protecting our future...we are committed to protecting our future by conducting our business in a...

HudBay Minerals 2009 Corporate Social Responsibility Report

Protecting Our Future

We are committed to Protecting our Future by conducting our business in a sustainable manner that is sensitive to the interests of everyone affected by our business.

HudBay Minerals Inc. (TSX: HBM) is a Canadian integrated mining company with assets in North, Central and South America, principally focused on the discovery, production and marketing of base and precious metals. We are committed to Protecting our Future by conducting our business in a sustainable manner that is sensitive to the interests of everyone affected by our operations.

A member of the S&P/TSX Composite Index and the S&P/TSX Global Mining Index, HudBay Minerals is committed to the highest possible standards of corporate governance and corporate and social responsibility.

From left to right: A Snow Lake employee, a flora recovery project in Guatemala, HudBay’s lamp station at Trout Lake mine.

Table of Contents

1 Our Priorities 2 Who We Are 4 What We Do 6 Message from the CEO 8 About this Report 10 Progress and Priorities 12 Strategy and Governance 16 Governance in

the Community 20 Supporting Our Communities 24 Putting Safety First 27 Protecting the Environment 35 Economic Performance 37 Measuring Our

Performance 41 GRI Index 44 Glossary IBC Corporate Information

GovernanceWe believe that conducting our business in a transparent, accountable and sustainable manner requires that we follow the highest standards of corporate governance.

1CommunitiesWe give back to the communities in which we operate through employment opportunities, support of local businesses and by funding important social programs.

2

EnvironmentWe work hard to minimize the impact of our operations on the environment and to carefully restore closed operations as green spaces or prepare them for redevelopment into other uses.

4Economic impactWe are committed to achieving sustainable growth that reflects the interests of all stakeholders.

5

Health and safetyWe are committed to protecting the health and safety of our employees, contractors and surrounding communities.

3

Our Priorities

1 Manitoba/Saskatchewan Operations are centred in the Flin Flon Greenstone Belt

Mines Concentrators Metallurgical plants • 777 Mine • Flin Flon Concentrator • Flin Flon Zinc Plant • Trout Lake Mine • Snow Lake Concentrator • Flin Flon Copper Smelter* • Chisel North Mine

Development projects Advanced exploration projects • Lalor Project • Cold and Lost Properties • Reed Property

2 Ontario Offices Metallurgical plants • HudBay Head Office • Zochem Zinc Oxide

3 Michigan Metallurgical plants • White Pine Copper Refinery*

Advanced Exploration Projects • Back Forty Project

4 Guatemala Pre-development projects • Fenix Nickel Project

5 New York Mines Concentrators • Balmat Mine† • Balmat Concentrator†

6 Yukon Exploration projects • Tom/Jason Properties

7 Chile Exploration projects • Mineral Carrizal Alto SA • Minera Quebrada de Oro SA

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* Permanently closed in 2010.

† Currently on care and maintenance.

HudBay Minerals Inc. is a Canada-based integrated mining and minerals company with expertise in all aspects of the metals business. With headquarters in Toronto, Ontario, Canada, our principal assets are located in Canada, the United States and Guatemala.

Who We Are

America. These minerals are essential components in countless industrial and commercial products from batteries, electrical wiring and metal tubing, to sunscreen and vitamins. Our customers include companies that coat their steel products with zinc to prevent premature corrosion. We also supply brass mills that produce alloys of copper and zinc as well as companies that produce cast zinc parts. Products produced from our metals have a very high recycling rate.

The company is focused on exploring, mining, processing and selling metal products including zinc, zinc oxide, and copper with significant gold and silver by-product credits. Our closed operations are rehabilitated with the intent of returning them to a viable state in compliance with regulatory and environmental standards. HudBay is the third largest producer of zinc and copper metals in Canada and is the third largest producer of zinc oxide in North

2 HudBay Minerals Inc.

HudBay Minerals Inc.Canada

HMI Nickel Inc.British Columbia

Balmat HoldingCorporation

Delaware, USA

Compañia Guatemaltecade Niquel S.A.2

Guatemala

St. Lawrence Zinc Company LLC4 Delaware, USA

HudBay Marketing& Sales Inc.

Canada

Hudson Bay Mining andSmelting Co., Limited1

Canada

Hudson Bay Exploration and Development Company Limited3

Canada

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Corporate structure

1 Hudson Bay Mining and Smelting Co., Limited owns our 777 mine, Trout Lake mine, Chisel North mine and Lalor project and indirectly owns, through subsidiaries, our White Pine copper refinery.

2 Compañia Guatemalteca de Niquel S.A. owns the Fenix Project.

3 Hudson Bay Exploration and Development Company Limited owns our key exploration properties.

4 St. Lawrence Zinc Company LLC owns the Balmat mine.

HudBay has also enhanced its pipeline of advanced exploration projects through joint venture agreements. In Michigan, the company announced a joint venture agreement for the Back Forty Project, a promising zinc deposit with potential gold credits. An option agreement allows HudBay to earn an interest in the Cold and Lost properties in the Sherridon VMS District in Manitoba. HudBay also signed a letter of intent with respect to the copper-rich Reed Lake property in the Flin Flon Greenstone Belt.

HudBay is a publically traded Canadian corporation organized under the Canada Business Corporations Act. Our common shares (155,854,655 outstanding as of December 31, 2009) trade on the Toronto Stock Exchange (TSX: HBM) and are included in the S&P/TSX Composite Index and the S&P/TSX Global Mining Index. The company is a member of industry associations, including the Mining Association of Canada, the Prospectors & Developers Association of Canada, the Canadian Institute of Mining, Metallurgy and Petroleum, the Canadian Chamber of Commerce, the Mining Association of Manitoba, the Saskatchewan Mining Association, the Mines Accident Prevention Association of Manitoba, the International Zinc Association, the Canadian Dam Association and the Manitoba Employers Council.

Tom Goodman, HudBay’s Senior Vice President and Chief Operating Officer, is the president of the Manitoba Mining Association. Alan Hair, HudBay’s Senior Vice President, Business Development and Technical Services, is on the Board of directors of the Mining Association of Canada and is also a member of its executive committee. HudBay also participates on the Mining Association of Canada’s environment committee as well as the public affairs committee.

HudBay is an 83-year-old company with a rich mining tradition in the prolific Flin Flon Greenstone Belt in northern Manitoba and Saskatchewan. Since our inception, more than 150 million tonnes of ore has been mined from the 26 mines developed in the Belt. In 2009, revenues from our operations paid the wages and benefits of more than 1,600 employees, the majority of whom are based in Manitoba, as well as taxes that support government programs, hospitals and schools. We are also deeply committed to supporting charitable work; in 2009, HudBay donated nearly $1.4 million to a variety of organizations, including the Canadian Museum for Human Rights, the United Way chapter in Winnipeg and community projects in Manitoba and Guatemala.

HudBay currently operates three mines, two concentrators and a metallurgical plant near Flin Flon, Manitoba, and a metallurgical plant in Brampton, Ontario. Our copper smelter in Flin Flon and copper refinery in White Pine, Michigan both ceased operations in June 2010. Our Balmat operations in New York state, which include a mine and concentrator, have been on care and maintenance since August 2008. In Guatemala, an updated feasibility study is scheduled for our Fenix project.

Our most advanced project is Lalor in Snow Lake, Manitoba, which is being developed into HudBay’s next big mine on an expedited basis. Originally discovered in 2007 as a zinc deposit, subsequent exploration discovered separate and distinct gold zones in January 2009 and a new copper gold zone in September 2009. Approval was granted in October 2009 for $85 million in capital expenditures to initiate mine development and in August 2010, HudBay made a full commitment to Lalor by authorizing $560 million in expenditures in order to advance the project into full production.

3 2009 Corporate Social Responsibility Report

As a fully integrated company, HudBay has operations that range from exploration, to mining, to metal production to the sale of finished products, including special high-grade zinc.

What We Do

Trout Lake Mine Manitoba

The Trout Lake mine produces zinc, copper, gold and silver. It is located six kilometres from HudBay’s main ore concentrator and metallurgical complex in Flin Flon. Commercial production at the mine commenced in 1982 and is projected to end in 2012.

Chisel North Mine Manitoba

The Chisel North mine produces zinc and is located 10 kilometres from HudBay’s Snow Lake ore concentrator, which is 215 kilometres from Flin Flon. Commercial production at the mine commenced in 2000 and is projected to end in 2012.

777 Mine Manitoba

The 777 mine is HudBay’s premier mine and produces zinc, copper, gold and silver. Located in Flin Flon, 777 is situated immediately adjacent to the company’s principal concentrator and metallurgical plants. Commercial production commenced in January 2004 and current reserves provide for continuous production through 2020.

Closed operations are rehabilitated with the intent of returning them to their natural state in compliance with regulatory and environmental standards.

Lalor Project Manitoba

HudBay’s Lalor project is located in the Chisel basin of the prolific Flin Flon Greenstone Belt, about 15 kilometres from the Snow Lake ore concentrator. The deposit was discovered in 2007 and intensive exploration since then has discovered separate and distinct zinc, gold and copper-gold zones. The base case pre-feasibility study is ongoing and is expected to be enhanced by conducting engineering and tradeoff studies to further refine the project design, while an underground ramp from the Chisel North mine to Lalor is currently under construction. In August 2010, HudBay made a full commitment to Lalor by authorizing $560 million in expenditures in order to advance the project into full production.

Fenix Nickel Project Guatemala

HudBay acquired the Fenix property in Guatemala in 2008. It was a fully operational nickel laterite mining and smelting operation until it was placed on care and maintenance in 1980. HudBay is currently updating the mine’s feasibility study with a focus on mine optimization and electrical power strategy as options for redevelopment are evaluated.

Back Forty Project Michigan

The Back Forty project is subject to an option and joint venture agreement signed with Aquila Resources Inc. in 2009. Located in the Upper Peninsula of Michigan, the property holds extensive reserves of zinc, gold, copper and silver. Work to prepare a feasibility study and project permitting applica-tions is underway. Subsequent to year-end, HudBay exercised its option to earn a 51% joint venture interest in the project.

exPLOraTiON aNd deveLOPMeNT PrOJeCTS

MiNeS


Sustainable mining

Renewed commitment to exploration

Of HudBay’s $42 million 2010 exploration program, $8 million has been earmarked for Lalor. The regional drill program is also being expanded, targeting prospective areas adjacent to the Lalor project.

Snow Lake Concentrator Manitoba

The Snow Lake concentrator processes ore from the Chisel North mine and will process ore from the Lalor Project, which is currently under construction. It produces zinc concentrate that is transported 215 kilometres to the zinc plant at Flin Flon for processing into finished metal. The concentrator’s ore capacity is 1.2 million tonnes per year.

Flin Flon Concentrator Manitoba

The Flin Flon concentrator produces zinc and copper concentrates from ore mined at the 777 and Trout Lake mines. Zinc concentrate is fed to the zinc plant at Flin Flon for processing into finished metal. HudBay has begun to sell copper concentrate to third-party copper smelters. The concentrator’s ore capacity is 2.2 million tonnes per year.

Zinc Plant Manitoba

HudBay’s zinc plant in Flin Flon uses advanced technologies to produce special high-grade metal from zinc concentrate. Feedstock consists of zinc concentrate from company concentrators at Flin Flon and Snow Lake, plus additional purchased third-party concentrate as required. The plant’s process includes a two-stage pressure leaching unit, four steps of solution purification, an electrolysis circuit and a casting facility. The zinc plant’s output capacity is 115,000 tonnes of refined zinc metal per year.

reed Lake Property Manitoba

In July 2010, HudBay signed a joint venture agreement with VMS Ventures to develop the Reed Lake property, a copper-rich deposit in the Flin Flon Greenstone Belt that can supply ore to HudBay’s existing concentrators. The property is currently under option to VMS and HudBay would have an option to acquire a majority interest in the joint venture.

Cold and Lost Properties Manitoba

The Cold and Lost properties are located in the Sherridon VMS district in the Flin Flon Greenstone Belt. They are held by Halo Resources Ltd., with whom HudBay signed an agreement in 2009 that provides an option to acquire a majority joint venture interest. If economically mineable ore is located, it can be transported 110 kilometres to HudBay’s processing facilities at Flin Flon.

HudBay is the third largest producer of zinc and copper metals in Canada and is the third largest producer of zinc oxide in North America.

HudBay’s strategic growth plan is focused on optimizing and expanding our principal operating platform in Manitoba, while pursuing accretive growth opportunities farther afield.

exPLOraTiON aNd deveLOPMeNT PrOJeCTS

MeTaLLurGiCaL PLaNTCONCeNTraTOrS


Growing scale

In Guatemala we continued investments in the region of El Estor, home to our Fenix brownfield nickel project, which have laid the groundwork for its development. Many of these investments are aimed at cementing our relationship with the broader community, whose efficient functioning and support are critical to the long-term success of the company in Guatemala.

Key investments in 2009 and early 2010 in Guatemala totalled US$9.3 million and included:

• More than 35 kilometres of highway upgrades

• Expansion of the regional airport in El Estor

• Renovation of the Ak’nal’eb Educational Center

• Funding for 33 programs by the Raxché Foundation, managed and supported by CGN, our Guatemalan subsidiary

• Ongoing financial support for the Setal Reserve, a private 617-hectare nature preserve created by CGN

As we advance the Fenix project to a decision on how to proceed going forward, we will continue to invest in El Estor. This support is integral to HudBay’s relationship with the community and helps to maintain our social license to operate.

In Flin Flon, the hub of our northern Manitoba operations, a number of notable investments were realized in 2009. Many of these were made possible by the HudBay 80th Anniversary Fund, a $1 million capital pool established in 2008 to benefit community initiatives. During 2009 there were eight recipients of $10,000 or more in Flin Flon and

This year’s corporate social responsibility report is the second we have published using the widely recognized Global Reporting Initiative (GRI) framework and related Sustainability Reporting Guidelines, specifically the G3 Guidelines. Last year we established a benchmark for our CSR reporting, and made a commitment to continuously improve our contribution to this area of growing importance for our business and the mining industry as a whole. To help fulfil that commitment, we engaged Deloitte & Touche LLP to assist us in determining our level of readiness for undergoing external verification on our CSR information and to check our GRI application level self declaration.

Our work with Deloitte & Touche LLP advanced HudBay’s CSR reporting in two ways. First it is enabling us to develop our information systems and processes to be robust enough to support an externally verified report going forward and second, it identified opportunities for ongoing improvement in reporting. As a result, we have made considerable progress on the external assurance path towards achieving a “+” application level under the GRI, for future reports. This reflects HudBay’s commitment to continuous improvement and demonstrates our dedication to achieving high CSR standards.

For HudBay, 2009 was one of the most eventful and tumultuous years in its history. It is best characterized as a year of transition, but one where stability was restored, enabling the company to advance its strategy in several ways. This included key accomplishments in the area of corporate social responsibility.

Over its 83-year history, HudBay has always believed that sustainable growth depends on respecting the interest of all the people affected by our operations. This spirit of accountability has been our guidepost and today it continues to help us chart our course.

Message from the CEO

6 HudBay Minerals Inc. HudBay Minerals Inc.

neighbouring Creighton, Saskatchewan. (For details see the Supporting our Communities section of this report).

Our track record of supporting the communities in which we work is an extension of the high standards we have established within our operations.

Success at the operational level is reflected in various measures of sustainable performance. In particular, HudBay has seen dramatic improvements in its overall safety record and this is reflected in our improving lost time accident record. In fact, our flagship 777 mine in Flin Flon has had no lost time accidents in nearly three years.

We also possess an enviable environmental record, which is underpinned by our reclamation and restoration of previously mined areas in northern Manitoba. With the closure of our Flin Flon copper smelter in June 2010, we also made great strides in reducing atmospheric emissions. Our remaining operations in Flin Flon now produce significantly lower atmospheric emissions because they run primarily on hydroelectric power.

One of the strongest reflections of our commitment to good corporate citizenship is HudBay’s labour relations record. In Manitoba, the company’s core operations have not experienced a work stoppage since 1971 and our current labour agreements do not expire until the end of 2011.

For 2010, HudBay’s commitment to corporate social responsibility remains steadfast. We remain focused on improving our performance in corporate operations, financial results and accountability to stakeholders. With their continued support, we look forward to reporting further progress in 2011.

David Garofalo President and Chief Executive Officer

“ Our track record of supporting the communities in which we work is an extension of the high standards we have established within our operations.”

– David Garofalo

david Garofalo President and Chief Executive Officer


properties in Canada, the United States and Guatemala as illustrated on page two of this report.

For the first time, this report includes complete data from our Guatemalan subsidiary. It does not include joint venture interests or any other investments of the company. When comparing key performance indicators to previous years, readers should also bear in mind that the Chisel North mine and Snow Lake concentrator were out of operation between January and October 2009 due to low zinc prices. Our Balmat mine and concentrator in New York were put on care and maintenance in August 2008 and remain inoperative to date for the same reason.

Also not covered by this report are mineral interests not yet material to our company that have been acquired or announced since the publication of our 2008 CSR report. These include:

• An agreement with Aquila Resources Inc. in August 2009 granting HudBay the right to acquire a majority interest in Aquila’s Back Forty Project located in Menominee County, Michigan. HudBay has a 51% ownership interest in Aquila with conditional options to obtain up to a 65% interest and the right to act as joint venture operator of any eventual mining development.

• An option agreement with Halo Resources Ltd. in December 2009 which allows HudBay to earn up to a 67.5% joint venture interest in Halo’s Cold and Lost properties in the Sherridon VMS District in Manitoba.

• A joint venture and four option agreements with VMS Ventures Inc. in July 2010 relating to the copper-rich Reed Lake property and a series of adjacent mineral properties held by VMS in Manitoba’s Flin Flon Greenstone Belt. HudBay has a 70% operating interest and VMS has a 30% interest in a joint venture respecting the Reed Lake property and the two claims immediately to the south.

This report covers activities of the company from January 1, 2009 to December 31, 2009. This report also covers some significant events that have occurred subsequent to 2009, yet prior to the publication of this report. Our 2008 report, which covered the period January 1, 2008 to December 31, 2008, was published in September 2009. Our next report, which will cover activities for the calendar year 2010, is scheduled for publication in 2011.

As always, our CSR report focuses on sustainable priorities that reflect the commitments detailed in our Charter of the Environmental, Health and Safety Committee and the company’s Code of Business Conduct and Ethics. It is intended to help all of our stakeholders better understand how we manage the various issues and challenges that fall under the domain of “corporate social responsibility.” Our stakeholders include employees of HudBay and its subsidiaries, investors, suppliers and service providers, as well as the communities, Aboriginal groups, governments, regulators and non-governmental organizations affected by, or that can affect, HudBay’s operations.

The major areas of content covered by this report include corporate governance, community relations, labour and employment, health and safety, environmental and economic performance. The commentary is anchored by GRI Performance indicators that are designed to encourage rigorous monitoring and reporting systems and help measure our performance against important corporate responsibility goals and objectives. These performance indicators are referenced throughout this report and are summarized in the table on page 42 and 43.

Wherever possible, country-specific data have been used, while regional and aggregate data have also been included. Except where specifically indicated, the data reflect reporting on a uniform basis for HudBay Minerals Inc. and all of its operating

This 2009 Corporate and Social Responsibility (CSR) report is the sixth we have published in accordance with the guiding principles of Toward Sustainable Mining (TSM) and the second published in accordance with Global Reporting Initiative (GRI) G3 guidelines. Using these guidelines, we have prepared a B level report.

About this Report


Basis of reporting

All financial information in this report is presented in Canadian dollars. All operating data is reported using the metric system. Some metrics are reported on both an absolute basis and on an intensity basis against kilotonnes of metal processed. Safety data frequency rates are measured per 200,000 hours worked.

data measurement techniques

Data for the indicators are collected and compiled using information submitted by each site on a standard template. We provide instructions and criteria for GRI G3 and TSM, and also supply a greenhouse gas (GHG) emissions worksheet (developed by the Mining Association of Canada).

data quality and data control

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. At every link in the operating chain, the appropriate manager checks the accuracy of the data, which is then reviewed by the entire executive team.

We provide safety and environmental incident definitions so that all operations report incidents consistently. We calculate greenhouse gas emissions using published factors for emissions from grid electricity in each of the countries in which we operate.

Most of the performance data for water and energy is metered. We do not generate power at any of our majority-owned operations, but rather buy it from local grids. Utility bills are therefore used to compile total energy consumption numbers.

Key risks, impacts and opportunities

The nature of our operations creates both opportunities and risks for HudBay. Our operations provide welcome employment opportunities to local communities but they consume large quantities of water and will inevitably have some impact on the environment due to the nature of the mining and metal processing business. We work hard to minimize these impacts through a comprehensive sustainability strategy that assigns responsibility, accountability and sufficient resources for its execution. As described elsewhere in this report, comprehensive programs are in place at all facilities to protect the health and safety of our employees and communities and minimize the impact of our operations on the environment. A complete description of the risks and uncertainties inherent to our business can be found in the MD&A of our 2009 annual report.

HudBay is also developing a Risk Management Policy that defines our approach to enterprise risk management and establishes a framework within which, specialized policies and practices are developed and refined.

As HudBay continues to renew and integrate policy, program and management structures, the successful delivery of its mandate relies on effective and cohesive management of risk. As such, the objective of the Risk Management Policy is to create a risk-smart workforce within HudBay to identify, manage and reduce or eliminate risks to the successful achievement of our overall business objectives.

Deciding what is material

Subject matter in a GRI-aligned sustainability report should reflect a company’s most significant social, socio-economic and environmental impacts and should help its stakeholders make informed assessments and decisions.

For sustainability reporting, we define “material information” as information that might influence the perceptions of stakeholders concerning the level of HudBay’s commitment to conducting a successful and sustainable business.

In the process of defining key issues, we regularly examine a variety of information sources including systematic feedback from operating management, senior management interviews, company and industry media coverage, relevant internal documents and records, leading CSR reports from our own and other industries, the work of leading

sustainability organizations such as the Global Reporting Initiative and industry associations such as the Mining Association of Canada.

As a result of this review, we have determined that the key areas of interest to our stakeholders and the company itself pertain to:

• directing the corporation with good governance;

• acting as a positive partner in the communities where we work;

• making safety the number one priority of all employees

• minimizing environmental harm and rehabilitating the land affected by our operations; and

• managing HudBay with transparency and accountability.


Progress and Priorities

1 Continuously improve safety with ultimate target of zero lost-time accidents (LTA) due to injuries at operations

2 Reduce medical aid and first aid accident frequencies

1 Support the communities where we operate

1 Meet or better the regulated emission targets

2 Ensure effective usage of fresh water by setting a target to reduce consumption by 1% per annum

3 Reclaim land impacted by HudBay operations back to healthy and vibrant ecosystems

4 Evaluate any potential health or environmental impact of elevated metal levels in the soil in the Flin Flon Creighton area

1 To maintain a strong balance sheet

2 Actively expand portfolio of quality mineral reserves

1 Comply with regulatory requirements, and identify and integrate best governance practices

Communities Our mines and plants need their neighbouring towns, and vice versa. We tap into the local labour force and suppliers, and the towns enjoy the employment and commerce we bring. We invest in charities and infrastructure, help with emergency systems, assist communities affected by layoffs, and work with the communities and government to reduce our environmental impact.

Safety We strive to be a mining industry leader in health and safety for the benefit of our employees and the communities in which they work.

environment Our goal is to continuously improve our environmental performance over time by:

• Reducing our consumption and use of inputs such as energy, water and land.

• Reducing our environmental footprint from outputs such as greenhouse gas and sulphur dioxide emissions and other wastes.

economic Our goal is to increase shareholder value through efficient operations, organic growth and accretive acquisitions, while maintaining our financial strength.

Governance An eight member Board with an independent chair is highly engaged via 4 committees.

Key objectives


Progress and Priorities

• Overall LTA frequency of employees and long-term contractors was reduced to 0.5

• Achieved a medical aid frequency of 11 and a first aid frequency of 20

• 1,621 direct jobs with $180M annual payroll

• $7.8M to municipalities through taxes and grants in lieu of taxes

• $34M in income, mining, capital and use taxes to federal and provincial governments

• $846,000 in contributions on various charities

• In Guatemala spent $5.4M on road-building, $208,000 on community projects and $154,000 on information programs

• Total CO2-e emissions were 18% lower than they were in 2008, mostly due to reduced throughput and corresponding emissions from our copper Smelter in Flin Flon

• Decreased fresh water usage by 7%

• Supported urban spaces rehabilitation, Green Project and Soil Studies Project

• Supported protection of 617 ha adjacent to CGN property

• Continued to fund and participate in the Human Health Risk Assessment (HHRA)

• Cash and cash equivalents of $887M

• Approved an $85 million expenditure to fund the development of the Lalor project

• Re-started operations at the Chisel North mine and Snow Lake Concentrator

• Entered into an agreement with Aquila Resources to receive an option to acquire up to a 65% joint venture interest in the Back Forty project

• Revised charters of the 4 BOD sub-committees: – Audit – Corporate Governance & Nominating – Compensation – Environmental, Health & Safety

• Target reducing LTA to zero

• Reduce severity to zero

• To maintain or reduce the medical aid and first aid accident frequencies

• Continue to support communities where we operate in conformance with MAC’s TSM indicator for External Outreach

• Reduce total CO2-e emissions by at least another 1%, maintaining our better-than-Kyoto target.

• Reduce fresh water usage by another 2% from 2008 usage at Flin Flon operations (2009 improvement partially due to sites on care and maintenance for most of the year)

• Will continue greening programs and rehabilitation of mines

• Report on the findings of HHRA on June 17, 2010

• Aggressively pursue development of Lalor project ($560 million construction commitment made in August 2010)

• Continue exploration of Flin Flon Greenstone Belt

• Explore opportunities to grow beyond Manitoba base

• To make strategic investments and maintain strong cash position

• Hire a new CEO (permanent CEO hired in July 2010)

0.55LTA frequency lowest in 80+ year history

25%Cap on new shares issued for acquisitions without shareholder consent

-37.5%Amount below Kyoto Protocol target of CO2 emissions in 2009

617haSize of protected area designated with CGN support

1,621Direct jobs

$887MCash and cash equivalents at the end of 2009

accomplishments in 2009 Priorities for 2010


Strategy and Governance

The framework also establishes a common set of performance expectations for the Board and the senior management team. Information about our charters, policies and positions can be accessed on our website at www.hudbayminerals.com.

HudBay’s Board of Directors has ultimate responsibility for setting and overseeing the implementation of governance and sustainability strategies. The Board is assisted in carrying out these responsibilities by the Corporate Governance and Nominating Committee and the Environmental, Health and Safety Committee of the Board of Directors.

Among its other responsibilities, the Corporate Governance and Nominating Committee is responsible for developing and recommending to the Board of Directors appropriate corporate governance principles

Since its appointment on March 23, 2009, the Board has refined the company’s governance framework to promote the interests of shareholders and the effective functioning of the Board and its committees. These improvements include:

• Requiring shareholder approval to increase the number of shares by more than 25% during an acquisition

• Requiring executive officers and directors to own a meaningful number of HudBay shares

• Linking equity-based compensation to the performance of the company

• Adopting a majority voting policy whereby a director who receives more votes “withheld” than votes “for” will resign promptly.

We believe that good corporate governance is essential to the creation of sustainable growth. Our governance practices and policies define the roles and responsibilities of the Board and management in conducting our business in a transparent and accountable manner that respects the interests of all stakeholders.

Tom Goodman, Senior Vice President and Chief Operating Officer (left) discussing operating strategy with Brad Lantz, Vice President, Mining (right).


and strategies for the company. This includes oversight of all sustainability issues not addressed by other committees including community relations and social and other philanthropic activities. The Corporate Governance and Nominating Committee Chair is an independent and non-executive director.

The Environmental, Health and Safety Committee is responsible for assisting the Board of Directors in its oversight of the development and implementation by management of the company, the policies, programs and systems relating to environmental and health and safety issues. This includes environmental, safety and health performance and monitoring of current and future legal and regulatory issues to ensure compliance with applicable legislation, rules and regulations and best management practices. The Committee is chaired by a non-independent executive director with direct knowledge of HudBay’s operating facilities.

A complete description of committee responsibilities can also be found at www.hudbayminerals.com.

Providing recommendations to the Board

Stakeholders and other interested parties are encouraged to communicate directly with the Board in writing or through a Board Communication portal on HudBay’s website. The Board has also established a “whistleblower” service using a third-party that can be reached at www.clearviewconnects.com for the confidential, anonymous submission of good-faith reports to the Chair of the Audit Committee of HudBay about perceived violations of the company’s internal and accounting controls, auditing matters or violations of the company’s Code of Business Conduct and Ethics.

Board independence

For a director to be considered independent under the policies of the Canadian Securities Administrators, he or she must have no direct or indirect material relationship with the company, being a relationship that could, in the view of the Board, reasonably interfere with his or her independent judgment, and must not be in any

relationship deemed to be not independent pursuant to such policies. To assist in determining the independence of directors for purposes that include compliance with applicable legal and regulatory requirements and policies, the Board has adopted certain categorical standards, which are part of the Corporate Governance Guidelines.

Board evaluations

At least annually, and more often if required, the Corporate Governance and Nominating Committee conducts a review and evaluation of the performance of the Board of Directors and its members and committees, including the compliance of the Board of Directors with the Board’s Charter. This evaluation assesses the contribution of the Board and individual Directors with a specific focus on areas in which the directors and senior management believe that the contribution of the Board of Directors could be improved.

The Board also has an Environmental, Health and Safety Committee, which assists the Board in discharging its responsibility relating to its oversight of our policies, programs and systems relating to environmental and health and safety issues and performance, and monitoring legal and regulatory issues to ensure our compliance with applicable legislation, rules and regulations and best management practices. Each member of the Environmental, Health and Safety Committee is required to have or develop an understanding of environmental, health and safety matters and best practices.

Board expertise

In co-operation with HudBay’s senior management, the Corporate Governance and Nominating Committee also conducts an appropriate orientation and education for new directors in order to familiarize them with the company and its business (including the company’s reporting structure, strategic plans, significant financial, accounting and risk issues, compliance programs and policies, senior management and the independent auditor).

HudBay refined its approach to governance in 2009 to establish a common set of expectations for the Board and senior management team.


Committees in compliance with corporate governance requirements of applicable legislation, and that such compliance is reviewed periodically by the Corporate Governance and Nominating Committee,

• ensuring internal control and management information systems are in place and are evaluated and reviewed periodically on the initiative of the Audit Committee.

Compensation and performance

Since taking office in March 2009, the Board has conducted a broad review of HudBay’s corporate governance. As part of this review, the Compensation Committee has reviewed the company’s executive and director compensation programs and implemented changes designed to increase the association between pay and performance and adopt other best practice compensation measures. One of the most important changes to the programs was the replacement of option grants with performance-conditioned share units. The share units, which represent a significant part of total compensation, ensure that senior executives and directors have a significant equity interest in our company, which better aligns their interests with those of the company’s shareholders and is consistent with our desire to implement best practices in HudBay’s compensation programs.

Conflicts of interest

Under applicable corporate law and the corporation’s by-laws, a director or officer who is a party to a material contract or transaction, is a director or officer of a party to such a contract or transaction or otherwise has a material interest in a party to such contract or transaction must disclose such interest to the Corporation and, in the case of a director, must refrain from voting on such contract or transaction.

In addition, HudBay personnel subject to our Code of Business Conduct and Ethics (including directors and officers) are required to avoid any relationship or activity that might create or appear to create a conflict between their personal interest and the interests of the corporation and its subsidiaries.

The Corporate Governance and Nominating Committee develops and recommends to the Board criteria for selecting new directors, assist the Board by identifying individuals qualified to become members of the Board, and recommend to the Board nominees for election to the Board in annual meetings and directors to be appointed to each Committee and as the Chair of each Committee. In doing so, the Corporate Governance and Nominating Committee applies a number of criteria in assessing individuals that may be qualified to become directors and members of Committees, including:

• their judgment, character, expertise, skills and knowledge that may be useful to the oversight of HudBay’s business,

• their diversity of viewpoints, backgrounds, experiences and other demographics,

• their business and other relevant experience, and

• the extent to which the interplay of their expertise, skills, knowledge and experience with that of other members of the Board will build a board that is effective, collegial and responsive to the needs of the company.

These criteria are applied in respect of each individual director, and in respect of the Board and each Committee as a whole.

In fulfilling its statutory mandate and discharging its duty of stewardship of HudBay, the Board assumes responsibility for, among other things:

• reviewing and approving the strategic plan and business objectives that are submitted by senior management and monitoring the implementation by senior management of the strategic plan,

• reviewing the principal strategic, operational, reporting and compliance risks for the company and overseeing, with the assistance of the Audit Committee, the implementation and monitoring of appropriate risk management systems and monitoring of risks,

• ensuring, with the assistance of the Corporate Governance and Nominating Committee, the effective functioning of the Board and its

Strategy and Governance

The Board has implemented changes to the executive and director compensation programs in accordance with best practice to better align their interests with those of HudBay’s shareholders.


Accordingly, directors and officers are not permitted to work for a competitor as a consultant or board member and all other conflicts of interest are prohibited as a matter of company policy, except under guidelines approved by the Board of directors. Any HudBay personnel who become aware of a conflict or potential conflict are advised to bring it to the attention of a supervisor or department head.

risk management

HudBay has established a Risk Management Policy for the purpose of ensuring that strategic, compliance, operational and financial risks are present throughout our organization. It is sound

business practice to manage risk in the pursuit of strategic objectives in a proactive, systemic and explicit manner.

The Risk Management Policy will apply to all employees and defines our approach to enterprise risk management and establishes a framework within which specialized policies and practices will be developed and refined. The objective of the Risk Management Policy is to create a risk-smart workforce within HudBay to identify, manage and reduce or eliminate risks to the successful achievement of our overall business objectives.

Code of conduct and business ethics

HudBay maintains a strict behavioural code which sets out expectations for every director, officer and employee of the company. The code has the following purposes:

• to promote honest and ethical conduct;

• to avoid conflicts of interest;

• to promote full, fair, accurate, timely and understandable disclosure;

• to promote compliance with rules, laws and regulations;

• to promote prompt internal reporting of violations of the code;

• to provide guidance to help recognize and deal with ethical issues;

• to provide mechanisms to report unethical conduct; and

• to help foster a culture of honesty and accountability.

A complete copy of the Code can be found on our website at: www.hudbayminerals.com/corporate/governance.php


a commitment to excellence

We have certified the management systems at our operating facilities to internationally recognized ISO standards which promote continuous improvement in our performance. ISO 9001 ensures that a company has the quality management and assurance systems to consistently provide product that meets our customers’ expectations. ISO 14001 requires that management systems are in place to prevent and minimize harmful effects on the environment. All of our operating facilities are also governed by OHSAS 18001, an international health and safety certification system that helps minimize risk to our employees and nearby communities.

We are committed to certifying all operating properties to international standards within two years of starting operations.

Stakeholder engagement

We have developed a formal process to engage our stakeholders or “communities of interest” (COIs) who can be affected by, or affect, our business. Such COIs are defined in two ways:

1. Through actual engagement (i.e. communities in close proximity to the business and communities where formal agreements exist); and

2. Through brainstorming sessions which incorporate reviews of current external communications and relationships.

Governance in the Community

HudBay Minerals Inc.’s sustainability strategy leverages the company’s many strengths to produce long-term value for all our stakeholders, whether their primary interests are economic, environmental or social. Our strategies – and the policies and programs that are designed to support them – are intended to ensure HudBay achieves profitable growth while continuously improving our social and environmental performance.

We continue to build relation-ships in El Estor, Guatemala, home to the Fenix brownfield nickel project.


Applicable government departments (federal and provincial) are identified and consulted on an as required basis per project. These departments are identified on respective legal registers controlled within HMI subsidiary and division ISO and OHSAS management systems.

The departments identified through this process are reviewed annually at respective HMI subsidiary and division ISO and OHSAS Management Review meetings. Meetings with identified COIs are conducted on both an informal and formal basis in accordance with evolving issues and mutual needs. Formal meetings with COIs, where specific HMI division / subsidiary issues are discussed, must be documented.

COi outreach and dialogue

HudBay relies on various means of ongoing commu-nication and dialogue to maintain active relationships with our communities of interest. These are outlined in the communication requirements of our subsidiary and division ISO and OHSAS management systems. Additionally, HudBay’s Disclosure Committee is responsible for ensuring compliance with our legal disclosure obligations.

HudBay’s stakeholder groups or communities of interest include:

Employees:

• United Steelworkers of America

• Flin Flon Trades Association

• International Brotherhood of Electrical Workers

• International Association of Machinists and Aerospace Workers

• Communications, Energy and Paperworkers Union of Canada

• Employees in general

• Employee Health & Safety Committees

Aboriginal:

• Cormorant Resource Management Group

• Moose Lake Resource Management Group

• Cumberland House Band

• Peter Ballantyne Band

• Opaskwayak Cree Nation

• Lac Vieux Desert Band of Lake Superior Chippewa Indians

• Keweenaw Bay Indian Community, Lake Superior Band of Chippewa Indians

• Others (as identified by specific projects)

Associations:

• Mining Association of Canada

• Manitoba Mining Association

• Saskatchewan Mining Association

• Mines Accident Prevention Association of Manitoba

• Canadian Institute of Mining and relevant Societies

• International Zinc Association

• Canadian Dam Association

• Manitoba Employers Council

• Applicable professional associations

• Prospectors & Developers Associations

• Canadian Manufacturers and Exporters

• Industrial Gas Users Association

• Industrial Accident Prevention Association (ON)

• AIME – Society of Mining Engineers

Governments (as per ISO/OHSAS systems):

• Federal (Canada / U.S.A.)

• Applicable Provincial / State

• Joint Regulatory Group (HBMS-FF/SL only)

Municipalities:

• City of Flin Flon

• Town of Creighton

• Village of Denare Beach

• Town of Snow Lake

• City of Brampton

• Region of Peel (ON)

• Town of Gouverneur, New York

• Carp Lake Township, Michigan

• Village of Ontonagon, Michigan

Local Groups:

• Flin Flon & District Chamber of Commerce

• Healthy Flin Flon and sub-committees

• Flinty Project

• Green Project

• NOR-MAN Community Trauma Response Team University College of the North

• Tailings Working Group

• NORMAN Regional Health Authority

• Local Snowmobile Clubs (FF, SL, The Pas)

• Flin Flon & District Environment Council

• Flin Flon & District Assessment and Referral Service


industry affiliations

As a producing member of the Mining Association of Canada (MAC), HudBay subscribes to the Toward Sustainable Mining (TSM) principles, a rigorous system for achieving best performance and continuous improvement in four critical areas, with annual internal assessments and reports and external verification every three years. We are among the majority of publicly owned Canadian mining companies that are MAC members. Our last external verification was completed in 2010 and our next will be conducted in 2013. Please refer to the environmental section of this report for a complete description of our performance.

A complete description of TSM can be found at http://www.mining.ca/www/Towards_Sustaining_Mining/index.php.

Northern Manitoba Mining academy

In July 2010, HudBay announced its participation in a collaborative venture to launch the Northern Manitoba Mining Academy with the University College of the North, Northern Manitoba Sector Council, the Province of Manitoba, the city of Flin Flon and the University of Manitoba. The Academy’s mandate is to provide northern Manitoba residents access to mining-related training with the objective of creating a knowledgeable, skilled and sustainable workforce. HudBay is donating $200,000 and approximately half an acre of land in a prime location for training purposes as part of its commitment to this initiative.

Local Groups (continued):

• Little Athapap Camp Owners Association

• Big Island / Schist Lake Properties Association

• Greenstone Community Futures Development Corporation

• Flin Flon School Division

• Local businesses bordering on Zochem property

• Brampton Board of Trade

• Ontonagon County Economic Development Corporation, Michigan

• White Pine School District, Michigan

• Ontonagon County Chamber of Commerce, Michigan

• Ewen-Trout Creek School District, Michigan

• Carp Lake Township Planning Commission, Michigan

• Ontonagon Area School District, Michigan

• Gogebic and Ontonagon County 4H Groups, Michigan

• White Pine 4th of July Committee, Michigan

Customers, Suppliers and Contractors (as per ISO/OHSAS systems)1

Non-governmental Organizations (monitored only):

• Sierra Club of Canada

• Mining Watch Canada

• Greenpeace

• Friends of the Earth

• Amnesty International

Other:

• Base Metals Environmental Multi-Stakeholder Advisory Group (BEMAG)

• Donations Committee (FF/SL)

• Universities & other schools (for recruiting and for research projects)

Financial Community and Shareholders:

• Shareholders

• Banks

• Other potential investors

1 Customers, suppliers and contractors will vary according to the metal produced, geographic location and operations.

Governance in the Community


Board of Directors*

J. Bruce Barraclough1,3,4

John L. Knowles4

David Garofalo3

Alan J. Lenczner2,3

Alan R. Hibben1,4

Kenneth G. Stowe1

W. Warren Holmes3

G. Wesley Voorheis2

1 Member of Compensation Committee, chaired by Mr. Hibben.

2 Member of Corporate Governance and Nominating Committee, chaired by Mr. Voorheis.

3 Member of Environment, Health and Safety Committee, chaired by Mr. Holmes.

4 Member of Audit Committee, chaired by Mr. Barraclough.

*Current Board of Directors and Management as of the publication of this report.

David Garofalo President & Chief Executive Officer

David S. Bryson Senior Vice President and Chief Financial Officer

Alan T.C. Hair Senior Vice President, Business Development and Technical Services

H. Maura Lendon Senior Vice President, Corporate Services and Chief Legal Officer

Tom A. Goodman Senior Vice President and Chief Operating Officer

Management

John D. Bracale Country Manager, Guatemala and President, Compania Guatemalteca de Niquel, S.A.

Brad W. Lantz Vice President, Mining

Cashel Meagher Vice President, Exploration

John Vincic Vice President, Investor Relations and Corporate Communications

Ken Gillis Senior Vice President, Corporate Development


Our economic impact

Wherever HudBay operates, the community and its larger region benefit economically, both directly and indirectly. The company has employed more than 47,000 people over the past 83 years. In addition, wherever our operations are located, our presence gives rise to a host of secondary businesses, ranging from contractors who support our activities at job sites to retail and other commercial enterprises within communities.

HudBay has a strong record of philanthropy; in 2009 we provided direct funding of $1.4 million to benefit our communities. Of the total, $400,000 was this year’s instalment of a $1 million contribution toward the Canadian Museum for Human Rights in Winnipeg (see p.21). In the Flin Flon / Creighton region, 2009 was the second year of the HudBay

HudBay’s communities

HudBay’s immediate communities are the population centres near our areas of mining activity. But in a broader sense, our “communities of interest” comprise an extended mix of stakeholders that reaches far beyond our operations to the people and organizations that affect, or are affected by, HudBay’s operations. These stakeholders include our employees (including trade unions), aboriginal peoples (First Nations, Métis and Indigenous), community groups (ranging from business groups to sports teams), associations of all kinds (mineral industry, safety, health, environmental), governments at all levels, regional educational institutions, plus customers, contractors, suppliers, and others.

Supporting Our Communities

The towns near our mines and processing facilities support HudBay by providing skilled employees and goods and services that make our operations possible. In return, we provide support to local programs, make investments in community projects, render assistance when employees are laid off and minimize the environmental impact of our operations.

The development of the Fenix project is expected to lead to abundant local employment opportunities.


80th Anniversary Fund, a $1 million capital pool established to benefit community initiatives. During 2009 there were eight recipients of $10,000 or more, including:

1. Walking path between Flin Flon and Creighton

2. Creighton running track

3. Flin Flon Ski Club trail and facility upgrade

4. Phantom Lake Golf Club upgrade

5. Flin Flon Station Museum

6. Channing Recreation Association

7. Friends of Alder Park

8. Flin Flon Square

In addition, HudBay donated $333,000 toward community projects at CGN, our subsidiary in Guatemala. In Winnipeg, the location of one of our corporate offices, the local United Way received $10,000 and the National Aboriginal Achievement

Foundation benefited from a $5,000 donation. Other noteworthy contributions were $12,500 to the Safe Workers of Tomorrow and $15,000 to the North-West Caribou Project.

Helping communities cope with changing economic times

Mines and processing facilities do not last indefinitely, and layoffs from a major employer can hit a community hard. In New York State, HudBay’s Balmat mine and concentrator were placed on care and maintenance in 2008 when zinc prices declined and the operations were no longer deemed economically viable. In Guatemala, construction at the Fenix project was also postponed in 2008 when the global economic crisis reached its worst point. In Manitoba, the copper smelter in Flin Flon closed in June 2010. This aging facility would not have met new environmental regulations and could not be

Our presence gives rise to a host of secondary businesses, ranging from contractors who support our activities at job sites to retail and other commercial enterprises within communities.

Total contributions to charities (in CDN $000):

$1,415

(at right): Exterior and interior artist renderings of the Canadian Museum for Human Rights in Winnipeg.

Case Study: HudBay’s $1 million investment in human rights

HudBay strongly believes in the inalienable right of the individual to be treated with dignity, fairness and respect, regardless of culture, race, color or religion. As evidence of this commitment, HudBay has committed $1 million to the Canadian Museum for Human Rights in Winnipeg.

This unique institution – the only federal museum to be located outside the National Capital Region – will be the largest human rights centre in the world. It has a special mission to prepare young people to become leaders and advocates in human rights.

This donation is the largest single philanthropic gift in the company’s history, and it was made to honour HudBay employees, past and present, who have made our success possible over the past eight decades.

Projected to open in 2012, the physical home of the Canadian Museum for Human Rights promises to be an inspiring international landmark, drawing visitors from around the globe. The Canadian Museum for Human Rights is a $310 million project created by a partnership that includes the Government of Canada, the Province of Manitoba and the City of Winnipeg.


Case Study: Manitoba Rangers

HudBay’s support of First Nations found a new means of expression during 2009 with the Manitoba Rangers program. The initiative is a seven-week, live-in employment and training experience for aboriginal youth aged 16 to 18. Through training sessions and hands-on work experience, the program familiarizes the teens with northern Manitoba’s three main resource sectors: mining, forestry and energy. More importantly, participants learn the essential job-related aspects of each industry and in the process, they discover which one appeals to them the most.

involvement by local communities, government authorities and other interested parties. Its website can be found at www.flinflonsoilsstudy.com.

HHRA created two working committees to encourage broad participation. The first, the Community Advisory Committee (CAC), reflects HudBay’s commitment to making the process fully transparent, and during 2009 it held five meetings. The second working committee is the Technical Advisory Committee (TAC), comprised of officials from the governments of Canada, Manitoba and Saskatchewan. Its role is to make the HHRA a thorough, scientifically rigorous assessment of potential health risks to the community. The TAC met 15 times during 2009.

To assist with the HHRA project, HudBay retained Intrinsik Environmental Sciences Inc., an independent Toronto-based consulting company. Intrinsik conducted an exhaustive investigation to detect mercury, lead and arsenic in soil samples from Flin Flon and biological samples from children living in the region. Intrinsik’s analysis and conclusions were subjected to rigorous peer review by Toxicology Excellence for Risk Assessment (TERA), a not-for-profit U.S. organization. With this process we sought to ensure that the entire HHRA effort, while completely funded by HudBay, would not only be conducted according to high scientific standards, but also would be independent and objective.

upgraded to modern standards to make it compe-titive with international smelters. In conjunction with the smelter’s closing, HudBay will also close the White Pine copper refinery in Michigan in 2010.

Under such circumstances it’s up to the employer to do all it reasonably can to mitigate community hardship. For example, many copper smelter employees were redeployed to other operations or accepted offers of early retirement, while others entered in-house apprenticeship programs to learn new trades. As a result, fewer than 25% of a total of more than 250 smelter employees received layoff notices. To assist those people, we liaised with government authorities to advise on retraining options and ensure access to unemployment benefits.

Human Health risk assessment

When the Manitoba Department of Conservation conducted environmental soil sampling near certain HudBay operations in 2006, researchers encountered elevated levels of arsenic, cadmium, lead and mercury. These sites, located at Flin Flon, Manitoba and neighbouring Creighton, Saskatchewan, are in the vicinity of HudBay’s 777 Mine and integrated metallurgical complex. As a result of the government’s July 2007 report, HudBay created the Human Health Risk Assessment (HHRA) project to investigate further by launching the Flin Flon Soils Study (FFSS). From the beginning, the HHRA has sought to maximize

Supporting Our Communities

(at right): An aboriginal youth learns about the conductivity of rocks.


Intrinsik’s initial FFSS report was released at an open house at Flin Flon City Hall on June 17, 2010. The study concluded that the likelihood of health effects among area residents from exposure to the metals evaluated is negligible to low. The full report is available on the FFSS website.

In addition to the HHRA, a community health assessment was conducted by government agencies in 2008. Investigators gathered health data from area residents to determine whether they had suffered ill effects due to environmental reasons. The report, released in November 2008, found no significant differences in health or premature death rates in residents of Flin Flon and Creighton compared to the populations of Manitoba and Saskatchewan.

Manitoba rangers

HudBay has a proud tradition of serving the First Nation communities whose good will has long been a vital part of our social licence to operate. In 2009, we were pleased to introduce the Manitoba Rangers program, a unique employment and training experience that introduces teens to northern Manitoba’s most important resource sectors.

The mining portion of the Manitoba Rangers was presented by the Mining Matters program of the Prospectors and Developers Association of Canada (PDAC) and members of HudBay’s exploration and development and environment staff. HudBay contributed to the program as an industry partner and also played an important role coordinating funding from participants that included Government

of Manitoba, Manitoba Hydro, Tolko Industries, Manitoba Keewatinowi Okimakinak and the Northern Sector Council.

The 2009 camp hosted 14 participants for six weeks in July and August.

Manitoba Science academy

As an employer in the mining industry, HudBay is keenly aware of the importance of education in the fields of science and engineering. That’s why we support Manitoba Science Academy (“MSA”) a non-profit educational program whose mandate is to encourage youth to pursue careers in research science and engineering.

In the junior program, selected outperforming high school students participate in a challenging six-week program featuring high-level research projects. Supervised by a professional research scientist, the students gain hands-on experience, collecting and analyzing data and preparing scientific reports on the findings of their study. In the senior program, university science and engineering students acting as research assistants work a valuable 16-week summer job related to their field of study. Once they have completed their scientific research, they convert elements of their study into an educational curriculum which they then deliver to the MSA students.

HudBay is pleased to be a supporter of this worthwhile program. Other sponsors include the governments of Canada and Manitoba, Atomic Energy of Canada Ltd., Manitoba Hydro and Vale Inco.

From recreational sports to high quality day care, HudBay is committed to enhancing the lives of our employees in Flin Flon and other communities.


Putting Safety First

We maintain our commitment to reduce this number. We believe in creating a workplace with zero lost-time accidents.

Our health program in northern Manitoba includes industrial hygiene and occupational health, supplemented by the HBMS Wellness Committee that works proactively to improve the health and wellbeing of employees. Their accomplishments include the opening of a gymnasium at our Flin Flon operations for the use and fitness of employees.

Our emergency teams include two fire departments, six mine rescue teams, a hazardous materials team, a confined space and rescue team, and high-angle rescue.

Safety, health and employment practice

HudBay’s production operations’ management systems are certified to OHSAS 18001, an important international occupational health and safety standard. Our commitment is to certify all our facilities by the time they go into production. Our management systems continue to focus on identifying workplace hazards, assessing risks, and implementing suitable controls.

The lost-time accident (LTA) frequency across the company was 0.55 per 200,000 hours worked in 2009, a significant improvement over the 0.97 realized in 2008. In real terms this means that nine HudBay employees in Manitoba and two in Guatemala had to miss work in 2009 due to injury.

At HudBay, we strive to be a mining industry leader in health and safety for the benefit of our employees and for the communities in which they work. We have set ambitious safety targets and have excellent management systems in place.

Lost-time accident (LTA) frequency in 2009 (per 200,000 hours worked):

0.55

HudBay maintains modern health and safety, hazardous materials, fire and rescue systems to protect the well being of employees.


We enjoy workforce stability at our Canadian operations. Our voluntary turnover rate continues to be very low and improved over last year. Including retirements, the turnover rate at our operations was 2% in 2009, compared to 6.2% in 2008. We have successfully renegotiated new three-year agreements with the unionized staff in Flin Flon and Snow Lake, which will expire in December 2011. We also have an amending agreement that precludes strikes or

lockouts prior to December 31, 2012. The collective bargaining agreement at Zochem was renewed to 2012 and CGN has become a unionized workplace.

We try to employ a workforce at each site that reflects the diversity of the local population. The table below shows the proportions of females, Aboriginals, disabled and visible minorities whom we employ at our various worksites.

Our emergency teams include two fire departments, six mine rescue teams, a hazardous materials team, a confined space and rescue team and high-angle rescue.

Number of employees

(Dec. 31 of each year) 2009 2008 2007

Business unit / LocationHudBay Minerals Inc. Corporate office – Toronto / Winnipeg 18 17 15Hudson Bay Mining & Smelting Co., Limited; Hudson Bay Exploration and Development Co. Ltd. Operations and exploration – Flin Flon, MB 1,334 1,387 1,386 Operations and exploration – Snow Lake, MB 78 109 98Zochem plant – Brampton, ON 36 37 41White Pine Copper Refinery – White Pine, MI 59 62 63St. Lawrence Zinc – Balmat Mine – Balmat, NY 12 34 227Fenix project – El Estor / Guatemala City, Guatemala 84 130 0

Total 1,621 1,776 1,830

Workforce diversity (employed at each site)

Corporate HBMS White Pine St. Lawrence Fenix Project office Flin Flon/ Zochem Copper Zinc and country Toronto and Snow Lake, Brampton, refinery Gouverneur, office Company

Winnipeg MB ON MI NY Guatemala average

Female 44.4% 8.71% 22% 7% 0% 13% 9.5%Aboriginal 0% 6.86% 0% 0% 0% 39% 8.0%Disabled 0% 3.97% 0% 0% 0% 0% 3.5%Visible minorities 11.1% 2.76% 25% 0% 0% 0% 3.1%


Safety of employees in 2009

Lost time Person-hours1 frequency2 LTa severity3

Business unit / Location HBMS (including HBED & HMI corporate office) – Flin Flon, Snow Lake and Winnipeg, MB and Toronto, ON 3,179,407 0.55 13.72Zochem plant – Brampton, ON 75,925 0 0White Pine Copper Refinery – White Pine, MI 133,718 2.99 338.02St. Lawrence Zinc – Balmat Mine – Balmat, NY3 27,208 0 0Fenix project – Guatemala City and El Estor, Guatemala (Sept – Dec, 2008) 593,911 0.65 23.01

Total / Overall 4,010,169 0.55 13.72

1 Includes contractors.

2 Frequency of lost-time accidents per 200,000 person-hours worked.

3 Severity of lost-time accidents measured in number of days lost per 200,000 person-hours worked.

Lost-time accident frequency comparison

(Accidents per

200,000 person-hours worked) 2009 2008 2007 2006 2005

HudBay Minerals1 0.55 0.97 1.05 0.96 0.62Manitoba mining industry2 0.6 1.54 1.98 1.11 1.02Ontario mining and aggregate industry3 0.9 1.3 1.5 1.5 1.7Canadian mineral exploration4 – 2.3 2.3 1.7 0.5Manitoba all industry5 3.8 4.1 4.2 4.3 4.3

1 Includes employees and long-term contractors.

2 Mines Accident Prevention Association of Manitoba Annual Report 2009.

3 Mine Health & Safety Conference 2010, Health and Safety Statistical Status Report.

4 AME BC and PDAC Canadian Mineral Exploration Health and Safety Annual Report 2008.

5 Manitoba Workers Compensation Board Annual Report 2009. The 2009 time loss injury rate is an estimate and will be confirmed in the 2010 Annual Report.

Putting Safety First


greenhouse gases, sulphur dioxide and particulates. The tables and charts in this section and in the Measuring Our Performance section (p.38) illustrate our key performance metrics in 2009 and how they compare with previous years.

Consumption: Lower energy usage

Direct overall energy consumption during 2009 decreased by 13% from 2008. The company achieved significant reductions in heavy oil, propane, natural gas, diesel and light oil consumption, due to a reduction in metal production as well as careful management of the copper smelter in Flin Flon. There was a marginal increase in 2009 gasoline consumption, reflecting inclusion of Guatemalan operations (which were not included in 2008 figures). Indirect energy consumption (representing purchased electricity) decreased by 10%.

HudBay aims to continuously improve environmental performance and minimize the environmental footprint of our operations. We do this by:

1. Setting progressively higher environmental achievement targets and measuring our progress in achieving them;

2. Ensuring production operations meet the requirements of ISO 14001 Environmental Management Systems certification; and

3. Rehabilitating former mines and processing sites in a manner that restores them to a natural state or prepares them for re-use in another way.

voluntarily reducing consumption, minimizing emissions

HudBay assesses its environmental performance by measuring consumption of resources such as energy and water, and output of emissions such as

Protecting the Environment

HudBay is committed to the discovery, mining, extracting and marketing of metals in a sustainable manner that respects the interest of all stakeholders. We continued to earn their trust in 2009 by reducing the environmental impact of our operations and finding innovative ways to rehabilitate former mines and processing sites.

Direct overall energy consumption during 2009 decreased by:

13%

(clockwise from right): A HudBay employee collects a water sample, a caribou running and an aerial view of the Trout Lake mine.


Energy intensity, which measures the amount of energy required to produce each kilotonne of metal, increased by 6% during 2009. Because we were unable to obtain third-party copper concentrate on economic terms to supply the copper smelter, copper production from the smelter declined, which impacted energy intensity. The 80-year-old copper smelter’s outdated technology could not be economically updated to current standards and it was closed according to plan in June 2010. From that point onward, copper concentrate has been shipped for sale to third parties.

Emissions: reduced discharge volumes

HudBay’s emissions during 2009 were lower than the previous year in all categories.

Emissions of sulphur dioxide decreased by 23% in 2009. This was largely achieved by application of current technologies and reduced production from the copper smelter. The changes also reduced emissions of carbon dioxide, a closely watched greenhouse gas, which were 18% lower than in 2008. The Kyoto Protocol of 1997 requires industries of member nations to reduce CO2 emissions to at least 6% below baseline levels of 1990 by the year

2015. At the 2009 level, HudBay’s CO2 emissions are already 37.5% below that requirement. In addition, particulate emissions were 10% lower and the volume of treated water eased by 2%, largely due to reduced consumption.

HudBay’s 2009 statistical results clearly demonstrate major improvements in environmental performance. While there is still room for improvement, virtually all metrics are moving in the proper direction and are expected to improve further because of the closure of the copper smelter.

Land and water use: minimizing our footprint

HudBay mines and processes ore and explores for new deposits with a view to minimizing the land and water required for operations.

HudBay’s water use is reported under separate categories of the environmental table to conform to GRI G3 guidelines and shows our water use and effluent are progressively diminishing year over year. While part of the 2008 reduction in water consumed was due to the suspension of operations at Balmat, the overall success of our water-management systems has curbed both consumption and discharge of water used in processing operations.


Members of the community enjoy the new walking path between Flin Flon and Creighton.


HudBay’s emissions during 2009 were lower than the previous year in all categories.

The Surface Tenure table indicates a total of 15,909 hectares. In addition to being a much smaller figure, the data show that most acreage actually being used is in Manitoba, with considerably less in other jurisdictions. In Nunavut and Chile, there has been no development at all. By optimizing land utilization, we can better manage environmental issues and minimize costs.

The figures indicate that HudBay controls the mineral rights to a substantial amount of land. We believe that these lands provide substantial opportunities to explore for new deposits and mines, which are the future of HudBay.

Consumption of fresh water at all operations decreased by 7% during 2009. This reduction was made possible by water conservation measures implemented at the Flin Flon Metallurgical Complex.

The Land Use table on p.40, which has been restructured this year in conformity with GRI G3 guidelines, details land holdings under HudBay’s control (“Mineral Tenure”) and the area we actually use for activities (“Surface Tenure”).

The Mineral Tenure table shows a total of 476,394 hectares, distributed among four Canadian provinces and one territory, plus additional holdings in the U.S., Guatemala and Chile. Approximately 70% of the land is in our “home” jurisdiction of Manitoba.

air discharges (Flin Flon)

energy consumption and intensity

■ Electricity ■ Heavy Oil■ Propane ■ Natural Gas■ Diesel ■ Light Oil■ Gasoline

air discharges (HudBay)

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6,054

0908070605

34.331.431.531.4

36.0

6,3016,659 6,803 6,855

6,054

0908070605

SO2 emissions(000 tonnes)

Particulate emissions(000 tonnes)

Ozone depleters(kilograms)

Community SO2 Occurrences

HudBay’s energy Consumption by Country(energy in total terajoules)

■ Canada ■ Guatemala ■ USA

HudBay’s energy Consumption by Source(energy in total terajoules)

HudBay’s energy intensity(terajoules per kilotonne of metal produced)

Data in 2009 includes Guatemalan operations.

See page 28 for further details. *The large decrease in ozone depleting substances (refrigerants) was due to rectifying an ongoing slow leak in 2009.

Data in 2009 includes Guatemalan operations.

These are warnings of elevated levels of sulphur dioxide occurrences within the community as required by Manitoba Order 24(4), which do not require further action.

0908070605

250260260236 240

CO2 equivalent emissions(000 tonnes)


Protecting the Flin Flon landscape

Legacy: Flin Flon’s long history of mining and smelting laid the foundation for today’s thriving community – but also created a landscape that, in places, lacks full vegetation. Forests were clear-cut to supply timber for house construction and fuel, and without reforestation, forest fires consumed leftover brush. That led to unchecked erosion of thin glacial soils in the region, leaving little more than bedrock that was then impacted by process emissions. While such a landscape poses harsh challenges for regeneration, HudBay has set in motion a three-part process to address this issue.

research: The first step is a research program to identify the most appropriate remedial measures. In 2008, HudBay entered into an agreement with the University of Saskatchewan for a five-year soil study project in the Flin Flon / Creighton area. Funding was provided by HudBay and the Natural Sciences and Engineering Research Council of Canada, and soil sampling began in 2008. When completed, the study will identify specific pollutants and their locations, recommend strategies for remediation, test them in the field and analyze their effectiveness. For example, a pilot program in 2009 sought to establish why standard remedial measures had little effect in certain areas.

Greening: The second step aims to rehabilitate spaces in the Flin Flon / Creighton region. In 2009, HudBay completed the second year of progressive remediation at a well-used public highway on the perimeter of the community. The $200,000 project pre-treats soil by removing rubble, then adding limestone or a clay cap, topsoil and hydroseed, followed by a mulch cover. The work in 2009 covered 9,000 square metres, bringing the two- year total to 22,000 square metres.

Supporting: The third step elicits support from the surrounding community to put remedial measures into effect. For example, for the past 11 years the Green Project has been promoting environmental stewardship with residents of Flin Flon and Creighton. Under the initiative, residents have promoted vegetation growth by spreading crushed limestone in non-residential areas. In 2009 the initiative was assisted by participants in the Manitoba Rangers program for aboriginal youth (see Communities, p.20).

Human Health risk assessment in Flin Flon / Creighton

The Human Health Risk Assessment (HHRA) was initiated in 2007 as part of the Flin Flon Soils Study (FFSS) to investigate concentrations of metals in the soil of the neighbouring communities of Flin Flon and Creighton. A Manitoba Conservation study in 2006 found that levels of some metals were higher than average, but that there was no immediate risk to human health.

The FFSS was launched to better understand the nature of soil conditions in the region and to determine if exposure to them presents long- term health risks. Metals evaluated comprised copper, selenium, cadmium, methyl mercury, inorganic mercury, arsenic and lead. The work was done by an independent testing laboratory based in Mississauga, Ontario and its independence was assured by a rigorous process of peer review (see Communities, p.20).

The initial FFSS report was released at an open house at Flin Flon City Hall on June 17, 2010. The study concluded that the likelihood of health effects among area residents from exposure to the metals evaluated are negligible to low. The full report was posted online at www.flinflonsoilsstudy.com.

342

236260 260

250240 HudBay’s 2009 CO2-e level

was 37.5% below the Kyoto target amount

Kyoto target (320)

090807060590

Data for Guatemalan operations included in this chart only for operations in 2009.

CO2-e numbers are amended each year according to the GHG protocol, which states that previous data should be recalculated using the latest published emission factors.

CO2-e emissions by Source(kilotonnes per year)

■ Heavy Oil ■ Propane ■ Electricity■ Natural Gas ■ Diesel ■ Limestone■ ODS (r-22) ■ Gasoline ■ Biomass (wood)■ ODS (r-124) ■ Coal and Other



for redevelopment into other uses. Remediation has become one of the most important phases of the mine life cycle and is now a core area of expertise for HudBay. This expertise demonstrates HudBay’s position as an industry leader in mine remediation and exemplifies our commitment to high environmental standards.

Manitoba

In Manitoba, most rehabilitative activities during 2009 were focused at the Flin Flon Metallurgical Complex. At the Callinan (South Main) Mine, which was closed following the start-up of the 777 Mine nearby, demolition crews removed the headframe, change house, water tower, fuel storage facilities and several outbuildings.

In addition to the Callinan Mine site, several smaller projects at the Metallurgical Complex were also completed. These included demolition of three sections of a redundant oxide conveyor, removal of a rail trestle and demolition of the old drying plant to make room for the new copper concentrate filter plant.

The rehabilitation schedule for 2010 provides for removal of the North Main headframe and remaining mine structures. Once this work is finished, the terrain will be graded and prepared for new facility construction or seeding as green space.

Following the closure of the copper smelter in June 2010, the plan calls for the removal of dust, bricks, pumps and other materials from the various smelter buildings. The demolition of smelter infrastructure will take place in the future.

Supplementary to the HHRA, a community health assessment was conducted by government agencies in 2008. Its report concluded that there are no significant differences in health or premature death rates in the region compared with overall rates in Manitoba and Saskatchewan.

While the FFSS study and the 2008 provincial government report are reassuring, low-level risks from some metals remain. The FFSS recommends further reductions in air emissions, continued monitoring and some additional precautionary measures. The report notes that improvement in emissions can be expected from the June 2010 closure of the Flin Flon copper smelter.

Mine remediation: making it right

HudBay’s activities have complied with the standards and regulations of the day throughout our history. Over time, these standards and regulations have progressed and HudBay’s practices have kept pace and often surpassed them.

Today, HudBay’s mine closure and property remediation takes place according to a codified legal framework. In addition, HudBay is voluntarily revisiting some of the mine sites worked decades ago both by ourselves and by other companies whose assets we inherited as legacy properties. HudBay remediation specialists first render the sites safe by properly securing mine entrances and removing abandoned structures. Next we apply leading-edge techniques that rehabilitate the surrounding areas (if necessary) and either restore them as green spaces or prepare them

A piece of the Callinan Mine’s headframe was removed and donated to the Flin Flon Station Museum.


Another area of attention has been the Hanson Lake Highway Dam, which for decades has been incremen- tally raised to accommodate the Flin Flon Tailings Impoundment System. To stop erosion of the dam slopes, they have been hydroseeded with grass. This action has stabilized the surface of the structure and transformed it into an attractive green space.

Ontario

From 1948 to 1960, uranium and fluorite (calcium fluoride) was mined by others at the Cardiff South property, located 50 km west of Bancroft, Ontario. In 2008-09, HudBay returned to the former mine site and performed a number of remediation measures. Areas that had been disturbed were graded and seeded with native grass mixture. To prevent people from entering the abandoned mine shaft, the shaft was recapped and made more secure. Access to the shaft cap area was further restricted with barriers constructed at the base of a pile of waste rock and at the foot of a path leading to the site.

In the same area west of Bancroft, the Rare Earth #1 Mine saw uranium mining from 1948 to 1956. In 2009 HudBay backfilled the adit (horizontal mine opening), recapped the mine shaft, demolished and re-graded concrete building foundations and re-graded disturbed areas to promote revegetation.

Still in the region west of Bancroft, the Richardson property was the site of extensive exploration activities from 1922 to 1933, and in 1946, 1948 and 1955. Crews explored for fluorite and uraninite, a uranium-rich ore also called pitchblende. In 2009, abandoned adit openings were backfilled, concrete building foundations were demolished and the entire site was re-graded and revegetated.

Yukon

HudBay’s most extensive remediation project to date is Tom Valley, a lead-zinc exploration property near MacMillan Pass, Yukon. Its remote location, 175 km northeast of the community of Ross River, has made this project difficult and costly.

After transporting camp materials and construction equipment to the exploration site in 2009, work crews began by upgrading the access road to the access adit. They installed timber beams at the adit portal to stabilize the entrance and installed air venting in underground workings. Next, north and south waste rock dumps were re-contoured and a

sludge containment pond in the north waste rock dump was constructed. Sludge was then removed from the first 100 metres of underground workings and disposed of in the sludge containment pond. A waste rock cover was put in place (including an HDPE liner) on the north waste rock dump, following which a pressure relief bypass raise was installed.

To prepare for the installation of an adit plug in 2010, crews hauled 160 cubic metres of gravel from the Ross River to the site, drilled two test boreholes at the plug location and performed hydraulic conductivity tests to determine the level of grouting required.

Guatemala

The Fenix property in Guatemala was acquired by HudBay in 2009 as part of a larger corporate transaction. The property was the site of a laterititic nickel mine operated by Inco Ltd. from 1977 to 1980, when it was placed on care and maintenance.

One of the first orders of business was managing legacy issues that included residual polychlorinated biphenyls (PCBs). These compounds were used as a coolant and insulating fluid in transformers that formed part of the legacy operation’s power grid.

Stage I work, which began in April 2010, involved the extensive safety training of personnel, the preparation of drainage and storage areas, the draining of transformer fluid into specialized drums, the dismantling of transformers and the movement of drums and transformers into temporary storage.

Stage II involved the dismantling of ceramics, boxes and accessories for the transformers, re-sealing of valves and holes, the placement of transformers, radiators, auxiliary equipment and anchoring equipment in containers, the loading of oil barrels and casks with wastes contaminated with PCBs and the transportation of all material to Sto. Tomás de Castilla Port.

Stage III, which was completed in June 2010, involved ocean transportation to Rotterdam and final destruction at Orion B.V. Netherlands. The breakdown of the total weight received and destroyed was:

PCB Contaminated Solids 3.06 Tonnes

PCB Contaminated oil 22.74 Tonnes

PCB Contaminated copper core transformers 24.05 Tonnes

PCB contaminated aluminum core transformers 30.09 Tonnes



techniques combined with field surveys, scientists have mapped and characterized wetlands throughout the project area.

• Air quality and meteorology – meteorologists established an on-site data measurement station that collected air and climate data over a two-year period. Instruments measured rainfall, wind speed and direction, air particulate matter and solar radiation.

• Cultural resources – archaeologists and historians have researched past uses of the region and studied known archaeological sites near the project area, and conducted field studies to look for possible new sites.

• Socioeconomic impact – Planners have collected data on land use, existing roads and utilities, residential areas, community resources and recreational areas. University of Minnesota economists have modeled the predicted economic benefits of the mine, including job creation and tax revenues.

The results of these studies are being directly incorporated into the mine planning and design process. This will be accomplished through an environmental impact assessment, which will provide a detailed analysis of project collateral effects and mitigation measures. Our goal is to make certain that the environment is fully protected in compliance with all regulations throughout mine planning, operations, closure and reclamation.

In addition to integrating environmental sustainability into the planning process, the Back Forty Project is working to incorporate social sustainability into its practices. As a member of the community, management has adopted a “good neighbour” policy – meaning we are committed to working with local communities to protect their interests, in addition to providing local jobs, paying taxes and generating other social and economic development opportunities.

We have proactively sought to reach out to a wide variety of stakeholders in an ongoing dialogue. This outreach has taken the form of numerous open houses, site tours, educational presentations, individual meetings, local hiring and purchasing practices, and community involvement. Through these efforts, we are working to build strong relationships and work collaboratively to identify and address stakeholder interests.

Smelter closure: Making Flin Flon a cleaner community

In Flin Flon, environmental concerns contributed to HudBay’s decision to permanently close our copper smelter in June 2010. Although the 80-year-old facility met current regulatory standards, its outdated technology would have made it difficult to meet stricter emission requirements that are expected in the future. The closure means particulate and sulphur dioxide emissions have essentially been eliminated from Flin Flon operations.

The closure was conducted in accordance with current environmental protocols. In the wake of the shutdown, the company is cleaning up and disposing of waste materials. For example, prior to demolition, crews will wash down dust from buildings while collecting and treating waste water.

environmental sustainability: the Back Forty project

Environmental sustainability is an important strategic component of the Back Forty project, a joint venture with Aquila Resources in Michigan. As part of the planning process, the joint venture has performed extensive environmental baseline studies of the project area over the past two years. Multiple teams of scientists have completed detailed field studies of both natural and social resources within the planned mine area and surrounding region. Resource studies have addressed a number of environmental areas that include:

• Wildlife – biologists have conducted tracking studies of small and large mammals, identified reptiles and amphibians, performed fish surveys, and studied mussels and aquatic insects. Wildlife habitat has also been identified and mapped.

• Plants – hundreds of plant species have been catalogued in the project area by botanists, and the locations of any rare species carefully noted along with existing invasive plants.

• Water resources and wetlands – hydrogeologists have placed numerous groundwater monitoring wells across and outside of the project area, and established multiple surface water sampling stations to study seasonal changes in water quality and flow in the region. Using remote sensing


Towards Sustainable Mining

As a producing 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, and HudBay reports its efforts annually to MAC. The TSM regime has four performance categories, as follows:

• Crisis communications management – Requires effective protocols to ensure all stakeholders are kept apprised of developments during an emergency.

• Tailings management – Measures a mining operator’s commitment to locate, design, construct, operate and close tailings facilities so that all structures are stable, solids and water are properly managed and structures comply with industry and government standards.

• External outreach – Aims to create new channels of communication and forge useful relationships with key individuals and groups outside the industry.

• Energy use and greenhouse gas emissions (GHG) management – requires the operator to have a formal energy management system that reduces intensity by 1% annually and a GHG reduction strategy that decreases GHG output by 1% annually.

HudBay reports are externally verified by MAC-trained assessors every three years. The previous assessment was in 2007, which resulted in three MAC awards: gold for Crisis Communications Management, bronze for Tailings Management and bronze for External Outreach. HudBay has been conducting rigorous internal audits to MAC specifications. Externally verified results for 2009 as determined by our 2010 audit are as follows:

• Crisis communications management – HudBay completed a table top simulation exercise to test crisis communications readiness, which completes MAC’s third requirement for the protocol in this category.

• Tailings management – The previous year’s score was confirmed in 2009, while demonstrating continuous improvement. We are very proud to have achieved verified scores of 4 for all indicators within this protocol.

• External outreach – No change in overall score.

• Energy use and GHG management – Our performance in this indicator was lower in 2009, largely because energy and GHG emissions intensity targets were not met.

accommodating Manitoba’s caribou

HudBay is mindful of wildlife in areas where we operate and as appropriate we adjust our activities to accommodate species that could be affected.

That is what happened in the winter and spring of 2010 as exploration drilling crews deployed to the Greenstone Belt in the region of Snow Lake. HudBay applied to Manitoba Conservation for a permit to drill five holes. The regulator replied by advising that wildlife scientists had been monitoring caribou migration and were concerned that such activities could disrupt their patterns of travel. As a result, we reduced the application to two holes from five, which reduced the scope of activity in the area. Further discussions with officials led to helicopters increasing their travel height to at least 1,000 feet to minimize disruption as they ferried HudBay’s work crews to and from work sites.

Shortly afterward, a drilling permit needed to be renewed for an exploration program nearby. Manitoba Conservation officials expressed concern about drilling activities disrupting the calving of caribou at that time of year and as a result, HudBay delayed the permit renewal by one month.

Meanwhile, during 2009 HudBay entered the second year of a program that installs tracking collars on caribou to chart migratory patterns in the Wabowden range, 800 km northeast of Winnipeg. Our $30,000 contribution will help to plan land usage to reduce habitat loss, degradation and fragmentation under the federal Species at Risk Act (2003). HudBay remains a start-up member of the Northeast Woodland Caribou Advisory Committee, which aims to ensure long-term sustainability of woodland caribou and their required habitats.



Development of the project is ongoing. Lalor’s convenient location, promising exploration results and strategic development timing make it a strong prospect to become HudBay’s next big mine and it is now the company’s top priority.

Once Lalor is fully commissioned, which is expected in 2014, it will more than replace output from the company’s Chisel North and Trout Lake mines. These operations, which currently supply 40% of feed to the zinc plant in Flin Flon, are expected to run out of mineable reserves in 2012. That requires Lalor to be developed on an expedited basis as a vital component of HudBay’s future.

During the final two years of Chisel North’s operation, a price hedging program will be in place to protect its economic viability if zinc prices descend once again to the levels of early 2009.

HudBay’s production volumes during 2009 were fully in line with expectations. Record output at the company’s flagship 777 mine in Flin Flon, Manitoba helped to offset the suspension of operations at the Chisel North mine and Snow Lake concentrator.

Sharply declining base metal prices during 2008 rendered the Chisel North operation uneconomic, and in January 2009 the mine and concentrator were placed on care and maintenance. However, as the year progressed, metal prices recovered to the point where Chisel North regained economic viability. In October 2009 HudBay announced the decision to restart operations in the second quarter of 2010, and the $7 million recommissioning project was completed on schedule and within budget.

Lalor

The Lalor deposit was discovered in March 2007 as a result of exploration drilling three kilometres from the Chisel North mine. Since then exploration activity has greatly increased, with electromagnetic geophysical surveys and as many as six diamond drills turning simultaneously on the property.

This work has led to the identification of three distinct deposits – base metals, gold and copper-gold. In October 2009, the company filed a 43-101 resource estimate for the base metal zone and since then a conceptual estimate has been prepared for the gold zone and the copper-gold zone. On the basis of current data, Lalor is estimated to hold the second-richest metal deposit ever discovered in the prolific Flin Flon Greenstone Belt of northern Manitoba.

Economic Performance

HudBay’s revenues declined 27% in 2009 due to low metal prices amid the economic downturn. Due to the sale of our interest in Lundin Mining, however, and the efficient management of our operations, HudBay ended 2009 with a 54% increase in net earnings and a very strong balance sheet. We also prepared to resume full production, exploration and development activities as metal prices began to recover.

New road construction at Lalor, which is expected to achieve initial production in 2012.


Key production figures

2009 2008 2007

Zinc (000 tonnes) 106.8 125.3 126.3Copper (000 tonnes) 58.6 74.7 90.0Gold (000 troy oz) 91.3 108.5 102.6Silver (000 troy oz) 2,006.6 2,293.9 1,446.7

Key 2009 financial results

(in CDN $ millions, except per share amounts) 2009 2008 2007

Revenue $ 720.7 $ 981.9 $ 1,269.8Earnings before tax $ 141.9 $ 169.7 $ 365.5Net earnings $ 112.8 $ 73.4 $ 227.1Basic earnings per share $ 0.73 $ 0.54 $ 1.79Cash and cash equivalents $ 886.8 $ 704.7 $ 757.6

economic value generated and distributed by HudBay Minerals

(CDN $000s) 2009 2008 2007 2006

Revenue $ 720,722 $ 981,894 $ 1,269,841 $ 1,129,003Operating costs $ (505,841) $ (685,616) $ (730,748) $ (598,053)Net earnings $ 112,771 $ 73,353 $ 277,139 $ 563,991No. of employees and contractors 1,621 1,776 1,830 1,751Payroll costs (including benefits) $ 180,200 $ 196,105 $ 198,000 $ 151,199Income, mining, capital and use tax $ 34,000 $ 47,954 $ 42,500 $ 48,128Municipal taxes and grants $ 7,800 $ 7,572 $ 7,500 $ 6,741Donations and community investments $ 1,415 $ 677 $ 171 $ 138

Jan 09 Feb 09 Mar 09 Apr 09 May 09 Jun 09 Jul 09 Aug 09 Sep 09 Oct 09 Nov 09 Dec 09

$1.20

$1.00

$0.80

$0.60

$0.20

$0.40

$4.00

$3.00

$2.00

$1.00

LMe Copper and Zinc Metal Prices in 2009(US$ / lb) ■ Copper ■ Zinc

Economic Performance


Social performance

2009 2008 2007 2006

Total Workforce Permanent employees Flin Flon, MB 1,334 1,387 1,386 1,336 Snow Lake, MB 78 109 98 93 Winnipeg, MB 2 6 15 12 Brampton, ON 36 37 41 41 Toronto, ON 16 11 – – Gouveneur, NY 12 34 227 180 White Pine, MI 59 62 63 59 Guatemala City, Guatemala 16 19 – – El Estor, Guatemala 68 111 – –

Total Permanent Employees 1,621 1,776 1,830 1,721

Person-hours of work (including contractors) Flin Flon, Snow Lake, Winnipeg and Toronto 3,179,407 3,552,062 3,564,686 3,299,647 Brampton, ON 75,925 88,681 90,216 96,261 Gouveneur, NY 27,208 404,793 595,852 435,141 White Pine, MI 133,718 151,077 148,585 136,942 El Estor / Guatemala City, Guatemala 593,911 331,155 – –

Total person-hours 4,010,169 4,527,768 4,399,339 3,967,991

Number of full-time employees added (decreased) Canada (84) 10 28 17 US (25) (194) 51 239 Guatemala (46) 130 – –

Total (155) (54) 79 256

employment Voluntary turnover rate1 2% 6% 6% 7% Number of coop and summer students hired 26 76 n/a n/a Number of contractor full-time equivalent staff 458 – n/a n/a Number of permanent employees represented by trade unions 1,294 1,313 n/a n/a

Workforce diversity Female 9.5% 9.7% 8.0% 7.7%Aboriginal 8.0% 9.4% 5.7% 5.4%Disabled 3.5% 3.3% 3.4% 4.0%Visible minorities 3.1% 2.8% 2.7% 2.8%

Composition of executive management and corporate governance bodies Board of Directors (ratio male to female) 8:0 8:0 7:0 6:0Executive management (ratio male to female) 7:1 5:1 5:1 6:0

1 Voluntary turnover rate is the number of employees hired to replace those who leave, expressed as a percent of total employees.

Measuring Our Performance


Social performance

2009 2008 2007 2006

Workforce age distribution1 Certified < 30 9.79% n/a n/a n/a 30 – 50 52.76% n/a n/a n/a > 50 37.45% n/a n/a n/a

Non-certified < 30 8.22% n/a n/a n/a 30 – 50 50.23% n/a n/a n/a > 50 41.55% n/a n/a n/a

Number of strikes or lockouts exceeding one week 0 – – –

Total number of incidents of discrimination (and actions taken) 5 2 n/a n/a n/a

Community practices Total charitable donations and contributions (in CDN $000) $ 1,415 $ 677 $ 171 $ 138Complaints from communities 3 19 2 2

Society Number of fines or sanctions for non-compliance with laws and regulations 0 0 0 0

Product responsibilityNumber of fines or sanctions for non-compliance with laws and regulations concerning the provision and use of products and services 0 0 0 0

Health and safety performance Lost time accident frequency (per 200,000 hours worked) 0.55 1.0 1.1 1.0Lost time accident severity 14 314 24 30Restricted work accident frequency 2 3 3 2Medical aid accident frequency 11 13 14 14First aid accident frequency 20 17 20 21Fatality (number) 0 1 0 0Reportable occurrences 21 40 44 39

Closure Plans Number of operations with closure plans 5 4 4 4Percentage of total operations with closure plans 100% 80% 100% 100%Overall financial provision representing the present value of future cash flows3 (in CDN $000) $ 54,460 $ 46,632 $ 38,241 $ 33,548

1 This is FF / SL only and is as of July, 2010.

2 Identified by the union as discrimination grievances for FF /SL. Two withdrawn by union, one on hold by union, two awaiting arbitration; no other discrimination incidents identified.

3 This relates to estimated closure costs per Canadian Generally accepted accounting principles. See note 14 to the Notes to the Consolidated Financial Statements in the 2009 Annual report.



environmental (eN)

2009 2008 2007 2006

regulatory compliance Fines/sanctions 0 0 0 0

direct energy consumed (energy in total terajoules)1 Heavy oil 1,767 1,990 2,003 1,926Propane 652 727 642 521Natural gas 321 384 372 360Diesel 164 230 262 220Light oil 4 32 37 28Gasoline 10 9 11 9

Total 2,918 3,372 3,327 3,064

energy Indirect energy consumed (energy in total terajoules)2 3,136 3,482 3,477 3,593Energy intensity (terajoules per kilotonne of metal produced) 36.0 34.3 31.4 31.5

Total water withdrawal (000 cubic meters) Surface water 12,352 n/a n/a n/aGround water 379 n/a n/a n/aMunicipal water supplies 1,307 n/a n/a n/a

Total water withdrawal 14,038 15,121 15,601 14,874

Total direct and indirect greenhouse gas emissions (kilotonnes of CO2 equivalent) Direct CO2-e emissions 199.9 230.9 228.8 211.5 Indirect carbon dioxide emissions 41.0 56.3 60.4 62.8

Total 240.90 287.20 289.20 274.30

Emissions of ozone-depleting substances (kg)3 11 708 414 472

NOx, SOx and other significant air emissions (in kilotonnes)4 Sulphur dioxide emissions 143.5 184.7 201.8 195.4 Particulate 0.9 1.0 1.6 1.5

Total water discharged5 Water treated (000 cubic meters) 19,074 19,383 21,458 44,892

Total number of significant spills6 3 11 8 3

1 No direct energy consumed from renewable energy sources.

2 The majority of indirect energy purchased and consumed is in Manitoba and consists of renewable (hydro-electric) energy.

3 The large decrease in ozone depleting substances (refrigerants) was due to rectifying an ongoing slow leak in 2009.

4 NOx emissions are not tracked as the Government of Canada does not consider the mining sector to be significant emitters of NOx.

5 Water discharged from the Tom Valley exploration property is naturally flowing and not reported – HudBay is evaluating the most appropriate modelling methodology.

6 Significant spills are those that are reportable to government agencies, whether by law or in accordance with company policy. All spills were handled in a timely manner, with no residual effects and did not result in any monetary fines. The details of the spills are as follows: Spill 1 – 490 litres lubricating oil from the Flin Flon Mill to the tailings facility – material was absorbed in tailings solids so it did not leave the property. Spill 2 – 25 pounds R-22 (ODS substance) from Zinc Pressure Leach (ZPL) air conditioner. Spill 3 – 50,000 US gallons of Trout Lake Mine wastewater – a pipe break resulted in water exiting outside of the approved discharge point (onto ice-slush cleaned up with no environmental impact).


Land use

Mineral Surface (in hectares) tenure tenure

Manitoba 335,545.2 5,844.4Saskatchewan 72,763.5 1,480.4Ontario 11,058.7 3.8Yukon 5,823.4 120.7Nunavut 21.0 0.0

Total Canada 425,211.8 7,449.3

New York 21,620.3 57.7

Total USA 21,620.3 57.7

Chile 1,531.0 0.0Guatemala 28,030.0 8,402.8

Total South / Central America 29,561.0 8,402.8

Total 476,393.1 15,909.8

Grand total 492,302.9

economic (eC)

2009 2008 2007 2006

Revenues (in CDN$ millions) $ 720.7 $ 981.9 $ 1,269.8 $ 1,129.0Operating costs (in CDN$ millions) $ (505.8) $ (685.6) $ (730.7) $ (598.1)Earnings before tax (in CDN$ millions) $ 141.9 $ 169.7 $ 365.5 $ 442.5Net earnings (in CDN$ millions) $ 112.8 $ 73.4 $ 277.1 $ 564.0 Cash and cash equivalents (in CDN$ millions) $ 886.8 $ 704.7 $ 757.6 $ 385.9

Mine production Zinc (000 tonnes) 106.8 125.3 126.3 123.3Copper (000 tonnes) 58.6 74.7 90.0 88.2Gold (000 troy ounces) 91.4 108.5 102.6 98.0Silver (000 troy ounces) 2,006.6 2,293.9 1,446.7 1,344.9

In-mine reserves1 (millions of tonnes) 15.1 18.24 21.4 22.8

indirect economic impacts (in CdN $ millions) Income, mining, capital and use tax $ 34.0 $ 48.0 $ 42.5 $ 48.1Municipal taxes and grants $ 7.8 $ 7.6 $ 7.5 $ 6.7Payroll including benefits $ 180.2 $ 196.1 $ 198.0 $ 151.2

1 In-mine reserve figures contained in this 2007 sustainability Report do not include the significant findings of Lalor Lake which was publicly reported in early 2008.



GRI Guidelines, Management Approach, Performance Indicators and TSM Indicators Index

HudBay’s 2009 Corporate Social Responsibility Report has been prepared in accordance with the Global Reporting Initiative (GRI)’s G3 sustainability reporting guidelines, and is self-declared to Application Level B. For more information about the GRI guidelines and what a self declared B level report means, please consult the GRI website at www.globalreporting.org.

Our efforts in achieving GRI’s requirements are marked in the GRI Content Index below along with page numbers for more information. The table also includes the location of sections on HudBay’s Management Approach, and the Toward Sustainable Mining indicators.

Global reporting Profile disclosures

G3 # Page number

1.1 – 1.2 Strategy • 6 – 7, 9, Inside Back Cover (IBC)

2.1 – 2.6 Organizational profile • Inside Front Cover (IFC), 2 – 6,

2.7 Markets served • 2

2.8 – 2.9 Scale • 2, 26, 32, 37

2.10 Awards • 34

3.1 – 3.4 report parameters and profile • 8, IBC

3.5 Report materiality • 8, 9

3.6 – 3.8 Report scope and boundary • 8

3.9 Data measurement and quality • 9

3.10 – 3.11 Restatements and changes • 8

3.12 GRI content index • 41 – 43

3.13 Policy regarding external assurance • 6

4.1 – 4.4 Governance • 10, 12 – 13, 19

4.5 Linkage between compensation and performance • 14

4.6 Process to avoid conflicts of interest • 15

4.7 Process for determining director qualifications/expertise • 13 – 14

4.8 Internally developed mission/values/codes/etc. • 15

4.9 Procedures of highest governance body to oversee the identification and management of risks and opportunities, adherence with standards, etc. • 13, 15

4.10 Process for evaluating highest governing body’s performance • 13, 14

4.11 Adherence to the precautionary principle • 15

4.12 Externally developed charters, principles, etc. • 18

4.13 Membership in associations • 3, 18

4.14 – 4.15 Stakeholder engagement • 16 – 18

4.16 Frequency and type of stakeholder engagement • 16, 17

4.17 Key topics raised and addressed through stakeholders engagement • 22

disclosure on management approach

Economic • 10, 11, 35, 36, 40

Environmental • 10, 11, 27 – 34, 39, 40

Social • 10, 11, 20 – 26, 37, 38


Performance indicators

GRI # Description Section Heading in Report

EC1 Direct economic value generated and distributed, including revenues, • Message from the CEO (p. 6); operating costs, employee compensation, donations and other • Progress & priorities (p. 11); community investments, retained earnings, and payments to • Our economic impact (p. 20 – 21); capital providers and governments + Payments to local communities • Economic performance (p. 36) as part of land use agreements, not including land purchases

EC8 Development and impact of infrastructure investments • Message from the CEO (p. 6 – 7); and services provided primarily for public benefit through commercial, • Supporting our communities (p. 20 – 21) in-kind, or pro bono engagement

EC9* Understanding and describing significant indirect economic impacts, • Communities – Helping communities including the extent of impacts cope with changing economic times (p. 21 – 22)

EN3 Direct energy consumption by primary energy source • Measuring our performance (p. 39)

EN4 Indirect energy consumption • Measuring our performance (p. 39)

EN8 Total water withdrawal by source • Measuring our performance (p. 39)

EN13* Habitats protected or restored • Mine remediation – making it right (p. 30 – 33)

EN16 Total direct and indirect greenhouse gas emissions by weight • Measuring our performance (p. 39)

EN18* Initiatives to reduce greenhouse gas emissions and • Emissions: reduced discharge volumes (p. 27 – 29); reductions achieved • Measuring our performance (p. 39)

EN19 Emissions of ozone-depleting substances by weight • Measuring our performance (p. 39)

EN20 NOx, SOx, and other significant air emissions by • Measuring our performance (p. 39) type and weight

EN21* Total water discharge by quality and destination • Measuring our performance (p. 39)

EN23 Total number and volume of significant spills • Measuring our performance (p. 39)

EN24 Weight of transported, imported, exported, or treated • Guatemala (p. 32) waste deemed hazardous under the terms of the Basel Convention Annex I, II, III, and VIII, and percentage of transported waste shipped internationally

EN28 Monetary value of significant fines and total number of • Measuring our performance (p. 39) non-monetary sanctions for non-compliance with environmental laws and regulations

HR4 Total number of incidents of discrimination and actions taken • Measuring our performance (p. 38)

LA1 Total workforce by employment type, employment contract, and region • Measuring our performance (p. 37)

LA2* Total number and rate of employee turnover by age group, • Measuring our performance (p. 37) gender, and region.

LA4 Percentage of employees covered by collective bargaining agreements • Measuring our performance (p. 37)

MM4 Number of strikes and lock-outs exceeding one week’s duration, • Measuring our performance (p. 38) by country

LA7 Rates of injury, occupational diseases, lost days, and absenteeism, • Safety of employees in 2009 (p. 26); and total number of work-related fatalities by region • Measuring our performance (p. 38)

LA13 Composition of governance bodies and breakdown of employees • Board of Directors (p. 19, 38); per category according to gender, age group, minority group • Workforce diversity membership, and other indicators of diversity (employed at each site) (p. 25, 37)

PR9 Product and service fines • Measuring our performance (p. 38)

GRI Index


GRI # Description Section Heading in Report

SO1* Nature, scope, and effectiveness of any programs and practices that • Supporting our communities (p. 20 – 23) assess and manage the impacts of operations on communities, including entering, operating, and exiting

SO8 Monetary value of significant fines and total number of non-monetary • Measuring our performance (p. 38) sanctions for non-compliance with laws and regulations

MM10 Closure plans • Measuring our performance (p. 38)

Toward Sustainable Mining indicators

Tailings management • Towards Sustainable Mining (p. 34)

Crisis management/emergency preparedness and response • Towards Sustainable Mining (p. 34)

Community engagement and dialogue • Towards Sustainable Mining (p. 34)

Energy and greenhouse gas management • Towards Sustainable Mining (p. 34)

* Denotes partially met GRI Indicator.

Gri application level grid

Report Application Levels

C2002

In Accordance C+ B B+ A A+

Self declared

Third Party

Checked

Gri declared

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ally

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d

rep

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ext

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ally

ass

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d

rep

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Man

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Op

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Glossary

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.

Recordable injury – Medical injury or Modified work injury or Lost-time injury. A medical injury is a work-related injury that is a non-lost-time or non-modified work activity but requires medical treatment beyond first aid.

acronyms

CO2 – Carbon dioxide

CSR – Corporate social responsibility

GHG – Greenhouse gases

LME – London Metals Exchange

NGO – Non-governmental organization

NRSEC – Natural Sciences and Engineering Research Council of Canada

SO2 – Sulphur dioxide

TSM – Towards Sustainable Mining

Gri abbreviations

EC – Economic

EN – Environment

HR – Human Rights

LA – Labour

MM – Mining and Metals

PR – Product Responsibility

SO – Society

Biodiversity – short for “biological diversity”; the variety of living organisms, genetic diversity, habitat diversity that create and sustain variation in the environment.

Contractor – one who agrees to perform work or supply items at a certain price or rate.

Employee – a person directly employed by HudBay Minerals Inc. and/or its subsidiaries.

Frequency – number of injuries (recordable or lost-time) multiplied by 200,000, divided by total hours worked.

G3 Indicator – sustainability performance indicators contained in the G3 guidelines of the Global Reporting Initiative. The G3 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 – 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.


Corporate Information

For more information on the company and HudBay’s corporate social responsibility strategy, please consult the company’s website at www.hudbayminerals.com. The company’s Annual Information Form is also available on the website.

HudBay Minerals

Dundee Place 1 Adelaide Street East Suite 2501 Toronto, Ontario M5C 2V9

For more information about HudBay’s corporate social responsibility efforts, feedback on this report and investor or other general public inquiries:

John vincic

Vice President, Investor Relations and Corporate Communications Telephone: 416 362-0615 Facsimile: 416 362-7844

Email: [email protected]

www.hudbayminerals.com

“ Over its 83-year history, HudBay has always believed

that sustainable growth depends on respecting the interest

of all the people affected by our operations. This spirit

of accountability has been our guidepost and today it

continues to help us chart our course.”

David Garofalo President and Chief Executive Officer

protecting our future...we are committed to protecting our future by conducting our business in a...

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