on our land, challenging the boundaries of such land or our rights to possess and operate on such land, protesting against our operation, impeding project activities through roadblocks or other public manifestations and attacking project assets or personnel. The risk of disruptions from such opposition tends to increase with national, regional and local elections in Peru as well as with change to the general political and social climate in the area in which we operate. We continue to seek to constructively engage with all our stakeholders in the Constancia region and we continue to actively monitor the Peru social risks and political landscape.

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, 2021, the Company assessed whether there were impairment or impairment reversal indicators associated with the general business environment and known changes to business planning (including any arising from the potential impacts of COVID-19 on our business). Other than an impairment indicator related to the increase in closure cost obligations at our Flin Flon operations triggered by lower discount rates, 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 an updated LOM plan for the Rosemont project and/or a Copper World PEA and/or the outcome of the Rosemont appeals litigation could give rise to an indicator of impairment or impairment reversal and cause an adjustment to the carrying value of relevant assets.

Management expects changes in risk-free discount rates to impact the revaluation of our environmental obligations and our PP&E. However, due to the planned near-term closure of the 777 mine and Flin Flon operations, there is a risk that such changes or updates to the Flin Flon operational plan may result in an impairment or impairment reversal until the operations are closed mid-2022.

Metals Price Strategic Risk Management

From time to time, we maintain price protection programs and conduct commodity price risk management 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 base metal price hedging:

In conjunction with a major capital commitment to a growth opportunity for which operating cash flow is a key funding source;
To ensure the viability of a shorter life and/or higher cost mine;
To manage the risk associated with provisional pricing terms in concentrate purchase and sale agreements; or,
To offset fixed price zinc sales contracts with customers.

During 2021, we entered into copper hedging transactions intended to manage the risk associated with provisional pricing terms in concentrate sales agreements.

As at December 31, 2021, we had 72.8 million pounds of net copper fixed for floating swaps outstanding at an average fixed receivable price of $4.34/lb associated with provisional pricing risk in concentrate sales agreements. These swaps settle across January to April 2022.

During the second 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 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.

To provide a service to customers who purchase zinc from our plants and require known future prices, we enter into fixed price sales contracts. To ensure that we continue to receive a floating or unhedged realized zinc price, we enter into forward zinc purchase contracts that effectively offset the fixed price sales contracts with our customers.

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.

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, 2021, approximately $233.6 million of our cash was held in US dollars, approximately $30.4 million of our cash was held in Canadian dollars, and approximately $7.0 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)	2021				2020
	Q4	Q3^3^	Q2	Q1	Q4	Q3	Q2	Q1
Revenue	425.2	359.0	404.2	313.6	322.3	316.1	208.9	245.1
Gross earnings (loss)	81.7	(85.4)	82.2	52.5	34.4	39.3	(12.7)	(22.0)
(Loss) profit before tax	(0.2)	(147.8)	14.8	(69.6)	0.9	(23.9)	(74.6)	(81.5)
(Loss) profit	(10.5)	(170.4)	(3.4)	(60.1)	7.4	(24.0)	(51.9)	(76.1)
Adjusted net earnings (loss)^1,3^	32.7	0.9	5.4	(16.1)	(16.4)	(25.4)	(39.7)	(39.3)
(Loss) earnings per share:
Basic and diluted	(0.04)	(0.65)	(0.01)	(0.23)	0.03	(0.09)	(0.20)	(0.29)
Adjusted net earnings (loss)^1,3^per share	0.13	0.00	0.02	(0.06)	(0.06)	(0.10)	(0.15)	(0.15)
Operating cash flow^2^	156.9	103.5	132.8	90.7	86.1	84.4	29.5	42.0
Adjusted EBITDA^1^	180.3	119.3	143.2	104.2	106.9	96.1	49.1	55.0

^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 changes in non-cash working capital. ^3^The adjusted net earnings (loss) and adjusted net earnings (loss) per share in the third quarter of 2021 have been adjusted by $37.3 million from what was previously reported 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.

Base metal prices have steadily increased since the second quarter of 2020. Other than one-time charges, our revenues, gross profit and operating cash flow have steadily improved with the rise in base metal prices and, more recently, with the benefit of production from the higher grade Pampacancha deposit and the ramp-up of the New Britannia gold mill.

The 2021 fourth quarter results reflect higher realized base metal prices, particularly for zinc, and sustained higher precious metals prices. This strength in commodity prices combined with higher gold production following the commencement of commercial production at New Britannia and improving copper recoveries has led to record revenue of $425.2 million in the fourth quarter of 2021. Adjusted EBITDA and operating cash flow both reached record highs driven by the aforementioned revenue growth. Notwithstanding these records, continued inflationary pressures along with lower copper grades have caused operating costs to climb and put pressure on the gross margins, compared to earlier quarters. As a result of the planned closure of Flin Flon operations in June 2022 and lower long term discount rates, a revaluation of our environmental obligation for the Flin Flon closure plan resulted in a $46.2 million non-cash charge, which negatively impacted net income for the quarter.

As part of our year-end 2021 tax provision calculation, a review of all previous tax impacts on adjusted earnings was completed. During the course of the review, we determined that the tax impact related to the impairment charge for the environmental obligation for the third quarter of 2021 had been understated. This impacted our calculation of adjusted net earnings and adjusted net earnings per share. As a result, the previously disclosed adjusted net earnings of $38.2 million for the third quarter of 2021 has been recalculated to an adjusted net earnings of $0.9 million and the adjusted net earnings per share of $0.15 has been recalculated to an adjusted net earnings per share of nil. This recalculation of adjusted net earnings and adjusted net earnings per share does not impact our financial statements and has been included in the full year adjusted net earnings and adjusted net earnings per share tables disclosed in this MD&A.

During the third quarter of 2021, we continued to realize higher base metal prices resulting in elevated revenues and operating cash flow. Mining at Pampacancha has 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, have 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.

We experienced production disruptions during the first half of 2020 due to an eight-week suspension of Constancia operations in Peru from a government declared state of emergency and at the 777 mine during the fourth quarter of 2020 due to a six-week interruption to perform repairs following a skip hoist incident. However, the deferral of production and sales that arose from these disruptions allowed us to benefit from increasing commodity prices. The reduced copper production from Constancia and 777 in 2020 was partially offset by increased production from Lalor. Earnings in the fourth quarter of 2020 were negatively impacted by the 777 production interruption which resulted in $11.7 million in certain overhead costs being expensed. Earnings in the first and second quarter of 2020 were impacted by the temporary suspension of operations at Constancia, which resulted in $31.9 million in certain overhead costs being expensed.

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 and dividends declared per share)	2021	2020	2019
Revenue	1,502.0	1,092.4	1,237.4
Gross profit	131.0	39.0	151.5
(Loss) profit before tax	(202.8)	(179.1)	(452.8)
(Loss) profit	(244.4)	(144.6)	(343.8)
Adjusted net earnings (loss) ^1^	23.1	(121.0)	(48.6)
(Loss) earnings per share:
Basic and diluted	(0.93)	(0.55)	(1.32)
Adjusted net earnings (loss)^1^ per share	0.09	(0.46)	(0.18)
Total assets	4,616.2	4,666.6	4,461.1
Operating cash flow^2^	483.9	241.9	307.3
Adjusted EBITDA^1^	547.1	306.7	358.5
Total non-current financial liabilities^3^	1,345.7	1,360.1	1,074.2
Dividends declared per share - C$^4^	0.02	0.02	0.02

^2^ Operating cash flow before change in non-cash working capital.

^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.

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 second and third 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 have 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 allowed 2021 operating cash flow to increase by 100% from the prior year. Net losses in 2021 were $244.4 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 for 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 by $72.4 million compared to 2019 as a result of the same factors described above.

In 2019, realized prices for copper and zinc decreased by 7% and 11% respectively, compared to prices in 2018. Realized prices for gold increased by 6% compared to prices in 2018. Mill throughput at Constancia reached annual record levels, contributing to higher milling costs, however milled grades dropped in accordance with the mine plan and these factors drove the overall reduction in operating cash flow before changes in non-cash working capital. Revenues decreased by 16% due to lower metals prices and sales volumes for copper and zinc. Profit before tax decreased $623.6 million mainly due to a $322.2 million Rosemont impairment charge, as well as a write down of the UCM Receivable for $26.0 million.

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 pound of zinc produced and combined unit cost and zinc plant 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 pound of zinc produced are shown because we believe they help investors and management assess the performance of our Manitoba operations. Combined unit cost and zinc plant unit cost is shown because we believe they help investors and management assess our cost structure and margins that are not impacted by variability in by-product commodity prices.

In addition, during 2021, there were non-recurring adjustments for Manitoba operations, including severance, past service pension costs, write-downs of certain machinery and equipment, 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, none of which management believes are indicative of ongoing operating performance and have therefore been excluded from the calculations of adjusted net earnings (loss) and adjusted EBITDA.

In the first half of 2020, a government-imposed shutdown of non-essential businesses led to a temporary suspension of our Constancia mining operations. Similarly, in the fourth quarter of 2020, a shaft incident led to a production interruption at 777 in Manitoba. Fixed overhead production costs incurred during these temporary production disruptions were directly charged to cost of sales. These costs did not contribute to production of inventory and were therefore excluded from the calculations of adjusted net earnings (loss), adjusted EBITDA and cash costs.

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 three months and year ended December 31, 2021 and 2020.

	Three months ended		Year ended
(in $ millions)	Dec. 31, 2021	Dec. 31, <br>2020	Dec. 31, 2021	Dec. 31,<br>2020
(Loss) profit for the period	(10.5)	7.4	(244.4)	(144.6)
Tax expense (recovery)	10.3	(6.5)	41.6	(34.5)
(Loss) profit before tax	(0.2)	0.9	(202.8)	(179.1)
Adjusting items:
Mark-to-market adjustments^1^	13.3	(28.0)	66.7	(14.4)
Peru inventory reversal	-	(2.2)	(1.4)	-
Peru cost of sales direct charge from temporary shutdown	-	-	-	31.9
Manitoba cost of sales direct charge from temporary shutdown	-	11.7	-	11.7
Variable consideration adjustment - stream revenue and accretion	-	-	(1.0)	(10.4)
Foreign exchange loss (gain)	1.1	2.6	1.5	(1.6)
Write-down of unamortized transaction costs	-	-	2.5	3.8
Premium paid on redemption of notes	-	-	22.9	7.3
Impairment - environmental obligation	46.2	-	193.5	-
Restructuring charges - Manitoba^2^	3.4	-	12.4	-
Past service pension cost	0.7	-	5.0	-
Loss on disposal of plant and equipment - Manitoba	2.4	-	7.8	-
Adjusted earnings (loss) before income taxes	66.9	(15.0)	107.1	(150.8)
Tax (expense) recovery	(10.3)	6.5	(41.6)	34.5
Adjusted tax (expense) recovery impact^3^	(23.9)	(7.9)	(42.4)	(4.7)
Adjusted net earnings (loss)	32.7	(16.4)	23.1	(121.0)
Adjusted net earnings (loss) ($/share)	0.13	(0.06)	0.09	(0.46)
Basic weighted average number of common shares outstanding (millions)	261.6	261.3	261.5	261.3

^1^ Includes changes in fair value of the embedded derivative on our Redeemed Notes, 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^ Includes severance accrued for unionized employees and write down of materials and supply inventories at the Flin Flon operations.

^3^ Amounts have been adjusted on a year-to-date basis for 2021. The adjusted net earnings (loss) and adjusted net earnings (loss) per share from the third quarter of 2021 have been adjusted by $37.3 million from what was previously reported due to a change in tax impacts. 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. See the "Trend Analysis and Quarterly Review" section of this MD&A for further details.

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 earnings in the fourth quarter of 2021 of $32.7 million or $0.13 earnings per share and an adjusted net earnings for the year ended December 31, 2021 of $23.1 million or $0.09 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 three months and year ended December 31, 2021 and 2020:

	Three months ended		Year ended
(in $ millions)	Dec. 31, 2021	Dec. 31, <br>2020	Dec. 31, 2021	Dec. 31, <br>2020
(Loss) profit for the period	(10.5)	7.4	(244.4)	(144.6)
Add back: Tax expense (recovery)	10.3	(6.5)	41.6	(34.5)
Add back: Net finance expense	38.6	6.3	221.0	141.9
Add back: Other expenses	16.1	6.0	29.8	17.6
Add back: Depreciation and amortization^1^	89.9	98.6	357.9	361.8
Less: Amortization of deferred revenue and variable consideration adjustment	(17.3)	(20.1)	(73.1)	(74.0)
	127.1	91.7	332.8	268.2
Adjusting items (pre-tax):
Peru inventory write down reversal	-	(2.2)	(1.4)	-
Impairment - environmental obligation	46.2	-	193.5	-
Restructuring charges - Manitoba^2^	-	-	5.4	-
Past service pension cost	0.7	-	5.0	-
Cash portion of Peru cost of sales direct charge from temporary shutdown	-	-	-	15.8
Cash portion of Manitoba cost of sales direct charge from temporary shutdown	-	8.2	-	8.2
Share-based compensation expenses^3^	6.3	9.2	11.8	14.5
Adjusted EBITDA	180.3	106.9	547.1	306.7

^1^ Includes the non-cash portion of the Peru cost of sales charge from the temporary shutdown of $16.1 million and the non-cash portion of the Manitoba cost of sales charge from the temporary shutdown of $3.5 million, for the year ended December 31, 2020.

^2^ Represents the write-down of materials and supply inventories at the Flin Flon operations.

^3^ 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, 2021 and December 31, 2020:

(in $ thousands)	Dec. 31, 2021	Dec. 31, <br>2020
Total long-term debt	1,180,274	1,135,675
Cash	(270,989)	(439,135)
Net debt	909,285	696,540

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 assets. 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 three months and year ended December 31, 2021 and 2020. 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
(in thousands)	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2021	Dec. 31, 2020
Peru	50,389	47,519	171,548	161,269
Manitoba	11,777	12,619	47,745	48,905
Net pounds of copper produced	62,166	60,138	219,293	210,174
Consolidated	Three months ended				Year ended
---	---	---	---	---	---	---	---	---
	Dec. 31, 2021		Dec. 31, 2020		Dec. 31, 2021		Dec. 31, 2020
Cash cost per pound of copper produced	$000s	$/lb	$000s	$/lb	$000s	$/lb	$000s	$/lb
Cash cost, before by-product credits	232,224	3.73	196,533	3.27	867,607	3.95	709,757	3.38
By-product credits	(200,306)	(3.22)	(170,646)	(2.84)	(704,345)	(3.21)	(582,882)	(2.77)
Cash cost, net of by-product credits	31,918	0.51	25,887	0.43	163,262	0.74	126,875	0.60
Consolidated	Three months ended				Year ended
---	---	---	---	---	---	---	---	---
	Dec. 31, 2021		Dec. 31, 2020		Dec. 31, 2021		Dec. 31, 2020
Supplementary cash cost information	$000s	$/lb ^1^	$000s	$/lb ^1^	$000s	$/lb ^1^	$000s	$/lb ^1^
By-product credits^2^:
Zinc	74,585	1.20	77,593	1.29	302,301	1.38	265,105	1.26
Gold ^3^	99,728	1.60	61,010	1.01	289,981	1.32	219,245	1.04
Silver ^3^	14,853	0.24	20,624	0.34	61,388	0.28	67,342	0.32
Molybdenum & other	11,140	0.18	11,419	0.19	50,675	0.23	31,190	0.15
Total by-product credits	200,306	3.22	170,646	2.84	704,345	3.21	582,882	2.77
Reconciliation to IFRS:
Cash cost, net of by-product credits	31,918		25,887		163,262		126,875
By-product credits	200,306		170,646		704,345		582,882
Treatment and refining charges	(13,721)		(14,723)		(55,430)		(56,888)
Inventory adjustments	-		82		3,999		2,302
Share-based compensation expense	744		919		1,347		1,400
Past service pension cost	737		-		4,965		-
Change in product inventory	(16,247)		(4,521)		(18,180)		(1,829)
Royalties	3,594		2,818		15,274		12,807
Overhead costs related to suspension of activities (cash) - Peru	-		-		-		15,810
Overhead costs related to suspension of activities (cash) - Manitoba	-		8,232		-		8,232
Depreciation and amortization^4^	89,927		98,583		357,924		361,827
Cost of sales^5^	297,258		287,923		1,177,506		1,053,418

^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 38 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 months and year ended December 31, 2021 the variable consideration adjustments amounted to income of nil and $1,617, respectively. For the three months and year ended December 31, 2020 - income of nil and $6,668, respectively.

^4^Depreciation is based on concentrate sold.

^5^ As per IFRS financial statements.

Peru	Three months ended		Year ended
(in thousands)	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2021	Dec. 31, 2020
Net pounds of copper produced^1^	50,389	47,519	171,548	161,269

^1^Contained copper in concentrate.

Peru	Three months ended				Year ended
	Dec. 31, 2021		Dec. 31, 2020		Dec. 31, 2021		Dec. 31, 2020
Cash cost per pound of copper produced	$000s	$/lb	$000s	$/lb	$000s	$/lb	$000s	$/lb
Mining	27,756	0.55	24,967	0.53	98,200	0.57	70,724	0.44
Milling	40,121	0.80	39,219	0.83	168,477	0.99	134,096	0.83
G&A	18,351	0.36	14,327	0.30	63,629	0.37	43,105	0.27
Onsite costs	86,228	1.71	78,513	1.65	330,306	1.93	247,925	1.54
Treatment & refining	8,636	0.17	10,082	0.21	32,365	0.19	36,655	0.23
Freight & other	11,609	0.23	9,989	0.21	41,316	0.24	34,794	0.21
Cash cost, before by-product credits	106,473	2.11	98,584	2.08	403,987	2.36	319,374	1.98
By-product credits	(41,900)	(0.83)	(28,802)	(0.61)	(139,885)	(0.82)	(85,067)	(0.53)
Cash cost, net of by-product credits	64,573	1.28	69,782	1.47	264,102	1.54	234,307	1.45
Peru	Three months ended				Year ended
---	---	---	---	---	---	---	---	---
	Dec. 31, 2021		Dec. 31, 2020		Dec. 31, 2021		Dec. 31, 2020
Supplementary cash cost information	$000s	$/lb ^1^	$000s	$/lb ^1^	$000s	$/lb ^1^	$000s	$/lb ^1^
By-product credits^2^:
Gold^3^	24,325	0.49	5,394	0.11	61,510	0.37	17,626	0.11
Silver^3^	7,793	0.15	13,584	0.29	35,154	0.20	41,870	0.26
Molybdenum	9,782	0.19	9,824	0.21	43,221	0.25	25,571	0.16
Total by-product credits	41,900	0.83	28,802	0.61	139,885	0.82	85,067	0.53
Reconciliation to IFRS:
Cash cost, net of by-product credits	64,573		69,782		264,102		234,307
By-product credits	41,900		28,802		139,885		85,067
Treatment and refining charges	(8,636)		(10,082)		(32,365)		(36,655)
Inventory adjustments	-		(2,188)		(1,446)		32
Share-based compensation expenses	145		213		247		288
Change in product inventory	(4,507)		(6,550)		(13,743)		(3,883)
Royalties	762		1,399		3,503		5,121
Overhead costs related to suspension of activities (cash)	-		-		-		15,810
Depreciation and amortization^4^	54,078		50,861		194,408		184,275
Cost of sales^5^	148,315		132,237		554,591		484,362

^1^Per pound of copper produced.

^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.

Manitoba	Three months ended		Year ended
(in thousands)	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2021	Dec. 31, 2020
Net pounds of copper produced^1^	11,777	12,619	47,745	48,905

^1^Contained copper in concentrate.

Manitoba	Three months ended				Year ended
	Dec. 31, 2021		Dec. 31, 2020		Dec. 31, 2021		Dec. 31, 2020
Cash cost per pound of copper produced	$000s	$/lb	$000s	$/lb	$000s	$/lb	$000s	$/lb
Mining	58,891	5.01	46,598	3.69	222,660	4.66	178,308	3.65
Milling	22,193	1.88	11,147	0.88	62,995	1.32	46,057	0.94
Refining (zinc)	19,008	1.61	18,736	1.48	72,392	1.52	71,799	1.47
G&A	13,746	1.17	9,898	0.78	52,963	1.11	46,930	0.96
Onsite costs	113,838	9.67	86,379	6.85	411,010	8.61	343,094	7.02
Treatment & refining	5,085	0.43	4,641	0.37	23,065	0.48	20,233	0.41
Freight & other	6,828	0.58	6,929	0.55	29,545	0.62	27,056	0.55
Cash cost, before by-product credits	125,751	10.68	97,949	7.76	463,620	9.71	390,383	7.98
By-product credits	(158,406)	(13.45)	(141,844)	(11.24)	(564,460)	(11.82)	(497,815)	(10.18)
Cash cost, net of by-product credits	(32,655)	(2.77)	(43,895)	(3.48)	(100,840)	(2.11)	(107,432)	(2.20)
Manitoba	Three months ended				Year ended
---	---	---	---	---	---	---	---	---
	Dec. 31, 2021		Dec. 31, 2020		Dec. 31, 2021		Dec. 31, 2020
Supplementary cash cost information	$000s	$/lb ^1^	$000s	$/lb ^1^	$000s	$/lb ^1^	$000s	$/lb ^1^
By-product credits^2^:
Zinc	74,585	6.33	77,593	6.15	302,301	6.33	265,105	5.42
Gold^3^	75,403	6.40	55,616	4.41	228,471	4.78	201,619	4.12
Silver^3^	7,060	0.60	7,040	0.56	26,234	0.55	25,472	0.52
Other	1,358	0.12	1,595	0.13	7,454	0.16	5,619	0.11
Total by-product credits	158,406	13.45	141,844	11.24	564,460	11.82	497,815	10.18
Reconciliation to IFRS:
Cash cost, net of by-product credits	(32,655)		(43,895)		(100,840)		(107,432)
By-product credits	158,406		141,844		564,460		497,815
Treatment and refining charges	(5,085)		(4,641)		(23,065)		(20,233)
Inventory adjustments	-		2,270		5,445		2,270
Past service pension cost	737		-		4,965		-
Share-based compensation expenses	599		706		1,100		1,112
Change in product inventory	(11,740)		2,029		(4,437)		2,054
Royalties	2,832		1,419		11,771		7,686
Overhead costs related to suspension of activities (cash)	-		8,232		-		8,232
Depreciation and amortization^4^	35,849		47,722		163,516		177,552
Cost of sales^5^	148,943		155,686		622,915		569,056

^1^ Per pound of copper produced.

^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.

Consolidated	Three months ended				Year ended
	Dec. 31, 2021		Dec. 31, 2020		Dec. 31, 2021		Dec. 31, 2020
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	31,918	0.51	25,887	0.43	163,262	0.74	126,875	0.60
Cash sustaining capital expenditures	77,539	1.25	81,523	1.36	268,190	1.22	257,558	1.23
Capitalized exploration	8,000	0.13	8,040	0.13	8,000	0.04	8,040	0.04
Royalties	3,594	0.06	2,818	0.05	15,274	0.07	12,807	0.06
Sustaining cash cost, net of by-product credits	121,051	1.95	118,268	1.97	454,726	2.07	405,280	1.93
Corporate selling and administrative expenses & regional costs	14,729	0.24	15,709	0.26	46,663	0.21	45,010	0.21
Accretion and amortization of decommissioning and community agreements^1^	894	0.01	1,006	0.02	2,830	0.01	4,115	0.02
All-in sustaining cash cost, net of by-product credits	136,674	2.20	134,983	2.24	504,219	2.30	454,405	2.16
Reconciliation to property, plant and equipment additions:
Property, plant and equipment additions	91,432		96,377		346,335		303,653
Capitalized stripping net additions	19,201		20,763		79,426		83,137
Decommissioning and restoration obligation net additions	(555)		3,637		(49,457)		46,792
Total accrued capital additions	110,078		120,777		376,304		433,582
Less other non-sustaining capital costs^2^	42,621		62,041		146,978		248,150
Total sustaining capital costs	67,457		58,736		229,326		185,432
Right of use leased assets	(6,714)		(250)		(26,685)		(17,670)
Capitalized lease cash payments - operating sites	9,099		8,973		35,071		33,606
Community agreement cash payments	1,266		-		1,691		2,591
Accretion and amortization of decommissioning and restoration obligations	6,431		14,064		28,987		53,599
Cash sustaining capital expenditures	77,539		81,523		268,390		257,558

^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, growth capital expenditures and decommissioning and restoration obligation adjustments.

Peru	Three months ended				Year ended
	Dec. 31, 2021		Dec. 31, 2020		Dec. 31, 2021		Dec. 31, 2020
Sustaining cash cost per pound of copper produced	$000s	$/lb	$000s	$/lb	$000s	$/lb	$000s	$/lb
Cash cost, net of by-product credits	64,573	1.28	69,782	1.47	264,102	1.54	234,307	1.45
Cash sustaining capital expenditures	50,423	1.00	43,542	0.92	146,044	0.85	107,994	0.67
Capitalized exploration^1^	8,000	0.16	8,040	0.17	8,000	0.05	8,040	0.05
Royalties	762	0.02	1,399	0.03	3,503	0.02	5,121	0.03
Sustaining cash cost per pound of copper produced	123,758	2.46	122,763	2.58	421,649	2.46	355,462	2.20

^1^Only includes exploration costs incurred for locations near to existing mine operations.

Manitoba	Three months ended				Year ended
	Dec. 31, 2021		Dec. 31, 2020		Dec. 31, 2021		Dec. 31, 2020
Sustaining cash cost per pound of copper produced	$000s	$/lb	$000s	$/lb	$000s	$/lb	$000s	$/lb
Cash cost, net of by-product credits	(32,655)	(2.77)	(43,895)	(3.48)	(100,840)	(2.11)	(107,432)	(2.20)
Cash sustaining capital expenditures	27,116	2.30	37,981	3.01	122,146	2.56	149,564	3.06
Royalties	2,832	0.24	1,419	0.11	11,771	0.25	7,686	0.16
Sustaining cash cost per pound of copper produced	(2,707)	(0.23)	(4,495)	(0.36)	33,077	0.69	49,818	1.02

Zinc Cash Cost and Zinc Sustaining Cash Cost

Cash cost per pound of zinc produced ("zinc 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 zinc as the primary metal of production as it is the largest 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:

Zinc 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 zinc 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 copper will occur later, and an increase in production of copper metal will tend to result in an increase in zinc cash cost under this measure.
Zinc cash cost, net of by-product credits - In order to calculate the net cost to produce and sell zinc, the net of by-product credits measure subtracts the revenues realized from the sale of the metals other than zinc. The by-product revenues from copper, gold, and silver are significant and are integral to the economics of our Manitoba operation. The economics that support our decision to produce and sell zinc 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 zinc 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 zinc prices, the zinc cash cost net of by-product credits would increase, requiring a higher zinc price than that reported to maintain positive cash flows and operating margins.
Zinc sustaining cash cost, net of by-product credits - This measure is an extension of zinc 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 zinc cash cost, which is focused on operating costs only.

The tables below present a detailed build-up of zinc cash cost and zinc sustaining cash cost, net of by-product credits, for the Manitoba business unit, and reconciliations between zinc cash cost, net of by-product credits, to the most comparable IFRS measures of cost of sales for the three months and year ended December 31, 2021 and 2020. Zinc 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, 2021	Dec. 31, 2020	Dec. 31, 2021	Dec. 31, 2020
Net pounds of zinc produced^1^	51,163	56,974	206,196	260,432

^1^ Contained zinc in concentrate.

Manitoba	Three months ended				Year ended
	Dec. 31, 2021		Dec. 31, 2020		Dec. 31, 2021		Dec. 31, 2020
Cash cost per pound of zinc produced	$000s	$/lb	$000s	$/lb	$000s	$/lb	$000s	$/lb
Cash cost, before by-product credits^1^	125,751	2.45	97,949	1.72	463,620	2.25	390,383	1.50
By-product credits	(129,164)	(2.52)	(98,915)	(1.74)	(464,333)	(2.25)	(363,312)	(1.40)
Zinc cash cost, net of by-product credits	(3,413)	(0.07)	(966)	(0.02)	(713)	-	27,071	0.10

^1^For additional detail on cash cost, before by-product credits please see page 63 of this MD&A.

Manitoba	Three months ended				Year ended
	Dec. 31, 2021		Dec. 31, 2020		Dec. 31, 2021		Dec. 31, 2020
Supplementary cash cost information	$000s	$/lb ^1^	$000s	$/lb ^1^	$000s	$/lb ^1^	$000s	$/lb ^1^
By-product credits^2^:
Copper	45,343	0.89	34,664	0.61	202,174	0.98	130,602	0.50
Gold^3^	75,403	1.47	55,616	0.98	228,471	1.11	201,619	0.77
Silver^3^	7,060	0.14	7,040	0.12	26,234	0.13	25,472	0.11
Other	1,358	0.03	1,595	0.03	7,454	0.04	5,619	0.02
Total by-product credits	129,164	2.52	98,915	1.74	464,333	2.25	363,312	1.40
Reconciliation to IFRS:
Cash cost, net of by-product credits	(3,413)		(966)		(713)		27,071
By-product credits	129,164		98,915		464,333		363,312
Treatment and refining charges	(5,085)		(4,641)		(23,065)		(20,233)
Past service pension cost	737		-		4,965		-
Share-based compensation expenses	599		706		1,100		1,112
Inventory adjustments	-		2,270		5,445		2,270
Change in product inventory	(11,740)		2,029		(4,437)		2,054
Royalties	2,832		1,419		11,771		7,686
Overhead costs related to suspension of activities (cash)	-		8,232		-		8,232
Depreciation and amortization^4^	35,849		47,722		163,516		177,552
Cost of sales^5^	148,943		155,686		622,915		569,056

^1^ Per pound of zinc 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 38.

^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.

Manitoba	Three months ended				Year ended
	Dec. 31, 2021		Dec. 31, 2020		Dec. 31, 2021		Dec. 31, 2020
Sustaining cash cost per pound of zinc produced	$000s	$/lb	$000s	$/lb	$000s	$/lb	$000s	$/lb
Zinc cash cost, net of by-product credits	(3,413)	(0.07)	(966)	(0.02)	(713)	-	27,071	0.10
Cash sustaining capital expenditures	27,116	0.53	37,981	0.67	122,146	0.59	149,564	0.57
Royalties	2,832	0.06	1,419	0.02	11,771	0.06	7,686	0.03
Sustaining cash cost per pound of zinc produced	26,535	0.52	38,434	0.67	133,204	0.65	184,321	0.71

Combined Unit Cost & 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. In the first half of 2020, as a result of the temporary suspension of operations in Peru, fixed overhead production costs incurred during the suspension were directly charged to cost of sales. These costs did not contribute to production of inventory and were therefore excluded from the calculation of combined unit costs.

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 three months and year ended December 31, 2021 and 2020.

Peru	Three months ended		Year ended
(in thousands except unit cost per tonne)	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2021	Dec. 31, 2020
Combined unit cost per tonne processed
Mining	27,756	24,967	98,200	70,724
Milling	40,121	39,219	168,477	134,096
G&A ^1^	18,351	14,327	63,629	43,105
Other G&A ^2^	(1,937)	213	(2,152)	865
Unit cost	84,291	78,726	328,154	248,790
Tonnes ore milled	8,049	7,742	28,810	26,297
Combined unit cost per tonne	10.47	10.17	11.39	9.46
Reconciliation to IFRS:
Unit cost	84,291	78,726	328,154	248,790
Freight & other	11,609	9,989	41,316	34,794
Other G&A	1,937	(213)	2,152	(865)
Share-based compensation expenses	145	213	247	288
Inventory adjustments	-	(2,188)	(1,446)	32
Change in product inventory	(4,507)	(6,550)	(13,743)	(3,883)
Royalties	762	1,399	3,503	5,121
Overhead costs related to suspension of activities (cash)	-	-	-	15,810
Depreciation and amortization	54,078	50,861	194,408	184,275
Cost of sales^3^	148,315	132,237	554,591	484,362

^1^ G&A as per cash cost reconciliation above.

^2^ Other G&A primarily includes profit sharing costs. ^3^ As per IFRS financial statements.

Manitoba	Three months ended		Year ended
(in thousands except tonnes ore milled and unit cost per tonne)	Dec. 31,2021	Dec. 31,<br>2020	Dec. 31, 2021	Dec. 31, <br>2020
Combined unit cost per tonne processed
Mining	58,891	46,598	222,660	178,308
Milling	22,193	11,147	62,995	46,057
G&A ^1^	13,746	9,898	52,963	46,930
Less: G&A allocated to zinc metal production and other areas	(3,762)	(3,301)	(14,656)	(14,441)
Unit cost	91,068	64,342	323,962	256,854
USD/CAD implicit exchange rate	1.26	1.30	1.25	1.34
Unit cost - C$	114,751	83,669	406,164	344,672
Tonnes ore milled	682,292	598,287	2,640,272	2,618,065
Combined unit cost per tonne - C$	168	140	154	132
Reconciliation to IFRS:
Unit cost	91,068	64,342	323,962	256,854
Freight & other	6,828	6,929	29,545	27,056
Refined (zinc)	19,008	18,736	72,392	71,799
G&A allocated to zinc metal production	3,762	3,301	14,656	14,441
Share-based compensation expenses	599	706	1,100	1,112
Inventory adjustments	-	2,270	5,445	2,270
Past service pension cost	737	-	4,965	-
Change in product inventory	(11,740)	2,029	(4,437)	2,054
Royalties	2,832	1,419	11,771	7,686
Overhead costs related to suspension of activities (cash)	-	8,232	-	8,232
Depreciation and amortization	35,849	47,722	163,516	177,552
Cost of sales^2^	148,943	155,686	622,915	569,056

^1^ G&A as per cash cost reconciliation above.

^2^ As per IFRS financial statements.

Manitoba	Three months ended		Year ended
(in thousands except zinc plant unit cost per pound)	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2021	Dec. 31, 2020
Zinc plant unit cost
Zinc plant costs	19,008	18,736	72,392	71,799
G&A ^1^	13,746	9,898	52,963	46,930
Less: G&A allocated to other areas	(9,984)	(6,597)	(38,307)	(32,499)
Zinc plant unit cost	22,770	22,037	87,048	86,230
USD/CAD implicit exchange rate	1.26	1.30	1.25	1.34
Zinc plant unit cost - C$	28,690	28,700	109,062	115,400
Refined metal produced (in pounds)	45,819	63,533	197,461	246,117
Zinc plant unit cost per pound - C$	0.63	0.45	0.55	0.47
Reconciliation to IFRS:
Zinc plant unit cost	22,770	22,037	87,048	86,230
Freight & other	6,828	6,929	29,545	27,056
Mining	58,891	46,598	222,660	178,308
Milling	22,193	11,147	62,995	46,057
G&A allocated to other areas	9,984	6,597	38,307	32,499
Share-based compensation expenses	599	706	1,100	1,112
Inventory adjustments	-	2,270	5,445	2,270
Past service pension costs	737	-	4,965	-
Change in product inventory	(11,740)	2,029	(4,437)	2,054
Royalties	2,832	1,419	11,771	7,686
Overhead costs related to suspension of activities (cash)	-	8,232	-	8,232
Depreciation and amortization	35,849	47,722	163,516	177,552
Cost of sales^2^	148,943	155,686	622,915	569,056

^1^ G&A as per cash cost reconciliation above.

^2^ As per IFRS financial statements.

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, 2021.

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;
IFRS 15 - Revenue - stream transactions
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;
Determining whether assets meet criteria for classification as held for sale;
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):
Determining the accounting classification of the precious metals stream deposit;
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, 2021.

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, 2021, 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, 2021, 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, 2021 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, 2021.

The effectiveness of the Company's ICFR as of December 31, 2021 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, 2021.

Changes in ICFR

We did not make any changes to ICFR during the year ended December 31, 2021 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, production, cost and capital and exploration expenditure guidance, expectations regarding the impact of COVID-19 and inflationary pressures on the cost of operations, financial condition and prospects, expectations regarding the Copper World project, including future drill programs, potential synergies with Rosemont and the timeline for completing a preliminary economic assessment, expectations regarding the Snow Lake gold strategy, including anticipated timelines for achieving target throughput and recoveries at the New Britannia mill, increasing the mining rate at Lalor to 5,300 tpd and implementing the Stall mill recovery improvement program, expectations regarding the Flin Flon closure process and the transition of personnel and equipment to Snow Lake, expectations regarding the potential to reprocess Flin Flon tailings in the future and the possible benefits of such a project, the potential and our anticipated plans for advancing our mining properties surrounding Constancia and elsewhere in Peru, 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:

our ability to continue to operate safely and at full capacity despite COVID-19 related challenges;
the availability, global supply and effectiveness of COVID-19 vaccines, the effective distribution of such vaccines in the countries in which we operate, the lessening of restrictions related to COVID-19, and the anticipated rate and timing for each of the foregoing;
the ability to achieve production and cost guidance;
no significant interruptions to our operations due to COVID-19 or social or political unrest in the regions Hudbay operates;
a positive preliminary economic assessment in respect of Copper World will present opportunities to unlock value at Rosemont;
the successful outcome of the Rosemont litigation;
the ability to ramp-up the New Britannia mill to target throughput and recoveries and achieve the anticipated production;
the economic prospects of reprocessing Flin Flon tailings;
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, risks associated with COVID-19 and its effect on our operations, financial condition, projects and prospects, uncertainties related to the closure of the 777 mine and the Flin Flon operations, the direct and indirect impacts of the change in government in Peru, future uncertainty with respect to the Peruvian mining tax regime and social unrest in Peru, risks generally associated with the mining industry, such as economic factors (including future commodity prices, currency fluctuations, energy prices and general cost escalation in the current inflationary environment), uncertainties related to the development and operation of our projects, risks related to the ongoing Rosemont litigation process and other legal challenges that could affect Rosemont or Copper World, risks related to the new Lalor mine plan, including the continuing ramp-up of the New Britannia mill and the ability to convert inferred mineral resource estimates to higher confidence categories, risks related to the technical and economic prospects of reprocessing Flin Flon tailings, the potential that additional financial assurance will be required to support the updated Flin Flon closure plan, 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 our reserves, volatile financial markets that may affect our ability to obtain additional financing on acceptable terms, the failure to obtain required approvals or clearances from government authorities on a timely basis, uncertainties related to the geology, continuity, grade and estimates of mineral reserves and resources, and the potential for variations in grade and recovery rates, uncertain costs of reclamation activities, our ability to comply with our pension and other post-retirement obligations, our ability to abide by the covenants in our debt instruments and other material contracts, tax refunds, hedging transactions, as well as the risks discussed under the heading "Financial Risk Management" in this MD&A and under the heading "Risk Factors" in our most recent Annual Information Form.

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 Geology. Mr. Tavchandjian is a qualified person pursuant to 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.

	2021 ^4^	Q4 2021	Q3 2021^5^	Q2 2021	Q1 2021	2020 ^4^	Q4 2020	Q3 2020	Q2 2020	Q1 2020	2019	Q4 2019
Consolidated Financial Condition (000s)
Cash	$ 270,989	$ 270,989	$297,451	$294,287	$310,564	$439,135	$439,135	$449,014	$391,136	$305,997	$396,146	$396,146
Total long-term debt	1,180,274	1,180,274	1,182,612	1,181,195	1,180,798	1,135,675	1,135,675	1,175,104	988,418	988,074	985,255	985,255
Net debt1	909,285	909,285	885,161	886,908	870,234	696,540	696,540	726,090	597,282	682,077	589,109	589,109
Consolidated Financial Performance (000s except per share amounts)
Revenue	$ 1,501,998	$ 425,170	$358,961	$404,242	$313,624	$1,092,418	$322,290	$316,108	$208,913	$245,105	$1,237,439	$324,485
Cost of sales	1,370,979	343,426	444,379	322,060	261,112	1,053,418	287,923	276,830	221,567	267,096	1,085,897	298,852
(Loss) earnings before tax	(202,751)	(149)	(147,830)	14,819	(69,592)	(179,089)	911	(23,944)	(74,604)	(81,452)	(452,763)	(42,352)
(Loss) earnings	(244,358)	(10,453)	(170,411)	(3,395)	(60,102)	(144,584)	7,406	(23,955)	(51,901)	(76,134)	(343,810)	(1,455)
Basic and diluted (loss) earnings	$ (0.93)	$ (0.04)	$(0.65)	$(0.01)	$(0.23)	$(0.55)	$0.03	$(0.09)	$(0.20)	$(0.29)	$(1.32)	$(0.01)
Adjusted earnings (loss) per share 1	$ 0.09	$ 0.13	$-	$0.02	$(0.06)	$(0.46)	$(0.06)	$(0.10)	$(0.15)	$(0.15)	$(0.18)	$(0.09)
Operating cash flow before change in non-cash working capital 1	483,862	156,917	103,509	132,786	90,656	241,863	86,071	84,383	29,457	41,951	307,284	69,141
Adjusted EBITDA (in millions) 1	547.1	180.3	119.3	143.2	104.2	306.7	106.9	96.1	49.1	55.0	358.5	82.2
Consolidated Operational Performance
Contained metal in concentrate produced 2
Copper	99,470	28,198	23,245	23,474	24,553	95,333	27,278	25,395	18,026	24,635	137,179	32,422
Gold	184,781	55,561	53,872	39,848	35,500	124,622	32,376	29,277	32,614	30,355	114,692	32,712
Silver	3,038,952	893,194	763,167	685,916	696,673	2,750,873	730,679	671,685	580,817	767,692	3,585,330	930,137
Zinc	93,529	23,207	20,844	21,538	27,940	118,130	25,843	30,570	31,222	30,495	119,106	30,592
Molybdenum	1,146	275	282	295	294	1,204	333	392	124	354	1,272	372
Contained metal in doré
Gold	9,002	8,598	404	-	-	-	-	-	-	-	-	-
Silver	6,529	6,519	10	-	-	-	-	-	-	-	-	-
Payable metal in concentrate and doré sold
Copper	92,200	24,959	21,136	25,176	20,929	88,888	22,963	25,903	15,951	24,072	128,519	33,715
Gold	168,358	56,927	47,843	38,205	25,383	122,949	35,179	30,605	30,590	26,574	108,999	30,344
Silver	2,427,508	638,640	701,601	577,507	509,760	2,585,586	762,384	705,495	541,785	575,922	3,452,926	909,423
Zinc 3	96,435	21,112	21,619	25,361	28,343	109,347	28,431	26,520	27,604	26,792	104,319	28,001
Molybdenum	1,098	245	304	265	284	1,321	457	313	120	431	1,186	199
Cash cost 1	$ 0.74	$ 0.51	$ 0.62	$ 0.84	$ 1.04	$ 0.60	$ 0.43	$ 0.65	$ 0.29	$ 0.98	$ 0.83	$ 0.90
Sustaining cash cost	$ 2.07	$ 1.95	$ 1.97	$ 2.25	$ 2.16	$ 1.93	$ 1.97	$ 2.02	$ 1.59	$ 2.05	$ 1.72	$ 2.11
All-in sustaining cash cost 1	$ 2.30	$ 2.20	$ 2.18	$ 2.48	$ 2.37	$ 2.16	$ 2.24	$ 2.25	$ 1.91	$ 2.17	$ 1.86	$ 2.22

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 Reporting Measures" section of this MD&A.

^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.

		2021 ^4^	Q4 2021	Q3 2021	Q2 2021	Q1 2021	2020 ^4^	Q4 2020	Q3 2020	Q2 2020	Q1 2020	2019	Q4 2019
Peru Operations
Constancia ore mined^1^	tonnes	29,714,327	7,742,469	6,208,019	8,016,373	7,747,466	27,529,950	9,313,784	8,455,668	2,775,286	6,985,212	33,308,369	8,049,063
Copper	%	0.31	0.33	0.30	0.30	0.30	0.32	0.31	0.31	0.34	0.34	0.43	0.41
Gold	g/tonne	0.04	0.04	0.04	0.04	0.04	0.03	0.03	0.03	0.04	0.03	0.04	0.04
Silver	g/tonne	2.88	2.81	2.76	3.02	2.90	2.75	2.61	2.55	2.90	3.10	3.76	3.87
Molybdenum	%	0.01	0.01	0.01	0.01	0.01	0.02	0.01	0.02	0.02	0.02	0.02	0.02
Pampacancha ore mined^1^	tonnes	5,141,001	2,107,196	2,050,813	982,992	-	-	-	-	-	-	-	-
Copper	%	0.27	0.27	0.27	0.26	-	-	-	-	-	-	-	-
Gold	g/tonne	0.30	0.34	0.27	0.27	-	-	-	-	-	-	-	-
Silver	g/tonne	4.02	4.26	3.58	4.43	-	-	-	-	-	-	-	-
Molybdenum	%	0.01	0.01	0.01	0.01	-	-	-	-	-	-	-	-
Ore milled	tonnes	28,809,755	8,048,925	6,985,035	7,413,043	6,362,752	26,297,318	7,741,714	7,480,655	4,355,482	6,719,466	31,387,281	7,474,136
Copper	%	0.32	0.33	0.30	0.31	0.33	0.34	0.33	0.33	0.34	0.34	0.42	0.42
Gold	g/tonne	0.08	0.11	0.11	0.07	0.04	0.03	0.03	0.03	0.04	0.03	0.04	0.04
Silver	g/tonne	3.35	3.67	3.93	2.88	2.84	2.87	2.74	2.68	3.04	3.13	3.64	3.86
Molybdenum	%	0.01	0.01	0.01	0.01	0.01	0.02	0.02	0.02	0.01	0.02	0.02	0.02
Copper recovery	%	84.6	86.0	84.9	83.3	84.1	83.0	85.3	83.3	76.6	84.3	85.7	85.6
Gold recovery	%	64.6	63.6	71.9	62.2	52.0	49.8	52.7	51.6	43.4	50.2	48.1	50.0
Silver recovery	%	63.7	60.8	59.1	68.2	69.9	66.9	70.1	66.7	59.6	68.2	68.2	68.2
Molybdenum recovery	%	31.5	26.7	33.5	33.3	33.4	29.4	28.4	30.4	19.9	35.0	26.5	30.8
Contained metal in concentrate				-
Copper	tonnes	77,813	22,856	18,072	19,058	17,827	73,150	21,554	20,803	11,504	19,290	113,825	26,659
Gold	ounces	50,306	17,917	17,531	10,220	4,638	12,395	3,689	3,333	2,311	3,062	19,723	5,007
Silver	ounces	1,972,949	578,140	521,036	468,057	405,714	1,622,972	477,775	430,208	253,687	461,302	2,504,769	631,774
Molybdenum	tonnes	1,146	275	282	295	294	1,204	333	392	124	354	1,272	372
Payable metal sold				-
Copper	tonnes	71,398	20,551	16,065	19,946	14,836	68,506	18,583	21,654	9,023	19,247	106,184	28,430
Gold	ounces	41,807	16,304	16,902	5,638	2,963	10,986	3,297	3,753	1,317	2,618	18,956	4,824
Silver	ounces	1,490,651	380,712	457,263	315,064	337,612	1,518,548	480,843	433,595	242,519	361,591	2,452,496	666,839
Molybdenum	tonnes	1,098	245	304	265	284	1,321	457	313	120	431	1,186	199
Peru combined unit operating cost^,2, 3^	$/tonne	$ 11.39	$ 10.47	$11.62	$11.25	$12.46	$9.46	$10.17	$9.85	$7.77	$9.31	$9.50	$10.20
Peru cash cost^3^	$/lb	$ 1.54	$ 1.28	$1.26	$1.85	$1.82	$1.45	$1.47	$1.54	$1.31	$1.42	$1.16	$1.36
Peru sustaining cash cost^3^	$/lb	$ 2.46	$ 2.46	$2.31	$2.69	$2.36	$2.20	$2.58	$2.29	$1.84	$1.91	$1.65	$2.17

^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 Reporting Measures" section of this MD&A

^4^Annual consolidated results may not calculate based on amounts presented in this table due to rounding.

		2021 ^1^	Q4 2021	Q3 2021	Q2 2021	Q1 2021	2020 ^1^	Q4 2020	Q3 2020	Q2 2020	Q1 2020	2019	Q4 2019
Manitoba Operations
Lalor ore mined	tonnes	1,593,141	422,208	392,380	356,951	421,602	1,654,240	468,101	357,213	407,408	421,518	1,536,780	390,140
Copper	%	0.71	0.78	0.86	0.64	0.57	0.74	0.80	0.66	0.77	0.70	0.75	0.80
Zinc	%	4.23	4.19	3.60	3.81	5.20	5.73	5.54	5.98	6.05	5.43	6.36	6.20
Gold	g/tonne	3.41	3.92	3.85	3.19	2.67	2.51	2.79	2.28	2.64	2.27	2.16	2.63
Silver	g/tonne	24.66	30.35	22.13	22.98	22.75	25.31	24.96	21.23	28.4	26.18	25.51	28.38
777 ore mined	tonnes	1,053,710	266,744	256,536	255,170	275,260	991,576	164,856	264,905	281,890	279,925	1,109,782	269,342
Copper	%	1.28	1.13	1.06	0.82	2.06	1.40	1.89	0.98	1.72	1.18	1.37	1.17
Zinc	%	3.91	4.16	3.88	3.57	4.00	3.88	2.98	3.95	4.13	4.11	3.22	3.33
Gold	g/tonne	2.03	1.80	1.96	1.97	2.39	1.90	1.85	2.01	1.91	1.82	1.61	1.52
Silver	g/tonne	25.25	25.02	22.99	23.35	29.32	24.13	21.64	24.25	25.73	23.86	18.67	18.52
Stall & New Britannia Concentrator Combined:
Ore milled	tonnes	1,506,756	419,727	408,201	317,484	361,344	1,412,751	372,624	335,739	334,601	369,787	1,290,300	310,622
Copper	%	0.72	0.75	0.82	0.68	0.60	0.73	0.79	0.68	0.76	0.70	0.73	0.80
Zinc	%	4.30	4.12	3.58	4.06	5.53	5.76	5.47	6.11	6.16	5.38	6.39	6.24
Gold	g/tonne	3.42	3.90	3.84	3.19	2.57	2.55	2.88	2.35	2.70	2.28	2.13	2.60
Silver	g/tonne	24.95	30.07	23.32	22.02	23.40	25.37	24.43	22.08	28.72	26.28	25.48	28.12
Copper recovery	%	86.8	88.7	84.3	88.8	85.7	86.2	87.1	84.0	86.6	86.5	85.9	85.9
Zinc recovery	%	88.9	87.4	88.2	88.1	91.1	91.9	90.9	92.7	92.4	91.4	91.1	90.7
Gold recovery	%	54.9	54.6	53.4	55.5	57.5	60.0	59.5	57.4	62.3	60.9	56.8	61.1
Silver recovery	%	54.4	53.9	52.7	55.1	56.2	60.4	60.3	57.5	62.1	61.1	60.4	62.9
Flin Flon Concentrator:
Ore milled	tonnes	1,133,516	262,565	258,062	329,503	283,386	1,205,314	225,663	322,156	324,906	332,589	1,362,006	374,529
Copper	%	1.23	1.12	1.06	0.89	1.88	1.28	1.59	0.99	1.52	1.11	1.27	1.11
Zinc	%	3.95	4.16	3.86	3.65	4.20	4.21	3.87	4.07	4.41	4.36	3.78	4.05
Gold	g/tonne	2.04	1.78	1.96	2.06	2.34	1.96	1.99	1.99	1.99	1.88	1.72	1.75
Silver	g/tonne	24.90	25.04	22.93	23.65	28.01	24.26	22.65	24.01	25.56	24.33	19.84	20.56
Copper recovery	%	87.7	86.7	85.2	84.8	91.3	86.0	88.1	83.9	87.3	84.1	88.0	86.9
Zinc recovery	%	83.0	83.1	82.2	84.8	81.8	85.5	83.9	87.9	84.9	85.0	85.5	85.8
Gold recovery	%	58.5	59.2	58.1	52.9	64.0	56.0	56.6	55.3	58.6	53.5	59.4	56.1
Silver recovery	%	45.1	45.6	42.4	37.5	54.1	45.9	46.5	42.0	50.7	44.3	50.8	49.2
^1^Annual consolidated results may not calculate based on amounts presented in this table due to rounding.
		2021 ^4^	Q4 2021	Q3 2021	Q2 2021	Q1 2021	2020 ^4^	Q4 2020	Q3 2020	Q2 2020	Q1 2020	2019	Q4 2019
---	---	---	---	---	---	---	---	---	---	---	---	---	---
Manitoba Operations (continued)
Total Manitoba contained metal in concentrate produced
Copper	tonnes	21,657	5,342	5,173	4,416	6,726	22,183	5,724	4,592	6,522	5,345	23,354	5,763
Zinc	tonnes	93,529	23,207	20,844	21,538	27,940	118,130	25,843	30,570	31,222	30,495	119,106	30,592
Gold	ounces	134,475	37,644	36,341	29,628	30,862	112,227	28,687	25,944	30,303	27,293	94,969	27,705
Silver	ounces	1,066,003	315,054	242,131	217,859	290,959	1,127,901	252,904	241,477	327,130	306,390	1,080,561	298,363
Precious metal in doré produced
Gold	ounces	9,002	8,598	404	-	-	-	-	-	-	-	-	-
Silver	ounces	6,529	6,519	10	-	-	-	-	-	-	-	-	-
Total Manitoba payable metal sold and doré
Copper	tonnes	20,802	4,408	5,071	5,230	6,093	20,382	4,380	4,249	6,928	4,825	22,335	5,285
Zinc^1^	tonnes	96,435	21,112	21,619	25,361	28,343	109,347	28,431	26,520	27,604	26,792	104,346	28,001
Gold	ounces	126,551	40,623	30,941	32,567	22,420	111,963	31,882	26,852	29,273	23,956	90,043	25,520
Silver	ounces	936,857	257,928	244,338	262,443	172,148	1,067,038	281,541	271,900	299,266	214,331	1,000,430	242,584
Manitoba combined unit operating cost^2,3^	C$/tonne	$ 154	$ 168	$147	$148	$151	$132	$140	$126	$135	$127	$134	$128
Manitoba cash cost^3^	$/lb	$ (2.11)	$ (2.77)	$(1.64)	$(3.51)	$(1.04)	$(2.20)	$(3.48)	$(3.41)	$(1.51)	$(0.62)	$(0.75)	$(1.26)
Manitoba sustaining cash cost^3^	$/lb	$ 0.69	$ (0.23)	$0.75	$0.36	$1.62	$1.02	$(0.36)	$0.83	$1.16	$2.54	$2.07	$1.83

^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, 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 MD&A. ^4^Annual consolidated results may not calculate based on amounts presented in this table due to rounding.

Hudbay Minerals Inc.: Exhibit 99.3 - Filed by newsfilecorp.com

	TSX, NYSE - HBM<br><br> <br>2022 No. 2
23 York Street, Suite 800<br>Toronto, Ontario<br>Canada M5J 2V5<br>tel: 416 362-8181fax: 416 362-7844<br>hudbay.com	News Release

Hudbay Announces Fourth Quarter and Full Year 2021 Results and Provides Annual Guidance

Toronto, Ontario, February 23, 2022 - Hudbay Minerals Inc. ("Hudbay" or the "company") (TSX, NYSE:HBM) today released its fourth quarter and full year 2021 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

Consolidated copper production of 99,470 tonnes and consolidated gold production of 193,783 ounces increased by 4% and 55%, respectively, in 2021 as compared to 2020.
Achieved 2021 consolidated copper, gold and silver production guidance while zinc production fell short of the 2021 guidance range.
Peru copper production met 2021 guidance with strong operating performance in the fourth quarter, aided by the continued ramp up of Pampacancha. Manitoba zinc production was below 2021 guidance primarily due to higher dilution and mine plan limitations at the 777 mine as it approaches closure.
Record quarterly consolidated gold production of 64,159 ounces in the fourth quarter, an increase of 18% compared to the third quarter of 2021, due to higher grades at Pampacancha and the commissioning of the New Britannia mill.
Generated record quarterly revenue of $425.2 million. Operating cash flow before change in non-cash working capital was $156.9 million and adjusted EBITDA^i^ was $180.3 million in the fourth quarter of 2021, due to higher realized base metals prices and higher gold and copper sales volumes, partially offset by lower zinc sales volumes.
Full year, consolidated cash cost and sustaining cash cost per pound of copper produced, net of by-product credits^i^, of $0.74 and $2.07, respectively, achieved 2021 guidance as inflationary cost pressures were offset by strong by-product credits.
Consolidated cash cost and sustaining cash cost per pound of copper produced, net of by-product credits^i^, for the fourth quarter of 2021 were $0.51 and $1.95, respectively, a decrease of 18% and an increase of 1%, respectively, compared to the third quarter of 2021.
Fourth quarter net loss and loss per share were $10.5 million and $0.04, respectively. After adjusting for an impairment charge related to a revaluation of our Flin Flon environmental obligation due to declining long term discount rates, amongst other items, fourth quarter adjusted net earnings^i^ per share was $0.13.

TSX, NYSE - HBM<br><br> <br>2022 No. 2

Executing on Growth Initiatives

New Britannia achieved commercial production on November 30, 2021. December mill throughput averaged 1,200 tonnes per day with gold and silver recoveries in line with metallurgical models. Throughput and recoveries are expected to achieve design rates in the second quarter of 2022.
Published an initial mineral resource estimate for Copper World on December 15, 2021, which contained a higher grade, near-surface zone that has the potential to be mined earlier in the mine life and is composed of both sulphide and oxide mineralogy. The company remains on track to complete a preliminary economic assessment of Copper World in the first half of 2022.
Results from the Constancia Norte underground scoping study are expected to be incorporated into the annual mineral reserve and resource update for Constancia in March 2022.
Commenced a winter drilling program in Manitoba in January 2022 to test high-priority targets near Lalor and 1901 for potential reserve and resource expansion and support the completion of a preliminary economic assessment of the Flin Flon tailings reprocessing opportunity.

"2021 was a year of execution for Hudbay as we invested approximately $250 million in our brownfield growth projects at Pampacancha and New Britannia," said Peter Kukielski, President and Chief Executive Officer. "We began to see increased cash flows from these short-payback, high-return investments in the fourth quarter and we are now at an inflection point where we anticipate meaningful copper and gold production growth along with significant EBITDA and cash flow growth. 2022 will be a year in which we start to reap the rewards from our disciplined growth strategy while we advance our high-quality pipeline of copper growth assets, including our newly discovered Copper World project in Arizona, which we believe will generate significant value."

2022 Annual Guidance and Outlook

Consolidated copper production is forecast to increase by 17% to 116,000^ii^ tonnes in 2022 and by 34% to 133,500^ii^ tonnes in 2024, compared to 2021, with higher copper grades expected from the Pampacancha deposit in Peru.
Consolidated gold production is forecast to increase by 28% to 247,500^ii^ ounces in 2022 and by 59% to 307,500^ii^ ounces in 2024, compared to 2021, due to higher production from the New Britannia mill and Pampacancha.
Introduced 2022 cash cost guidance by business unit with Peru cash cost of $1.10 to $1.40 per pound of copper produced, net of by-product credits^i^, and Manitoba cash cost of $300 to $550 per ounce of gold produced, net of by-product credits^i^.
2022 unit operating costs are expected to increase by approximately 7%^ii^ in Peru and 15%^ii^ in Manitoba, compared to 2021, as a result of expected higher input costs due to industry wide inflation in each region and the transition of operations in Manitoba.
Consolidated cash cost guidance of $0.60 to $1.05 and consolidated sustaining cash cost guidance of $1.60 to $2.25, in each case, per pound of copper produced, net of by-product credits, is expected in 2022.
Total capital expenditures are expected to decline by 17% year-over-year as major growth investment programs in Peru and Manitoba were completed in 2021 and lower sustaining capital spending is expected in Peru, offset by higher growth spending on technical and economic studies for Copper World.
Exploration spending of approximately $65.0 million in 2022 reflects plans to continue drilling activities at Copper World and test promising targets in Peru, Manitoba, Nevada and Chile.

TSX, NYSE - HBM<br><br> <br>2022 No. 2

Summary of Fourth Quarter Results

Consolidated copper production in the fourth quarter of 2021 was 28,198 tonnes, a 21% increase compared to the third quarter of 2021, primarily due to higher throughput and copper grades in Peru. Consolidated gold production was 64,159 ounces in the fourth quarter of 2021, another quarterly record for Hudbay and an increase of 18% versus the third quarter, primarily due to higher gold production in Snow Lake with the commissioning of the New Britannia mill in the fourth quarter. Consolidated zinc production in the quarter increased by 11% versus the third quarter of 2021, primarily due to higher zinc grades at 777 and Lalor. Consolidated silver production in the fourth quarter increased by 18% compared to the third quarter as higher grades and recoveries in Manitoba offset lower grades in Peru.

In the fourth quarter of 2021, consolidated cash cost per pound of copper produced, net of by-product credits^i^, was $0.51, compared to $0.62 in the third quarter of 2021. This 18% decrease was mainly a result of higher copper production and higher gold by-product revenue. Sustaining cash cost per pound of copper produced, net of by-product credits^i^, slightly decreased to $1.95 in the fourth quarter of 2021, from $1.97 in the third quarter, primarily due to the same factors affecting cash cost offset by higher sustaining capital expenditures and royalties.

Operating cash flow before change in non-cash working capital was $156.9 million during the fourth quarter of 2021, reflecting an increase of $53.4 million compared to the third quarter of 2021, primarily the result of higher realized base metal prices and higher gold and copper sales volumes.

Net loss and net loss per share in the fourth quarter of 2021 were $10.5 million and $0.04, respectively, compared to a net loss and net loss per share of $170.4 million and $0.65, respectively, in the third quarter of 2021. Fourth quarter results were negatively impacted by a revaluation of the environmental obligation due to lower long term discount rates since the middle of the year and a corresponding increase to Flin Flon's property plant and equipment ("PP&E"). As the closure of the 777 mine and Flin Flon operations is expected to commence within several months, an impairment charge was made to PP&E resulting in a loss of $46.2 million. The quarterly financial results were also negatively impacted by $13.3 million in mark-to-market net losses arising from the revaluation of the gold prepayment liability, revaluation of certain other financial instruments, share-based compensation, and a $3.4 million Flin Flon restructuring charge.

Adjusted net earnings^i^ and adjusted net earnings per share^i^ in the fourth quarter of 2021 were $32.7 million and $0.13 per share, respectively, after adjusting for the impairment charge related to the revaluation of the environmental obligation in Flin Flon, among other items. This compares to adjusted net earnings and adjusted net earnings per share of $0.9 million and $0.00 per share in the third quarter of 2021, which were recalculated as a result of the company's year-end 2021 tax provision calculation review (see "Non-IFRS Financial Performance Measures"). Fourth quarter adjusted EBITDA^i^ increased to $180.3 million, compared to $119.3 million in the third quarter of 2021, primarily due to higher copper and gold sales volumes and higher realized prices, partially offset by higher exploration and selling and administrative expenses.

As at December 31, 2021, Hudbay's liquidity includes $271.0 million in cash and cash equivalents as well as undrawn availability of $346.9 million under its revolving credit facilities. The company's liquidity position was further enhanced in October 2021 through the renegotiation of its credit facilities to increase available borrowings to $450.0 million and extend the maturity to 2025.

TSX, NYSE - HBM<br><br> <br>2022 No. 2

Summary of Full Year Results

On a consolidated basis, Hudbay's copper, gold and silver production met 2021 guidance; however, production of zinc and molybdenum fell short of the 2021 guidance ranges. Production of gold in Peru exceeded the top end of the guidance range due to strong gold grades from Pampacancha. Production of gold and silver in Manitoba fell below the 2021 guidance range primarily due to higher than expected grade dilution at the 777 mine during the fourth quarter and prioritizing base metal rich zones in the fourth quarter at Lalor while deferring some gold-rich ore for future processing at New Britannia to achieve higher gold recoveries. Zinc production was impacted by higher dilution and mine plan limitations as the 777 mine approaches the end of life.

Consolidated cash costs per pound of copper produced, net of by-product credits^i^, for 2021 was $0.74, and consolidated sustaining cash cost per pound of copper produced, net of by-product credits^i^, for 2021 was $2.07, in line with the company's 2021 guidance range.

Operating cash flow before change in non-cash working capital increased to $483.9 million from $241.9 million in 2020. The increase is the result of higher realized base metal and molybdenum prices and higher sales volumes of gold and copper, partially offset by lower zinc sales volumes.

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Financial Condition ($000s)	Dec. 31, 2021	Sep. 30, 2021	Dec. 31, 2020
---	---	---	---
Cash and cash equivalents	270,989	297,451	439,135
Total long-term debt	1,180,274	1,182,612	1,135,675
Net debt^1^	909,285	885,161	696,540
Working capital^2^	147,512	159,917	306,888
Total assets	4,616,231	4,504,661	4,666,645
Equity	1,476,828	1,490,180	1,699,806

^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, 2021	Sep. 30, 2021		Dec. 31, 2020
Revenue	425,170	358,961		322,290
Cost of sales	343,426	444,379		287,923
(Loss) earnings before tax	(149)	(147,830)		911
(Loss) earnings	(10,453)	(170,411)		7,406
Basic and diluted earnings (loss) per share	(0.04)	(0.65)		0.03
Adjusted earnings (loss) per share1	0.13	0.00^2^		(0.06)
Operating cash flow before change in non-cash working capital	156.9	103.5		86.1
Adjusted EBITDA1	180.3	119.3		106.9
	Year Ended
	Dec. 31, 2021		Dec. 31, 2020
Revenue	1,501,998		1,092,418
Cost of sales	1,370,979		1,053,418
Loss before tax	(202,751)		(179,089)
Loss	(244,358)		(144,584)
Basic and diluted loss per share	(0.93)		(0.55)
Adjusted earnings (loss) per share1	0.09		(0.46)
Operating cash flow before change in non-cash working capital3	483.9		241.9
Adjusted EBITDA1	547.1		306.7
1 Adjusted 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.<br> 2 The adjusted net earnings (loss) and adjusted net earnings (loss) per share in the third quarter of 2021 have been adjusted by 37.3 million from what was previously reported 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.<br> 3 Operating cash flow before precious metals stream deposit and changes in non-cash working capital.

All values are in US Dollars.

TSX, NYSE - HBM<br><br> <br>2022 No. 2
Consolidated Production and Cost Performance		Three Months Ended
---	---	---	---	---
	******	Dec. 31, 2021	Sep. 30, 2021	Dec. 31, 2020
Contained metal in concentrate and doré produced^1^		****
Copper	tonnes	28,198	23,245	27,278
Gold	ounces	64,159	54,276	32,376
Silver	ounces	899,713	763,177	730,679
Zinc	tonnes	23,207	20,844	25,843
Molybdenum	tonnes	275	282	333
Payable metal sold		****
Copper	tonnes	24,959	21,136	22,963
Gold^2^	ounces	56,927	47,843	35,179
Silver^2^	ounces	638,640	701,601	762,384
Zinc^3^	tonnes	21,112	21,619	28,431
Molybdenum	tonnes	245	304	457
Consolidated cash cost per pound of copper produced^4^		****
Cash cost	$/lb	0.51	0.62	0.43
Sustaining cash cost	$/lb	1.95	1.97	1.97
All-in sustaining cash cost	$/lb	2.20	2.18	2.24
		Year Ended
		Dec. 31, 2021		Dec. 31, 2020
Contained metal in concentrate and doré produced^1^		****
Copper	tonnes	99,470		95,333
Gold	ounces	193,783		124,622
Silver	ounces	3,045,481		2,750,873
Zinc	tonnes	93,529		118,130
Molybdenum	tonnes	1,146		1,204
Payable metal sold		****
Copper	tonnes	92,200		88,888
Gold^2^	ounces	168,358		122,949
Silver^2^	ounces	2,427,508		2,585,586
Zinc^3^	tonnes	96,435		109,347
Molybdenum	tonnes	1,098		1,321
Consolidated cash cost per pound of copper produced^4^		****
Cash cost	$/lb	0.74		0.60
Sustaining cash cost	$/lb	2.07		1.93
All-in sustaining cash cost	$/lb	2.30		2.16

^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.

TSX, NYSE - HBM<br><br> <br>2022 No. 2

Peru Operations Review

Peru Operations		Three Months Ended			Year Ended
	******	Dec. 31, 2021	Sep. 30, 2021	Dec. 31, 2020	Dec. 31, 2021	Dec. 31, 2020
Constancia ore mined^1^	tonnes	7,742,469	6,208,019	9,313,784	29,714,327	27,529,950
Copper	%	0.33	0.30	0.31	0.31	0.32
Gold	g/tonne	0.04	0.04	0.03	0.04	0.03
Silver	g/tonne	2.81	2.76	2.61	2.88	2.75
Molybdenum		0.01	0.01	0.01	0.01	0.02
Pampacancha ore mined	tonnes	2,107,196	2,050,813	-	5,141,001	-
Copper	%	0.27	0.27	-	0.27	-
Gold	g/tonne	0.34	0.27	-	0.30	-
Silver	g/tonne	4.26	3.58	-	4.02	-
Molybdenum		0.01	0.01	-	0.01	-
Ore milled	tonnes	8,048,925	6,985,035	7,741,714	28,809,755	26,297,318
Copper	%	0.33	0.30	0.33	0.32	0.34
Gold	g/tonne	0.11	0.11	0.03	0.08	0.03
Silver	g/tonne	3.67	3.93	2.74	3.35	2.87
Molybdenum		0.01	0.01	0.02	0.01	0.02
Copper recovery	%	86.0	84.9	85.3	84.6	83.0
Gold recovery	%	63.6	71.9	52.7	64.6	49.8
Silver recovery	%	60.8	59.1	70.1	63.7	66.9
Molybdenum recovery		26.7	33.5	28.4	31.5	29.4
Contained metal in concentrate		****			****
Copper	tonnes	22,856	18,072	21,554	77,813	73,150
Gold	ounces	17,917	17,531	3,689	50,306	12,395
Silver	ounces	578,140	521,036	477,775	1,972,949	1,622,972
Molybdenum	tonnes	275	282	333	1,146	1,204
Payable metal sold		****			****
Copper	tonnes	20,551	16,065	18,583	71,398	68,506
Gold	ounces	16,304	16,902	3,297	41,807	10,986
Silver	ounces	380,712	457,263	480,843	1,490,651	1,518,548
Molybdenum	tonnes	245	304	457	1,098	1,321
Combined unit operating cost^2,3,^^4^	$/tonne	10.47	11.62	10.17	11.39	9.46
Cash cost^3,^^4^	$/lb	1.28	1.26	1.47	1.28	1.45
Sustaining cash cost^3,^^4^	$/lb	2.46	2.31	2.58	2.46	2.20

^1^ Reported tonnes and grade for ore mined are estimates based on mine plan assumptions and may not reconcile fully 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 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.

^4^Includes approximately $4.1 million, or $0.51 per tonne, of COVID-related costs during the three months ended December 31, 2021, $4.8 million, or $0.69 per tonne during the three months ended September 30, 2021, and $19.8 million, or $0.69 per tonne during the year ended December 31, 2021.

Peru has experienced notable improvements in COVID-19 health statistics throughout 2021. Peru operations did not encounter any major COVID-19 interruptions during the year; however, with the recent emergence of the Omicron variant in Peru, the company has continued to maintain stringent COVID-19 measures and controls to ensure the safety of Hudbay's workforce and this has contributed to elevated unit operating costs.

TSX, NYSE - HBM<br><br> <br>2022 No. 2

During the fourth quarter of 2021, the Constancia operations produced 22,856 tonnes of copper, 17,917 ounces of gold, 578,140 ounces of silver and 275 tonnes of molybdenum. Copper production was 26% higher than the third quarter due to an increase in throughput and recovery at both Constancia and Pampacancha. Gold and silver production increased by 2% and 11%, respectively, due to the increased throughput and higher grades. This was another record quarter for gold production in Peru.

Total ore mined during the fourth quarter of 2021 increased by 19% from the third quarter of 2021 as mining levels were optimized for mill throughput. Ore mined at Pampacancha in 2021 was 5.1 million tonnes, exceeding the four million tonne threshold required to receive an additional $4 million deposit from Wheaton Precious Metals under the amended Constancia streaming agreement. The proceeds of this deposit were received in December 2021 and were accounted for as an increase in the deferred revenue balance.

Ore milled during the fourth quarter of 2021 was 15% higher than the previous quarter due to a scheduled semi-annual mill maintenance program affecting third quarter ore milled. Milled grades for copper were higher than the third quarter due to higher grades from the Constancia pit. Milled grades for gold were consistent with the most recent quarter, while milled silver grades were lower but consistent with the mine plan.

Copper recoveries in the fourth quarter increased over the third quarter of 2021 due to lower oxide levels in the Constancia ore. Recoveries of gold in the fourth quarter of 2021 were lower than the third quarter due to variability of the Pampacancha volume being treated and the increased presence of zinc, while silver recoveries slightly increased compared to the third quarter due to variable metallurgical characteristics of the earlier ores from Pampacancha and slightly lower silver head grades.

Combined mine, mill and G&A unit operating costs in the fourth quarter of 2021 were $10.47 per tonne, a 10% improvement versus the third quarter of 2021. COVID-related costs in Peru were $4.1 million in the fourth quarter of 2021. Combined unit operating costs in the fourth quarter were $9.96 per tonne excluding these COVID-related costs. Full year combined unit operating costs were 20% higher than the same period in 2020 due to inflationary pressures on consumables and energy costs and higher COVID-19 expenditures, offset in part by additional tonnes milled.

Peru's cash cost per pound of copper produced, net of by-product credits, in the fourth quarter of 2021 was $1.28, relatively in line with the prior quarter. Peru's sustaining cash cost per pound of copper produced, net of by-product credits, in the fourth quarter of 2021 increased to $2.46, compared to $2.31 in the third quarter of 2021, due to higher capitalized expenditures, partially offset by higher copper production.

TSX, NYSE - HBM<br><br> <br>2022 No. 2

Manitoba Operations Review

Manitoba Operations		Three Months Ended			Year Ended
	******	Dec. 31, 2021	Sep. 30, 2021	Dec. 31,2020	Dec. 31,2021	Dec. 31, 2020
Lalor ore mined	tonnes	422,208	392,380	468,101	1,593,141	1,654,240
Copper	%	0.78	0.86	0.80	0.71	0.74
Zinc	%	4.19	3.60	5.54	4.23	5.73
Gold	g/tonne	3.92	3.85	2.79	3.41	2.51
Silver	g/tonne	30.35	22.13	24.96	24.66	25.31
777 ore mined	tonnes	266,744	256,536	164,856	1,053,710	991,576
Copper	%	1.13	1.06	1.89	1.28	1.40
Zinc	%	4.16	3.88	2.98	3.91	3.88
Gold	g/tonne	1.80	1.96	1.85	2.03	1.90
Silver	g/tonne	25.02	22.99	21.64	25.25	24.13
Stall Concentrator & New Britannia Mill:		****			****
Ore milled	tonnes	419,727	408,201	372,624	1,506,756	1,412,751
Copper	%	0.75	0.82	0.79	0.72	0.73
Zinc	%	4.12	3.58	5.47	4.30	5.76
Gold	g/tonne	3.90	3.84	2.88	3.42	2.55
Silver	g/tonne	30.07	23.32	24.43	24.95	25.37
Copper recovery	%	88.7	84.3	87.1	86.8	86.2
Zinc recovery	%	87.4	88.2	90.9	88.9	91.9
Gold recovery	%	54.6	53.4	59.5	54.9	60.0
Silver recovery	%	53.9	52.7	60.3	54.4	60.4
Flin Flon Concentrator:		****			****
Ore milled	tonnes	262,565	258,062	225,663	1,133,516	1,205,314
Copper	%	1.12	1.06	1.59	1.23	1.28
Zinc	%	4.16	3.86	3.87	3.95	4.21
Gold	g/tonne	1.78	1.96	1.99	2.04	1.96
Silver	g/tonne	25.04	22.93	22.65	24.90	24.26
Copper recovery	%	86.7	85.2	88.1	87.7	86.0
Zinc recovery	%	83.1	82.2	83.9	83.0	85.5
Gold recovery	%	59.2	58.1	56.6	58.5	56.0
Silver recovery	%	45.6	42.4	46.5	45.1	45.9
Total contained metal in concentrate and doré
Copper	tonnes	5,342	5,173	5,724	21,657	22,183
Zinc	tonnes	23,207	20,844	25,843	93,529	118,130
Gold	ounces	46,242	36,745	28,687	134,477	112,227
Silver	ounces	321,573	242,141	252,904	1,072,532	1,127,901
Total payable metal sold		****			****
Copper	tonnes	4,408	5,071	4,380	20,802	20,382
Zinc^2^	tonnes	21,112	21,619	28,431	96,435	109,347
Gold	ounces	40,623	30,941	31,882	126,551	111,963
Silver	ounces	257,928	244,338	281,541	936,857	1,067,038
Combined unit operating cost^3,4^	C$/tonne	168	147	140	154	132
Cash cost^4^	$/lb	(2.77)	(1.64)	(3.48)	(2.11)	(2.20)
Sustaining cash cost^4^	$/lb	(0.23)	0.75	(0.36)	0.69	1.02

^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 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, please see the "Non-IFRS Financial Reporting Measures" section of this news release.

TSX, NYSE - HBM<br><br> <br>2022 No. 2

During the fourth quarter of 2021, Manitoba operations produced 5,342 tonnes of copper, 46,242 ounces of gold, 321,573 ounces of silver and 23,207 tonnes of zinc. Copper production was relatively in line as compared to the third quarter and gold and silver production increased by 11% and 33%, respectively, due to the ramp-up at New Britannia.

Full year copper production achieved 2021 guidance; however, zinc, gold and silver production for the year fell short of the company's guidance ranges. Zinc production was predominantly impacted by higher than planned dilution at the 777 mine as it nears the end of life. Gold and silver production were below guidance due to higher dilution at the 777 mine in the fourth quarter and the deferral of some higher gold content ore for future processing at New Britannia to achieve higher gold recoveries.

Although there was less feed to the Stall concentrator in the fourth quarter as gold ore was directed to New Britannia, the combined Snow Lake mills processed a significantly higher volume of ore in the fourth quarter of 2021 and Stall recoveries were consistent with the metallurgical model for the head grades delivered. New Britannia recoveries continued ramping up during the fourth quarter. The Flin Flon concentrator consumed the available ore feed from the 777 mine in the fourth quarter of 2021 and recoveries were consistent with the metallurgical model for the head grades delivered.

Combined unit operating costs in the fourth quarter of 2021 increased by 14% compared to the third quarter of 2021, primarily due to higher milling costs in Snow Lake with the ramp-up of the New Britannia mill in the quarter, partially offset by higher tonnes processed. Full year combined mine, mill and G&A unit operating costs were 17% higher than the prior year due to the same factors as the fourth quarter variances. Full year combined unit operating cost was within the 2021 guidance range.

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Manitoba's cash cost per pound of copper produced, net of by-product credits, in the fourth quarter of 2021 was negative $2.77, lower than the third quarter primarily due to higher by-product credits as gold revenues increased, offsetting operating cost increases as noted above. Manitoba's sustaining cash cost per pound of copper produced, net of by-product credits, in the fourth quarter of 2021 was negative $0.23, lower than the $0.75 achieved in the third quarter, due to the same factors affecting cash costs.

COVID-19 Business Update

Hudbay is maintaining COVID-19 measures and controls to ensure the safety of its workforce, partners and communities. This has contributed to increased operating costs beyond levels initially budgeted for 2021. Despite the maintenance of these stringent measures, the company continues to experience intermittent operational supply chain, travel, labour and shipping disruptions with periodic waves of COVID-19 cases.

New Britannia Commercial Production Achieved

Advancing the Copper World Discovery

On December 15, 2021, Hudbay released a National Instrument 43-101 ("NI 43-101") initial mineral resource estimate for the recently discovered Copper World deposits in Arizona. The 100% owned Copper World project is located in close proximity to the 100% owned Rosemont deposit, with mineralization closer to surface than Rosemont. The Copper World project consists of seven deposits extending over seven kilometres, including Bolsa, Broad Top Butte, Copper World, Peach, Elgin, South Limb and North Limb.

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The company has increased the number of drill rigs at site to six to conduct infill drilling and to support future economic studies. The technical studies for Copper World are well-advanced and the results will be incorporated into a Preliminary Economic Assessment ("PEA") contemplating the development of the Copper World deposits in conjunction with the Rosemont deposit. The PEA is also expected to reflect preliminary expectations of potential synergies between Copper World and Rosemont. Hudbay is on track to publish the PEA results in a NI 43-101 Technical Report in the first half of 2022.

An updated three-dimensional visualization of Copper World, including the location of the deposits, drilling completed in 2020 and 2021, historical mine sites and the updated mineral resource estimates can be found at the following link:

https://vrify.com/embed/decks/10916-2022-copper-world-exploration-deck

The company continues to await a decision from the U.S. Court of Appeals for the Ninth Circuit relating to the appeal of the unprecedented Rosemont court decision.

Other Exploration Updates

Peru Regional Exploration

Hudbay continues drilling and scoping studies to evaluate the underground potential at Constancia Norte, and the results are expected to be incorporated into the annual mineral reserve and resource update for Constancia in March 2022. The company also continues to progress exploration agreement discussions with nearby communities on prospective properties near Constancia.

Snow Lake Regional Exploration

The company is actively conducting surface and underground winter drilling activities in the Snow Lake area, primarily focused on testing down-plunge extensions of the copper-gold rich feeder zone at the 1901 deposit, the drilling gap between 1901 and lens 17 at Lalor, and a high-priority geophysical target located immediately north of Lalor. In addition, Hudbay continues to compile drilling results from the 2021 program at Lalor and 1901, which are expected to be incorporated into the annual mineral reserve and resource estimates to be published at the end of March 2022.

Flin Flon Reclamation Obligations and Tailings Reprocessing Opportunity

In early January 2022, Hudbay commenced a confirmatory drill program on the tailings facility in Flin Flon to support the completion of a PEA on the tailings reprocessing opportunity by the first quarter of 2023. The company is also conducting engineering and test work throughout 2022 to support the PEA. This opportunity could utilize the Flin Flon concentrator, with modifications, after the closure of the 777 mine, creating operating and economic benefits to the Flin Flon community. It could also provide the opportunity to redesign the closure plans, increase metal production, defer or reduce certain closure costs and reduce the environmental footprint of the tailings facility.

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2022 Key Objectives and Annual Guidance

Hudbay's key objectives for 2022 are to:

Deliver meaningful copper and gold production growth to generate positive cash flow and strong returns on invested capital;
Accelerate drilling, economic studies and permitting activities for the recently discovered Copper World deposits and identify synergies with Rosemont to unlock value;
Execute the third phase of the company's Snow Lake gold strategy by optimizing the New Britannia mill, preparing for the ramp up to 5,300 tonnes per day at Lalor and initiating the Stall mill recovery improvement program;
Progress Constancia's leading efficiency metrics by applying smart technologies to continuously improve operating performance, including sensor-based ore sorting and milling flowsheet enhancements;
Reach a community agreement to explore the prospective properties near Constancia;
Transition the Flin Flon operations through orderly closure while further exploring the potential to reprocess tailings in Flin Flon;
Conduct brownfield and greenfield exploration programs in the Snow Lake region, Peru, Arizona, Nevada and Chile for new mineral discoveries;
Define greenhouse gas emissions reduction targets to further enhance the company's ESG objectives; and,
Evaluate 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. As a result of the COVID-19 global pandemic, the company has experienced intermittent operational, supply chain, travel, labour and shipping disruptions, and it may continue to experience similar disruptions in the future. Given the uncertainty of the duration and magnitude of the impact of COVID-19, the social and political tensions in Peru and the mine plan limitations at the 777 mine given its pending closure, the company's 2022 production and cost guidance are subject to a higher-than-normal degree of uncertainty. The guidance below does not reflect any potential for unforeseen suspensions or other significant disruption to the company's operations.

TSX, NYSE - HBM<br><br> <br>2022 No. 2

Production Guidance

Contained Metal in Concentrate and Doré^1^		2022 Guidance	Year Ended<br>Dec. 31, 2021	2021 Guidance
Peru
Copper	tonnes	89,000 - 115,000	77,813	72,000 - 88,000
Gold	oz	70,000 - 90,000	50,306	40,000 - 50,000
Silver	oz	1,620,000 - 2,100,000	1,972,949	1,800,000 - 2,170,000
Molybdenum	tonnes	1,100 - 1,400	1,146	1,400 - 1,700
Manitoba
Gold	oz	150,000 - 185,000	143,477	150,000 - 165,000
Zinc	tonnes	50,000 - 70,000	93,529	96,000 - 107,000
Copper	tonnes	12,000 - 16,000	21,657	20,000 - 24,000
Silver	oz	800,000 - 1,100,000	1,072,532	1,200,000 - 1,400,000
Total
Copper	tonnes	101,000 - 131,000	99,470	92,000 - 112,000
Gold	oz	220,000 - 275,000	193,783	190,000 - 215,000
Zinc	tonnes	50,000 - 70,000	93,529	96,000 - 107,000
Silver	oz	2,420,000 - 3,200,000	3,045,481	3,000,000 - 3,570,000
Molybdenum	tonnes	1,100 - 1,400	1,146	1,400 - 1,700
^1^Metal reported in concentrate and doré is prior to refining losses or deductions associated with smelter terms.

On a consolidated basis, Hudbay met 2021 production guidance for copper, gold and silver, and Peru's gold production exceeded the top end of the guidance range due to strong gold grades from the Pampacancha satellite deposit. Zinc production was below the guidance range primarily due to higher grade dilution and mine plan limitations experienced at the 777 mine in Manitoba late in the year as the mine approaches the end of its life. Molybdenum production was below guidance but was consistent with the range published in the Constancia mine plan released in March 2021.

In 2022, consolidated copper production is forecast to increase by 17%^ii^ compared to 2021 levels primarily as a result of higher expected copper production in Peru, with higher planned copper grades from both the Constancia and Pampacancha pits more than offsetting lower copper production in Manitoba. Consolidated gold production in 2022 is expected to increase by 28%^ii^ year-over-year due to significantly higher gold grades and recoveries expected in both Manitoba and Peru. In Manitoba, gold production is expected to increase by 17%^ii^ in 2022 due to the first full year of production at the recently refurbished New Britannia gold mill. In Peru, gold production is expected to increase by 59%^ii^ in 2022 as the first full year of Pampacancha is incorporated. Year-over-year zinc production is expected to decline by 36%^ii^ as a result of the expected closure of the 777 mine in June 2022 and the mining of the gold-rich zones at Lalor in connection with the startup of the New Britannia mill, which will result in mining less of the zinc-rich base metal zones at Lalor.

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Manitoba's 2022 production guidance reflects continued strong production from the Lalor mine, operating at a throughput rate of 4,650 tonnes per day and ramping up to 5,300 tonnes per day by 2023. The New Britannia mill is expected to average 1,500 tonnes per day in 2022 with continued ramp-up activities and rod mill liner maintenance scheduled during the first quarter and full design rates expected to be achieved in the second quarter. 2022 production assumes lower mining rates at the 777 mine as the mine approaches closure in June 2022. The low end of the production guidance ranges reflects reduced output from the 777 mine to capture the potential for higher dilution and increased variability in the remnant stopes. The 2022 and 2023 guidance contained in this news release replaces the company's previously issued guidance for these years.

3-Year Production Outlook<br><br> <br>Contained Metal in Concentrate and Doré^1^		2022 Guidance	2023 Guidance	2024 Guidance
Peru
Copper	tonnes	89,000 - 115,000	110,000 - 134,000	111,000 - 136,000
Gold	ounces	70,000 - 90,000	100,000 - 125,000	110,000 - 135,000
Silver	ounces	1,620,000 - 2,100,000	2,300,000 - 2,800,000	2,900,000 - 3,500,000
Molybdenum	tonnes	1,100 - 1,400	2,000 - 2,400	1,700 - 2,100
Manitoba^2^
Gold	ounces	150,000 - 185,000	160,000 - 195,000	170,000 - 200,000
Zinc	tonnes	50,000 - 70,000	36,000 - 44,000	36,000 - 44,000
Copper	tonnes	12,000 - 16,000	10,000 - 12,000	9,000 - 11,000
Silver	ounces	800,000 - 1,100,000	1,000,000 - 1,200,000	1,000,000 - 1,200,000
Total
Copper	tonnes	101,000 - 131,000	120,000 - 146,000	120,000 - 147,000
Gold	ounces	220,000 - 275,000	260,000 - 320,000	280,000 - 335,000
Zinc	tonnes	50,000 - 70,000	36,000 - 44,000	36,000 - 44,000
Silver	ounces	2,420,000 - 3,200,000	3,300,000 - 4,000,000	3,900,000 - 4,700,000
Molybdenum	tonnes	1,100 - 1,400	2,000 - 2,400	1,700 - 2,100
^1^Metal reported in concentrate and doré is prior to smelting and refining losses or deductions associated with smelter terms.<br><br> <br>^2^ Manitoba production guidance assumes the 777 mine is depleted at the end of the second quarter of 2022, resulting in lower copper and zinc production after its closure.

Consolidated copper and gold production are expected to increase to 133,500^ii^ tonnes and 307,500^ii^ ounces, respectively, in 2024, which represents an increase of 34%^ii^ and 59%^ii^, respectively, from 2021 levels, which demonstrates the continued growth from the company's recent brownfield growth projects. These growth projects are expected to more than offset the lost copper and gold production from 777 after its closure in mid-2022.

Peru's three-year production guidance reflects the incorporation of Pampacancha into the mine plan with higher copper and gold grades from 2022 and beyond. The mine plan has been re-sequenced since the publication of the March 2021 Constancia technical report, resulting in higher gold grade areas in the Pampacancha pit being moved from 2022 to 2023, which is expected to lead to a 41%^ii^ increase in gold production in 2023 from 2022 levels.

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Capital Expenditure Guidance

Capital Expenditures^1^<br><br> <br>(in $ millions)	2022 Guidance	Year Ended<br><br> <br>Dec. 31, 2021	2021 Guidance
Sustaining capital	****	****	****
Peru^2^	105.0	128.9	135.0
Manitoba^3^	115.0	100.4	90.0
Total sustaining capital	220.0	229.3	225.0
Growth capital	****
Peru	10.0	22.8	25.0
Manitoba^3^	50.0	119.2	105.0
Arizona^4^	35.0	22.9	20.0
Total growth capital	95.0	164.9	150.0
Capitalized exploration	25.0	13.3	15.0
Total capital expenditures	340.0	407.5	390.0
^1^ Excludes capitalized costs not considered to be sustaining or growth capital expenditures.<br><br> <br>^2^ Includes capitalized stripping costs.<br><br> <br>^3^ Capital expenditures are converted into U.S. dollars using an exchange rate of 1.27 Canadian dollars.<br><br> <br>^4^ Arizona spending includes capitalized costs associated with the Copper World and Rosemont projects.

Total capital expenditures are expected to decline by 17% year-over-year primarily due to lower expected sustaining capital in Peru and lower growth spending in Manitoba in 2022.

The spending guidance excludes approximately $20.0 million of tailings investments in Manitoba as Hudbay completes the improvements on the legacy Flin Flon tailings impoundment area in 2022, a program that was initiated in 2019, to ensure compliance with higher industry-wide standards for tailings dam safety. These expenditures are associated with the decommissioning and restoration liability and, therefore, will be accounted for as a drawdown of the liability through operating cash flow, rather than sustaining capital expenditures.

TSX, NYSE - HBM<br><br> <br>2022 No. 2

Exploration Guidance

Exploration Expenditures<br><br> <br>(in $ millions)	2022 Guidance	Year Ended<br><br> <br>Dec. 31, 2021	2021 Guidance
Peru	25.0	17.3	20.0
Manitoba	15.0	10.5	10.0
Arizona and other	25.0	25.5	34.0
Total exploration expenditures	65.0	53.3	64.0
Capitalized spending	(25.0)	(13.3)	(15.0)
Total exploration expense	40.0	40.0	49.0

Total expected exploration expenditures of $65.0 million in 2022 are higher than 2021 levels due to continued exploration activities at the Copper World discovery in Arizona and additional drilling activities in Peru and Manitoba.

In Peru, 2022 drilling activities will focus on three greenfield projects, including the Llaguen project in northern Peru and in-mine exploration at Constancia and Pampacancha. Hudbay also expects to advance community relations and permitting activities on the regional satellite properties in Peru during 2022. In Manitoba, the company expects to complete a winter drill program focused on testing targets in the Chisel Basin, drilling targets identified at 1901 and the Lalor mine and drilling the Flin Flon tailings area. In Arizona, 2022 exploration expenditures include further infill drilling at the Copper World deposits, continued exploration drilling between the known deposits at Copper World and a planned initial drill program at the Mason Valley skarn properties in late 2022.

Unit Cost and Cash Cost Guidance

Hudbay is introducing cash cost guidance in 2022 for each of its operations. Copper remains the primary metal produced in the Peru operations and therefore the company has presented cash cost per pound of copper produced. In Manitoba, recognizing that with the New Britannia mill operating at full capacity, the primary metal produced is gold and, therefore, the company has included guidance for cash cost per ounce of gold produced. Hudbay continues to provide combined mine/mill unit operating cost guidance by site and consolidated copper cash cost and sustaining cash cost guidance given copper remains the primary revenue contributor on a consolidated basis.

Peru Operating Costs		2022 Guidance	Year Ended Dec. 31, 2021	2021 Guidance
Combined mine/mill unit operating cost (excluding COVID-19 costs)^1,2^	$/tonne	10.10 - 12.90	10.70	-
Combined mine/mill unit operating cost (including COVID-19 costs)^1,2^	$/tonne	-	11.39	8.90 - 10.90
Cash cost per pound of copper^2,3^	$/lb	1.10 - 1.40	1.54	-

^1^Reflects combined mine, mill and G&A costs per tonne of ore milled. Peru costs reflect the deduction of expected capitalized stripping costs. Unit operating cost guidance in 2022 excludes estimated COVID-19 related costs of approximately $18.0 million. 2021 actual COVID-19 costs incurred was $19.8 million, which was higher than budgeted in 2021.

^2^ Combined unit costs and cash cost per pound of copper produced 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.

^3^ Cash cost, net of by-product credits, per pound of copper contained in concentrate. By-product credits are calculated using the gold and silver deferred revenue drawdown rates in effect on December 31, 2021 and the following commodity prices: $1,800 per ounce gold, $24.00 per ounce silver and $13.00 per pound molybdenum. Peru cash cost guidance was introduced in 2022 and is not available for 2021.

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Combined unit costs for Peru in 2022 are approximately 7%^ii^ higher than 2021 as a result of higher consumable costs, including grinding media and fuel, higher mill maintenance costs due to general cost pressures seen in the industry, payments relating to community agreements and the impact of processing harder ore in the Constancia pit.

Copper cash costs in Peru are expected to decline by 19%^ii^ in 2022 versus 2021, primarily due to higher gold by-product credits and higher copper production.

Manitoba Operating Costs		2022 Guidance	Year Ended Dec. 31, 2021	2021 Guidance
Combined mine/mill unit operating cost^1,2^	C$/tonne	170 - 185	154	145 - 155
Cash cost per ounce of gold^2,^^3^	$/oz	300 - 550	-	-

^1^Reflects combined mine, mill and G&A costs per tonne of ore milled.

^2^ Combined unit costs and cash costs per ounce of gold produced 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.

^3^ Cash cost, net of by-product credits, per ounce of gold contained in concentrate and doré. By-product credits are calculated using the following commodity prices: $1.25 per pound zinc (excludes premium), $24.00 per ounce silver, $4.00 per pound copper and an exchange rate of 1.27 C$/US$. Manitoba cash cost guidance was introduced in 2022 and is not available for 2021. Similarly, reported actual cash cost per pound of gold for Manitoba will be introduced in 2022 and is not available for 2021.

Combined unit costs for Manitoba in 2022 are forecast to be approximately 15%^ii^ higher than 2021 levels primarily due to expected cost inflation on materials and consumables and the inclusion of the New Britannia mill, which is expected to result in higher milling unit costs compared to the Flin Flon and Stall mills as disclosed in the Snow Lake operations mine plan released in March 2021. Manitoba unit costs also reflect the closure of the 777 mine in June 2022 and the transition of a portion of the workforce to Snow Lake.

Gold cash costs in Manitoba are expected to be $300 to $550 per ounce of gold in 2022 as gold production increases year-over-year and the operations transition to becoming a majority gold producer.

Consolidated Copper Cash Cost ^1,2^		2022 Guidance	Year Ended<br><br> <br>Dec. 31, 2021	2021 Guidance
Cash cost	$/lb	0.60 - 1.05	0.74	0.65 - 0.80
Sustaining cash cost	$/lb	1.60 - 2.25	2.07	2.05 - 2.30

The mid-point of the guidance range for consolidated cash cost per pound of copper produced, net of by-product credits^i^, is higher than 2021 levels due to the expected increase in unit costs as described above, partially offset by expected higher copper production and higher gold by-product credits. The mid-point of the guidance range for consolidated sustaining cash cost per pound of copper produced, net of by-product credits^i^, is lower than 2021 levels due to lower sustaining capital expenditures and higher copper production, partially offset by the increase in unit costs.

TSX, NYSE - HBM<br><br> <br>2022 No. 2

Dividend Declared

A semi-annual dividend of C$0.01 per share was declared on February 23, 2022. The dividend will be paid out on March 25, 2022 to shareholders of record as of March 8, 2022.

Website Links

Hudbay:

www.hudbay.com

Management's Discussion and Analysis:

https://www.hudbayminerals.com/files/doc_financials/2021/q4/MDA214.pdf

Financial Statements:

https://www.hudbayminerals.com/files/doc_financials/2021/q4/FS214.pdf

Conference Call and Webcast

Date:	Thursday, February 24, 2022
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 Geology. Mr. Tavchandjian is a qualified person pursuant to 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 us on SEDAR at www.sedar.com.

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 and 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.

TSX, NYSE - HBM<br><br> <br>2022 No. 2

Hudbay believes adjusted net earnings (loss) and adjusted net earnings (loss) per share adds additional context through the company's performance for the current period and provide 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. The company provides adjusted EBITDA to help users analyze its results and to provide additional information about the company's 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 and per ounce of gold produced are shown because the company believes they help investors and management assess the performance of its current and future operations, including the margin generated by the operations and the company. Combined unit cost is shown because the company believes it helps investors and management assess the cost structure and margins that are not impacted by variability in by-product commodity prices.

In addition, during 2021, there were non-recurring adjustments for Manitoba operations, including severance, past service pension costs, write-downs of certain machinery and equipment, and inventory supplies write-downs as well as non-cash impairment charges related to an updated Flin Flon closure plan and long term declining discount rates, none of which management believes are indicative of the ongoing operating performance and have therefore been excluded from the calculations of adjusted net earnings (loss) and adjusted EBITDA.

As part of the company's year-end 2021 tax provision calculation, a review of all previous tax impacts on adjusted earnings was completed. During the course of the review, Hudbay determined that the tax impact related to the impairment charge for the environmental obligation for the third quarter of 2021 had been understated. This impacted its calculation of adjusted net earnings and adjusted net earnings per share. As a result, the previously disclosed adjusted net earnings of $38.2 million for the third quarter of 2021 has been recalculated to an adjusted net earnings of $0.9 million and the adjusted net earnings per share of $0.15 has been recalculated to an adjusted net earnings per share of $0.00. This recalculation of the adjusted net earnings and adjusted net earnings per share does not impact Hudbay's financial statements and has been included in the full year adjusted net earnings and adjusted net earnings per share tables disclosed in this news release.

The following tables provide detailed reconciliations to the most comparable IFRS measures.

TSX, NYSE - HBM<br><br> <br>2022 No. 2

Adjusted Net Earnings (Loss) Reconciliation

	Three Months Ended
(in $ millions)	Dec. 31, 2021	Sep. 30, 2021	Dec. 31, 2020
(Loss) profit for the period	(10.5)	(170.4)	7.4
Tax expense (recovery)	10.3	22.6	(6.5)
(Loss) profit before tax	(0.2)	(147.8)	0.9
Adjusting items:	****
Mark-to-market adjustments^1^	13.3	1.7	(28.0)
Peru inventory reversal	-	-	(2.2)
Manitoba cost of sales direct charge from temporary shutdown	-	-	11.7
Foreign exchange loss (gain)	1.1	(3.1)	2.6
Impairment - environmental obligation	46.2	147.3	-
Restructuring charges - Manitoba^2^	3.4	9.0	-
Past service pension cost	0.7	4.2	-
Loss on disposal of plant and equipment - Manitoba	2.4	5.4	-
Adjusted earnings (loss) before income taxes	66.9	16.7	(15.0)
Tax (expense) recovery	(10.3)	(22.6)	6.5
Adjusted tax (expense) recovery impact^3^	(23.9)	6.8	(7.9)
Adjusted net earnings (loss)	32.7	0.9	(16.4)
Adjusted net earnings (loss) ($/share)	0.13	0.00	(0.06)
Basic weighted average number of common shares outstanding (millions)	261.6	261.5	261.3

^1^Includes changes in fair value of the embedded derivative on our Redeemed Notes, 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^Includes severance accrued for unionized employees and write down of materials and supply inventories at the Flin Flon operations.

^3^The Q3 2021 adjusted net earnings (loss) and adjusted net earnings (loss) per share have been adjusted by $37.3 million from what was previously reported due to a change in tax impacts. 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. See the "Trend Analysis and Quarterly Review" section of the Q4 2021 MD&A for further details.

TSX, NYSE - HBM<br><br> <br>2022 No. 2
	Year Ended
---	---	---
(in $ millions)	Dec. 31, 2021	Dec. 31, 2020
Loss for the period	(244.4)	(144.6)
Tax expense (recovery)	41.6	(34.5)
Loss before tax	(202.8)	(179.1)
Adjusting items:
Mark-to-market adjustments^1^	66.7	(14.4)
Peru inventory reversal	(1.4)	-
Peru cost of sales direct charge from temporary shutdown	-	31.9
Manitoba cost of sales direct charge from temporary shutdown	-	11.7
Variable consideration adjustment - stream revenue and accretion	(1.0)	(10.4)
Foreign exchange loss (gain)	1.5	(1.6)
Write-down of unamortized transaction costs	2.5	3.8
Premium paid on redemption of notes	22.9	7.3
Impairment - environmental obligation	193.5	-
Restructuring charges - Manitoba^2^	12.4	-
Past service pension cost	5.0	-
Loss on disposal of plant and equipment - Manitoba	7.8	-
Adjusted earnings (loss) before income taxes	107.1	(150.8)
Tax (expense) recovery	(41.6)	34.5
Adjusted tax expense impact^3^	(42.4)	(4.7)
Adjusted net earnings (loss)	23.1	(121.0)
Adjusted net earnings (loss) ($/share)	0.09	(0.46)
Basic weighted average number of common shares outstanding (millions)	261.5	261.3
^1^ Includes changes in fair value of the embedded derivative on our Redeemed Notes, 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^ Includes severance accrued for unionized employees and write down of materials and supply inventories at the Flin Flon operations.
^3^ Amounts have been adjusted on a year-to-date basis for 2021. The Q3 2021 adjusted net earnings (loss) and adjusted net earnings (loss) per share have been adjusted by $37.3 million from what was previously reported due to a change in tax impacts. 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. See the "Trend Analysis and Quarterly Review" section of the Q4 2021 MD&A for further details.
TSX, NYSE - HBM<br><br> <br>2022 No. 2
---

Adjusted EBITDA Reconciliation

	Three Months Ended
(in $ millions)	Dec. 31, 2021	Sept 30, 2021	Dec. 31, 2020
(Loss) profit for the period	(10.5)	(170.4)	7.4
Add back: Tax expense (recovery)	10.3	22.6	(6.5)
Add back: Net finance expense	38.6	30.2	6.3
Add back: Other expenses	16.1	16.0	6.0
Add back: Depreciation and amortization^1^	89.9	86.0	98.6
Less: Amortization of deferred revenue and variable consideration adjustment	(17.3)	(23.5)	(20.1)
	127.1	(39.1)	91.7
Adjusting items (pre-tax):
Peru inventory write down reversal	-	-	(2.2)
Impairment - environmental obligation	46.2	147.3	-
Restructuring charges - Manitoba^2^	-	5.4	-
Past service pension cost	0.7	4.2	-
Cash portion of Manitoba cost of sales direct charge from temporary shutdown	-	-	8.2
Share-based compensation expenses^3^	6.3	1.5	9.2
Adjusted EBITDA	180.3	119.3	106.9

^1^ Includes the non-cash portion of the Manitoba cost of sales direct charge from the temporary shutdown of $3.5 million for the three months ended December 31, 2020.

^2^ Represents the write down of materials and supply inventories at the Flin Flon operations.

^3^ Share-based compensation expenses reflected in cost of sales and selling and administrative expenses.

	Year Ended
(in $ millions)	Dec. 31, 2021	Dec. 31, 2020
Loss for the period	(244.4)	(144.6)
Add back: Tax expense (recovery)	41.6	(34.5)
Add back: Net finance expense	221.0	141.9
Add back: Other expenses	29.8	17.6
Add back: Depreciation and amortization^1^	357.9	361.8
Less: Amortization of deferred revenue and variable consideration adjustment	(73.1)	(74.0)
	332.8	268.2
Adjusting items (pre-tax):
Peru inventory write down reversal	(1.4)	-
Impairment - environmental obligation	193.5	-
Restructuring charges - Manitoba^2^	5.4	-
Past service pension cost	5.0	-
Cash portion of Peru cost of sales direct charge from temporary shutdown	-	15.8
Cash portion of Manitoba cost of sales direct charge from temporary shutdown	-	8.2
Share-based compensation expenses^3^	11.8	14.5
Adjusted EBITDA	547.1	306.7

^2^ Represents the write-down of materials and supply inventories at the Flin Flon operations.

^3^Share-based compensation expenses reflected in cost of sales and selling and administrative expenses.

TSX, NYSE - HBM<br><br> <br>2022 No. 2

Net Debt Reconciliation

(in thousands)
	Sep. 30, 2021	Dec. 31, 2020
Total long-term debt	1,182,612	1,135,675
Cash and cash equivalents	297,451	439,135
Net debt	885,161	696,540

All values are in US Dollars.

Cash Cost Reconciliation

Consolidated	Three Months Ended
Net pounds of copper produced
(in thousands)	Dec. 31, 2021	Sep. 30, 2021	Dec. 31, 2020
Peru	50,389	39,842	47,519
Manitoba	11,777	11,404	12,619
Net pounds of copper produced	62,166	51,246	60,138
Consolidated	Year Ended
---	---	---
Net pounds of copper produced
(in thousands)	Dec. 31, 2021	Dec. 31, 2020
Peru	171,548	161,269
Manitoba	47,745	48,905
Net pounds of copper produced	219,293	210,174
Consolidated	Three Months Ended
---	---	---	---	---	---	---
	Dec. 31, 2021		Sep. 30, 2021		Dec. 31, 2020
Cash cost per pound of copper produced	$000s	$/lb^1^	$000s	$/lb^1^	$000s	$/lb^1^
Cash cost, before by-product credits	232,224	3.73	206,615	4.04	196,533	3.27
By-product credits	(200,306)	(3.22)	(175,057)	(3.42)	(170,646)	(2.84)
Cash cost, net of by-product credits	31,918	0.51	31,558	0.62	25,887	0.43

^1^Per pound of copper produced.

Consolidated	Year Ended
	Dec. 31, 2021		Dec. 31, 2020
Cash cost per pound of copper produced	$000s	$/lb^1^	$000s	$/lb^1^
Cash cost, before by-product credits	867,607	3.95	709,757	3.38
By-product credits	(704,345)	(3.21)	(582,882)	(2.77)
Cash cost, net of by-product credits	163,262	0.74	126,875	0.60

^1^Per pound of copper produced.

TSX, NYSE - HBM<br><br> <br>2022 No. 2
Consolidated	Three Months Ended
---	---	---	---	---	---	---
******	Dec. 31, 2021		Sep. 30, 2021		Dec. 31, 2020
Supplementary cash cost information	$000s	$/lb ^1^	$000s	$/lb ^1^	$000s	$/lb ^1^
By-product credits^2^:	******	******	******	******	******	******
Zinc	74,585	1.20	67,695	1.32	77,593	1.29
Gold ^3^	99,728	1.60	76,241	1.49	61,010	1.01
Silver ^3^	14,853	0.24	15,957	0.31	20,624	0.34
Molybdenum & other	11,140	0.18	15,164	0.30	11,419	0.19
Total by-product credits	200,306	3.22	175,057	3.42	170,646	2.84
Reconciliation to IFRS:	******	******			******	******
Cash cost, net of by-product credits	31,918	******	31,558		25,887	******
By-product credits	200,306	******	175,057		170,646	******
Treatment and refining charges	(13,721)	******	(14,531)		(14,723)	******
Share-based compensation expense	744	******	145		919	******
Inventory adjustments	-	******	5,445		82	******
Past service pension cost	737	******	4,229			******
Change in product inventory	(16,247)	******	5,672		(4,521)	******
Royalties	3,594	******	3,489		2,818	******
Overhead costs related to suspension of activities (cash) - Manitoba	-	******	-		8,232	******
Depreciation and amortization^4^	89,927	******	86,010		98,583	******
Cost of sales^5^	297,258	******	297,074		287,923	******

^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. The variable consideration adjustments amounted to income of nil for three months ended December 31, 2021, September 30, 2021 and December 31, 2020.

^4^Depreciation is based on concentrate sold.

^5^ As per IFRS financial statements.

TSX, NYSE - HBM<br><br> <br>2022 No. 2
Consolidated	Year Ended
---	---	---	---	---
******	Dec. 31, 2021		Dec. 31, 2020
Supplementary cash cost information	$000s	$/lb ^1^	$000s	$/lb ^1^
By-product credits^2^:	******	******	******	******
Zinc	302,301	1.38	265,105	1.26
Gold ^3^	289,981	1.32	219,245	1.04
Silver ^3^	61,388	0.28	67,342	0.32
Molybdenum & other	50,675	0.23	31,190	0.15
Total by-product credits	704,345	3.21	582,882	2.77
Reconciliation to IFRS:	******	******	******	******
Cash cost, net of by-product credits	163,262	******	126,875	******
By-product credits	704,345	******	582,882	******
Treatment and refining charges	(55,430)	******	(56,888)	******
Inventory Adjustments	3,999	******	2,302	******
Share-based compensation expense	1,347	******	1,400	******
Past service pension cost	4,965	******	-	******
Change in product inventory	(18,180)	******	(1,829)	******
Royalties	15,274	******	12,807	******
Overhead costs related to suspension of activities (cash) - Peru	-	******	15,810	******
Overhead costs related to suspension of activities (cash) - Manitoba	-	******	8,232	******
Depreciation and amortization^4^	357,924	******	361,827	******
Cost of sales^5^	1,177,506	******	1,053,418	******

^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 year ended December 31, 2021 and December 31, 2020 the variable consideration adjustments amounted to income of $1,617 and $6,668, respectively.

^4^Depreciation is based on concentrate sold.

^5^As per IFRS financial statements.

Peru	Three Months Ended
(in thousands)	Dec. 31, 2021	Sept. 30, 2021	Dec. 31, 2020
Net pounds of copper produced^1^	50,389	39,842	47,519

^1^Contained copper in concentrate.

Peru	Year Ended
(in thousands)	Dec. 31, 2021	Dec. 31, 2020
Net pounds of copper produced^1^	171,548	161,269

^1^Contained copper in concentrate.

TSX, NYSE - HBM<br><br> <br>2022 No. 2
Peru	Three Months Ended
---	---	---	---	---	---	---
	Dec. 31, 2021		Sep. 30, 2021		Dec. 31, 2020
Cash cost per pound of copper produced	$000s	$/lb	$000s	$/lb	$000s	$/lb
Mining	27,756	0.55	22,772	0.57	24,967	0.53
Milling	40,121	0.80	44,750	1.12	39,219	0.83
G&A	18,351	0.36	13,948	0.35	14,327	0.30
Onsite costs	86,228	1.71	81,470	2.04	78,513	1.65
Treatment & refining	8,636	0.17	7,292	0.18	10,082	0.21
Freight & other	11,609	0.23	9,464	0.24	9,989	0.21
Cash cost, before by-product credits	106,473	2.11	98,226	2.46	98,584	2.08
By-product credits	(41,900)	(0.83)	(47,984)	(1.20)	(28,802)	(0.61)
Cash cost, net of by-product credits	64,573	1.28	50,242	1.26	69,782	1.47
Peru	Year Ended
---	---	---	---	---
	Dec. 31, 2021		Dec. 31, 2020
Cash cost per pound of copper produced	$000s	$000s	$000s	$/lb
Mining	98,200	0.57	70,724	0.44
Milling	168,477	0.99	134,096	0.83
G&A	63,629	0.37	43,105	0.27
Onsite costs	330,306	1.93	247,925	1.54
Treatment & refining	32,365	0.19	36,655	0.23
Freight & other	41,316	0.24	34,794	0.22
Cash cost, before by-product credits	403,987	2.36	319,374	1.98
By-product credits	(139,885)	(0.82)	(85,067)	(0.53)
Cash cost, net of by-product credits	264,102	1.54	234,307	1.45
TSX, NYSE - HBM<br><br> <br>2022 No. 2
---
Peru	Three Months Ended
---	---	---	---	---	---	---
	Dec. 31, 2021		Sep. 30, 2021		Dec. 31, 2020
Supplementary cash cost information	$000s	$/lb^1^	$000s	$/lb^1^	$000s	$/lb^1^
By-product credits^2^:
Gold^3^	24,325	0.49	24,196	0.61	5,394	0.11
Silver^3^	7,793	0.15	10,557	0.26	13,584	0.29
Molybdenum	9,782	0.19	13,231	0.33	9,824	0.21
Total by-product credits	41,900	0.83	47,984	1.20	28,802	0.61
Reconciliation to IFRS:
Cash cost, net of by-product credits	64,573		50,242		69,782
By-product credits	41,900		47,984		28,802
Treatment and refining charges	(8,636)		(7,292)		(10,082)
Inventory adjustments	-		-		(2,188)
Share-based compensation expenses	145		31		213
Change in product inventory	(4,507)		(3,126)		(6,550)
Royalties	762		998		1,399
Depreciation and amortization^4^	54,078		47,185		50,861
Cost of sales^5^	148,315		136,022		132,237

^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.

Peru	Year Ended
	Dec. 31, 2021		Dec. 31, 2020
Supplementary cash cost information	$000s	$/lb^1^	$000s	$/lb^1^
By-product credits^2^:	****	****
Gold^3^	61,510	0.37	17,626	0.11
Silver^3^	35,154	0.20	41,870	0.26
Molybdenum	43,221	0.25	25,571	0.16
Total by-product credits	139,885	0.82	85,067	0.53
Reconciliation to IFRS:	****	****
Cash cost, net of by-product credits	264,102	****	234,307
By-product credits	139,885	****	85,067
Treatment and refining charges	(32,365)	****	(36,655)
Inventory adjustments	(1,446)	****	32
Share-based compensation expenses	247	****	288
Change in product inventory	(13,743)	****	(3,883)
Royalties	3,503	****	5,121
Overhead costs related to suspension of activities	-	****	15,810
Depreciation and amortization^4^	194,408	****	184,275
Cost of sales^5^	554,591	****	484,362

^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.

TSX, NYSE - HBM<br><br> <br>2022 No. 2
Manitoba	Three Months Ended
---	---	---	---
(in thousands)	Dec. 31, 2021	Sep. 30, 2021	Dec. 31, 2020
Net pounds of copper produced^1^	11,777	11,404	12,619

^1^Contained copper in concentrate.

Manitoba	Year Ended
(in thousands)	Dec. 31, 2021	Dec. 31, 2020
Net pounds of copper produced^1^	47,745	48,905

^1^Contained copper in concentrate.

Manitoba	Three Months Ended
	Dec. 31, 2021		Sep. 30, 2021		Dec. 31, 2020
Cash cost per pound of copper produced	$000s	$/lb	$000s	$/lb	$000s	$/lb
Mining	58,891	5.01	54,634	4.79	46,598	3.69
Milling	22,193	1.88	14,484	1.27	11,147	0.88
Refining (Zinc)	19,008	1.61	15,868	1.39	18,736	1.48
G&A	13,746	1.17	8,680	0.76	9,898	0.78
Onsite costs	113,838	9.67	93,666	8.21	86,379	6.85
Treatment & refining	5,085	0.43	7,239	0.63	4,641	0.37
Freight & other	6,828	0.58	7,484	0.66	6,929	0.55
Cash cost, before by-product credits	125,751	10.68	108,389	9.50	97,949	7.76
By-product credits	(158,406)	(13.45)	(127,073)	(11.14)	(141,844)	(11.24)
Cash cost, net of by-product credits	(32,655)	(2.77)	(18,684)	(1.64)	(43,895)	(3.48)
Manitoba	Year Ended
---	---	---	---	---
	Dec. 31, 2021		Dec. 31, 2020
Cash cost per pound of copper produced	$000s	$/lb	$000s	$/lb
Mining	222,660	4.66	178,308	3.65
Milling	62,995	1.32	46,057	0.94
Refining (Zinc)	72,392	1.52	71,799	1.47
G&A	52,963	1.11	46,930	0.96
Onsite costs	411,010	8.61	343,094	7.02
Treatment & refining	23,065	0.48	20,233	0.41
Freight & other	29,545	0.62	27,056	0.55
Cash cost, before by-product credits	463,620	9.71	390,383	7.98
By-product credits	(564,460)	(11.82)	(497,815)	(10.18)
Cash cost, net of by-product credits	(100,840)	(2.11)	(107,432)	(2.20)
TSX, NYSE - HBM<br><br> <br>2022 No. 2
---
Manitoba	Three Months Ended
---	---	---	---	---	---	---
******	Dec. 31, 2021		Sep. 30, 2021		Dec. 31, 2020
Supplementary cash cost information	$000s	$/lb	$000s	$/lb	$000s	$/lb
By-product credits^2^:	******	******	******	******	******	******
Zinc	74,585	6.33	67,695	5.94	77,593	6.15
Gold^3^	75,403	6.40	52,045	4.56	55,616	4.41
Silver^3^	7,060	0.60	5,400	0.47	7,040	0.56
Other	1,358	0.12	1,933	0.17	1,595	0.13
Total by-product credits	158,406	13.45	127,073	11.14	141,844	11.24
Reconciliation to IFRS:	******	******			******	******
Cash cost, net of by-product credits	(32,655)	******	(18,684)		(43,895)	******
By-product credits	158,406	******	127,073		141,844	******
Treatment and refining charges	(5,085)	******	(7,239)		(4,641)	******
Inventory adjustments	-	******	5,445		2,270	******
Past service pension cost	737	******	4,229		-	******
Share-based compensation expenses	599	******	114		706	******
Change in product inventory	(11,740)	******	8,798		2,029	******
Royalties	2,832	******	2,491		1,419	******
Overhead costs related to suspension of activities (cash)	-	******	-		8,232	******
Depreciation and amortization^4^	35,849	******	38,825		47,722	******
Cost of sales^5^	148,943	******	161,052		155,686	******

^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.

Manitoba	Year Ended
******	Dec. 31, 2021		Dec. 31, 2020
Supplementary cash cost information	$000s	$/lb	$000s	$/lb
By-product credits^2^:	******	******	******	******
Zinc	302,301	6.33	265,105	5.42
Gold^3^	228,471	4.78	201,619	4.12
Silver^3^	26,234	0.55	25,472	0.52
Other	7,454	0.16	5,619	0.11
Total by-product credits	564,460	11.82	497,815	10.18
Reconciliation to IFRS:	******	******	******	******
Cash cost, net of by-product credits	(100,840)	******	(107,432)	******
By-product credits	564,460	******	497,815	******
Treatment and refining charges	(23,065)	******	(20,233)	******
Inventory adjustments	5,445	******	2,270	******
Past service pension cost	4,965	******	-	******
Share-based compensation expenses	1,100	******	1,112	******
Change in product inventory	(4,437)	******	2,054	******
Royalties	11,771	******	7,686	******
Overhead costs related to suspension of activities (cash)	-	******	8,232	******
Depreciation and amortization^4^	163,516	******	177,552	******
Cost of sales^5^	622,915	******	569,056	******

^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.

TSX, NYSE - HBM<br><br> <br>2022 No. 2

Sustaining and All-in Sustaining Cash Cost Reconciliation

Consolidated	Three Months Ended
	Dec. 31, 2021		Sep. 30, 2021		Dec. 31, 2020
All-in sustaining cash cost per pound of copper produced	$000s	$/lb	$000s	$/lb	$000s	$/lb
Cash cost, net of by-product credits	31,918	0.51	31,558	0.62	25,887	0.43
Cash sustaining capital expenditures	77,539	1.25	65,694	1.28	81,523	1.36
Capitalized exploration	8,000	0.13	-	-	8,040	0.13
Royalties	3,594	0.06	3,489	0.07	2,818	0.05
Sustaining cash cost, net of by-product credits	121,051	1.95	100,741	1.97	118,268	1.97
Corporate selling and administrative expenses & regional costs	14,729	0.24	10,177	0.20	15,709	0.26
Accretion and amortization of decommissioning and community agreements^1^	894	0.01	652	0.01	1,006	0.02
All-in sustaining cash cost, net of by-product credits	136,674	2.20	111,570	2.18	134,983	2.24
Reconciliation to property, plant and equipment additions:
Property, plant and equipment additions	91,432		76,435		96,377
Capitalized stripping net additions	19,201		19,094		20,763
Decommissioning and restoration obligation net additions	(555)		4,563		3,637
Total accrued capital additions	110,078		100,092		120,777
Less other non-sustaining capital costs^2^	42,621		37,662		62,041
Total sustaining capital costs	67,457		62,430		58,736
Right of use leased assets	(6,714)		(9,549)		(250)
Capitalized lease cash payments - operating sites	9,099		8,453		8,973
Community agreement cash payments	1,266		82		-
Accretion and amortization of decommissioning and restoration obligations	6,431		4,278		14,064
Cash sustaining capital expenditures	77,539		65,694		81,523

^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, growth capital expenditures and decommissioning and restoration obligation adjustments.

TSX, NYSE - HBM<br><br> <br>2022 No. 2
Consolidated	Year Ended
---	---	---	---	---
	Dec. 31, 2021		Dec. 31, 2020
All-in sustaining cash cost per pound of copper produced	$000s	$/lb	$000s	$/lb
Cash cost, net of by-product credits	163,262	0.74	126,875	0.60
Cash sustaining capital expenditures	268,190	1.22	257,558	1.23
Capitalized exploration	8,000	0.04	8,040	0.04
Royalties	15,274	0.07	12,807	0.06
Sustaining cash cost, net of by-product credits	454,726	2.07	405,280	1.93
Corporate selling and administrative expenses & regional costs	46,663	0.21	45,010	0.21
Accretion and amortization of decommissioning and community agreements^1^	2,830	0.01	4,115	0.02
All-in sustaining cash cost, net of by-product credits	504,219	2.30	454,405	2.16
Reconciliation to property, plant and equipment additions:	******	******
Property, plant and equipment additions	346,335	******	303,653
Capitalized stripping net additions	79,426	******	83,137
Decommissioning and restoration obligation net additions	(49,457)	******	46,792
Total accrued capital additions	376,304	******	433,582
Less other non-sustaining capital costs^2^	146,978	******	248,150
Total sustaining capital costs	229,326	******	185,432
Right of use leased assets	(26,685)	******	(17,670)
Capitalized lease cash payments - operating sites	35,071	******	33,606
Community agreement cash payments	1,691	******	2,591
Accretion and amortization of decommissioning and restoration obligations	28,987	******	53,599
Cash sustaining capital expenditures	268,390	******	257,558

^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, growth capital expenditures and decommissioning and restoration obligation adjustments.

TSX, NYSE - HBM<br><br> <br>2022 No. 2
Peru	Three Months Ended
---	---	---	---	---	---	---
	Dec. 31, 2021		Sep. 30, 2021		Dec. 31, 2020
Sustaining cash cost per pound of copper produced	$000s	$/lb	$000s	$/lb	$000s	$/lb
Cash cost, net of by-product credits	64,573	1.28	50,242	1.26	69,782	1.47
Cash sustaining capital expenditures	50,423	1.00	40,921	1.03	43,542	0.92
Capitalized exploration^1^	8,000	0.16	-	-	8,040	0.17
Royalties	762	0.02	998	0.03	1,399	0.03
Sustaining cash cost per pound of copper produced	123,758	2.46	92,161	2.31	122,763	2.58

^1^Only includes exploration costs incurred for locations near to existing mine operations.

Peru	Year Ended
	Dec. 31, 2021		Dec. 31, 2020
Sustaining cash cost per pound of copper produced	$000s	$/lb	$000s	$/lb
Cash cost, net of by-product credits	264,102	1.54	234,307	1.45
Cash sustaining capital expenditures	146,044	0.85	107,994	0.67
Capitalized exploration^1^	8,000	0.05	8,040	0.05
Royalties	3,503	0.02	5,121	0.03
Sustaining cash cost per pound of copper produced	421,649	2.46	355,462	2.20
Manitoba	Three Months Ended
---	---	---	---	---	---	---
	Dec. 31, 2021		Sep. 30, 2021		Dec. 31, 2020
Sustaining cash cost per pound of copper produced	$000s	$/lb	$000s	$/lb	$000s	$/lb
Cash cost, net of by-product credits	(32,655)	(2.77)	(18,684)	(1.64)	(43,895)	(3.48)
Cash sustaining capital expenditures	27,116	2.30	24,773	2.17	37,981	3.01
Royalties	2,832	0.24	2,491	0.22	1,419	0.11
Sustaining cash cost per pound of copper produced	(2,707)	(0.23)	8,580	0.75	(4,495)	(0.36)
Manitoba	Year Ended
---	---	---	---	---
	Dec. 31, 2021		Dec. 31, 2020
Sustaining cash cost per pound of copper produced	$000s	$/lb	$000s	$/lb
Cash cost, net of by-product credits	(100,840)	(2.11)	(107,432)	(2.20)
Cash sustaining capital expenditures	122,146	2.56	149,564	3.06
Royalties	11,771	0.25	7,686	0.16
Sustaining cash cost per pound of copper produced	33,077	0.69	49,818	1.02
TSX, NYSE - HBM<br><br> <br>2022 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, 2021	Sep. 30, 2021	Dec. 31, 2020
Mining	27,756	22,772	24,967
Milling	40,121	44,750	39,219
G&A ^1^	18,351	13,948	14,327
Other G&A ^2^	(1,937)	(286)	213
Unit cost	84,291	81,184	78,726
Tonnes ore milled	8,049	6,985	7,742
Combined unit cost per tonne	10.47	11.62	10.17
Reconciliation to IFRS:	****
Unit cost	84,291	81,184	78,726
Freight & other	11,609	9,464	9,989
Other G&A	1,937	286	(213)
Share-based compensation expenses	145	31	213
Inventory adjustments	-	-	(2,188)
Change in product inventory	(4,507)	(3,126)	(6,550)
Royalties	762	998	1,399
Depreciation and amortization	54,078	47,185	50,861
Cost of sales^3^	148,315	136,022	132,237

^1^G&A as per cash cost reconciliation above.

^2^Other G&A primarily includes profit sharing costs.

^3^As per IFRS financial statements.

Peru	Year Ended
(in thousands except ore tonnes milled and unit cost per tonne)	******	******
Combined unit cost per tonne processed	Dec. 31, 2021	Dec. 31, 2020
Mining	98,200	70,724
Milling	168,477	134,096
G&A ^1^	63,629	43,105
Other G&A ^2^	(2,152)	865
Unit cost	328,154	248,790
Tonnes ore milled	28,810	26,297
Combined unit cost per tonne	11.39	9.46
Reconciliation to IFRS:	****
Unit cost	328,154	248,790
Freight & other	41,316	34,794
Other G&A	2,152	(865)
Share-based compensation expenses	247	288
Inventory adjustments	(1,446)	32
Change in product inventory	(13,743)	(3,883)
Royalties	3,503	5,121
Overhead costs related to suspension of activities (cash)	-	15,810
Depreciation and amortization	194,408	184,275
Cost of sales^3^	554,591	484,362

^1^G&A as per cash cost reconciliation above.

^2^Other G&A primarily includes profit sharing costs.

^3^As per IFRS financial statements.

TSX, NYSE - HBM<br><br> <br>2022 No. 2
Manitoba	Three Months Ended
---	---	---	---
(in thousands except tonnes ore milled and unit cost per tonne)	******	******	******
Combined unit cost per tonne processed	Dec. 31, 2021	Sep. 30, 2021	Dec. 31, 2020
Mining	58,891	54,634	46,598
Milling	22,193	14,484	11,147
G&A ^1^	13,746	8,680	9,898
Less: G&A allocated to zinc metal production	(3,762)	(3,280)	(3,301)
Less: Other G&A related to profit sharing costs	-	3,381	-
Unit cost	91,068	77,899	64,342
USD/CAD implicit exchange rate	1.26	1.26	1.30
Unit cost - C$	114,751	98,151	83,669
Tonnes ore milled	682,292	666,263	598,287
Combined unit cost per tonne - C$	168	147	140
Reconciliation to IFRS:	****
Unit cost	91,068	77,899	64,342
Freight & other	6,828	7,484	6,929
Refined (zinc)	19,008	15,868	18,736
G&A allocated to zinc metal production	3,762	3,280	3,301
Other G&A related to profit sharing	-	(3,381)	-
Share-based compensation expenses	599	114	706
Inventory adjustments	-	5,445	2,270
Past service pension cost	737	4,229	-
Change in product inventory	(11,740)	8,798	2,029
Royalties	2,832	2,491	1,419
Overhead costs related to suspension of activities (cash)	-	-	8,232
Depreciation and amortization	35,849	38,825	47,722
Cost of sales^2^	148,943	161,052	155,686

^1^G&A as per cash cost reconciliation above.

^2^As per IFRS financial statements.

TSX, NYSE - HBM<br><br> <br>2022 No. 2
Manitoba	Year Ended
---	---	---
(in thousands except tonnes ore milled and unit cost per tonne)	******	******
Combined unit cost per tonne processed	Dec. 31, 2021	Dec. 31, 2020
Mining	222,660	178,308
Milling	62,995	46,057
G&A ^1^	52,963	46,930
Less: G&A allocated to zinc metal production and other areas	(14,656)	(14,441)
Unit cost	323,962	256,854
USD/CAD implicit exchange rate	1.25	1.34
Unit cost - C$	406,164	344,672
Tonnes ore milled	2,640,272	2,618,065
Combined unit cost per tonne - C$	154	132
Reconciliation to IFRS:	****
Unit cost	323,962	256,854
Freight & other	29,545	27,056
Refined (zinc)	72,392	71,799
G&A allocated to zinc metal production	14,656	14,441
Share-based compensation expenses	1,100	1,112
Inventory adjustments	5,445	2,270
Past service pension cost	4,965	-
Change in product inventory	(4,437)	2,054
Royalties	11,771	7,686
Overhead costs related to suspension of activities (cash)	-	8,232
Depreciation and amortization	163,516	177,552
Cost of sales^2^	622,915	569,056

^1^G&A as per cash cost reconciliation above.

^2^As per IFRS financial statements.

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, production, cost and capital and exploration expenditure guidance, expectations regarding the impact of COVID-19 and inflationary pressures on the cost of operations, financial condition and prospects, expectations regarding the Copper World project, including future drill programs, potential synergies with Rosemont and the timeline for completing a preliminary economic assessment, expectations regarding the Snow Lake gold strategy, including anticipated timelines for achieving target throughput and recoveries at the New Britannia mill, increasing the mining rate at Lalor to 5,300 tpd and implementing the Stall mill recovery improvement program, expectations regarding the Flin Flon closure process and the transition of personnel and equipment to Snow Lake, expectations regarding the potential to reprocess Flin Flon tailings in the future and the possible benefits of such a project, the potential and Hudbay's anticipated plans for advancing the mining of its properties surrounding Constancia and elsewhere in Peru, 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.

TSX, NYSE - HBM<br><br> <br>2022 No. 2

The material factors or assumptions that Hudbay has identified and applied in drawing conclusions or making forecasts or projections are set out in the forward-looking information include, but are not limited to:

Hudbay's ability to continue to operate safely and at full capacity despite COVID-19 related challenges;
the availability, global supply and effectiveness of COVID-19 vaccines, the effective distribution of such vaccines in the countries in which the company operates, the lessening of restrictions related to COVID-19, and the anticipated rate and timing for each of the foregoing;
the ability to achieve production and cost guidance;
no significant interruptions to operations due to COVID-19 or social or political unrest in the regions Hudbay operates;
a positive preliminary economic assessment in respect of Copper World will present opportunities to unlock value at Rosemont;
the successful outcome of the Rosemont litigation;
the ability to ramp-up the New Britannia mill to target throughput and recoveries and achieve the anticipated production;
the economic prospects of reprocessing Flin Flon tailings;
the success of mining, processing, exploration and development activities;
the scheduled maintenance and availability of Hudbay'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 business and growth strategies, including the success of the company's 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 Hudbay's ability to develop its projects;
the timing and receipt of various regulatory and governmental approvals;
the availability of personnel for exploration, development and operational projects and ongoing employee relations;
maintaining good relations with the labour unions that represent certain of Hudbay's employees in Manitoba and Peru;
maintaining good relations with the communities in which Hudbay operates, including the neighbouring Indigenous communities and local governments;
no significant unanticipated challenges with stakeholders at various projects;
no significant unanticipated events or changes relating to regulatory, environmental, health and safety matters;

TSX, NYSE - HBM<br><br> <br>2022 No. 2

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 Hudbay'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, risks associated with COVID-19 and its effect on the company's operations, financial condition, projects and prospects, uncertainties related to the closure of the 777 mine and the Flin Flon operations, the direct and indirect impacts of the change in government in Peru, future uncertainty with respect to the Peruvian mining tax regime and social unrest in Peru, risks generally associated with the mining industry, such as economic factors (including future commodity prices, currency fluctuations, energy prices and general cost escalation in the current inflationary environment), uncertainties related to the development and operation of Hudbay's projects, risks related to the ongoing Rosemont litigation process and other legal challenges that could affect Rosemont or Copper World, risks related to the new Lalor mine plan, including the continuing ramp-up of the New Britannia mill and the ability to convert inferred mineral resource estimates to higher confidence categories, risks related to the technical and economic prospects of reprocessing Flin Flon tailings, the potential that additional financial assurance will be required to support the updated Flin Flon closure plan, 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 Hudbay's reserves, volatile financial markets that may affect its 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 headings "Financial Risk Management" and "Outlook" in Hudbay's Management's Discussion and Analysis for the year ended December 31, 2021 and "Risk Factors" in Hudbay's most recent Annual Information Form.

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.

TSX, NYSE - HBM<br><br> <br>2022 No. 2

About Hudbay

Hudbay (TSX, NYSE: HBM) is a diversified mining company primarily producing copper concentrate (containing copper, gold and silver), zinc metal and silver/gold doré. Directly and through its subsidiaries, Hudbay owns three polymetallic mines, four ore concentrators and a zinc production facility in northern Manitoba and Saskatchewan (Canada) and Cusco (Peru), and copper projects in Arizona and Nevada (United States). The company's 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 vision is to be a responsible, top-tier operator of long-life, low-cost mines in the Americas. 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. 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. 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

________________________

^i^ Adjusted net loss; adjusted net loss per share; adjusted EBITDA; cash cost, sustaining cash cost and all-in sustaining cash cost per pound of copper produced and per ounce of gold produced, net of by-product credits; unit operating costs; and net debt 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.

^ii^ Assumes the mid-point of the guidance range is achieved.