Hudbay Minerals : Quarterly Reports Q1 2024

Unaudited Condensed Consolidated Interim Financial Statements (In US dollars)

HUDBAY MINERALS INC.

For the three months ended March 31, 2024 and 2023

HUDBAY MINERALS INC.

Condensed Consolidated Interim Balance Sheets (Unaudited and in thousands of US dollars)

		Mar. 31,		Dec. 31,
	Note	2024		2023
Assets
Current assets
Cash and cash equivalents	$	284,385	$	249,794
Trade and other receivables	7	197,732		203,429
Inventories	8	201,965		207,334
Prepaid expenses and other current assets		14,138		6,289
Other financial assets	9	1,678		4,102
Taxes receivable		578		2,300
		700,476		673,248
Receivable	7	12,010		12,157
Inventories	8	16,321		24,450
Other financial assets	9	6,846		7,089
Intangibles and other assets	10	50,780		52,453
Property, plant and equipment	11	4,231,536		4,316,006
Deferred tax assets		139,830		151,946
Goodwill		73,484		75,285
	$	5,231,283	$	5,312,634
Liabilities
Current liabilities
Trade and other payables	$	238,977	$	239,149
Taxes payable		39,941		53,441
Other liabilities	12	34,685		30,035
Other financial liabilities	13	43,775		42,235
Gold prepayment liability	14	37,945		55,901
Lease liabilities	15	31,920		28,902
Deferred revenue	17	72,383		87,672
		499,626		537,335
Other financial liabilities	13	58,835		51,720
Lease liabilities	15	60,236		61,433
Long-term debt	16	1,278,587		1,287,536
Deferred revenue	17	329,142		330,848
Pension obligations		5,786		6,010
Other employee benefits		97,863		101,849
Environmental and other provisions	18	301,342		321,912
Deferred tax liabilities		388,833		407,152
		3,020,250		3,105,795
Equity
Share capital	20b	2,241,841		2,240,233
Reserves		19,523		30,177
Retained earnings		(153,832)		(173,599)
Equity attributable to owners of the Company		2,107,532		2,096,811
Non-controlling interest		103,501		110,028
	$	5,231,283	$	5,312,634

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HUDBAY MINERALS INC.

Condensed Consolidated Interim Statement of Earnings

(Unaudited and in thousands of US dollars, except per share amounts)

			Three months ended March 31,
	Note		2024		2023
Revenue	6a	$	524,989	$	295,219
Cost of sales
Mine operating costs			263,762		161,284
Depreciation and amortization	6b		109,273		67,422
			373,035		228,706
Gross profit			151,954		66,513
Selling and administrative expenses			16,607		9,146
Exploration expenses			12,593		8,242
Other expenses	6c		16,260		4,959
Re-evaluation adjustment - environmental provision	18		(5,269)		(8,240)
Results from operating activities			111,763		52,406
Net interest expense on long term debt	6d		19,208		17,007
Accretion on streaming arrangements	6d		6,176		6,501
Change in fair value of financial instruments	6d		6,954		5,597
Other net finance costs	6d		11,675		5,871
Net finance expense			44,013		34,976
Earnings before tax			67,750		17,430
Tax expense	19		49,215		11,973
Net earnings for the period		$	18,535	$	5,457
Attributable to:
Owners of the Company		$	22,358	$	5,457
Non-controlling interest			(3,823)		-
Net earnings for the period		$	18,535	$	5,457
Net earnings per share
Basic and diluted		$	0.05	$	0.02
Weighted average number of common shares outstanding:
Basic	21		350,781,240		262,030,805
Diluted	21		350,970,348		262,324,929

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HUDBAY MINERALS INC.

Condensed Consolidated Interim Statements of Comprehensive Income (Loss) (Unaudited and in thousands of US dollars)

		Three months ended March 31,
		2024		2023
Net earnings for the period	$	18,535	$	5,457
Other comprehensive income:
Item that will be reclassified subsequently to net earnings:
Recognized directly in equity:
Net (loss) gain on translation of foreign currency balances		(16,821)		136
		(16,821)		136
Items that will not be reclassified subsequently to net earnings:
Recognized directly in equity:
Gold prepayment revaluation		(15)		15
Tax effect		4		(4)
Remeasurement - actuarial loss (gain)		3,575		(1,245)
Tax effect		19		(270)
		3,583		(1,504)
Other comprehensive loss net of tax, for the period		(13,238)		(1,368)
Attributable to:
Owners of the Company	$	11,824	$	4,089
Non-controlling interest		(6,527)		-
Total comprehensive income for the period	$	5,297	$	4,089

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HUDBAY MINERALS INC.

Condensed Consolidated Interim Statements of Cash Flows (Unaudited and in thousands of US dollars)

	Three months ended March 31,
		2024		2023
Cash generated from operating activities:
Net earnings for the period	$	18,535	$	5,457
Tax expense	19	49,215		11,973
Items not affecting cash:
Depreciation and amortization	6b	109,759		67,752
Share-based compensation expense		5,858		1,195
Net finance expense	6d	44,013		34,976
Amortization of deferred revenue and variable consideration	6a	(23,171)		(15,857)
Pension and other employee benefit payments, net of accruals		3,227		3,074
Amortization of community agreements		3,021		1,610
Re-evaluation adjustment - environmental obligation	18	(5,269)		(8,240)
Decommissioning and restoration payments		(148)		(904)
Other	24a	6,319		(6,470)
Taxes paid		(63,820)		(8,958)
Operating cash flow before change in non-cash working capital		147,539		85,608
Change in non-cash working capital	24b	(7,863)		(14,329)
		139,676		71,279
Cash used in investing activities:
Acquisition of property, plant and equipment		(62,371)		(64,952)
Community agreements		(1,379)		(1,912)
Grants received	11	2,400		-
Net sale of investments		-		53
Change in restricted cash		-		138
Interest received		2,430		1,597
		(58,920)		(65,076)
Cash (used in) generated from financing activities:
Proceeds from revolving credit facility		-		40,000
Repayment of revolving credit facility	16b	(10,000)		-
Interest paid on long-term debt		(903)		-
Financing costs		(5,330)		(3,133)
Lease payments	15	(7,749)		(5,364)
Equipment financing payments		(850)		-
Gold prepayment repayments	14	(21,433)		(6,428)
Net proceeds from exercise of stock options and warrants		1,256		78
Dividends paid	20b	(2,591)		(1,908)
		(47,600)		23,245
Effect of movement in exchange rates on cash		1,435		450
Net increase in cash and cash equivalents		34,591		29,898
Cash and cash equivalents, beginning of the period		249,794		225,665
Cash and cash equivalents, end of the period	$	284,385	$	255,563

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HUDBAY MINERALS INC.

Condensed Consolidated Interim Statements of Changes in Equity (Unaudited and in thousands of US dollars)

	Share capital	Other capital		Foreign currency	Remeasurement		Retained			Non-
			Total		controlling	Total equity
		(note 20)		reserves	translation reserve		reserve		earnings		interest
Balance, January 1, 2023	$	1,780,774	$	58,503	$	(14,759)	$	(17,206)	$	(235,503)	$1,571,809	$	-	$ 1,571,809
Net earnings		-		-		-		-		5,457	5,457		-	5,457
Other comprehensive income (loss)		-		-		136		(1,504)		-	(1,368)		-	(1,368)
Total comprehensive income (loss)		-		-		136		(1,504)		5,457	4,089		-	4,089
Contributions by and distributions to
owners:
Dividends (note 20b)		-		-		-		-		(1,908)	(1,908)		-	(1,908)
Stock options		-		453		-		-		-	453		-	453
Issuance of shares related to stock		118		(40)		-		-		-	78		-	78
options exercised
Total contributions by and distributions		118		413		-		-		(1,908)	(1,377)		-	(1,377)
to owners
Balance, March 31, 2023	$	1,780,892	$	58,916	$	(14,623)	$	(18,710)	$	(231,954)	$1,574,521	$	-	$ 1,574,521
Net earnings		-		-		-		-		60,910	60,910		3,176	64,086
Other comprehensive income (loss)		-		-		9,215		(6,969)		-	2,246		(124)	2,122
Total comprehensive income (loss)		-		-		9,215		(6,969)		60,910	63,156		3,052	66,208
Contributions by and distributions to
owners:
Dividends (note 20b)		-		-		-		-		(2,555)	(2,555)		-	(2,555)
Shares issued on acquisition of
Copper Mountain, net of share		436,499		-		-		-		-	436,499		106,976	543,475
issuance costs (note 4)
Shares and warrants issued on		12,503		725		-		-		-	13,228		-	13,228
acquisition of Rockcliff (note 5)
Flow-through shares issued, net of		10,166		-		-		-		-	10,166		-	10,166
share issuance costs (note 20b)
Stock options		-		1,684		-		-		-	1,684		-	1,684
Issuance of shares related to stock		173		(61)		-		-		-	112		-	112
options exercised
Total contributions by and distributions		459,341		2,348		-		-		(2,555)	459,134		106,976	566,110
to owners
Balance, December 31, 2023	$	2,240,233	$	61,264	$	(5,408)	$	(25,679)	$	(173,599)	$2,096,811	$	110,028	$ 2,206,839

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HUDBAY MINERALS INC.

Condensed Consolidated Interim Statements of Changes in Equity (Unaudited and in thousands of US dollars)

	Share capital	Other capital		Foreign currency	Remeasurement		Retained				Non-
				Total	controlling		Total equity
		(note 20)		reserves	translation reserve		reserve		earnings			interest
Balance, January 1, 2024	$	2,240,233	$	61,264	$	(5,408)	$	(25,679)	$	(173,599)	$	2,096,811	$	110,028	$	2,206,839
Net earnings		-		-		-		-		22,358		22,358		(3,823)		18,535
Other comprehensive (loss) income		-		-		(14,117)		3,583		-		(10,534)		(2,704)		(13,238)
Total comprehensive (loss) income		-		-		(14,117)		3,583		22,358		11,824		(6,527)		5,297
Contributions by and distributions to
owners:
Dividends (note 20b)		-		-		-		-		(2,591)		(2,591)		-		(2,591)
Stock options		-		223		-		-		-		223		-		223
Issuance of shares related to stock		1,608		(343)		-		-		-		1,265		-		1,265
options and warrants exercised
Total contributions by and distributions		1,608		(120)		-		-		(2,591)		(1,103)		-		(1,103)
to owners
Balance, March 31, 2024	$	2,241,841	$	61,144	$	(19,525)	$	(22,096)	$	(153,832)	$	2,107,532	$	103,501	$	2,211,033

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HUDBAY MINERALS INC.

Notes to Unaudited Condensed Consolidated Interim Financial Statements (in thousands of US dollars, except where otherwise noted)

For the three months ended March 31, 2024 and 2023

1. Reporting entity

Hudbay Minerals Inc. ("HMI" or the "Company") is a company existing under the Canada Business Corporations Act. The address of the Company's principal executive office is 25 York Street, Suite 800, Toronto, Ontario. The unaudited condensed consolidated interim financial statements ("financial statements") of the Company for the three months ended March 31, 2024 and 2023 represent the financial position and the financial performance of the Company and its subsidiaries (together referred to as "Hudbay").

Wholly owned subsidiaries as at March 31, 2024 included HudBay Peru Inc., HudBay Peru S.A.C. ("Hudbay Peru"), HudBay (BVI) Inc., Hudbay Arizona Inc., Copper World, Inc. ("Copper World") and Mason Resources (US) Inc. ("Mason"). On January 1, 2024, the Company amalgamated with Copper Mountain Mining Inc., Hudbay British Columbia Inc. and Rockcliff Metals Corp. ("Rockcliff") and continued carrying on business as Hudbay Minerals Inc. Following the amalgamation, the Company directly holds a 75% interest in Copper Mountain Mine (BC) Ltd. ("CMBC") and is the direct holder of all of Rockcliff's mineral properties. Mitsubishi Materials Corporation ("MMC"), an arms-length party, owns the remaining 25% interest in CMBC.

Hudbay is a diversified mining company with long-life assets in North and South America. Hudbay's operations in Cusco (Peru) produce copper with gold, silver and molybdenum by-products. Hudbay's operations in Manitoba (Canada) produce gold with copper, zinc and silver by-products. Hudbay's operations in British Columbia (Canada) produce copper with gold and silver by-products. Hudbay has a development pipeline that includes copper development projects in Arizona and Nevada (United States), and a focused growth strategy on exploration, development, operation, and optimization of properties that Hudbay already controls, as well as other mineral assets that Hudbay may acquire that fit the Company's strategic criteria. The Company is governed by the Canada Business Corporations Act and its shares are listed under the symbol "HBM" on the Toronto Stock Exchange, New York Stock Exchange and Bolsa de Valores de Lima.

2. Basis of preparation

1. Statement of compliance:
   These interim financial statements have been prepared in accordance with IAS 34, Interim Financial Reporting as issued by the International Accounting Standards Board ("IASB") and do not include all of the information required for full annual financial statements by International Financial Reporting Standards ("IFRS") as issued by the IASB.

These interim financial statements should be read in conjunction with the Company's audited consolidated financial statements for the year ended December 31, 2023 which includes information necessary or useful to understanding the Company's business and financial statement presentation. In particular, the Company's material accounting policies are presented as note 3 in the Company's audited consolidated financial statements for the year ended December 31, 2023 and have been consistently applied in the preparation of these interim financial statements, in addition to the new standard noted below.

The Board of Directors approved these interim financial statements on May 13, 2024.

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HUDBAY MINERALS INC.

Notes to Unaudited Condensed Consolidated Interim Financial Statements (in thousands of US dollars, except where otherwise noted)

For the three months ended March 31, 2024 and 2023

1. Use of judgements and estimates:
   The preparation of the interim financial statements in conformity with IFRS requires Hudbay to make judgements, estimates and assumptions, in applying accounting policies that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the interim financial statements, as well as reported amounts of revenue and expenses during the reporting period. Actual results may differ from these judgements, estimates and assumptions. The interim financial statements reflect the judgements and estimates outlined by Hudbay in its audited consolidated financial statements for the year ended December 31, 2023.

3. New standards

New standards and interpretations adopted

Amendment to IAS 1 - Presentation of Financial Statements

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

4. Acquisition of Copper Mountain Mining Corporation

On June 20, 2023, Hudbay acquired all of the issued and outstanding common shares of Copper Mountain Mining Inc. (formerly, Copper Mountain Mining Corp., and referred to herein as "Copper Mountain"), as part of a court-approved plan of arrangement. At the time, Copper Mountain held 75% of CMBC, the entity that owns 100% of the Copper Mountain mine. MMC owns the remaining 25% interest in CMBC as a non-controlling interest.

As a result of the acquisition, Hudbay obtained control of Copper Mountain on June 20, 2023.

Management determined that the assets and processes comprised a business and therefore accounted for the transaction as a business combination, using the acquisition method of accounting.

Consideration transferred:

The purchase consideration paid by Hudbay was for 100% of the net assets of Copper Mountain and their 100% owned subsidiaries ("100% owned entities") and a 75% ownership in CMBC. The aggregate purchase consideration for the acquired assets, net of the liabilities assumed is as follows:

Equity instruments (84,165,617 common shares of Hudbay)	$	436,687
Cash		3,794
Consideration transferred - June 20, 2023	$	440,481

The fair value of the common shares issued was based on Hudbay's listed share price of C$6.87 at the June 20, 2023 acquisition date. Immediately prior to the acquisition, Copper Mountain settled its outstanding restricted share units and performance share units through the issuance of shares and settled its stock options for replacement Hudbay options that were immediately settled in cash.

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HUDBAY MINERALS INC.

Notes to Unaudited Condensed Consolidated Interim Financial Statements (in thousands of US dollars, except where otherwise noted)

For the three months ended March 31, 2024 and 2023

Hudbay incurred acquisition related costs of $6,932 during the year ended December 31, 2023, mainly relating to external legal and advisory fees and due diligence costs, which were recorded in other expense in the consolidated income statements. In addition, Hudbay incurred share issuance costs of $188 and presented these as a deduction from share capital.

Identifiable assets acquired and liabilities assumed:

The fair value of the net assets was determined using a combination of market, income and cost methods. The fair value of the non-controlling interest was then computed at a 25% of the equity interest in CMBC.

The following presents the allocation of the final purchase price, resulting in recognized fair value amounts of identifiable assets acquired and liabilities assumed as follows:

Fair value of net assets acquired / (liabilities) assumed		Final
Cash and cash equivalent	$	14,483
Trade and other receivables		19,110
Inventories		47,875
Prepaid expenses		3,096
Other financial assets		8,495
Property, plant and equipment		434,821
Mineral properties		369,000
Inventories - low grade stockpile		6,000
Trade and other payables		(77,111)
Advances from Hudbay		(3,421)
Lease liabilities		(34,617)
Other financial liabilities		(9,550)
Long-term debt		(144,981)
Environmental and other provisions		(12,702)
Deferred tax liabilities		(148,246)
Total fair value of net identifiable assets acquired	$	472,252

The fair values of mineral properties, low grade stockpile and other property, plant and equipment have been determined based on an independent valuation, using a combination of market, income and cost methods. In particular, the fair values of the mineral properties and low grade stockpile have been calculated using significant judgements and estimates.

Trade receivables acquired as part of the acquisition have a fair value of $8,764 which is equal to their gross contractual value. Other receivables acquired have a fair value of $10,346 which is equal to their gross contractual value. Trade and other receivables are expected to be collected during the next 12 months.

Hudbay provided advances to Copper Mountain prior to the acquisition date, which have been recorded as a purchaser loan.

Hudbay recognized goodwill as a result of the acquisition as follows:

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