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6-K

Hudbay Minerals Inc. (HBM)

6-K 2021-08-10 For: 2021-06-30
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Added on April 08, 2026

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 August 2021

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 August 9, 2021, 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) Unaudited Condensed Consolidated Interim Financial Statements for the period ended June 30, 2021, (2) Management's Discussion and Analysis for the period ended June 30, 2021, (3) Form 52-109F2 Certification of Interim Filings Full Certificate - CEO, (4) Form 52-109F2 Certification of Interim Filings Full Certificate - CFO, (5) News Release dated August 9, 2021.

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

  • Exhibit 99.1 — Unaudited Condensed Consolidated Interim Financial Statements for the three months ended June 30, 2021 and 2020;
  • Exhibit 99.2 — Management’s Discussion and Analysis of Results of Operations and Financial Condition for the three months ended June 30, 2021;
  • Exhibit 99.3 — CEO Certification of Interim Filings;
  • Exhibit 99.4 — CFO Certification of Interim Filings; and
  • Exhibit 99.5 — News Release dated August 9, 2021.

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/ Patrick Donnelly
Name: Patrick Donnelly
Title: Vice President and General Counsel

Date: August 10, 2021

EXHIBIT INDEX

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

Exhibit Description
99.1 Unaudited Condensed Consolidated Interim Financial Statements for the three months ended June 30, 2021 and 2020
99.2 Management’s Discussion and Analysis of Results of Operations and Financial Condition for the three months ended June 30, 2021
99.3 CEO Certification of Interim Filings
99.4 CFO Certification of Interim Filings
99.5 News Release dated August 9, 2021 
Hudbay Minerals Inc.: Exhibit 99.1 - Filed by newsfilecorp.com

Unaudited Condensed Consolidated Interim Financial Statements

(In US dollars)

HUDBAY MINERALS INC.

For the three and six months ended June 30, 2021 and 2020

**HUDBAY MINERALS INC.**Condensed Consolidated Interim Balance Sheets<br>(Unaudited and in thousands of US dollars)
Jun. 30, Dec. 31,
--- --- --- --- --- --- --- ---
Note 2021 2020
Assets
Current assets
Cash $ 294,287 $ 439,135
Trade and other receivables 6 164,939 141,199
Inventories 7 154,750 143,105
Prepaid expenses and other current assets 10,758 16,717
Other financial assets 8 18,498 3,073
Taxes receivable 12,843 12,446
656,075 755,675
Receivables 6 16,383 18,568
Inventories 7 25,539 22,006
Other financial assets 8 11,117 15,669
Intangibles and other assets 9 20,882 21,173
Property, plant and equipment 10 3,735,548 3,731,655
Deferred tax assets 17b 122,283 101,899
$ 4,587,827 $ 4,666,645
Liabilities
Current liabilities
Trade and other payables $ 210,493 $ 233,147
Taxes payable 9,525 2,701
Other liabilities 11 49,977 51,971
Other financial liabilities 12 53,831 24,713
Lease liabilities 13 30,223 33,473
Deferred revenue 15 82,227 102,782
436,276 448,787
Other financial liabilities 12 153,835 194,378
Lease liabilities 13 37,617 30,041
Long-term debt 14 1,181,195 1,135,675
Deferred revenue 15 459,604 443,902
Provisions 16 271,532 331,799
Pension obligations 19,464 23,316
Other employee benefits 123,877 129,508
Deferred tax liabilities 17b 245,503 229,433
2,928,903 2,966,839
Equity
Share capital 18b 1,778,478 1,777,340
Reserves (633 ) (24,200 )
Retained earnings (118,921 ) (53,334 )
1,658,924 1,699,806
$ 4,587,827 $ 4,666,645
Commitments (note 21)
**HUDBAY MINERALS INC.**Condensed Consolidated Interim Income Statements<br>(Unaudited and in thousands of US dollars)
---
Note Three months ended<br>June 30, Six months ended<br>June 30,
--- --- --- --- --- --- --- --- --- --- --- --- --- ---
2021 2020 2021 2020
Revenue 5a $ 404,242 $ 208,913 $ 717,866 $ 454,020
Cost of sales
Mine operating costs 222,755 140,760 401,186 321,419
Depreciation and amortization 5b 99,305 80,807 181,987 167,246
322,060 221,567 583,173 488,665
Gross profit (loss) 82,182 (12,654 ) 134,693 (34,645 )
Selling and administrative expenses 10,055 10,713 19,999 15,816
Exploration and evaluation expenses 12,571 2,192 19,624 7,965
Other expenses (income) 5d 1,026 1,276 (2,321 ) 6,768
Results from operating activities 58,530 (26,835 ) 97,391 (65,194 )
Net interest expense on long term debt 5e 17,305 19,729 38,538 39,364
Accretion on streaming arrangements 5e 10,536 15,732 26,064 32,031
Change in fair value of financial instruments 5e 8,566 4,656 47,573 10,900
Other net finance costs 5e 7,304 7,652 39,989 8,567
Net finance expense 43,711 47,769 152,164 90,862
Profit (loss) before tax 14,819 (74,604 ) (54,773 ) (156,056 )
Tax expense (recovery) 17a 18,214 (22,703 ) 8,724 (28,021 )
Loss for the period $ (3,395 ) $ (51,901 ) $ (63,497 ) $ (128,035 )
Loss per share
Basic and Diluted $ (0.01 ) $ (0.20 ) $ (0.24 ) $ (0.49 )
Weighted average number of common shares outstanding:
Basic and Diluted 19 261,452,295 261,272,151 261,387,047 261,272,151
**HUDBAY MINERALS INC.**Condensed Consolidated Interim Statements of Cash Flows<br>(Unaudited and in thousands of US dollars)
---
Note Three months ended<br>June 30, Six months ended<br>June 30,
--- --- --- --- --- --- --- --- --- --- --- --- --- ---
2021 2020 2021 2020
Cash generated from operating activities:
Loss for the period $ (3,395 ) $ (51,901 ) $ (63,497 ) $ (128,035 )
Tax expense (recovery) 17a 18,214 (22,703 ) 8,724 (28,021 )
Items not affecting cash:
Depreciation and amortization 5b 99,787 81,230 182,949 168,087
Share-based compensation 5c 2,301 3,597 4,087 885
Net interest expense on long term debt 5e 17,305 19,729 38,538 39,364
Accretion on streaming arrangements 5e 10,536 15,732 26,064 32,031
Change in fair value of financial instruments 5e 8,566 4,656 47,573 10,900
Other net finance costs 5e 7,304 7,652 39,989 8,567
Inventory (recovery) write-down 7 (723 ) (8,154 ) (1,446 ) 2,221
Amortization of deferred revenue and variable consideration 5a (17,105 ) (13,904 ) (32,331 ) (23,664 )
Pension and other employee benefit payments, net of accruals 1,770 1,750 4,411 3,934
Decommissioning and restoration payments 16 (5,304 ) (3,193 ) (9,941 ) (6,129 )
Other 22a (858 ) (1,650 ) (11,668 ) (2,679 )
Taxes paid (5,612 ) (3,384 ) (10,013 ) (6,052 )
Operating cash flow before change in non-cash working capital 132,786 29,457 223,439 71,409
Change in non-cash working capital 22b (36,408 ) 1,911 (75,267 ) (30,954 )
96,378 31,368 148,172 40,455
Cash used in investing activities:
Acquisition of property, plant and equipment (100,555 ) (47,751 ) (183,505 ) (98,836 )
Proceeds from disposal of investments 1,081 - 1,081 -
Interest received 225 342 663 1,480
(99,249 ) (47,409 ) (181,761 ) (97,356 )
Cash (used)/generated from financing activities:
Issuance of senior unsecured notes, net of transaction costs 14a (6 ) - 591,922 -
Principal repayments 14a - - (600,000 ) -
Premium paid on redemption of notes 14a - - (22,878 ) -
Interest paid on long-term debt - - (50,835 ) (37,375 )
Financing costs (4,144 ) (4,441 ) (7,730 ) (8,177 )
Lease payments 13 (8,973 ) (8,192 ) (18,746 ) (17,209 )
Gold prepayment proceeds 12 - 115,005 - 115,005
Net proceeds from exercise of stock options 297 - 740 -
Dividends paid 18b - - (2,090 ) (1,804 )
(12,826 ) 102,372 (109,617 ) 50,440
Effect of movement in exchange rates on cash (580 ) (1,192 ) (1,642 ) 1,451
Net (decrease) increase in cash (16,277 ) 85,139 (144,848 ) (5,010 )
Cash, beginning of the period 310,564 305,997 439,135 396,146
Cash, end of the period $ 294,287 $ 391,136 $ 294,287 $ 391,136
For supplemental information, see note 22.
**HUDBAY MINERALS INC.**Condensed Consolidated Interim Statements of Comprehensive Loss<br>(Unaudited and in thousands of US dollars)
---
Three months ended <br>June 30, Six months ended <br>June 30,
--- --- --- --- --- --- --- --- --- --- --- --- ---
2021 2020 2021 2020
Loss for the period $ (3,395 ) $ (51,901 ) $ (63,497 ) $ (128,035 )
Other comprehensive income (loss):
Item that will be reclassified subsequently to profit or loss:
Recognized directly in equity:
Net gain (loss) on translation of foreign currency balances 4,390 9,534 7,852 (10,586 )
4,390 9,534 7,852 (10,586 )
Items that will not be reclassified subsequently to profit or loss:
Recognized directly in equity:
Gold prepayment revaluation (note 20a) (637 ) (480 ) (2,184 ) (480 )
Tax effect (note 17c) 171 129 587 129
Remeasurement - actuarial (loss)  gain (2,481 ) (31,594 ) 18,068 (98 )
Tax effect (note 17c) (164 ) 1,940 (1,273 ) (1,344 )
(3,111 ) (30,005 ) 15,198 (1,793 )
Other comprehensive income (loss) net of tax, for the period 1,279 (20,471 ) 23,050 (12,379 )
Total comprehensive loss for the period $ (2,116 ) $ (72,372 ) $ (40,447 ) $ (140,414 )
**HUDBAY MINERALS INC.**Condensed Consolidated Interim Statements of Changes in Equity<br>(Unaudited and in thousands of US dollars)
---
Share capital<br>(note 18) 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 - - - - (128,035 ) (128,035 )
Other comprehensive loss - - (10,586 ) (1,793 ) - (12,379 )
Total comprehensive loss - - (10,586 ) (1,793 ) (128,035 ) (140,414 )
Contributions by and distributions to owners:
Dividends (note 18b) - - - - (1,804 ) (1,804 )
Stock options (note 5c) - 398 398
Total contributions by and distributions to owners - 398 - - (1,804 ) (1,406 )
Balance, June 30, 2020 $ 1,777,340 $ 55,213 $ (13,185 ) $ (78,259 ) $ (34,806 ) $ 1,706,303
Loss - - - - (16,549 ) (16,549 )
Other comprehensive income (loss) - - 14,756 (3,449 ) - 11,307
Total comprehensive income (loss) - - 14,756 (3,449 ) (16,549 ) (5,242 )
Contributions by and distributions to owners:
Dividends - - - - (1,979 ) (1,979 )
Stock options (note 5c) - 724 - - - 724
Total contributions by and distributions to owners - 724 - - (1,979 ) (1,255 )
Balance, December 31, 2020 $ 1,777,340 $ 55,937 $ 1,571 $ (81,708 ) $ (53,334 ) $ 1,699,806
**HUDBAY MINERALS INC.**Condensed Consolidated Interim Statements of Changes in Equity<br>(Unaudited and in thousands of US dollars)
---
Share capital<br>(note 18) 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 - - - - (63,497 ) (63,497 )
Other comprehensive income - - 7,852 15,198 - 23,050
Total comprehensive income (loss) - - 7,852 15,198 (63,497 ) (40,447 )
Contributions by and distributions to owners:
Dividends (note 18b) - - - - (2,090 ) (2,090 )
Stock options - 915 - - - 915
Transfer to share capital related to stock options redeemed 398 (398 ) - - - -
Issuance of shares related to stock options redeemed 740 - - - - 740
Total contributions by and distributions<br>to owners 1,138 517 - - (2,090 ) (435 )
Balance, June 30, 2021 $ 1,778,478 $ 56,454 $ 9,423 $ (66,510 ) $ (118,921 ) $ 1,658,924
**HUDBAY MINERALS INC.**Notes to Unaudited Condensed Consolidated Interim Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>For the three and six months ended June 30, 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 unaudited condensed consolidated interim financial statements ("interim financial statements") of the Company for the three and six months ended June 30, 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 June 30, 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), 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 interim financial statements have been prepared in accordance with IAS 34, Interim Financial Reporting as issued by the International Accounting Standards Board ("IASB") and do not include all of the information required for full annual financial statements by International Financial Reporting Standards ("IFRS").

These interim financial statements should be read in conjunction with the Company's audited consolidated financial statements for the year ended December 31, 2020 which includes information necessary or useful to understanding the Company's business and financial statement presentation. In particular, the Company's significant accounting policies are presented as note 3 in the audited consolidated financial statements for the year ended December 31, 2020 and have been consistently applied in the preparation of these interim financial statements.

The Board of Directors approved these interim financial statements on August 9, 2021.

**HUDBAY MINERALS INC.**Notes to Unaudited Condensed Consolidated Interim Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>For the three and six months ended June 30, 2021 and 2020

(b)   COVID-19 estimation uncertainty:

At the end of 2019, a novel strain of coronavirus ("COVID-19") was first reported. The COVID-19 outbreak has developed rapidly in 2020 and into 2021, with a significant number of infections around the world, including regions Hudbay operates in. On March 11, 2020, the World Health Organization declared the COVID-19 outbreak a global pandemic. Since then, containment measures have resulted in decreased economic activity, which has adversely affected the broader global economy.

The resulting impacts on global commerce have been and continue to be far-reaching. Since the initial outbreak there has been volatility in stock markets, commodities and foreign exchange markets, restrictions on the conduct of business in many jurisdictions and the global movement of people and some goods have become restricted.

The Company has evaluated the potential impacts arising from COVID-19 on all aspects of its business.

(c)   Use of judgements and estimates:

The preparation of the interim financial statements in conformity with IFRS requires Hudbay to make judgements, estimates and assumptions, in applying accounting policies that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the interim financial statements, as well as reported amounts of revenue and expenses during the reporting period. Actual results may differ from these judgements, estimates and assumptions. The interim financial statements reflect the judgements and estimates outlined by Hudbay in its audited consolidated financial statements for the year ended December 31, 2020, except as noted below.

As a result of a new National Instrument 43-101 ("NI 43-101") technical report for the Constancia copper mine in Peru, effective January 1, 2021, which reflects an updated mine plan with a new grade and ore tonnage profile, Hudbay made a change in estimate in Peru for the allocation of mining cost to inventories and depreciation for certain mineral property, property plant and equipment ("PP&E") assets, to reflect the changes in grades following the new NI 43-101 to utilize contained metal in the respective calculations. Please see notes 5b, 7 and 10 for further details on the impact of this change in estimation method.

During the current period, as a result of volatile discount rates and inflation rates, management re-examined the inflation estimate used to calculate the decommissioning, restoration and similar liabilities ("DRO"). It was concluded that the implied difference between the nominal bond yield and the corresponding maturity real return bond yield provides a more accurate estimate of the effective inflation rate. As such, during the current period, the inflation rate estimate used to calculate DRO has been prospectively revised. Please see notes 5d and 16 for further details on the impact of this change in estimation method.

3. Significant accounting policies

These interim financial statements reflect the accounting policies applied by Hudbay in its audited consolidated financial statements for the year ended December 31, 2020 and comparative periods.

**HUDBAY MINERALS INC.**Notes to Unaudited Condensed Consolidated Interim Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>For the three and six months ended June 30, 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 6

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 interim financial statements.

During the first half of 2021, Hudbay has not entered into any new contracts or contract modifications that are dependent on the LIBOR rate.

**HUDBAY MINERALS INC.**Notes to Unaudited Condensed Consolidated Interim Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>For the three and six months ended June 30, 2021 and 2020

5. Revenue and expenses

(a) Revenue

Hudbay's revenue by significant product types:

Three months ended<br>June 30, Six months ended<br>June 30,
2021 2020 2021 2020
Copper $ 250,254 $ 88,193 $ 423,939 $ 227,371
Zinc 77,374 59,020 159,477 122,574
Gold 57,885 44,020 100,077 86,769
Silver 7,227 4,960 13,624 11,034
Molybdenum 7,175 2,332 14,145 11,496
Other 2,604 955 4,163 1,855
402,519 199,480 715,425 461,099
Non-cash streaming arrangement items ^1^
Amortization of deferred revenue - gold 9,224 6,321 14,097 10,456
Amortization of deferred revenue - silver 7,881 7,583 16,617 16,021
Amortization of deferred revenue - variable<br>consideration adjustments - prior periods - - 1,617 (2,813 )
17,105 13,904 32,331 23,664
Pricing and volume adjustments ^2^ (139 ) 6,993 (2,712 ) (3,583 )
419,485 220,377 745,044 481,180
Treatment and refining charges (15,243 ) (11,464 ) (27,178 ) (27,160 )
$ 404,242 $ 208,913 $ 717,866 $ 454,020
^1^See note 15.
^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.
**HUDBAY MINERALS INC.**Notes to Unaudited Condensed Consolidated Interim Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>For the three and six months ended June 30, 2021 and 2020
---

Consideration from the Company's stream agreements is considered variable (note 15). 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 current period catch up adjustment is made for all prior year stream revenues since the stream agreement inception date. This variable consideration adjustment for the six months ended June 30, 2021 resulted in an increase of revenue of $1,617. The variable consideration adjustment for the six months ended June 30, 2020 resulted in a reversal of revenue of $2,813.

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 15.

(b) Depreciation and amortization

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

Three months ended<br>June 30, Six months ended<br>June 30,
2021 2020 2021 2020
Cost of sales $ 99,305 $ 80,807 $ 181,987 $ 167,246
Selling and administrative expenses 482 423 962 841
$ 99,787 $ 81,230 $ 182,949 $ 168,087

Effective January 1, 2021, the Company made a change in estimate for certain mineral property PP&E assets recorded in Peru to reflect the changes in grades following the recently published NI 43-101 to utilize contained metal in the depreciation calculation. For the three and six months ended June 30, 2021, depreciation expense is higher by $372 and lower by $515, respectively, 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 10 for further details.

**HUDBAY MINERALS INC.**Notes to Unaudited Condensed Consolidated Interim Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>For the three and six months ended June 30, 2021 and 2020

(c) Share-based compensation expenses

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

Cash-settled Total share-<br>based<br>payment <br>expense
RSUs DSUs PSUs Stock<br>options
Three months ended June 30, 2021
Cost of sales $ 274 $ - $ - $ - $ 274
Selling and administrative 677 (1 ) 783 492 1,951
Other expenses 76 - - - 76
$ 1,027 $ (1 ) $ 783 $ 492 $ 2,301
Six months ended June 30, 2021
Cost of sales $ 458 $ - $ - $ - $ 458
Selling and administrative 1,350 47 1,211 915 3,523
Other expenses 106 - - - 106
$ 1,914 $ 47 $ 1,211 $ 915 $ 4,087
Three months ended June 30, 2020
Cost of sales $ 284 $ - $ - $ - $ 284
Selling and administrative 949 1,598 284 398 3,229
Other expenses 84 - - - 84
$ 1,317 $ 1,598 $ 284 $ 398 $ 3,597
Six months ended June 30, 2020
Cost of sales $ 68 $ - $ - $ - $ 68
Selling and administrative 70 65 284 $ 398 817
Other expenses - - - - -
$ 138 $ 65 $ 284 $ 398 $ 885

During the three and six months ended June 30 2021, the Company granted 509,385 stock options (three and six months ended June 30, 2020 - nil and 1,581,385, respectively). For further details on stock options, see note 18c.

**HUDBAY MINERALS INC.**Notes to Unaudited Condensed Consolidated Interim Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>For the three and six months ended June 30, 2021 and 2020

(d) Other expenses (income)

Three months ended<br>June 30, Six months ended <br>June 30,
2021 2020 2021 2020
Regional costs $ 940 $ 895 $ 1,760 $ 1,780
Loss (gain) on disposal of property, plant and equipment 7 457 (296 ) 2,857
Closure cost adjustment - non-producing properties (525 ) 199 (5,024 ) 1,044
Allocation of community costs 508 752 861 1,480
Other 96 (1,027 ) 378 (393 )
$ 1,026 $ 1,276 $ (2,321 ) $ 6,768

Due to rising risk-free interest rates during the first half of 2021, 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 income statement, resulting in a gain of $525 and $5,024 for the three and six months ended June 30, 2021.

**HUDBAY MINERALS INC.**Notes to Unaudited Condensed Consolidated Interim Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>For the three and six months ended June 30, 2021 and 2020

(e) Net finance expense ****

Three months ended<br>June 30, Six months ended<br>June 30,
2021 2020 2021 2020
Net interest expense on long-term debt
Interest expense on long-term debt $ 17,305 $ 19,729 $ 38,538 $ 39,364
Accretion on streaming arrangements (note 15)
Current year additions 10,536 15,732 25,470 31,071
Variable consideration adjustments - prior periods - - 594 960
10,536 15,732 26,064 32,031
Change in fair value of financial assets and liabilities at fair value through profit or loss
Embedded derivatives (note 14) - 1,200 49,754 4,071
Gold prepayment liability 5,907 7,572 (6,593 ) 7,572
Investments 2,659 (4,116 ) 4,412 (743 )
8,566 4,656 47,573 10,900
Other net finance costs
Net foreign exchange loss (gain) 1,735 1,768 3,406 (3,078 )
Accretion on community agreements measured at amortized cost 1,042 1,121 1,695 2,242
Unwinding of discounts on provisions 1,166 775 2,027 2,125
Withholding taxes 1,944 2,137 3,967 4,030
Premium paid on redemption of notes (note 14) - - 22,878 -
Write-down of unamortized transaction costs (note 14) - - 2,480 -
Other finance expense 1,569 2,183 4,051 4,686
Interest income (152 ) (332 ) (515 ) (1,438 )
7,304 7,652 39,989 8,567
Net finance expense $ 43,711 $ 47,769 $ 152,164 $ 90,862

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

**HUDBAY MINERALS INC.**Notes to Unaudited Condensed Consolidated Interim Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>For the three and six months ended June 30, 2021 and 2020

6. Trade and other receivables

Jun. 30, 2021 Dec. 31, 2020
Current
Trade receivables $ 152,071 $ 107,787
Statutory receivables 10,117 28,445
Other receivables 2,751 4,967
164,939 141,199
Non-current
Taxes receivable 16,383 16,941
Other receivables - 1,627
16,383 18,568
$ 181,322 $ 159,767

7. Inventories

Jun. 30, 2021 Dec. 31, 2020
Current
Stockpile $ 16,599 $ 13,906
Work in progress 5,500 6,364
Finished goods 72,200 72,923
Materials and supplies 60,451 49,912
154,750 143,105
Non-current
Stockpile 23,441 16,704
Materials and supplies 2,098 5,302
25,539 22,006
$ 180,289 $ 165,111

The cost of inventories recognized as an expense, including depreciation, and included in cost of sales amounted to $295,444 and $532,842 for the three and six months ended June 30, 2021 (three and six months ended June 30, 2020 - $187,651 and $416,844).

During the three and six months ended June 30, 2021, Hudbay recognized a recovery of $723 and $1,446 in cost of sales related to adjustments of the carrying value of inventories to net realizable value (three and six months ended June 30, 2020 - a recovery of $8,154 and expense of $2,221). Adjustments to the carrying value of inventories to net realizable value were related to changes in commodity prices.

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 with respect to 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 six months ended June 30, 2021, as a result of the change in allocation, stockpile and finished goods inventories have declined and increased by $3,896 and $326, respectively.

**HUDBAY MINERALS INC.**Notes to Unaudited Condensed Consolidated Interim Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>For the three and six months ended June 30, 2021 and 2020

8. Other financial assets

Jun. 30, 2021 Dec. 31, 2020
Current
Derivative assets $ 18,161 $ 2,736
Restricted cash 337 337
18,498 3,073
Non-current
Investments at fair value through profit or loss 11,117 15,669
$ 29,615 $ 18,742

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.

9. Intangibles and other assets

Intangibles and other assets of $20,882 (December 31, 2020 - $21,173) includes $15,131 of other assets (December 31, 2020 - $15,764) and $5,751 of intangibles (December 31, 2020 - $5,409).

Other assets represent the carrying value of certain future community costs. The liability remaining for these agreements is recorded in other financial liabilities at amortized cost (note 12). Amortization of the carrying amount is recorded in the condensed consolidated interim income statements within other (income) expenses (note 5d).

Intangibles mainly represent computer software costs.

**HUDBAY MINERALS INC.**Notes to Unaudited Condensed Consolidated Interim Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>For the three and six months ended June 30, 2021 and 2020

10. Property, plant and equipment

Jun. 30, 2021 Cost Accumulateddepreciationandamortization Carryingamount
Exploration and evaluation assets 80,257 $ - $ 80,257
Capital works in progress 946,027 - 946,027
Mining properties 2,413,219 (1,219,902 ) 1,193,317
Plant and equipment 2,804,601 (1,380,295 ) 1,424,306
Plant and equipment-ROU Assets1 235,697 (144,056 ) 91,641
6,479,801 $ (2,744,253 ) $ 3,735,548
Dec. 31, 2020 Cost Accumulated<br>depreciation and<br>amortization Carrying amount
Exploration and evaluation assets 79,059 $ - $ 79,059
Capital works in progress 957,162 - 957,162
Mining properties 2,217,461 (1,126,274 ) 1,091,187
Plant and equipment 2,793,719 (1,271,581 ) 1,522,138
Plant and equipment - ROU Assets1 214,303 (132,194 ) 82,109
6,261,704 $ (2,530,049 ) $ 3,731,655
1 Includes 3,584 of capital works in progress - ROU assets (cost) that relate to the Arizona Business unit (December 31, 2020 - 4,777 related to the Arizona and Manitoba Business units)

All values are in US Dollars.

For the six months ended June 30, 2021, the increase in property, plant and equipment (cost) of $218,097 was mainly caused by fixed asset and construction in progress asset additions of $219,599 and effects of movements in exchange rates of $56,253, partially offset by decreases in decommissioning and restoration assets of $53,465 (producing assets) mostly as a result of changes in discount rates associated with remeasurement of the liabilities.

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 in order to reflect the changes in grades following the recently published NI 43-101.

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 three months ended June 30, 2021, depreciation expense is greater by $372 and for the six months ended June 30, 2021 is lower by $515, compared to the result under the previous depreciation calculation.

**HUDBAY MINERALS INC.**Notes to Unaudited Condensed Consolidated Interim Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>For the three and six months ended June 30, 2021 and 2020

11. Other liabilities

Jun. 30, 2021 Dec. 31, 2020
Current
Provisions (note 16) $ 32,478 $ 33,675
Pension liability 13,499 13,552
Other employee benefits 3,350 3,154
Unearned revenue 650 1,590
$ 49,977 $ 51,971

12. Other financial liabilities

Jun. 30, 2021 Dec. 31, 2020
Current
Derivative liabilities $ 11,310 $ 15,312
Gold prepayment liability 34,225 -
Other financial liabilities at amortized cost 8,296 9,401
53,831 24,713
Non-current
Deferred Rosemont acquisition consideration 26,729 25,961
Gold prepayment liability 98,397 137,031
Other financial liabilities at amortized cost 28,709 31,386
153,835 194,378
$ 207,666 $ 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 condensed consolidated interim 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.

On May 7, 2020, the Company entered into an agreement 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 fair value adjustment recorded in profit or loss and other comprehensive income for the three and six months ended June 30, 2021 totaled a net loss of $6,544 and net gain of $4,409, respectively (three and six months ended June 30, 2020 - losses of $8,052).

**HUDBAY MINERALS INC.**Notes to Unaudited Condensed Consolidated Interim Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>For the three and six months ended June 30, 2021 and 2020

Other financial liabilities 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 other financial liabilities at amortized cost during the three and six months ended June 30, 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 other financial liabilities 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 19,945
Disbursements (22,138 )
Accretion 1,695
Effects of changes in foreign exchange (3,284 )
Balance, June 30, 2021 $ 37,005

13. 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 22,681
Lease payments (18,746 )
Accretion and other movements 391
Balance, June 30, 2021 $ 67,840
Jun. 30, 2021 Dec. 31, 2020
--- --- --- --- ---
Current $ 30,223 $ 33,473
Non-current 37,617 30,041
$ 67,840 $ 63,514
**HUDBAY MINERALS INC.**Notes to Unaudited Condensed Consolidated Interim Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>For the three and six months ended June 30, 2021 and 2020
---

Hudbay has entered into leases for its Peru, Manitoba and Arizona business units which expire between 2021 and 2043. The interest rates on leases which were capitalized have interest rates between 1.95% to 5.44%, 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 condensed consolidated interim income statements for the periods ended June 30, 2021 and June 30, 2020, relating to leases for which a recognition exemption was applied.

Three months ended <br>June 30, Six months ended <br>June 30,
2021 2020 2021 2020
Short-term leases $ 7,699 $ 8,158 $ 16,238 $ 20,854
Low value leases 93 44 186 124
Variable leases 7,158 11,835 15,241 22,366
Total $ 14,950 $ 20,037 $ 31,665 $ 43,344

Payments made for short term, low value and variable leases would mostly be captured as expenses in the condensed consolidated interim 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.

14. Long-term debt

Long-term debt is comprised of the following:

Jun. 30, 2021 Dec. 31, 2020
Senior unsecured notes (a) $ 1,184,688 $ 1,139,695
Less: Unamortized transaction costs - revolving credit facilities (b) (3,493 ) (4,020 )
$ 1,181,195 $ 1,135,675
**HUDBAY MINERALS INC.**Notes to Unaudited Condensed Consolidated Interim Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>For the three and six months ended June 30, 2021 and 2020
---

(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 837
Balance, June 30, 2021 1,184,688

All values are in US Dollars.

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

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").

The unamortized transaction costs of $2,480 were expensed upon extinguishment of the 2025 Notes. The early redemption of these notes resulted in a charge of $22,878, which was recorded on the condensed consolidated interim income statements (note 5e).

The early redemption of the 2025 Notes reflected the exercise of a prepayment option previously valued at $49,754. As such, the prepayment option has been expensed in the condensed consolidated interim income statements (note 5e).

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 charge of $7,252, which was recorded on the condensed consolidated interim income statements.

As at June 30, 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 and (ii) a series of 6.125% senior notes due 2029 in an aggregate principal amount of $600,000.

**HUDBAY MINERALS INC.**Notes to Unaudited Condensed Consolidated Interim Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>For the three and six months ended June 30, 2021 and 2020

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 project and any newly formed or acquired subsidiaries that primarily hold or may develop non-producing mineral assets that are in the pre-construction phase of development. **** Hudbay's revolving credit facilities are secured against substantially all of the Company's assets, other than those associated with the Arizona business unit.

(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 (1,511 )
Transaction costs 984
Balance, June 30, 2021 ^1^ $ 3,493
^1^ Balance, representing deferred transaction costs, is in an asset position.

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 have been amended.

The unamortized transaction costs of $1,502 were expensed upon restructuring of the credit facilities.

As at June 30, 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 $93,366 in letters of credit issued under the Canada revolving credit facility to support its reclamation and pension obligations. As at June 30, 2021, there were no cash advances under the credit facilities.

Surety bonds

The Arizona business unit had $8,591 in surety bonds issued to support future reclamation and closure obligations. No cash collateral is required to be posted under these surety bonds.

Other letters of credit

The Peru business unit had $88,066 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.

**HUDBAY MINERALS INC.**Notes to Unaudited Condensed Consolidated Interim Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>For the three and six months ended June 30, 2021 and 2020

15. 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 condensed consolidated interim 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.

Hudbay expects that the remaining performance obligations for the 777 and Peru streams will be settled by the expiry of their respective stream agreements, which is no earlier than 2052.

777 Stream Agreement

For the three and six months ended June 30, 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 legal deposit provided by August 1, 2052, the expiry date of the agreement. If the legal deposit is not fully repaid with precious metals credits from 777 production by the expiry date, a cash payment for the remaining amount will be due at the expiry date of the agreement. Given the mineral reserve and resources of the 777 mine and the current mine plan, there is a possibility that an amount of the legal deposit may not be repaid by means of 777 mine's precious metals credits over its expected remaining mine life. As at June 30, 2021, this prepayment amount does not meet the definition of a financial liability. Hudbay incorporates the possibility of repayment as part of its assessment of variable consideration in recognizing the amount of deferred revenue to recognize in income.

**HUDBAY MINERALS INC.**Notes to Unaudited Condensed Consolidated Interim Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>For the three and six months ended June 30, 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. 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.

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 Peru 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 Peru silver was $21.86 per ounce (year ended December 31, 2020 - $21.52 per ounce).

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 (30,714 )
Variable consideration adjustments - prior periods (1,617 )
Accretion on streaming arrangements (note 5e)
Current year-to-date additions 25,470
Variable consideration adjustments - prior periods 594
Effects of changes in foreign exchange 1,414
Balance, June 30, 2021 $ 541,831

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 six months ended June 30, 2021.

**HUDBAY MINERALS INC.**Notes to Unaudited Condensed Consolidated Interim Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>For the three and six months ended June 30, 2021 and 2020

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 condensed consolidated interim balance sheets as follows:

Jun. 30, 2021 Dec. 31, 2020
Current $ 82,227 $ 102,782
Non-current 459,604 443,902
$ 541,831 $ 546,684
**HUDBAY MINERALS INC.**Notes to Unaudited Condensed Consolidated Interim Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>For the three and six months ended June 30, 2021 and 2020
---

16. Provisions

Reflected in the condensed consolidated interim balance sheets as follows:

Jun. 30, 2021 Decommissioning,restoration andsimilar liabilities Deferredshare units Restrictedshare units Performanceshare units Other Total
Current (note 11) $ 21,698 $ 6,879 $ 3,901 $ - $ - $ 32,478
Non-current 260,644 - 3,782 3,302 3,804 271,532
$ 282,342 $ 6,879 $ 7,683 $ 3,302 $ 3,804 $ 304,010
Dec. 31, 2020 Decommissioning,<br>restoration and<br>similar liabilities Deferred<br>share units Restricted<br>share units Performance<br>share units Other Total
Current (note 11) $ 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

The following table summarizes changes in decommissioning, restoration and similar liabilities:

Balance, December 31, 2020 $ 343,132
Net reductions in provisions (3,373 )
Disbursements (9,941 )
Effect of change in estimate to inflation rates^1^ (13,988 )
Unwinding of discounts (note 5e) 2,027
Effect of change in nominal discount rate (41,254 )
Effect of foreign exchange 5,739
Balance, June 30, 2021 $ 282,342
^1^Represents changes in estimates of inflation rates applied to expected undiscounted cash flows.

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 first quarter of 2021, as a result of volatile discount rates and inflation rates, management re-examined the inflation estimate used to calculate the DRO liability. It was concluded that the implied difference between the nominal bond yield and the corresponding maturity real return bond yield provides a more accurate estimate of the effective inflation rate. As such, since the  first quarter of 2021, the inflation rate estimate used to calculate DRO has been prospectively revised.

As at June 30, 2021, decommissioning, restoration and similar liabilities have been discounted to their present value at nominal rates ranging from 0.09% to 2.09% per annum (December 31, 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 Unaudited Condensed Consolidated Interim Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>For the three and six months ended June 30, 2021 and 2020

17. Income and mining taxes

(a) Tax recoveries:

The tax expense (recoveries) is applicable as follows:

Three months ended<br>June 30, Six months ended<br>June 30,
2021 2020 2021 2020
Current:
Income taxes $ 1,916 $ 687 $ 2,883 $ 700
Mining taxes (recoveries) 9,429 - 13,673 (17 )
Adjustments in respect of prior years 3 - 3 (349 )
11,348 687 16,559 334
Deferred:
Income tax recoveries - origination, revaluation and/or reversal of temporary differences 6,794 (23,722 ) (19,698 ) (27,911 )
Mining tax expense (recoveries) - origination, revaluation and/or reversal of temporary difference 93 332 4,824 (830 )
Adjustments in respect of prior years (21 ) - 7,039 386
6,866 (23,390 ) (7,835 ) (28,355 )
$ 18,214 $ (22,703 ) $ 8,724 $ (28,021 )

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.

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

Jun. 30, 2021 Dec. 31, 2020
Deferred income tax asset $ 122,283 $ 94,070
Deferred mining tax asset - 7,829
122,283 101,899
Deferred income tax liability (232,769 ) (220,568 )
Deferred mining tax liability (12,734 ) (8,865 )
(245,503 ) (229,433 )
Net deferred tax liability balance, end of period $ (123,220 ) $ (127,534 )
**HUDBAY MINERALS INC.**Notes to Unaudited Condensed Consolidated Interim Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>For the three and six months ended June 30, 2021 and 2020
---

(c) Changes in deferred tax assets and liabilities:

Six monthsended <br>Jun. 30, 2021 Year ended<br>Dec. 31, 2020
Net deferred tax liability balance, beginning of year $ (127,534 ) $ (167,882 )
Deferred tax recovery 7,835 43,236
OCI transactions (686 ) (759 )
Foreign currency translation on the deferred tax liability (2,835 ) (2,129 )
Net deferred tax liability balance, end of period $ (123,220 ) $ (127,534 )

18. 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:

Six months ended <br>June 30, 2021 Year ended<br>Dec. 31, 2020
Commonshares Amount Common<br>shares Amount
Balance, beginning of year 261,272,151 $ 1,777,340 261,272,151 $ 1,777,340
Exercise of options 244,978 1,138 - -
Balance, end of period 261,517,129 $ 1,778,478 261,272,151 $ 1,777,340

During the six months ended June 30, 2021, the Company paid $2,090 in dividends on March 26, 2021 to shareholders of record as of March 9, 2021. During the six months ended June 30, 2020, the Company paid $1,804 in dividends on March 27, 2020 to shareholders of record as of March 10, 2020.

(c) 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.

The following is a continuity of the changes in the number of stock options outstanding:

**HUDBAY MINERALS INC.**Notes to Unaudited Condensed Consolidated Interim Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>For the three and six months ended June 30, 2021 and 2020
Number ofshares subjectto option Weighted-averageexercise priceC$
--- --- --- --- ---
Balance, January 1, 2020 -
Number of units granted during the year 1,581,385 $ 3.77
Forfeited (18,196 ) $ 3.76
Balance, December 31, 2020 1,563,189 $ 3.77
Number of units granted during the period 509,385 $ 10.42
Exercised (244,978 ) $ 3.76
Forfeited (30,040 ) $ 5.47
Balance, June 30, 2021 1,797,556 $ 5.63

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

For options granted during the six months ended Jun. 30, 2021
Weighted average share price at grant date (CAD) $ 10.42
Risk-free rate 1.015%
Expected dividend yield 0.2%
Expected stock price volatility (based on historical volatility) 60.5%
Expected life of option since grant date (months) 84
Weighted average per share fair value of stock options granted (CAD) $ 6.06

Stock options outstanding and exercisable as at June 30, 2021:

Range of exercise prices C$ Number ofoptionsoutstanding Weighted averageremainingcontractual life(years) Weightedaverage exerciseprice C$ Number ofoptionsexercisable
$3.76 -  $3.84 1,169,814 5.7 3.76 232,287
$3.85 - $7.17 126,076 5.7 3.92 42,024
$7.18 - $10.42 501,666 6.7 10.42 -

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

**HUDBAY MINERALS INC.**Notes to Unaudited Condensed Consolidated Interim Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>For the three and six months ended June 30, 2021 and 2020

19. Earnings per share

Three months ended<br>June 30, Six months ended<br>June 30,
2021 2020 2021 2020
Basic and diluted weighted average common shares outstanding 261,452,295 261,272,151 261,387,047 261,272,151

The determination of the diluted weighted-average number of common shares excludes the impact of 501,666 weighted-average stock options outstanding that were anti-dilutive for the three and six months ended June 30, 2021 (three and six months ended June 30, 2020 - 1,581,385).

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. For the three and six months ended June 30, 2021 and 2020, Hudbay calculated diluted loss per share using 261,452,295 and 261,387,047 common shares, respectively.

**HUDBAY MINERALS INC.**Notes to Unaudited Condensed Consolidated Interim Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>For the three and six months ended June 30, 2021 and 2020

20. 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:

Jun. 30, 2021 Dec. 31, 2020
FV CV FV CV
Financial assets at amortized cost
Cash and cash equivalents 1 294,287 $ 294,287 $ 439,135 $ 439,135
Restricted cash1 337 337 337 337
Fair value through profit or loss
Trade and other receivables 1, 2, 3 154,822 154,822 114,381 114,381
Non-hedge derivative assets 4 18,161 18,161 2,736 2,736
Investments 5 11,117 11,117 15,669 15,669
Total financial assets 478,724 478,724 572,258 572,258
Financial liabilities at amortized cost
Trade and other payables1, 2 191,947 191,947 209,413 209,413
Deferred Rosemont acquisition consideration 8 26,729 26,729 25,961 25,961
Other financial liabilities 6 35,807 37,005 41,912 40,787
Senior unsecured notes 7 1,241,658 1,184,688 1,277,124 1,139,695
Fair value through profit or loss
Gold prepayment liability 9 132,622 132,622 137,031 137,031
Non-hedge derivative liabilities 4 11,310 11,310 15,312 15,312
Total financial liabilities 1,640,073 1,584,301 1,706,753 1,568,199
Net financial liability (1,161,349 ) $ (1,105,577 ) $ (1,134,495 ) $ (995,941 )
1 Cash and cash equivalents, 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 12). 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 14) 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 12) 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 six months ended June 30, 2021 was a loss of 2,184 (year ended December  31, 2020 was a loss of 1,885).

All values are in US Dollars.

**HUDBAY MINERALS INC.**Notes to Unaudited Condensed Consolidated Interim Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>For the three and six months ended June 30, 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.

June 30, 2021 Level 1 Level 2 Level 3 Total
Financial assets measured at fair value
Financial assets at FVTPL:
Non-hedge derivatives $ - $ 18,161 $ - $ 18,161
Investments 11,117 - - 11,117
$ 11,117 $ 18,161 $ - $ 29,278
Financial liabilities measured at fair value
Financial liabilities at FVTPL:
Non-hedge derivatives $ - $ 11,310 $ - $ 11,310
Gold prepayment liability - 132,622 - 132,622
Financial liabilities at amortized cost:
Other financial liabilities - - 35,807 35,807
Senior unsecured notes 1,241,658 - - 1,241,658
$ 1,241,658 $ 143,932 $ 35,807 $ 1,421,397
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:
Other financial liabilities - - 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 Unaudited Condensed Consolidated Interim Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>For the three and six months ended June 30, 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 six months ended June 30, 2021 and year ended December 31, 2020, Hudbay did not make any such transfers.

(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 June 30, 2021, Hudbay had 56.4 million pounds of net copper swaps outstanding at an effective average price of $4.36/lb and settling across July to October 2021. 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 June 30, 2021 was an asset of $6,349  (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 June 30, 2021, Hudbay held contracts for forward zinc purchased of 4.1 million pounds (December 31, 2020 - 3.5 million pounds) that related to forward customer sales of zinc. Prices range from $1.09/lb to $1.37 /lb (December 31, 2020 - $0.87/lb to $1.30/lb) and settlement dates extend to December 2021. The aggregate fair value of the transactions at June 30, 2021 was a net asset position of $502  (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.

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.

**HUDBAY MINERALS INC.**Notes to Unaudited Condensed Consolidated Interim Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>For the three and six months ended June 30, 2021 and 2020

As at June 30, 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 Jun. 30, 2021 Dec. 31, 2020 Jun. 30, 2021
Copper pounds<br>(in thousands) 57,336 47,901 4.26
Gold oz 19,391 18,106 1,771
Silver oz 85,881 123,380 26.17

All values are in US Dollars.

The aggregate changes in fair value of provisionally priced receivables within the copper and zinc concentrate sales contracts at June 30, 2021, was a liability position of $6,338 (December 31, 2020 - an asset position of $21,295).

(d) Embedded derivatives

Prepayment option embedded derivative

The senior unsecured notes (note 14) 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 income statement (note 5e). 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 June 30, 2021 was nil (December 31, 2020 - $49,754).

(e) Other financial liabilities

Gold prepayment liability

The gold prepayment liability (note 12) requires settlement by physical delivery of gold ounces or equivalent gold credits. The fair value of the financial liability at June 30, 2021 was a liability of $132,622 (December 31, 2020 - $137,031).

**HUDBAY MINERALS INC.**Notes to Unaudited Condensed Consolidated Interim Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>For the three and six months ended June 30, 2021 and 2020

21. Commitments and contingencies

Capital commitments

As at June 30, 2021, Hudbay had outstanding capital commitments in Canada of approximately $50,498 of which $50,362 can be terminated, approximately $41,664 in Peru, all of which can be terminated, and approximately $179,226 in Arizona, primarily related to the Rosemont project, of which approximately $88,882 can be terminated by Hudbay.

22. Supplementary cash flow information

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

Three months ended<br>June 30, Six months ended<br>June 30,
2021 2020 2021 2020
Loss (gain) on disposal of property, plant & equipment (note 5d) $ 7 $ 457 $ (296 ) $ 2,857
Closure cost adjustment - non-producing properties (note 5d) (525 ) 199 (5,024 ) 1,044
Share based compensation paid - - (6,626 ) (2,981 )
Pampacancha delivery obligation paid - (2,726 ) - (4,927 )
Other (340 ) 420 278 1,328
$ (858 ) $ (1,650 ) $ (11,668 ) $ (2,679 )

(b) Change in non-cash working capital:

Three months ended<br>June 30, Six months ended<br>June 30,
2021 2020 2021 2020
Change in:
Trade and other receivables $ (7,664 ) $ (18,821 ) $ (22,614 ) $ (5,735 )
Other financial assets/liabilities (19,609 ) 21,705 (19,419 ) (1,153 )
Inventories 7,227 (515 ) (14,262 ) (7,799 )
Prepaid expenses 6,703 1,400 6,307 2,362
Trade and other payables (1,969 ) (5,492 ) (22,767 ) (22,327 )
Provisions and other liabilities (21,096 ) 3,634 (2,512 ) 3,698
$ (36,408 ) $ 1,911 $ (75,267 ) $ (30,954 )
**HUDBAY MINERALS INC.**Notes to Unaudited Condensed Consolidated Interim Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>For the three and six months ended June 30, 2021 and 2020
---

(c) Non-cash transactions:

During the six months ended June 30, 2021 and 2020, Hudbay entered into the following non-cash investing and financing activities which are not reflected in the condensed consolidated interim statements of cash flows:

- Remeasurement of Hudbay's decommissioning and restoration liabilities for the six months ended June 30, 2021 led to a net decrease in related property, plant and equipment assets of $53,465 (six months ended June 30, 2020 - a net increase of $58,449) mostly related to changes in discount rates associated with remeasurement of the liabilities.

- Property, plant and equipment included $22,681 (six months ended June 30, 2020 - $7,067) of capital additions related to the recognition of ROU assets and $19,945 of capital additions related to agreements with communities (six months ended June 30, 2020 - $85,630).

**HUDBAY MINERALS INC.**Notes to Unaudited Condensed Consolidated Interim Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>For the three and six months ended June 30, 2021 and 2020

23. Segmented information

Corporate and other activities include the Company's exploration activities in Chile, Canada and the State of Nevada. These exploration entities are not individually significant, as they do not meet the minimum quantitative thresholds for standalone segment disclosure. Corporate and other activities are not considered a segment and are included as a reconciliation to total consolidated results.

Three months ended June 30, 2021
Manitoba Peru Arizona Corporateand otheractivities Total
Revenue from external customers $ 197,312 $ 206,930 $ - $ - $ 404,242
Cost of sales
Mine operating costs 123,499 99,256 - - 222,755
Depreciation and amortization 46,595 52,710 - - 99,305
Gross profit 27,218 54,964 - - 82,182
Selling and administrative expenses - - - 10,055 10,055
Exploration and evaluation 1,327 3,150 7,889 205 12,571
Other expenses (income) 102 1,281 (278 ) (79 ) 1,026
Results from operating activities $ 25,789 $ 50,533 $ (7,611 ) $ (10,181 ) $ 58,530
Net interest expense on long term debt 17,305
Accretion on streaming arrangements 10,536
Change in fair value of financial instruments 8,566
Other net finance costs 7,304
Profit before tax 14,819
Tax expense 18,214
Loss for the period $ (3,395 )
**HUDBAY MINERALS INC.**Notes to Unaudited Condensed Consolidated Interim Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>For the three and six months ended June 30, 2021 and 2020
---
Three months ended June 30, 2020
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Manitoba Peru Arizona Corporate<br>and other<br>activities Total
Revenue from external customers $ 155,280 $ 53,633 $ - $ - $ 208,913
Cost of sales
Mine operating costs 99,238 41,522 - - 140,760
Depreciation and amortization 47,655 33,152 - - 80,807
Gross profit (loss) 8,387 (21,041 ) - - (12,654 )
Selling and administrative expenses - - - 10,713 10,713
Exploration and evaluation 1,148 972 - 72 2,192
Other (income) expenses (703 ) 1,515 48 416 1,276
Results from operating activities $ 7,942 $ (23,528 ) $ (48 ) $ (11,201 ) $ (26,835 )
Net interest expense on long term debt 19,729
Accretion on streaming arrangements 15,732
Change in fair value of financial instruments 4,656
Other net finance costs 7,652
Loss before tax (74,604 )
Tax recovery (22,703 )
Loss for the period $ (51,901 )
Six months ended June 30, 2021
--- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Manitoba Peru Arizona Corporateand otheractivities Total
Revenue from external customers $ 375,268 $ 342,598 $ - $ - $ 717,866
Cost of sales
Mine operating costs 224,077 177,109 - - 401,186
Depreciation and amortization 88,842 93,145 - - 181,987
Gross profit 62,349 72,344 - - 134,693
Selling and administrative expenses - - - 19,999 19,999
Exploration and evaluation 3,385 4,021 12,272 (54 ) 19,624
Other (income) expenses (4,549 ) 2,357 (224 ) 95 (2,321 )
Results from operating activities $ 63,513 $ 65,966 $ (12,048 ) $ (20,040 ) $ 97,391
Net interest expense on long term debt 38,538
Accretion on streaming arrangements 26,064
Change in fair value of financial instruments 47,573
Other net finance costs 39,989
Loss before tax (54,773 )
Tax expense 8,724
Loss for the period $ (63,497 )
**HUDBAY MINERALS INC.**Notes to Unaudited Condensed Consolidated Interim Financial Statements<br>(in thousands of US dollars, except where otherwise noted)<br>For the three and six months ended June 30, 2021 and 2020
---
Six months ended June 30, 2020
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Manitoba Peru Arizona Corporate<br>and other<br>activities Total
Revenue from external customers $ 279,113 $ 174,907 $ - $ - $ 454,020
Cost of sales
Mine operating costs 193,082 128,337 - - 321,419
Depreciation and amortization 86,852 80,394 - - 167,246
Gross loss (821 ) (33,824 ) - - (34,645 )
Selling and administrative expenses - - - 15,816 15,816
Exploration and evaluation 4,994 2,716 - 255 7,965
Other expenses 2,675 2,979 158 956 6,768
Results from operating activities $ (8,490 ) $ (39,519 ) $ (158 ) $ (17,027 ) $ (65,194 )
Net interest expense on long term debt 39,364
Accretion on streaming arrangements 32,031
Change in fair value of financial instruments 10,900
Other net finance costs 8,567
Loss before tax (156,056 )
Tax recovery (28,021 )
Loss for the period $ (128,035 )
June 30, 2021
--- --- --- --- --- --- --- --- --- ---
Manitoba Peru Arizona Corporateand otheractivities Total
Total assets 809,964 $ 2,610,359 $ 729,504 $ 438,000 $ 4,587,827
Total liabilities 503,684 976,400 77,176 1,371,643 2,928,903
Property, plant and equipment1 714,811 2,260,104 717,835 42,798 3,735,548
1 Included in Corporate and other activities are 27.5 million of property, plant and equipment that is located in Nevada.

All values are in US Dollars.

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 562,013 976,756 76,926 1,354,144 2,966,839
Property, plant and equipment1 699,884 2,290,097 709,939 31,735 3,731,655
1 Included in Corporate and other activities are 27.5 million of property, plant and equipment that is located in Nevada.

All values are in US Dollars.

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

Management's Discussion and Analysis of

Results of Operations and Financial Condition

For the three and six months ended

June 30, 2021

August 9, 2021

TABLE OF CONTENTS Page
Introduction 1
Our Business 1
Summary 2
Key Financial Results 4
Key Production Results 5
Key Costs Results 6
Recent Developments 6
Peru Operations Review 9
Manitoba Operations Review 13
Financial Review 21
Liquidity and Capital Resources 32
Trend Analysis and Quarterly Review 37
Non-IFRS Financial Performance Measures 38
Accounting Changes and Critical Estimates 51
Changes in Internal Control over Financial Reporting 52
Notes to Reader 52
Summary of Results 55

INTRODUCTION

This Management's Discussion and Analysis ("MD&A") dated August 9, 2021 is intended to supplement Hudbay Minerals Inc.'s unaudited condensed consolidated interim financial statements and related notes for the three and six months ended June 30, 2021 and 2020 (the "consolidated interim financial statements"). The consolidated interim financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS"), including International Accounting Standard 34, Interim Financial Reporting, 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 June 30, 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.

  • This MD&A includes an updated discussion of the risks associated with the COVID-19 pandemic and its effect on our operations, financial condition, projects and prospects, and supplements the discussion of these risks in our most recent Annual Information Form ("AIF").

  • 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 52 of this MD&A and to carefully review the risks associated with the COVID-19 pandemic that are discussed throughout this MD&A.

Additional information regarding Hudbay, including the risks related to our business and those that are reasonably likely to affect our financial statements in the future, is contained in our continuous disclosure materials, including our most recent AIF, consolidated interim 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), 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. Our vision is to be a responsible, top-tier operator of long-life, low-cost mines in the Americas. 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.

SUMMARY

Second Quarter Operating and Financial Results

  • Generated $404.2 million in revenue, $132.8 million of operating cash flow before change in non-cash working capital and $143.2 million of adjusted EBITDA^1^ in the second quarter of 2021 from higher realized metal prices and higher copper and precious metals sales volumes, partially offset by lower sales volumes of zinc.

  • Consolidated copper production in the second quarter was 23,474 tonnes at cash cost and sustaining cash cost per pound of copper produced, net of by-product credits^1^, of $0.84 and $2.25, respectively. Consolidated gold production increased to 39,848 ounces in the second quarter, a record for Hudbay.

  • Second quarter Peru production was boosted by higher metal recoveries and initial production from Pampacancha in April 2021. Pampacancha production continues to ramp up in line with the recently published Constancia mine plan, which contemplates an increase in average annual copper production to approximately 102,000 tonnes over the next eight years starting in 2022.

  • Second quarter Manitoba metal production was impacted by lower copper and zinc grades, lower precious metal recoveries and production interruptions.

  • On track to meet annual guidance for copper, zinc and precious metals production, consolidated sustaining capital expenditures, and Manitoba unit operating cost in 2021. After adjusting for unbudgeted COVID-related costs in Peru, full year unit operating costs for Peru are expected to be within the 2021 guidance range.

  • Second quarter net loss and loss per share were $3.4 million and $0.01, respectively. After adjusting for the net mark-to-market loss on financial instruments, amongst other items, second quarter adjusted net earnings^1^ per share were $0.02.

  • Cash and cash equivalents decreased during the second quarter to $294.3 million, as at June 30, 2021 mainly as a result of $100.6 million of capital investments primarily for the construction of the New Britannia refurbishment project and sustaining capital expenditures, partially offset by cash generated from operations.

  • On June 19, a worker employed by a service provider at the Lalor mine was fatally injured from a fall while working at height. The Company is undertaking a number of initiatives to learn from this tragic incident.

Executing on Growth Initiatives

  • New Britannia project continues to track ahead of the original schedule with approximately 95% of the project completed at the end of July. New Britannia gold circuit commissioning completed in July 2021 and first gold pour is expected in August, ahead of the original schedule. 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 operation starting in 2022.

  • Due to additional costs and COVID-19 related impacts, approximately $20 million in additional growth capital is expected to be spent this year at New Britannia and 2021 growth capital guidance has been revised accordingly.

  • Following the finalization of the remaining land user agreement for Pampacancha, first production was achieved in April, consistent with the recently published mine plan.

  • Completed 85,000 feet of drilling at the Copper World property in Arizona in the first half of the year and the Company remains on track to complete an initial inferred resource estimate before the end of the year and a preliminary economic assessment in the first half of 2022.

  • Released the 18^th^ Annual Sustainability Report in May 2021 discussing Hudbay's key accomplishments and initiatives in 2020; how the Company manages the social, environmental and economic risks, impacts and opportunities associated with its activities; and, the importance of continuous improvement in these areas for the Company's long-term success.

Summary of Second Quarter Results

Cash generated from operating activities in the second quarter of 2021 increased to $96.4 million compared to $31.4 million in the same quarter of 2020. Operating cash flow before change in non-cash working capital was $132.8 million during the second quarter of 2021, reflecting an increase of $103.3 million compared to the same period of 2020. The increase in operating cash flow is primarily the result of higher realized metal prices and higher copper and precious metals sales volumes, partially offset by lower sales volumes of zinc.

Consolidated copper production in the second quarter of 2021 increased by 30% compared to the same period in 2020 primarily as a result of higher throughput and copper recoveries in Peru, partially offset by lower copper grades in Manitoba. Consolidated gold production in the second quarter of 2021 increased by 22% versus the second quarter of 2020, due to record gold production in Peru as mining from the high-grade Pampacancha deposit commenced in the quarter. Consolidated zinc production in the quarter decreased by 31% while silver production increased by 18%, versus the comparative quarter, primarily as a result of changes in grades and recoveries.

Net loss and loss per share in the second quarter of 2021 were $3.4 million and $0.01, respectively, compared to a net loss and loss per share of $51.9 million and $0.20, respectively, in the second quarter of 2020. Second quarter earnings benefited from higher realized prices for all metals, combined with higher sales volumes of copper and precious metals which were partially offset by lower sales volumes of zinc and elevated operating costs in Peru.

Adjusted net earnings^1^and adjusted net earnings per share^1^ in the second quarter of 2021 were $5.4 million and $0.02 per share after adjusting for the net mark-to-market loss on financial instruments among other items. This compares to an adjusted net loss and adjusted net loss per share of $39.7 million, and $0.15 per share in the same period of 2020. Second quarter adjusted EBITDA^1^was $143.2 million, compared to $49.1 million in the same period of 2020. As previously disclosed, sales volumes in the first quarter of 2021 were impacted by shipping delays in Peru and Manitoba, resulting in the delayed parcels being recognized as revenue in the second quarter of 2021.

As at June 30, 2021, our liquidity includes $294.3 million in cash and cash equivalents as well as undrawn availability of $295.2 million under our Credit Facilities. We expect that our current liquidity together with cash flows from operations will be sufficient to meet our liquidity needs for the foreseeable future.

*Reflects Constancia temporary suspension of operations in April and May of 2020.

^1^Adjusted net loss and adjusted net loss per share, adjusted EBITDA, cash cost, all-in sustaining cash cost per pound of copper 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.

KEY FINANCIAL RESULTS

Financial Condition Dec. 31, 2020
(in thousands)
Cash and cash equivalents 294,287 $ 439,135
Total long-term debt 1,135,675
Net debt1 696,540
Working capital 306,888
Total assets 4,666,645
Equity 1,699,806
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.

All values are in US Dollars.

Financial Performance Three months ended Six months ended
(in $ thousands, except per share amounts) Jun. 30, 2021 Jun. 30, 2020 Jun. 30, 2021 Jun. 30, 2020
Revenue $ 404,242 $ 208,913 $ 717,866 $ 454,020
Cost of sales 322,060 221,567 583,173 488,665
Profit (loss) before tax 14,819 (74,604) (54,773) (156,056)
Net loss (3,395) (51,901) (63,497) (128,035)
Basic and diluted loss per share (0.01) (0.20) (0.24) (0.49)
Adjusted earnings (loss) per share^1^ 0.02 (0.15) (0.04) (0.30)
Operating cash flow before change in non-cash working capital^2^ 132.8 29.5 223.4 71.4
Adjusted EBITDA^1,2^ 143.2 49.1 247.4 104.1
^1^ Adjusted 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.

In the second quarter of 2021, consolidated cash cost per pound of copper produced, net of by-product credits^1^, was $0.84, compared to $0.29 in the same period in 2020. This increase was a result of higher operating costs in Peru and Manitoba partially offset by significantly higher zinc, gold and molybdenum byproduct credits and higher copper production.

Sustaining cash cost per pound of copper produced, net of by-product credits^1^, increased to $2.25 in the second quarter of 2021 from $1.59 in the same period in 2020 primarily due to the same reasons affecting cash cost as well as higher sustaining capital expenditures. All-in sustaining cash cost per pound of copper produced, net of by-product credits^1^, in the second quarter of 2021 was $2.48, which increased from $1.91 in the same period last year primarily due to the same reasons.

We expect our consolidated cash cost and sustaining cash cost per pound of copper produced, net of by-product credits, to be within the guidance ranges for 2021.

^1^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 the discussion under the "Non-IFRS Financial Reporting Measures" section of this MD&A.

KEY PRODUCTION RESULTS

Three months ended Three months ended
Jun. 30, 2021 Jun. 30, 2020
Peru Manitoba Total Peru Manitoba Total
Contained metal in concentrate produced ^1^
Copper tonnes 19,058 4,416 23,474 11,504 6,522 18,026
Gold oz 10,220 29,628 39,848 2,311 30,303 32,614
Silver oz 468,057 217,859 685,916 253,687 327,130 580,817
Zinc tonnes - 21,538 21,538 - 31,222 31,222
Molybdenum tonnes 295 - 295 124 - 124
Payable metal sold
Copper tonnes 19,946 5,230 25,176 9,023 6,928 15,951
Gold oz 5,638 32,567 38,205 1,317 29,273 30,590
Silver oz 315,064 262,443 577,507 242,519 299,266 541,785
Zinc ^2^ tonnes - 25,361 25,361 - 27,604 27,604
Molybdenum tonnes 265 - 265 120 - 120
^1^Metal reported in concentrate is prior to deductions associated with smelter contract terms.
^2^ Includes refined zinc metal sold and payable zinc in concentrate sold.
Six months ended Six months ended
--- --- --- --- --- --- --- ---
Jun. 30, 2021 Jun. 30, 2020
Peru Manitoba Total Peru Manitoba Total
Contained metal in concentrate produced ^1^
Copper tonnes 36,885 11,142 48,027 30,793 11,867 42,660
Gold oz 14,858 60,490 75,348 5,373 57,596 62,969
Silver oz 873,771 508,818 1,382,589 714,989 633,520 1,348,509
Zinc tonnes - 49,478 49,478 - 61,717 61,717
Molybdenum tonnes 589 - 589 478 - 478
Payable metal sold
Copper tonnes 34,782 11,323 46,105 28,270 11,753 40,023
Gold oz 8,601 54,987 63,588 3,936 53,229 57,165
Silver oz 652,676 434,591 1,087,267 604,110 513,597 1,117,707
Zinc ^2^ tonnes - 53,704 53,704 - 54,396 54,396
Molybdenum tonnes 549 - 549 551 - 551
^1^Metal reported in concentrate is prior to deductions associated with smelter contract terms.
^2^ Includes refined zinc metal sold and payable zinc in concentrate sold.

KEY COST RESULTS

Three months ended Six months ended Guidance
Jun. 30, 2021 Jun. 30, 2020 Jun. 30, 2021 Jun. 30, 2020 Annual<br><br> <br>2021
Consolidated cash cost per pound of copper produced1
Cash cost 1 0.84 0.29 0.94 0.69 0.65 - 0.80
Peru 1.85 1.31 1.84 1.38
Manitoba (3.51) (1.51) (2.02) (1.11)
Sustaining cash cost 1 2.25 1.59 2.20 1.85 2.05 - 2.30
Peru 2.69 1.84 2.53 1.88
Manitoba 0.36 1.16 1.12 1.78
All-in sustaining cash cost1 2.48 1.91 2.42 2.06
Combined mine/mill unit operating cost per tonne of copper processed1,2
Peru 3 11.25 7.77 11.81 8.70 8.90 - 10.90
Manitoba 148 135 150 131 145 - 155
Zinc Plant unit operating cost per tonne of zinc processed1,4
Unit operating costs 0.54 0.45 0.52 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 6.3 million, or 0.85 per tonne, of COVID-related costs during the three months ended June 30, 2021 and 10.9 million, or 0.79 per tonne during the six months ended June 30, 2021.
4 Zinc plant unit operating costs include G&A costs per pound of zinc processed.

All values are in US Dollars.

RECENT DEVELOPMENTS

COVID-19 Business Update

The COVID-19 pandemic continues to have a persistent and protracted financial impact on our operations as we continue to maintain strict COVID-19 measures to ensure the safety of our workforce and the communities in which we operate.

Although there has been a notable reduction in the number of new cases of COVID-19 in Canada and Peru along with increased vaccine availability throughout our operating regions, we continue to incur COVID-19 related expenditures beyond levels we originally budgeted, including rapid diagnostic test kits, personal protective equipment, temporary accommodation for employees awaiting test results, transportation costs as well as additional cleaning and sanitation expenses related to unscheduled COVID-19 related interruptions at our operations. These COVID-related challenges have also had a negative financial impact on the refurbishment of the New Britannia mill and Peru unit costs. We continue to manage the impact and monitor the risks of the pandemic at each of our locations, and our focus remains on continuing to operate safely and efficiently.

New Britannia Mill Progress and Manitoba Growth Capital Update

Refurbishment activities at the New Britannia gold mill were completed in June 2021 and commissioning and startup activities occurred in July. The mill is expected to achieve first gold production in August, in line with the timelines assumed in the Company's production guidance. These timelines are ahead of the original schedule to produce first gold before the end of 2021. 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.

The construction of a new copper flotation facility is on track for commissioning and ramp up in the fourth quarter of 2021. The overall project is approximately 95% complete as of the end of July. As noted last quarter, Hudbay has observed COVID-related cost pressures on the project capital estimate at New Britannia and there have been areas of cost escalation with industry cost inflationary pressures as the project nears completion. As a result, approximately $20 million in additional growth capital is expected to be spent this year at New Britannia. We also expect an additional $10 million to be spent in 2021 on the advancement of the Stall mill recovery improvement program, early works for the Lalor mine expansion to 5,300 tonnes per day and the impacts of foreign exchange movements. As such, Manitoba's total growth capital guidance in 2021 has increased to $105 million from $75 million.

Exploration Update

Copper World Exploration

Hudbay's 2020 drill program at our Copper World property in Arizona confirmed the discovery of the Broad Top Butte, Copper World, Peach and Elgin deposits, with a combined strike length of over five kilometres and opportunities to discover additional mineralization between the deposits. The program intersected significant volumes of high-grade copper sulphide and oxide mineralization starting, in most cases, near surface or at shallow depth. Drilling at Broad Top Butte included intersections of 440 feet of 1.38% copper and 246 feet of 0.70% copper starting at surface. Drilling at the Peach and Eglin deposits included intersections of 500 feet of 0.82% copper and 300 feet of 0.64% copper, both starting from surface. The mineralization at the Copper World deposits is located closer to surface than at Rosemont and remains open at depth.

The expanded 2021 exploration program at Copper World is well-advanced with 85,000 feet of drilling completed in the first half of the year and four drill rigs currently turning at site. We expect to publish an update once the majority of assays have been received for the holes drilled during the first half of 2021. The hydrogeological, geotechnical, mineralogical and metallurgical studies are underway. We are also evaluating several targets identified through geophysical surveys on our extensive regional land package. We continue to expect to complete an initial inferred resource estimate before the end of the year and a preliminary economic assessment in the first half of 2022.

Peru Regional Exploration

We continue to progress discussions with the community of Uchucarcco on the Maria Reyna and Caballito properties, both of which are located within ten kilometres of Constancia.

At the end of June, we commenced drilling at the Llaguen copper porphyry target located in northern Peru, near the city of Trujillo and in close proximity to existing infrastructure. The initial confirmatory phase of the drill program consists of 5,000 metres with two drill rigs presently turning at site. Pending positive results from this initial drilling phase, a second phase aimed at defining an initial mineral resource for Llaguen is expected to follow either later this year or in the second quarter of 2022 after the rainy season.

A scouting eight-hole drill program was completed at the Quehuincha North target near Constancia. Copper sulphides and oxides were intercepted but at tenors too low to be of economic merit.

Snow Lake Regional Exploration

Our regional exploration efforts in the Snow Lake area continue, following on our success from the 2021 winter drill program in the Chisel Basin where the copper-gold rich feeder of the 1901 deposit was discovered and high grade zinc and gold mineralization was confirmed through infill and extension drilling. Our summer program includes surface mapping and ground geophysics to identify both base metal and gold targets as well as a follow-up limited drill program on a new target identified immediately north of the Lalor mine from a borehole survey completed in February 2021. The results from our 2021 drill program in Snow Lake are expected to be incorporated into the annual mineral reserve and resource estimates to be published at the end of March 2022.

18^th^ Annual Sustainability Report

In May 2021, Hudbay released its integrated annual and sustainability report ("Annual Sustainability Report"). The Annual Sustainability Report provides transparency and progress on key accomplishments and initiatives in 2020. We believe that continuously improving how we manage the social, environmental and economic risks, impacts and opportunities associated with our activities is critical for the Company's long-term success.

  • Our 2020 Annual Sustainability Report disclosures were mapped to the Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB) Metals & Mining industry standard and the Task Force on Climate-related Financial Disclosures (TCFD). We also provide disclosure through the CDP Climate, Water and Forests questionnaires.

  • To inform our sustainability programs and improve our performance, we apply and voluntarily support several international best practice standards, including ISO 14001, ISO 45001, ISO 9001, Towards Sustainable Mining, the Voluntary Principles on Security and Human Rights and International Finance Corporation (IFC) Performance Standards.

  • As a member of the Mining Association of Canada, Hudbay implements the Towards Sustainable Mining (TSM) Protocols at all of our operations, with the goal to maintain a score of "A" or higher for all protocols. The implementation of the TSM Tailings protocol and our commitment to ensuring that our Tailings Storage Facilities are constructed following the Canadian Dam Safety Guidelines represents substantial alignment to the new Global Tailings Standard released in 2020.

  • Over 50% of our total energy consumption in 2020 was from renewable sources. All electricity at our operations is supplied by third parties via regional grids. Nearly all of the electricity produced in Manitoba is through renewable hydropower and, in Peru, over 50% is from renewable sources.

  • Constancia continued its leading safety track record among Peruvian copper mines and was the first mine in Peru to obtain the SafeGuard certification, recognizing full compliance with all COVID-19 safety protocols.

  • Manitoba achieved its annual safety targets and continuous operations in an environment of enhanced COVID-19 safety protocols and controls, while working closely with the local health authorities.

  • We recognize the opportunity that the mining industry has to positively contribute to the 17 UN Sustainable Development Goals (SDGs) that are a part of the UN's 2030 Agenda for Sustainable Development.

Collective Bargaining Agreements

In June 2021, Hudbay signed a new collective bargaining agreement with the union at our Peru operations for three years, effective November 10, 2020. The Company also reached new three-and-a-half year collective bargaining agreements with four of our six unions in Manitoba, effective July 1, 2021. The Company continues to advance the collective bargaining process with the remaining two unions in Manitoba.

Dividend Declared

A semi-annual dividend of C$0.01 per share was declared on August 9, 2021. The dividend will be paid out on September 24, 2021 to shareholders of record as of September 3, 2021.

PERU OPERATIONS REVIEW

Three months ended Six months ended Guidance
Jun. 30, 2020 Jun. 30, 2021 Jun. 30, 2020 Annual
2021
Constancia ore mined 1 8,016,373 2,775,286 15,763,839 9,760,498
Copper 0.30 0.34 0.30 0.34
Gold 0.04 0.04 0.04 0.03
Silver 3.02 2.90 2.96 3.04
Molybdenum 0.01 0.02 0.01 0.02
Pampacancha ore mined 1 982,992 - 982,992 -
Copper 0.26 - 0.26 -
Gold 0.27 - 0.27 -
Silver 4.43 - 4.43 -
Molybdenum 0.01 - 0.01 -
Ore milled 7,413,043 4,355,482 13,775,795 11,074,949
Copper 0.31 0.34 0.32 0.34
Gold 0.07 0.04 0.06 0.03
Silver 2.88 3.04 2.86 3.09
Molybdenum 0.01 0.01 0.01 0.01
Copper concentrate 82,696 51,331 160,656 135,346
Concentrate grade 23.05 22.41 22.96 22.75
Copper recovery 83.3 76.6 83.7 81.3
Gold recovery 62.2 43.4 58.6 47.0
Silver recovery 68.2 59.6 69.0 64.9
Molybdenum recovery 33.3 19.9 33.3 29.2
Combined unit operating costs2.3,4 11.25 7.77 11.81 8.70 8.90 - 10.90
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 6.3 million, or 0.85 per tonne, of COVID-related costs during the three months ended June 30, 2021 and 10.9 million, or 0.79 per tonne during the six months ended June 30, 2021.

All values are in US Dollars.

Despite recent notable improvements in COVID-19-related statistics in Peru, the Constancia team continues to adhere to strict COVID-19 measures and controls while continuing to effectively and efficiently operate in order to ensure the safety of our workforce, partners and the communities in which we operate. This has allowed Constancia to maintain strong operations, although it has resulted in increased unit operating costs.

Operational performance at Constancia during the first half of 2021 improved significantly compared to the first half of 2020 as activity during the comparative period was impacted by an eight-week suspension of operations through to mid-May 2020 due to a government declared state of emergency at the onset of the COVID-19 pandemic.

Total ore mined during the second quarter of 2021 increased 224% from the comparative 2020 period and 16% from the first quarter of 2021 as a result of strong operational efficiencies and a smooth ramp up at Pampacancha. Following the finalization of the remaining land user agreement, Pampacancha achieved first production in April, consistent with our recently published mine plan. Due to its short ramp-up period, Pampacancha also achieved commercial production in April 2021.

Ore milled during the second quarter of 2021 was 70% higher than the same period in 2020 due to the temporary suspension of operations in the comparative period offset slightly by increased ore hardness in the most recent quarter. Compared to the same period in 2020, milled gold grades in the second quarter increased by 75% due to significantly higher gold head grades from Pampacancha, while silver and copper grades declined by 5% and 9%, respectively.

Recoveries of all metals increased significantly in the second quarter of 2021, compared with the same period in 2020, as prior period recoveries were negatively impacted by a six-week period of processing stockpiled ore containing higher levels of contaminants following the restart of operations. During the second quarter of 2021, Constancia achieved record gold recoveries due to significantly higher head grades from Pampacancha and lower levels of contaminants in the current mining phases of the pits.

Year-to-date ore milled was 24% higher than the same period in 2020 due to the same factors as the quarterly variances, partially offset by a scheduled semi-annual maintenance shutdown in January 2021 that did not occur in the comparative period. Recoveries of all metals in the first half of 2021 were higher than the same period in 2020 due to the same factor as described above for the quarter-over-quarter variance.

Combined mine, mill and G&A unit operating costs in the second quarter of 2021 were 45% higher than the same period in 2020 primarily due to higher costs associated with enhanced COVID-19 protocols, and the impacts of the temporary suspension of operations in the comparative period which resulted in higher mining costs in the current quarter, partially offset by a higher volume of ore milled. COVID-related costs in Peru of $6.3 million in the second quarter were higher than budgeted and are expected to continue at a similar run rate for the remainder of the year. Unit operating costs in the second quarter were $10.40 per tonne excluding these COVID-related costs. We expect Peru unit operating costs to be in line with the 2021 guidance range after adjusting for unbudgeted COVID-related costs.

Contained metal in concentrate produced Three months ended Six months ended Guidance
Jun. 30, 2021 Jun. 30, 2020 Jun. 30, 2021 Jun. 30, 2020 Annual
2021
Copper tonnes 19,058 11,504 36,885 30,793 72,000 - 88,000
Gold oz 10,220 2,311 14,858 5,373 40,000 - 50,000
Silver oz 468,057 253,687 873,771 714,989 1,800,000 - 2,170,000
Molybdenum tonnes 295 124 589 478 1,400 - 1,700

Production of all metals, and especially gold, was higher in the second quarter of 2021 and year-to-date compared to the same periods in 2020 due to higher metal recoveries and a temporary suspension of operations in 2020, as noted above, partially offset by lower copper and silver grades.

Other than molybdenum, which we expect will fall slightly below the 2021 guidance range but in line with the recently published mine plan, we expect the production of all remaining metals in Peru to be in line with the 2021 full year guidance.

*Reflects Constancia temporary suspension of operations in April and May of 2020.

Peru Cash Cost and Sustaining Cash Cost

Three months ended Six months ended
Jun. 30,2021 Jun. 30, <br>2020 Jun. 30,2021 Jun. 30, <br>2020
Cash cost per pound of copper produced, net of by-product credits^1^ $/lb 1.85 1.31 1.84 1.38
Sustaining cash cost per pound of copper produced, net of by-product credits^1^ $/lb 2.69 1.84 2.53 1.88
^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.

Cash cost per pound of copper produced, net of by-product credits, for the three and six months ended June 30, 2021 were $1.85 and $1.84, respectively. The cash costs increased 41% and 33%, respectively, compared to the same periods in 2020. The overall increase is primarily due to higher mining costs, as noted above, higher general and administrative costs from enhanced COVID-19 protocols, and higher milling costs, partially offset by higher copper production.

Sustaining cash cost per pound of copper produced, net of by-product credits for the three and six months ended June 30, 2021 increased by 46% and 35%, respectively, compared to the same periods of 2020, mainly due to the same factors noted above affecting cash costs and higher sustaining capital expenditures as the comparative period was impacted by a temporary suspension of operations.

Metal Sold

Three months ended Six months ended
Jun. 30, 2021 Jun. 30, 2020 Jun. 30, 2021 Jun. 30, 2020
Payable metal in concentrate
Copper tonnes 19,946 9,023 34,782 28,270
Gold oz 5,638 1,317 8,601 3,936
Silver oz 315,064 242,519 652,676 604,110
Molybdenum tonnes 265 120 549 551

Quantities of payable metal sold for the three and six months ended June 30, 2021 were higher than the same period in 2020 primarily for the same reasons that affected contained metal production. Second quarter Peru sales benefited from the delayed shipment of a parcel of concentrate in the first quarter of 2021 that was subsequently recognized as revenue in the current quarter.

MANITOBA OPERATIONS REVIEW

Mines

Three months ended Six months ended
Jun. 30, 2021 Jun. 30, 2020 Jun. 30, 2021 Jun. 30, 2020
Lalor
Ore tonnes 356,951 407,408 778,553 828,926
Copper % 0.64 0.77 0.60 0.73
Zinc % 3.81 6.05 4.56 5.73
Gold g/tonne 3.19 2.64 2.91 2.46
Silver g/tonne 22.98 28.40 22.86 27.27
777
Ore tonnes 255,170 281,890 530,430 561,815
Copper % 0.82 1.72 1.46 1.45
Zinc % 3.57 4.13 3.79 4.12
Gold g/tonne 1.97 1.91 2.18 1.87
Silver g/tonne 23.35 25.73 26.45 24.80
Total Mines
Ore tonnes 612,121 689,298 1,308,983 1,390,741
Copper % 0.72 1.16 0.95 1.02
Zinc % 3.71 5.26 4.25 5.08
Gold g/tonne 2.68 2.34 2.62 2.22
Silver g/tonne 23.14 27.31 24.31 26.27
Unit Operating Costs^1,2^ Three months ended Six months ended
--- --- --- --- --- --- ---
Jun. 30, 2021 Jun. 30, 2020 Jun. 30, 2021 Jun. 30, 2020
Mines
Lalor C$/tonne 123.44 96.66 115.92 94.88
777 C$/tonne 90.61 80.55 86.45 77.39
Total Mines C$/tonne 109.75 90.07 103.98 87.82
^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.

Overall production at the Manitoba business unit in the second quarter was negatively impacted by COVID-19 related absences and interruptions at our Snow Lake and Flin Flon operations, a scheduled maintenance shutdown at Lalor and a temporary suspension of Lalor operations from June 19 to June 24 following a tragic fatal incident. The incident occurred during underground mining operations on the evening of June 19, 2021, when a worker employed by a service provider was fatally injured from a fall while working at height. Operations were suspended to allow for a thorough investigation by external authorities and a joint investigation by Hudbay and the service provider. Hudbay is committed to preventing similar occurrences and applying the learnings from this incident across our operations.

Ore mined at our Manitoba operations during the second quarter of 2021 was 11% lower than the same period in 2020 due to the factors outlined above. Gold grades mined during the three months ended June 30, 2021 were 15% higher, respectively, compared to the same period in 2020, consistent with the life of mine production schedules at Lalor and 777. Copper, silver and zinc grades mined during the three months ended June 30, 2021 were 38%, 15% and 30% lower than the same period in 2020 in part due to remnant mining at 777, which introduces higher quarter-over-quarter grade variation as 777 nears the end of its mine life, and the mining sequence at Lalor.

Development and underground construction activities continue in the lower part of the Lalor mine to support the start-up and ongoing operation of the New Britannia mill. At the end of the second quarter, approximately 47,000 tonnes of gold ore had been stockpiled as initial feed for the New Britannia mill, an increase of 21,000 tonnes from the end of the first quarter of 2021. The incremental mining activity associated with growing the gold ore stockpile has contributed to elevated combined mine, mill and G&A unit operating costs during the first half of 2021.

The 777 mine is now within one year of closure and the focus continues to be on mining out the remaining reserves by executing the mine production sequence and completing the necessary ground rehabilitation in order to access old workings and remnant stopes.

Total unit operating costs for the mines during the second quarter of 2021 increased by 22% compared to the same period in 2020 mainly due to lower capitalized development at both Lalor and 777 and lower production in the quarter, as previously noted. Year-to-date total unit operating costs in Manitoba were 18% higher as compared to the same period in 2020 due to the same factors as the second quarter variances.

Processing Facilities

Three months ended Six months ended
Jun. 30, 2021 Jun. 30, 2020 Jun. 30, 2021 Jun. 30, 2020
Stall Concentrator
Ore tonnes 317,484 334,601 678,828 704,388
Copper % 0.68 0.76 0.64 0.73
Zinc % 4.06 6.16 4.84 5.75
Gold g/tonne 3.19 2.70 2.86 2.48
Silver g/tonne 22.02 28.72 22.76 27.44
Copper concentrate tonnes 11,028 11,312 21,375 22,950
Concentrate grade % Cu 17.40 19.51 17.74 19.41
Zinc concentrate tonnes 22,575 37,267 58,269 73,397
Concentrate grade % Zn 50.29 51.13 50.71 50.72
Copper recovery % 88.8 86.6 87.3 86.5
Zinc recovery % 88.1 92.4 89.9 91.9
Gold recovery % 55.5 62.3 56.5 61.6
Silver recovery % 55.1 62.1 55.7 61.6
Contained metal in concentrate produced
Copper tonnes 1,919 2,208 3,791 4,455
Zinc tonnes 11,352 19,057 29,548 37,225
Gold oz 18,078 18,096 35,285 34,626
Silver oz 123,844 191,837 276,750 382,856
Flin Flon Concentrator
Ore tonnes 329,503 324,906 612,889 657,495
Copper % 0.89 1.52 1.35 1.31
Zinc % 3.65 4.41 3.90 4.39
Gold g/tonne 2.06 1.99 2.19 1.94
Silver g/tonne 23.65 25.56 25.67 24.93
Copper concentrate tonnes 11,504 19,120 33,816 32,642
Concentrate grade % Cu 21.70 22.56 21.74 22.70
Zinc concentrate tonnes 20,096 24,192 39,209 48,564
Concentrate grade % Zn 50.69 50.28 50.83 50.43
Copper recovery % 84.8 87.3 89.0 85.9
Zinc recovery % 84.8 84.9 83.3 84.9
Gold recovery % 52.9 58.6 58.4 56.1
Silver recovery % 37.5 50.7 45.9 47.6
Contained metal in concentrate produced
Copper tonnes 2,497 4,314 7,351 7,412
Zinc tonnes 10,186 12,165 19,930 24,492
Gold oz 11,550 12,207 25,205 22,970
Silver oz 94,015 135,293 232,068 250,664
Unit Operating Costs^1^ **** Three months ended Six months ended Guidance
--- --- --- --- --- --- --- --- ---
Jun. 30, 2020 Jun. 30, 2021 Jun. 30, 2020 Annual
2021
Concentrators
Stall C/tonne 24.80 24.20 23.90 23.24
Flin Flon C/tonne 26.95 23.97 27.01 22.85
Combined mine/mill unit operating costs ^2,3^
Manitoba C/tonne 148 135 150 131 145 - 155
^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.

All values are in US Dollars.

The Stall concentrator processed all available ore during the second quarter of 2021, which was 5% lower than the same period in 2020. Stall recoveries during the second quarter of 2021 were higher for copper and lower for zinc and precious metals versus the comparative period in 2020 but were consistent with the metallurgical model.

Ore processed at the Flin Flon concentrator during the second quarter of 2021 remained relatively consistent compared to the same period in 2020. Recoveries of copper, gold and silver at the Flin Flon concentrator during the second quarter of 2021 were lower by 3%, 10% and 26%, respectively, compared to the same period in 2020 mostly due to lower head grades from the 777 mine, but were consistent with the metallurgical model. Unit operating costs at the Flin Flon concentrator increased by 12% during the second quarter compared to the same period in 2020 primarily due to higher tailings operating costs as we approach mine closure and plan for the transition of the facility to care and maintenance in 2022.

Year-to-date ore processed at Stall and Flin Flon decreased by 4% and 7%, respectively, due to reduced mine production compared to 2020 and the stockpiling of approximately 47,000 tonnes of Lalor gold ore as initial feed for New Britannia mill.

Combined mine, mill and G&A unit operating costs in the second quarter of 2021 increased by 10% compared to the same period in 2020, due to lower mill throughput as well as higher overall operating costs for the reasons described above. Year-to-date combined mine, mill and G&A unit operating costs were 15% higher than the prior year due to the same factors as the second quarter variances.

Manitoba contained metal in concentrate produced^1^ Three months ended Six months ended Guidance
Jun. 30, 2021 Jun. 30, 2020 Jun. 30, 2021 Jun. 30, 2020 Annual
2021
Copper tonnes 4,416 6,522 11,142 11,867 20,000 - 24,000
Gold oz 29,628 30,303 60,490 57,596 150,000 - 165,000
Silver oz 217,859 327,130 508,818 633,520 1,200,000 - 1,400,000
Zinc tonnes 21,538 31,222 49,478 61,717 96,000 - 107,000
^1^Metal reported in concentrate is prior to deductions associated with smelter terms.

Copper, zinc and silver production declined by 32%, 31% and 33%, respectively, in the second quarter of 2021 compared to the same quarter in 2020 primarily due to lower grades and lower overall throughput as a result of production interruptions and ore stockpiling for the New Britannia mill. Despite encountering higher gold head grades, gold production was 2% lower in the second quarter of 2021 compared to the same period in 2020 due to the impact of lower overall throughput, lower gold recoveries and the stockpiling of gold ore for the New Britannia mill.

Year-to-date production of copper, silver, and zinc declined by 6%, 20% and 20%, respectively, compared to the same period in 2020 primarily due to the same factors as the second quarter variances versus prior year. Gold production increased by 5% during the same time frame versus the comparative period mainly due to higher gold grades offset by lower throughput.

Full year production of all metals and unit operating costs in Manitoba are on track to achieve the guidance ranges for 2021.

Zinc Plant

Zinc Production Three months ended Six months ended Guidance
Jun. 30,2021 Jun. 30,<br>2020 Jun. 30,2021 Jun. 30,<br>2020 Annual
2021
Zinc Concentrate Treated
Domestic tonnes 47,376 63,350 101,865 124,701
Refined Metal Produced
Domestic tonnes 22,419 27,535 48,927 56,001 96,000 - 103,000
Unit Operating Costs Three months ended Six months ended Guidance
--- --- --- --- --- --- --- --- --- ---
Jun. 30,2021 Jun. 30,<br>2020 Jun. 30,2021 Jun. 30, <br>2020 Annual
2021
Zinc Plant ^1,2^ C$/lb 0.54 0.45 0.52 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.

Production of refined cast zinc in the second quarter of 2021 was 19% lower than the same period in 2020 due to lower zinc grades and lower zinc recoveries resulting in lower zinc concentrate availability from the mills. Operating costs per pound of zinc metal produced was higher by 20% over the same period primarily due to lower production. Year-to-date refined zinc metal production decreased by 13% compared to the first half of 2020 due to the same factors as the second quarter variance.

Full year production of cast zinc and zinc plant unit operating cost are expected to be within guidance ranges for the full year 2021.

Manitoba Cash Cost and Sustaining Cash Cost

Three months ended Six months ended
Jun. 30,<br>2020 Jun. 30,2021 Jun. 30,<br>2020
Cost per pound of copper produced
Cash cost per pound of copper produced, net of by-product credits ^1^ /lb (3.51) (1.51) (2.01) (1.11)
Sustaining cash cost per pound of copper produced, net of by-product credits ^1^ /lb 0.36 1.16 1.12 1.78
Cost per pound of zinc produced
Cash cost per pound of zinc produced, net of by-product credits ^1^ /lb (0.23) (0.06) 0.00 0.19
Sustaining cash cost per pound of zinc produced, net of by-product credits ^1^ /lb 0.56 0.50 0.71 0.75
^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.

All values are in US Dollars.

Cash cost per pound of copper produced, net of by-product credits, in the second quarter of 2021 was negative $3.51. These costs were lower compared to the same period in 2020, as a result of higher by-product revenues and lower copper production more than offsetting higher mining costs. Cash cost per pound of copper produced, net of by-product credits, for the first six months of 2021 were lower compared to the same period in 2020, primarily due to the same reasons.

Sustaining cash cost per pound of copper produced, net of by-product credits, in the second quarter of 2021 was $0.36. These costs were lower compared to the same period in 2020, primarily due to the reasons listed above and lower comparative sustaining capital expenditures. Sustaining cash cost per pound of copper produced, net of by-product credits, for the first six months of 2021 were lower compared to the same period in 2020.

Cash cost and sustaining cash cost per pound of zinc produced, net of by-product credits, in the second quarter of 2021 and year-to-date were lower than the same periods in the prior year as a result of significantly higher by-product credits and lower sustaining capital expenditures, partially offset by higher mining costs.

Metal Sold

Three months ended Six months ended
Jun. 30,2021 Jun. 30,<br>2020 Jun. 30,2021 Jun. 30,<br>2020
Payable metal in concentrate
Copper tonnes 5,230 6,928 11,323 11,753
Gold oz 32,567 29,273 54,987 53,229
Silver oz 262,443 299,266 434,591 513,597
Refined zinc tonnes 25,361 27,604 53,704 54,396

Quantities of payable copper and silver and refined zinc sold for the three and six months ended June 30, 2021 were lower than each of the comparable periods in 2020 due to the same reasons that affected contained metal production. Due to a lack of railcar availability in the first quarter of 2021, second quarter Manitoba sales benefited from the buildup of copper concentrate inventory that was subsequently recognized as revenue in the current quarter.

FINANCIAL REVIEW

Financial Results

In the second quarter of 2021, we recorded a net loss of $3.4 million compared to a net loss of $51.9 million for the same period in 2020, representing an increase in profit of $48.5 million. Year-to-date in 2021, we recorded a net loss of $63.5 million compared to a net loss of $128.0 million for the same period in 2020, representing an increase in profit of $64.5 million.

The following table provides further details on these variances:

(in $ millions) Three months ended<br><br> <br>June 30, 2021 Six months ended<br><br> <br>June 30, 2021
Increase (decrease) in components of profit or loss:
Revenues 195.3 263.9
Cost of sales
Mine operating costs (82.0) (79.8)
Depreciation and amortization (18.5) (14.7)
Selling and administrative expenses 0.6 (4.2)
Exploration and evaluation expenses (10.4) (11.7)
Other expenses 0.3 9.0
Net finance expense 4.1 (61.3)
Tax (40.9) (36.7)
Increase in profit for the period 48.5 64.5

Revenue

Revenue for the second quarter of 2021 was $404.2 million, $195.3 million higher than the same period in 2020, mainly due to higher realized metal prices as well as higher sales volumes of copper and precious metals. Offsetting this increase were lower sales volumes of zinc, due to lower Manitoba throughput, grades and recoveries. The significantly increased sales volumes of copper and, to a lesser extent, precious metals is largely the result of comparatively lower production in the prior year period due to the temporary suspension of Constancia operations following a government declared state of emergency.

Revenue for the first half of 2021 was $717.9 million, $263.9 million higher than the same period in 2020, mainly due to higher realized metal prices as well as higher sales volumes of copper and gold and a more favourable relative variable consideration adjustment on our stream revenue. Offsetting this increase were lower sales volumes of zinc and silver due to lower Manitoba throughput and recoveries.

(in $ millions) Three months ended<br><br> <br>June 30, 2021 Six months ended<br><br> <br>June 30, 2021
Metals prices^1^ ****
Higher copper prices 101.4 156.1
Higher zinc prices 24.1 40.9
Higher gold prices 1.3 2.5
Higher silver prices 1.3 4.2
Sales volumes
Higher copper sales volumes 52.3 34.1
Lower zinc sales volumes (4.7) (1.5)
Higher gold sales volumes 13.5 11.3
Higher (lower) silver sales volumes 0.9 (0.7)
Other
Change in derivative mark-to-market on zinc (1.8) 0.3
Molybdenum and other volume and pricing differences 10.7 12.3
Variable consideration adjustments - 4.4
Effect of lower treatment and refining charges (3.7) -
Increase in revenue in 2021 compared to 2020 195.3 263.9
^1^ See discussion below for further information regarding metals prices.

Our revenue by significant product type is summarized below:

Three months ended Six months ended
(in $ millions) Jun. 30,2021 Jun. 30,<br>2020 Jun. 30,2021 Jun. 30,<br>2020
Copper 250.2 88.2 423.9 227.4
Zinc 77.4 59.0 159.5 122.6
Gold 57.9 44.0 100.1 86.8
Silver 7.2 5.0 13.6 11.0
Molybdenum 7.1 2.3 14.2 11.5
Other metals 2.6 1.0 4.2 1.8
Revenue from contracts 402.4 199.5 715.5 461.1
Amortization of deferred revenue - gold 9.2 6.3 14.1 10.5
Amortization of deferred revenue - silver 7.9 7.6 16.6 16.0
Amortization of deferred revenue - variable consideration adjustments - prior periods - - 1.6 (2.8)
Pricing and volume adjustments^1^ (0.1 ) 7.0 (2.7 ) (3.6)
Treatment and refining charges (15.2 ) (11.5) (27.2 ) (27.2)
Revenue 404.2 208.9 717.9 454.0
^1^Pricing and volume adjustments represents mark-to-market adjustments on provisionally prices sales, realized and unrealized changes to fair value for non-hedge derivative contracts and adjustments to originally invoiced weights and assays.

For further detail on variable consideration adjustments, refer to note 15 of our consolidated interim 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 second quarter of 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 Six months ended
Jun. 30, 2021 Jun. 30, <br>2020 Jun. 30, 2021 Jun. 30, <br>2020
Prices
Copper /lb 4.40 2.57 4.13 4.08 2.54
Zinc^3^ /lb 1.39 0.96 1.28 1.35 1.01
Gold^4^ /oz 1,803 1,771 1,793 1,752
Silver^4^ /oz 26.74 24.19 28.12 24.21
^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 and six months ended June 30, 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 Precious Metals, 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 26.

All values are in US Dollars.

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

Three months ended June 30, 2021
(in millions) 1 Zinc Gold Silver Molybdenum Other Total
Revenue per financial statements 77.4 57.9 7.2 7.1 2.6 402.4
Amortization of deferred revenue - 9.2 7.9 - - 17.1
Pricing and volume adjustments2 ) 0.3 1.8 0.3 3.7 - (0.1 )
By-product credits 3 77.7 68.9 15.4 10.8 2.6 419.4
Derivative mark-to-market 4 - - - - - -
Revenue, excluding mark-to-market on non-QP hedges 77.7 68.9 15.4 10.8 2.6 419.4
Payable metal in concentrate sold 5 25,361 38,205 577,507 265 - -
Realized price 6 3,063 1,803 26.74 - - -
Realized price 7 1.39 - - - - -
Six months ended June 30, 2021
(in millions) 1 Zinc Gold Silver Molybdenum Other Total
Revenue per financial statements 159.5 100.1 13.6 14.2 4.2 715.5
Amortization of deferred revenue - 14.1 16.6 - - 30.7
Pricing and volume adjustments2 ) 0.5 (0.2 ) 0.3 6.2 - (2.7 )
By-product credits 3 160.0 114.0 30.5 20.4 4.2 743.5
Derivative mark-to-market4 0.1 - - - - 0.1
Revenue, excluding mark-to-market on non-QP hedges 160.1 114.0 30.5 20.4 4.2 743.6
Payable metal in concentrate sold 5 53,704 63,588 1,087,267 549 - -
Realized price 6 2,982 1,793 28.12 - - -
Realized price 7 1.35 - - - - -
1 Average realized price per unit sold may not calculate based on amounts presented in this table due to rounding.
2 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.
3 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.
4 Derivative mark-to-market excludes mark-to-market on QP hedges.
5 Copper, zinc and molybdenum shown in metric tonnes and gold and silver shown in ounces.
6 Realized price for copper, zinc and molybdenum in /metric tonne and realized price for gold and silver in /oz.
7 Realized price for copper and zinc in /lb.

All values are in US Dollars.

Three months ended June 30, 2020
(in millions) 1 Zinc Gold Silver Molybdenum Other Total
Revenue per financial statements 59.0 44.0 5.0 2.3 1.0 199.5
Amortization of deferred revenue - 6.3 7.6 - - 13.9
Pricing and volume adjustments2 1.1 3.8 0.6 (0.6) - 7.0
By-product credits 3 60.1 54.1 13.2 1.7 1.0 220.4
Derivative mark-to-market 4 (1.8 ) - - - - (1.8 )
Revenue, excluding mark-to-market on non-QP hedges 58.3 54.1 13.2 1.7 1.0 218.6
Payable metal in concentrate sold 5 27,604 30,590 541,785 120 - -
Realized price 6 2,111 1,771 24.19 - - -
Realized price 7 0.96 - - - - -
Six months ended June 30, 2020
(in millions) 1 Zinc Gold Silver Molybdenum Other Total
Revenue per financial statements 122.6 86.8 11.0 11.5 1.8 461.1
Amortization of deferred revenue - 10.5 16.0 - - 26.5
Pricing and volume adjustments2 ) (2.0 ) 2.9 - (1.3 ) - (3.6 )
By-product credits 3 120.6 100.2 27.0 10.2 1.8 484.0
Derivative mark-to-market4 0.4 - - - - 0.4
Revenue, excluding mark-to-market on non-QP hedges 121.0 100.2 27.0 10.2 1.8 484.4
Payable metal in concentrate sold 5 54,396 57,165 1,117,707 551 - -
Realized price 6 2,225 1,752 24.21 - - -
Realized price 7 1.01 - - - - -
1 Average realized price per unit sold may not calculate based on amounts presented in this table due to rounding.
2 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.
3 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.
4 Derivative mark-to-market excludes mark-to-market on QP hedges.
5 Copper, zinc and molybdenum shown in metric tonnes and gold and silver shown in ounces.
6 Realized price for copper, zinc and molybdenum in /metric tonne and realized price for gold and silver in /oz.
7 Realized price for copper and zinc in /lb.

All values are in US Dollars.

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

Stream Sales

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

Three months ended Six months ended
Jun. 30, 2021 Jun. 30, 2021
Manitoba Peru ^4^ Manitoba Peru ^4^
Gold 5,694 2,321 8,271 3,997
Silver 109,381 295,116 158,143 641,254
Gold deferred revenue drawdown rate1,2 1,284 824 1,273 894
Gold cash rate3 425 408 425 408
Total gold stream realized price 1,709 1,232 1,698 1,302
Silver deferred revenue drawdown rate1,2 24.73 17.54 24.50 19.87
Silver cash rate3 6.26 6.02 6.26 6.02
Total silver stream realized price 30.99 23.56 30.76 25.89
Three months ended Six months ended
Jun. 30, 2020
Peru Manitoba Peru
Gold 4,783 1,019 7,222 2,345
Silver 100,042 253,996 141,443 603,618
Gold deferred revenue drawdown rate1,2 1,114 976 1,131 976
Gold cash rate 3 420 404 420 404
Total gold stream realized price 1,534 1,380 1,551 1,380
Silver deferred revenue drawdown rate1,2 21.16 21.52 21.43 21.52
Silver cash rate 3 6.20 5.96 6.20 5.96
Total silver stream realized price 27.36 27.48 27.63 27.48
1Subsequent to the variable consideration adjustment recorded on January 1, 2021, the deferred revenue amortization is recorded in Manitoba at C1,578/oz gold and C30.38/oz silver (June 30, 2020- C1,556/oz gold and C29.58/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.

All values are in US Dollars.

During the second quarter of 2021, an amendment to the Peru gold stream was signed with Wheaton Precious Metals ("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 rate of recovery that applies to Pampacancha production. Based on the nature of the amendment to the streaming agreement it was determined that, under IFRS, this contract modification should be treated as a termination of the existing contract and the creation of a new contract for accounting purposes. The accounting for such a modification is fully prospective.

Given the new accounting treatment, a new interest rate is required to compute the financing component of the contract. This rate has declined significantly compared to the rate in the original contract. As such, Hudbay revised its estimate of the remaining number of gold ounces expected to be delivered and, more significantly, the interest rate for the Peru streaming arrangement and, as a result, adjusted the gold and silver drawdown rates starting May 1, 2021.

Cost of Sales

Our detailed cost of sales is summarized as follows:

(in $ thousands) Three months ended Six months ended
Jun. 30, 2021 Jun. 30, 2020 Jun. 30, 2021 Jun. 30, 2020
Peru
Mining 26,133 7,595 47,672 27,537
Milling 40,286 18,703 83,606 52,041
Changes in product inventory 4,465 (1,916 ) (6,110 ) (2,159 )
Depreciation and amortization - DRO assets 1,110 1,003 2,311 1,942
Depreciation and amortization - Other PP&E^1^ 51,600 32,149 90,834 78,452
G&A 16,962 7,542 31,401 16,226
Overhead costs related to suspension of activities (cash) - 12,358 - 15,810
Inventory adjustments (723 ) (8,155 ) (1,446 ) 2,221
Freight, royalties and other charges 12,133 5,395 21,986 16,661
Total Peru cost of sales 151,966 74,674 270,254 208,731
Manitoba
Mining 54,714 44,820 109,134 89,487
Milling 13,655 11,466 26,317 23,009
Zinc plant 17,908 16,617 37,515 35,559
Changes in product inventory 10,795 5,916 (1,495 ) 2,620
Depreciation and amortization - DRO assets 1,377 10,658 13,897 19,718
Depreciation and amortization - Other PP&E^1^ 45,218 36,997 74,945 67,134
G&A 14,971 11,277 30,923 25,209
Freight, royalties and other charges 11,456 9,142 21,683 17,198
Total Manitoba cost of sales 170,094 146,893 312,919 279,934
Cost of sales 322,060 221,567 583,173 488,665
^1^Includes depreciation and amortization from property, plant, and equipment, excluding decommissioning and restoration assets.

Total cost of sales for the second quarter of 2021 was $322.1 million, reflecting an increase of $100.5 million from the second quarter of 2020. Peru cost of sales increased by $77.3 million in the second quarter of 2021, compared to the same period of 2020. This increase is mainly related to a temporary suspension of Constancia operations in the comparative period that resulted in less overall mining, milling, general and administrative costs, freight, and units-of-production depreciation, partially offset by a $25.6 million fixed overhead charge (cash: $12.4 million, non-cash: $13.2 million included in depreciation) being recorded in the second quarter of 2020. Manitoba cost of sales increased by $23.2 million in the second quarter of 2021, compared to the same period of 2020, mainly due to the drawdown of finished goods inventory.

Total cost of sales year-to-date in 2021 was $583.2 million, reflecting an increase of $94.5 million from the same period in 2020. In Peru, costs increased in the first half of 2021 by $61.5 million, largely due to the same factors as the second quarter variance as well as higher milling costs related to the scheduled plant maintenance during the first quarter of 2021 and higher general and administrative costs mainly related to comparatively higher COVID-related costs. In Manitoba, cost of sales increased by $33.0 million compared to the first half of 2020 as a result of higher mining costs for the same reasons outlined in the second quarter variance, higher general and administrative costs related to higher employee profit-sharing, COVID-related costs and higher depreciation costs, partially offset by lower relative changes in product inventory caused by a slight buildup of inventory during the first half of 2021.

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

For the second 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 $10.4 million compared to the second quarter in 2020, as the Copper World drilling program continued during the second quarter of 2021.

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

- Selling and administrative expenses increased by $4.2 million compared to the same period in 2020. This increase was mainly due to higher stock-based compensation charges as a result of the relative impact of the revaluation of previously issued share units to higher share prices.

- Other operating expenses decreased by $9.0 million, compared to the same period in 2020 primarily due to a reversal of DRO expenses on non-producing properties in Manitoba as a result of increasing discount rates and a reduction in losses on disposal of property, plant and equipment in the current quarter.

- Exploration and evaluation expenses increased by $11.7 million compared to 2020 for the same reason as noted above.

Net finance expense

(in $ thousands) Three months ended Six months ended
Jun. 30, 2021 Jun. 30, 2020 Jun. 30, 2021 Jun. 30, 2020
Finance costs - accrued or payable:
Interest expense on long-term debt 17,305 19,729 38,538 39,364
Withholding taxes 1,944 2,137 3,967 4,030
Tender premium on 7.625% senior unsecured notes - - 22,878 -
Other accrued/payable costs (income)^1^ 1,417 1,851 3,536 3,248
Total finance costs - accrued or payable 20,666 23,717 68,919 46,642
Finance costs - non-cash:
Accretion on streaming agreements^2^ 10,536 15,732 26,064 32,031
Change in fair value of financial assets and liabilities at fair value through profit or loss 8,566 4,656 47,573 10,900
Write off unamortized transaction costs - - 2,480 -
Other non-cash costs^3^ 3,943 3,664 7,128 1,289
Total finance costs - non-cash 23,045 24,052 83,245 44,220
Net finance expense 43,711 47,769 152,164 90,862
^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 June 30, 2021, net finance expense decreased by $4.1 million compared to the same period in 2020 due to a $3.1 million decrease in accrued finance costs and a $1.0 million decrease in non-cash finance costs.

These decreases were primarily driven by a $5.2 million reduction of the accretion on streaming agreements arising from a lower interest rate on the amended Peru streaming agreement, a $2.4 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, a change of $1.7 million related to the revaluation of the gold prepayment liability and a reduction of a $1.2 million loss on the revaluation of an embedded derivative. Offsetting these reductions in net finance expense were higher revaluation losses of $6.8 million on our investments consisting of securities in Canadian metals and mining companies.

During the six months ended June 30, 2021, net finance expense increased by $61.3 million compared to the same period in 2020 due to a $39.0 million increase in non-cash finance costs as well as a $22.3 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, expensing a call premium of $22.9 million and a write off of unamortized transaction costs of $2.5 million all in the first quarter of 2021 with no corresponding charges in the same period of 2020. In addition, we also incurred an increase of $5.2 million in revaluation losses on our equity investments. Offsetting these increases in net finance expense was a $14.2 million increase in non-cash gains on the revaluation of the gold prepayment liability due to increasing discount rates and higher gold forward prices relative to the same period in 2020.

Tax Expense

For the three and six months ended June 30, 2021, tax expense increased by $40.9 million and $36.7 million respectively, compared to the same period in 2020. The following table provides further details:

Six months ended
Jun. 30,<br>2020 Jun. 30,2021 Jun. 30,<br>2020
(in thousands)
Deferred tax expense (recovery) - income tax 1 (23,722 ) (19,627 ) (27,525 )
Deferred tax expense (recovery) - mining tax 1 332 11,792 (830 )
Total deferred tax expense (recovery) (23,390 ) (7,835 ) (28,355 )
Current tax expense - income tax 687 2,883 351
Current tax expense (recovery) - mining tax - 13,676 (17 )
Total current tax expense 687 16,559 334
Tax expense (recovery) (22,703 ) 8,724 (28,021 )
1 Deferred tax expense (recovery) represents our draw down/increase of non-cash deferred income and mining tax assets/liabilities.

All values are in US Dollars.

Income Tax Recovery

Applying the estimated Canadian statutory income tax rate of 26.3% to our loss before taxes of $54.8 million for the year-to-date period in 2021 would have resulted in a tax recovery of approximately $14.4 million; however, we recorded an income tax recovery of $16.7 million. The significant items causing our effective income tax rate to be different than the 26.3% estimated Canadian statutory income tax rate include:

^-^ Certain deductible temporary differences mostly with respect to Peru, and mostly 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 $7.1 million.

^-^ Certain deductible temporary differences with respect to Manitoba, and mostly 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. Adjusted for the average annual effective tax rate methodology, this resulted in deferred tax expense of $1.5 million.

^-^ Certain foreign exchange gains and other items are not taxable for local income tax purposes and therefore result in a deferred tax expense of $2.8 million.

Mining Tax Expense

Applying the estimated Manitoba mining tax rate of 10.0% to our loss before taxes of $54.8 million for the year-to-date period in 2021 would have resulted in a tax recovery of approximately $5.5 million; however, we recorded a mining tax expense of $25.5 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;

^-^ 15% of total mining taxable profit if mining profits are between C$55 million and C$100 million; 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 June 30, 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.

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 $400.0 million and substantially similar terms and conditions. As at June 30, 2021, our liquidity includes $294.3 million in cash and cash equivalents as well as undrawn availability of $295.2 million under our Credit Facilities. As at June 30, 2021, we were in compliance with our covenants under the Credit Facilities and had drawn $104.8 million in letters of credit under the Credit Facilities.

As at June 30, 2021, the Arizona business unit had $8.6 million in surety bonds issued to support future reclamation and closure obligations. The Peru business unit also had $88.1 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 June 30, 2021 compared to December 31, 2020

Cash and cash equivalents decreased by $144.8 million during the first six months of the year to $294.3 million as at June 30, 2021. This decrease was mainly the result of $183.5 million of capital investments primarily at our Peru and Manitoba operations, interest payments of $50.8 million, other financing and leasing payments of $38.7 million and $18.7 million, respectively, as well as paid dividends of $2.1 million. Offsetting these cash outflows was cash flow from operating activities of $148.2 million. We hold the majority of our cash and cash equivalents in low-risk, liquid investments with major Canadian and Peruvian financial institutions.

Working capital decreased by $87.1 million to $219.8 million from December 31, 2020 to June 30, 2021, primarily due to the cash and cash equivalent decrease of $144.8 million and an increase of $29.1 million in other financial liabilities due to a partial reclassification of the gold prepayment liability to current. Offsetting these items was an increase to trade and other receivables of $23.7 million, mainly related to timing of sales receivables, an increase in other financial assets of $15.4 million related to the valuation of our copper and zinc derivatives, a decrease in trade and other payables of $22.7 million arising mainly from timing of interest payments on our senior notes and a decrease of $20.6 million in our current portion of deferred revenue related to our stream agreements.

Cash Flows

The following table summarizes our cash flows for the three and six months ended June 30, 2021 and June 30, 2020:

(in $ thousands) Three months ended Six months ended
Jun. 30,2021 Jun. 30,<br>2020 Jun. 30,2021 Jun. 30,<br>2020
Operating cash flow before changes in non-cash<br> working capital 132,786 29,457 223,439 71,409
Change in non-cash working capital (36,408 ) 1,911 (75,267 ) (30,954 )
Cash generated from operating activities 96,378 31,368 148,172 40,455
Cash used in investing activities (99,249 ) (47,409 ) (181,761 ) (97,356 )
Cash (used in) generated by financing activities (12,826 ) 102,372 (109,617 ) 50,440
Effect of movement in exchange rates on cash and cash equivalents (580 ) (1,192 ) (1,642 ) 1,451
(Decrease) increase in cash and cash equivalents (16,277 ) 85,139 (144,848 ) (5,010 )

Cash Flow from Operating Activities

Cash generated from operating activities was $96.4 million during the second quarter of 2021, an increase of $65.0 million compared with the same period in 2020. Operating cash flow before change in non-cash working capital was $132.8 million during the second quarter of 2021, reflecting an increase of $103.3 million compared to the second quarter of 2020. The increase in operating cash flow is primarily the result of higher realized metal prices, and higher copper and gold sales volumes. This was partially offset by lower sales volumes of zinc compared to the second quarter of 2020.

Year-to-date cash generated from operating activities was $148.2 million, representing an increase of $107.7 million compared to the same period in 2020. Operating cash flow before change in non-cash working capital was $223.4 million during the first half of 2021, compared to $71.4 million in the same period in 2020. The year-to-date increase in operating cash flow is due to the same factors described above for the quarter-over-quarter variance.

Cash Flow from Investing and Financing Activities

During the second quarter of 2021, we used $112.1 million in investing and financing activities, primarily driven by $100.6 million of capital expenditures, capitalized lease payments of $9.0 million, and other financing payments of $4.1 million.

Year-to-date, we spent $291.4 million in investing and financing activities, driven by $183.5 million of capital expenditures, interest payments of $50.8 million, other financing payments of $38.7 million, capitalized lease payments of $18.7 million and dividends paid of $2.1 million.

Capital Expenditures

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

Six months ended Guidance
Jun. 30,<br>2020 Jun. 30,2021 Jun. 30,<br>2020 Annual
(in millions) 2021
Manitoba sustaining capital expenditures 27.2 54.7 51.0 90.0
Peru sustaining capital expenditures 1 6.6 45.0 19.2 135.0
Total sustaining capital expenditures 33.8 99.7 70.2 225.0
Arizona capitalized costs 4.6 6.5 7.7 20.0
Peru growth capitalized expenditures 2 - 21.2 70.2 25.0
Manitoba growth capitalized expenditures 4 11.0 76.1 14.7 105.0
Other capitalized costs 3 17.0 (39.5) 60.2
Capitalized exploration 0.9 2.1 2.3 15.0
Total other capitalized costs 33.5 66.4 155.1
Total capital additions 67.3 166.1 225.3
Reconciliation to cash capital additions:
Decommissioning and restoration obligation (16.7) 53.5 (58.4)
Right-of-use asset additions (4.8) (22.7) (7.1)
Change in community agreement accruals 6.5 1.3 (62.3)
Change in capital accruals and other (4.5) (14.7) 1.3
Total cash capital additions 47.8 183.5 98.8
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 Other capitalized costs include decommissioning and restoration adjustments.
4 Hudbay's revised growth capital guidance for Manitoba of 105.0 was revised in August 2021.

All values are in US Dollars.

Sustaining capital expenditures in Manitoba for the three months ended June 30, 2021 were $33.8 million representing an increase of $6.6 million compared to the same period in 2020 due to increased tailings management costs at our Anderson tailings facility.

Sustaining capital expenditures in Peru for the three and six months ended June 30, 2021 were $32.2 million and $45.0 million, respectively, representing increases of $25.6 million and $25.8 million compared to the same period in 2020. The increases were mainly due to the curtailed spending in the comparative 2020 periods arising from an eight-week suspension of Constancia operations. During the second quarter of 2021, expenditures incurred mainly related to higher capitalized stripping, as we commenced mining operations at Pampacancha, as well as mine maintenance and tailings management construction costs.

Manitoba's year-to-date growth capital of $76.1 million comprises spending for the New Britannia refurbishment project including the construction of the new copper flotation building and the connecting concentrate/tailings pipeline. The project was approximately 95% complete at the end of July following commissioning of the gold circuit and remains on track for first gold production in August. As noted in the first quarter, Hudbay has observed COVID-related cost pressures on the project capital estimate at New Britannia and there have been areas of cost escalation with industry cost inflationary pressures as the project nears completion. As a result, approximately $20 million in additional growth capital is expected to be spent this year at New Britannia. We also expect an additional $10 million to be spent in 2021 on the advancement of the Stall mill recovery improvement program, early works for the Lalor mine expansion to 5,300 tonnes per day and the impact of foreign exchange movements. As such, Manitoba's growth capital guidance in 2021 has increased to $105 million from $75 million.

Peru's year-to-date growth capital of $21.2 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. Subsequent capital spending in the second quarter is related to the Pampachancha land access agreements.

We expect consolidated sustaining capital expenditures in 2021 to be in line with our full year guidance.

Other capitalized costs for the three and six months ended June 30, 2021 were $23.7 million and negative $39.5 million, respectively. These relate primarily to the remeasurement of previously recognized decommissioning and restoration liabilities at our Peru and Manitoba operations as a result of changing discount rates. During the second quarter, we also entered into new leasing agreements for non-operating locations of $11.9 million.

Capital Commitments

As at June 30, 2021, we had outstanding capital commitments in Canada of approximately $50.5 million of which $50.4 million can be terminated, approximately $41.7 million in Peru primarily related to exploration option agreements, all of which can be terminated, and approximately $179.2 million in Arizona, primarily related to our Rosemont project, of which approximately $88.9 million can be terminated.

Contractual Obligations

The following table summarizes our significant contractual obligations as at June 30, 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^ 1,634.8 69.3 127.7 727.5 710.3
Gold prepayment obligation^2^ 132.6 34.2 98.4 - -
Lease obligations 158.8 111.8 24.5 7.0 15.5
Purchase obligation - capital commitments 271.1 66.9 31.7 22.7 149.8
Purchase obligation - other commitments^3^ 904.7 414.6 297.5 138.6 54.0
Pension and other employee future benefits obligations^2^ 170.9 16.8 24.6 63.4 66.1
Community agreement obligations^4^ 54.2 10.4 8.6 5.2 30.0
Decommissioning and restoration obligations^5^ 267.7 20.9 17.0 8.4 221.4
Total 3,594.8 744.9 630.0 972.8 1,247.1
^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, Pampacancha delivery obligation, 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 August 8, 2021, there were 261,517,129 common shares of Hudbay issued and outstanding. In addition, there were 1,785,906 stock options outstanding.

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 2019
Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3
Revenue 404.2 313.6 322.3 316.1 208.9 245.1 324.5 291.3
Gross profit 82.2 52.5 34.4 39.3 (12.7) (22.0) 25.6 31.0
Profit (loss) before tax 14.8 (69.6) 0.9 (23.9) (74.6) (81.5) (42.4) (348.4)
Profit (loss) (3.4) (60.1) 7.4 (24.0) (51.9) (76.1) (1.5) (274.8)
Adjusted net earnings (loss)^1^ 5.4 (16.1) (16.4) (25.4) (39.7) (39.3) (24.6) (23.2)
Earnings (loss) per share:
Basic and diluted (0.01) (0.23) 0.03 (0.09) (0.20) (0.29) (0.01) (1.05)
Adjusted net (loss) earnings^1^per share 0.02 (0.06) (0.06) (0.10) (0.15) (0.15) (0.09) (0.09)
Operating cash flow^2^ 132.8 90.7 86.1 84.4 29.5 42.0 69.1 71.2
Adjusted EBITDA^1^ 143.2 104.2 106.9 96.1 49.1 55.0 82.2 76.2
^1^ Adjusted net (loss) earnings, adjusted net (loss) earnings 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.

Following the onset of the COVID-19 pandemic in the first quarter of 2020, commodity prices have steadily increased to what is currently their highest levels in many years. With this increase in commodity prices, our revenues, gross profit, adjusted net earnings (loss), operating cash flow and adjusted EBITDA have steadily improved since early-2020 which mirrors the rise in commodity prices.

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.

For information on previous trends and quarterly reviews, refer to our MD&A for the year ended December 31, 2020, dated February 18, 2021.

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 better reflect the Company's performance for the current period and are better indications of 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 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 interim income statements, to adjusted net earnings (loss) for the three and six months ended June 30, 2021 and 2020.

Three months ended Six months ended
(in $ millions) Jun. 30,2021 Jun. 30,<br>2020 Jun. 30,2021 Jun. 30,<br>2020
Profit (loss) for the period (3.4) (51.9) (63.5) (128.0)
Tax expense (recovery) 18.2 (22.7) 8.7 (28.0)
Profit (loss) before tax 14.8 (74.6) (54.8) (156.1)
Adjusting items:
Mark-to-market adjustments^1^ 10.9 8.3 51.7 11.8
Peru inventory (reversal)/write-down (0.7) (8.2) (1.4) 2.2
Peru cost of sales direct charge from temporary shutdown - 25.6 - 31.9
Variable consideration adjustment - stream revenue and accretion - - (1.0) 3.8
Foreign exchange (gain) loss 1.7 1.8 3.4 (3.1)
Write-down of unamortized transaction costs - - 2.5 -
Premium paid on redemption of notes - - 22.9 -
Adjusted earnings (loss) before income taxes 26.7 (47.1) 23.3 (109.5)
Tax (expense) recovery (18.2) 22.7 (8.7) 28.0
Tax impact of adjusting items (2.3) (9.9) (21.2) (14.7)
Non-cash deferred tax adjustments (0.8) (5.4) (4.1) 17.1
Adjusted net earnings (loss) 5.4 (39.7) (10.7) (79.1)
Adjusted net earnings (loss) ($/share) 0.02 (0.15) (0.04) (0.30)
Basic weighted average number of common shares outstanding (millions) 261.5 261.3 261.4 261.3
^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.

After adjusting reported net loss 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 second quarter 2021 of $5.4 million or $0.02 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 interim income statements, to adjusted EBITDA for the three and six months ended June 30, 2021 and 2020:

Six months ended
(in millions) Jun. 30,<br>2020 Jun. 30,2021 Jun. 30,<br>2020
Profit (loss) for the period ) (51.9 ) (63.5 ) (128.0 )
Add back: Tax expense (recovery) (22.7 ) 8.7 (28.0 )
Add back: Net finance expense 47.8 152.2 90.9
Add back: Other (income) expenses 1.3 (2.3 ) 6.8
Add back: Depreciation and amortization1 80.8 182.0 167.2
Less: Amortization of deferred revenue and variable consideration adjustment ) (13.9 ) (32.3 ) (23.7 )
41.4 244.8 85.2
Adjusting items (pre-tax):
Peru inventory (reversal) / write-down ) (8.2 ) (1.4 ) 2.2
Cash portion of Peru cost of sales direct charge from temporary shutdown 12.4 - 15.8
Share-based compensation expenses2 3.5 4.0 0.9
Adjusted EBITDA 49.1 247.4 104.1
1 Includes the non-cash portion of the Peru cost of sales direct charge from the temporary shutdown of 13.2 million and 16.1 million for thethree and six months ended June 30, 2020.
2 Share-based compensation expenses reflected in cost of sales and selling and administrative expenses.

All values are in US Dollars.

Net Debt

The following table presents our calculation of net debt as at June 30, 2021 and December 31, 2020:

(in $ thousands) Jun. 30,2021 Dec. 31, <br>2020
Total long-term debt 1,181,195 1,135,675
Cash and cash equivalents (294,287) (439,135)
Net debt 886,908 696,540

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 and six months ended June 30, 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 Six months ended
Net pounds of copper produced
(in thousands) Jun. 30, 2021 Jun. 30, 2020 Jun. 30, 2021 Jun. 30, 2020
Peru 42,015 25,361 81,317 67,888
Manitoba 9,736 14,379 24,564 26,162
Net pounds of copper produced 51,751 39,740 105,881 94,050
Consolidated Three months ended Six months ended
--- --- --- --- --- --- --- --- ---
Jun. 30, 2021 Jun. 30, 2020 Jun. 30, 2021 Jun. 30, 2020
Cash cost per pound of copper produced $000s $/lb $000s $/lb $000s $/lb $000s $/lb
Cash cost, before by-product credits 218,899 4.23 141,374 3.56 428,764 4.05 324,529 3.45
By-product credits (175,470) (3.39) (129,939) (3.27) (328,983) (3.11) (259,831) (2.76)
Cash cost, net of by-product credits 43,429 0.84 11,435 0.29 99,781 0.94 64,698 0.69
Consolidated Six months ended
--- --- --- --- --- --- --- ---
Jun. 30, 2020 Jun. 30, 2021 Jun. 30, 2020
Supplementary cash cost information $/lb ^1^ $000s $/lb ^1^ $000s $/lb ^1^ $000s $/lb ^1^
By-product credits2:
Zinc 1.50 60,094 1.51 160,021 1.51 120,594 1.28
Gold 3 1.33 54,163 1.36 114,012 1.08 100,143 1.06
Silver 3 0.30 13,108 0.33 30,579 0.29 27,060 0.29
Molybdenum & other 0.26 2,574 0.06 24,371 0.23 12,034 0.13
Total by-product credits 3.39 129,939 3.27 328,983 3.11 259,831 2.76
Reconciliation to IFRS:
Cash cost, net of by-product credits 11,435 99,781 64,698
By-product credits 129,939 328,983 259,831
Treatment and refining charges (11,464) (27,178) (27,160)
Share-based compensation expense 284 458 68
Inventory adjustments (8,155) (1,446) 2,221
Change in product inventory 4,000 (7,605) 461
Royalties 2,363 8,193 5,490
Overhead costs related to suspension of activities (cash) - Peru 12,358 - 15,810
Depreciation and amortization4 80,807 181,987 167,246
Cost of sales5 221,567 583,173 488,665
1 Per pound of copper 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 24 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 six months ended June 30, 2021 the variable consideration adjustments amounted to net income of 1,617. For the six months ended June 30, 2020 - a net expense of 2,813.
4 Depreciation is based on concentrate sold.
5 As per IFRS financial statements.

All values are in US Dollars.

Peru Three months ended Six months ended
(in thousands) Jun. 30, 2021 Jun. 30, 2020 Jun. 30, 2021 Jun. 30, 2020
Net pounds of copper produced^1^ 42,015 25,361 81,317 67,888
^1^Contained copper in concentrate.
Peru Three months ended Six months ended
--- --- --- --- --- --- --- --- ---
Jun. 30, 2021 Jun. 30, 2020 Jun. 30, 2021 Jun. 30, 2020
Cash cost per pound of copper produced $000s $/lb $000s $/lb $000s $/lb $000s $/lb
Mining 26,133 0.62 7,595 0.30 47,672 0.59 27,537 0.41
Milling 40,286 0.96 18,703 0.74 83,606 1.02 52,041 0.77
G&A 16,910 0.40 7,493 0.30 31,330 0.39 16,241 0.24
Onsite costs 83,329 1.98 33,791 1.33 162,608 2.00 95,819 1.41
Treatment & refining 9,824 0.23 5,165 0.20 16,437 0.20 15,879 0.23
Freight & other 11,555 0.29 4,817 0.19 20,242 0.25 14,603 0.22
Cash cost, before by-product credits 104,708 2.50 43,773 1.73 199,287 2.45 126,301 1.86
By-product credits (27,137) (0.65) (10,575) (0.42) (50,001) (0.61) (32,590) (0.48)
Cash cost, net of by-product credits 77,571 1.85 33,198 1.31 149,286 1.84 93,711 1.38
Peru Three months ended Six months ended
--- --- --- --- --- --- --- --- ---
Jun. 30, 2021 Jun. 30, 2020 Jun. 30, 2021 Jun. 30, 2020
Supplementary cash cost information $000s $/lb ^1^ $000s $/lb ^1^ $000s $/lb ^1^ $000s $/lb ^1^
By-product credits^2^:
Gold^3^ 8,835 0.21 2,129 0.08 12,989 0.16 6,133 0.09
Silver^3^ 7,466 0.18 6,827 0.27 16,804 0.21 16,280 0.24
Molybdenum 10,836 0.26 1,619 0.06 20,208 0.25 10,177 0.15
Total by-product credits 27,137 0.65 10,575 0.42 50,00 1 0.61 32,590 0.48
Reconciliation to IFRS:
Cash cost, net of by-product credits 77,571 33,198 149,286 93,711
By-product credits 27,137 10,575 50,001 32,590
Treatment and refining charges (9,824) (5,165) (16,437) (15,879)
Inventory adjustments (723) (8,155) (1,446) 2,221
Share-based compensation expenses 52 49 71 (15)
Change in product inventory 4,465 (1,916) (6,110) (2,159)
Royalties 578 578 1,744 2,058
Overhead costs related to suspension of activities (cash) - 12,358 - 15,810
Depreciation and amortization^4^ 52,710 33,152 93,145 80,394
Cost of sales^5^ 151,966 74,674 270,254 208,731
^1^Per pound of copper 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 24.
^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 Six months ended
--- --- --- --- ---
(in thousands) Jun. 30, 2021 Jun. 30, 2020 Jun. 30, 2021 Jun. 30, 2020
Net pounds of copper produced^1^ 9,736 14,379 24,564 26,162
^1^Contained copper in concentrate.
Manitoba Three months ended Six months ended
--- --- --- --- --- --- --- --- ---
Jun. 30, 2021 Jun. 30, 2020 Jun. 30, 2021 Jun. 30, 2020
Cash cost per pound of copper produced $000s $/lb $000s $/lb $000s $/lb $000s $/lb
Mining 54,714 5.62 44,820 3.12 109,134 4.44 89,487 3.42
Milling 13,655 1.40 11,466 0.80 26,317 1.07 23,009 0.88
Refining (zinc) 17,908 1.84 16,617 1.16 37,515 1.53 35,559 1.36
G&A 14,749 1.51 11,042 0.77 30,536 1.24 25,126 0.96
Onsite costs 101,026 10.38 83,945 5.85 203,502 8.28 173,181 6.62
Treatment & refining 5,419 0.56 6,299 0.44 10,741 0.44 11,281 0.43
Freight & other 7,746 0.80 7,357 0.51 15,234 0.62 13,766 0.53
Cash cost, before by-product credits 114,191 11.73 97,601 6.80 229,477 9.34 198,228 7.58
By-product credits (148,333) (15.24) (119,364) (8.31) (278,982) (11.36) (227,241) (8.69)
Cash cost, net of by-product credits (34,142) (3.51) (21,763) (1.51) (49,505) (2.02) (29,013) (1.11)
Manitoba Three months ended Six months ended
--- --- --- --- --- --- --- --- ---
Jun. 30, 2021 Jun. 30, 2020 Jun. 30, 2021 Jun. 30, 2020
Supplementary cash cost information $000s $/lb ^1^ $000s $/lb ^1^ $000s $/lb ^1^ $000s $/lb ^1^
By-product credits^2^:
Zinc 77,707 7.98 60,094 4.18 160,021 6.51 120,594 4.61
Gold^3^ 60,045 6.17 52,034 3.62 101,023 4.11 94,010 3.59
Silver^3^ 7,977 0.82 6,281 0.44 13,775 0.56 10,780 0.41
Other 2,604 0.27 955 0.07 4,163 0.17 1,857 0.07
Total by-product credits 148,333 15.24 119,364 8.31 278,982 11.36 227,241 8.69
Reconciliation to IFRS:
Cash cost, net of by-product credits (34,142) (21,763) (49,505) (29,013)
By-product credits 148,333 119,364 278,982 227,241
Treatment and refining charges (5,419) (6,299) (10,741) (11,281)
Share-based compensation expenses 222 235 387 83
Change in product inventory 10,795 5,916 (1,495) 2,620
Royalties 3,710 1,785 6,449 3,432
Depreciation and amortization^4^ 46,595 47,655 88,842 86,852
Cost of sales^5^ 170,094 146,893 312,919 279,934
^1^ Per pound of copper 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 24.
^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 Six months ended
--- --- --- --- --- --- --- --- ---
Jun. 30, 2021 Jun. 30, 2020 Jun. 30, 2021 Jun. 30, 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 43,429 0.84 11,435 0.29 99,781 0.94 64,698 0.69
Cash sustaining capital expenditures 68,803 1.33 49,467 1.24 125,257 1.18 104,196 1.10
Royalties 4,288 0.08 2,363 0.06 8,193 0.08 5,490 0.06
Sustaining cash cost, net of by-product credits 116,520 2.25 63,265 1.59 233,231 2.20 174,384 1.85
Corporate selling and administrative expenses & regional costs 10,995 0.22 11,608 0.29 21,759 0.21 17,596 0.19
Accretion and amortization of decommissioning and community agreements^1^ 705 0.01 1,049 0.03 1,284 0.01 1,850 0.02
All-in sustaining cash cost, net of by-product credits 128,220 2.48 75,922 1.91 256,274 2.42 193,830 2.06
Reconciliation to property, plant and equipment additions:
Property, plant and equipment additions 96,090 31,719 178,468 123,483
Capitalized stripping net additions 22,506 18,969 41,131 43,191
Decommissioning and restoration obligation net additions 11,039 16,690 (53,465) 58,449
Total accrued capital additions 129,635 67,378 166,134 225,123
Less other non-sustaining capital costs^2^ 63,694 33,527 66,395 154,947
Total sustaining capital costs 65,941 33,851 99,739 70,176
Right of use leased assets (9,101) (4,716) (10,422) (7,085)
Capitalized lease cash payments - operating sites 8,331 7,609 17,519 15,980
Community agreement cash payments 108 546 343 1,485
Accretion and amortization of decommissioning and restoration obligations 3,524 12,177 18,078 23,640
Cash sustaining capital expenditures 68,803 49,467 125,257 104,196
^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 Six months ended
--- --- --- --- --- --- --- --- ---
Jun. 30, 2021 Jun. 30, 2020 Jun. 30, 2021 Jun. 30, 2020
Sustaining cash cost per pound of copper produced $000s $/lb $000s $/lb $000s $/lb $000s $/lb
Cash cost, net of by-product credits 77,571 1.85 33,198 1.31 149,286 1.84 93,711 1.38
Cash sustaining capital expenditures 34,898 0.83 12,855 0.51 54,698 0.67 32,099 0.47
Royalties 578 0.01 578 0.02 1,744 0.02 2,058 0.03
Sustaining cash cost per pound of copper produced 113,047 2.69 46,631 1.84 205,728 2.53 127,868 1.88
Manitoba Three months ended Six months ended
--- --- --- --- --- --- --- --- ---
Jun. 30, 2021 Jun. 30, 2020 Jun. 30, 2021 Jun. 30, 2020
Sustaining cash cost per pound of copper produced $000s $/lb $000s $/lb $000s $/lb $000s $/lb
Cash cost, net of by-product credits (34,142) (3.51) (21,763) (1.51) (49,505) (2.01) (29,013) (1.11)
Cash sustaining capital expenditures 33,905 3.49 36,612 2.55 70,559 2.87 72,097 2.76
Royalties 3,710 0.38 1,785 0.12 6,449 0.26 3,432 0.13
Sustaining cash cost per pound of copper produced 3,473 0.36 16,634 1.16 27,503 1.12 46,516 1.78

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 and six months ended June 30, 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 Six months ended
(in thousands) Jun. 30, 2021 Jun. 30, 2020 Jun. 30, 2021 Jun. 30, 2020
Net pounds of zinc produced^1^ 47,483 68,833 109,080 136,063
^1^ Contained zinc in concentrate.
Manitoba Three months ended Six months ended
--- --- --- --- --- --- --- --- ---
Jun. 30, 2021 Jun. 30, 2020 Jun. 30, 2021 Jun. 30, 2020
Cash cost per pound of zinc produced 000s /lb 000s /lb 000s /lb 000s /lb
Cash cost, before by-product credits^1^ 114,191 2.40 97,601 1.41 229,477 2.10 198,228 1.45
By-product credits (125,026 (2.63 (101,485 (1.47 (229,104 (2.10 (171,765 (1.26
Zinc cash cost, net of by-product credits (10,835 (0.23 (3,884 (0.06 373 - 26,463 0.19
^1^ For additional detail on cash cost, before by-product credits please see page 44 of this MD&A.

All values are in US Dollars.

Manitoba Three months ended Six months ended
Jun. 30, 2021 Jun. 30, 2020 Jun. 30, 2021 Jun. 30, 2020
Supplementary cash cost information 000s $/lb ^1^ 000s $/lb ^1^ 000s $/lb ^1^ 000s $/lb ^1^
By-product credits^2^:
Copper 54,400 1.15 42,215 0.61 110,143 1.01 65,118 0.48
Gold^3^ 60,045 1.26 52,034 0.76 101,023 0.92 94,010 0.69
Silver^3^ 7,977 0.17 6,281 0.09 13,775 0.13 10,780 0.08
Other 2,604 0.05 955 0.01 4,163 0.04 1,857 0.01
Total by-product credits 125,026 2.63 101,485 1.47 229,104 2.10 171,765 1.26
Reconciliation to IFRS:
Cash cost, net of by-product credits (10,835 (3,884 373 26,463
By-product credits 125,026 101,485 229,104 171,765
Treatment and refining charges (5,419 (6,299 (10,741 (11,281
Share-based compensation expenses 222 235 387 83
Change in product inventory 10,795 5,916 (1,495 2,620
Royalties 3,710 1,785 6,449 3,432
Depreciation and amortization^4^ 46,595 47,655 88,842 86,852
Cost of sales^5^ 170,094 146,893 312,919 279,934
^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 24.
^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.

All values are in US Dollars.

Manitoba Three months ended Six months ended
Jun. 30, 2021 Jun. 30, 2020 Jun. 30, 2021 Jun. 30, 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 (10,835 (0.23 (3,884 (0.06 373 - 26,463 0.19
Cash sustaining capital expenditures 33,905 0.71 36,612 0.53 70,559 0.65 72,097 0.53
Royalties 3,710 0.08 1,785 0.03 6,449 0.06 3,432 0.03
Sustaining cash cost per pound of zinc produced 26,780 0.56 34,513 0.50 77,381 0.71 101,992 0.75

All values are in US Dollars.

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 and six months ended June 30, 2021 and 2020.

Peru Three months ended Six months ended
(in thousands except unit cost per tonne) Jun. 30,2021 Jun. 30,<br>2020 Jun. 30,2021 Jun. 30,<br>2020
Combined unit cost per tonne processed
Mining 26,133 7,595 47,672 27,537
Milling 40,286 18,703 83,606 52,041
G&A ^1^ 16,910 7,493 31,330 16,241
Other G&A ^2^ 52 49 71 561
Unit cost 83,381 33,840 162,679 96,380
Tonnes ore milled 7,413 4,355 13,776 11,075
Combined unit cost per tonne 11.25 7.77 11.81 8.70
Reconciliation to IFRS:
Unit cost 83,381 33,840 162,679 96,380
Freight & other 11,555 4,817 20,242 14,603
Other G&A (52) (49) (71) (561)
Share-based compensation expenses 52 49 71 (15)
Inventory adjustments (723) (8,155) (1,446) 2,221
Change in product inventory 4,465 (1,916) (6,110) (2,159)
Royalties 578 578 1,744 2,058
Overhead costs related to suspension of activities (cash) - 12,358 - 15,810
Depreciation and amortization 52,710 33,152 93,145 80,394
Cost of sales^3^ 151,966 74,674 270,254 208,731
^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 Six months ended
--- --- --- --- ---
(in thousands except tonnes ore milled and unit cost per tonne) Jun. 30,2021 Jun. 30,<br>2020 Jun. 30,2021 Jun. 30,<br>2020
Combined unit cost per tonne processed
Mining 54,714 44,820 109,134 89,487
Milling 13,655 11,466 26,317 23,009
G&A ^1^ 14,749 11,042 30,536 25,126
Less: G&A allocated to zinc metal production (3,724) (3,264) (8,320) (7,423)
Less: Other G&A related to profit sharing costs (1,274) - (640) -
Unit cost 78,120 64,064 157,027 130,199
USD/CAD implicit exchange rate 1.23 1.39 1.23 1.37
Unit cost - C$ 95,927 88,753 193,267 178,017
Tonnes ore milled 646,987 659,507 1,291,717 1,361,883
Combined unit cost per tonne - C$ 148 135 150 131
Reconciliation to IFRS:
Unit cost 78,120 64,064 157,027 130,199
Freight & other 7,746 7,357 15,234 13,766
Refined (zinc) 17,908 16,617 37,515 35,559
G&A allocated to zinc metal production 3,724 3,264 8,320 7,423
Other G&A related to profit sharing 1,274 - 640 -
Share-based compensation expenses 222 235 387 83
Change in product inventory 10,795 5,916 (1,495) 2,620
Royalties 3,710 1,785 6,449 3,432
Depreciation and amortization 46,595 47,655 88,842 86,852
Cost of sales^2^ 170,094 146,893 312,919 279,934
^1^ G&A as per cash cost reconciliation above.
^2^ As per IFRS financial statements.
Manitoba Three months ended Six months ended
--- --- --- --- ---
(in thousands except zinc plant unit cost per pound) Jun. 30,2021 Jun. 30,<br>2020 Jun. 30,2021 Jun. 30,<br>2020
Zinc plant unit cost
Zinc plant costs 17,908 16,617 37,515 35,559
G&A ^1^ 14,749 11,042 30,536 25,126
Less: G&A allocated to other areas (9,751) (7,778) (21,577) (17,702)
Less: Other G&A related to profit sharing (1,274) - (640) -
Zinc plant unit cost 21,632 19,881 45,834 42,983
USD/CAD implicit exchange rate 1.23 1.39 1.23 1.36
Zinc plant unit cost - C$ 26,585 27,544 56,249 58,454
Refined metal produced (in pounds) 49,425 60,704 107,863 123,461
Zinc plant unit cost per pound - C$ 0.54 0.45 0.52 0.47
Reconciliation to IFRS:
Zinc plant unit cost 21,632 19,881 45,834 42,983
Freight & other 7,746 7,357 15,234 13,766
Mining 54,714 44,820 109,134 89,487
Milling 13,655 11,466 26,317 23,009
G&A allocated to other areas 9,751 7,778 21,577 17,702
Other G&A related to profit sharing 1,274 - 640 -
Share-based compensation expenses 222 235 387 83
Change in product inventory 10,795 5,916 (1,495) 2,620
Royalties 3,710 1,785 6,449 3,432
Depreciation and amortization 46,595 47,655 88,842 86,852
Cost of sales^2^ 170,094 146,893 312,919 279,934
^1^ G&A as per cash cost reconciliation above.
^2^ As per IFRS financial statements.

ACCOUNTING CHANGES AND CRITICAL ESTIMATES

New standards and interpretations adopted

As of January 1, 2021, we have adopted an amendment to IAS 16, Property, Plant and Equipment ("IAS 16").

For information on new standards and interpretations adopted, refer to note 4 of our June 30, 2021 consolidated interim financial statements.

Estimates and judgements

The preparation of the consolidated interim 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 interim 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.

For more information on judgements and estimates, refer to note 2 of our June 30, 2021 consolidated interim financial statements.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

Management is responsible for establishing and maintaining adequate internal control over financial reporting ("ICFR"). ICFR is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS.

We did not make any changes to ICFR during the three months ended June 30, 2021 that materially affected or are reasonably likely to materially affect our ICFR.

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 and potential revisions to such guidance, anticipated production at our mines and processing facilities, expectations regarding the impact of the COVID-19 pandemic on our operations, financial condition and prospects, and our ability to effectively engage with local communities in Peru and other stakeholders, the anticipated timing, cost and benefits of developing the Rosemont project and the outcome of litigation challenging Rosemont's permits, expectations regarding the Copper World exploration program, expectations regarding the Lalor gold strategy, including the refurbishment, commissioning and ramp-up of the New Britannia mill and the expectations regarding the mine plan for the 1901 deposit, increasing the mining rate at Lalor and optimizing the Stall and New Britannia mills, the possibility of converting inferred mineral resource estimates to higher confidence categories, the potential and our anticipated plans for advancing our mining properties surrounding Constancia and 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 during the COVID-19 pandemic;

  • 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 unit cost guidance;

  • no significant interruptions to our operations or significant delays to our development projects in Manitoba and Peru due to the COVID-19 pandemic;

  • the availability of spending reductions and liquidity options;

  • the successful completion of the New Britannia project on budget and on schedule;

  • the successful outcome of the Rosemont litigation;

  • the successful renegotiation of collective agreements with the labour unions that represent certain of our employees in Manitoba;

  • 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 the COVID-19 pandemic and its effect on our operations, financial condition, projects and prospects, the possibility of a global recession arising from the COVID-19 pandemic and attempts to control it, the change in government in Peru, future uncertainty with respect to the Peruvian mining tax regime, risks generally associated with the mining industry, such as economic factors (including future commodity prices, currency fluctuations, energy prices and general cost escalation), uncertainties related to the development and operation of our projects, risks related to the U.S. district court's recent decisions to set aside the U.S. Forest Service's FROD and the Biological Opinion for Rosemont and related appeals and other legal challenges, risks related to the new Lalor mine plan, including the schedule for the refurbishment, commissioning and ramp-up of the New Britannia mill and the ability to convert inferred mineral resource estimates to higher confidence categories, dependence on key personnel and employee and union relations, risks related to political or social instability, unrest or change, risks in respect of Indigenous and community relations, rights and title claims, operational risks and hazards, including the cost of maintaining and upgrading the Company's tailings management facilities and any unanticipated environmental, industrial and geological events and developments and the inability to insure against all risks, failure of plant, equipment, processes, transportation and other infrastructure to operate as anticipated, compliance with government and environmental regulations, including permitting requirements and anti-bribery legislation, depletion of 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 the Rosemont project has been approved by Cashel Meagher, P. Geo, our Senior Vice President and Chief Operating Officer. The technical and scientific information related to our other material mineral projects contained in this MD&A has been approved by Olivier Tavchandjian, P. Geo, our Vice President, Exploration and Geology. Messrs. Meagher and Tavchandjian are qualified persons pursuant to NI 43-101. For a description of the key assumptions, parameters and methods used to estimate mineral reserves and resources 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 2020 2019
Q2 Q1 2020 Q4 Q3 Q2 Q1 2019 Q4 Q3
Consolidated Financial Condition (000s)
Cash and cash equivalents $ 294,287 $ 310,564 $ 439,135 $ 439,135 $ 449,014 $ 391,136 $ 305,997 $ 396,146 $ 396,146 $ 398,438
Total long-term debt 1,181,195 1,180,798 1,135,675 1,135,675 1,175,104 988,418 988,074 985,255 985,255 976,272
Net debt1 886,908 870,234 696,540 696,540 726,090 597,282 682,077 589,109 589,109 577,834
Consolidated Financial Performance (000s except per  share amounts)
Revenue $ 404,242 $ 313,624 $ 1,092,418 $ 322,290 $ 316,108 $ 208,913 $ 245,105 $ 1,237,439 $ 324,485 $ 291,282
Cost of sales 322,060 261,112 1,053,418 287,923 276,830 221,567 267,096 1,085,897 298,852 260,327
Earnings (loss) before tax 14,819 (69,592 ) (179,089) 911 (23,944 ) (74,604) (81,452 ) (452,763) (42,352 ) (348,367)
(Loss) earnings (3,395 ) (60,102) (144,584 ) 7,406 (23,955 ) (51,901) (76,134 ) (343,810) (1,455 ) (274,796)
Basic and diluted (loss) earnings per share $ (0.01 ) $ (0.23 ) $ (0.55 ) $ 0.03 $ (0.09 ) $ (0.20 ) $ (0.29 ) $ (1.32 ) $ (0.01 ) $ (1.05 )
Adjusted earnings (loss) per share 1 $ 0.02 $ (0.06 ) $ (0.46 ) $ (0.06 ) $ (0.10 ) $ (0.15 ) $ (0.15 ) $ (0.18 ) $ (0.09 ) $ (0.09 )
Operating cash flow before change in non-cash working capital 1 132,786 90,656 241,863 86,071 84,383 29,457 41,951 307,284 69,141 71,204
Adjusted EBITDA 1, 2 143.2 104.2 306.7 106.9 96.1 49.1 55.0 358.5 82.2 76.2
Consolidated Operational Performance
Contained metal in concentrate produced 3
Copper 23,474 24,553 95,333 27,278 25,395 18,026 24,635 137,179 32,422 36,422
Gold 39,848 35,500 124,622 32,376 29,277 32,614 30,355 114,692 32,712 28,319
Silver 685,916 696,673 2,750,873 730,679 671,685 580,817 767,692 3,585,330 930,137 924,191
Zinc 21,538 27,940 118,130 25,843 30,570 31,222 30,495 119,106 30,592 28,639
Molybdenum 295 294 1,204 333 392 124 354 1,272 372 262
Payable metal in concentrate sold
Copper 25,176 20,929 88,888 22,963 25,903 15,951 24,072 128,519 33,715 29,916
Gold 38,205 25,383 122,949 35,179 30,605 30,590 26,574 108,999 30,344 25,488
Silver 577,507 509,760 2,585,586 762,384 705,495 541,785 575,922 3,452,926 909,423 756,296
Zinc 4 25,361 28,343 109,347 28,431 26,520 27,604 26,792 104,319 28,001 29,140
Molybdenum 265 284 1,321 457 313 120 431 1,186 199 334
Cash cost 1 $ 0.84 $ 1.04 $ 0.60 $ 0.43 $ 0.65 $ 0.29 $ 0.98 $ 0.83 $ 0.90 $ 0.71
Sustaining cash cost $ 2.25 $ 2.16 $ 1.93 $ 1.97 $ 2.02 $ 1.59 $ 2.05 $ 1.72 $ 2.11 $ 1.62
All-in sustaining cash cost 1 $ 2.48 $ 2.37 $ 2.16 $ 2.24 $ 2.25 $ 1.91 $ 2.17 $ 1.86 $ 2.22 $ 1.69
1 Net debt, adjusted (loss) earnings per share, adjusted EBITDA, cash cost, sustaining cash cost and all-in sustaining cash cost per pound of copper produced, net of by-product credits, 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.
3 Metal reported in concentrate is prior to deductions associated with smelter contract terms.
4 Includes refined zinc metal sold.

All values are in US Dollars.

2021 2020 2019
Q2 Q1 2020 Q4 Q3 Q2 Q1 2019 Q4 Q3
Peru Operations
Constancia ore mined^1^ tonnes 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 8,413,367
Copper % 0.30 0.30 0.32 0.31 0.31 0.34 0.34 0.43 0.41 0.44
Gold g/tonne 0.04 0.04 0.03 0.03 0.03 0.04 0.03 0.04 0.04 0.05
Silver g/tonne 3.02 2.90 2.75 2.61 2.55 2.90 3.10 3.76 3.87 3.93
Molybdenum % 0.01 0.01 0.02 0.01 0.02 0.02 0.02 0.02 0.02 0.02
Pampacancha ore mined^1^ tonnes 982,992 - - - - - - - - -
Copper % 0.26 - - - - - - - - -
Gold g/tonne 0.27 - - - - - - - - -
Silver g/tonne 4.43 - - - - - - - - -
Molybdenum % 0.01 - - - - - - - - -
Ore milled tonnes 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 8,240,344
Copper % 0.31 0.33 0.34 0.33 0.33 0.34 0.34 0.42 0.42 0.44
Gold g/tonne 0.07 0.04 0.03 0.03 0.03 0.04 0.03 0.04 0.04 0.04
Silver g/tonne 2.88 2.84 2.87 2.74 2.68 3.04 3.13 3.64 3.86 3.76
Molybdenum % 0.01 0.01 0.02 0.02 0.02 0.01 0.02 0.02 0.02 0.02
Copper recovery % 83.3 84.1 83.0 85.3 83.3 76.6 84.3 85.7 85.6 86.0
Gold recovery % 62.2 52.0 49.8 52.7 51.6 43.4 50.2 48.1 50.0 48.3
Silver recovery % 68.2 69.9 66.9 70.1 66.7 59.6 68.2 68.2 68.2 68.9
Molybdenum recovery % 33.3 33.4 29.4 28.4 30.4 19.9 35.0 26.5 30.8 20.2
Contained metal in concentrate
Copper tonnes 19,058 17,827 73,150 21,554 20,803 11,504 19,290 113,825 26,659 31,091
Gold ounces 10,220 4,638 12,395 3,689 3,333 2,311 3,062 19,723 5,007 5,565
Silver ounces 468,057 405,714 1,622,972 477,775 430,208 253,687 461,302 2,504,769 631,774 686,258
Molybdenum tonnes 295 294 1,204 333 392 124 354 1,272 372 262
Payable metal sold
Copper tonnes 19,946 14,836 68,506 18,583 21,654 9,023 19,247 106,184 28,430 25,314
Gold ounces 5,638 2,963 10,986 3,297 3,753 1,317 2,618 18,956 4,824 3,858
Silver ounces 315,064 337,612 1,518,548 480,843 433,595 242,519 361,591 2,452,496 666,839 529,139
Molybdenum tonnes 265 284 1,321 457 313 120 431 1,186 199 334
Peru combined unit operating cost^,2, 3^ $/tonne $ 11.25 $ 12.46 $ 9.46 $ 10.17 $ 9.85 $ 7.77 $ 9.31 $ 9.50 $ 10.20 $ 8.63
Peru cash cost^3^ $/lb $ 1.85 $ 1.82 $ 1.45 $ 1.47 $ 1.54 $ 1.31 $ 1.42 $ 1.16 $ 1.36 $ 1.06
Peru sustaining cash cost^3^ $/lb $ 2.69 $ 2.36 $ 2.20 $ 2.58 $ 2.29 $ 1.84 $ 1.91 $ 1.65 $ 2.17 $ 1.53
^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
2021 2020 2019
--- --- --- --- --- --- --- --- --- --- --- ---
Q2 Q1 2020 Q4 Q3 Q2 Q1 2019 Q4 Q3
Manitoba Operations
Lalor ore mined tonnes 356,951 421,602 1,654,240 468,101 357,213 407,408 421,518 1,536,780 390,140 346,456
Copper % 0.64 0.57 0.74 0.80 0.66 0.77 0.70 0.75 0.80 0.68
Zinc % 3.81 5.20 5.73 5.54 5.98 6.05 5.43 6.36 6.20 6.16
Gold g/tonne 3.19 2.67 2.51 2.79 2.28 2.64 2.27 2.16 2.63 2.21
Silver g/tonne 22.98 22.75 25.31 24.96 21.23 28.4 26.18 25.51 28.38 25.56
777 ore mined tonnes 255,170 275,260 991,576 164,856 264,905 281,890 279,925 1,109,782 269,342 273,319
Copper % 0.82 2.06 1.40 1.89 0.98 1.72 1.18 1.37 1.17 1.33
Zinc % 3.57 4.00 3.88 2.98 3.95 4.13 4.11 3.22 3.33 3.01
Gold g/tonne 1.97 2.39 1.90 1.85 2.01 1.91 1.82 1.61 1.52 1.63
Silver g/tonne 23.35 29.32 24.13 21.64 24.25 25.73 23.86 18.67 18.52 15.42
Stall Concentrator:
Ore milled tonnes 317,484 361,344 1,412,751 372,624 335,739 334,601 369,787 1,290,300 310,622 318,539
Copper % 0.68 0.60 0.73 0.79 0.68 0.76 0.70 0.73 0.80 0.64
Zinc % 4.06 5.53 5.76 5.47 6.11 6.16 5.38 6.39 6.24 6.22
Gold g/tonne 3.19 2.57 2.55 2.88 2.35 2.70 2.28 2.13 2.60 2.12
Silver g/tonne 22.02 23.40 25.37 24.43 22.08 28.72 26.28 25.48 28.12 25.16
Copper recovery % 88.8 85.7 86.2 87.1 84.0 86.6 86.5 85.9 85.9 84.4
Zinc recovery % 88.1 91.1 91.9 90.9 92.7 92.4 91.4 91.1 90.7 91.8
Gold recovery % 55.5 57.5 60.0 59.5 57.4 62.3 60.9 56.8 61.1 54.3
Silver recovery % 55.1 56.2 60.4 60.3 57.5 62.1 61.1 60.4 62.9 57.4
Flin Flon Concentrator:
Ore milled tonnes 329,503 283,386 1,205,314 225,663 322,156 324,906 332,589 1,362,006 374,529 331,216
Copper % 0.89 1.88 1.28 1.59 0.99 1.52 1.11 1.27 1.11 1.22
Zinc % 3.65 4.20 4.21 3.87 4.07 4.41 4.36 3.78 4.05 3.64
Gold g/tonne 2.06 2.34 1.96 1.99 1.99 1.99 1.88 1.72 1.75 1.74
Silver g/tonne 23.65 28.01 24.26 22.65 24.01 25.56 24.33 19.84 20.56 17.36
Copper recovery % 84.8 91.3 86.0 88.1 83.9 87.3 84.1 88.0 86.9 89.1
Zinc recovery % 84.8 81.8 85.5 83.9 87.9 84.9 85.0 85.5 85.8 86.7
Gold recovery % 52.9 64.0 56.0 56.6 55.3 58.6 53.5 59.4 56.1 59.1
Silver recovery % 37.5 54.1 45.9 46.5 42.0 50.7 44.3 50.8 49.2 48.7
2021 2020 2019
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Q2 Q1 2020 Q4 Q3 Q2 Q1 2019 Q4 Q3
Manitoba Operations (continued)
Total Manitoba contained metal in concentrate produced
Copper tonnes 4,416 6,726 22,183 5,724 4,592 6,522 5,345 23,354 5,763 5,331
Zinc tonnes 21,538 27,940 118,130 25,843 30,570 31,222 30,495 119,106 30,592 28,639
Gold ounces 29,628 30,862 112,227 28,687 25,944 30,303 27,293 94,969 27,705 22,754
Silver ounces 217,859 290,959 1,127,901 252,904 241,477 327,130 306,390 1,080,561 298,363 237,933
Total Manitoba payable metal sold
Copper tonnes 5,230 6,093 20,382 4,380 4,249 6,928 4,825 22,335 5,285 4,602
Zinc^1^ tonnes 25,361 28,343 109,347 28,431 26,520 27,604 26,792 104,346 28,001 29,140
Gold ounces 32,567 22,420 111,963 31,882 26,852 29,273 23,956 90,043 25,520 21,630
Silver ounces 262,443 172,148 1,067,038 281,541 271,900 299,266 214,331 1,000,430 242,584 227,157
Manitoba combined unit operating cost^2,3^ C$/tonne $ 148 $ 151 $ 132 $ 140 $ 126 $ 135 $ 127 $ 134 $ 128 $ 130
Manitoba cash cost^3^ $/lb $ (3.51 ) $ (1.04 ) $ (2.20 ) $ (3.48 ) $ (3.41 ) $ (1.51 ) $ (0.62 ) $ (0.75 ) $ (1.26 ) $ (1.31 )
Manitoba sustaining cash cost^3^ $/lb $ 0.36 $ 1.62 $ 1.02 $ (0.36 ) $ 0.83 $ 1.16 $ 2.54 $ 2.07 $ 1.83 $ 2.15
^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. 
Hudbay Minerals Inc.: Exhibit 99.3 - Filed by newsfilecorp.com

FORM 52-109F2 CERTIFICATION OF INTERIM FILINGS FULL CERTIFICATE

I, Peter Kukielski, President and Chief Executive Officer of Hudbay Minerals Inc., certify the following:

  1. Review: I have reviewed the interim financial report and interim MD&A (together, the "interim filings") of Hudbay Minerals Inc. ****** (the "issuer") for the interim period ended June 30, 2021.

  2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.

  3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.

  4. Responsibility: The issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings, for the issuer.

  5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer's other certifying officer(s) and I have, as at the end of the period covered by the interim filings

(a) designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that

(i) material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and

(ii) information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and

(b) designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer's GAAP.

5.1 Control framework: The control framework the issuer's other certifying officer(s) and I used to design the issuer's ICFR is the Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

5.2 N/A

5.3 N/A

  1. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer's ICFR that occurred during the period beginning on April 1, 2021 ****** and ended on June 30, 2021 that has materially affected, or is reasonably likely to materially affect, the issuer's ICFR.

Date: August 9, 2021

(signed) Peter Kukielski

Peter Kukielski President and Chief Executive Officer

Hudbay Minerals Inc.: Exhibit 99.4 - Filed by newsfilecorp.com

FORM 52-109F2 CERTIFICATION OF INTERIM FILINGS FULL CERTIFICATE

I, Steve Douglas, Senior Vice President and Chief Financial Officer of Hudbay Minerals Inc., certify the following:

  1. Review: I have reviewed the interim financial report and interim MD&A (together, the "interim filings") of Hudbay Minerals Inc. ****** (the "issuer") for the interim period ended June 30, 2021.

  2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.

  3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.

  4. Responsibility: The issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings, for the issuer.

  5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer's other certifying officer(s) and I have, as at the end of the period covered by the interim filings

(a) designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that

(i) material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and

(ii) information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and

(b) designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer's GAAP.

5.1 Control framework: The control framework the issuer's other certifying officer(s) and I used to design the issuer's ICFR is the Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

5.2 N/A

5.3 N/A

  1. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer's ICFR that occurred during the period beginning on April 1, 2021 ****** and ended on June 30, 2021 that has materially affected, or is reasonably likely to materially affect, the issuer's ICFR.

Date: August 9, 2021

(signed) Steve Douglas

Steve Douglas Senior Vice President and Chief Financial Officer

Hudbay Minerals Inc.: Exhibit 99.5 - Filed by newsfilecorp.com
TSX, NYSE - HBM<br><br> <br>2021 No. 18
25 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 Second Quarter 2021 Results

Toronto, Ontario, August 9, 2021 - Hudbay Minerals Inc. ("Hudbay" or the "company") (TSX, NYSE:HBM) today released its second quarter 2021 financial results. All amounts are in U.S. dollars, unless otherwise noted.

Second Quarter Operating and Financial Results

  • Generated $404.2 million in revenue, $132.8 million of operating cash flow before change in non-cash working capital and $143.2 million of adjusted EBITDA^[i]^ in the second quarter of 2021 from higher realized metal prices and higher copper and precious metals sales volumes, partially offset by lower zinc sales volumes.
  • Consolidated copper production in the second quarter was 23,474 tonnes at cash cost and sustaining cash cost per pound of copper produced, net of by-product credits^i^, of $0.84 and $2.25, respectively. Consolidated gold production increased to 39,848 ounces in the second quarter, a record for Hudbay.
  • Second quarter Peru production was boosted by higher metal recoveries and initial production from Pampacancha in April 2021. Pampacancha production continues to ramp up in line with the recently published Constancia mine plan, which contemplates an increase in average annual copper production to approximately 102,000 tonnes over the next eight years starting in 2022.
  • Second quarter Manitoba metal production was impacted by lower copper and zinc grades, lower precious metal recoveries and production interruptions.
  • On track to meet annual guidance for copper, zinc and precious metals production, consolidated sustaining capital expenditures, and Manitoba unit operating costs in 2021. After adjusting for unbudgeted COVID-related costs in Peru, full year unit operating costs for Peru are expected to be within the 2021 guidance range.
  • Second quarter net loss and loss per share were $3.4 million and $0.01, respectively. After adjusting for the net mark-to-market loss on financial instruments, amongst other items, second quarter adjusted net earnings^i^ per share were $0.02.
  • Cash and cash equivalents decreased during the second quarter to $294.3 million, as at June 30, 2021, mainly as a result of $100.6 million of capital investments primarily for the construction of the New Britannia refurbishment project and sustaining capital expenditures, partially offset by cash generated from operations.
  • On June 19, a worker employed by a service provider at the Lalor mine was fatally injured from a fall while working at height. The company is undertaking a number of initiatives to learn from this tragic incident.

Executing on Growth Initiatives

  • New Britannia project continues to track ahead of the original schedule with approximately 95% of the project completed at the end of July. New Britannia gold circuit commissioning completed in July 2021 and first gold pour is expected in August, ahead of the original schedule. Annual gold production from Lalor and the Snow Lake operations is expected to increase to over 180,000 ounces at 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 operation starting in 2022.
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  • Due to additional costs and COVID-19 related impacts, approximately $20 million in additional growth capital is expected to be spent this year at New Britannia and 2021 growth capital guidance has been revised accordingly.
  • Following the finalization of the remaining land user agreement for Pampacancha, first production was achieved in April, consistent with the recently published mine plan.
  • Completed 85,000 feet of drilling at the Copper World property in Arizona in the first half of the year and the company remains on track to complete an initial inferred resource estimate before the end of the year and a preliminary economic assessment in the first half of 2022.
  • Released the 18^th^ Annual Sustainability Report in May 2021 discussing Hudbay's key accomplishments and initiatives in 2020, how the company manages the social, environmental and economic risks, impacts and opportunities associated with its activities, and the importance of continuous improvement in these areas for the company's long-term success.

"We are deeply saddened by the fatality at our Lalor mine in June and we are committed more than ever to our objective of zero harm across the organization," said Peter Kukielski, President and Chief Executive Officer. "Operationally, our second quarter results benefited from higher production at our Peru operations after the successful ramp up of mining activities at Pampacancha during the quarter. We also expect to achieve our first gold pour at the New Britannia mill this month, ahead of the original schedule, which together with the startup of Pampacancha, is expected to result in increased cash flows from these high-return investments starting in the second half of 2021. COVID-19 continues to have an impact our operations, but we remain focused on managing these impacts while continuing to execute our growth initiatives and focusing on operating safely and efficiently."

Summary of Second Quarter Results

Cash generated from operating activities in the second quarter of 2021 increased to $96.4 million compared to $51.8 million in the first quarter of 2021. Operating cash flow before change in non-cash working capital was $132.8 million during the second quarter of 2021, reflecting an increase of $42.1 million compared to the first quarter of 2021. The increase in operating cash flow is primarily the result of higher realized metal prices and higher copper and precious metals sales volumes, partially offset by lower zinc sales volumes.

Consolidated copper production in the second quarter of 2021 was 23,474 tonnes, a 4% decrease from the first quarter of 2021, primarily as a result of lower copper grades in Manitoba, partially offset by higher throughput in Peru. Consolidated gold production in the second quarter of 2021 was 39,848 ounces, an increase of 12% versus the first quarter of 2021, due to record gold production in Peru as mining from the high-grade Pampacancha deposit commenced in the quarter. Consolidated zinc production in the quarter decreased by 23% while silver production decreased by 2% versus the first quarter, primarily as a result of lower grades and recoveries.

In the second quarter of 2021, consolidated cash cost per pound of copper produced, net of by-product credits^i^, was $0.84, compared to $1.04 in the first quarter of 2021. This decrease was mainly a result of higher by-product credits. Sustaining cash cost per pound of copper produced, net of by-product credits^i^, increased to $2.25 in the second quarter of 2021, from $2.16 in the same period in 2020 primarily due to higher sustaining capital expenditures, partially offset by higher by-product credits. Hudbay continues to expect consolidated cash cost and sustaining cash cost per pound of copper produced, net of by-product credits, to be within the guidance ranges for 2021.

Net loss and loss per share in the second quarter of 2021 were $3.4 million and $0.01, respectively, compared to a net loss and loss per share of $60.1 million and $0.23, respectively, in the first quarter of 2021. Second quarter earnings benefited from higher realized prices of copper, zinc and gold, combined with higher copper and precious metals sales volumes, which were partially offset by lower zinc sales volumes and higher tax expenses.

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Adjusted net earnings^i^ and adjusted net earnings per share^i^ in the second quarter of 2021 were $5.4 million and $0.02 per share after adjusting for the net mark-to-market loss on financial instruments among other items. This compares to an adjusted net loss and adjusted net loss per share of $16.1 million and $0.06 per share in the first quarter of 2021. Second quarter adjusted EBITDA^i^ was $143.2 million, compared to $104.2 million in the first quarter of 2021. As previously disclosed, sales volumes in the first quarter of 2021 were impacted by shipping delays in Peru and Manitoba, resulting in the delayed parcels being recognized as revenue in the second quarter of 2021.

As at June 30, 2021, Hudbay's liquidity includes $294.3 million in cash and cash equivalents as well as undrawn availability of $295.2 million under its credit facilities. The company expects that the current liquidity together with cash flows from operations will be sufficient to meet its liquidity needs for the foreseeable future.

Financial Condition ($000s) Jun. 30, 2021 Mar. 31, 2021 Dec. 31, 2020
Cash and cash equivalents 294,287 310,564 439,135
Total long-term debt 1,181,195 1,180,798 1,135,675
Net debt^1^ 886,908 870,234 696,540
Working capital 219,799 236,281 306,888
Total assets 4,587,827 4,549,196 4,666,645
Equity 1,658,924 1,660,250 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.

Consolidated Financial Performance **** Three Months Ended
**** Jun. 30, 2021 Mar. 31, 2021 Jun. 30, 2020
Revenue $000s 404,242 313,624 208,913
Cost of sales $000s 322,060 261,112 221,567
Earnings (loss) before tax $000s 14,819 (69,592) (74,604)
Earnings (loss) $000s (3,395) (60,102) (51,901)
Basic and diluted earnings (loss) per share $/share (0.01) (0.23) (0.20)
Adjusted earnings (loss) per share^1^ $/share 0.02 (0.06) (0.15)
Operating cash flow before change in non-cash working capital $ millions 132.8 90.7 29.5
Adjusted EBITDA^1^ $ millions 143.2 104.2 49.1
^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.
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---
Consolidated Production and Cost Performance Three Months Ended
--- --- --- --- ---
****** Jun. 30, 2021 Mar. 31, 2021 Jun. 30, 2020
Contained metal in concentrate produced^1^ ****
Copper tonnes 23,474 24,553 18,026
Gold ounces 39,848 35,500 32,614
Silver ounces 685,916 696,673 580,817
Zinc tonnes 21,538 27,940 31,222
Molybdenum tonnes 295 294 124
Payable metal in concentrate sold ****
Copper tonnes 25,176 20,929 15,951
Gold ounces 38,205 25,383 30,590
Silver ounces 577,507 509,760 541,785
Zinc^2^ tonnes 25,361 28,343 27,604
Molybdenum tonnes 265 284 120
Consolidated cash cost per pound of copper produced^3^ ****
Cash cost $/lb 0.84 1.04 0.29
Peru $/lb 1.85 1.82 1.31
Manitoba $/lb (3.51) (1.04) (1.51)
Sustaining cash cost $/lb 2.25 2.16 1.59
Peru $/lb 2.69 2.36 1.84
Manitoba $/lb 0.36 1.62 1.16
All-in sustaining cash cost $/lb 2.48 2.37 1.91

^1^ Metal reported in concentrate is prior to deductions associated with smelter contract terms.

^2^ Includes refined zinc metal sold and payable zinc in concentrate sold.

^3^Cash cost, sustaining cash cost and all-in sustaining cash cost per pound of copper produced, net of by-product credits, are non-IFRS financial performance measures with no standardized definition under IFRS. For further information, please see the "Non-IFRS Financial Reporting Measures" section of this news release.

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Peru Operations Review

Peru Operations Three Months Ended
****** Jun. 30, 2021 Mar. 31, 2021 Jun. 30, 2020
Constancia ore mined^1^ tonnes 8,016,373 7,747,466 2,775,286
Copper % 0.30 0.30 0.34
Gold g/tonne 0.04 0.04 0.04
Silver g/tonne 3.02 2.90 2.90
Molybdenum 0.01 0.01 0.02
Pampacancha ore mined tonnes 982,992 - -
Copper % 0.26 - -
Gold g/tonne 0.27 - -
Silver g/tonne 4.43 - -
Molybdenum 0.01 - -
Ore milled tonnes 7,413,043 6,362,752 4,355,482
Copper % 0.31 0.33 0.34
Gold g/tonne 0.07 0.04 0.04
Silver g/tonne 2.88 2.84 3.04
Molybdenum 0.01 0.01 0.01
Copper recovery % 83.3 84.1 76.6
Gold recovery % 62.2 52.0 43.4
Silver recovery % 68.2 69.9 59.6
Molybdenum recovery 33.3 33.4 19.9
Contained metal in concentrate ****
Copper tonnes 19,058 17,827 11,504
Gold ounces 10,220 4,638 2,311
Silver ounces 468,057 405,714 253,687
Molybdenum tonnes 295 294 124
Payable metal sold ****
Copper tonnes 19,946 14,836 9,023
Gold ounces 5,638 2,963 1,317
Silver ounces 315,064 337,612 242,519
Molybdenum tonnes 265 284 120
Combined unit operating cost^2,3^^,4^ $/tonne 11.25 12.46 7.77
Cash cost^4^ $/lb 1.85 1.82 1.31
Sustaining cash cost^4^ $/lb 2.69 2.36 1.84

^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^Includes COVID-related costs of approximately $6.3 million, or $0.85 per tonne, during the three months ended June 30, 2021 and $4.6 million, or $0.72 per tonne, during the first quarter of 2021.

^4^Combined unit cost, cash cost and sustaining cash cost 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.

Despite recent notable improvements in COVID-19-related statistics in Peru, the Constancia team continues to adhere to strict COVID-19 measures and controls to ensure the safety of Hudbay's workforce, partners and the communities in which it operates. This has allowed Constancia to maintain strong operations, although it has resulted in increased unit operating costs.

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During the second quarter 2021, the Constancia operations produced 19,058 tonnes of copper, 10,220 ounces of gold, 468,057 ounces of silver and 295 tonnes of molybdenum. Production was higher than the first quarter of 2021 primarily as a result of increased throughput and improved gold grades and recoveries compared to the first quarter. Other than molybdenum, which is expected to fall slightly below the 2021 guidance range but in line with the recently published mine plan, Hudbay expects the production of all remaining metals in Peru to be in line with the 2021 full year guidance.

Ore mined during the second quarter of 2021 increased 16% from the first quarter of 2021 as a result of strong operational efficiencies and a smooth ramp up at Pampacancha. Following the finalization of the remaining land user agreement, Pampacancha achieved first production in April, consistent with the company's recently published mine plan. Due to its short ramp-up period, Pampacancha also achieved commercial production in April 2021. Ore milled during the second quarter of 2021 was 17% higher than the first quarter of 2021 as the prior period was impacted by a scheduled mill maintenance shutdown, offset slightly by increased ore hardness in the most recent quarter. Milled grades for copper were lower than the prior quarter, in line with the mine plan, and milled gold grades increased by 75% due to higher gold head grades from Pampacancha. During the second quarter of 2021, Constancia achieved record gold recoveries primarily due to significantly higher head grades from Pampacancha.

Combined mine, mill and G&A unit operating costs in the second quarter of 2021 were $11.25 per tonne, and lower than the first quarter of 2021, primarily due to a higher volume of ore milled, partially offset by higher costs associated with COVID-19 protocols. COVID-related costs in Peru of $6.3 million in the second quarter were higher than budgeted and are expected to continue at a similar run rate for the remainder of the year. Unit operating costs in the second quarter were $10.40 per tonne excluding these COVID-related costs. Hudbay expects Peru unit operating costs to be in line with the 2021 guidance range after adjusting for unbudgeted COVID-related costs.

Peru's cash cost per pound of copper produced, net of by-product credits, in the second quarter of 2021 was $1.85, relatively unchanged from the previous quarter. Higher mining costs and higher general and administrative costs from enhanced COVID-19 protocols were generally offset by lower milling costs and higher gold by-product credits. Peru's sustaining cash cost per pound of copper produced, net of by-product credits, in the first quarter of 2021 increased to $2.69, compared to $2.36 in the first quarter of 2021, due to same factors noted above affecting cash costs, offset by higher sustaining capital expenditures.

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Manitoba Operations Review

Manitoba Operations Three Months Ended
****** Jun. 30, 2021 Mar. 31, 2021 Jun. 30, 2020
Lalor ore mined tonnes 356,951 421,602 407,408
Copper % 0.64 0.57 0.77
Zinc % 3.81 5.20 6.05
Gold g/tonne 3.19 2.67 2.64
Silver g/tonne 22.98 22.75 28.40
777 ore mined tonnes 255,170 275,260 281,890
Copper % 0.82 2.06 1.72
Zinc % 3.57 4.00 4.13
Gold g/tonne 1.97 2.39 1.91
Silver g/tonne 23.35 29.32 25.73
Stall Concentrator: ****
Ore milled tonnes 317,484 361,344 334,601
Copper % 0.68 0.60 0.76
Zinc % 4.06 5.53 6.16
Gold g/tonne 3.19 2.57 2.70
Silver g/tonne 22.02 23.40 28.72
Copper recovery % 88.8 85.7 86.6
Zinc recovery % 88.1 91.1 92.4
Gold recovery % 55.5 57.5 62.3
Silver recovery % 55.1 56.2 62.1
Flin Flon Concentrator: ****
Ore milled tonnes 329,503 283,386 324,906
Copper % 0.89 1.88 1.52
Zinc % 3.65 4.20 4.41
Gold g/tonne 2.06 2.34 1.99
Silver g/tonne 23.65 28.01 25.56
Copper recovery % 84.8 91.3 87.3
Zinc recovery % 84.8 81.8 84.9
Gold recovery % 52.9 64.0 58.6
Silver recovery % 37.5 54.1 50.7
Total contained metal in concentrate ****
Copper tonnes 4,416 6,726 6,522
Zinc tonnes 21,538 27,940 30,303
Gold ounces 29,628 30,862 327,130
Silver ounces 217,859 290,959 31,222
Total payable metal sold ****
Copper tonnes 5,230 6,093 6,928
Zinc^1^ tonnes 25,361 28,343 27,604
Gold ounces 32,567 22,420 29,273
Silver ounces 262,443 172,148 299,266
Combined unit operating cost^2,3^ C$/tonne 148 151 135
Cash cost^3^ $/lb (3.51) (1.04) (1.51)
Sustaining cash cost^3^ $/lb 0.36 1.62 1.16

^1^ Includes refined zinc metal sold and payable zinc in concentrate sold.

^2^ Reflects combined mine, mill and G&A costs per tonne of ore milled. ^3^ Combined unit cost, cash cost and sustaining cash cost are non-IFRS financial performance measures with no standardized definition under IFRS. For further information, please see the "Non-IFRS Financial Reporting Measures" section of this news release.

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Overall production at the Manitoba business unit in the second quarter was negatively impacted by COVID-19 related absences and interruptions at Hudbay's Snow Lake and Flin Flon operations, a scheduled maintenance shutdown at Lalor and a temporary suspension of Lalor operations from June 19 to June 24 following a tragic fatal incident. The incident occurred during underground mining operations on the evening of June 19, 2021, when a worker employed by a service provider was fatally injured from a fall while working at height. Operations were suspended to allow for a thorough investigation by external authorities and a joint investigation by Hudbay and the service provider. Hudbay is committed to preventing similar occurrences and applying the learnings from this incident across its operations.

Production during the quarter included 21,538 tonnes of zinc, 4,416 tonnes of copper, 29,628 ounces of gold and 217,859 ounces of silver. Production results of all metals were lower than the previous quarter primarily due to the aforementioned production interruptions, lower grades, lower recoveries and ore stockpiling for the New Britannia mill.

Ore mined at the Manitoba operations during the second quarter of 2021 was lower than the first quarter of 2021 due to the factors outlined above. Gold grades were higher compared to the previous quarter, consistent with the life of mine production schedule at Lalor. Copper, zinc and silver grades were lower in part due to remnant mining at 777, which results in higher quarter-over-quarter variation as 777 nears the end of its mine life, and the mining sequence at Lalor. The 777 mine is now within one year of closure, and the focus continues to be mining out the remaining reserves by executing the mine production sequence and completing the necessary ground rehabilitation in order to access old workings and remnant stopes.

Development and underground construction activities continue in the lower part of the Lalor mine to support the start-up and ongoing operation of the New Britannia mill. At the end of the second quarter, approximately 47,000 tonnes of gold ore had been stockpiled as initial feed for the New Britannia mill, an increase of 21,000 tonnes from the end of the first quarter of 2021. The incremental mining activity associated with growing the gold ore stockpile has contributed to elevated combined mine, mill and G&A unit operating costs during the first and second quarters of 2021.

The Stall concentrator processed all available ore during the second quarter of 2021, which was 12% lower than the first quarter of 2021. Stall recoveries during the second quarter of 2021 were higher for copper and lower for zinc and precious metals versus the previous quarter but were consistent with the metallurgical model. Ore processed at the Flin Flon concentrator in the second quarter of 2021 increased by 16% compared to the first quarter as a result of processing available ore stockpiles. Recoveries of copper, gold and silver at the Flin Flon concentrator during the second quarter of 2021 were lower than the previous quarter mostly due to lower head grades from the 777 mine, but were consistent with the metallurgical model.

Combined mine, mill and G&A unit operating costs in the second quarter of 2021 slightly decreased compared to the first quarter of 2021 and remained within the annual guidance range.

Manitoba's cash cost per pound of copper produced, net of by-product credits, for the second quarter of 2021 was negative $3.51, lower than the prior quarter primarily due to higher by-product revenues and lower copper production. Manitoba's sustaining cash cost per pound of copper produced, net of by-product credits, in the second quarter of 2021 was $0.36 compared to $1.62 in the first quarter, primarily due to the reasons listed above.

Full year production of all metals and unit operating costs in Manitoba are on track to achieve the guidance ranges for 2021.

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COVID-19 Business Update

The COVID-19 pandemic continues to have a persistent and protracted financial impact on Hudbay's operations as the company continues to maintain strict COVID-19 measures to ensure the safety of its workforce and the communities in which it operates.

Although there has been a notable reduction in the number of new cases of COVID-19 in Canada and Peru along with increased vaccine availability throughout the company's operating regions, Hudbay continues to incur COVID-19 related expenditures beyond levels originally budgeted, including rapid diagnostic test kits, personal protective equipment, temporary accommodation for employees awaiting test results, transportation costs as well as additional cleaning and sanitation expenses related to unscheduled COVID-19 related interruptions at the company's operations. These COVID-related challenges have also had a negative financial impact on the refurbishment of the New Britannia mill and Peru unit costs. The company continues to manage the impact and monitor the risks of the pandemic at each of its locations, and its focus remains on continuing to operate safely and efficiently.

New Britannia Mill Progress and Manitoba Growth Capital Update

Refurbishment activities at the New Britannia gold mill were completed in June 2021 and commissioning and startup activities occurred in July. The mill is expected to achieve first gold production in August, in line with the timelines assumed in the company's production guidance. These timelines are ahead of the original schedule to produce first gold before the end of 2021. 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.

The construction of a new copper flotation facility is on track for commissioning and ramp up in the fourth quarter of 2021. The overall project is approximately 95% complete as of the end of July. As noted last quarter, Hudbay has observed COVID-related cost pressures on the project capital estimate at New Britannia and there have been areas of cost escalation with industry cost inflationary pressures as the project nears completion. As a result, the company expects approximately $20 million in additional growth capital to be spent this year at New Britannia. The company also expects an additional $10 million to be spent in 2021 on the advancement of the Stall mill recovery improvement program, early works for the Lalor mine expansion to 5,300 tonnes per day and the impacts of foreign exchange movements. As such, Manitoba's total growth capital guidance in 2021 has increased to $105 million from $75 million.

Exploration Update

Copper World Exploration

Hudbay's 2020 drill program at its Copper World property in Arizona confirmed the discovery of the Broad Top Butte, Copper World, Peach and Elgin deposits, with a combined strike length of over five kilometres and opportunities to discover additional mineralization between the deposits. The program intersected significant volumes of high-grade copper sulphide and oxide mineralization starting, in most cases, near surface or at shallow depth. Drilling at Broad Top Butte included intersections of 440 feet of 1.38% copper and 246 feet of 0.70% copper starting at surface. Drilling at the Peach and Eglin deposits included intersections of 500 feet of 0.82% copper and 300 feet of 0.64% copper, both starting from surface. The mineralization at the Copper World deposits is located closer to surface than at Rosemont and remains open at depth.

The expanded 2021 exploration program at Copper World is well-advanced with 85,000 feet of drilling completed in the first half of the year and four drill rigs currently turning at site. Hudbay expects to publish an update once the majority of assays have been received for the holes drilled during the first half of 2021. The hydrogeological, geotechnical, mineralogical and metallurgical studies are underway. The company is also evaluating several targets identified through geophysical surveys on Hudbay's extensive regional land package. Hudbay continues to expect to complete an initial inferred resource estimate before the end of the year and a preliminary economic assessment in the first half of 2022.

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Peru Regional Exploration

Hudbay continues to progress discussions with the community of Uchucarcco on the Maria Reyna and Caballito properties, both of which are located within ten kilometres of Constancia.

At the end of June, the company commenced drilling at the Llaguen copper porphyry target located in northern Peru, near the city of Trujillo and in close proximity to existing infrastructure. The initial confirmatory phase of the drill program consists of 5,000 metres with two drill rigs presently turning at site. Pending positive results from this initial drilling phase, a second phase aimed at defining an initial mineral resource for Llaguen is expected to follow either later this year or in the second quarter of 2022 after the rainy season.

A scouting eight-hole drill program was completed at the Quehuincha North target near Constancia. Copper sulphides and oxides were intercepted but at tenors too low to be of economic merit.

Snow Lake Regional Exploration

The company's regional exploration efforts in the Snow Lake area continue, following on its success from the 2021 winter drill program in the Chisel Basin where the copper-gold rich feeder of the 1901 deposit was discovered and high grade zinc and gold mineralization was confirmed through infill and extension drilling. Hudbay's summer program includes surface mapping and ground geophysics to identify both base metal and gold targets as well as a follow-up limited drill program on a new target identified immediately north of the Lalor mine from a borehole survey completed in February 2021. The results from Hudbay's 2021 drill program in Snow Lake are expected to be incorporated into the annual mineral reserve and resource estimates to be published at the end of March 2022.

18th Annual Sustainability Report

In May 2021, Hudbay released its integrated annual and sustainability report ("Annual Sustainability Report"). The Annual Sustainability Report provides transparency and progress on key accomplishments and initiatives in 2020. The company believes that continuously improving how it manages the social, environmental and economic risks, impacts and opportunities associated with its activities is critical for its long-term success.

  • Hudbay's 2020 Annual Sustainability Report disclosures were mapped to the Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB) Metals & Mining industry standard and the Task Force on Climate-related Financial Disclosures (TCFD). The company also provides disclosure through the CDP Climate, Water and Forests questionnaires.
  • To inform Hudbay's sustainability programs and improve its performance, the company applies and voluntarily supports several international best practice standards, including ISO 14001, ISO 45001, ISO 9001, Towards Sustainable Mining, the Voluntary Principles on Security and Human Rights and International Finance Corporation (IFC) Performance Standards.
  • As a member of the Mining Association of Canada, Hudbay implements the Towards Sustainable Mining (TSM) Protocols at all of its operations, with the goal to maintain a score of "A" or higher for all protocols. The implementation of the TSM Tailings protocol and the company's commitment to ensuring that its Tailings Storage Facilities are constructed following the Canadian Dam Safety Guidelines represents substantial alignment to the new Global Tailings Standard released in 2020.
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  • Over 50% of Hudbay's total energy consumption in 2020 was from renewable sources. All electricity at Hudbay's operations is supplied by third parties via regional grids. Nearly all of the electricity produced in Manitoba is through renewable hydropower and, in Peru, over 50% is from renewable sources.
  • The Peru business unit continued its leading safety track record among Peruvian copper mines and was the first mine in Peru to obtain the SafeGuard certification, recognizing full compliance with all COVID-19 safety protocols.
  • The Manitoba business unit achieved its annual safety targets and continuous operations in an environment of enhanced COVID-19 safety protocols and controls, while working closely with the local health authorities.
  • Hudbay recognizes the opportunity that the mining industry has to positively contribute to the 17 UN Sustainable Development Goals (SDGs) that are a part of the UN's 2030 Agenda for Sustainable Development.

Details of Hudbay's sustainability performance data can be found in the Disclosure Centre on the company's website, which includes updated greenhouse gas emissions data revised in August to incorporate International Energy Agency scope 2 emissions factors.

Collective Bargaining Agreements

Hudbay signed a new collective bargaining agreement with the union at its Peru operations for three years, effective November 10, 2020. The company also reached new three-and-a-half year collective bargaining agreements with four of its six unions in Manitoba, effective July 1, 2021. The company continues its efforts to advance the collective bargaining process with the remaining two unions in Manitoba.

Dividend Declared

A semi-annual dividend of C$0.01 per share was declared on August 9, 2021. The dividend will be paid out on September 24, 2021 to shareholders of record as of September 3, 2021.

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Website Links

Hudbay:

www.hudbay.com

Management's Discussion and Analysis:

http://www.hudbayminerals.com/files/doc_financials/2021/Q2/MDA212.pdf

Financial Statements:

http://www.hudbayminerals.com/files/doc_financials/2021/Q2/FS212.pdf

Conference Call and Webcast

Date: Tuesday, August 10, 2021
Time: 8:30 a.m. ET
Webcast: http://services.choruscall.ca/links/hudbay20210810.html
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 Rosemont project has been approved by Cashel Meagher, P. Geo, Hudbay's Senior Vice President and Chief Operating Officer. The technical and scientific information related to the company's other material mineral projects contained in this news release has been approved by Olivier Tavchandjian, P. Geo, Hudbay's Vice President, Exploration and Geology. Messrs. Meagher and Tavchandjian are qualified persons pursuant to NI 43-101. For a description of the key assumptions, parameters and methods used to estimate mineral reserves and resources at Hudbay's material properties, as well as data verification procedures and a general discussion of the extent to which the estimates of scientific and technical information may be affected by any known environmental, permitting, legal title, taxation, sociopolitical, marketing or other relevant factors, please see the technical reports for the company's material properties as filed by Hudbay on SEDAR at www.sedar.com.

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.

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Hudbay believes adjusted net earnings (loss) and adjusted net earnings (loss) per share better reflect the company's performance for the current period and are better indications of 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.

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

Adjusted Net Earnings (Loss) Reconciliation

Three Months Ended
(in $ millions) Jun. 30, 2021 Mar. 31, 2021 Jun. 30, 2020
Profit (loss) for the period (3.4 ) (60.1 ) (51.9 )
Tax expense (recovery) 18.2 (9.5 ) (22.7 )
Profit (loss) before tax 14.8 (69.6 ) (74.6 )
Adjusting items:
Mark-to-market adjustments^1^ 10.9 40.8 8.3
Peru inventory (reversal)/write-down (0.7 ) (0.7 ) (8.2 )
Peru cost of sales direct charge from temporary shutdown - - 25.6
Variable consideration adjustment - stream revenue and accretion - (1.0 ) -
Foreign exchange loss 1.7 1.7 1.8
Write-down of unamortized transaction costs - 2.5 -
Premium paid on redemption of notes - 22.9 -
Adjusted earnings (loss) before income taxes 26.7 (3.4 ) (47.1 )
Tax (expense) recovery (18.2 ) 9.5 22.7
Tax impact of adjusting items (2.3 ) (18.9 ) (9.9 )
Non-cash deferred tax adjustments (0.8 ) (3.3 ) (5.4 )
Adjusted net earnings (loss) 5.4 (16.1 ) (39.7 )
Adjusted net earnings (loss) ($/share) 0.02 (0.06 ) (0.15 )
Basic weighted average number of common shares outstanding (millions) 261.5 261.3 261.3
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Adjusted EBITDA Reconciliation

Three Months Ended
(in $ millions) Jun. 30, 2021 Mar. 31, 2021 Jun. 30, 2020
Profit (loss) for the period (3.4 ) (60.1 ) (51.9 )
Add back: Tax expense (recovery) 18.2 (9.5 ) (22.7 )
Add back: Net finance expense 43.7 108.5 47.8
Add back: Other expenses (income) 1.0 (3.3 ) 1.3
Add back: Depreciation and amortization^1^ 99.3 82.7 80.8
Less: Amortization of deferred revenue and variable consideration adjustment (17.1 ) (15.2 ) (13.9 )
141.7 103.1 41.4
Adjusting items (pre-tax):
Peru inventory (reversal) / write-down (0.7 ) (0.7 ) (8.2 )
Cash portion of Peru cost of sales direct charge    from temporary shutdown - - 12.4
Share-based compensation expenses^2^ 2.2 1.8 3.5
Adjusted EBITDA 143.2 104.2 49.1

^1^Includes the non-cash portion of the Peru cost of sales direct charge from the temporary shutdown of $13.2 million for the three months ended June 30, 2020.

^2^ Share-based compensation expenses reflected in cost of sales and selling and administrative expenses.

Net Debt Reconciliation

(in thousands)
Mar. 31, 2021 Dec. 31, 2020
Total long-term debt 1,180.798 1,135,675
Cash and cash equivalents ) (310,564 ) (439,135 )
Net debt 870,234 696,540

All values are in US Dollars.

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Cash Cost Reconciliation

Consolidated Three Months Ended
Net pounds of copper produced
(in thousands) Jun. 30, 2021 Mar. 31, 2021 Jun. 30, 2020
Peru 42,015 39,302 25,361
Manitoba 9,736 14,828 14,379
Net pounds of copper produced 51,751 54,130 39,740
Consolidated Three Months Ended
--- --- --- --- --- --- ---
Jun. 30, 2021 Mar. 31, 2021 Jun. 30, 2020
Cash cost per pound of copper produced 000s /lb1 000s /lb1 000s /lb1
Cash cost, before by-product credits 218,899 4.23 209,866 3.88 141,374 4.05
By-product credits (175,470 (3.39 (153,515 (2.84 (129,939 (3.11
Cash cost, net of by-product credits 43,429 0.84 56,351 0.94 99,781 0.94

All values are in US Dollars.

Consolidated Three Months Ended
****** Jun. 30, 2021 Mar. 31, 2021 Jun. 30, 2020
Supplementary cash cost information 000s $/lb ^1^ 000s $/lb ^1^ 000s $/lb ^1^
By-product credits^2^: ****** ****** ******
Zinc 77,707 1.50 82,315 1.52 60,094 1.51
Gold ^3^ 68,880 1.33 45,134 0.83 54,163 1.56
Silver ^3^ 15,443 0.30 15,135 0.28 13,108 0.33
Molybdenum & other 13,440 0.26 10,931 0.20 2,574 0.06
Total by-product credits 175,470 3.39 153,515 2.84 129,939 3.27
Reconciliation to IFRS: ****** ****** ******
Cash cost, net of by-product credits 43,429 ****** 56,351 ****** 11,435 ******
By-product credits 175,470 ****** 153,515 ****** 129,939 ******
Treatment and refining charges (15,243 ****** (11,936 ****** (11,464 ******
Share-based compensation        expense 274 ****** 184 ****** 284 ******
Inventory adjustments (723 ****** (723 ****** (8,155 ******
Change in product inventory 15,260 ****** (22,864 ****** 4,000 ******
Royalties 4,288 ****** 3,903 ****** 2,363 ******
Overhead costs related to suspension of activities (cash) - Peru - ****** - ****** 12,358 ******
Depreciation and amortization^4^ 99,305 ****** 82,682 ****** 80,807 ******
Cost of sales^5^ 322,060 ****** 261,112 ****** 221,587 ******

All values are in US Dollars.

^1^Per pound of copper produced.

^2^ By-product credits are computed as revenue per financial statements, amortization of deferred revenue and pricing and volume adjustments

^3^ Gold and silver by-product credits do not include variable consideration adjustments with respect to stream arrangements. Variable consideration adjustments are cumulative adjustments to gold and silver stream deferred revenue primarily associated with the net change in mineral reserves and resources or amendments to the mine plan that would change the total expected deliverable ounces under the precious metal streaming arrangement. For the three months ended March 31, 2021 the variable consideration adjustments amounted to net income of $1,617.

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^4^Depreciation is based on concentrate sold.

^5^As per IFRS financial statements.

Peru Three Months Ended
(in thousands) Jun. 30, 2021 Mar. 31, 2021 Jun. 30, 2020
Net pounds of copper produced^1^ 42,015 39,302 25, 361

^1^Contained copper in concentrate.

Peru Three Months Ended
Q2 2021 Q1 2021 Q2 2020
Cash cost per pound of copper produced 000s /lb 000s /lb 000s /lb
Mining 26,133 0.62 21,539 0.55 7,595 0.30
Milling 40,286 0.96 43,320 1.10 18,703 0.74
G&A 16,910 0.40 14,420 0.37 7,493 0.30
Onsite costs 83,329 1.98 79,279 2.02 33,791 1.33
Treatment & refining 9,824 0.23 6,614 0.17 5,165 0.20
Freight & other 11,555 0.29 8,688 0.22 4,817 0.19
Cash cost, before by-product credits 104,708 2.50 94,581 2.41 43,773 1.73
By-product credits (27,137 (0.65 (22,864 (0.58 (10,575 (0.42
Cash cost, net of by-product credits 77,571 1.85 71,717 1.82 33,198 1.31

All values are in US Dollars.

Peru Three Months Ended
Jun. 30, 2021 Mar. 31, 2021 Jun. 30, 2020
Supplementary cash cost information 000s $/lb 000s $/lb 000s $/lb
By-product credits^2^:
Gold^3^ 8,835 0.21 4,155 0.11 2,129 0.08
Silver^3^ 7,466 0.18 9,337 0.24 6,827 0.27
Molybdenum 10,836 0.26 9,372 0.24 1,619 0.06
Total by-product credits 27,137 0.65 22,864 0.58 10,575 0.42
Reconciliation to IFRS:
Cash cost, net of by-product credits 77,571 71,717 33,198
By-product credits 27,137 22,864 10,575
Treatment and refining charges (9,824 (6,614 (5,165
Inventory adjustments (723 (723 (8,155
Share-based compensation expenses 52 19 49
Change in product inventory 4,465 (10,575 (1,916
Royalties 578 1,165 578
Overhead costs related to suspension of activities (cash) - - 12,358
Depreciation and amortization^4^ 52,710 40,435 33,152
Cost of sales^5^ 151,966 118,288 74,674

All values are in US Dollars.

^1^Per pound of copper produced.

^2^By-product credits are computed as revenue per financial statements, 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.

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^5^As per IFRS financial statements.

Manitoba Three Months Ended
(in thousands) Jun. 30, 2021 Mar. 31, 2021 Jun. 30, 2020
Net pounds of copper produced^1^ 9,736 14,828 14,379

^1^Contained copper in concentrate.

Manitoba Three Months Ended
Jun. 30, 2021 Mar. 31, 2021 Jun. 30, 2020
Cash cost per pound of copper produced 000s /lb 000s /lb 000s /lb
Mining 54,714 5.62 54,420 3.67 44,820 3.12
Milling 13,655 1.40 12,662 0.85 11,466 0.80
Refining (Zinc) 17,908 1.84 19,607 1.32 16,617 1.16
G&A 14,749 1.51 15,787 1.06 11,042 0.77
Onsite costs 101,026 10.38 102,476 6.91 83,945 5.85
Treatment & refining 5,419 0.56 5,322 0.36 6,299 0.44
Freight & other 7,746 0.80 7,487 0.50 7,357 0.51
Cash cost, before by-product credits 114,191 11.73 115,285 7.77 97,601 6.80
By-product credits (148,333 (15.24 (130,651 (8.81 (119,364 (8.31
Cash cost, net of by-product credits (34,142 (3.51 (15,366 (1.04 (21,763 (1.51

All values are in US Dollars.

Manitoba Three Months Ended
****** Jun. 30, 2021 Mar. 31, 2021 Jun. 30, 2020
Supplementary cash cost information 000s $/lb 000s $/lb 000s $/lb
By-product credits^2^: ****** ****** ******
Zinc 77,707 7.98 82,315 5.55 60,094 4.18
Gold^3^ 60,045 6.17 40,979 2.76 52,034 3.62
Silver^3^ 7,977 0.82 5,798 0.39 6,281 0.44
Other 2,604 0.27 1,559 0.11 955 0.07
Total by-product credits 148,333 15.24 130,651 8.81 119,364 8.31
Reconciliation to IFRS: ****** ****** ******
Cash cost, net of by-product credits (34,142 ****** (15,366 ****** (21,763 ******
By-product credits 148,333 ****** 130,651 ****** 119,364 ******
Treatment and refining charges (5,419 ****** (5,322 ****** (6,299 ******
Share-based compensation expenses 222 ****** 165 ****** 235 ******
Change in product inventory 10,795 ****** (12,289 ****** 5,916 ******
Royalties 3,710 ****** 2,738 ****** 1,785 ******
Depreciation and amortization^4^ 46,595 ****** 42,247 ****** 47,655 ******
Cost of sales^5^ 170,094 ****** 142,824 ****** 146,893 ******

All values are in US Dollars.

^1^Per pound of copper produced.

^2^By-product credits are computed as revenue per financial statements, 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.

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Sustaining and All-in Sustaining Cash Cost Reconciliation

Consolidated Three Months Ended
Jun. 30, 2021 Mar. 31, 2021 Jun. 30, 2020
All-in sustaining cash cost per pound of copper produced 000s $/lb 000s $/lb 000s $/lb
Cash cost, net of by-product credits 43,429 0.84 56,351 1.04 11,435 0.29
Cash sustaining capital expenditures 68,803 1.33 56,456 1.04 49,467 1.24
Royalties 4,288 0.08 3,903 0.07 2,363 0.06
Sustaining cash cost, net of by-product credits 116,520 2.25 116,710 2.16 63,265 1.59
Corporate selling and administrative expenses & regional costs 10,995 0.22 10,765 0.20 11,608 0.29
Accretion and amortization of decommissioning and community agreements^1^ 705 0.01 579 0.01 1,049 0.03
All-in sustaining cash cost, net of by-product credits 128,220 2.48 128,054 2.37 75,922 1.91
Reconciliation to property, plant and equipment additions:
Property, plant and equipment additions 96,090 82,378 31,719
Capitalized stripping net additions 22,506 18,625 18,969
Decommissioning and restoration obligation net additions 11,039 (64,504 16,690
Total accrued capital additions 129,635 36,499 67,378
Less other non-sustaining capital costs^2^ 63,694 2,655 33,527
Total sustaining capital costs 65,941 33,844 33,851
Right of use leased assets (9,101 (1,321 (4,716
Capitalized lease cash payments - operating sites 8,331 9,188 7,609
Community agreement cash payments 108 235 546
Accretion and amortization of decommissioning and restoration obligations 3,524 14,510 12,177
Cash sustaining capital expenditures 68,803 56,456 49,467

All values are in US Dollars.

Peru Three Months Ended
Jun. 30, 2021 Mar. 31, 2021 Jun. 30, 2020
Sustaining cash cost per pound of copper produced $000s $/lb $000s $/lb $000s $/lb
Cash cost, net of by-product credits 77,571 1.85 71,717 1.82 33,198 1.31
Cash sustaining capital expenditures 34,898 0.83 19,802 0.50 12,855 0.51
Royalties 578 0.01 1,165 0.03 578 0.02
Sustaining cash cost per pound of copper produced 113,047 2.69 92,684 2.36 46,631 1.84
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Manitoba Three Months Ended
--- --- --- --- --- --- ---
Jun. 30, 2021 Mar. 31, 2021 Jun. 30, 2020
Sustaining cash cost per pound of copper produced 000s /lb 000s /lb 000s /lb
Cash cost, net of by-product credits (34,142 (3.51 (15,366 (1.04 (21,763 (1.51
Cash sustaining capital expenditures 33,905 3.49 36,654 2.47 36,612 2.55
Royalties 3,710 0.38 2,738 0.18 1,785 0.12
Sustaining cash cost per pound of copper produced 3,473 0.36 24,026 1.62 16,634 1.16

All values are in US Dollars.

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 Jun. 30, 2021 Mar. 31, 2021 Jun. 30, 2020
Mining 26,133 21,539 7,595
Milling 40,286 43,320 18,703
G&A ^1^ 16,910 14,420 7,493
Other G&A ^2^ 52 19 49
Unit cost 83,381 79,298 33,840
Tonnes ore milled 7,413 6,363 4,355
Combined unit cost per tonne 11.25 12.46 7.77
Reconciliation to IFRS: ****
Unit cost 83,381 79,298 33,840
Freight & other 11,555 8,688 4,817
Other G&A (52 ) (19 ) (49 )
Share-based compensation expenses 52 19 49
Inventory adjustments (723 ) (723 ) (8,155 )
Change in product inventory 4,465 (10,575 ) (1,916 )
Royalties 578 1,165 578
Overhead costs related to suspension of activities (cash) - - 12,358
Depreciation and amortization 52,710 40,435 33,152
Cost of sales^3^ 151,966 118,288 74,674

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

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

^3^As per IFRS financial statements.

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Manitoba Three Months Ended
--- --- --- --- --- --- ---
(in thousands except tonnes ore milled and unit cost per tonne) ****** ****** ******
Combined unit cost per tonne processed Jun. 30, 2021 Mar. 31, 2021 Jun. 30, 2020
Mining 54,714 54,420 44,820
Milling 13,655 12,662 11,466
G&A ^1^ 14,749 15,787 11,042
Less: G&A allocated to zinc metal production (3,724 ) (3,818 ) (3,264 )
Less: Other G&A related to profit sharing costs (1,274 ) (2,179 ) -
Unit cost 78,120 76,872 64,064
USD/CAD implicit exchange rate 1.23 1.27 1.39
Unit cost - C$ 95,927 97,341 88,753
Tonnes ore milled 646,987 644,730 659,507
Combined unit cost per tonne - C$ 148 151 135
Reconciliation to IFRS: ****
Unit cost 78,120 76,872 64,064
Freight & other 7,746 7,487 7,357
Refined (zinc) 17,908 19,607 16,617
G&A allocated to zinc metal production 3,724 3,818 3,264
Other G&A related to profit sharing 1,274 2,179 -
Share-based compensation expenses 222 165 235
Change in product inventory 10,795 (12,289 ) 5,916
Royalties 3,710 2,738 1,785
Depreciation and amortization 46,595 42,247 47,655
Cost of sales^2^ 170,094 142,824 146,893

^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 and potential revisions to such guidance, anticipated production at Hudbay's mines and processing facilities, expectations regarding the impact of the COVID-19 pandemic on operations, financial condition and prospects, and the company's ability to effectively engage with local communities in Peru and other stakeholders, the anticipated timing, cost and benefits of developing the Rosemont project and the outcome of litigation challenging Rosemont's permits, expectations regarding the Copper World exploration program, expectations regarding the Lalor gold strategy, including the refurbishment, commissioning and ramp-up of the New Britannia mill and the expectations regarding the mine plan for the 1901 deposit, increasing the mining rate at Lalor and optimizing the Stall and New Britannia mills, the possibility of converting inferred mineral resource estimates to higher confidence categories, 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>2021 No. 18

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 during the COVID-19 pandemic;
  • 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 unit cost guidance;
  • no significant interruptions to operations or significant delays to the company's development projects in Manitoba and Peru due to the COVID-19 pandemic;
  • the availability of spending reductions and liquidity options;
  • the successful completion of the New Britannia project on budget and on schedule;
  • the successful outcome of the Rosemont litigation;
  • the successful renegotiation of collective agreements with the labour unions that represent certain of Hudbay's employees in Manitoba;
  • 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>2021 No. 18
  • 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 the COVID-19 pandemic and its effect on the company's operations, financial condition, projects and prospects, the possibility of a global recession arising from the COVID-19 pandemic and attempts to control it, the change in government in Peru, future uncertainty with respect to the Peruvian mining tax regime, risks generally associated with the mining industry, such as economic factors (including future commodity prices, currency fluctuations, energy prices and general cost escalation), uncertainties related to the development and operation of Hudbay's projects, risks related to the U.S. district court's recent decisions to set aside the U.S. Forest Service's FROD and the Biological Opinion for Rosemont and related appeals and other legal challenges, risks related to the new Lalor mine plan, including the schedule for the refurbishment, commissioning and ramp-up of the New Britannia mill and the ability to convert inferred mineral resource estimates to higher confidence categories, dependence on key personnel and employee and union relations, risks related to political or social instability, unrest or change, risks in respect of Indigenous and community relations, rights and title claims, operational risks and hazards, including the cost of maintaining and upgrading the Company's tailings management facilities and any unanticipated environmental, industrial and geological events and developments and the inability to insure against all risks, failure of plant, equipment, processes, transportation and other infrastructure to operate as anticipated, compliance with government and environmental regulations, including permitting requirements and anti-bribery legislation, depletion of 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 heading "Financial Risk Management" in the company's Management's Discussion and Analysis dated August 9, 2021 and under the heading "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>2021 No. 18

About Hudbay

Hudbay (TSX, NYSE: HBM) is a diversified mining company primarily producing copper concentrate (containing copper, gold and silver) and zinc metal. 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

Director, 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.

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