Mr. Peter Kukielski reports

HUDBAY DE-RISKS COPPER WORLD PHASE I WITH ENHANCED PRE-FEASIBILITY STUDY

Hudbay Minerals Inc. has released the results of the enhanced prefeasibility study (PFS) for phase I of its 100-per-cent-owned Copper World project in Arizona. All dollar amounts are in U.S. dollars, unless otherwise noted.

"The PFS for phase I of Copper World significantly enhances the economics and derisks the project through higher levels of engineering, a simplified project design, lower upfront capex and a longer mine life," said Peter Kukielski, Hudbay's president and chief executive officer. "Copper World is an attractive copper growth project for Hudbay and our stakeholders, generating strong project returns and bringing many benefits to the community and local economy in Arizona. We will continue to be prudent with our financing plans for Copper World as we remain focused on meeting all of the prerequisites for project sanctioning as laid out in our 3-P plan in October, 2022."

2023 PFS summary

The PFS reflects the results of the company's further technical work on the first phase of the Copper World project. Phase I is a stand-alone operation requiring state and local permits only. Phase I has a mine life of 20 years, which is four years longer than the phase I mine life that was presented in the preliminary economic assessment published in June, 2022, due to an increase in the capacity for tailings and waste deposition as a result of optimizing the site layout. The second phase of the project is expected to involve an expansion onto federal lands with an extended mine life and enhanced project economics. Phase II would be subject to the federal permitting process and has not been included in the PFS results.

Phase I contemplates average annual copper production of 85,000 tonnes over a 20-year mine life, at average cash costs and sustaining cash costs of $1.47 and $1.81 per pound of copper, respectively. A variable cut-off grade strategy allows for higher mill head grades in the first 10 years, which increases annual production to approximately 92,000 tonnes of copper at average cash costs and sustaining cash costs of $1.53 and $1.95 per pound of copper, respectively.

At a copper price of $3.75 per pound, the after-tax net present value (NPV) of phase I using an 8-per-cent discount rate is $1.1-billion and the internal rate of return (IRR) is 19 per cent. The valuation metrics are leveraged to higher copper prices, and at a price of $4.25 per pound, the after-tax NPV (8 per cent) of phase I increases to $1.7-billion, and the IRR increases to 25.5 per cent. In the flotation-only scenario, the project has an after-tax NPV (8 per cent) of $863-million, an after-tax IRR of 18.7 per cent and a payback period of 5.3 years at $3.75 per pound copper. At a copper price of $4.25 per pound, the flotation-only NPV (8 per cent) increases to $1.5-billion and the IRR increases to 25.7 per cent. These economics demonstrate the project is robust even without the concentrate leach facility, providing Hudbay with flexibility to optimize the project in the future through financing the addition of the concentrate leach facility with operating cash flows or potential government incentives for critical minerals processing.

A summary of key valuation, production and cost details from the PFS can be found herein.

Simplified project design

Copper World is planned to be a traditional open-pit shovel and truck operation with a conventional flotation concentrator producing copper concentrate and molybdenum concentrate, with an expansion of the processing facility to include a copper concentrate leach facility in year 5, producing copper cathode and silver/gold dore.

The overall mining operation is expected to consist of four open pits in phase I, with similar processing infrastructure as contemplated in the 2022 PEA. The mine plan for phase I is now optimized solely on the flotation of both copper sulfides and oxides.

The concentrator during phase I will have an installed capacity of 60,000 tons per day with conventional crushing, grinding, flotation, molybdenum separation, concentrate dewatering and tailings thickening. For the first four years, the final product is a copper concentrate sold to market. The processing plant is expected to be expanded by year 5 with the construction of a concentrate leach facility in year 4, which will produce copper cathodes and silver/gold dore. The concentrate leach facility will also include sulphur flotation, an acid plant, an SX/EW (solvent extraction and electrowinning) plant and a Merrill Crowe circuit for precious metals. The concentrate leach facility will also produce sulphur which will be processed into sulphuric acid at the acid plant. When sulphur production from the concentrate leach process is insufficient to fill the sulphuric acid plant capacity, sulphur will be purchased at local market price. When sulphuric acid production exceeds the concentrate leach requirements, the excess will be sold.

As part of the PFS, detailed test work was completed on the different concentrate leach technologies, including Glencore Technology's Albion process as well as low- and high-temperature pressure oxidation. The tests indicate Albion and high-temperature pressure oxidation yield the highest copper extraction rates in the range of 97 per cent to 99 per cent for all samples. Albion was selected as the preferred concentrate leach technology because it is simpler to operate, is modular and offers flexibility to scale the plant, and has significantly lower acid neutralization requirements when compared with high-temperature pressure oxidation.

The concentrate leach facility is sized at 70,000 tonnes of copper cathode during phase I, which represents 50 per cent of the maximum 140,000-tonne design capacity. In the PFS, there remains the opportunity to process third party feed during the last two years of the mine life to maximize the utilization of the SX/EW facility. Given the modular nature of the Albion technology, there also remains the opportunity to increase the scale of the concentrate leach facility up to the maximum design capacity, which will allow for the processing of additional internal concentrates or third party feed and further increase the NPV and IRR.

The PFS contemplates the construction of three tailings storage facilities for phase I and provides storage for 385 million tonnes, sufficient for 20 years of mine life on land requiring state and local permits only.

Total initial capital costs are estimated to be $1.3-billion for phase I ($1.1-billion net of existing stream agreement), including all costs associated with the construction of the concentrator and associated infrastructure. The construction of the concentrate leach facility in year 4 is estimated at $367-million and includes the cost for the SX/EW plant, acid plant, sulphur burner and precious metals plant. Contingency costs have been applied to direct capital costs at 20 per cent and the PFS assumes capital leasing of mobile equipment.

Significant social and environmental benefits

Global copper market fundamentals are expected to be strong with a structural deficit emerging in the medium term. Global mine production and available smelter capacity are expected to struggle to keep pace with metal demand boosted by the green energy revolution. The United States is expected to remain a net copper importer during this period, and domestic supply will be required to help secure growing U.S. metal demand related to increased manufacturing capacity and infrastructure development, bolstering the country's energy independence and domestic electric vehicle battery supply chain and production needs.

The made-in-America copper cathode produced at Copper World is expected to be sold entirely to domestic U.S. customers and would make Copper World the third-largest domestic cathode producer in the United States. Producing copper cathode would reduce the operation's total energy requirements, and greenhouse gas (GHG) and sulphur (SO2 (sulphur dioxide)) emissions by eliminating overseas shipping, smelting and refining activities relating to copper concentrate. The company estimates that the project will reduce total energy consumption by more than 10 per cent, including a more than 30-per-cent decline in energy consumption relating to downstream processing, when compared with a project design that produces copper concentrates for overseas smelting and refining. The PFS base case is expected to result in an approximate 14-per-cent reduction in scope 1, 2 and 3 GHG emissions compared with the flotation-only scenario. Hudbay is targeting further reductions in the project's GHG emissions as part of the company's specific emissions reduction targets for its existing operations to align with the global 50 per cent by 2030 climate change goal, which are discussed in the section titled "project optimization and upside opportunities" below.

The Copper World project is expected to generate significant benefits for the community and local economy in Arizona. Over the anticipated 20-year life of the operation, the company expects to contribute more than $850-million in U.S. taxes, including approximately $170-million in taxes to the state of Arizona. Hudbay also expects Copper World to create more than 400 direct jobs and up to 3,000 indirect jobs in Arizona. Copper World will offer competitive wages and benefits and the company intends to engage in partnerships with local apprenticeship readiness programs and community-based work force training programs across the skilled and technical levels to fill and maintain all positions. The project is also expected to generate approximately $250-million in property taxes over the 20-year mine life.

In July, 2023, the U.S. Department of Energy announced the designation of copper as a critical material for energy. Hudbay has applied for tax credits under the Inflation Reduction Act that are being awarded by the U.S. Department of Energy in conjunction with the Internal Revenue Agency for qualifying projects that construct processing facilities for critical material for sustainable energy initiatives. The copper cathode produced at Copper World, together with the significant social benefits for the community and local economy, position the project as a strong candidate for government tax incentives. The financial analysis in the PFS does not incorporate any potential benefits from these tax incentives.

Simplified permitting process

The permitting process for Copper World is expected to only require state and local permits for phase I. In July, 2022, Hudbay received approval from the Arizona state mine inspector for its amended mined land reclamation plan (MLRP), the first key state permit required for Copper World. The MLRP was initially approved in October, 2021, and was subsequently amended to reflect a larger private land project footprint. This approval by the Arizona state mine inspector was challenged in state court but the challenge was dismissed in May, 2023, as having no basis. In late 2022, Hudbay submitted the applications for an aquifer protection permit and an air quality permit to the Arizona Department of Environmental Quality. The company expects to receive these two outstanding state permits in mid-2024.

In May, 2023, the U.S. Supreme Court issued a favourable decision in the case of Sackett versus EPA (Environmental Protection Agency) that clarified the definition of waters of the U.S. and rejected the significant nexus test that the agencies had previously used to assert jurisdiction over relatively remote dry washes like those at the Copper World site. This decision strengthens Hudbay's position that no 404 permit or other Clean Water Act approvals are required for the Copper World project.

Also, in May, 2023, Hudbay received a favourable ruling from the U.S. Court of Appeals for the Ninth Circuit that reversed the U.S. Fish and Wildlife Service's designation of the Copper World area as jaguar critical habitat. While this ruling does not impact the state permitting process for phase I of Copper World, it is expected to simplify the federal permitting process for phase II.

Mineral reserve and resource estimates

The PFS and mine plan are based on updated mineral resource estimates for the Copper World deposits, which include the Peach-Elgin, West, Broadtop Butte and East deposits. Based on the new model, contained copper in measured and indicated mineral resources, inclusive of mineral reserves, has increased by 4 per cent as compared with the mineral resources in the 2022 PEA. In addition, contained copper in mill feed increased by 41 per cent in the PFS compared with the contained copper in milled resources in phase I of the PEA mine plan due to higher grades and the flotation of both copper sulphides and oxides.

The mineral reserves milled is lower than the mineral resources mined in the PFS due to limitations on tailings capacity beyond 20 years in phase I. There are approximately 40 million tonnes of resources that are economic to mine in the PFS but are excluded from the reserves and cash flow analysis. This additional material provides upside potential that could be included in the mine plan if additional land is accessed for tailings capacity.

The current mineral reserve and resource estimates for Copper World (effective as of July 1, 2023) are summarized herein and replace the prior mineral resource estimates set forth in the 2022 PEA.

Project optimization and upside opportunities

The company has identified many opportunities that may further enhance project economics, reduce environmental impacts, increase annual production and extend mine life, which have not been considered in the Phase I PFS.

• Mine life extension potential -- there remains approximately 60 per cent of the total copper contained in measured and indicated mineral resources, excluding the PFS reserves, providing significant potential for the phase II expansion and mine life extension. In addition, the inferred mineral resources estimates are at a comparable copper grade and also provide significant upside potential.
• Increased concentrate leach capacity -- the selected concentrate leach technology allows the facility to be scalable in the future to be large enough to process all of the internally produced copper concentrates, further enhancing project economics and IRR. Operating the Albion plant at 100-per-cent capacity is estimated to reduce total GHG emissions by 25 per cent compared with an operation that only produces copper concentrate.
• Access to federal green funding incentives -- Hudbay is exploring options for government incentives to help fund the future development of the concentrate leach facility, which may offer attractive financing terms and allow the construction of the concentrate leach facility to occur earlier and potentially at a larger capacity with improved project economics.
• Earlier receipt of federal permits for phase II expansion -- Hudbay is optimistic that it will be able to secure federal permits well before the end of the life of phase I, which could allow the mining of more high-value tonnes earlier in the mine life and significantly increase annual copper production, the project economics and IRR.
• Green opportunities -- there are several emission reduction opportunities the company will evaluate with future studies, including the potential to source renewable energy from local providers at a nominal cost, the use of autonomous or electric haul trucks at the operation, and various postreclamation land uses such as domestic renewable energy production. Also, if Hudbay is able to secure additional private land to improve the tailings configuration, there is the potential to accelerate dry stack tailings deposition into phase I, which would reduce water consumption.

Prudent financing plan and disciplined capital allocation

As part of Hudbay's disciplined financial planning approach to Copper World, the company has introduced a three-prerequisite plan (3-P), including specific leverage targets that it would need to achieve prior to making an investment decision in the project:

1. Permits -- receipt of all state-level permits required for phase I;
2. Plan -- completion of a definitive feasibility study with an internal rate of return of greater than 15 per cent;
3. Prudent financing strategy -- multifaceted financing strategy including:
   • A committed minority joint venture partner;
   • A renegotiated precious metals stream agreement optimized for the current project;
   • Net debt to EBITDA (earnings before interest, taxes, depreciation and amortization) ratio of less than 1.2 times;
   • A minimum cash balance of $600-million;
   • Limited non-recourse project level debt of up to $500-million.

Under the existing precious metals stream agreement with Wheaton Precious Metals, Hudbay is entitled to receive a deposit payment of $230-million for delivery of gold and silver production from Copper World. The estimated total initial financing requirement for phase I of Copper World, net of the stream agreement, amounts to approximately $1.1-billion.

Hudbay intends to complete a minority joint venture partner process after receiving permits and prior to commencing a definitive feasibility study, which will allow the potential joint venture partner to participate in the financing of definitive feasibility study activities in 2024 as well as in the final project design for Copper World. The opportunity to sanction Copper World is not expected until 2025 based on current estimated timelines. The decision to sanction Copper World will ultimately be evaluated against other competing investment opportunities as part of Hudbay's capital allocation process.

Conference call and webcast

Date: Friday, Sept. 8, 2023

Time: 8:30 a.m. ET

Webcast: Hudbay website

Dial-in: 1-416-915-3239 or 1-800-319-4610

Qualified person and National Instrument 43-101

The scientific and technical information contained in this news release has been approved by Olivier Tavchandjian, PGeo, Hudbay's senior vice-president, exploration and technical services. Mr. Tavchandjian is a qualified person pursuant to Canadian Securities Administrators' National Instrument 43-101 -- Standards of Disclosure for Mineral Projects.

A copy of the NI 43-101 technical report for the PFS will be made available on Hudbay's SEDAR+ profile and on Hudbay's EDGAR profile. The new technical report supports the disclosure in this news release and will be the current technical report in respect of all the mineral properties that form part of the Copper World project and shall supersede and replace the 2022 PEA in its entirety.

About Hudbay Minerals Inc.

Hudbay is a copper-focused mining company with three long-life operations and a world-class pipeline of copper growth projects in Tier 1 mining-friendly jurisdictions of Canada, Peru and the United States.

Hudbay's operating portfolio includes the Constancia mine in Cusco (Peru), the Snow Lake operations in Manitoba (Canada) and the Copper Mountain mine in British Columbia (Canada). Copper is the primary metal produced by the company, which is complemented by meaningful gold production. Hudbay's growth pipeline includes the Copper World project in Arizona, the Mason project in Nevada (United States), the Llaguen project in La Libertad (Peru), and several expansion and exploration opportunities near its existing operations.

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