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Hud

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Hudbay | 2011 Corporate Social Responsibility Report

Table of ConTenTs

Introduction p1 Responsible Mining p2 Message from the CEO p4 Targets and Achievements p6 About This Report p8 Strategy and Governance p10

Economic Responsibility p18 Employees p22 Local Communities p28 Environmental Stewardship p34 Key Performance Data p40 GRI Index p45

Glossary (inside back cover)

YUKON

COLOMBIA

MICHIGAN

MANITOBA

HEAD OFFICE

PERU

CHILE

about Hudbay

> Hudbay is a diversified mining company that produces copper concentrate (containing copper, gold and silver) and zinc metal. We are headquartered in Toronto, Ontario, Canada, and listed on the Toronto Stock Exchange and the New York Stock Exchange under the symbol HBM.

operaTionsFlin Flon, Manitoba

• 777 and Trout Lake mines

• Flin Flon concentrator

• Zinc plant

Snow Lake, Manitoba

• Chisel North mine

• Snow Lake concentrator

DevelopmenTLalor Project, Manitoba

Constancia Project, Peru

Reed Copper Project, Manitoba

exploraTionBack Forty Joint Venture

Project, Michigan

Tom and Jason, Yukon

Cartagena, Colombia (office supporting

early-stage exploration)

Santiago, Chile (office supporting

early-stage exploration)

Care anD mainTenanCeBalmat, New York

• Zinc mine and concentrator

NotES:Hudbay held an interest in the Fenix nickel project in

Guatemala until it was sold in September 2011. The

Company also owned the Zochem zinc oxide plant in

Brampton, Ontario, until it was sold in October 2011.

Both Fenix and Zochem are included in the statistics and

indicators discussed in this report up to the point of sale.

Hudbay 2011 CoRpoRatE SoCIaL RESpoNSIbILIty REpoRt > 1

at Hudbay, wE aRE pRoud of tHE faCt tHat tHE mINERaLS wE mINE pLay a fuNdamENtaL RoLE IN tHE EvERyday LIvES of bILLIoNS of pEopLE aRouNd tHE woRLd. wE aLSo uNdERStaNd tHE RESpoNSIbILItIES tHat ComE wItH mININg. fRom tHE StaRt of ExpLoRatIoN to mINE CLoSuRE, wE HoLd ouRSELvES aCCouNtabLE foR CREatINg SuStaINabLE ECoNomIC, ENvIRoNmENtaL aNd SoCIaL pERfoRmaNCE.

• Implemented a corporate human rights policy in 2011

• Achieved our best-ever year for safety, with lost time accident frequency down from 1.2 in 2010 to 0.3 in 2011

• Collaborated with the Mining Association of Manitoba and the Northern Manitoba Sector Council to develop training

to help qualify northern and First Nations people for jobs at our operations

• Signed life of mine land use agreements with the communities of Uchuccarco and Chilloroya in Peru (March 2012)

• Set up scholarship funds with the Universidad Nacional de San Antonio Abad del Cusco and the Universidad Nacional

San Agustin de Arequipa in Peru for students studying in mining-related fields

• Reduced greenhouse gas emissions from our Manitoba operations by 83% from 1990 to 2011

• Invested $2.4 million in community programs and contributions to charities

>

2 < Hudbay 2011 CoRpoRatE SoCIaL RESpoNSIbILIty REpoRt

ExpLoRatIoN

Prior to exploration, we engage with local communities and

indigenous peoples and obtain all necessary approvals and

permits. Leading-edge exploration technology and best

practices are designed to minimize our environmental impact.

Exp

dEvELopmENt

A mine is built only if a mineral deposit is economically

feasible, and community and appropriate environmental

standards can be met. We conduct environmental and social

impact assessments and financial feasibility studies, consult

with local stakeholders and obtain all necessary permits.

During construction, preference is given to local citizens

and businesses for jobs and contracts.

dev

opERatIoNS

We require our operating facilities to become certified

under the ISO 14001 environmental standard and the

OHSAS 18001 health and safety standard within two years

of start-up. In the workplace and the community, we uphold

high standards of honest and ethical behaviour and strive to

build capacity to enable people to improve their career and

economic prospects.

ops

prd

pRoduCtS

All Hudbay products are accompanied by material safety

data sheets that provide pertinent information on product

composition, toxicology relating to human health and the

environment, handling, storage and exposure issues.

Rem

REmEdIatIoN

At mine closure, we carry out an orderly, safe and

environmentally sound process of converting an operating

mine to its pre-mining condition. Over the course of its

history, Hudbay has successfully reclaimed and remediated

19 mines.

360° RESpoNSIbILIty

> From the start of exploration to mine closure, we strive to be a responsible partner – committed to the health, safety and well-being of our team members and accountable for creating sustainable economic, environmental and social performance.


product StewardshipOur principal products are copper

concentrate and zinc. The copper

concentrate is primarily sold to

smelters in North America and

Europe. From there, several stages

of melting and purifying the copper

content ultimately result in 99.9%

pure copper, which is used in a

myriad of different products. The

concentrate is shipped by rail in

covered cars.

We ship cast zinc metal produced

at our Flin Flon zinc plant by rail

and truck to a variety of industrial

customers (primarily galvanizers)

throughout North America.

Because of Hudbay’s position in

the value chain, we believe that

meeting our product stewardship

commitments is best done in

collaboration with other key

stakeholders, including governments

and industry associations. Hudbay

is a member of the International

Zinc Association, whose mission

is to support and advance zinc

products and markets through

research, development, technology

transfer and communication of the

unique attributes that make zinc

sustainable and essential for life.

products in useHudbay products are the building

blocks for many of life’s essentials:

• The average North American

home contains 400 pounds of

copper (used for electrical wiring,

pipes and appliances)

• The average car contains 50 pounds

of copper and the average

747 jetliner contains 9,000 pounds

• The average person will use

1,500 pounds of copper just to

enjoy today’s standard of living

(in computers, telephones,

automobiles, etc.)

• 55% of zinc is used for galvanizing

to protect steel from corrosion

• The average car contains about

39 pounds of zinc

• Zinc is called the “great

protector” because it is used to

protect metals (galvanizing) as

well as humans, in products such

as sunscreen (zinc oxide), zinc

lozenges and vitamins

External Codes and InitiativesHudbay has adopted a number of

voluntary codes and external

frameworks that we consider

particularly relevant to our business.

For some, we undergo regular

third-party verification:

• ISO 14001 environmental standard

• OHSAS 18001 health and safety

standard

• Towards Sustainable Mining

(TSM) – an initiative of the Mining

Association of Canada

• Voluntary Principles on Security

and Human Rights – an operating

framework that ensures

respect for human rights and

fundamental freedoms

• Global Reporting Initiative (GRI) –

the generally accepted framework

for reporting on an organization’s

economic, environmental and

social performance

• Carbon Disclosure Project (CDP) –

thousands of organizations

from across the world’s major

economies measure and disclose

their greenhouse gas emissions,

water use and climate change

strategies through the CDP


mESSagE to StakEHoLdERS

> This is an exciting time for Hudbay as we apply the skills and knowledge gained from 85 years of successful mining in Manitoba to the development of new mines and to our entry into new parts of the world.

Our very first mine gave rise to the town of Flin Flon, and

we are still there today, running a world-class operation and

pursuing new opportunities in step with the community.

Similarly, our operations in Snow Lake have flourished and

been a mainstay of that community for more than 50 years.

Over the course of our history, Hudbay has proven to be a

responsible business and a responsible corporate citizen –

upholding a strong set of values and ethical principles,

providing stable and fulfilling careers for our people,

delivering value to our customers and shareholders, and

helping build strong and sustainable communities.

Recognizing that we can only provide an economic base to

our communities if Hudbay remains financially strong as a

company, we have at times needed to reduce our employee

numbers to sustainable levels. We have strived to do so in a

responsible manner. Now we are in a growth phase, which will

in turn help many of our local communities thrive.

As Hudbay expands throughout the Americas, we intend to

continue the same way we have in Manitoba, confident in our

abilities and firm in our belief that business objectives and

sustainable development go hand in hand. Evidence of our

intentions can be found in our 2011 accomplishments.

SafEty pERfoRmaNCE

Upon reaffirming our focus on safety this past year, we

improved on the Company’s stellar safety record, achieving

our best-ever lost time accident frequency. We also worked

to support good safety practices at our new sites. The

Lalor project went 707 days without a lost time accident.

Additionally, safety team members from the corporate

office and Manitoba operations collaborated with their new

Peruvian colleagues to build environment, health, safety and

community management systems at Constancia and provide

safety training and advice to the management team.


tRaININg aNd EduCatIoN

We believe that hiring as many local people as possible is best

for Hudbay and for our communities. In 2011, we worked to

prepare residents living near our projects for employment

at these operations. In Manitoba, this included collaborating

with the Mining Association of Manitoba and the Northern

Manitoba Sector Council to develop technical training

programs. Similarly, in Peru, we introduced a program to

provide technical skills training to people in the neighbouring

communities of Uchuccarco and Chilloroya, partnering with

Tecsup, the Peruvian technical training organization. Some

120 students each completed 60 hours of training in 2011.

In addition, we launched a program designed to foster

entrepreneurship, and began meeting with other nearby

communities from whom we also draw our workforce, to

discuss development opportunities with them.

Our experience in Flin Flon has demonstrated the importance

of affiliations with educational institutions in strengthening

community capacity and building our potential talent pool.

We donated land and are financially supporting the recently

completed Northern Manitoba Mining Academy, which aims to

train the next generation of area miners for high-skilled jobs.

In much the same way, we are collaborating on the creation of

the International Centre for Mining Production and Regional

Development in the province of Chumbivilcas in Peru. We

also set up scholarship funds with the Universidad Nacional

de San Antonio Abad del Cusco and the Universidad Nacional

San Agustin de Arequipa to support students studying in

mining-related fields. Scholarship recipients will have the

opportunity to gain real-world experience at Hudbay projects

across the Americas.

CommuNIty ENgagEmENt

We value our longstanding associations with the communities

near our Manitoba operations and look forward to establishing

similar relationships with the communities near our new

project locations.

Stakeholder dialogue and engagement are essential for

building trust, maintaining community support and enabling

us to deliver on our commitments. In 2011, we were pleased

to participate in the newly established community advisory

group at the Back Forty project in Michigan and the joint

environmental monitoring committee at Constancia, which

provide forums for dialogue and collaboration.

Meanwhile, the past year presented many challenges in our

relationships with local communities in Peru, as we stepped

in as a new owner of the Constancia project and moved

the project towards construction. We believe that our

commitment to peaceful dialogue, combined with the training

of our workforce and security contractor, enabled us to work

constructively with the communities, and paved the way

for the signing of life of mine land use agreements with the

Uchuccarco and Chilloroya communities in March 2012.

woRd of tHaNkS

Ultimately, our success in business and in corporate social

responsibility comes down to our people. Hudbay has

incredibly talented people who regularly demonstrate

their enthusiasm and willingness to do the right thing

and to achieve the best possible results for our Company,

our investors and our communities. I extend to them my

heartfelt thanks.

Sincerely,

DaviD GarofaloPresident and Chief Executive Officer

Hudbay is moving onto the larger world stage with pride and confidence. We recently launched a new brand as our way of sending a clear message that we are one company, with a single set of values and operating principles, dedicated to finding, developing and operating safe, sustainable and profitable mines.


2011 taRgEtS aNd aCHIEvEmENtS

taRgEt aCHIEvEmENt dEtaILS

HealTH anD safeTY Target zero lost time accidents Lost time accident frequency of 0.3 made 2011 our best-ever year for safety, down from 1.2 in 2010.

Reduce accident severity to zero Lost time accident severity declined from 30 in 2010 to 7.6 in 2011.

Reduce medical aid and first aid Medical aid frequency declined from 10 in 2010 to 7.1 in 2011. frequencies over 2010 performance First aid frequency improved from 18 to 12.7.

CommUniTY Expand our implementation of the Personnel working on the Constancia project are using the TSM external outreach framework framework to guide their community engagement activities.

Work with the local communities to See pages 20 and 30 (Lalor) and pages 21 and 31 (Constancia) help them prepare for involvement with for details. the Lalor and Constancia projects

environmenT Reduce total CO2-equivalent (CO2-e) CO2-e emissions declined by 46% primarily due to the elimination emissions by 1% over 2010 emissions of the use of heavy fuel oil associated with our first full year without the copper smelter and subsequent to the conversion to electric boilers at the Flin Flon complex.

Reduce Flin Flon operations’ fresh Total water consumption declined by 3.1% due to a variety of water usage by 1% from 2010 usage water conservation projects.

Continue progress on the greening Completed the final cleanup in the South Main headframe area program in Flin Flon and commenced revegetation of the Mouse Pond area and the Hanson Lake Highway dam.

eConomiC Advance construction of the Lalor project Surface mining facilities at Lalor were largely constructed by year-end in preparation for initial production in the second half of 2012.

Prepare the Constancia project for Carried out more than $50 million of work to advance project a construction decision in 2012 design and planning. A formal project recommendation is expected in mid-2012.

Progress to construction decision Made a $71 million commitment to the construction of the on Reed copper project Reed copper project, with first production expected by late 2013.

Continue exploration of the Invested more than $30 million in exploration in the FFGB. Flin Flon Greenstone Belt (FFGB) Airborne electromagnetic surveys have identified more than 2,000 geophysical anomalies that we are systematically testing.

Expand exploration activity in current • Realized significant exploration success in Peru, confirming the target regions of Yukon, Michigan, continuity of higher-grade copper and gold mineralization at the Peru and Chile nearby Pampacancha deposit. • Entered into option agreements in Chile and Colombia. • Completed an exploration program at the Tom and Jason properties in the Yukon. • Progressed the drilling program, engineering work and environmental assessments at the Back Forty project in Michigan.

Continue program of strategic investments • Invested $44 million in our junior portfolio by adding to five and establish longer-term credit existing positions and investing in five new equity opportunities. facilities for financial flexibility • Efforts to arrange project financing for Constancia were initiated and are ongoing.


taRgEt aCHIEvEmENt dEtaILS

GovernanCe Develop and implement a corporate Human Rights Policy was approved in May 2011. This policy human rights policy formalizes our human rights commitments, including our commitment to the Voluntary Principles on Security and Human Rights, which we followed at our Guatemalan subsidiary during Hudbay’s ownership.

2012 taRgEtS

OPERATIONAL EXCELLENCE / LEADERSHIP

Health and safety

Target zero lost time accidents

Reduce accident severity to zero

Community

Transition through the closure of the Trout Lake and Chisel mines, and increase workforces on the Reed and Lalor projects without layoffs

Continue our work with local communities near the Constancia project to help community members gain employment with or provide services to the project

environment

Continue CO2-equivalent annual reduction target of 1% in 2012

Continue Flin Flon operations’ annual fresh water usage reduction target of 1% from 2011 usage

Continue progress on the greening program in Flin Flon

Governance

Progress implementation of the Human Rights Policy, particularly progressing implementation of the Voluntary Principles on Security and Human Rights at Constancia in Peru

FINANCIAL EXCELLENCE / GROWTH

economic

Lalor project – achieve first pre-production ore in 2012

Reed copper project – submit Environmental Act Licence and initiate the underground development ramp with Hudbay crews

Constancia project – obtain approvals for construction

Grow reserves and resources per share

PARTIALLY ACHIEVED ExCELLENT PROGRESS ACHIEVED


about tHIS REpoRt

> The 2011 Corporate Social Responsibility (CSR) report is our eighth such report, and the fourth published in accordance with Global Reporting Initiative (GRI) 3.1 guidelines. Using these guidelines, we have prepared a B level report, as checked by PricewaterhouseCoopers LLP. Our objective over the next few years is to continue at the B reporting level, while incrementally expanding the scope of the data presented and targeting the content to address the interests of our stakeholders.

This report covers Company activities from January 1, 2011 to

December 31, 2011. It also covers some significant events that

occurred subsequent to 2011, and prior to the publication of

this report. Our 2010 report was published in September 2011.

This report covers all operating locations and exploration

activities managed by Hudbay during 2011. Statistical data for

Hudbay Peru is included in this report from April 2011 onward

and for the Back Forty project from June 2011 onward. Data

for the Fenix project and Zochem are included from the start

of the year to the last full month before the sale of each of

these businesses.

audIENCE

The intended audience for this report includes employees of

Hudbay and its subsidiaries, investors, suppliers and service

providers, as well as the communities, indigenous peoples,

governments, regulators and non-governmental organizations

neighbouring, overseeing or interested in Hudbay’s operations

and exploration activities.

baSIS of REpoRtINg

All financial information is presented in Canadian dollars.

All operating data is reported using the metric system.

Some metrics are reported on both an absolute basis and an

intensity basis against kilotonnes of metal processed. Safety

data frequency rates are measured per 200,000 hours worked.

data mEaSuREmENt tECHNIquES

Data is measured or estimated, and operations are asked to

explain significant deviations in year-over-year trends.

The performance data is reported at a mix of operational and

corporate levels. Data is checked and approved at the site

level, and also reviewed for consistency by the corporate data

collection team. During the 2010 reporting, we engaged a

third party to assist in reviewing and improving our templates

and definitions, and further documenting our data collection

process. Some of the changes recommended by the

consultant were implemented in the 2010 report, and further

improvements were made for the 2011 data collection.

We will continue to implement the recommendations and

look for additional improvement opportunities next year,

both to ensure data accuracy and to support the incorporation

of new project groups.

We provide safety and environmental incident definitions

so that all operations report incidents consistently. We

calculate greenhouse gas (GHG) emissions using published

factors for emissions.

Most of the performance data for water and energy is metered.

We do not generate electricity at any of our operations, but

rather buy it from local grids. Utility grid statistics are therefore

used to compile electricity-related GHG numbers. Our

Constancia project site uses a mix of electricity purchased

from the local grid augmented by electricity generated on-site.

In this case, there is both an indirect GHG calculation and a

direct component based on overall site diesel fuel consumption.

QUESTIONS, COMMENTS OR FEEDBACk

We invite your comments and questions about this report. Please contact david Clarry, vice president, Corporate Social Responsibility, 416 362-7364, [email protected].


Data for the indicators is collected and compiled using

information submitted by each site on a standard template.

We provide instruction and criteria for GRI G3.1 and Towards

Sustainable Mining (TSM), and also supply a GHG emissions

worksheet (developed by the Mining Association of Canada).

dEfININg REpoRt CoNtENt

To ensure that our CSR Report addresses the topics of greatest

interest to our stakeholders, we undertook a materiality review

in 2011. The review involved a series of meetings of Hudbay

personnel assisted by a third-party consultant. Participants

included senior leaders as well as representatives from each

site and a cross-section of functional areas.

The process involved identifying key stakeholder groups,

based on the nature and clarity of linkages between the

Company and the stakeholder groups. We then identified

and ranked the issues of importance to each key group.

Assessments were based primarily on our ongoing

consultation and engagement with each stakeholder group

as well as factors such as basic expectations expressed

in international standards and agreements, public policy,

regulations, media coverage and the work of leading

sustainability organizations.

The outcomes were used to identify the priority topics and

additional GRI indicators to be covered in future CSR reports.

We are attempting to provide some additional information on

these topics in this report, as noted in the table at right, and will

continue to refine our information gathering on these topics.

Here is our assessment of the issues of highest priority to our

top-three ranked stakeholder groups, and where you can find

information about these topics:

HigH-Priorityissues WHeretoFindinFormation

Economic performance page 19

Governance page 11

Stakeholder engagement and resettlement page 30

Labour and management relations page 25

Closure planning page 42

Employment general page 23

Occupational health and safety page 24

Training and education page 26

Local market presence pages 20 and 21

Emissions, effluents and waste pages 35 to 38

We intend to conduct a similar exercise every three years.

We are also working to formally track the perspectives

of our increasingly diverse stakeholder community so

that our CSR reporting can continue to provide the most

relevant information.

We engaged PricewaterhouseCoopers LLP (PwC) to complete a set of specified procedures designed to test our assertion that

our CSR report was presented in conformance with the B level reporting standard set out in the guidelines. PwC completed

these procedures and submitted its test results to management, who concluded that the test results supported its assertion.

The PwC tests did not represent an audit or review of the CSR report or the information contained therein.


2REACHED LIFE OF MINE LAND USE AGREEMENTS WITH TWO COMMUNITIES ADJACENT TO THE CONSTANCIA PROJECT IN PERU

Cashel Meagher, Hudbay’s Vice President, South America Business Unit, visiting the Uchuccarco community.


StRatEgy aNd govERNaNCE

> Responsibility begins with the way we conduct our business. Our approach is largely informed by the operating principles and practices developed and refined at our northern Manitoba sites over our 85-year history.

ouR appRoaCH

Hudbay’s strategy is focused on growing the Company

through exploration and development of properties we

already control, such as our Lalor project in Manitoba, as well

as through the acquisition of exploration and development

properties, such as our Constancia project in Peru. We also

intend to optimize the value of our producing assets through

efficient and safe operations.

Good CSR practices are central to our ability to execute our

business strategy. We must demonstrate a broader benefit

from our presence, work in partnership with communities and

governments, and minimize the environmental impact of our

operations in order to achieve our financial goals.

Our approach to CSR is largely informed by the operating

principles and practices developed and refined at our northern

Manitoba locations over our 85-year history. Across the

Company, our sites are united in their commitment to:

• Uphold high standards of honest and ethical behaviour

• Protect the health and welfare of employees and

contractors at our sites

• Be a great place to work

• Be a positive partner in the communities where we operate

• Minimize environmental harm and rehabilitate land affected

by operations

CSR maNagEmENt

Hudbay’s Board of Directors is responsible for overseeing the

implementation of governance and sustainability strategies.

The Board is assisted by the Corporate Governance and

Nominating (CG&N) Committee and the Environmental, Health,

Safety and Sustainability (EHSS) Committee of the Board.

The CG&N Committee develops and recommends appropriate

corporate governance principles and strategies. The CG&N

chair is an independent and non-executive director.

The EHSS Committee oversees management’s development and

implementation of environmental, health and safety policies,

programs and systems. The Committee meets quarterly to

review the Company’s performance and how we are managing

key EHSS issues. The Committee also monitors the external

ISO 14001 and OHSAS 18001 verification processes for

Hudbay’s management systems. The EHSS Committee is also

chaired by an independent director.

Day-to-day management of Hudbay’s CSR program is

the responsibility of our Vice President, Corporate Social

Responsibility, along with executive management personnel

at each operation.

“Upholding high standards of corporate social responsibility is essential for Hudbay’s continued growth. It improves our relationships with communities and governments that give us our licence to operate, helps us manage the risks associated with our activities and reflects our values as individuals. Good governance of CSR assures our stakeholders that we are achieving our standards. In short, good CSR practices make Hudbay a better company and a better investment.”

DaviD ClarrYVice President, Corporate Social Responsibility


CodE of buSINESS CoNduCt aNd EtHICS

Our Code of Business Conduct and Ethics (the Code) sets out

basic principles to guide the behaviour of directors, officers

and employees, all of whom are required to comply with the

Code. All Board directors, executive officers and employees

at a manager level and above are required to provide written

confirmation of their compliance with the Code.

Among other things, the Code sets out responsibilities

regarding conflicts of interest. Directors, officers and

employees are required to avoid any relationship or activity

that might create, or appear to create, a conflict between

their personal interests and the interests of Hudbay and its

subsidiaries. All Hudbay personnel who become aware of a real

or potential conflict are advised to bring it to the attention of

a supervisor or department head.

In addition to the Code, every director, officer and employee

must comply with Hudbay’s Timely Disclosure, Confidentiality

and Insider Trading Policy (the Trading Policy), and all other

Company policies and procedures applicable to them. Copies

of the Code and the Trading Policy are available on our website.

EHS maNagEmENt SyStEm SuRvEILLaNCE audItS

Hudbay requires that the management systems at our

operating facilities be certified under the ISO 14001

environmental standard and the OHSAS 18001 health and

safety standard within two years of start-up. Once certified,

the operations are subject to external surveillance audits

twice a year and internal audits several times a year, in order

to confirm that the management systems continue to comply

with the requirements of the audit standard and that we are

indeed following the management systems.

For the internal audits, a schedule is developed at the beginning

of the year outlining the specific elements to be audited

through interviews, observation of activities and review of

documentation and records. The results of the most recent

audit and any correction actions taken to address previously

identified issues are also reviewed.

Audit reports are submitted to the teams audited and to the

site management team for review and follow-up as needed.

External audit reports are also circulated to corporate

management and the EHSS Committee.

Constancia community team members meet in Peru. Hudbay’s relationship with neighbouring communities has included a joint environmental monitoring committee composed of community members, government authorities and Company representatives.

GOVERNANCE PRACTICES

Please see our 2012 Management Information Circular, available on SEDAR at www.sedar.com and on EDGAR at www.sec.gov, for additional information on Hudbay corporate governance practices, including:

• Board role, composition, independence, qualifications and evaluation

• Board committees and charters

• Executive compensation practices

STRATEGY AND GOVERNANCE


RISk maNagEmENt

We recognize that risk management is essential for effective

governance and for achieving our business objectives. Our risk

management policy defines Hudbay’s approach to enterprise

risk management and establishes a framework within which

specialized policies and practices are developed and refined.

Through our risk management policy, we aim to build capacity

within our people, systems and processes to effectively embed

risk management in the Company culture.

The Board of Directors is ultimately responsible for overseeing

the risk management function, and the Audit Committee of

the Board is mandated to assist in this regard. The Director

of Risk Management and Planning leads the enterprise risk

management program and supports internal risk owners.

All Hudbay executives are responsible for integrating risk

management practices into their key business processes,

including strategic planning, budget and business planning, and

performance measurement. The framework requires practices

for risk identification, assessment, measurement, monitoring,

reporting and treatment. These practices may be specific to

each business area, but must facilitate consolidation of all

significant risk information at the executive management level.

Twice a year, senior management presents to the Audit

Committee the corporate risk assessment, which covers all

major risks that the organization is managing, progress made

in addressing them, and any new or changed risks. Once the

Audit Committee’s input is received, the risk assessment is

presented to the Board.

Human Rights policyHudbay’s Human Rights Policy articulates our commitments to human rights. Key aspects include commitments to:

• Ethical business practices

• Labour practices and labour relations – including our commitments to respecting the rights of labour, and to health

and safety

• Community participation – including community consultation, contributing to long-term and sustainable opportunities

for communities, respecting communities’ legal rights, and participating in a common effort to promote respect for

human rights as they relate to the role of our business

• Security measures that respect human rights – including our adoption of the Voluntary Principles on Security and Human

Rights (Voluntary Principles), and the United Nations (UN) Code of Conduct for Law Enforcement Officials

This policy was approved by our Board of Directors in 2011. While we believe the policy largely reflects practices already

in place at Hudbay, additional implementation in 2011 focused on implementation of the Voluntary Principles at the

Constancia project.

BOArd COMMUNICATIONS

Employees, shareholders and other interested stakeholders are invited to communicate with our Board through our website at www.hudbayminerals.com/eng/contact. Communications are forwarded to the Board Chairman unless addressed to a specific director.

To make a confidential, good-faith report to the Chair of the Hudbay Audit Committee about a perceived violation of the Company’s internal and accounting controls, auditing matters or violations of the Company’s Code of Business Conduct and Ethics, please call 1 877 457-7318 or visit www.clearviewconnects.com. Reports are handled under our whistleblower policy and the Chair of the Audit Committee is responsible for ensuring that they are appropriately investigated. Five incidents were reported in 2011, all of which were investigated and resolved, with corrective action where necessary.



precautionary principleWe recognize that our operations have significant

economic, social and environmental impacts on local

communities, both positive and negative. We work

to maximize the potential positives and mitigate the

negatives. Hudbay operates under the precautionary

principle through the life of a mine, which includes the

use of baseline environmental and social impact studies;

evaluating how to avoid, mitigate or control potentially

significant impacts; implementing appropriate

monitoring and management systems; and addressing

the need for mine closure. In all cases, provision is made

for public consultation and input.

SECuRIty aNd HumaN RIgHtS

In keeping with our Human Rights policy, we have adopted

the Voluntary Principles and train our security personnel

(company or contractor) on the UN Code of Conduct for Law

Enforcement Officials.

The aim of the Voluntary Principles is to guide companies in

maintaining the safety and security of their operations within

an operating framework that ensures respect for human rights

and fundamental freedoms.

We first implemented the Voluntary Principles for personnel

and contractors at the former Fenix project in Guatemala.

This included the development of a policy statement on

security, extensive training of security personnel and active

participation in a community security committee organized by

the local government.

At Constancia, we retained an independent security consultant

in 2011 to conduct a security review and recommend any

changes required in our policies and procedures to align with

the Voluntary Principles. Among the measures taken, we

added a training component on the Voluntary Principles, the

UN Code of Conduct for Law Enforcement Officials and the

UN guidelines on use of force. This training supplements daily

meetings to review security procedures and weekly training on

specific security topics.

We also hired a chief of security for Constancia who works

closely with the national police and a private security

contractor to maintain security on our 20,000-hectare

property. Security personnel patrol the property on foot and

horseback, and in trucks equipped with radios, flashlights

and binoculars. Neither the guards nor Hudbay personnel are

permitted to carry weapons. If a serious confrontation arises,

they are expected to contact local police for assistance.

Government archeologists catalogue artifacts found on Hudbay’s Constancia project. Before mining activities can begin, an archeological team is required to survey the property and record any historical items.



CommuNIty tENSIoNS aNd aCHIEvEmENtS at CoNStaNCIa

Hudbay’s Constancia project borders the communities of

Uchuccarco and Chilloroya. Both communities are constituted

under a Peruvian legal structure providing communal land

ownership to community members. While a large portion of

the land required for the project was purchased from private

land owners, exploration has also been carried out within the

communities, and construction of the project requires purchase

of rights to some of the land of each community.

We believe that Hudbay and Norsemont Mining (the previous

owner of Constancia) have enjoyed good relations with the

Uchuccarco and Chilloroya communities since Norsemont

began exploration in 2005. There have been annual land

rental agreements with each community for many years, and

exploration and project development activities have provided

much employment to these neighbouring communities and to

other communities in the region.

However, 2011 was a year of many changes in transitioning the

project to Hudbay, and in evolving from a relationship focused

on short-term exploration activity to the need to negotiate life

of mine land use agreements with each community. It was also

a year of increasing social conflict in Peru generally, prompted

in part by a tightly contested presidential election and by

attention on some high-profile mining projects.

Our relationship with the community of Uchuccarco was

particularly challenging, partially driven by conflicting

information on property boundaries. The situation led to

a number of peaceful protests by community members.

However, throughout this period, we and the community

sought to keep actions amicable and communications open.

We believe that our policies and training were a major factor

in the ability of our site personnel to respond constructively

to these circumstances, and we appreciate that the local

communities also worked constructively with us.

Hudbay executives and community leaders attend a ceremony to sign a life of mine agreement with the Uchuccarco community.



In March 2012, we reached life of mine land use agreements

with Uchuccarco and Chilloroya. The agreements include

payments to community members, funding for community

development projects, a commitment to local hiring and the

provision of alternative farmland that Hudbay purchased

from a private land owner. We are now in the process of

agreeing on resettlement plans for each of the 36 families

that have dwellings on the land purchased for the mine. These

resettlements include replacement of their houses, farmland

and buildings, and other support and compensation.

Hudbay IN guatEmaLa

On September 9, 2011, Hudbay completed the sale of its

interest in Compañía Guatemalteca de Níquel (CGN), which

owns the Fenix ferro-nickel project in Guatemala. Although

Fenix was a promising project, management and the Board

determined that it did not fit Hudbay’s strategic criteria.

During the time that Hudbay held an interest in the project

through CGN (from late 2008 to September 2011), we and

our subsidiaries worked to resolve an issue of illegal land

occupations through peaceful and constructive dialogue. We

also supported a number of community programs through the

Raxche Foundation and directly supported several community

security initiatives.

Despite our efforts and, we believe, our responsible behaviour,

three claims have been filed against Hudbay in Canada which

are related to our ownership of CGN. These lawsuits include

serious allegations of wrongdoing against CGN security

personnel in relation to illegal land occupations. Based on

extensive internal investigations and eyewitness reports,

Hudbay believes the allegations in the lawsuits are without

merit. More information on this issue can be found on

our website at www.hudbayminerals.com/English/

Responsibility/CSR-Issues/default.aspx.

Cashel Meagher, Vice President, South America Business Unit, with Uchuccarco community members in Peru.



INduStRy INvoLvEmENt

Hudbay participates in a number of industry associations and

multi-stakeholder groups through membership, funding,

provision of expertise, and participation in committees and

working groups. Memberships include the following:

• Mining Association of Canada

• Mining Association of Manitoba

• Saskatchewan Mining Association

• Mines Accident Prevention Association of Manitoba

• Northern Manitoba Sector Council (not-for-profit

corporation representing the region’s major mining,

forestry and energy sector employers)

• Canadian Institute of Mining and relevant societies

• International Zinc Association

• Canadian Dam Association

• Manitoba Employers Council

• Prospectors and Developers Associations (of Canada, and

provincial associations)

• Canadian Manufacturers and Exporters

• Industrial Accident Prevention Association (Ontario)

• AIME – Society of Mining Engineers

• Grupo Cusco (Peru) (an independent group of mining

companies conducting exploration activities in the

Region of Cusco, Peru)

• Cámara de Comercio Peru Canada (Peruvian-Canadian

Chamber of Commerce)

• SNMPE (national society of mining, oil and gas, and electrical

companies in Peru)

• SARCC (organization of SNMPE member companies

providing emergency response services)

• Grupo Dialogo (multi-stakeholder group promoting open

and transparent dialogue on mining, environmental

protection and sustainable development)

• Empresarios por la Educación (a Peruvian private sector

organization to promote and develop educational projects)

• Marinette & Menominee Area Chamber of Commerce

• Michigan Manufacturer’s Association

• Dickinson Area Partnership (association focused on

improving the economic health of the Dickinson County

area in northern Michigan)

• Economic Club of Marquette County

• Canadian Council for Aboriginal Business

• Rocky Mountain Mineral Law Foundation

towards Sustainable miningAs a member of the Mining Association of Canada (MAC), Hudbay is committed

to achieving the performance objectives set out in Towards Sustainable Mining

(TSM). This is a codified system establishing benchmarks for best performance

and continuous improvement in the areas of crisis communications, tailings

management, external outreach, energy use and greenhouse gas emissions,

biodiversity, and health and safety. Our conformance to TSM is externally

verified by MAC-trained assessors every three years. For recent performance

data, please visit the TSM page on our website at www.hudbayminerals.com/

English/Responsibility/Reports/tSm-table/default.aspx.

A Hudbay employee tests a tailings sample in Flin Flon, Manitoba.



$330 millionCOMMITTED $330 MILLION FOR GROWTH PROJECTS IN 2012

The Fortunia camp at Hudbay’s Constancia project in Peru.


ECoNomIC RESpoNSIbILIty

> We are committed to producing strong investor returns and creating better futures for communities and employees by finding, building and operating successful mines.

ouR appRoaCH

Hudbay’s mission is to create sustainable value through

increased commodity exposure on a per share basis, in

high-quality long-life deposits with exploration potential in

jurisdictions where conditions are supportive of responsible

mine development and operation.

We believe that our broader commitment to sustainability

needs to be anchored by strong economic performance.

To realize this:

• We pursue growth by finding new deposits and bringing

them into production, and by acquiring exploration and

development properties that meet our strategic criteria.

• We optimize the value of our producing assets through safe

and efficient operations.

• We maintain a strong balance sheet.

Our business success gives us the means to hire and invest

in people, pay competitive wages and benefits, generate

business opportunities for local entrepreneurs, and provide

financial support and expertise for community programs and

infrastructure development.

CoRpoRatE pERfoRmaNCE

Hudbay’s 2011 financial results reflected strong operating and

cost performance, together with the successful elimination

of our excess copper concentrate inventory. Results also

benefited from stronger copper and precious metal prices

compared to 2010.

Our Manitoba operations achieved their production targets

for the fifth consecutive year. The 777 mine produced at

full capacity and we managed the challenges associated

with late-stage mining operations at our Trout Lake and

Chisel North mines.

We sold the Fenix ferro-nickel project in Guatemala and

Zochem, our Brampton, Ontario-based zinc oxide production

facility. These transactions will allow us to better focus our

attention and financial resources on our growth strategy.

Including losses from discontinued operations due mainly to

the disposition and related carrying value impairment of our

investment in the Fenix project, Hudbay recorded a loss of

$163.6 million in 2011 as compared to a profit of $21.0 million

in the prior year. Profit from continuing operations was

$75.2 million compared to $40.4 million in 2010, as higher

sales volumes and metal prices more than offset the impact

of deferred Peruvian mining taxes.

“Peru is an interesting place to work. The optimism is overwhelming and the economic investment relative to what the country is accustomed to is staggering. However, for a variety of reasons, many remote communities depend on mining companies for investment. Forming respectful and trusting relationships with these communities is critical to meeting their needs and expectations, and that is Hudbay’s priority.”

CasHel meaGHerVice President, South America Business Unit

ANNUAL REPORT

For more information about Hudbay’s 2011 financial and operational performance, please see our 2011 Annual Report available on our website.


Operating cash flow (not including changes in working capital)

was $220.3 million in 2011 compared with $140.5 million in 2010,

also reflecting higher metal prices and sales volumes. We

reinvested our cash flow in the Lalor and Constancia projects and

other growth opportunities as well as our common share dividend.

Significant progress was made on our growth projects:

• Upon acquiring the Constancia copper project in early

2011, we carried out more than $50 million of work

to advance project design and planning. We expect to

present to our Board a formal project recommendation

including a financing plan by mid-2012. We also realized

significant exploration success in the region, confirming the

continuity of higher-grade copper and gold mineralization

at the Pampacancha deposit, just 2.5 kilometres from the

Constancia site.

• By year-end, surface mining facilities at the Lalor project

near our Snow Lake operations were largely constructed, in

preparation for initial production in the second half of 2012.

We also committed an additional $144 million to build a new

concentrator, which will increase the planned production

rate from 3,500 to 4,500 tonnes per day.

• We made a $71 million commitment to the construction of

the Reed copper project near the Flin Flon operation, with

first production expected by late 2013. Reed is a high-grade,

near-surface copper deposit that will add approximately

17,000 tonnes of annual copper production over a five-year

mine life, with minimal capital investment and a limited

environmental footprint.

Despite these significant investments, Hudbay ended the year

with no debt, cash and cash equivalents of $899.1 million, and

total available liquidity of $1.1 billion.

LoCaL HIRINg

Most of our employees live, work and raise their families in the

towns in which Hudbay operates. We believe that hiring as many

local people as possible is best for us and for our communities.

In 2011, our focus was on preparing communities near the Lalor

and Constancia projects for employment at these operations.

In Manitoba, we are working with the Mining Association

of Manitoba and the Northern Manitoba Sector Council

(NMSC) to develop training that will help northern and First

Nations people gain the skills necessary for employment

at our Manitoba sites – as well as preparing businesses for

commercial opportunities associated with our operations.

As part of this effort, we collaborated with the NMSC, the

University College of the North, the Province of Manitoba, the

City of Flin Flon and the University of Manitoba to launch the

Northern Manitoba Mining Academy. The Academy will help

train the next generation of area miners for high-skilled jobs

and enable current workers to upgrade their skills. Building

construction was completed in 2011 and instruction will begin

in 2012. Hudbay donated $200,000 and approximately half an

acre of land near our operations.

At Constancia in Peru, we have targeted hiring 70% of entry-

level labourers from the local region. To achieve this goal, we

developed fair and transparent recruitment guidelines, and

Economic ContributionsIn 2011, Hudbay contributed:

• 1,430 permanent jobs, 1,343 contractor full-time

equivalent jobs and 31 summer student jobs

• $199.4 million in wages and benefits

• $7.6 million to municipalities through taxes and grants

(in lieu of taxes)

• $90.2 million in income, mining, capital and use taxes

to federal and provincial governments

• $1.7 million in community investments and

contributions to charities

Hudbay geologists attend a project meeting in Flin Flon, Manitoba.

ECONOMIC RESPONSIBILITY


implemented a competitive wage policy. We also introduced

training programs to prepare the local population to gain higher

value work with the project at its various stages:

• Working with Tecsup, the Peruvian technical training

organization, we developed a program aimed at providing

technical skills training to people in the nearby communities

of Uchuccarco and Chilloroya. In 2011, 120 people completed

60 hours of training in the initial modules focused on basic

math and communication skills.

• Together with Chacra School, we launched a program

designed to foster entrepreneurship in Uchuccarco

and Chilloroya, as a means of supporting the needs of

Constancia and sustaining the communities past the mine

closure. More than 50 students from local high schools

participated in workshops in 2011.

buyINg LoCaL

Although we do not have a formal corporate purchasing

policy, we make best efforts to buy from vendors and

contractors within the local region or country whenever

possible. While much of our equipment requires the scale,

advanced technologies and support capabilities of large

international suppliers, there are generally opportunities for

local businesses in areas such as construction, maintenance,

transportation and catering.

We work to understand the capabilities of local contractors,

advise them of opportunities that match those capabilities,

and assist them in interpreting and following our procurement

and bidding processes. In 2011, we conducted four workshops

and 14 meetings with companies in the communities near

Constancia to help them qualify for business with us.

INfRaStRuCtuRE dEvELopmENt

In most cases, our mines are catalysts for the development

of nearby communities. We share the benefits of our

operations through direct taxes and grants in lieu of taxes,

and we assist from time to time with municipal projects that

require special funding.

In the Flin Flon/Creighton region, 2011 was the fourth year of

the Hudbay 80th Anniversary Project, a $1 million capital pool

established to benefit community initiatives. Major projects

benefiting from the fund in 2011 included: Flin Flon Skate

Park project (approximately $107,000), Flin Flon Chamber

of Commerce Pioneer Park project ($90,000), Peake Nature

Park Enhancement project ($30,000) and the Flinty Project –

Reservoir Hill Lookout project ($21,500).

In 2011, we announced a $2 million commitment to the Town

of Snow Lake to assist funding the municipality’s portion

of a new waste water treatment plant, and a $100,000

contribution towards repairs to the Snow Lake community

hall roof. We also made a $50,000 commitment to a study

investigating options for the Snow Lake airport.

university partnershipsHudbay has set up scholarship funds with the Universidad Nacional de San

Antonio Abad del Cusco (UNSAAC) and the Universidad Nacional San Agustin

de Arequipa (UNSA) in Peru. The funds will be used to give young people access

to higher education in mining-related fields, and to create and equip Hudbay

classrooms on both campuses. Scholarship recipients will have the opportunity

to work at Hudbay projects across the Americas.

UNSAAC and Hudbay are also collaborating on the creation of the International

Centre for Mining Production and Regional Development. The goal of the

Centre is to encourage and promote education, cultural preservation, social

welfare and sustainable development in the province of Chumbivilcas, where

the Constancia project is located.

A ceremony commemorating the Hudbay scholarship fund established with the Universidad Nacional de San Antonio Abad del Cusco (UNSAAC) took place at UNSAAC in Cusco, Peru.

ECONOMIC RESPONSIBILITY


0.3LOST TIME ACCIDENT FREqUENCy OF 0.3 IN 2011 WAS HUDBAy’S BEST-EVER PERFORMANCE

A contractor working at Hudbay’s Lalor project.


“Our goal is zero harm in the workplace. We have worked hard over many years to refine the safety systems and practices and instill a safety first culture at our Manitoba operations. In 2011, our mine and mill employees achieved that goal, with zero lost time accidents – an accomplishment that is almost unheard of in the mining industry. It is a powerful indicator of how strongly we all feel about safety and the effectiveness of our approach.”

riCHarD m. TrUDeaUManager, Flin Flon & Snow Lake Mines

EmpLoyEES

> Our success relies strongly on the skills, experience and commitment of our people. In addition to ensuring a safe workplace, we invest in our employees and strive to provide dynamic career paths with growth opportunities.

ouR appRoaCH

Hudbay is committed to performance excellence – as a

company and as individuals. To achieve our goals, we set out

to attract and retain talented people at every level of our

organization and provide them with the resources they need

to succeed.

We strive to build a caring and collaborative culture, where

employees feel that they are part of a single company with

shared values and operating principles – no matter where

they are located. They are treated with respect and dignity, in

accordance with our Code of Business Conduct and Ethics, and

are encouraged to take initiative and contribute their ideas.

Safety is a core value and we ensure that our people have

the necessary knowledge, skills, equipment and support to

perform their tasks safely.

Hudbay has a long tradition of developing employees and

equipping them to rise through the ranks of the organization

through formal training and on-the-job experiences. Our current

expansion opens up opportunities for global assignments,

participation on larger teams and new careers. We are putting

in place new systems and processes to facilitate employee

mobility and advancement.

As the Company grows, we are also establishing global,

regional and site-specific human resources programs to

ensure common approaches aligned with our shared values

and expectations, while addressing local labour markets,

needs and norms.

ouR woRkfoRCE

total workforce(permanent employees as of December 31 of each year)

2011 2010 2009

Corporate Offices – Toronto and Winnipeg 56 37 18

Flin Flon, MB 1,179 1,212 1,334

Snow Lake, MB 104 102 78

Brampton, ON 0 42 36

Gouveneur, NY 9 10 12

Stephenson/White Pine, MI 8 17 59

Guatemala 0 72 84

Peru 74 n/ap n/ap

Total 1,430 1,492 1,621


SafEty ExCELLENCE

Hudbay achieved one of its best-ever years for safety

performance in 2011. Lost time accident (LTA) frequency across

the Company was 0.3 per 200,000 hours worked, compared to

1.2 in 2010. Importantly, this includes both Hudbay employees

and the hundreds of contractors working at our sites. There

was also significant improvement in lost time accident severity,

medical aid frequency and first aid frequency.

Most of the improvement was at our Manitoba operations,

supported by increased workplace stability following the

2010 closure of the copper smelter and a reaffirmation of

safety management systems. We are also working to support

good safety practices at our new sites. The Lalor project

went 707 days without an LTA, and the Constancia project

increased its full-time equivalent workforce (employees

and contractors) from 350 in March to a peak of 1,100 in

November, while maintaining an LTA frequency similar to our

other operations. Safety team members from the corporate

office and Manitoba operations are collaborating with their

new Peruvian colleagues to build environment, health, safety

and community management systems at Constancia and

provide safety training and advice to the management team.

HudBay Lalor Constancia Reed Total 2012E 37.5 0 0 47.5 0.7002953662016E 29.336 6.616 85.000 11.732 0.704907199

0.0

0.2

0.4

0.6

0.8

1.0

1.2

0

25

50

75

100

125

Lost Time Accident Frequency(per 200,000 hours worked)

1.11.0

0.5

1.2

0.3

2007 2008 2009 2010 2011


0

50

100

150

200

250

300

350

0

25

50

75

100

125

Lost Time Accident Severity(number of days lost per 200,000 hours worked)

24

314

14 30 82007 2008 2009 2010 2011

a Lesson in the unexpectedIn July 2011, an uninitiated, premature blast occurred at the 200-metre

level of the Trout Lake mine. There were no people in the area at the time

and no injuries occurred. Our response to the incident included a third-

party investigation which concluded that the likely cause of the blast was a

lightning strike near the mine headframe that travelled through the ground

and caused the electric detonators to fire prematurely. Although this was a

highly unusual event, and all procedures had been properly followed, several

recommendations were made for preventing similar incidents in the future.

We are sharing these recommendations with safety superintendents across the

mining industry.

An aerial view of Hudbay’s Trout Lake mine in Flin Flon, Manitoba.

EMPLOYEES


An employee works in the hoist room for the Lalor project in Snow Lake, Manitoba.

Lost time accident frequency Comparison(accidents per 200,000 hours worked)

2011 2010 2009

Hudbay1 0.3 1.2 0.5

Manitoba mining industry2 0.5 1.0 0.6

Ontario mining industry3 0.6 0.5 0.6

Manitoba all industry4 3.3 3.3 3.5

1 Includes employees and long-term contractors.2 Mines Accident Prevention Association of Manitoba Annual Report.3 Mine Health & Safety Conference 2010, 2011, Health and Safety Statistical

Status Report.4 Manitoba Workers Compensation Board Annual Report.

ExpLoRatIoN SafEty

Approximately 75% of our exploration activity is carried out

by contractors, who conduct diamond drilling, geophysical

studies, line cutting and road building on our behalf. Safety is

a priority and we have put in place an OHSAS 18001 certified

management system for our Canadian exploration work.

In 2011, one of our contractors incurred two lost time injuries,

which prompted Hudbay to request that the contractor

establish a corrective action plan. The contractor investigated

and took immediate corrective action, but also developed a

broader performance improvement plan. Elements included the

hiring of a full-time occupational health and safety professional,

new hire orientation conducted by Hudbay, daily monitoring

and documenting of safety and production performance,

high-hazard risk assessments, and an improved back to work

program for injured workers. It also contained the provision that

if competent crews were not available for a job, the drills would

be shut down until the situation had been rectified.

maNagINg tRaNSItIoN IN maNItoba

Significant changes are underway at our northern Manitoba

operations as we shut down the Chisel North and Trout Lake

mines, and prepare to open the Lalor and Reed mines.

Lalor, which is scheduled to begin initial production in

mid-2012, will be one of Manitoba’s largest mines, with an

estimated life of more than 20 years. We expect that, at its

peak, it will require approximately 350 employees – 250 more

than are currently working in the nearby Snow Lake operations

(Chisel North mine and Snow Lake concentrator).

We believe that it is best for our employees to live in the

communities in which they work, as opposed to having a

fly-in/fly-out operation. It is better for the well-being of

the employees and their families and for the well-being of

local communities. Our goal is to transition as many existing

employees as possible to the Lalor and Reed operations –

whether they come from Manitoba or elsewhere in our

international organization – and we are working on plans to

facilitate such transfers.

Labour RelationsA supportive work environment translates into good

labour relations. We respect employees’ rights of

freedom of association and collective bargaining.

In 2011, our Manitoba operations negotiated new

three-year collective bargaining agreements with

six of its seven unions. Negotiations are ongoing

with the remaining union, representing approximately

20% of our Manitoba workforce.

EMPLOYEES


One of the issues is the limited availability of suitable housing

in Snow Lake, a lakefront community of 1,000 inhabitants

whose population has fluctuated as mines open and close.

In the short term, during mine development and initial

production, we are opening the Snow Lake construction camp

to our employees. The camp can house 196 people. However,

we are also discussing potential long-term solutions with the

local government and developers.

oNE Hudbay

In 2011, we implemented a Company-wide, bilingual talent

management system to reinforce our commitment to

performance excellence and better align our people strategies

with our corporate objectives and values. It started with

the deployment of a performance management module

for professional and management employees as a means of

ensuring aligned, clear goals and objective, accurate talent

assessments. We have also begun using the recruitment

module. Future modules will incorporate areas such as

compensation, 360° feedback, learning and development,

and succession planning.

We also established a global compensation framework

to help attract and retain talent, promote a consistent

approach to pay aligned with our shared values and facilitate

the movement of employees from one region to another. At

the same time, the framework allows for flexibility to address

unique regional needs and market practices.

tRaININg aNd dEvELopmENt

Hudbay has a long history of providing people with stable and

fulfilling careers, with generations of families working at the

Company. We also have a tradition of developing employees

to reach their full potential, and giving them exposure

to potential new careers, whether through on-the-job

experiences, apprenticeship programs or in-class learning.

In 2011, we developed a supervisor development program,

which is being piloted among 150 supervisors in Manitoba

in 2012. The program is aimed at developing the leadership

skills of frontline people, and includes modules such as

communicating effectively, coaching people, influence and

change management, building business acumen, leading

teams and sharing best practices. The 12-day program is

spread throughout the year. A condensed version of the

Inclusive workplaceOur Code of Business Conduct and Ethics makes it clear

that Hudbay is an equal opportunity employer and does

not discriminate on the basis of race, colour, religion,

sex, national origin, age, sexual orientation or disability.

We have policies in place to ensure fair employment,

including equal treatment in hiring, promotion, training,

compensation, termination and corrective action.

A Constancia geologist examines drill core from the project.

rECRUITING ON THE WEB

As Hudbay expands, we must ensure we have the skilled people needed to resource projects such as Lalor, Reed and Constancia. Over the past few years, the competition for technically skilled people willing to work in remote locations has intensified. To help us stand out from the crowd, we developed a new careers website that speaks to things that matter most to potential job candidates, including the nature of the work at Hudbay and what it is like to live in the regions around our mines and projects. Visit us on the web at hudbaycareers.ca.

EMPLOYEES


program was shared with the 25 managers overseeing the

150 frontline supervisors so that managers can better

support the supervisors once they begin applying their honed

skills and knowledge back on the job.

EmbRaCINg dIvERSIty

We view diversity as a source of pride and strength. Hudbay’s

international expansion opens up new opportunities to

integrate people with different backgrounds and perspectives

and to build our cultural depth.

Increasingly, we are establishing cross-functional

international teams to leverage the collective wisdom of

the various regions. We encourage bilingualism (English

and Spanish) in the workplace and many people, including

executives, are learning Spanish. Our regional teams have

been bolstered with experienced local nationals, and we

have moved senior executives to new roles. For example,

Cashel Meagher, formerly Vice President, Exploration, was

promoted to Vice President, South America Business Unit,

and is now based in Peru. Hernan Soza, who was leading

our exploration activities in South America, is now our

Vice President, Exploration, based in Toronto.

Monthly employee presentations are designed to educate

people about key areas of our business. The sessions are

delivered in English and Spanish by company leaders or key

functional managers. Employees around the world are invited

to participate through webconferencing.

workforce diversity(as of December 31 of each year)

2011 2010 2009

Women 12.2% 12.0% 9.5%

Aboriginal 10.5% 11.9% 8.0%

Disabled 7.2% 7.4% 3.5%

Visible minorities 5.1% 6.7% 3.1%

A safety meeting is conducted prior to the beginning of the work day at the Constancia project in Peru.

EMPLOYEES


14CONSTANCIA JOINT ENVIRONMENTAL MONITORING COMMITTEE CONDUCTED 14 VISITS TO THE PROJECT SITE IN 2011

Children from the rural community of Chilloroya. Hudbay has signed a life of mine agreement with the Chilloroya community.


LoCaL CommuNItIES

> We strive to build constructive community relationships and enhance the economic, social, civil and cultural well-being of individuals and regions affected by our activities.

ouR appRoaCH

Hudbay’s operations bring opportunities and issues of concern

to the people living near our projects and mine sites. We set

out to build close and productive relationships with our host

communities, to understand and address their concerns, and

to help improve the quality of life. Our approach is based

on mutual respect, ongoing dialogue and a desire to work

together to achieve positive outcomes.

Our Human Rights Policy commits us to respect the culture,

customs and history of the countries and immediate regions

in which we operate. We study, communicate and engage

in advance with resident stakeholders in affected areas

regarding the anticipated impact of our activities before we

engage in large-scale investments or business developments.

We seek dialogue aimed at a practical common effort to

promote respect for human rights consistent with the role of

our business.

Hudbay also recognizes the sensitivities involved in addressing

issues related to the cultural heritage of indigenous

communities. We seek to ensure that these matters are

handled respectfully with representatives from the indigenous

communities who have a lawful claim to the lands on which we

are engaged in exploration or extraction activities.

StakEHoLdER IdENtIfICatIoN

As part of our 2011 materiality review, we went through a

process of identifying Hudbay’s key stakeholder groups. See

page 9 for additional information about this review.

Based on our assessment, the following were identified as

our primary stakeholder groups, with the top three being the

financial community, employees/unions and local communities:

• Financial community

• Employees/unions

• Local communities

• Governments

• Customers

• Indigenous government/communities

• Artisanal miners

• Trade associations

“We enjoy a good relationship with the people in the Town of Snow Lake, who are familiar with Hudbay and, after decades of operation in their backyard, trust that we will follow regulations and good operating practices. As the Lalor project progresses, we have made it a priority to keep the community informed of our work.”

Kim proCTorLalor Project Manager

CORPORATE DONATIONS

Hudbay has a strong record of philanthropy in the areas near our operations. In 2011, we donated $536,000 to various charities and initiatives. In addition, we provided funds to invest in infrastructure and development programs in our communities. These community investments (described elsewhere in this report) totaled $478,000 for communities in the Flin Flon/Snow Lake area, $427,000 for communities near the Constancia project and $189,000 in Guatemala (during our period of ownership in 2011).


appRoaCHES to StakEHoLdER ENgagEmENt

The primary communication channels with the financial

community are our website, regulatory filings, annual and

quarterly reports, news releases, and senior management

presentations, as well as meetings, telephone conversations,

media interviews, speeches and conference calls.

Employee communications occur primarily on the job, in

individual meetings between employees and their supervisors,

and in large group meetings (specific to a team, a function

or business unit, or a site). We also use email, the Company

intranet, all-employee webconferencing and site newsletters

to communicate with employees.

Community engagement processes are tailored to the

needs of the site and community. We strive to maintain

open and ongoing dialogue to help us address the key issues

associated with our business. Processes include community

advisory groups, community meetings, open houses, site

tours, school presentations and participation in community-

organized events.

CommuNIty RELatIoNS at SNow LakE

As the Lalor project progresses, we want the people in the

nearby Town of Snow Lake to know about its status, timelines,

workforce requirements and plans. In addition to one-on-one

conversations, we held two formal meetings in 2011.

Approximately 120 people attended an April meeting, which

was widely promoted through the local newspaper and flyers.

While the greatest interest by far was in hearing about the

plans for Lalor, residents also asked about job opportunities,

training and apprenticeships, tailings, roads, trap lines

and financing.

An open house was held in June in preparation for our

submission of the Environmental Act Licence. At this meeting,

we provided a project update and gathered community

feedback on concerns they had about the environmental

impacts of the operation. Issues focused mainly on

environmental discharges and potential interference with

snowmobile trails.

An employee working at the water treatment plant in Snow Lake, Manitoba.

Infrastructure development In 2011, we announced a $2 million commitment to

the Town of Snow Lake to assist funding the municipality’s

portion of a new waste water treatment plant, and

a $100,000 contribution towards repairs to the Snow

Lake community hall roof. We also made a $50,000

commitment to a study investigating options for the

Snow Lake airport.

LOCAL COMMUNITIES


In addition to meetings, the local media are invited to the work

site three or four times a year for project updates and photo

shoots, which are then published in area newspapers.

buILdINg bRIdgES at CoNStaNCIa

The Constancia concession includes land within the communities

of Uchuccarco and Chilloroya, as well as 4,097 hectares of land

purchased from private owners. All land in the two communities

is under communal ownership and our acquisition of surface

rights requires approval by two-thirds of community members.

Constancia has been a substantial employer of Uchuccarco

and Chilloroya community members, as well as residents from

other nearby communities. Access to the community land for

exploration was granted annually by written agreements with

each community, and the project has assisted with social and

economic development projects in each community.

Since Hudbay’s acquisition of Constancia in 2011, we have

sought to maintain strong relations with both communities. We

worked through a number of issues with the communities in

2011 related to the transition in ownership and moving towards

construction (see Community Tensions and Achievements at

Constancia on page 15), and we believe we are making good

progress towards the legal agreements and constructive

relationships that will support construction of the mine.

The relationships with neighbouring communities have

included a joint environmental monitoring committee

composed of community members, government authorities

and Company representatives. The committee is charged

with promoting the care and conservation of the natural

environment by monitoring and recording Hudbay’s activities

and impacts at the Constancia project. We provide the

committee with technical training and support. The committee

conducted 14 visits to the project site in 2011 and provided

feedback, which, among other actions, prompted us to

accelerate the remediation of exploration sites in the area.

This committee is currently being reformed to support the

construction phase of the project.

duty to ConsultThrough its involvement in the Mining Association of Manitoba, Hudbay is collaborating with First Nations leaders and

the provincial government in an effort to accelerate exploration and mine permitting in the province. Since the duty

to consult First Nations on resource development on traditional lands was recognized more than 20 years ago, many

provinces have created criteria for when consultation should be triggered and when the benefits of development

should flow to bands. The working group aims to set out clear guidelines for Manitoba as to when a First Nation

becomes involved in exploration and mining activity.

In Peru, on August 23, 2011, the Legislative Branch approved a law governing the consultation rights of indigenous or

native people. The law requires the government to consult such communities about initiatives that could affect them.

Associated regulations clarifying the consultation process were issued on April 3, 2012, but additional regulations are

required to identify which communities would be included in this process. At Constancia, we have already carried out

extensive consultation with the neighbouring communities.

LOCAL COMMUNITIES


Read to growHudbay is collaborating with the Business Association for

Education and the Faculty of Education at the Universidad

Peruana Cayetano Heredia on an initiative to upgrade

methodologies for teaching reading and writing to

elementary schools in the districts of Velille, Livitaca and

Chamaca. Thirty-seven teachers and three co-ordinators

from 13 schools participated in the program in 2011.

Our life of mine land use agreements with the Uchuccarco and

Chilloroya communities, and ongoing resettlement planning

with affected families, are discussed on page 15. Recognizing

these are difficult and complex issues, we have retained

experienced third-party experts to guide us and the community

through the process in a way that adheres to high international

standards of fairness and transparency.

baCk foRty CommuNIty advISoRy gRoup

At the advanced-stage Back Forty project in Michigan,

our team facilitated the creation of a community advisory

group (CAG) made up of individuals representing a diverse

range of skills, community sectors and views on mining.

Membership was established through a consensus process.

With a mandate agreed upon by Hudbay and CAG members,

and with operating support from Hudbay, the CAG is a

self-managing group that sets meeting agendas and makes

information requests to Hudbay based on issues identified by

CAG members.

In addition to reviewing project status and plans, the CAG

provides recommendations on ways to meet community

objectives, maintains dialogue regionally concerning

sustainable economic development, and provides Hudbay

with feedback on project-related initiatives.

dIaLoguE IN CHILE aNd CoLombIa

Community dialogue starts well before actual mining begins

and continues throughout the life of the operation.

For example, before commencing exploration drilling in

Chile, we met with residents near the proposed area to

advise them of our plans, discuss concerns, and gain their

support for building paths and conducting the study. While

the initial drilling was unsuccessful, we set the stage for good

community relations and were welcomed back a second time

for continued exploration in the area.

In Colombia, we held two local community meetings to explain

our current exploration study. We also initiated a social and

environmental baseline assessment in our current prospecting

area, the results of which will be incorporated into any future

mine planning and design. The assessment was conducted

by two Colombian experts in the field and included a survey

of families in the area to gather demographic data and to

determine their hopes and expectations if we were to begin

operating in the area.

Children ride on a bicycle path at a Flin Flon, Manitoba, daycare. The bicycle path was funded from Hudbay’s 80th Anniversary Fund, established in 2008.

LOCAL COMMUNITIES


aRtISaNaL mININg

Both Uchuccarco and Chilloroya have significant levels of

artisanal mining on community land. The Uchuccarco activity

takes place around an abandoned mine that is not part of

Hudbay’s mineral rights. The Chilloroya activity occurs in

the Pampacancha area near Constancia and is subject to a

five-year agreement signed with Norsemont (the previous

owner of Constancia), which allows artisanal mining by a

community enterprise on the condition that it is restricted to

Pampacancha and is brought into legal compliance.

CommuNIty CompLaINtS

At Flin Flon, community members are invited to call our

telephone hotline if they have a complaint about the

Company’s operations. We have a detailed complaint

procedure to ensure that concerns are appropriately handled.

Six complaints were registered in 2011, all of which were

addressed to the satisfaction of the community members.

The complaints related to helicopter traffic departing from

the hangar (two complaints), the impact of the Lalor project

on trap lines, noise emanating from the South Main cleanup

activity (two complaints) and an outdoor odour problem that

is the subject of an ongoing investigation.

In Peru, we registered 56 grievances from local community

members through our grievance process, relating primarily

to local labour issues: timeliness of payments, delivery of

payment receipts and others. Please also see Community

Tensions and Achievements at Constancia on page 15 for a

broader perspective on our community relationships.

manitoba Ranger programOnce again in 2011, Hudbay donated $10,000 to the

Manitoba Ranger Program, a seven-week, live-in

employment and training experience for Aboriginal

youth aged 16 to 18. Through training sessions and

hands-on work, the program familiarizes the teens

with northern Manitoba’s three main resource sectors:

mining, forestry and energy.

In the fall of 2011, Hudbay conducted a tour of its 777 mine in Flin Flon, Manitoba, as part of its involvement in the Manitoba Ranger Program.

LOCAL COMMUNITIES


46%CO2-EqUIVALENT EMISSIONS AT OUR MANITOBA BUSINESS UNIT DECLINED By 46% IN 2011

Overhead view of Hudbay’s Constancia project in Peru.


ENvIRoNmENtaL StEwaRdSHIp

> We hold ourselves accountable for our impact on the environment, and work hard to continuously improve environmental performance and minimize the footprint of our operations.

ouR appRoaCH

Hudbay is subject to extensive regulation by federal, state,

provincial and local authorities over a variety of environmental

matters, including: air and water quality; protection and

enhancement of the environment; use, storage and disposal

of hazardous materials; and reclamation and restoration of

mining properties.

Our environmental management program is directed at

environmental protection and compliance. The program

consists of an environmental policy, codes of practice,

regular audits, the integration of environmental procedures

into operation procedures, employee training, and

emergency prevention and response procedures. We have

a dedicated team charged with managing environmental

activities and compliance with all applicable environmental

standards and regulations.

Our strategies include:

• Setting continuously improving environmental targets and

measuring performance against them

• Maintaining ISO 14001 environmental management systems

certification at all production operations

• Proactively rehabilitating land after cessation of operations

so as to accelerate natural reclamation

• Supporting community projects to minimize the aesthetic

impact of our activities

We did not have any material environmental non-compliance

incidents in 2011.

CLImatE CHaNgE aNd ENERgy uSE

As intensive users of electricity and fossil fuels, Hudbay

operations contribute to climate change through energy

consumption and associated greenhouse gas (GHG) emissions.

We strive to reduce our impact by minimizing energy use and,

where possible, reducing the carbon intensity of our products

and operations.

For the past several years, we have worked towards a goal

of reducing total CO2-equivalent (CO2-e) emissions by at

least 1% per year. We achieved our goal again in 2011, with

a 49% reduction in direct emissions, which was largely due

to the elimination of the use of heavy fuel oil associated

with our first full year without the copper smelter and

subsequent to the conversion to electric boilers at the

Flin Flon metallurgical complex. Instead of using heavy

fuel oil, the new boilers are powered by clean, renewable

hydroelectricity. We expect further improvement in 2012

when the boilers will have been operational for the full year.

Indirect emissions also decreased despite our increased

electricity consumption, due to a substantially lower

emission intensity for the Manitoba electrical supply.

Since 1990, CO2-e emissions have declined by 80% at our

Manitoba operations.

“Hudbay is committed to preserving the biodiversity of the wetlands in and around the Constancia project. As part of our plan for the area that will be affected by construction, high-priority species of concern will be relocated to separate off-site conservation areas where they can continue to thrive. We intend to work closely with the community to identify the best locations and ensure the best possible outcomes.”

eriKa CalmellEnvironmental, Health and Safety MS Superintendent



0

25

50

75

100

125

CO2-e Emissions (Manitoba BU) (Direct and Indirect)(kilotonnes)

341,687

238,378

226,846

243,670213,291

128,219

0

50000

100000

150000

200000

250000

300000

3500001990

1994

1998

2002

2006

2010

68,7232011

CO2e Emissions (Manitoba BU)(Direct and Indirect)(kilotonnes)

341,687

238,378

226,846

243,670213,291

128,219

1990

1994

1998

2002

2006

2010

50000

100000

150000

200000

250000

300000

350000

Smelter Closure June 2010

Despite a number of energy conservation initiatives, energy use

at our Manitoba Business Unit rose in 2011, with a 6.3% increase

in unit energy consumption. The increase is largely attributed to

deeper mining at the Trout Lake mine and construction of the

Lalor mine (which is not yet contributing metal to the

intensity measure).

Each division sets annual energy reduction targets and

plans. Among the projects implemented in 2011, a variable-

frequency drive was installed on the 777 North mine

downcast fan, which is expected to deliver energy savings of

approximately 25%. The team also designed a new propane

burner unit for a downcast fan, which will be installed in 2012.

direct Energy Consumption by primary Energy Source(terajoules)

2011 2010 2009

Heavy oil 144 990 1,767

Propane 544 515 652

Natural gas 221 426 321

Diesel 215 179 164

Light oil 5 3 4

Gasoline 10 9 10

Total 1,138 2,122 2,918

LEEd gold buildingIn 2011 we relocated Hudbay’s head office to 25 york Street in Toronto, which

is a LEED (Leadership in Energy and Environmental Design) Gold Building. The

building includes green features such as combination green roof and white

reflective roof components, rainwater cistern for irrigation and toilet flushing

and occupant-controlled ventilation diffusers. Other features are occupancy

and daylighting sensors, energy-efficient lighting design with individual fixture

controls and dimmable ballasts, and low-emitting sealants, adhesives, paints,

coatings, laminates, composites and carpet. More than three-quarters of the

wood used is Forest Stewardship Council certified.

Hudbay’s head office in Toronto, Ontario.

ENVIRONMENTAL STEWARDSHIP


The team representing Hudbay Flin Flon won the 2012 Manitoba Provincial Mine Rescue competition.

Emergency procedures testingHudbay’s Manitoba emergency response manual details

what to do in the event of various possible emergency

failures within the tailings impoundment system. We test

emergency response procedures annually to ensure their

adequacy. In 2011, environment department personnel

conducted a table-top response to a scenario in which

a pick-up truck lost control and crashed through the ice

and into a clarification pond, resulting in a fuel spill.

watER maNagEmENt

We are committed to reducing our reliance on fresh water and

minimizing impacts on the quality of local water sources.

Although our water intake does not significantly impact any

of our water sources, we set a goal of reducing fresh water

usage by at least 1% per year at the Flin Flon operations.

In 2011, total water consumption was down by 3.1%, from

11,611,573 cubic metres in 2010 to 11,249,682 cubic metres.

A number of projects contributed to the decrease. For example,

at the Snow Lake mill, a project to convert all water streams

to recycled water resulted in a 13.4% decline in fresh

water consumption.

None of the effluents discharged from Hudbay operations

have a significant impact on the receiving streams or water

bodies in which they are discharged. Stringent regulatory

requirements must be met at the point of effluent discharge,

and we achieved 100% compliance in 2011.

total water withdrawal(000 cubic metres)

2011 2010 2009

Total water withdrawal 11,784 12,044 14,038

aIR EmISSIoNS

We have rigorous processes in place to measure, control and

reduce harmful emissions to air.

With the closure of the Flin Flon copper smelter in 2010,

sulphur dioxide (SO2) emissions have been virtually eliminated.

In 2011, trace SO2 concentrations near the Flin Flon complex

were associated with the boiler conversion and burning off of

heavy oil that was completed midway through the year.

Our operations also emit dust and particulates containing

heavy metals. We have a particulate monitoring program

in place and ensure that particulate levels remain below

regulatory limits. Readings are reviewed by the government

and external compliance auditors.



Each year, a dust management plan is implemented in line with

the annual tailings deposition plan and weather conditions.

Temporarily inactive tailings areas are covered with water, if

possible, by adjusting pond water elevations. We use a variety

of methods for active tailings areas including pouring gravel

over the crest of the tailings dams, and creating covers of

calcium chloride sand, compacted snow or ice. There were no

significant fugitive dust occurrences in 2011.


0

50

100

150

200

250

0

25

50

75

100

125

Total Direct and Indirect GHG Emissions(kilotonnes per CO2-equivalent)

241

170

87

2009 2010 2011

waStE maNagEmENt

All Hudbay operations have waste management plans to

reduce, reuse, recycle and responsibly dispose of the waste

they generate.

Hudbay adheres to the Mining Association of Canada’s (MAC)

best practices for managing tailings. Tailings are piped into

secure engineered impoundments, known as tailings dams.

MAC guidelines cover the location, design, construction,

operation and closure of tailings facilities so that all structures

are stable and comply with industry and government

standards, and that solids and water are properly managed.

We have operated the base metal tailings management area

known as the Flin Flon Tailings Impoundment System (FFTIS)

for over 80 years. In 2011, approximately $6.5 million was

invested in system upgrades to improve tailings storage

and dust management. Upgrades included dam capacity

increases, a new seepage collection pipeline system and

regular maintenance.

Waste rock from our mines is reused as fill in underground

operations, tailings facilities and site rehabilitation, or it is

managed on-site according to environmental regulations.

Aerial view of Hudbay’s main operation and tailings facility in Flin Flon, Manitoba.

biodiversityAlthough none of our operations are near protected

areas or areas of high biodiversity importance, we

are making advances in biodiversity conservation

and plan to establish annual site-specific biodiversity

targets and plans in the near future. Current practices

include environmental baseline studies for exploration

and development projects and the integration of

conservation measures into planning and operating

processes. For example, in Canada, we adjust exploration

practices to accommodate caribou migration patterns

and install duck bangers to keep ducks away from the

Flin Flon tailings ponds.



LaNd uSE

We strive to minimize our environmental footprint at

every stage of operation, from initial exploration to

decommissioning and closure. Of the total area of land

owned, leased or managed by Hudbay (468,266 hectares),

we used only 1.9%.

As we build the Lalor mine, we are using existing roads

and plan to use existing facilities (such as the waste water

treatment system) wherever possible to reduce our

environmental impact. Instead of stockpiling waste rock

on-site, non-acid-generating waste rock will be reused for

site activities such as fill in underground operations and site

rehabilitation. Acid-generating waste rock will be hauled to

a former operating mine that has not yet been rehabilitated.

The mine water will be stored in the mine pit prior to

treatment through the plant.

At the Reed project, we are using existing access roads and

the existing exploration camp. We are committed to leaving

vegetation intact as best we can. During operations, mined ore

will be trucked 120 kilometres to the Flin Flon concentrator

for processing. Water will be drawn from a well rather than

surface water bodies.

REmEdIatIoN

Mine remediation is a core part of our business. Our

practice is to carry out an orderly, safe and environmentally

sound process of converting an operating mine to its

pre-mining condition.

At the Flin Flon complex, we are implementing a progressive

rehabilitation program that aims to restore the environment

in and around the complex and enhance the visual impact.

In 2011, this work included the final cleanup of the former

South Main headframe area. The site was re-contoured to

ensure that all runoff water remains on our property. We also

installed a limestone/clay/topsoil cover system on top of the

contoured waste rock to promote plant growth and natural

revegetation. Additionally, after the closure of the copper

smelter, the heavy fuel oil tanks were removed in 2011

and demolished following responsible hazardous waste

disposal procedures.

As part of the multi-year rehabilitation program, we are

greening spaces between the community and our operations,

including a well-used public highway. The work involves

pre-treating soil by removing rubble, then adding limestone or

a clay cap, topsoil and hydroseed, followed by a mulch cover.

Soil StudyIn 2008, Hudbay entered into an agreement with the

University of Saskatchewan for a five-year soil study

project in the Flin Flon/Creighton area. The study is

focused on identifying specific pollutants in the soil, and

recommending and testing remediation strategies for

enhancing the growth of vegetation. Funding is provided

by Hudbay and the Natural Sciences and Engineering

Research Council of Canada.

green projectThe Green Project is a community effort aimed

at accelerating the restoration of the forests in

Flin Flon and Creighton to their original northern beauty.

Community members, school children and Hudbay

volunteers have all been involved in spreading crushed

limestone in non-residential areas to promote vegetation

growth. Hudbay has sponsored the project for more than

10 years, and contributed another $20,000 in 2011.



kEy pERfoRmaNCE data

eConomiC 2011 2010 2009 2008

Direct economic value generated and distributed (in $ millions) (EC1)Revenues1,2 $ 904.7 $ 788.2 $ 720.7 $ 981.9

operating costs1,2 Canada (543.2) 534.4 (491.6) (635.3)US (18.2) 20.9 (7.1) (39.3)Guatemala (3.2) 13.5 (7.1) (11.0)South America (9.5) 0.4 n/ap n/apTotal $ (574.1) $ (451.0) $ (505.8) $ (685.6)

Employee wages and benefitsCanada 188.4 186.4 170.3 177.7US 2.2 n/av 6.4 18.4Guatemala 2.2 3.5 3.5 2.0South America 6.6 n/ap n/ap n/apTotal – Payroll including benefits $ 199.4 $ 189.9 $ 180.1 $ 196.1

Income, mining, capital and use tax (in $ millions) $ 90.2 $ 75.4 $ 34.0 $ 48.0 Municipal taxes and grants (in $ millions) $ 7.6 $ 7.5 $ 7.8 $ 7.6 Total payments to government3 $ 97.8 $ 82.9 $ 41.8 $ 55.6

payments (in $000s) to local communities for land use3

Canada 0.0 n/av n/av n/avUS 0.0 n/av n/av n/avGuatemala 0.0 n/av n/av n/av South America 73.0 n/av n/av n/avTotal $ 73.0 n/av n/av n/av

Community practicesCommunity investments (in $000s)Canada 478 620.4 1,057.0 677.0 US 0.0 7.0 24.8 n/avGuatemala 189 663.2 333.0 216.3 South America 427 n/ap n/ap n/apSubtotal – Community investments $ 1,094 $ 1,290.6 $ 1,414.8 $ 893.3 Charitable donations (in $000s) 536 n/av4 n/av4 n/av4

Total community investments and donations $ 1,703 $ 1,291 $ 1,415 $ 893

Profit before tax ($ millions)2 209.0 108.7 141.9 169.7 Cash and cash equivalents (in $ millions) $ 899.1 $ 901.7 $ 886.8 $ 704.7

mine production (contained metal in concentrate)Zinc (000 tonnes) 75.8 77.3 78.7 103.1Copper (000 tonnes) 54.3 52.4 48.4 50.1Gold (000 troy oz.) 94.6 87.2 92.2 102.8Silver (000 troy oz.) 875.8 843.4 1,004.6 1,071.0

metal productionZinc metal (000 tonnes) 107.7 100.0 106.8 125.3 Zinc oxide (000 tonnes) n/av 41.0 25.1 34.7 Copper (000 tonnes) n/av 19.8 58.6 74.7 Gold (000 troy oz.) n/av 35.6 91.4 108.5 Silver (000 troy oz.) n/av 372.3 2,006.6 2,293.9


emploYees 2011 2010 2009 2008

Total workforce (LA1)Full-time employees Flin Flon, MB 1,179 1,212 1,334 1,387 Snow Lake, MB 104 102 78 109 Winnipeg, MB 3 3 2 6 Brampton, ON 0 42 36 37 Toronto, ON 53 34 16 11 Gouveneur, NY 9 10 12 34 Stephenson/White Pine, MI 8 17 59 62 Guatemala City, Guatemala 0 17 16 19 El Estor, Guatemala 0 55 68 111 Peru 74 n/ap n/ap n/apTotal full-time employees 1,430 1,492 1,621 1,776

employment Number of part-time employees 28 2 n/av n/av Number of contract (term) employees 10 n/av n/av n/av Number of co-op and summer students hired 31 57 26 76 Number of contractor full-time equivalent staff 1,343 544 458 n/av Number of employees represented by collective bargaining agreements 986 1,040 1,294 1,313 Percentage of employees represented by trade unions (LA4) 69.0% 69.7% 79.8% 73.9% Number of strikes or lockouts exceeding one week (MM4) 0 0 0 0Voluntary turnover rate (LA2)5 6% 10% 7% 6%

Workforce age distribution <30 10.2% 9.8% 9.5% n/av30–50 49.0% 54.3% 52.2% n/av>50 40.9% 35.9% 38.3% n/av

person-hours of work (including contractors) Flin Flon, Snow Lake, Winnipeg and Toronto 3,486,280 3,183,242 3,179,407 3,552,062 Brampton, ON 78,986 88,073 75,925 88,681 Gouveneur, NY 24,312 27,027 27,208 404,793 Stephenson, MI 29,824 103,039 133,718 151,077 El Estor/Guatemala City, Guatemala 665,048 691,064 593,911 331,155 Peru 1,322,371 n/ap n/ap n/apTotal person-hours 5,606,821 4,092,445 4,010,169 4,527,768

net number of full-time employees added (decreased) (LA2) Canada (161) (73) (84) 10 US (10) (44) (25) (194) Guatemala (72) (12) (46) 130 Peru 74 n/ap n/ap n/apTotal (169) (129) (155) (54)


employees (continued) 2011 2010 2009 2008

Health and safety performance (LA7) (per 200,000 hours worked, except where noted) Lost time accident frequency 0.3 1.2 0.5 1.0 Lost time accident severity (days lost per 200,000 hours worked) 7.6 30 14 314 Restricted work accident frequency 1.5 2 2 3 Medical aid accident frequency 7.1 10 11 13 First aid accident frequency 12.7 18 20 17 Fatality (number) 0 0 0 1 Absentee rate (as a % of hours scheduled to be worked) n/av n/av n/av n/av Reportable occurrences (defined as H&S incidents required by law to be reported to a government agency) 33 33 21 40

Composition of governance bodies and breakdown of employees (LA13) workforce diversity Female 12.2% 12.0% 9.5% 9.7%Aboriginal 10.5% 11.9% 8.0% 9.4%Disabled 7.2% 7.4% 3.5% 3.3%Visible minorities 5.1% 6.7% 3.1% 2.8%

Composition of executive management and corporate governance bodies Board of Directors (ratio male to female) 8:0 8:0 8:0 8:0Age distribution <30 0% 0% 0% 0% 30–50 12.5% 12.5% 0% 0% >50 87.5% 87.5% 100% 100%Executive management (ratio male to female) 11:1 10:1 7:1 5:1Age distribution <30 0% n/av n/av n/av 30–50 50% n/av n/av n/av >50 50% n/av n/av n/av

soCieTY 2011 2010 2009 2008

Total number of incidents of discrimination (HR4) (and actions taken) 0 0 5 n/avComplaints from communities6 62 1 3 19

employees trained in anti-corruption policies (SO3) Number – management 115 1,218 n/av n/avNumber – non-management 70 incl. above n/av n/avPercentage of workforce 13% 82% n/av n/av

Amount of fines or sanctions for non-compliance with laws and regulations7 (SO8) $ 400 $ 5,100 $ 1,470 $ 24,749

Closure plans (MM10)Number of site closure plans 11 11 5 4Percentage of total operations with closure plans 100% 100% 100% 80%Overall financial provision representing the present value of future cash flows relating to estimated closure costs per Canadian generally accepted accounting principles (see note 12 in the Notes to the Consolidated Financial Statements in the 2011 Annual Report) (in $000s) $ 146,082 $ 58,915 $ 54,460 $ 46,632

kEY PERFORMANCE DATA


society (continued) 2011 2010 2009 2008

Number of fines or sanctions for non-compliance with laws and regulations concerning the provision and use of products and services (PR9) 0 0 0 0

environmenT 2011 2010 2009 2008

Direct energy consumption by primary energy source (terajoules) (EN3) Heavy oil 144 990 1,767 1,990 Propane 544 515 652 727 Natural gas 221 426 321 384 Diesel 215 179 164 230 Light oil 5 3 4 32 Gasoline 10 9 10 9 Total 1,138 2,122 2,918 3,372

indirect energy consumption by primary energy source (terajoules) (EN4) Total electricity consumed 3,392 3,012 3,136 3,482 Energy intensity (terajoules per kilotonne of metal produced) 34.4 34.2 36.0 34.3

Total water withdrawal (000 cubic metres) (EN8) Surface water 11,321 11,658 12,352 n/av Ground water 461 384 379 n/av Municipal water supplies 2 2 1 n/av Total water withdrawal8 11,784 12,044 14,038 15,121

Total direct and indirect greenhouse gas emissions (kilotonnes of Co2-equivalent) (EN16) Direct carbon dioxide emissions 71.4 140.1 199.9 230.9 Indirect carbon dioxide emissions 15.4 29.8 41.0 56.3 Total 86.7 169.9 240.9 287.2

emissions of ozone-depleting substances (kg) (EN19) 0 0 11 708 nox, sox and other significant air emissions (in kilotonnes)9 (EN20) Sulphur dioxide emissions 0 58.2 143.5 184.7 Particulate 0.04 0.5 0.9 1.0 NOx and VOCs 0.01 0 0 n/av

Total water discharged (000 cubic metres) (EN21)To Flin Flon Creek/Ross Lake/Schist Lake 14,766 15,139 n/av n/avTo Anderson Creek/Wekusko Lake 3,698 5,507 n/av n/av To Woosey Creek/Morgan Lake 1,491 1,542 n/av n/av To Region of Peel Sewer 1.9 0.17 n/av n/av To White Pine Sewer 0 11 n/av n/avTo Lake Izabel 5 3 n/av n/av To Oswegatchie River in NY 3,109 2,791 n/av n/avWater treated (000 cubic metres)8 23,070 24,993 19,074 19,383

Total number of significant spills10,11 (EN23) 3 1 3 11Volume 47.0 m3 18.9 m3 n/av n/av



environment (continued) 2011 2010 2009 2008

Hazardous waste disposed of at external facility (tonnes) (EN24) 107 2,010 79.9 0

Number of fines or sanctions for non-compliance with environmental laws and regulations (EN28) 0 0 0 0

land use (hectares) – mineral Tenure (Controlled) (MM1) Manitoba 301,273.6 323,152.6 335,545.2 Saskatchewan 88,736.5 83,289.5 72,763.5 Ontario 11,058.7 11,058.7 11,058.7 Yukon 5,823.4 5,823.4 5,823.4 Nunavut 21.0 21.0 21.0 Total Canada 406,913.1 423,345.1 425,211.8 New York 31,590.4 22,329.5 21,620.3 Michigan 3,141.1 n/ap n/ap Total Usa 34,731.5 22,329.5 21,620.3 Chile 1,531.0 1,531.0 1,531.0 Guatemala 0.0 28,030.0 28,030.0 Peru 25,090.3 n/ap n/ap Total south/Central america 26,621.3 29,561.0 29,561.0 Total 468,266.0 475,235.6 476,393.1

land use (hectares) – surface Tenure (Disturbed) Manitoba 6,004.0 5,985.7 5,844.4Saskatchewan 928.7 1,494.8 1,480.4Ontario 0.0 0.0 3.8 Yukon 120.7 120.7 120.7 Nunavut 0.0 0.0 0.0 Total Canada 7,053.4 7,601.2 7,449.3 New York 57.7 57.7 57.7 Michigan 550.3 n/ap n/ap Total Usa 608.0 57.7 57.7 Chile 0.0 0.0 0.0 Guatemala 0.0 8,402.8 8,402.8 Peru 1,026.3 n/ap n/ap Total south/Central america 1,026.3 8,402.8 8,402.8 Total 8,687.7 16,061.7 15,909.8

percent of land used vs. controlled 1.9%

1 Revenues, Operating Costs differ from those in our financial statements due to GRI definitions. For example: Revenues include gross financial income as well as product sales; Operating Costs exclude depreciation and impairment, include exploration costs net of tax credits.

2 In fiscal 2011 Hudbay adopted the International Financial Reporting Standards (IFRS) with a transition date of January 1, 2010. The data shown in this report for 2010 and 2011 is therefore in conformity with IFRS and for 2008 and 2009 is in conformity with Canadian GAAP and has not been restated under IFRS. Accordingly, the 2008 and 2009 data may not be comparable with the information for fiscal 2010 and 2011.

3 This figure does not include land use payments to government.4 For 2008, 2009 and 2010 donations are included in the community investments lines above.5 Voluntary turnover rate is the number of employees hired to replace those who leave, expressed as a percent of total employees.6 56 cases of claims for monetary compensation related to local employment at the Constancia project; 6 for FF/SL (2 noise, 2 low-flying helicopters, 1 odour and

1 potentially project-impacted trapper). All concerns have been addressed.7 All fines are related to US Federal Mine Safety and Health Administration inspections at our St. Lawrence Zinc operation in Balmat, NY. Under MSHA any deficiency

is subject to a set financial penalty (whereas in other jurisdictions there would be a corrective action order). The totals shown reflect all deficiencies in each year, with specific penalties ranging from $60 to $6,000 per deficiency.

8 Water withdrawal does not include some mine dewatering. Water discharged includes surface runoff that accumulates in containments. Water discharged from the Tom Valley exploration property is not reported – the value is being reviewed.

9 NOx emissions are not tracked as the government of Canada does not consider the mining sector to be significant emitters of NOx.10 Significant spills are those that are reportable to government agencies, whether by law or in accordance with Company policy.11 No impact – CuSO4 and electrolytic acid neutralized and further treated in the tailings pond; tailings cleaned out of ditch and returned to tailings facility.

All concerns have been addressed.



gRI INdEx

INdICatoR dESCRIptIoN dEtaILS

sTraTeGY anD analYsis

1.1 Executive viewpoint Page 4

1.2 Key impacts, risks and opportunities Pages 2, 9

orGanizaTional profile

2.1 Name Inside Front Cover

2.2 Principal activities and products Inside Front Cover

2.3 Operational structure Inside Front Cover

2.4 Head office Inside Front Cover

2.5 Countries of operation Inside Front Cover

2.6 Nature of ownership Inside Front Cover

2.7 Markets Page 3

2.8 Scale of reporting organization Inside Front Cover, Hudbay 2011 Annual Report

2.9 Significant changes Inside Front Cover

reporT parameTers

3.1 Reporting period Page 8

3.2 Most recent previous report Page 8

3.3 Reporting cycle Page 8

3.4 Contact Page 8

3.5 Defining report content Page 9

3.6 Boundary of report Page 8

3.7 Specific limitations Page 8

3.8 Joint ventures Page 8

3.9 Data measurement Page 8

3.10 Restatements No restatements of prior years’ data were required

3.11 Changes in reporting parameters Page 8

3.12 GRI content index Page 45

3.13 External assurance Our internal data check process is described on page 8 –

we have not sought external assurance for this report


GRI INDEx


GovernanCe, CommiTmenTs anD enGaGemenT

4.1 Governance structure Corporate Governance Guidelines and Board Charter available

at www.hudbayminerals.com/English/about-us/governance/

default.aspx

4.2 Board chair Corporate Governance Guidelines and Board Charter

4.3 Board independence Corporate Governance Guidelines and Board Charter

4.4 Engagement with the board Page 13

4.5 Executive compensation 2012 Management Information Circular available on

SEDAR at www.sedar.com

4.6 Conflict of interest Page 12

4.7 Board qualifications Corporate Governance Guidelines and Board Charter

4.8 Mission, values, codes of conduct Pages 12, 19

4.9 Board oversight of sustainability Page 11

4.10 Board performance review Corporate Governance Guidelines and Board Charter

4.11 Precautionary principle Page 14

4.12 External codes and initiatives Page 3

4.13 Industry associations Page 17

4.14 Stakeholder groups Page 29

4.15 Stakeholder identification and selection Pages 9, 29

4.16 Approaches to stakeholder engagement Page 30

4.17 Stakeholder topics of concern Pages 9, 15, 30, 33

eConomiC

disclosure on management approach Page 19

EC1 Economic value Pages 19, 40

EC6 Local spending Pages 21, 40

EC7 Local hiring Page 20

EC8 Infrastructure investments and services Pages 21, 40



environmenT


EN3 Direct energy consumption Pages 35, 43

EN4 Indirect energy consumption Pages 36, 43

EN5 Energy conservation Page 35

EN8 Water withdrawal by source Pages 37, 43

EN9 Water sources affected Page 37

mm1 Land disturbed or rehabilitated Pages 39, 44

EN13 Habitats protected or restored Page 39

EN14 Managing impacts on biodiversity Page 38

EN16 Greenhouse gas emissions Pages 35, 43

EN18 Greenhouse gas reduction Page 35

EN19 Emissions of ozone-depleting substances Page 43

EN20 Significant air emissions Pages 37, 43

EN21 Water discharge Page 43

EN23 Spills Page 43

EN28 Environmental fines and sanctions Page 44

HUman riGHTs

disclosure on management approach Pages 13, 14, 29

HR4 Discrimination Page 42

HR8 Security training on human rights Page 14

mm5 Operations in or adjacent to indigenous Page 15

peoples’ territories

GRI INDEx



laboUr


La1 Workforce Page 41

La2 Employee turnover Page 41

La4 Collective bargaining Pages 25, 41

mm4 Strikes and lock-outs Page 41

La7 Illnesses, injuries and fatalities Pages 24, 42

La13 Diversity of governance bodies and workforce Pages 26, 27, 42

soCieTY


So1 Managing impacts on community Pages 29–33

So3 Anti-corruption training Page 42

So8 Fines and sanctions Page 42

So9 Operations with Significant Potential or Page 15

Actual Negative Impacts on Local Communities

S10 Prevention and Mitigation Measures Implemented Page 31

at Operations with Negative Impacts

mm6 Significant community disputes Pages 15, 16

mm7 Use of grievance mechanisms Page 33

mm8 Artisanal and small-scale mining Page 33

mm9 Resettlement Page 16

mm10 Mine closure Page 42

PRODuCT STEWARDSHIP


pR3 Product information Page 2

pR9 Fines and sanctions Page 43

mm11 Materials stewardship Page 3

GRI INDEx

gLoSSaRy

accident frequency – number of injuries (recordable or lost

time) multiplied by 200,000, divided by total hours worked

biodiversity – short for “biological diversity”; the variety of

living organisms, genetic diversity and habitat diversity that

creates and sustains variation in the environment

Community investment – voluntary investment of funds in

the broader community, including for physical infrastructure

and social programs

Contractor – one who agrees to perform work or supply items

at a certain price or rate

Donations – contributions to charities

employee – a person directly employed by Hudbay and/or

its subsidiaries

G3 indicator – any sustainability performance indicator

contained in the G3.1 guidelines of the Global Reporting

Initiative. The G3.1 guidelines provide the framework for

this report.

Global reporting initiative (Gri) – an independent

institution whose mission is to develop and disseminate

globally applicable sustainability reporting guidelines.

For more information, visit www.globalreporting.org.

Grant in lieu – an amount paid instead of property taxes

lost time accident (lTa) – a work-related injury that causes

the injured person to be unable to return to work on his/her

next scheduled workday after the day of the injury, because

he/she is unfit to perform any duties

maC – Mining Association of Canada

material information – a fact or a change to the Company

that could reasonably be expected to have a significant effect

on the market price or value of the securities of the Company

n/ap – not applicable

n/av – not available

restricted work – a work-related injury where a licensed

health care provider or the employer recommends that the

employee not perform one or more of the routine functions of

the job or not work the full workday that the employee would

have otherwise worked

Tailings – the fine waste rock that remains after separating

the valuable minerals from the ore during mining and

processing of mineral resources. They may contain trace

quantities of metals found in the host ore, as well as added

compounds used to extract the minerals.

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For more information on Hudbay and our corporate social

responsibility strategy and activities, please visit our website at

www.hudbayminerals.com.

Hudbay

25 York Street, Suite 800, Toronto, Ontario M5J 2V5

Tel: 416 362-8181 Fax: 416 362-7844

Some 450,000 children are at risk of dying every year due to the impact of

zinc deficiency on diarrhea, pneumonia and malaria. In Peru, 41.6% of the

population is at risk of inadequate zinc intake, making it one of the high-risk

countries. Of children under five, 18.3% are stunted. This prevalence

rises to 32% in the rural areas, reaching 37% in the poorest populations.

Hudbay aims to make a difference and is funding an International Zinc

Association initiative to improve the survival, growth and development of

undernourished children by funding UNICEF’s zinc supplementation and

treatment programs. Zinc Saves Kids has identified Peru and Nepal as priority

countries. To learn more, visit www.zincsaveskids.org.

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