6-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13A-16 OR 15D-16 OF
THE SECURITIES EXCHANGE ACT OF 1934

For the month of July 2016

Commission File Number: 001-34244

HUDBAY MINERALS INC.
(Translation of registrant’s name into English)

25 York Street, Suite 800
Toronto, Ontario
M5J 2V5, Canada
(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F [   ]                    Form 40-F [X]

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): [   ]

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): [   ]

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes [   ]                     No [X]

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-

EXPLANATORY NOTE

On July 27, 2016, HudBay Minerals Inc. (“Hudbay”) filed on the Canadian Securities Administrators’ System for Electronic Document Analysis and Retrieval (SEDAR) website at www.sedar.com the following documents: (1) Management’s Discussion and Analysis of Results of Operations and Financial Condition for the three and six months ended June 30, 2016; (2) Unaudited Condensed Consolidated Interim Financial Statements for the three and six months ended June 30, 2016 and 2015; (3) a Credit Supporters Disclosure; (4) CEO Certification of Interim Filings; (5) CFO Certification of Interim Filings; and (6) a press release announcing the quarterly results for the second quarter of 2016.

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

• Exhibit 99.1 — Management’s Discussion and Analysis of Results of Operations and Financial Condition for the three and six months ended June 30, 2016;

• Exhibit 99.2 — Unaudited Condensed Consolidated Interim Financial Statements for the three and six months ended June 30, 2016 and 2015;

• Exhibit 99.3 — Credit Supporters Disclosure;

• Exhibit 99.4 — CEO Certification of Interim Filings;

• Exhibit 99.5 — CFO Certification of Interim Filings; and

• Exhibit 99.6 — Press release announcing the quarterly results for the second quarter of 2016.

2

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

HUDBAY MINERALS INC.
(registrant)
By:	/s/ Patrick Donnelly
Name:	Patrick Donnelly
Title:	Vice President and General Counsel

Date: July 28, 2016

3

EXHIBIT INDEX

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

Exhibit Description

99.1	Management’s Discussion and Analysis of Results of Operations and Financial Condition for the three and six months ended June 30, 2016
99.2	Unaudited Condensed Consolidated Interim Financial Statements for the three and six months ended June 30, 2016 and 2015
99.3	Credit Supporters Disclosure
99.4	CEO Certification of Interim Filings
99.5	CFO Certification of Interim Filings
99.6	Press release announcing the quarterly results for the second quarter of 2016

4

EX-99.1

Management's Discussion and Analysis of
Results of Operations and Financial Condition

For the three and six months ended
June 30, 2016

July 27, 2016

TABLE OF CONTENTS	Page
Introduction	1
Our Business	1
Summary	2
Key Financial and Production Results	3
Constancia Operations Review	4
Manitoba Operations Review	6
Financial Review	11
Liquidity and Capital Resources	21
Trend Analysis and Quarterly Review	24
Non-IFRS Financial Performance Measures	25
Accounting Changes and Critical Estimates	32
Changes in Internal Control Over Financial Reporting	32
Notes to Reader	32

INTRODUCTION

This Management's Discussion and Analysis ("MD&A") dated July 27, 2016 is intended to supplement HudBay Minerals Inc.'s unaudited condensed consolidated interim financial statements and related notes for the three and six months ended June 30, 2016 and 2015 (the "consolidated interim financial statements"). The consolidated interim financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS"), including International Accounting Standard 34, Interim Financial Reporting, as issued by the International Accounting Standards Board.

References to “Hudbay”, the “Company”, “we”, “us”, “our” or similar terms refer to HudBay Minerals Inc. and its direct and indirect subsidiaries as at June 30, 2016. "Hudbay Peru" refers to HudBay Peru S.A.C., our wholly-owned subsidiary which owns a 100% interest in the Constancia mine, and “Augusta” and “Hudbay Arizona” refer to HudBay Arizona Corporation (formerly named Augusta Resource Corporation), our wholly-owned subsidiary, which indirectly owns a 92.05% interest in the Rosemont project.

Readers should be aware that:

−	This MD&A contains certain “forward-looking statements” and “forward-looking information” (collectively, “forward-looking information”) that are subject to risk factors set out in a cautionary note contained in our MD&A.
−	Effective July 1, 2015, we changed our presentation currency to US dollars from Canadian dollars.
−	This MD&A has been prepared in accordance with the requirements of the securities laws in effect in Canada, which may differ materially from the requirements of United States securities laws applicable to US issuers.
−	We use a number of non-IFRS financial performance measures in our MD&A.
−	The technical and scientific information in this MD&A has been approved by qualified persons based on a variety of assumptions and estimates.

For a discussion of each of the above matters, readers are urged to review the “Notes to Reader” discussion beginning on page 32 of this MD&A.

Additional information regarding Hudbay, including the risks related to our business and those that are reasonably likely to affect our financial statements in the future, is contained in our continuous disclosure materials, including our most recent Annual Information Form (“AIF”), audited consolidated financial statements and Management Information Circular available on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.

All amounts are in US dollars unless otherwise noted.

OUR BUSINESS

We are an integrated mining company producing copper concentrate (containing copper, gold and silver) and zinc metal. With assets in North and South America, we are focused on the discovery, production and marketing of base and precious metals. Through our subsidiaries, we own four polymetallic mines, four ore concentrators and a zinc production facility in northern Manitoba and Saskatchewan (Canada) and Cusco (Peru), and a copper project in Arizona (United States). Our growth strategy is focused on the exploration and development of properties we already control, as well as other mineral assets we may acquire that fit our strategic criteria. Our vision is to become a top-tier operator of long-life, low-cost mines in the Americas. Our mission is to create sustainable value through the acquisition, development and operation of high-quality and growing long-life deposits in mining-friendly jurisdictions. We are governed by the Canada Business Corporations Act and our shares are listed under the symbol "HBM" on the Toronto Stock Exchange, New York Stock Exchange and Bolsa de Valores de Lima. We also have warrants listed under the symbol “HBM.WT” on the Toronto Stock Exchange and “HBM/WS” on the New York Stock Exchange.

1

SUMMARY

In the second quarter of 2016, cash generated from operating activities increased to $137.5 million from $10.4 million in the second quarter of 2015. In addition, operating cash flow before change in non-cash working capital increased to $75.1 million in the current quarter from $17.0 million in the same quarter of 2015¹. Operating cash flow in the quarter benefited from substantially higher copper and precious metals sales volumes due to the Constancia project reaching commercial production on April 30, 2015. The increase in sales volumes and associated economies of scale more than offset the decline in realized sales prices of copper and zinc metals compared to the same quarter last year.

The net loss and loss per share in the second quarter of 2016 were $5.7 million and $0.02, respectively, compared to net loss and loss per share of $44.3 million and $0.19, respectively, in the second quarter of 2015. In the comparable period last year, there was an asset impairment charge of $19.9 million as a result of the decision not to proceed with construction of the new concentrator at Lalor following the acquisition of the New Britannia mine and mill (the “NBM Mill”).

Net loss and loss per share in the second quarter of 2016 was affected by, among other things, the following item:

	Pre-tax loss	After-tax loss		Per share loss
	($ millions)	($ millions)		($/share)
Non-cash deferred tax adjustments	-	(8.4	)	(0.04	)

Notwithstanding lower copper and zinc realized prices, revenues nearly doubled and gross profit increased more than ten-fold compared to the same quarter last year as a result of higher sales volumes and cost optimization at our operations. As a result of production growth and ongoing cost optimization initiatives, consolidated cash cost, net of by-product credits, declined to $0.83 per pound of copper produced from $1.28 per pound in the second quarter of 2015. Similarly, incorporating sustaining capital, capitalized exploration, royalties and corporate general and administrative (“G&A”) costs, consolidated all-in sustaining cash cost, net of by-product credits, declined to $1.42 per pound from $2.28 per pound in the second quarter of 2015¹.

Sales of copper contained in concentrate lagged production in the second quarter of 2016 mainly as a result of a delay in loading a 20,000 tonne parcel of concentrate at the port of Matarani in Peru due to extended ocean swells in late June. Concentrate inventory at the Constancia mine site and the Matarani port are currently at normal working levels.

During the second quarter, a Canadian chartered bank joined the syndicate for our Canadian and Peruvian senior secured revolving credit facilities (the “Facilities”) with $30.0 million in new commitments, bringing total commitments under the Facilities to $530.0 million. Including this additional credit availability, cash flow generated from the business and collection of Peruvian sales tax refunds during the quarter, total liquidity at June 30, 2016 was $293.5 million, compared to $190.1 million at March 31, 2016.

The cost reduction initiatives announced on February 24, 2016 are on track to meet our targets for 2016. Based on these efforts and operating results to date, we expect to meet all of our production, operating and capital cost guidance.

We declared a semi-annual dividend of $0.01 per share on July 27, 2016. The dividend will be paid on September 30, 2016 to shareholders of record as of September 9, 2016.

^{____________________________________________
1} Cash cost and all-in sustaining cash cost, net of by-product credits, per pound of copper produced, operating cash flow before change in non-cash working capital, and operating cash flow per share are not recognized under IFRS. For a detailed description of each of these non-IFRS financial performance measures used in this MD&A, please see the discussion under “Non-IFRS Financial Performance Measures” beginning on page 25 of this MD&A.

2

KEY FINANCIAL AND PRODUCTION RESULTS

Financial Condition
(in $ thousands)	Jun. 30, 2016	Dec. 31, 2015
Cash and cash equivalents	141,903	53,852
Total long-term debt	1,309,700	1,274,880
Net debt 1	1,167,797	1,221,028
Working capital	112,865	57,613
Total assets	4,551,578	4,479,585
Equity	1,771,256	1,787,290

Financial Performance		Three months ended				Six months ended
(in $ thousands, except per share and		Jun. 30,		Jun. 30,		Jun. 30,		Jun. 30,
cash cost amounts)		2016		2015		2016		2015
Revenue		246,975		150,889		500,600		279,602
Profit (loss) before tax		6,557		(45,818	)	(10,331	)	(57,298	)
Loss		(5,703	)	(44,290	)	(21,491	)	(64,127	)
Basic and diluted loss per share		(0.02	)	(0.19	)	(0.09	)	(0.27	)
Cash generated from operating activities		137,521		10,433		239,071		10,747
Operating cash flows before change in non-cash working capital 1		75,059		17,022		146,945		33,923
Operating cash flow per share 1		0.32		0.07		0.62		0.14
Cash cost per pound of copper produced, net of by-product credits 1		0.83		1.28		0.97		1.33
All-in sustaining cash cost per pound of copper produced, net of by-product credits 1		1.42		2.28		1.59		2.39
Production
Contained metal in concentrate2
Copper	tonnes	45,892		36,212		84,771		51,220
Gold	oz	29,705		23,217		56,949		46,892
Silver	oz	996,511		779,364		1,719,427		1,090,232
Zinc	tonnes	26,456		23,486		49,832		46,392
Metal Sold
Payable metal in concentrate
Copper	tonnes	36,834		25,868		78,753		36,863
Gold	oz	26,755		15,175		44,472		27,525
Silver	oz	715,873		428,095		1,490,182		528,411
Refined zinc	tonnes	23,728		25,657		49,148		49,436

1

Net debt, operating cash flow before change in non-cash working capital, operating cash flow per share, cash cost and all-in sustaining cash cost per pound of copper produced, net of by-product credits are non-IFRS financial performance measures with no standardized definition under IFRS. For further information and a detailed reconciliation, please see the discussion under "Non-IFRS Financial Reporting Measures" beginning on page 25 of this MD&A.

2

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

3

CONSTANCIA OPERATIONS REVIEW

		Three months ended		Six months ended		Guidance 1
		Jun. 30,	Jun. 30,	Jun. 30,	Jun. 30,	Annual
		2016	2015	2016	2015	2016
Ore mined	tonnes	6,526,635	7,235,552	13,359,315	8,388,021
Copper	%	0.64	0.66	0.61	0.63
Gold	g/tonne	0.09	0.04	0.07	0.05
Silver	g/tonne	4.75	5.47	4.24	5.38
Ore milled	tonnes	6,726,277	6,583,232	12,976,109	9,016,714
Copper	%	0.62	0.61	0.60	0.56
Gold	g/tonne	0.08	0.06	0.07	0.07
Silver	g/tonne	5.42	6.12	5.10	5.90
Copper concentrate	tonnes	139,745	93,994	254,283	109,844
Concentrate grade	% Cu	24.83	28.17	25.11	27.78
Copper recovery	%	82.7	66.3	82.3	60.3
Gold recovery	%	51.3	30.9	49.1	28.2
Silver recovery	%	66.4	45.6	60.5	40.3
Combined unit operating costs 1	$/tonne	7.88	9.22	7.82	9.22	7.30 - 8.20

¹ Reflects combined mine and mill costs per tonne of ore milled. Peru operations combined mine and mill unit costs include G&A, reflects the deduction of expected capitalized stripping costs and excludes costs and tonnes associated with pre-commercial production output.

During the second quarter of 2016, Constancia mining operations and cost optimization continued as planned. Ore mined during the second quarter of 2016 decreased by 10% as ore production rates were aligned to mill throughput rates. Mined and milled copper grades in the second quarter of 2016 were consistent with the same period in 2015. Mill throughput during the second quarter of 2016 was affected by higher than expected liner wear in the semi-autogenous grinding (SAG) mills. These affected liners were successfully replaced in July 2016.

Optimization of plant performance remains the primary focus for Constancia. Total copper recovery in the second quarter of 2016 was 82.7%, compared to 66.3% in the same period last year as oxidized copper in the ore feed was lower in 2016 and the metallurgy associated with the varying ore types is better understood.

Combined unit operating costs for the second quarter and year-to-date 2016 were within guidance expectations for 2016, notwithstanding the reduced throughput associated with the replacement of the trunnions on one of the grinding circuits.

Concentrate inventory levels in Peru were maintained well within normal working levels during the second quarter of 2016 with a temporary increase at the port due to extended ocean swells in late June. The port expansion at Matarani was completed at the end of June 2016, which improved access to our designated pier and reduced port costs.

4

		Three months ended		Six months ended		Guidance
Contained metal in		Jun. 30,	Jun. 30,	Jun. 30,	Jun. 30,	Annual
concentrate produced		2016	2015	2016	2015	2016
Copper	tonnes	34,699	26,474	63,842	30,515	110,000 -	130,000
Gold	oz	8,625	3,941	14,376	5,567
Silver	oz	778,448	590,892	1,287,442	689,213
Precious metals1	oz	19,745	12,381	32,768	15,413	50,000 -	65,000

¹ Precious metals production includes gold and silver production on a gold-equivalent basis. Silver is converted to gold at a ratio of 70:1.

During the second quarter of 2016, production of copper, gold and silver increased by 31%, 119% and 32%, respectively, compared to the same period in 2015. Year-to date production of copper, gold and silver were 109%, 158% and 87% higher than the same period in 2015. This growth reflects the ramp-up of Constancia to full production and the improvements in recoveries made in the last year.

Constancia's metal production and combined mine, mill and G&A unit operating costs are expected to be within guidance ranges for 2016.

Peru Cash Cost and Sustaining Cash Cost per Pound of Copper Produced

		Three months ended		Six months ended
		Jun. 30,	Jun. 30,	Jun. 30,	Jun. 30,
		2016	2015	2016	2015
Cash cost per pound of copper produced, net of by-product credits 1	$/lb	0.97	1.23	1.05	1.23
Sustaining cash cost per pound of copper produced, net of by-product credits 1	$/lb	1.39	2.10	1.44	2.10

¹ Cash cost and sustaining cash costs per pound of copper produced, net of by-product credits, are not recognized under IFRS. For more detail on this non-IFRS financial performance measure, please see the discussion under "Non-IFRS Financial Performance Measures" beginning on page 25 of this MD&A.

Cash cost, net of by-product credits, for the three and six months ended June 30, 2016 was $0.97 and $1.05 per pound of copper produced, a decrease from the same periods in 2015 of 21% and 15%, respectively, which reflect ongoing plant optimization and cost reduction initiatives.

Sustaining cash cost, net of by-product credits, for the three and six months ended June 30, 2016 was $1.39 and $1.44 per pound of copper produced, a decrease from the same period in 2015 of 34% and 31%, respectively, as a result of the same factors affecting cash cost.

Metal Sold

		Three months ended		Six months ended
		Jun. 30,	Jun. 30,	Jun. 30,	Jun. 30,
		2016	2015	2016	2015
Payable metal in concentrate
Copper	tonnes	26,562	18,405	57,835	18,405
Gold	oz	4,157	3,223	11,537	3,223
Silver	oz	482,332	319,897	1,148,415	319,897

5

MANITOBA OPERATIONS REVIEW

Mines

		Three months ended		Six months ended
		Jun. 30,	Jun. 30,	Jun. 30,	Jun. 30,
		2016	2015	2016	2015
777
Ore	tonnes	334,718	264,882	692,258	604,809
Copper	%	1.57	2.03	1.57	2.09
Zinc	%	2.52	2.73	2.76	2.98
Gold	g/tonne	1.39	1.43	1.36	1.63
Silver	g/tonne	17.26	17.88	17.44	19.30
Lalor
Ore	tonnes	281,136	246,809	543,034	440,593
Copper	%	0.55	0.73	0.57	0.76
Zinc	%	7.31	7.73	6.79	7.88
Gold	g/tonne	2.15	2.62	2.34	2.60
Silver	g/tonne	20.32	21.32	20.05	21.59
Reed 1
Ore	tonnes	114,452	112,504	225,913	231,149
Copper	%	4.87	3.12	4.63	2.96
Zinc	%	0.45	0.93	0.63	0.80
Gold	g/tonne	0.60	0.59	0.57	0.60
Silver	g/tonne	7.47	6.21	7.34	6.45
Total Mines
Ore	tonnes	730,306	624,195	1,461,205	1,276,551
Copper	%	1.70	1.71	1.67	1.79
Zinc	%	4.04	4.38	3.93	4.28
Gold	g/tonne	1.56	1.75	1.60	1.78
Silver	g/tonne	16.90	17.14	16.85	17.76

¹ Includes 100% of Reed mine production.

		Three months ended		Six months ended
		Jun. 30,	Jun. 30,	Jun. 30,	Jun. 30,
Unit Operating Costs		2016	2015	2016	2015
Mines
777	C$/tonne	50.64	64.48	50.81	58.42
Lalor	C$/tonne	63.48	76.39	66.20	73.52
Reed	C$/tonne	43.51	67.44	44.62	65.63
Total Mines	C$/tonne	55.01	69.85	56.11	64.90

Ore mined at our Manitoba mines during the second quarter of 2016 increased by 17% compared to the same period in 2015 as a result of increased production at Lalor and 777. Copper grades were higher at Reed as a result of the stopes mined. This was offset by lower copper grades at our 777 and Lalor mines, as expected. Silver grades in the second quarter of 2016 were in line with the same period in 2015, while zinc and gold grades were lower than the second quarter of 2015 by 8% and 11%, respectively. Unit operating costs for all Manitoba mines for the second quarter of 2016 declined by 21% compared to the same period in 2015, reflecting ongoing cost reduction efforts and increased production. Reed mine unit operating costs decreased by 35% compared to the same period in 2015, due to cost reduction efforts as well as higher proportion of capitalized development to expensed development compared to the second quarter of 2015.

6

Year-to-date ore production at our Manitoba mines was 14% higher than the same period in 2015 as a result of higher production at our Lalor and 777 mines. 2016 year-to-date copper, zinc, gold and silver grades were lower than the same period in 2015 by 7%, 8%, 10% and 5%, respectively, primarily related to lower grades at our Lalor and 777 mines. 777 grades are in line with mine plan expectations and Lalor grades are lower due to stope sequencing. Year-to-date total mine unit costs were 14% lower than the same period in 2015, reflecting ongoing cost reduction efforts and increased production.

7

Processing Facilities

		Three months ended		Six months ended
		Jun. 30,	Jun. 30,	Jun. 30,	Jun. 30,
		2016	2015	2016	2015
Flin Flon Concentrator
Ore	tonnes	437,759	375,669	866,389	839,156
Copper	%	2.39	2.33	2.27	2.32
Zinc	%	2.06	2.20	2.29	2.36
Gold	g/tonne	1.20	1.17	1.18	1.34
Silver	g/tonne	14.87	14.36	15.12	15.65
Copper concentrate	tonnes	40,964	36,029	76,072	76,450
Concentrate grade	% Cu	24.05	22.76	24.10	23.54
Zinc concentrate	tonnes	13,770	13,224	30,574	31,989
Concentrate grade	% Zn	51.35	50.26	51.48	50.44
Copper recovery	%	94.0	93.6	93.1	92.6
Zinc recovery	%	78.3	80.5	79.2	81.6
Gold recovery	%	60.9	55.5	59.5	59.5
Silver recovery	%	55.9	53.8	56.3	54.6
Contained metal in concentrate produced
Copper	tonnes	9,850	8,201	18,333	17,998
Zinc	tonnes	7,071	6,648	15,739	16,137
Precious metals1	oz	11,910	9,209	22,964	24,798
Snow Lake Concentrator
Ore	tonnes	285,434	249,217	542,534	424,313
Copper	%	0.57	0.73	0.58	0.76
Zinc	%	7.33	7.73	6.80	8.00
Gold	g/tonne	2.14	2.68	2.36	2.59
Silver	g/tonne	20.22	21.52	20.29	21.61
Copper concentrate	tonnes	6,682	7,709	12,593	13,349
Concentrate grade	% Cu	20.10	19.96	20.61	20.29
Zinc concentrate	tonnes	37,464	32,299	66,592	58,486
Concentrate grade	% Zn	51.74	52.13	51.20	51.73
Copper recovery	%	81.9	84.2	81.9	84.3
Zinc recovery	%	92.7	87.4	92.4	89.2
Gold recovery	%	55.1	53.2	55.9	56.2
Silver recovery	%	54.5	55.2	55.1	57.8
Contained metal in concentrate produced
Copper	tonnes	1,343	1,537	2,596	2,707
Zinc	tonnes	19,385	16,838	34,093	30,255
Precious metals1	oz	12,285	12,759	25,780	22,256

¹ Precious metals production includes gold and silver production on a gold-equivalent basis. Silver is converted to gold at a ratio of 70:1.

8

		Three months ended		Six months ended		Guidance
		Jun. 30,	Jun. 30,	Jun. 30,	Jun. 30,	Annual
Unit Operating Costs		2016	2015	2016	2015	2016
Concentrators
Flin Flon	C$/tonne	16.64	15.22	16.23	14.88
Snow Lake	C$/tonne	21.09	25.49	21.38	28.10
Combined mine/mill unit operating costs 1
Manitoba	C$/tonne	87.63	107.11	91.09	102.77	80 - 100

¹ Reflects combined mine, mill and G&A costs per tonne of milled ore. Includes the cost of ore purchased from our joint venture partner at Reed mine. For 2015, combined mine and mill unit operating costs have been restated on the same basis for consistency.

Ore processed in the Flin Flon concentrator in the second quarter of 2016 was 17% higher than the same period in 2015 primarily as a result of higher production at our 777 mine. Gold and silver recoveries were higher in the second quarter of 2016 compared to the same period in 2015 as a result of higher head grades, while zinc recovery was slightly lower due to lower zinc head grades. Unit operating costs at the Flin Flon concentrator were 9% higher in the second quarter of 2016 compared to the same period in 2015 as a result of higher maintenance expenditures. Ore processed in the Snow Lake concentrator in the second quarter of 2016 was 15% higher than the same period in 2015 as a result of higher production at the Lalor mine. Unit operating costs at the Snow Lake concentrator were 17% lower in the second quarter of 2016 compared to the second quarter of 2015 as a result of increased production.

Ore processed year-to-date in 2016 in Flin Flon was 3% higher than the same period in 2015 as a result of higher mine production, partially offset by unscheduled maintenance. 2016 year-to-date recoveries of all metals were fairly consistent with the same period in 2015. 2016 year-to-date unit operating costs at the Flin Flon concentrator were 9% higher than the same period in 2015 as a result of lower production in the first quarter of 2016 due to unscheduled maintenance as well as increased maintenance costs. Ore processed year-to-date in Snow Lake was 28% higher than the same period in 2015 as a result of higher production at Lalor. 2016 year-to-date copper, gold and silver recoveries were lower than the same period in 2015 as a result of lower copper grades. 2016 year-to-date unit operating costs at the Snow Lake concentrator were 24% lower than the same period in 2015 as a result of higher production throughout 2016.

Manitoba combined mine, mill and G&A unit operating costs in the second quarter and year-to-date in 2016 were 18% and 11% lower, respectively, than in the same periods in 2015 as a result of higher overall production and ongoing cost reduction initiatives, and were in line with full year guidance expectations.

		Three months ended		Six months ended		Guidance1
Manitoba contained metal in		Jun. 30,	Jun. 30,	Jun. 30,	Jun. 30,	Annual
concentrate produced 1,2		2016	2015	2016	2015	2016
Copper	tonnes	11,193	9,738	20,929	20,705	40,000 -	50,000
Zinc	tonnes	26,456	23,486	49,832	46,392	100,000 -	125,000
Gold	oz	21,080	19,276	42,573	41,325
Silver	oz	218,063	188,472	431,985	401,019
Precious metals3	oz	24,195	21,968	48,744	47,053	95,000 -	115,000

1	Includes 100% of Reed mine production.
2	Metal reported in concentrate is prior to deductions associated with smelter terms.
3	Precious metals production includes gold and silver production on a gold-equivalent basis. Silver is converted to gold at a ratio of 70:1.

During the second quarter of 2016, overall Manitoba production of copper, zinc, gold and silver were higher by 15%, 13%, 9% and 16%, respectively, as compared to the same period in 2015 as a result of higher mill throughput, offset by lower grades when compared to the same quarter in 2015.

9

During the first half of 2016, overall Manitoba production of copper, zinc, gold and silver were higher by 1%, 7%, 3% and 8%, respectively, as compared to the same period in 2015 as a result of the same factors that impacted second quarter production.

Manitoba’s metal production and combined mine, mill and G&A unit operating costs are expected to be within guidance ranges for 2016.

Zinc Plant

		Three months ended		Six months ended		Guidance
		Jun. 30,	Jun. 30,	Jun. 30,	Jun. 30,	Annual
Zinc Production		2016	2015	2016	2015	2016
Zinc Concentrate Treated
Domestic	tonnes	47,206	45,277	99,021	86,190
Purchased	tonnes	-	7,008	-	16,407
Total	tonnes	47,206	52,285	99,021	102,597	195,000-240,000
Refined Metal Produced
Domestic	tonnes	22,859	21,928	47,136	41,960
Purchased	tonnes	-	3,594	-	8,343
Total	tonnes	22,859	25,522	47,136	50,303	100,000-120,000

		Three months ended		Six months ended		Guidance
		Jun. 30,	Jun. 30,	Jun. 30,	Jun. 30,	Annual
Unit Operating Costs		2016	2015	2016	2015	2016
Zinc Plant 1	C$/lb	0.48	0.42	0.48	0.45	0.38 - 0.46

¹ Zinc unit operating costs include G&A costs. For 2015, zinc unit operating costs have been restated to include G&A costs for consistency.

Production of cast zinc in the second quarter of 2016 and year-to-date was 10% and 6% lower, respectively, compared to the same periods in 2015 due to limitations on zinc concentrate availability and the biennial maintenance shutdown which was completed during the second quarter. Operating costs per pound of zinc metal produced in the second quarter of 2016 and year-to-date were 13% and 7% higher, respectively, compared to the same periods in 2015, for the same reasons. Refined zinc metal production and operating costs are expected to be within guidance ranges for 2016.

10

Manitoba Cash Cost and Sustaining Cash Cost per Pound of Copper Produced

		Three months ended		Six months ended
		Jun. 30,	Jun. 30,	Jun. 30,	Jun. 30,
		2016	2015	2016	2015
Cash cost per pound of copper produced, net of by-product credits 1	$/lb	0.37	1.37	0.73	1.42
Sustaining cash cost per pound of copper produced, net of by-product credits 1	$/lb	1.10	2.11	1.67	2.20

¹ Cash cost and sustaining cash cost per pound of copper produced, net of by-product credits, are not recognized under IFRS. For more detail on this non-IFRS financial performance measure, please see the discussion under "Non-IFRS Financial Performance Measures" beginning on page 25 of this MD&A.

In Manitoba, cash cost, net of by-product credits, in the second quarter and year-to-date 2016 was $0.37 and $0.73 per pound of copper produced, a decrease of 73% and 49% per pound, respectively, compared to the same periods in 2015. The decrease is largely the effect of decreased purchases of zinc concentrate for processing, a decrease in general support costs as a result of cost reduction initiatives, and a reduction in costs in US dollar terms as a result of the weaker Canadian dollar versus the US dollar. Cash cost was also positively impacted by increased copper production and increased sales of precious metals.

The Manitoba sustaining cash cost, net of by-product credits, in the second quarter and year-to-date in 2016 was $1.10 and $1.67 per pound of copper produced, a decrease of 48% and 24% per pound, respectively, compared to the same periods in 2015, and was affected by the same factors impacting results in the second quarter.

Metal Sold

		Three months ended		Six months ended
		Jun. 30,	Jun. 30,	Jun. 30,	Jun. 30,
		2016	2015	2016	2015
Payable metal in concentrate
Copper	tonnes	10,272	7,463	20,918	18,458
Gold	oz	22,598	11,952	32,935	24,302
Silver	oz	233,541	108,198	341,767	208,514
Refined zinc	tonnes	23,728	25,657	49,148	49,436

FINANCIAL REVIEW

Financial Results

In the second quarter of 2016, we recorded a loss of $5.7 million compared to a loss of $44.3 million for the same period in 2015, a decrease in losses of $38.6 million.

Year-to-date 2016, we recorded a loss of $21.5 million compared to a loss of $64.1 million in the same period in 2015, a decrease in losses of $42.6 million.

11

The following table provides further details on these variances:

	Three months ended		Six months ended
(in $ millions)	Jun. 30, 2016		Jun. 30, 2016
Increase (decrease) in components of profit or loss:
Revenues	96.1		221.0
Cost of sales
Mine operating costs	(18.9	)	(79.7	)
Depreciation and amortization	(33.5	)	(82.3	)
Asset impairment	19.9		19.9
Finance expense	(11.0	)	(37.4	)
Other	(0.2	)	5.4
Tax	(13.8	)	(4.3	)
Decrease in loss in 2016 compared to 2015	38.6		42.6

Revenue

Revenue for the second quarter of 2016 was $247.0 million, $96.1 million higher than the same period in 2015, primarily as a result of higher sales volumes resulting from commercial production being achieved at Constancia. This increase was partially offset by lower realized prices and higher treatment and refining charges.

Year-to-date revenue was $500.6 million, $221.0 million higher than the same period in 2015, due to the same factors that affected second quarter results. The following table provides further details of this variance:

	Three months ended		Six months ended
(in $ millions)	Jun. 30, 2016		Jun. 30, 2016
Metals prices1
Lower copper prices	(40.9	)	(85.7	)
Lower zinc prices	(7.6	)	(19.2	)
Higher gold prices	2.3		6.7
Higher silver prices	0.6		0.2
Sales volumes
Higher copper sales volumes	63.2		241.7
Lower zinc sales volumes	(4.6	)	(0.7	)
Higher gold sales volumes	15.5		16.8
Higher silver sales volumes	5.3		14.2
Other
Derivative mark-to-market increase	3.9		8.1
Pre-production revenue decrease	65.6		65.6
Other volume and pricing differences	(0.4	)	(0.4	)
Effect of higher treatment and refining charges	(6.8	)	(26.3	)
Increase in revenue in 2016 compared to 2015	96.1		221.0

¹ See discussion below for further information regarding metals prices.

12

Our revenue by significant product type is summarized below:

	Three months ended				Six months ended
	Jun. 30,		Jun. 30,		Jun. 30,		Jun. 30,
(in $ millions)	2016		2015		2016		2015
Copper	171.3		149.0		369.9		213.4
Zinc	52.0		60.4		102.5		114.2
Gold	36.6		19.0		57.5		34.2
Silver	12.9		7.0		23.4		9.0
Other	0.6		0.7		1.3		2.1
Gross revenue1	273.4		236.1		554.6		372.9
Treatment and refining charges	(26.4	)	(19.6	)	(54.0	)	(27.7	)
Pre-production revenue	-		(65.6	)	-		(65.6	)
Revenue	247.0		150.9		500.6		279.6

¹ Copper, gold and silver revenues include unrealized gains and losses related to non-hedge derivative contracts including fixed for floating swaps, that are included in realized prices. Zinc revenues include unrealized gains and losses related to non-hedge derivative contracts that are not included in realized prices.

13

Realized sales prices

This measure is intended to enable management and investors to understand the average realized price of metals sold to third parties in each reporting period. The average realized price per unit sold does not have any standardized meaning prescribed by IFRS, is unlikely to be comparable to similar measures presented by other issuers, and should not be considered in isolation or a substitute for measures of performance prepared in accordance with IFRS.

Beginning with reporting for the three months and years ended December 31, 2015 and 2014, we have amended the methodology for determining realized prices. For sales of copper, gold and silver where there are outstanding non-hedge derivatives (“QP hedges”) which are intended to manage the provisional pricing risk arising from quotational period terms in concentrate sales agreements, we will no longer remove the impact of derivative mark-to-market adjustments on QP hedges included in revenues reported in the consolidated financial statements. We expect that gains and losses on QP hedges will offset provisional pricing adjustments on concentrate sales contracts, so this change is expected to result in a realized price that is better reflective of the proceeds we expect to receive. There has been no change in the realized price calculation methodology for zinc or where copper, gold and silver are being hedged using derivatives other than QP hedges.

Our realized prices for the second quarter and year-to-date 2016 and 2015 are summarized below:

			Realized prices1 for the			Realized prices1 for the
			Three months ended			Six months ended
		LME QTD	Jun. 30,	Jun. 30,	LME YTD	Jun. 30,	Jun. 30,
		20162	2016	2015	20162	2016	2015
Prices
Copper	$/lb	2.15	2.11	2.61	2.13	2.13	2.64
Zinc3	$/lb	0.87	0.93	1.08	0.81	0.88	1.06
Gold4	$/oz		1,368	1,239		1,293	1,236
Silver4	$/oz		18.09	16.40		15.70	16.98

1	Realized prices exclude refining and treatment charges and are on the sale of finished metal or metal in concentrate. Realized prices include the effect of provisional pricing adjustments on prior period sales.
2	London Metal Exchange average for copper and zinc prices.
3	Zinc realized prices include premiums paid by customers for delivery of refined zinc metal, but exclude unrealized gains and losses related to non-hedge derivative contracts that are included in zinc revenues. For the three months ended June 30, 2016, the unrealized component of the zinc derivative resulted in a gain of $0.06/lb. For the three months ended June 30, 2015, the unrealized component of the zinc derivative resulted in a loss of $0.01/lb.
4	Sales of gold and silver from our 777 and Constancia mines are subject to our precious metals stream agreement with Silver Wheaton, pursuant to which we recognize deferred revenue for precious metals deliveries and also receive cash payments. Stream sales are included within realized prices and their respective deferred revenue and cash payment rates can be found on page 16.

14

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

Three months ended June 30, 2016
(in $ millions)	Copper	Zinc		Gold		Silver	Other	Total
Revenue per financial statements	171.3	52.0		36.6		12.9	0.6	273.4
Derivative mark-to-market 5	-	(3.3	)	-		-	-	(3.3	)
Revenue, excluding mark-to-market on non-QP hedges	171.3	48.7		36.6		12.9	0.6	270.1
Payable metal in concentrate sold 1	36,834	23,728		26,755		715,873	-	-
Realized price 2,4	4,650	2,052		1,368		18.09	-	-
Realized price 3,4	2.11	0.93		-		-	-	-
Six months ended June 30, 2016
(in $ millions)	Copper	Zinc		Gold		Silver	Other	Total
Revenue per financial statements	369.9	102.5		57.5		23.4	1.3	554.6
Derivative mark-to-market 5	-	(7.1	)	-		-	-	(7.1	)
Revenue, excluding mark-to-market on non-QP hedges	369.9	95.4		57.5		23.4	1.3	547.5
Payable metal in concentrate sold 1	78,753	49,148		44,472		1,490,182	-	-
Realized price 2,4	4,697	1,940		1,293		15.70	-	-
Realized price 3,4	2.13	0.88		-		-	-	-
Three months ended June 30, 2015
(in $ millions)	Copper	Zinc		Gold		Silver	Other	Total
Revenue per financial statements	149.0	60.4		19.0		7.0	0.7	236.1
Derivative mark-to-market 5	-	0.6		-		-	-	0.6
Difference in average versus realized exchange rate	0.1	(0.1	)	(0.2	)	-	-	(0.2	)
Revenue, excluding mark-to-market on non-QP hedges	149.1	60.9		18.8		7.0	0.7	236.5
Payable metal in concentrate sold 1	25,868	25,657		15,175		428,095	-	-
Realized price 2,4	5,764	2,371		1,239		16.40	-	-
Realized price 3,4	2.61	1.08		-		-	-	-
Six months ended June 30, 2015
(in $ millions)	Copper	Zinc		Gold		Silver	Other	Total
Revenue per financial statements	213.4	114.2		34.2		9.0	2.1	372.9
Derivative mark-to-market 5	-	1.0		-		-	-	1.0
Difference in average versus realized exchange rate	0.7	0.3		(0.2	)	-	-	0.8
Revenue, excluding mark-to-market on non-QP hedges	214.1	115.5		34.0		9.0	2.1	374.7
Payable metal in concentrate sold 1	36,863	49,436		27,525		528,411	-	-
Realized price 2,4	5,809	2,338		1,236		16.98	-	-
Realized price 3,4	2.64	1.06		-		-	-	-

1	Copper and zinc shown in tonnes and gold and silver shown in ounces.
2	Realized price for copper and zinc in $/metric tonne and realized price for gold and silver in $/oz.
3	Realized price for copper and zinc in $/lb.
4	Average realized price per unit sold may not calculate based on amounts presented in this table due to rounding.
5	Derivative mark-to-market excludes mark-to-market on QP hedges.

15

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

Stream Sales

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

		Three months ended		Six months ended
		Jun. 30, 2016		Jun. 30, 2016
		Manitoba	Peru	Manitoba	Peru
Gold	oz	10,381	3,340	17,518	8,272
Silver	oz	130,447	482,332	215,870	1,148,415
Gold deferred revenue drawdown rate1	$/oz	1,074	436	1,049	436
Gold cash rate 2	$/oz	404	400	404	400
Silver deferred revenue drawdown rate1	$/oz	19.61	7.39	19.14	7.39
Silver cash rate 2	$/oz	5.96	5.90	5.96	5.90

		Three months ended		Six months ended
		Jun. 30, 2015		Jun. 30, 2015
		Manitoba	Peru	Manitoba	Peru
Gold	oz	9,490	3,223	16,119	3,224
Silver	oz	89,518	319,897	138,779	319,897
Gold deferred revenue drawdown rate1	$/oz	994	436	999	436
Gold cash rate 2	$/oz	400	400	400	400
Silver deferred revenue drawdown rate1	$/oz	20.20	7.63	20.26	7.63
Silver cash rate 2	$/oz	5.90	5.90	5.90	5.90

1	Deferred revenue amortization is recorded in Manitoba at C$1,382/oz and C$25.23/oz for gold and silver, respectively, (2015 - C$1,243/oz and C$25.18/oz) and converted to US dollars at the exchange rate in effect at the time of revenue recognition.
2	The gold and silver cash rate for Manitoba increased by 1% from $400/oz and $5.90/oz effective August 1, 2015. Subsequently every year, on August 1, the cash rate will increase by 1% compounded.

16

Cost of Sales

Our detailed cost of sales is summarized as follows:

	Three months ended				Six months ended
	Jun. 30,		Jun. 30,		Jun. 30,		Jun. 30,
(in $ thousands)	2016		2015		2016		2015
Manitoba
Manitoba mines	29,713		33,556		58,768		63,471
Manitoba concentrators	10,326		9,815		19,317		19,749
Zinc plant	16,393		15,468		32,190		32,438
Purchased ore and concentrate (before inventory changes)	4,996		10,549		8,219		23,451
Changes in domestic inventory	3,468		(15,943	)	4,962		(18,762	)
Depreciation and amortization	31,716		20,988		60,627		46,570
Freight, royalties and profit sharing	6,778		7,421		15,255		16,582
G&A and other charges	7,198		33,486		19,791		47,922
Total Manitoba cost of sales	110,588		115,340		219,129		231,421
Peru
Mine	14,381		8,615		26,913		8,615
Concentrator	27,905		21,380		54,534		21,380
Changes in domestic inventory	(9,873	)	(23,761	)	(2,788	)	(23,761	)
Depreciation and amortization	32,030		9,290		77,532		9,290
Freight, royalties and profit sharing	12,952		8,052		29,009		8,052
G&A and other charges	10,701		7,428		20,057		7,428
Total Peru cost of sales	88,096		31,004		205,257		31,004
Cost of sales	198,684		146,344		424,386		262,425

Total cost of sales for the second quarter of 2016 was $198.7 million, reflecting an increase of $52.4 million from the second quarter of 2015. Cost of sales related to Peru was $57.1 million higher as a result of the Constancia mine and concentrator achieving commercial production during the second quarter of 2015. Cost of sales related to Manitoba was $4.7 million lower than the same period in 2015. For Manitoba, depreciation and changes in domestic inventory increased primarily due to the fact that in the prior year there was a build up of concentrate inventory due to rail service limitations which were resolved in the third quarter of 2015. This was partially offset by decreases in purchased zinc concentrate. In addition, in the second quarter of 2016, G&A and other charges decreased by $26.3 million compared to the same period in 2015 primarily due to cost reduction efforts and the fact that the prior year included past service costs of $17.1 million associated with new collective bargaining agreements. For Manitoba, costs incurred in Canadian dollars were lower in US dollar terms in the current period compared to the prior period as a result of the weaker Canadian dollar versus the US dollar.

Year-to date cost of sales for 2016 was $424.4 million, an increase of $162.0 million compared to the same period in 2015. Cost of sales related to Peru was $174.3 million higher as a result of the Constancia mine and concentrator achieving commercial production during the second quarter of 2015. Cost of sales related to Manitoba was $12.3 million lower than the same period in 2015 primarily due to the same factors that impacted the second quarter cost of sales.

For details on unit operating costs refer to the respective tables in the “Operations Review” section beginning on page 4 of this MD&A.

17

For the second quarter of 2016, other significant variances in expenses, compared to the same period in 2015, include the following:

−	Selling and administrative expenses decreased by $0.7 million. This was mainly the result of a decrease of $2.3 million in general support costs as a result of efforts to reduce discretionary spending. This was partially offset by higher share based compensation expenses from the impact of re-valuing these rewards to a higher common share price at June 30, 2016 compared to March 31, 2016.
−	Asset impairment expenses were $19.9 million in the second quarter of 2015 as a result of the decision not to proceed with the construction of a new concentrator at Lalor following the acquisition of the NBM Mill in May 2015.
−	Finance expenses increased by $11.0 million mostly as a result of the achievement of commercial production at Constancia effective April 30, 2015. This triggered the cessation of capitalization of interest costs associated with our senior unsecured notes resulting in the recognition of approximately $10.1 million of more interest costs on the consolidated interim income statements. In addition, we incurred higher interest costs and amortization of finance fees on our Facilities of $2.8 million, which were a function of drawdowns on these Facilities.
−	Other finance gains decreased by $2.1 million primarily as a result of:

−	Foreign exchange gains decreased by $2.3 million to $1.1 million.
−	Mark-to-market on warrants resulted in losses of $1.2 million in the second quarter of 2016 compared to gains of $0.1 million in the second quarter of 2015.
−	A fair value adjustment on the embedded derivative related to the senior unsecured notes and our gold option liability related to the acquisition of the NBM Mill resulted in a loss of $0.4 million in the second quarter of 2016 compared to a gain of $0.9 million in the second quarter of 2015.
−	Partially offsetting these impacts were disposals, impairment and mark-to-market adjustments on held for trading investments, which resulted in a net gain of $1.2 million during the second quarter of 2016 compared to a loss of $1.6 million during the same period last year.

For 2016 year-to-date, other significant variances in expenses from operations, compared to 2015, include the following:

−	Selling and administrative expenses decreased by $1.6 million. This was mainly the result of a decrease of $2.3 million in general support costs as a result of efforts to reduce discretionary spending.
−	Asset impairment expenses were $19.9 million for year-to-date 2015 as a result of the decision not to proceed with construction of the new concentrator at Lalor following the acquisition of the NBM Mill in May 2015.
−	Finance expenses increased by $37.4 million mostly as a result of the achievement of commercial production at Constancia. This triggered the cessation of capitalization of interest costs associated with our senior unsecured notes resulting in the recognition of approximately $33.1 million of additional interest costs on the consolidated interim income statements. In addition, we incurred higher interest costs and amortization of finance fees on our facilities, which were a function of drawdowns on these Facilities.
−	Other finance losses decreased by $2.3 million primarily as a result of:

−

Foreign exchange losses decreased by $4.9 million to $0.2 million. The reduced losses were mainly a function of a weakening Canadian dollar versus the US dollar in the prior year period which resulted in losses on US denominated long-term debt balances in the Canadian functional currency of the parent entity at that time. Since the parent entity was changed to US functional currency on July 1, 2015, this currency fluctuation no longer has an impact on foreign exchange in the income statements for 2016.

−

Mark-to-market on warrants resulted in losses of $0.8 million in the current year-to-date period compared to losses of $2.6 million in the comparative period in 2015.

18

−	Disposals, impairment and mark-to-market adjustments on held for trading investments resulted in a net gain of $1.1 million during the current period of 2016 compared to a loss of $2.9 million during the same period last year.
−	Partially offsetting these impacts was the fair value adjustment on the embedded derivative related to the senior unsecured notes and our gold option liability related to the acquisition of the NBM Mill that resulted in a loss of $1.1 million during the second quarter of 2016 compared to a gain of $7.3 million during the same period last year.

Tax Expense (Recovery)

For the three and six months ended June 30, 2016, tax expense increased by $13.8 million and $4.3 million, respectively, compared to the same periods in 2015. The following table provides further details:

	Three months ended			Six months ended
	Jun. 30,	Jun. 30,		Jun. 30,	Jun. 30,
(in $ thousands)	2016	2015		2016	2015
Deferred tax expense (recovery) - income tax 1	5,840	(11,495	)	1,018	(4,570	)
Deferred tax expense (recovery) - mining tax 1	1,114	2,690		2,260	2,742
Total deferred tax recovery	6,954	(8,805	)	3,278	(1,828	)
Current tax expense - income tax	2,114	2,400		3,901	3,766
Current tax expense - mining tax	3,192	4,877		3,981	4,891
Total current tax expense	5,306	7,277		7,882	8,657
Tax expense (recovery)	12,260	(1,528	)	11,160	6,829

¹ Deferred tax expense (recovery) represents our draw down/increase of non-cash deferred income and mining tax assets/liabilities.

19

Income Tax Expense

Our effective income tax rate on the loss before tax for 2016 year-to-date was approximately negative 47.6% (2015 year-to-date - 1.4%) . Applying the estimated Canadian statutory income tax rate of 27.0% to our loss before taxes of $10.3 million would have resulted in a tax recovery of approximately $2.8 million; however, we recorded an income tax expense of $4.9 million (2015 year-to-date recovery - $0.8 million). The significant items causing our effective income tax rate to be different than the 27.0% estimated Manitoba statutory income tax rate include:

−	Certain deductible temporary differences with respect to additional liabilities for Manitoba decommissioning and restoration and other employee benefit liabilities were not recognized, as it is was not probable that we would realize the recovery based on the timing of the reversals of the deductible temporary differences and the future projected taxable profit of the Manitoba operations, adjusted for the average annual effective rate methodology, resulting in an increase in deferred tax expense of approximately $4.2 million (2015 year-to-date - $6.5 million);
−	The tax benefit of certain Peruvian expenses was not recognized in the year since it was not considered probable that the benefit of these expenditures would be realized as the tax authorities in Peru would view them as non-deductible expenditures for income tax purposes, resulting in an increase in deferred tax expense of $4.5 million (2015 year-to-date - $0.6 million);
−	Certain deductible temporary differences with respect to our foreign operations are recorded using an income tax rate other than the Canadian statutory income tax rate of 27.0%, resulting in a decrease in deferred tax expense of $2.6 million (2015 year-to-date - $2.1 million);
−	A decrease in the deferred tax expense of $3.0 million due to the fact that certain Canadian non-monetary assets are recognized at historical cost while the tax bases of the assets change as exchange rates fluctuate, which gives rise to taxable temporary differences; and
−	Increases to our decommissioning and restoration liabilities in Manitoba resulting from a decrease in discount rates required us to record a corresponding non-cash increase to property, plant, and equipment. We recognized a deferred tax expense of $3.7 million (2015 year-to-date - $0.8 million) related to the increase in property, plant and equipment; however, we did not recognize a deferred tax recovery related to the increase in the decommissioning and restoration liabilities because we determined it is not probable that we will realize the benefit of the recovery.

Mining Tax Expense

Applying the estimated Manitoba mining tax rate of 10.0% to our loss before taxes for 2016 year-to-date of $10.3 million would have resulted in a tax recovery of approximately $1.0 million and we recorded a mining tax expense of $6.2 million (2015 year-to-date - $7.6 million). For year-to date 2016, our effective rate for mining taxes was approximately negative 60.4% (2015 year-to-date - 13.3%) . Effective mining tax rates can vary significantly based on the composition of our earnings and the expected amount of mining taxable profits. Corporate costs and other costs not related to mining operations are not deductible in computing mining profits. A brief description of how mining taxes are calculated in our various business units is discussed below.

Manitoba

The Province of Manitoba imposes mining tax on profit related to the sale of mineral products mined in the Province of Manitoba (mining taxable profit) at the following rates:

−	10% of total mining taxable profit if mining profit is $50 million or less;
−	15% of total mining taxable profit if mining profits are between $55 million and $100 million; and
−	17% of total mining taxable profit if mining profits exceed $105 million.

We estimate that the tax rate that will be applicable when temporary differences reverse will be approximately 10.0% .

20

Peru

The Peruvian government imposes two parallel mining tax regimes, the Special Mining Tax and the Modified Royalty, on companies' operating mining income on a sliding scale, with progressive rates ranging from 2.0% to 8.4% and 1.0% to 12.0%, respectively. Based on financial forecasts, we have recorded a deferred tax liability as at June 30, 2016 at the tax rate we expect to apply when temporary differences reverse.

LIQUIDITY AND CAPITAL RESOURCES

Senior Secured Revolving Credit Facilities

On March 30, 2016, we amended and restated our Canadian and Peruvian Facilities to consolidate the lender groups and restructure the two Facilities to provide, among other things, more flexible financial covenants. During the second quarter, an additional commitment of $30.0 million was received, bringing total availability under the Facilities to $530.0 million.

As at June 30, 2016, $36.4 million of letters of credit had been advanced under the Canadian Facility to support our reclamation obligations in Manitoba. Including borrowings and letters of credit, a total of $243.4 million was drawn down under the Canadian Facility as at June 30, 2016. As at June 30, 2016, we had $135.0 million owing under the Peruvian Facility, and $151.6 million in undrawn availability under both Facilities.

As at June 30, 2016, we were in compliance with our covenants under the Facilities.

Equipment Finance Facility

In October 2013, we entered into an equipment financing facility to finance the purchase of components of the mobile fleet at our Constancia operations. Loans pursuant to the equipment financing facility have a term of six years, amortized on a quarterly basis, and are secured by the financed equipment. As at June 30, 2016, we had approximately $62.6 million owing under the facility.

Financial Condition

Financial Condition as at June 30, 2016 compared to December 31, 2015

Cash and cash equivalents increased by $88.1 million from December 31, 2015 to $141.9 million as at June 30, 2016. This increase was mainly a result of operating cash flow of $239.1 million and net borrowings of $31.1 million. Operating cash flow was partly offset by $98.7 million of capital investments primarily at our Peru and Manitoba operations, interest payments of $53.9 million, deposits of restricted cash mostly in Manitoba of $22.7 million and financing costs of $9.6 million. We hold the majority of our cash and cash equivalents in low-risk, liquid investments with major Canadian and Peruvian financial institutions.

Working capital increased by $55.3 million to $112.9 million from December 31, 2015 to June 30, 2016. In addition to the increased cash and cash equivalents position:

−	Current portion of long-term debt decreased by $53.4 million mainly as a result of amendments to the Peru Facility;
−	Trade and other payables decreased by $35.1 million primarily as a result of the timing of capital spending resulting in higher trade payables at December 31, 2015;
−	Inventories increased by $9.4 million mainly as a result of increased stockpile inventory, which is expected to return to normal levels by the end of 2016;
−	Trade and other receivables decreased by $100.0 million primarily due to the timing of sales and receipts of statutory amounts owing;
−	Other liabilities increased by $23.4 million mainly as a result of customer payments received in advance of revenue recognition; and
−	Other financial assets decreased by $13.7 million mainly as a result of market-to-market valuations on QP hedging.

21

Cash Flows

The following table summarizes our cash flows for the three and six months ended June 30, 2016 and June 30, 2015.

	Three months ended				Six months ended
	Jun. 30,		Jun. 30,		Jun. 30,		Jun. 30,
(in $ thousands)	2016		2015		2016		2015
Loss for the period	(5,703	)	(44,290	)	(21,491	)	(64,127	)
Tax expense (recovery)	12,260		(1,528	)	11,160		6,829
Items not affecting cash	69,008		64,036		164,104		92,934
Taxes paid	(506	)	(1,196	)	(6,828	)	(1,713	)
Operating cash flows before changes in non-cash working capital	75,059		17,022		146,945		33,923
Change in non-cash working capital	62,462		(6,589	)	92,126		(23,176	)
Cash generated from operating activities	137,521		10,433		239,071		10,747
Cash used in investing activities	(69,485	)	(142,965	)	(120,826	)	(298,468	)
Cash (used) generated in financing activities	(11,085	)	152,047		(30,584	)	224,682
Effect of movement in exchange rates on cash and cash equivalents	(765	)	(1,264	)	390		(773	)
Increase (decrease) in cash and cash equivalents	56,186		18,251		88,051		(63,812	)

Cash Flow from Operating Activities

Cash generated from operating activities was $137.5 million in the second quarter of 2016, an increase of $127.1 million compared with the same period last year. Operating cash flows before change in non-cash working capital were $75.1 million during the second quarter of 2016, reflecting an increase of $58.0 million compared to the second quarter of 2015, mainly as a result of higher sales volumes and an improving gross margin following the achievement of commercial production at Constancia. Changes in non-cash working capital generated $62.5 million of cash in the second quarter of 2016 mostly due to the timing of collections of trade and statutory tax receivables.

Year-to-date cash generated from operating activities was $239.1 million in 2016, an increase of $228.3 million compared with the same period last year. This increase is mostly the result of higher sales volumes and gross margins following the achievement of commercial production at Constancia and statutory tax refunds.

Cash Flow from Investing and Financing Activities

During the second quarter of 2016, we used $80.6 million in investing and financing activities primarily driven by capital expenditures of $52.4 million, interest and financing fee payments of $10.6 million, and principal payments of $24.1 million. In addition, a letter of credit issued under our Facilities to support pension obligations of the Manitoba business unit was reissued as a cash-collateralized letter of credit, resulting in an increase in the restricted cash balance of $17.6 million. This was partially offset by net proceeds on long-term borrowings of $19.5 million and net proceeds of $5.0 million related to an issuance of equity in connection with the vesting of restricted share unit awards.

Year-to-date, we used $151.4 million of cash in investing and financing activities primarily driven by capital expenditures, interest and finance fee payments, reclassifications to restricted cash and principal repayments.

22

Capital Expenditures

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

	Three months
	ended				Six months ended				Guidance
	Jun. 30,		Jun. 30,		Jun. 30,		Jun. 30,		Annual
(in $ millions)	2016		2015		2016		2015		2016 1
Manitoba sustaining capital expenditures	15.1		12.8		38.7		30.1		80.0
Peru sustaining capital expenditures	30.8		45.1		51.1		68.0		140.0
Total sustaining capital expenditures	45.9		57.9		89.8		98.1		220.0
Arizona other capitalized costs	5.2		15.8		16.7		20.7		30.0
Peru other capitalized costs	9.0		(39.8	)	16.2		42.0
Manitoba other capitalized costs	9.7		(4.0	)	14.0		6.9
Capitalized exploration	0.9		1.5		1.3		3.0		3.0
Capitalized interest	3.7		10.9		7.4		34.6
Total other capitalized costs	28.5		(15.6	)	55.6		107.2
Total accrued capital additions	74.4		42.3		145.4		205.3
Reconciliation to cash capital additions:
Decommissioning and restoration obligation	(14.5	)	7.3		(23.2	)	(8.7	)
Capitalized interest	(3.7	)	(10.9	)	(7.4	)	(34.6	)
Changes in capital accruals and other	(3.8	)	90.7		(16.1	)	100.2
Total cash capital additions	52.4		129.4		98.7		262.2

¹ Sustaining capital expenditure guidance excludes capitalized interest.

Sustaining capital expenditures in Manitoba for the three months ended June 30, 2016 were $15.1 million, an increase of $2.3 million compared to the same period in 2015. This increase is primarily due to increased capital development at our Lalor mine.

Sustaining capital expenditures in Manitoba for the six months ended June 30, 2016 were $38.7 million, an increase of $8.6 million compared to the same period in 2015. This increase is the result of major mobile equipment arriving in the first quarter of 2016. Manitoba capital expenditures are expected to decline over the balance of 2016 and are expected to remain within guidance ranges.

Sustaining capital expenditures in Peru for the three and six months ended June 30, 2016 were $30.8 million and $51.1 million, respectively, a decrease of $14.3 million and $16.9 million, compared to the same period in 2015. This decrease is the result of the cost reduction initiatives.

Sustaining capital expenditures in Peru are expected to be highest during the second and third quarters of 2016, as heavy civil earthworks activity on the Constancia tailings dam ramps up during the dry season. Capital expenditures in Arizona on the Rosemont project are expected to decline substantially over the balance of 2016. Capital expenditures for 2016 are expected to remain within guidance expectations.

Other Peru capitalized costs included capitalized pre-commercial production operating costs, net of pre-commercial production sales receipts as well as decommissioning and restoration adjustments. Other Manitoba capitalized costs include decommissioning and restoration adjustments.

23

Capital Commitments

As at June 30, 2016, we had outstanding capital commitments in Canada of approximately $0.6 million primarily related to a committed mobile equipment purchase, of which approximately $0.2 million cannot be terminated by Hudbay; approximately $70.6 million in Peru related to sustaining capital costs, of which all can be terminated by Hudbay; and approximately $163.5 million in Arizona, primarily related to the Rosemont project and expected to be paid after the commencement of Rosemont construction, of which approximately $79.7 million cannot be terminated by Hudbay.

Liquidity

As at June 30, 2016, we had total liquidity of approximately $293.5 million, including $141.9 million in cash and cash equivalents, as well as $151.6 million in availability under our Facilities. We expect that our current liquidity and future cash flows will be sufficient to meet our obligations in the coming year.

Outstanding Share Data

As of July 26, 2016, there were 236,231,688 common shares of Hudbay issued and outstanding. In addition, Hudbay warrants to acquire an aggregate of 21,830,490 common shares of Hudbay were outstanding and Augusta warrants to acquire an aggregate of 1,039,500 common shares of Hudbay and 561,000 warrants of Hudbay were outstanding; there were also options for an aggregate of 1,490,381 common shares outstanding.

TREND ANALYSIS AND QUARTERLY REVIEW

The following table sets forth selected consolidated financial information for each of our eight most recently completed quarters:

	2016						2015						2014
(in $ thousands)	Q2		Q1		Q4		Q3		Q2		Q1		Q4		Q3
Revenue	246,975		253,625		336,641		269,808		150,889		128,713		112,696		170,233
(Loss) profit before tax	6,557		(16,888	)	(325,611	)	(16,132	)	(45,818	)	(11,480	)	(24,392	)	53,934
(Loss) profit	(5,703	)	(15,788	)	(255,468	)	(11,833	)	(44,290	)	(19,837	)	43,594		46,153
(Loss) earnings per share:
Basic	(0.02	)	(0.07	)	(1.09	)	(0.05	)	(0.19	)	(0.08	)	0.19		0.21
Diluted	(0.02	)	(0.07	)	(1.09	)	(0.05	)	(0.19	)	(0.08	)	0.19		0.21
Operating cash flow per share1, 2	0.32		0.31		0.51		0.34		0.07		0.07		(0.01	)	0.06

1	Operating cash flow per share is before precious metals stream deposit and change in non-cash working capital. It is a non-IFRS financial performance measure with no standardized definition under IFRS. For further information and a detailed reconciliation, refer to the discussion under "Non-IFRS Financial Reporting Measures" beginning on page 25 of this MD&A.
2	Operating cash flow per share has been restated to reflect the presentation changes with respect to receivable and payable balances associated with copper fixed for floating swaps. For more information on this change, refer to note 4b of our June 30, 2016 condensed consolidated interim financial statements.

With the ramp-up of Constancia since reaching commercial production in the second quarter of 2015, the increased production volumes have generally trended revenues and gross profit higher since the end of 2014, notwithstanding lower realized metals prices. Subsequent to Constancia reaching commercial production, we no longer capitalize interest costs associated with financing Constancia development and therefore those charges are recognized as finance expenses. In addition, mining costs have been favourably impacted in the Manitoba business unit with the weakening of the Canadian dollar versus the US dollar, which lowers costs denominated in Canadian dollars.

24

In the second quarter of 2016, revenues remained consistent with the first quarter of 2016 as higher realized prices for precious metals offset marginal declines in sales volume due to the timing of production. Gross margins and cash generated from operating activities improved compared to the first quarter of 2016 as costs at Constancia benefited from continued site optimization and the Manitoba business unit benefited from cost reduction efforts as well as the weaker Canadian dollar.

In the first quarter of 2016, we continued to benefit from increased sales volumes following commercial production being attained at Constancia. Lower average realized prices of copper compared to the same quarter of 2015 partially offset the continued strong production volumes from the Peru operations and caused both gross profit and operating cash flow per share to be lower than in the fourth quarter of 2015.

In the fourth quarter of 2015, goodwill and asset impairments for the Peru and Arizona CGUs of $378.9 million were taken mainly as a result of lower expected copper prices and an expected delay in construction at Rosemont, which had a negative impact on profit.

For information on previous trends and quarterly reviews, refer to our MD&A dated February 24, 2016.

NON-IFRS FINANCIAL PERFORMANCE MEASURES

Operating cash flow before change in non-cash working capital and operating cash flow per share are included in this MD&A because we believe that they help investors and management to evaluate changes in cash flow generated from the various operations while, in the case of operating cash flow per share, taking into account changes in shares outstanding. Net debt is shown because it is a performance measure used by the Company to assess our financial position. Cash cost, sustaining and all-in sustaining cash cost per pound of copper produced are shown because we believe they help investors and management assess the performance of our operations, including the margin generated by the operations and the company. These measures do not have a meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers. These measures should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS and are not necessarily indicative of operating profit or cash flow from operations as determined under IFRS. Other companies may calculate these measures differently.

25

Operating Cash Flow per Share

The following table presents our calculation of operating cash flow per share for the three and six months ended June 30, 2016 and June 30, 2015:

		Three months ended					Six months ended
(in $ thousands, except shares and		Jun. 30,			Jun. 30,		Jun. 30,			Jun. 30,
per share amounts)		2016			2015		2016			2015
Cash generated in operating activities		137,521			10,433		239,071			10,747
Change in non-cash working capital		(62,462	)		6,589		(92,126	)		23,176
Operating cash flows before change in non-cash working capital		75,059			17,022		146,945			33,923
Weighted average shares outstanding - basic		235,308,611			234,588,385		235,270,150			234,109,246
Operating cash flows per share	$	0.32		$	0.07	$	0.62		$	0.14

Net Debt

The following table presents our calculation of net debt for the three and six months ended June 30, 2016 and June 30, 2015:

	Jun. 30,		Dec. 31,
(in $ thousands)	2016		2015
Total long-term debt	1,309,700		1,274,880
Cash and cash equivalents	(141,903	)	(53,852	)
Net debt	1,167,797		1,221,028

26

Cash Cost, Sustaining and All-in Sustaining Cash Cost

Cash cost per pound of copper produced (“cash cost”) is a non-IFRS measure that management uses as a key performance indicator to assess the performance of our operations. Our calculation designates copper as our primary metal of production as it has been, and is expected to be, the largest component of revenues. The calculation is presented in four manners:

−	Cash cost, before by-product credits - This measure is gross of by-product revenues and is a function of the efforts and costs incurred to mine and process all ore mined. However, the measure divides this aggregate cost over only pounds of copper produced, our primary metal of production. This measure is generally less volatile from period to period, as it is not affected by changes in the price received for by-product metals. It is, however, significantly affected by the relative mix of copper concentrate and finished zinc production, and an increase in production of zinc metal will tend to result in an increase in cash cost under this measure.
−	Cash cost, net of by-product credits - In order to calculate the net cost to produce and sell copper, the net of by-product credits measure subtracts the revenues realized from the sale of the metals other than copper. The by-product revenues from zinc, gold, and silver are significant and are integral to the economics of our operations. The economics that support our decision to produce and sell copper would be different if we did not receive revenues from the other significant metals being extracted and processed. This measure provides management and investors with an indication of the minimum copper price consistent with positive operating cash flows and operating margins, assuming realized by-product metal prices are consistent with those prevailing during the reporting period. It also serves as an important operating statistic that management and investors utilize to measure our operating performance versus that of our competitors. However, it is important to understand that if by-product metal prices decline alongside copper prices, the cash cost net of by-product credits would increase, requiring a higher copper price than that reported to maintain positive cash flows and operating margins.
−	Sustaining cash cost, net of by-product credits - This measure is an extension of cash cost that includes sustaining capital expenditures, capitalized exploration and net smelter returns royalties. It does not include corporate G&A. It provides a more fulsome measurement of the cost of sustaining production than cash cost, which is focused on operating costs only.
−	All-in sustaining cash cost, net of by-product credits - This measure is an extension of sustaining cash cost that includes corporate G&A. Due to the inclusion of corporate G&A, all-in sustaining cash cost is presented on a consolidated basis only.

The tables below present a detailed build-up of cash cost and sustaining cash cost, net of by-product credits, by business unit in addition to consolidated all-in sustaining cash cost, net of by-product credits, and reconciliations between cash cost, net of by-product credits, to the most comparable IFRS measures of cost of sales for the three and six months ended June 30, 2016 and 2015. Cash cost, net of by-product credits may not calculate exactly based on amounts presented in the tables below due to rounding.

27

Consolidated	Three months ended		Six months ended
Net pounds of copper produced1
(in thousands)	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Manitoba	24,676	21,469	46,140	45,647
Peru	76,499	39,991	140,747	39,991
Net pounds of copper produced1	101,175	61,460	186,887	85,638

Consolidated	Three months ended								Six months ended
Cash cost per pound of	Jun. 30, 2016				Jun. 30, 2015				Jun. 30, 2016				Jun. 30, 2015
copper produced	$000s		$/lb		$000s		$/lb		$000s		$/lb		$000s		$/lb
Cash cost, before by-product credits	166,860		1.65		148,488		2.42		331,990		1.78		248,385		2.90
By-product credits	(83,357	)	(0.82	)	(69,788	)	(1.14	)	(150,074	)	(0.80	)	(134,478	)	(1.57	)
Cash cost, net of by-product credits	83,503		0.83		78,700		1.28		181,916		0.97		113,907		1.33

¹ Contained copper in concentrate, exclusive of Constancia copper produced prior to the achievement of commercial production on May 1, 2015.

Consolidated	Three months ended								Six months ended
Supplementary cash cost	Jun. 30, 2016				Jun. 30, 2015				Jun. 30, 2016				Jun. 30, 2015
information	$000s		$/lb 1		$000s		$/lb 1		$000s		$/lb 1		$000s		$/lb 1
By-product credits:
Zinc	51,953		0.51		60,365		0.98		102,451		0.55		114,186		1.33
Gold	36,589		0.36		19,003		0.31		57,500		0.31		34,213		0.40
Silver	12,949		0.13		7,041		0.11		23,401		0.13		8,994		0.11
Other	597		0.01		624		0.01		1,327		0.01		1,998		0.02
Total by-product credits	102,088		1.01		87,033		1.41		184,679		1.00		159,391		1.86
Less: deferred revenue	(18,731	)	(0.19	)	(15,088	)	(0.25	)	(34,605	)	(0.19	)	(22,756	)	(0.27	)
Less: pre-production credits	-		-		(2,157	)	(0.04	)	-		-		(2,157	)	(0.03	)
Total by-product credits, net
of pre-production credits	83,357		0.82		69,788		1.12		150,074		0.81		134,478		1.56
Reconciliation to IFRS:
Cash cost, net of by-product credits	83,503				78,700				181,916				113,907
By-product credits	102,088				87,033				184,679				159,391
Change in deferred revenues	(18,731	)			(15,088	)			(34,605	)			(22,756	)
Pre-production revenues	-				(2,157	)			-				(2,157	)
Treatment and refining charges 2	(26,376	)			(11,812	)			(54,016	)			(19,926	)
Share-based payment	293				246				226				490
Pension enhancement	-				17,064				-				17,064
Adjustments related to zinc inventory write-off (reversals)	(2,341	)			-				(72	)			-
Change in product inventory	(6,405	)			(39,704	)			2,174				(42,523	)
Royalties	2,907				1,784				5,925				3,075
Depreciation and amortization	63,746				30,278				138,159				55,860
Cost of sales	198,684				146,344				424,386				262,425

1	Per pound of copper produced.
2	Excludes $7,739 of treatment and refining charges which were incurred prior to commercial production during the three and six months ended June 30, 2015.

28

Peru	Three months ended			Six months ended
(in thousands)	Jun. 30, 2016	Jun. 30, 2015		Jun. 30, 2016	Jun. 30, 2015
Pounds of copper produced1	76,499	58,365		140,747	67,273
Less: pre-production production of copper produced1	-	(18,374	)	-	(27,282	)
Net pounds of copper produced1	76,499	39,991		140,747	39,991

Peru	Three months ended								Six months ended
Cash cost per pound of copper	Jun. 30, 2016				Jun. 30, 2015				Jun. 30, 2016				Jun. 30, 2015
produced	$000s		$/lb		$000s		$/lb		$000s		$/lb		$000s		$/lb
Mining	14,381		0.19		8,615		0.22		26,913		0.19		8,615		0.22
Milling	27,905		0.36		21,380		0.53		54,534		0.39		21,380		0.53
G&A	10,701		0.14		7,428		0.19		20,057		0.14		7,428		0.19
Onsite costs	52,987		0.69		37,423		0.94		101,504		0.72		37,423		0.94
Treatment & refining	16,606		0.22		4,436		0.11		35,154		0.25		4,436		0.11
Freight & other	11,979		0.16		7,914		0.20		26,313		0.19		7,914		0.20
Cash cost, before by-product credits	81,572		1.07		49,773		1.24		162,971		1.16		49,773		1.24
By-product credits	(7,279	)	(0.10	)	(458	)	(0.01	)	(14,793	)	(0.11	)	(458	)	(0.01	)
Cash cost, net of by-product credits	74,293		0.97		49,315		1.23		148,178		1.05		49,315		1.23

¹ Contained copper in concentrate.

Peru	Three months ended								Six months ended
Supplementary cash cost	Jun. 30, 2016				Jun. 30, 2015				Jun. 30, 2016				Jun. 30, 2015
information	$000s		$/lb 1		$000s		$/lb 1		$000s		$/lb 1		$000s		$/lb 1
By-product credits:
Gold	4,562		0.06		2,100		0.05		10,928		0.08		2,100		0.05
Silver	7,737		0.10		4,362		0.11		15,826		0.11		4,362		0.11
Other	-		-		-		-		129		-		-		-
Total by-product credits	12,299		0.16		6,462		0.16		26,883		0.19		6,462		0.16
Less: deferred revenue	(5,020	)	(0.07	)	(3,847	)	(0.10	)	(12,090	)	(0.09	)	(3,847	)	(0.10	)
Less: pre-production credits	-		-		(2,157	)	(0.05	)	-		-		(2,157	)	(0.05	)
Total by-product credits, net of pre-production credits	7,279		0.10		458		0.01		14,793		0.11		458		0.01
Reconciliation to IFRS:
Cash cost, net of by-product credits	74,293				49,315				148,178				49,315
By-product credits	12,299				6,462				26,883				6,462
Change in deferred revenues	(5,020	)			(3,847	)			(12,090	)			(3,847	)
Pre-production revenues	-				(2,157	)			-				(2,157	)
Treatment and refining charges2	(16,606	)			(4,436	)			(35,154	)			(4,436	)
Change in product inventory	(9,873	)			(23,761	)			(2,788	)			(23,761	)
Royalties	973				138				2,696				138
Depreciation and amortization	32,030				9,290				77,532				9,290
Cost of sales	88,096				31,004				205,257				31,004

1	Per pound of copper produced.
2	Excludes $7,739 of treatment and refining charges which were incurred prior to commercial production during the three and six months ended June 30, 2015.

29

Manitoba	Three months ended		Six months ended
(in thousands)	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Net pounds of copper produced1	24,676	21,469	46,140	45,647

Manitoba	Three months ended								Six months ended
Cash cost per pound of	Jun. 30, 2016				Jun. 30, 2015				Jun. 30, 2016				Jun. 30, 2015
copper produced	$000s		$/lb		$000s		$/lb		$000s		$/lb		$000s		$/lb
Mining	29,713		1.20		33,556		1.56		58,768		1.27		63,471		1.39
Milling	10,326		0.42		9,815		0.46		19,317		0.42		19,749		0.43
Refining (zinc)	16,393		0.66		15,468		0.72		32,190		0.70		32,438		0.71
G&A	9,246		0.37		16,176		0.75		19,637		0.43		30,368		0.67
Purchased ore and zinc concentrates	4,996		0.20		10,549		0.49		8,219		0.18		23,451		0.51
Onsite costs	70,674		2.86		85,564		3.99		138,131		2.99		169,477		3.71
Treatment & refining	9,770		0.40		7,376		0.34		18,862		0.42		15,490		0.34
Freight & other	4,844		0.20		5,775		0.27		12,026		0.26		13,645		0.30
Cash cost, before by-product credits	85,288		3.46		98,715		4.60		169,019		3.66		198,612		4.35
By-product credits	(76,078	)	(3.08	)	(69,330	)	(3.23	)	(135,281	)	(2.93	)	(134,020	)	(2.94	)
Cash cost, net of by-product credits	9,210		0.37		29,385		1.37		33,738		0.73		64,592		1.42

¹ Contained copper in concentrate.

Manitoba	Three months ended								Six months ended
Supplementary cash cost	Jun. 30, 2016				Jun. 30, 2015				Jun. 30, 2016				Jun. 30, 2015
information	$000s		$/lb 1		$000s		$/lb 1		$000s		$/lb 1		$000s		$/lb 1
By-product credits:
Zinc	51,953		2.11		60,365		2.81		102,451		2.22		114,186		2.50
Gold	32,027		1.30		16,903		0.79		46,572		1.01		32,113		0.70
Silver	5,212		0.21		2,679		0.12		7,575		0.16		4,632		0.10
Other	597		0.02		624		0.03		1,198		0.03		1,998		0.04
Total by-product credits	89,789		3.64		80,571		3.75		157,796		3.42		152,929		3.35
Less: deferred revenue	(13,711	)	(0.55	)	(11,241	)	(0.52	)	(22,515	)	(0.49	)	(18,909	)	(0.41	)
Total by-product credits, net of pre-production credits	76,078		3.08		69,330		3.23		135,281		2.93		134,020		2.94
Reconciliation to IFRS:
Cash cost, net of by-product credits	9,210				29,385				33,738				64,592
By-product credits	89,789				80,571				157,796				152,929
Change in deferred revenues	(13,711	)			(11,241	)			(22,515	)			(18,909	)
Treatment and refining charges	(9,770	)			(7,376	)			(18,862	)			(15,490	)
Share-based payment	293				246				226				490
Pension enhancement	-				17,064				-				17,064
Adjustments related to zinc inventory write-off (reversals)	(2,341	)			-				(72	)			-
Change in product inventory	3,468				(15,943	)			4,962				(18,762	)
Royalties	1,934				1,646				3,229				2,937
Depreciation and amortization	31,716				20,988				60,627				46,570
Cost of sales	110,588				115,340				219,129				231,421

¹ Per pound of copper produced.

30

Consolidated	Three months ended				Six months ended
All-in sustaining cash cost per	Jun. 30, 2016		Jun. 30, 2015		Jun. 30, 2016		Jun. 30, 2015
pound of copper produced	$000s	$/lb	$000s	$/lb	$000s	$/lb	$000s	$/lb
Cash cost, net of by-product credits	83,503	0.83	78,700	1.28	181,916	0.97	113,907	1.33
Sustaining capital expenditures1	45,884	0.45	47,449	0.77	89,837	0.48	64,767	0.76
Capitalized exploration	912	0.01	1,452	0.02	1,327	0.01	2,992	0.03
Royalties	2,907	0.03	1,784	0.03	5,925	0.03	3,075	0.04
Sustaining cash cost, net of by-product credits	133,206	1.32	129,385	2.11	279,005	1.49	184,741	2.16
Corporate G&A	10,025	0.10	10,746	0.17	18,368	0.10	19,924	0.23
All-in sustaining cash cost, net of by-product credits	143,231	1.42	140,131	2.28	297,373	1.59	204,665	2.39

¹ Excludes costs associated with pre-commercial production output.

Peru	Three months ended				Six months ended
Sustaining cash cost per pound	Jun. 30, 2016		Jun. 30, 2015		Jun. 30, 2016		Jun. 30, 2015
of copper produced	$000s	$/lb	$000s	$/lb	$000s	$/lb	$000s	$/lb
Cash cost, net of by-product credits	74,293	0.97	49,315	1.23	148,178	1.05	49,315	1.23
Sustaining capital expenditures1	30,777	0.40	34,699	0.87	51,125	0.36	34,699	0.87
Royalties	973	0.01	138	-	2,696	0.02	138	-
Sustaining cash cost per pound of copper produced	106,043	1.39	84,152	2.10	201,999	1.44	84,152	2.10

¹ Excludes costs associated with pre-commercial production output.

Manitoba	Three months ended				Six months ended
Sustaining cash cost per pound	Jun. 30, 2016		Jun. 30, 2015		Jun. 30, 2016		Jun. 30, 2015
of copper produced	$000s	$/lb	$000s	$/lb	$000s	$/lb	$000s	$/lb
Cash cost, net of by-product credits	9,210	0.37	29,385	1.37	33,738	0.73	64,592	1.42
Sustaining capital expenditures	15,107	0.61	12,750	0.59	38,712	0.84	30,068	0.66
Capitalized exploration	912	0.04	1,452	0.07	1,327	0.03	2,992	0.07
Royalties	1,934	0.08	1,646	0.08	3,229	0.07	2,937	0.06
Sustaining cash cost per pound of copper produced	27,163	1.10	45,233	2.11	77,006	1.67	100,589	2.20

31

ACCOUNTING CHANGES AND CRITICAL ESTIMATES

New standards and interpretations not yet adopted

For information on new standards and interpretations not yet adopted, refer to note 5 of our June 30, 2016 consolidated interim financial statements.

Estimates and judgements

For information on significant areas requiring us to make estimates and judgements, refer to note 2 of our June 30, 2016 consolidated interim financial statements.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

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

We did not make any changes to ICFR during the quarter ended June 30, 2016 that materially affected or are reasonably likely to materially affect our ICFR.

NOTES TO READER

Forward-Looking Information

This MD&A contains forward-looking information within the meaning of applicable Canadian and United States securities legislation. All information contained in this MD&A, other than statements of current and historical fact, is forward-looking information. Often, but not always, forward-looking information can be identified by the use of words such as “plans”, “expects”, “budget”, “guidance”, “scheduled”, “estimates”, “forecasts”, “strategy”, “target”, “intends”, “objective”, “goal”, “understands”, “anticipates” and “believes” (and variations of these or similar words) and statements that certain actions, events or results “may”, “could”, “would”, “should”, “might” “occur” or “be achieved” or “will be taken” (and variations of these or similar expressions). All of the forward-looking information in this MD&A is qualified by this cautionary note.

Forward-looking information includes, but is not limited to, production, cost and capital and exploration expenditure guidance, including anticipated capital and operating cost savings, anticipated production at our mines and processing facilities, events that may affect our operations and development projects, the potential to refurbish the New Britannia mill and utilize it to process ore from the Lalor mine, anticipated cash flows from operations and related liquidity requirements, the anticipated effect of external factors on revenue, such as commodity prices, economic outlook, government regulation of mining operations, and business and acquisition strategies. Forward-looking information is not, and cannot be, a guarantee of future results or events. Forward-looking information is based on, among other things, opinions, assumptions, estimates and analyses that, while considered reasonable by us at the date the forward-looking information is provided, inherently are subject to significant risks, uncertainties, contingencies and other factors that may cause actual results and events to be materially different from those expressed or implied by the forward-looking information.

The material factors or assumptions that we identified and were applied by us in drawing conclusions or making forecasts or projections set out in the forward-looking information include, but are not limited to:

−	the success of mining, processing, exploration and development activities;
−	the success of Hudbay’s cost reduction initiatives;
−	the accuracy of geological, mining and metallurgical estimates;
−	anticipated metals prices and the costs of production;

32

−	the supply and demand for metals we produce;
−	the supply and availability of concentrate for our processing facilities;
−	the supply and availability of third party processing facilities for our concentrate;
−	the supply and availability of all forms of energy and fuels at reasonable prices;
−	the availability of transportation services at reasonable prices;
−	no significant unanticipated operational or technical difficulties;
−	the execution of our business and growth strategies, including the success of our strategic investments and initiatives;
−	the availability of additional financing, if needed;
−	the ability to complete project targets on time and on budget and other events that may affect our ability to develop our projects;
−	the timing and receipt of various regulatory and governmental approvals;
−	the availability of personnel for our exploration, development and operational projects and ongoing employee relations;
−	the ability to secure required land rights to develop the Pampacancha deposit;
−	maintaining good relations with the communities in which we operate, including the communities surrounding our Constancia mine and Rosemont project and First Nations communities surrounding our Lalor and Reed mines;
−	no significant unanticipated challenges with stakeholders at our various projects;
−	no significant unanticipated events or changes relating to regulatory, environmental, health and safety matters;
−	no contests over title to our properties, including as a result of rights or claimed rights of aboriginal peoples;
−	the timing and possible outcome of pending litigation and no significant unanticipated litigation;
−	certain tax matters, including, but not limited to current tax laws and regulations and the refund of certain value added taxes from the Canadian and Peruvian governments; and
−	no significant and continuing adverse changes in general economic conditions or conditions in the financial markets (including commodity prices and foreign exchange rates).

The risks, uncertainties, contingencies and other factors that may cause actual results to differ materially from those expressed or implied by the forward-looking information may include, but are not limited to, risks generally associated with the mining industry, such as economic factors (including future commodity prices, currency fluctuations, energy prices and general cost escalation), uncertainties related to the development and operation of our projects (including risks associated with the economics and permitting of the Rosemont project and related legal challenges), risks related to the maturing nature of our 777 mine and its impact on the related Flin Flon metallurgical complex, dependence on key personnel and employee and union relations, risks related to political or social unrest or change, risks in respect of aboriginal and community relations, rights and title claims, operational risks and hazards, including unanticipated environmental, industrial and geological events and developments and the inability to insure against all risks, failure of plant, equipment, processes, transportation and other infrastructure to operate as anticipated, planned infrastructure improvements in Peru not being completed on schedule or as planned, compliance with government and environmental regulations, including permitting requirements and anti-bribery legislation, depletion of our reserves, volatile financial markets that may affect our ability to obtain additional financing on acceptable terms, the permitting and development of the Rosemont project not occurring as planned, the failure to obtain required approvals or clearances from government authorities on a timely basis, uncertainties related to the geology, continuity, grade and estimates of mineral reserves and resources, and the potential for variations in grade and recovery rates, uncertain costs of reclamation activities, our ability to comply with our pension and other post-retirement obligations, our ability to abide by the covenants in our debt instruments and other material contracts, tax refunds, hedging transactions, as well as the risks discussed under the heading “Risk Factors” in our most recent Annual Information Form.

33

Should one or more risk, uncertainty, contingency or other factor materialize or should any factor or assumption prove incorrect, actual results could vary materially from those expressed or implied in the forward-looking information. Accordingly, you should not place undue reliance on forward-looking information. We do not assume any obligation to update or revise any forward-looking information after the date of this MD&A or to explain any material difference between subsequent actual events and any forward-looking information, except as required by applicable law.

Change in Functional and Presentation Currency

The functional currency of each of our subsidiaries is the currency of the primary economic environment in which the entity operates. We reconsider the functional currency of our entities if there is a change in events and conditions which determined the primary economic environment. Prior to July 1, 2015, our consolidated financial statements were presented in Canadian dollars, which was our and all our material subsidiaries' functional currency, except for Hudbay Peru, HudBay (BVI) Inc. and the Hudbay Arizona entities, which have a functional currency of US dollars.

The ability of Hudbay Peru to repatriate funds in US dollars, as a result of reaching commercial production in the first half of 2015, and the purchase of Hudbay Arizona have significantly increased our exposure to the US dollar as cash inflows are now predominantly in US dollars and revenue and costs related to Constancia operations and Rosemont development are denominated in US dollars. Consequently, effective July 1, 2015, the US dollar was adopted as our corporate entity’s functional currency on a prospective basis. All our subsidiaries continue to measure the items in their financial statements using their functional currencies.

Effective July 1, 2015, we changed our presentation currency to US dollars from Canadian dollars. This change in presentation currency was made to better reflect our business activities, comprised primarily of US dollar revenues as well as associated US dollar denominated financings, and is consistent with our peers. The consolidated financial statements for all years presented have been translated into the new presentation currency in accordance with International Accounting Standard 21, The Effects of Changes in Foreign Exchange Rates.

Note to United States Investors

This MD&A has been prepared in accordance with the requirements of the securities laws in effect in Canada, which may differ materially from the requirements of United States securities laws applicable to US issuers.

Presentation of Non-IFRS Financial Performance Measures

We use realized prices as a non-IFRS financial performance measure in our MD&A. For a detailed description, please see the discussion under “Financial Review” beginning on page 11 of this MD&A. In addition, we use operating cash flow per share, sustaining and all-in sustaining cash costs per pound of copper produced, and cash cost per pound of copper produced as non-IFRS financial performance measures in our MD&A. For a detailed description of each of the non-IFRS financial performance measures used in this MD&A, please see the discussion under “Non-IFRS Financial Performance Measures” beginning on page 25 of this MD&A.

Qualified Person

The technical and scientific information in this MD&A related to the Constancia mine has been approved by Cashel Meagher, P. Geo, our Senior Vice President and Chief Operating Officer. The technical and scientific information related to all other sites and projects contained in this MD&A has been approved by Robert Carter, P. Eng, our Director, Business Development and Technical Services at our Manitoba Business Unit. Messrs. Meagher and Carter are qualified persons pursuant to NI 43-101. For a description of the key assumptions, parameters and methods used to estimate mineral reserves and resources, as well as data verification procedures and a general discussion of the extent to which the estimates of scientific and technical information may be affected by any known environmental, permitting, legal title, taxation, sociopolitical, marketing or other relevant factors, please see the Technical Reports for our material properties as filed by us on SEDAR at www.sedar.com.

34

EX-99.2

Unaudited Condensed Consolidated Interim Financial Statements
(In US dollars)

HUDBAY MINERALS INC.

For the three and six months ended June 30, 2016 and 2015

HUDBAY MINERALS INC.

Condensed Consolidated Interim Balance Sheets

(Unaudited and in thousands of US dollars)

			Jun. 30,			Dec. 31,
	Note		2016			2015
Assets
Current assets
Cash and cash equivalents		$	141,903		$	53,852
Trade and other receivables	8		128,640			228,678
Inventories	9		129,564			120,186
Prepaid expenses	10		4,820			8,979
Other financial assets	11		2,789			16,512
Taxes receivable			21,602			6,971
			429,318			435,178
Receivables	8		31,145			26,223
Inventories	9		6,046			5,649
Other financial assets	11		100,087			72,730
Intangible assets - computer software			7,885			8,859
Property, plant and equipment	12		3,923,139			3,890,276
Deferred tax assets	18b		53,958			40,670
		$	4,551,578		$	4,479,585
Liabilities
Current liabilities
Trade and other payables		$	152,062		$	187,185
Taxes payable			3,409			4,393
Other liabilities	13		61,109			37,667
Other financial liabilities	14		14,783			10,195
Long-term debt	15		16,490			69,875
Deferred revenue	16		68,600			68,250
			316,453			377,565
Other financial liabilities	14		38,723			27,635
Long-term debt	15		1,293,210			1,205,005
Deferred revenue	16		505,330			529,010
Provisions	17		178,004			143,596
Pension obligations			43,143			34,260
Other employee benefits			97,103			80,695
Deferred tax liabilities	18b		308,356			294,529
			2,780,322			2,692,295
Equity
Share capital	19b		1,581,568			1,576,600
Reserves			(42,741	)		(45,003	)
Retained earnings			232,429			255,693
			1,771,256			1,787,290
		$	4,551,578		$	4,479,585

Capital commitments (note 22).

2

HUDBAY MINERALS INC.

Condensed Consolidated Interim Statements of Cash Flow

(Unaudited and in thousands of US dollars)

			Three months ended						Six months ended
			June 30,						June 30,
			2016			2015			2016			2015
						Restated						Restated
						(notes 2b, 4a, 4b	)					(notes 2b, 4a, 4b	)
Cash generated from (used in) operating activities:
Loss for the period		$	(5,703	)	$	(44,290	)	$	(21,491	)	$	(64,127	)
Tax expense (recovery)	18a		12,260			(1,528	)		11,160			6,829
Items not affecting cash:
Depreciation and amortization	7b		63,898			30,441			138,463			56,181
Share-based payment expense	7c		3,952			2,119			4,579			3,855
Net finance expense	7e		29,474			18,674			58,829			21,859
Change in fair value of derivatives	7e		453			(878	)		1,112			(7,258	)
Change in deferred revenue related to stream	16		(18,731	)		(15,088	)		(34,605	)		(22,756	)
Change in taxes receivable/payable, net	23a		(4,799	)		(6,080	)		(1,054	)		(6,944	)
Unrealized loss (gain) on warrants	7e		1,175			(82	)		838			2,601
Pension past service costs			-			17,064			-			17,064
(Gain) loss on available-for-sale investments	7e		(1,242	)		1,584			(1,143	)		2,866
Asset impairment	7f		-			19,916			-			19,916
Other and foreign exchange			(5,172	)		(3,634	)		(2,915	)		5,550
Taxes paid			(506	)		(1,196	)		(6,828	)		(1,713	)
Operating cash flows before change in non-cash working capital			75,059			17,022			146,945			33,923
Change in non-cash working capital	23a		62,462			(6,589	)		92,126			(23,176	)
			137,521			10,433			239,071			10,747
Cash generated from (used in) investing activities:
Acquisition of property, plant and equipment			(52,375	)		(129,439	)		(98,739	)		(262,243	)
Net cash received on disposal of subsidiaries			-			(11,756	)		-			(11,756	)
Acquisition of investment			331			-			331			-
Addition to restricted cash			(17,552	)		(453	)		(22,668	)		(22,811	)
Peruvian sales tax refunded on capital expenditures			-			1,030			-			2,751
Net interest received (paid)			111			(2,347	)		250			(4,409	)
			(69,485	)		(142,965	)		(120,826	)		(298,468	)
Cash generated from (used in) financing activities:
Long-term debt borrowing, net of transaction costs	15		19,529			145,141			59,326			268,972
Principal repayments	15		(24,123	)		(3,694	)		(28,245	)		(7,387	)
Interest paid on long-term debt			(5,445	)		(2,633	)		(53,943	)		(47,182	)
Proceeds from exercise of stock options			-			720			-			809
Financing costs			(5,179	)		(686	)		(9,603	)		(1,887	)
Net proceeds from issuance of equity	19b		4,968			13,199			4,968			13,199
Dividends paid	19b		-			-			(1,773	)		(1,842	)
Finance lease			(835	)		-			(1,314	)		-
			(11,085	)		152,047			(30,584	)		224,682
Effect of movement in exchange rates on cash and cash equivalents			(765	)		(1,264	)		390			(773	)
Net increase (decrease) in cash and cash equivalents			56,186			18,251			88,051			(63,812	)
Cash and cash equivalents, beginning of period			85,717			96,605			53,852			178,668
Cash and cash equivalents, end of period		$	141,903		$	114,856		$	141,903		$	114,856

3

HUDBAY MINERALS INC.

Condensed Consolidated Interim Income Statements

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

			Three months ended						Six months ended
			June 30,						June 30,
			2016			2015			2016			2015
						Restated						Restated
	Note					(notes 2b, 4a	)					(notes 2b, 4a	)
Revenue	7a	$	246,975		$	150,889		$	500,600		$	279,602
Cost of sales
Mine operating costs			134,938			116,066			286,227			206,565
Depreciation and amortization	7b		63,746			30,278			138,159			55,860
			198,684			146,344			424,386			262,425
Gross profit			48,291			4,545			76,214			17,177
Selling and administrative expenses			10,025			10,746			18,368			19,924
Exploration and evaluation			1,053			2,088			2,206			4,418
Other operating income and expenses	7d		1,884			1,717			6,152			5,109
Asset impairment	7f		-			19,916			-			19,916
Results from operating activities			35,329			(29,922	)		49,488			(32,190	)
Finance income	7e		(581	)		(393	)		(1,135	)		(699	)
Finance expenses	7e		30,055			19,067			59,964			22,558
Other finance (gain) loss	7e		(702	)		(2,778	)		990			3,249
Net finance expense			28,772			15,896			59,819			25,108
Profit (loss) before tax			6,557			(45,818	)		(10,331	)		(57,298	)
Tax expense (recovery)	18a		12,260			(1,528	)		11,160			6,829
Loss for the period		$	(5,703	)	$	(44,290	)	$	(21,491	)	$	(64,127	)
Loss per share
Basic and diluted		$	(0.02	)	$	(0.19	)	$	(0.09	)	$	(0.27	)
Weighted average number of common shares outstanding (note 20):
Basic			235,308,611			234,588,385			235,270,150			234,109,246
Diluted			235,308,611			234,588,385			235,270,150			234,109,246

4

HUDBAY MINERALS INC.

Condensed Consolidated Interim Statements of Comprehensive Income

(Unaudited and in thousands of US dollars)

		Three months ended						Six months ended
		June 30,						June 30,
		2016			2015			2016			2015
					Restated						Restated
					(notes 2b, 4a	)					(notes 2b, 4a	)
Loss for the period	$	(5,703	)	$	(44,290	)	$	(21,491	)	$	(64,127	)
Other comprehensive (loss) income:
Items that will be reclassified subsequently to profit or loss:
Recognized directly in equity:
Net exchange (loss) gain on translation of foreign currency balances		(165	)		(2,363	)		16,958			(13,326	)
Change in fair value of available-for-sale financial assets		4,046			(1,748	)		3,973			(2,174	)
Net exchange (loss) gain on available-for-sale financial assets		(57	)		-			530			-
		3,824			(4,111	)		21,461			(15,500	)
Items that will not be reclassified subsequently to profit or loss:
Recognized directly in equity:
Remeasurement - actuarial (loss) gain		(1,151	)		25,397			(22,269	)		18,664
Tax effect		(708	)		(3,779	)		3,775			(3,962	)
		(1,859	)		21,618			(18,494	)		14,702
Transferred to income statement:
Change in fair value of available-for-sale financial assets		127			1,588			226			2,891
Sale of investments		(931	)		(4	)		(931	)		(25	)
Tax effect		-			-			-			7
		(804	)		1,584			(705	)		2,873
Other comprehensive income net of tax, for the period		1,161			19,091			2,262			2,075
Total comprehensive loss for the period	$	(4,542	)	$	(25,199	)	$	(19,229	)	$	(62,052	)

5

HUDBAY MINERALS INC.

Condensed Consolidated Interim Statements of Changes in Equity

(Unaudited and in thousands of US dollars)

								Foreign currency
		Share capital			Other capital			translation			Available-for-			Remeasure-			Retained
		(note 19	)		reserves			reserve			sale reserve			ment reserve			earnings			Total equity
Balance, January 1, 2015	$	1,562,249		$	25,900		$	46,751		$	2,898		$	(119,465	)	$	590,725		$	2,109,058
Loss		-			-			-			-			-			(64,127	)		(64,127	)
Other comprehensive (loss) income		-			-			(13,326	)		699			14,702			-			2,075
Total comprehensive (loss) income		-			-			(13,326	)		699			14,702			(64,127	)		(62,052	)
Contributions by and distributions to owners:
Stock options exercised		1,152			(343	)		-			-			-			-			809
Equity issuance (note 19b)		13,199			-			-			-			-			-			13,199
Dividends (note 19b)		-			-			-			-			-			(1,842	)		(1,842	)
Total contributions by and distributions to owners		14,351			(343	)		-			-			-			(1,842	)		12,166
Balance, June 30, 2015	$	1,576,600		$	25,557		$	33,425		$	3,597		$	(104,763	)	$	524,756		$	2,059,172
Loss		-			-			-			-			-			(267,301	)		(267,301	)
Other comprehensive (loss) income		-			-			(47,322	)		(2,288	)		43,511			-			(6,099	)
Total comprehensive (loss) income		-			-			(47,322	)		(2,288	)		43,511			(267,301	)		(273,400	)
Contributions by and distributions to owners:
Reclassification of Augusta Warrants		-			3,280			-			-			-			-			3,280
Dividends		-			-			-			-			-			(1,762	)		(1,762	)
Total contributions by and distributions to owners		-			3,280			-			-			-			(1,762	)		1,518
Balance, December 31, 2015	$	1,576,600		$	28,837		$	(13,897	)	$	1,309		$	(61,252	)	$	255,693		$	1,787,290

6

HUDBAY MINERALS INC.

Condensed Consolidated Interim Statements of Changes in Equity

(Unaudited and in thousands of US dollars)

		Share capital			Other capital		Foreign currency			Available-for-sale		Remeasure-ment
		(note 19	)		reserves		translation reserve			reserve		reserve			Retained earnings			Total equity
Balance, January 1, 2016	$	1,576,600		$	28,837	$	(13,897	)	$	1,309	$	(61,252	)	$	255,693		$	1,787,290
Loss		-			-		-			-		-			(21,491	)		(21,491	)
Other comprehensive income (loss)		-			-		16,958			3,798		(18,494	)		-			2,262
Total comprehensive income (loss)		-			-		16,958			3,798		(18,494	)		(21,491	)		(19,229	)
Contributions by and distributions to owners:
Equity issuance (note 19b)		5,053			-		-			-		-			-			5,053
Share issue costs, net of tax (note 19b)		(85	)		-		-			-		-			-			(85	)
Dividends (note 19b)		-			-		-			-		-			(1,773	)		(1,773	)
Balance, June 30, 2016	$	1,581,568		$	28,837	$	3,061		$	5,107	$	(79,746	)	$	232,429		$	1,771,256

7

HUDBAY MINERALS INC.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

(in thousands of US dollars, except where otherwise noted)

For the three and six months ended June 30, 2016 and 2015

1.	Reporting entity
	HudBay Minerals Inc. ("HMI", “Hudbay” or the "Company") was amalgamated under the Canada Business Corporations Act on August 15, 2011. The address of the Company's principal executive office is 25 York Street, Suite 800, Toronto, Ontario. The unaudited condensed consolidated interim financial statements (“interim financial statements”) of the Company for the three and six months ended June 30, 2016 and 2015 represent the financial position and the financial performance of the Company and its subsidiaries (together referred to as the “Group” or “Hudbay” and individually as “Group entities”).
	Significant subsidiaries, as at June 30, 2016, include Hudson Bay Mining and Smelting Co., Limited (“HBMS”), Hudson Bay Exploration and Development Company Limited (“HBED”), HudBay Marketing & Sales Inc. (“HMS”), HudBay Peru Inc., HudBay Peru S.A.C. ("Hudbay Peru"), HudBay (BVI) Inc., HudBay Arizona Corporation (formerly Augusta Resource Corporation, “Augusta” or “Hudbay Arizona”) and Rosemont Copper Company (“Rosemont”).
	Hudbay is an integrated mining company producing copper concentrate (containing copper, gold and silver) and zinc metal. With assets in North and South America, the Group is focused on the discovery, production and marketing of base and precious metals. Through its subsidiaries, Hudbay owns four polymetallic mines, four ore concentrators and a zinc production facility in northern Manitoba and Saskatchewan (Canada) and Cusco (Peru) and a copper project in Arizona (United States). 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. Hudbay also has warrants listed under the symbol “HBM.WT” on the Toronto Stock Exchange and “HBM/WS” on the New York Stock Exchange.
	Management does not consider the impact of seasonality on operations to be significant on the interim financial statements.
2.	Basis of preparation
	(a)	Statement of compliance:
		These interim financial statements have been prepared in accordance with IAS 34, Interim Financial Reporting and do not include all of the information required for full annual financial statements by International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB").
		These interim financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2015 which includes information necessary or useful to understanding the Company’s business and financial statement presentation. In particular, the Company’s significant accounting policies are presented as note 2 in the audited consolidated financial statements for the year ended December 31, 2015, and have been consistently applied in the preparation of these interim financial statements.
		The Board of Directors approved these interim financial statements on July 27, 2016.

8

HUDBAY MINERALS INC.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

(in thousands of US dollars, except where otherwise noted)

For the three and six months ended June 30, 2016 and 2015

(b)	Functional and presentation currency:
	The Group's interim financial statements are presented in US dollars, which is the Company’s and all material subsidiaries' functional currency, except for HBMS, HBED and HMS, which have a functional currency of Canadian dollars. All values are rounded to the nearest thousand ($000) except where otherwise indicated. The Company changed its functional and presentation currency effective July 1, 2015, the details of which are described in note 4a.
(c)	Use of judgement:
	The preparation of the interim financial statements in conformity with IFRS requires the Group to make judgements, apart from those involving estimations, 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.
	The interim financial statements reflect the judgements outlined by the Group in its audited consolidated financial statements for the year ended December 31, 2015.
(d)	Use of estimates and assumptions:
	The preparation of the interim financial statements in conformity with IFRS requires the Group to make estimates and assumptions that affect the application of accounting policies, 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 estimates.
	The interim financial statements reflect the estimates outlined by the Group in its audited consolidated financial statements for the year ended December 31, 2015.

3.	Significant accounting policies
	These interim financial statements reflect the accounting policies applied by the Group in its audited consolidated financial statements for the year ended December 31, 2015 and comparative periods.
4.	Restatements

(a) Change in functional and presentation currency

The functional currency of each of the Group’s subsidiaries is the currency of the primary economic environment in which the entity operates. The Group reconsiders the functional currency of its entities if there is a change in events and conditions which determined the primary economic environment. Prior to July 1, 2015, the Group's consolidated financial statements were presented in Canadian dollars, which was the Company’s and all material subsidiaries' functional currency, except for Hudbay Peru, HudBay (BVI) Inc. and the Hudbay Arizona entities, which had a functional currency of US dollars.

9

HUDBAY MINERALS INC.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

(in thousands of US dollars, except where otherwise noted)

For the three and six months ended June 30, 2016 and 2015

The ability for Hudbay Peru to repatriate funds in US dollars, as a result of reaching commercial production in the first half of 2015, and the purchase of Hudbay Arizona have significantly increased the Company’s exposure to the US dollar as cash inflows are now predominantly in US dollars and revenue and costs related to Constancia operations and Rosemont development are denominated in US dollars. Consequently, effective July 1, 2015, the US dollar was adopted as the Company’s functional currency on a prospective basis. All the Group’s subsidiaries continue to measure the items in their financial statements using their functional currencies.

Effective July 1, 2015, the Group changed its presentation currency to US dollars from Canadian dollars. This change in presentation currency was made to better reflect the Group’s business activities, comprised primarily of US dollar revenues as well as associated US dollar denominated financings, and is consistent with the Group’s peers. The interim financial statements for all years presented have been translated into the new presentation currency in accordance with IAS 21, The Effects of Changes in Foreign Exchange Rates. The condensed consolidated statements of income and consolidated statements of comprehensive income have been translated into the presentation currency using the average exchange rates prevailing during each monthly reporting period. In addition, shareholders’ equity balances have been translated using historical rates based on rates in effect on the date of material transactions.

Consolidated Income Statements and Statements of Comprehensive Income

		Three months ended						Six months ended
		June 30, 2015						June 30, 2015
		As reported,			Restated			As reported,			Restated
		C$000			US$000			C$000			US$000
Revenue	$	185,779		$	150,889		$	346,431		$	279,602
Cost of sales		180,605			146,344			324,900			262,425
Gross profit		5,174			4,545			21,531			17,177
Results from operating activities		(36,944	)		(29,922	)		(39,062	)		(32,190	)
Loss before tax	$	(57,102	)	$	(45,818	)	$	(70,173	)	$	(57,298	)
Loss for the period	$	(55,218	)	$	(44,290	)	$	(78,921	)	$	(64,127	)
Total comprehensive (loss) income	$	(74,258	)	$	(25,199	)	$	107,205		$	(62,052	)
Loss per share - Basic and diluted	$	(0.24	)	$	(0.19	)	$	(0.34	)	$	(0.27	)

10

HUDBAY MINERALS INC.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

(in thousands of US dollars, except where otherwise noted)

For the three and six months ended June 30, 2016 and 2015

(b)

Restatement of amounts within cash generated from operating activities

Since the fourth quarter of 2015, the Group has significantly increased the number of copper fixed for floating swaps in order to manage the risk associated with provisional pricing terms in copper concentrate sales agreements. As a result, the Group has restated the presentation of the cash generated from operating activities section of the statements of cash flow to present the changes in the respective receivable and payable balances associated with these items all within changes in non-cash working capital. In the past, the gains or losses for the swaps were presented as a change in fair value of derivatives and the associated mark-to-market adjustments were presented as a change in non-cash working capital. The impact of this restatement for the three and six months ended June 30, 2015 is a decrease in 'operating cash flows before change in non-cash working capital' of $559 and $1,998, respectively, with an associated increase in 'change in non-cash working capital'.

5. New standards

New standards and interpretations adopted

As required by the IASB, effective January 1, 2016 the Group adopted the following amendment to IFRS:

− Amendments to IAS 16, Property, Plant and Equipment (“IAS 16”) and IAS 38, Intangible Assets (“IAS 38”) - the amendments to clarify that the use of revenue-based methods to calculate the depreciation of a tangible asset is not appropriate because revenue generated by an activity that includes the use of a tangible asset generally reflects factors other than the consumption of the economic benefits embodied in the asset. The IASB has also clarified that revenue is generally presumed to be an inappropriate basis for measuring the consumption of the economic benefits embodied in an intangible asset. This presumption for an intangible asset, however, can be rebutted in certain limited circumstances. The Group’s adoption of this amendment did not have any impact on its method of calculating depreciation or amortization.

New standards and interpretations not yet adopted

− IFRS 9, Financial Instruments (“IFRS 9”) - issued on July 24, 2014 is the IASB’s replacement of IAS 39 Financial Instruments: Recognition and Measurement. The standard includes requirements for recognition and measurement, impairment, derecognition and general hedge accounting. The IASB completed its project to replace IAS 39 in phases, adding to the standard as it completed each phase. The version of IFRS 9 issued in 2014 supersedes all previous versions and is mandatorily effective for periods beginning on or after January 1, 2018 with early adoption permitted (subject to local endorsement requirements). For a limited period, the previous version of IFRS 9 may be adopted early if not already done so provided the relevant date of initial application is before February 1, 2015. IFRS 9 does not replace the requirements for portfolio fair value hedge accounting for interest rate risk (often referred to as the “macro hedge accounting” requirements) since this phase of the project was separated from the IFRS 9 project due to the longer term nature of the macro hedging project which is currently at the discussion paper phase of the due process. The Group has not yet determined the effect of adoption of IFRS 9 on its consolidated financial statements.

11

HUDBAY MINERALS INC.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

(in thousands of US dollars, except where otherwise noted)

For the three and six months ended June 30, 2016 and 2015

−

IFRS 15, Revenue from Contracts with Customers (“IFRS 15”) - in May 2014, the IASB issued this standard which is effective for periods beginning on or after January 1, 2017 and is to be applied retrospectively. IFRS 15 clarifies the principles for recognizing revenue from contracts with customers. IFRS 15 will also result in enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed comprehensively (i.e. service revenue and contract modifications) and improve guidance for multiple-element arrangements. The Group intends to adopt IFRS 15 in its financial statements for the annual period beginning January 1, 2018. The IASB has affirmed its proposal to defer the effective date of this standard to January 1, 2018. The Group has not yet determined the effect of adoption of IFRS 15 on its consolidated financial statements.

−

IFRS 16, Leases (“IFRS 16”) - in January 2016, the IASB issued this standard which is effective for periods beginning on or after January 1, 2019, which replaces the current guidance in IAS 17, Leases (“IAS 17”), and is to be applied either retrospectively or a modified retrospective approach. Early adoption is permitted, but only in conjunction with IFRS 15, Revenue from Contracts with Customers. Under IAS 17, lessees were required to make a distinction between a finance lease (on balance sheet) and an operating lease (off balance sheet). IFRS 16 now requires lessees to recognize a lease liability reflective of future lease payments and a “right-of-use asset” for virtually all lease contracts. The Group has not yet determined the effect of adoption of IFRS 16 on its consolidated financial statements.

6. Acquisition of New Britannia Mine and Mill

On May 4, 2015, the Group acquired a 100% interest in the New Britannia Mine and Mill, located in Snow Lake, Manitoba, for $12,302 in cash consideration, plus a contingent payment of $5,000. In connection with the New Britannia acquisition, the Group entered into a private placement agreement with a Canadian bank to sell 1,357,000 Hudbay common shares for net proceeds of $13,040.

In accordance with IFRS 3, Business Combinations, this transaction does not meet the definition of a business combination as the assets acquired are not an integrated set of activities with inputs, processes and outputs. New Britannia Mine and Mill is not an operation.

The purchase price of $14,462 was finalized and allocated to the assets acquired and the liabilities assumed based on the fair value of the total consideration at the closing date of the acquisition. All financial assets acquired and financial liabilities assumed were recorded at their relative fair values. In addition, an option liability was recorded for the fair value amount of $1,164 in connection with the contingent consideration since it is an integral component of the consideration paid and represents a financial instrument. The fair values were allocated to the net assets on a relative fair value basis and the option liability was valued using the Black-Scholes model.

12

HUDBAY MINERALS INC.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

(in thousands of US dollars, except where otherwise noted)

For the three and six months ended June 30, 2016 and 2015

Assets acquired and liabilities assumed

The following summarizes the acquisition date allocation of the relative fair values of the major classes of assets and liabilities acquired:

Restricted cash	$	1,542
Machinery & equipment		10,410
Mineral property		2,890
Net decommissioning liability		(380	)
Total net assets acquired	$	14,462

The following summarizes consideration for the purchase:

Cash	$	12,302
Contingent payment - gold price option		1,164
Transaction costs		996
Total consideration	$	14,462

7. Revenue and expenses

(a) Revenue

The Group’s revenue by significant product types:

		Three months ended						Six months ended
		June 30,						June 30,
		2016			2015			2016			2015
Copper	$	171,263		$	148,978		$	369,937		$	213,448
Zinc		51,953			60,365			102,451			114,186
Gold		36,589			19,003			57,500			34,213
Silver		12,949			7,041			23,401			8,993
Other		597			624			1,327			1,998
		273,351			236,011			554,616			372,838
Treatment and refining charges		(26,376	)		(19,551	)		(54,016	)		(27,665	)
Pre-production revenue		-			(65,571	)		-			(65,571	)
	$	246,975		$	150,889		$	500,600		$	279,602

Pre-production revenue in the three and six months ended June 30, 2015 related to Constancia. Revenues related to inventory produced prior to commencement of commercial production are credited against capital costs rather than recognized as revenue in the condensed consolidated interim income statements.

Included in revenue for the three months ended June 30, 2016 are gains related to non-hedge derivative contracts of $4,746 (three months ended June 30, 2015 - losses of $559). Included in revenue for the six months ended June 30, 2016 are losses related to non-hedge derivative contracts of $15,316 (six months ended June 30, 2015 - losses of $1,998).

13

HUDBAY MINERALS INC.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

(in thousands of US dollars, except where otherwise noted)

For the three and six months ended June 30, 2016 and 2015

(b) Depreciation and amortization

Depreciation of property, plant and equipment and amortization of intangible assets are reflected in the condensed consolidated interim income statements as follows:

		Three months ended				Six months ended
		June 30,				June 30,
		2016		2015		2016		2015
Cost of sales	$	63,746	$	30,278	$	138,159	$	55,860
Selling and administrative expenses		152		163		304		321
	$	63,898	$	30,441	$	138,463	$	56,181

(c)	Share-based payment expense
	Share-based payment expenses are reflected in the condensed consolidated interim income statements as follows:

		Cash-settled				Total share-based
		RSUs		DSUs		payment expense
Three months ended June 30, 2016
Cost of sales	$	293	$	-	$	293
Selling and administrative expenses		2,320		974		3,294
Other operating expenses		365		-		365
	$	2,978	$	974	$	3,952
Six months ended June 30, 2016
Cost of sales	$	226	$	-	$	226
Selling and administrative expenses		2,824		916		3,740
Other operating expenses		613		-		613
	$	3,663	$	916	$	4,579
Three months ended June 30, 2015
Cost of sales	$	246	$	-	$	246
Selling and administrative expenses		1,285		352		1,637
Other operating expenses		236		-		236
	$	1,767	$	352	$	2,119
Six months ended June 30, 2015
Cost of sales	$	490	$	-	$	490
Selling and administrative expenses		2,552		753		3,305
Other operating expenses		60		-		60
	$	3,102	$	753	$	3,855

14

HUDBAY MINERALS INC.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

(in thousands of US dollars, except where otherwise noted)

For the three and six months ended June 30, 2016 and 2015

(d) Other operating income and expenses

		Three months ended						Six months ended
		June 30,						June 30,
		2016			2015			2016			2015
Net loss (gain) on writedown and sale of assets	$	-		$	-		$	2,151		$	(415	)
Joint venture operator fee income		(67	)		(87	)		(138	)		(180	)
Regional costs		1,040			1,017			2,155			2,238
Cost of non-producing properties		911			787			1,984			3,466
	$	1,884		$	1,717		$	6,152		$	5,109

(e) Finance income and expenses

		Three months ended						Six months ended
		June 30,						June 30,
		2016			2015			2016			2015
Finance income		(581	)		(393	)		(1,135	)		(699	)
Finance expense
Interest expense on long-term debt		27,942			25,207			54,560			48,769
Accretion on financial liabilities at amortized cost		342			230			669			582
Unwinding of discounts on provisions		661			684			1,328			1,421
Other finance expense		4,784			3,876			10,763			6,361
		33,729			29,997			67,320			57,133
Interest capitalized		(3,674	)		(10,930	)		(7,356	)		(34,575	)
		30,055			19,067			59,964			22,558
Other finance (gains) losses
Net foreign exchange (gains) losses		(1,064	)		(3,420	)		184			5,043
Change in fair value of financial assets
and liabilities at fair value through profit loss:
Hudbay and Augusta warrants		1,175			(82	)		838			2,601
Prepayment option embedded derivative/gold option		453			(878	)		1,112			(7,258	)
Investments classified as held-for-trading		(24	)		18			(1	)		(3	)
Realized gain on disposal of available-for-sale investments		(438	)		-			(438	)		-
Net gain reclassified from equity on disposal of available- for-sale investments		(931	)		(4	)		(931	)		(25	)
Net loss reclassified from equity on impairment of available-for-sale investments		127			1,588			226			2,891
		(702	)		(2,778	)		990			3,249
Net finance expense	$	28,772		$	15,896		$	59,819		$	25,108

Interest expense related to long-term debt and accretion of financial liabilities at amortized cost has been capitalized to the Constancia project until May 1, 2015 and to the Rosemont project (note 14 and 15).

15

HUDBAY MINERALS INC.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

(in thousands of US dollars, except where otherwise noted)

For the three and six months ended June 30, 2016 and 2015

During the three and six months ended June 30, 2016, the Group recognized impairment losses on investments in listed shares and transferred pre-tax losses of $127 and $226, respectively, from the available-for-sale reserve within equity to the condensed consolidated interim income statements (three and six months ended June 30, 2015 - $1,588 and $2,891, respectively).

(f)	Impairment
	As a result of the acquisition of the New Britannia Mill (note 6), Hudbay no longer expects to construct a new concentrator at Lalor. During the three months ended June 30, 2015, the Group recognized an impairment loss of $19,916 related to its concentrator assets at Lalor in Snow Lake, Manitoba. The impairment was determined based on the difference between carrying value and fair value less costs of disposal. On the condensed consolidated interim income statements, the impairment loss is presented in the asset impairment loss line item. The Group presents the asset impairment loss within the Manitoba segment in note 24.
	The fair value measurements for the determination of impairment charges in their entirety are categorized as Level 3 based on the degree to which fair value inputs are observable and have a significant effect on the recorded fair value.

8. Trade and other receivables

		Jun. 30, 2016		Dec. 31, 2015
Current
Trade receivables	$	29,508	$	85,373
Embedded derivatives - provisional pricing (note 21c)		4,568		(13,653	)
Statutory receivables		67,136		122,288
Receivable from joint venture partners		6,842		6,772
Other receivables		20,586		27,898
		128,640		228,678
Non-current
Statutory receivables - Peruvian sales tax		5,214		1,112
Receivable from joint venture partners		23,800		23,067
Other receivables		2,131		2,044
		31,145		26,223
	$	159,785	$	254,901

As at June 30, 2016, $67,101 (December 31, 2015 - $111,991) of the current statutory receivables relates to refundable sales taxes in Peru that Hudbay Peru has paid on capital expenditures and operating expenses. Management expects to receive the amount within one year. Significant judgements are required on measurement and classification of Peruvian sales taxes paid on capital expenditures and operating expenses (note 2c).

As commercial production commenced at the Reed mine on April 1, 2014, the Group has a receivable for 30% of the applicable development costs as well as other amounts due from the joint venture partner, VMS Ventures Inc., pursuant to the Reed Lake Project Joint Venture Agreement. The receivable will be repaid by offsetting amounts owed to VMS Ventures Inc. for the purchase of their proportionate share of the Reed mine ore. The receivable has been discounted and has been classified based on the expected timing of ore purchases. As at June 30, 2016, this receivable from VMS Ventures Inc. was $10,586 (December 31, 2015 - $11,775).

16

HUDBAY MINERALS INC.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

(in thousands of US dollars, except where otherwise noted)

For the three and six months ended June 30, 2016 and 2015

The remaining balance in the receivable from joint venture partners primarily relates to the Group’s joint venture partner for the Rosemont project in Arizona, which has been classified as non-current.

9. Inventories

		Jun. 30, 2016		Dec.31, 2015
Current
Stockpile	$	17,776	$	13,241
Work in progress		7,271		6,200
Finished goods		70,421		69,082
Materials and supplies		34,096		31,663
		129,564		120,186
Non-current
Materials and supplies		6,046		5,649
	$	135,610	$	125,835

The cost of inventories recognized as an expense, including depreciation, and included in cost of sales amounted to $178,177 and $374,749 for the three and six months ended June 30, 2016 (three and six months ended June 30, 2015 - $104,842 and $207,495, respectively).

10. Prepaid expenses

		Jun. 30, 2016		Dec. 31, 2015
Prepayments to suppliers related to operations		4,540		8,177
Prepaid insurance and other		280		802
	$	4,820	$	8,979

11. Other financial assets

		Jun. 30, 2016		Dec. 31, 2015
Current
Derivative assets	$	2,789	$	16,512
Non-current
Available-for-sale investments		13,825		9,206
Investments at fair value through profit or loss		64		59
Derivative assets		65		-
Restricted cash		86,133		63,465
		100,087		72,730
	$	102,876	$	89,242

17

HUDBAY MINERALS INC.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

(in thousands of US dollars, except where otherwise noted)

For the three and six months ended June 30, 2016 and 2015

Available-for-sale investments

As at June 30, 2016, available-for-sale investments consist of investments in Canadian-listed metals and mining companies, most of which are publicly traded. During the three and six months ended June 30, 2016 the Group recognized impairment losses of $127 and $226, respectively, related to its investments in the available-for-sale reserve within equity (three and six months ended June 30, 2015 - $1,588 and $2,891, respectively) (note 7e).

Restricted cash

As required by Peruvian law, Hudbay Peru provides security with respect to its decommissioning and restoration obligations. Hudbay Peru has provided a letter of credit in the amount of $68,781 as at June 30, 2016, and classified cash on deposit with a Peruvian bank to support the letter of credit as restricted cash (December 31, 2015 - $63,465).

During the second quarter of 2016, a letter of credit issued under the Group’s revolving credit facilities to support pension obligations of the Manitoba business unit was reissued as a cash-collateralized letter of credit, resulting in an increase in restricted cash balances of $17,352.

12. Property, plant and equipment

				Accumulated
				depreciation
				and			Carrying
Jun. 30, 2016		Cost		amortization			amount
Exploration and evaluation assets	$	15,529	$	-		$	15,529
Capital works in progress		822,972		-			822,972
Mining properties		1,754,436		(477,039	)		1,277,397
Plant and equipment		2,347,453		(540,212	)		1,807,241
	$	4,940,390	$	(1,017,251	)	$	3,923,139

				Accumulated
				depreciation
				and			Carrying
Dec. 31, 2015		Cost		amortization			amount
Exploration and evaluation assets	$	14,650	$	-		$	14,650
Capital works in progress		812,618		-			812,618
Mining properties		1,603,952		(394,098	)		1,209,854
Plant and equipment		2,289,556		(436,402	)		1,853,154
	$	4,720,776	$	(830,500	)	$	3,890,276

18

HUDBAY MINERALS INC.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

(in thousands of US dollars, except where otherwise noted)

For the three and six months ended June 30, 2016 and 2015

13. Other liabilities

		Jun. 30, 2016		Dec. 31, 2015
Current
Provisions (note 17)	$	11,760	$	10,630
Pension liability		23,357		23,221
Other employee benefits		2,327		2,107
Unearned revenue		23,665		1,709
	$	61,109	$	37,667

14. Other financial liabilities

		Jun. 30, 2016		Dec. 31, 2015
Current
Derivative liabilities	$	6,185	$	4,426
Finance leases		3,381		618
Other financial liabilities at amortized cost		5,217		5,151
		14,783		10,195
Non-current
Finance leases		11,637		2,607
Contingent consideration - gold price option		1,814		653
Warrants at fair value through profit and loss		6,208		5,047
Other financial liabilities at amortized cost		19,064		19,328
		38,723		27,635
	$	53,506	$	37,830

Other financial liabilities at amortized cost relate to agreements with communities near the Constancia operation which allow Hudbay to extract minerals over the useful life of the Constancia operation, carry out exploration and evaluation activities in the area and provide Hudbay with community support to operate in the region.

The derivative liabilities include derivative and hedging transactions as well as warrants issued as consideration for the acquisition of Augusta and warrants assumed on the acquisition of Augusta. Derivative liabilities are carried at their fair value with changes in fair value recorded to the condensed consolidated interim income statements in other finance (gain) loss. The fair value of derivative and hedging transactions are determined based on internal valuation models and the fair value of warrants issued are determined based on the quoted market prices for the listed warrants. The fair value of these warrants at June 30, 2016 is $6,208 (December 31, 2015 - $5,047). A total of 21,830,490 warrants were issued which entitle the holder to acquire a common share of the Company at a price of C$15.00 per share on, but not prior to, July 20, 2018. The Company, may, at its option, upon written notice to the warrant holders, settle the exercise of warrants for the in-the-money value, in cash, shares or a combination thereof.

19

HUDBAY MINERALS INC.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

(in thousands of US dollars, except where otherwise noted)

For the three and six months ended June 30, 2016 and 2015

The purchase price of the acquisition of New Britannia Mine and Mill (note 6) contained an option (European) that pays the seller $5,000 if the price of gold is equal to or above $1,400/oz on May 4, 2018. The option represents a financial liability and was recorded at fair value at the acquisition date of New Britannia and will be remeasured at each reporting date with the change in the fair value being recognized as unrealized gains or losses in finance income and expense.

15. Long-term debt

Long-term debt is comprised of the following:

		Jun. 30, 2016			Dec. 31, 2015
Senior unsecured notes (a)	$	917,568		$	917,329
Equipment finance facility (b)		57,895			66,521
Senior secured revolving credit facilities (c)		334,237			291,030
		1,309,700			1,274,880
Less: current portion		(16,490	)		(69,875	)
	$	1,293,210		$	1,205,005

(a) Senior unsecured notes

Balance, January 1, 2015	$	915,846
Change in fair value of embedded derivative (prepayment option)		1,049
Accretion of transaction costs		434
Balance, December 31, 2015	$	917,329
Accretion of transaction costs and premiums		239
Balance, June 30, 2016	$	917,568

20

HUDBAY MINERALS INC.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

(in thousands of US dollars, except where otherwise noted)

For the three and six months ended June 30, 2016 and 2015

(b) Equipment finance facility

Balance, January 1, 2015	$	71,221
Addition to Principal, net of transaction costs		10,092
Payments made		(15,902	)
Accretion of transaction costs		1,110
Balance, December 31, 2015	$	66,521
Transaction costs		(1,009	)
Payments made		(8,245	)
Accretion of transaction costs		628
Balance, June 30, 2016	$	57,895

The equipment finance facility is reflected in the condensed consolidated interim balance sheets as follows:

		Jun. 30, 2016		Dec. 31, 2015
Current	$	16,490	$	16,490
Non-current		41,405		50,031
	$	57,895	$	66,521

(c) Senior secured revolving credit facilities

Balance, January 1, 2015	$	-
Addition to Principal, net of transaction costs		304,374
Payments made		(14,925	)
Accretion of transaction costs		1,581
Balance, December 31, 2015	$	291,030
Addition to Principal, net of transaction costs		60,335
Payments made		(20,000	)
Accretion of transaction costs		2,872
Balance, June 30, 2016	$	334,237

 The senior secured credit facilities are reflected in the condensed consolidated interim balance sheets as follows:

		Jun. 30, 2016		Dec. 31, 2015
Current	$	-	$	53,385
Non-current		334,237		237,645
Balance, June 30, 2016	$	334,237	$	291,030

21

HUDBAY MINERALS INC.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

(in thousands of US dollars, except where otherwise noted)

For the three and six months ended June 30, 2016 and 2015

On March 30, 2016, the Group completed a restructuring of its two senior credit facilities and on June 17, 2016 a new accordion lender joined the syndicate which increased the maximum available amount under the Canadian facility by $30 million. The two facilities now share substantially similar terms and conditions, except that the $330 million Canada facility is secured by the Group’s Manitoba assets and the $200 million Peru facility is secured by the Group’s Peru assets. The facilities mature on March 31, 2019, and bear interest at LIBOR plus 4.50% .

16. Deferred revenue

The following table summarizes changes in deferred revenue:

Balance, January 1, 2015	$	688,125
Recognition of revenue		(51,860	)
Effects of changes in foreign exchange		(39,005	)
Balance, December 31, 2015	$	597,260
Recognition of revenue		(34,605	)
Effects of changes in foreign exchange		11,275
Balance, June 30, 2016	$	573,930

Deferred revenue is reflected in the condensed consolidated interim balance sheets as follows:

		Jun. 30, 2016		Dec. 31, 2015
Current	$	68,600	$	68,250
Non-current		505,330		529,010
	$	573,930	$	597,260

22

HUDBAY MINERALS INC.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

(in thousands of US dollars, except where otherwise noted)

For the three and six months ended June 30, 2016 and 2015

17. Provisions

Reflected in the condensed consolidated interim balance sheets as follows:

		Decommis-
		sioning,
		restoration
		and similar		Deferred		Restricted
Jun. 30, 2016		liabilities		share units		share units		Other		Total
Current (note 13)	$	3,274	$	2,821	$	4,713	$	952	$	11,760
Non-current		174,938		-		2,288		778		178,004
	$	178,212	$	2,821	$	7,001	$	1,730	$	189,764

		Decommis-
		sioning,
		restoration
		and similar		Deferred		Restricted
Dec. 31, 2015		liabilities		share units		share units		Other		Total
Current (note 13)	$	4,270	$	2,803	$	3,557	$	-	$	10,630
Non-current		142,765		-		831		-		143,596
	$	147,035	$	2,803	$	4,388	$	-	$	154,226

23

HUDBAY MINERALS INC.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

(in thousands of US dollars, except where otherwise noted)

For the three and six months ended June 30, 2016 and 2015

18. Income and mining taxes

(a) Tax expense (recovery):

The tax expense (recovery) is applicable as follows:

		Three months ended						Six months ended
		June 30,						June 30,
		2016			2015			2016			2015
Current:
Taxable income	$	2,114		$	2,288		$	3,901		$	3,654
Taxable mining profits		3,191			4,442			3,981			4,457
Adjustments in respect of prior years		-			546			-			546
		5,305			7,276			7,882			8,657
Deferred:
Income taxes - origination and reversal of temporary difference		6,010			(12,432	)		945			(5,860	)
Mining taxes - origination and reversal of temporary difference		1,081			2,215			2,244			3,029
Peruvian mining tax - origination and reversal of temporary difference		(159	)		(561	)		(177	)		(297	)
Adjustments in respect of prior years		23			1,974			266			1,300
		6,955			(8,804	)		3,278			(1,828	)
	$	12,260		$	(1,528	)	$	11,160		$	6,829

(b) Deferred tax assets and liabilities:

		Jun. 30, 2016			Dec. 31, 2015
Deferred income tax asset	$	53,958		$	40,670
Deferred income tax liability		(291,917	)		(280,432	)
Deferred mining tax liability - Canada		(3,294	)		(775	)
Deferred mining tax liability - Peru		(13,145	)		(13,322	)
		(308,356	)		(294,529	)
Net deferred tax liability balance	$	(254,398	)	$	(253,859	)

24

HUDBAY MINERALS INC.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

(in thousands of US dollars, except where otherwise noted)

For the three and six months ended June 30, 2016 and 2015

(c) Changes in deferred tax assets and liabilities:

		Six months ended			Year ended
		Jun. 30, 2016			Dec. 31, 2015
Net deferred tax liability balance, beginning of period	$	(253,859	)	$	(339,290	)
Deferred tax (expense)/recovery		(3,278	)		83,513
OCI transactions		3,775			(1,053	)
Foreign currency translation on the deferred tax liability		(1,036	)		2,971
Net deferred tax liability balance, end of period	$	(254,398	)	$	(253,859	)

(d) Other disclosure:

The tax rules and regulations applicable to mining companies are highly complex and subject to interpretation. The Group may be subject in the future to a review of its historic income and other tax filings and, in connection with such reviews, disputes can arise with the taxing authorities over the interpretation or application of certain tax rules and regulations in respect of the Group’s business. These reviews may alter the timing or amount of taxable income or deductions. The amount ultimately reassessed upon resolution of issues raised may differ from the amount accrued.

19. Share capital

(a)	Preference shares:
	Authorized: Unlimited preference shares without par value
(b)	Common shares:
	Authorized: Unlimited common shares without par value
	Issued and fully paid:

	Six months ended				Year ended
	Jun. 30, 2016				Dec. 31, 2015
	Common				Common
	shares		Amount		shares		Amount
Balance, beginning of year	235,231,688	$	1,576,600		233,615,857	$	1,562,249
Exercise of stock options	-		-		258,831		1,152
Equity issuance	1,000,000		5,053		1,357,000		13,199
Share issue costs, net of tax	-		(85	)			-
Balance, end of period	236,231,688	$	1,581,568		235,231,688	$	1,576,600

During the six months ended June 30, 2016, the Company issued 1,000,000 Hudbay common shares for net proceeds of $4,968 in connection with the vesting of restricted share units.

During 2015, in connection with the New Britannia acquisition (note 6), the Company issued 1,357,000 Hudbay common shares for net proceeds of $13,199.

25

HUDBAY MINERALS INC.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

(in thousands of US dollars, except where otherwise noted)

For the three and six months ended June 30, 2016 and 2015

During the six months ended June 30, 2016, the Company paid $1,773 in dividends on March 31, 2016 to shareholders of record as of March 11, 2016. The Company paid $1,842 in dividends on March 31, 2015 to shareholders of record as of March 13, 2015.

20. Loss per share data

	Three months ended		Six months ended
	June 30,		June 30,
	2016	2015	2016	2015
Weighted average common shares outstanding
Basic	235,308,611	234,588,385	235,270,150	234,109,246
Plus net incremental shares from
Assumed conversion: warrants	-	1,039,500	-	1,039,500
Assumed conversion: stock options	-	104,571	-	129,735
Diluted weighted average common shares outstanding	235,308,611	235,732,456	235,270,150	235,278,481

The determination of the diluted weighted-average number of common shares excludes 3,958,589 and 5,287,448 shares, related to stock options that were anti-dilutive for the three and six months ended June 30, 2016 (three and six months ended June 30, 2015 - 1,097,077 and 1,321,959 shares, respectively). The calculation also excludes all 21,830,490 Hudbay warrants issued as consideration for the acquisition of Augusta as they are out of the money.

For periods where Hudbay records a loss, the Group calculates diluted loss per share using the basic weighted average number of shares. If the diluted weighted average number of share was used, the result would be a reduction in the loss, which would be anti-dilutive. Consequently, for the three and six months ended June 30, 2016, the Group calculated diluted loss per share using 235,308,611 and 235,270,150 common shares, respectively. For the three and six months ended June 30, 2015, the Group calculated diluted loss per share using 234,588,385 and 234,109,246 common shares, respectively.

26

HUDBAY MINERALS INC.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

(in thousands of US dollars, except where otherwise noted)

For the three and six months ended June 30, 2016 and 2015

21. Financial instruments

(a) Fair value and carrying value of financial instruments:

 The following presents the fair value and carrying value of the Group's financial instruments and non- financial derivatives:

		Jun. 30, 2016						Dec. 31, 2015
		Fair			Carrying			Fair			Carrying
Recurring measurements		Value			value			Value			value
Loans and receivables
Cash and cash equivalents 1	$	141,903		$	141,903		$	53,852		$	53,852
Restricted cash1		86,133			86,133			63,465			63,465
Trade and other receivables1, 2		82,867			82,867			145,154			145,154
Fair value through profit or loss
Trade and other receivables - embedded derivatives3		4,568			4,568			(13,653	)		(13,653	)
Non-hedge derivative assets3		2,854			2,854			16,512			16,512
Investments at FVTPL4		64			64			59			59
Available-for-sale investments4		13,825			13,825			9,206			9,206
Total financial assets		332,214			332,214			274,595			274,595
Financial liabilities at amortized cost
Trade and other payables1, 2		145,822			145,822			179,576			179,576
Finance leases		15,018			15,018			3,225			3,225
Other financial liabilities5		13,258			24,281			12,045			24,479
Senior unsecured notes6		772,800			917,568			639,400			917,329
Equipment finance facility8		57,895			57,895			66,521			66,521
Senior secured revolving credit facilities8		334,237			334,237			291,030			291,030
Fair value through profit or loss
Trade and other payables - embedded derivatives3		100			100			(118	)		(118	)
Warrant liabilities3		6,208			6,208			5,047			5,047
Option liabilities3		1,814			1,814			653			653
Non-hedge derivative liabilities3		6,185			6,185			4,426			4,426
Total financial liabilities		1,353,337			1,509,128			1,201,805			1,492,168
Net financial liability	$	(1,021,123	)	$	(1,176,914	)	$	(927,210	)	$	(1,217,573	)

1	Cash and cash equivalents, restricted cash, trade and other receivables and trade and other payables are recorded at carrying value, which approximates fair value due to their short-term nature and generally negligible credit losses.
2	Excludes embedded provisional pricing derivatives, as well as tax and other statutory amounts.
3	Derivatives and embedded provisional pricing derivatives are carried at their fair value, which is determined based on internal valuation models that reflect observable forward market commodity prices, currency exchange rates, and discount factors based on market US dollar interest rates adjusted for credit risk. For the warrant and option liabilities, fair value is determined based on quoted market closing price or the Black-Scholes model.
4	Available-for-sale investments are carried at their fair value, which is determined using quoted market bid prices in active markets for listed shares and determined using valuation models for shares of private companies. Investments at FVTPL consist of warrants to purchase listed shares, which are carried at fair value as determined using a Black-Scholes model.
5	These financial liabilities relate to agreements with communities near the Constancia project in Peru (note 14). Fair values have been determined using a discounted cash flow analysis based on expected cash flows and a credit adjusted discount rate.
6	Fair value of the senior unsecured notes (note 15) has been determined using the quoted market price at the period end.
7	Fair value of the prepayment option embedded derivative related to the long-term debt (note 15) has been determined using a binomial tree/lattice approach based on the Hull-White single factor interest rate term structure model.
8	The carrying value of the facilities approximates the fair value as the facilities are based on floating interest rates.

27

HUDBAY MINERALS INC.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

(in thousands of US dollars, except where otherwise noted)

For the three and six months ended June 30, 2016 and 2015

Fair value hierarchy

The table below provides an analysis by valuation method of financial instruments that are measured at fair value subsequent to recognition. Levels 1 to 3 are defined based on the degree to which fair value inputs are observable and have a significant effect on the recorded fair value, as follows:

−	Level 1:	Quoted prices in active markets for identical assets or liabilities;
−	Level 2:	Valuation techniques use significant observable inputs, either directly or indirectly, or valuations are based on quoted prices for similar instruments; and
−	Level 3:	Valuation techniques use significant inputs that are not based on observable market data.

June 30, 2016		Level 1		Level 2		Level 3		Total
Financial assets measured at fair value
Financial assets at FVTPL:
Embedded derivatives	$	-	$	4,568	$	-	$	4,568
Non-hedge derivatives		-		2,854		-		2,854
Investments at FVTPL		-		64		-		64
Available-for-sale investments		12,288		-		1,537		13,825
	$	12,288	$	7,486	$	1,537	$	21,311
Financial liabilities measured at fair value
Financial assets at FVTPL:
Embedded derivatives	$	-	$	100	$	-	$	100
Non-hedge derivatives		-		6,185		-		6,185
Option liability		-		1,814		-		1,814
Warrant liabilities		6,208		-		-		6,208
	$	6,208	$	8,099	$	-	$	14,307

December 31, 2015		Level 1		Level 2			Level 3		Total
Financial assets measured at fair value
Financial assets at FVTPL:
Embedded derivatives	$	-	$	(13,653	)	$	-	$	(13,653	)
Non-hedge derivatives		-		16,512			-		16,512
Investments at FVTPL		-		59			-		59
Available-for-sale investments		7,761		-			1,445		9,206
	$	7,761	$	2,918		$	1,445	$	12,124
Financial liabilities measured at fair value
Financial assets at FVTPL:
Embedded derivatives	$	-	$	(118	)	$	-	$	(118	)
Non-hedge derivatives		-		4,426			-		4,426
Option liability		-		653			-		653
Warrant liabilities		5,047		-			-		5,047
	$	5,047	$	4,961		$	-	$	10,008

28

HUDBAY MINERALS INC.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

(in thousands of US dollars, except where otherwise noted)

For the three and six months ended June 30, 2016 and 2015

The Group's Level 3 investment relates to a minority investment in an unlisted junior mining company. As no observable inputs exist, the Group measures the Level 3 investment at the cost of the investment. The Group monitors business developments and the financial position of the investee to evaluate whether the fair value of the investment has changed significantly. Factors that could result in a significantly lower fair value measurement include poor exploration results or inadequate liquidity to continue as a going concern, among other factors. Factors that would result in a significantly higher fair value measurement include positive exploration results, among other factors.

The Group’s policy is to recognize transfers into and transfers out of fair value hierarchy levels as of the date of the event or change in circumstances that caused the transfer. During the six months ended June 30, 2016, the Group did not make any transfers.

(b) Derivatives and hedging:

Copper fixed for floating swaps

Hudbay enters into copper fixed for floating swaps in order to manage the risk associated with provisional pricing terms in copper concentrate sales agreements. As at June 30, 2016, the Group had 44,906 tonnes of net copper swaps at an average net fixed receivable price of $2.14/lb and settling across July to November 2016. At December 31, 2015, the Group had 77,111 tonnes of copper fixed for floating swaps outstanding at an average fixed receivable price $2.37/lb, settling across January 2016 through March 2016. The aggregate fair value of the transactions at June 30, 2016 was a liability position of $5,927 (December 31, 2015 - an asset position of $16,436).

Non-hedge derivative gold and silver contracts

From time to time, the Group enters into gold and silver forward sales contracts to hedge the commodity price risk associated with the future settlement of provisionally priced deliveries. At June 30, 2016, the Group held no gold or silver forward sales contracts. At December 31, 2015 the Group held 151,327 ounces of silver forward sales contracts and prices ranged from $14.17 to $15.21. The aggregate fair value of the transactions at December 31, 2015 was an asset position of $86.

Non-hedge derivative zinc contracts

Hudbay enters into fixed price sales contracts with zinc customers and, to ensure that the Group continues to receive a floating or unhedged realized zinc price, Hudbay enters into forward zinc purchase contracts that effectively offset the fixed price sales contracts. At June 30, 2016, the Group held contracts for forward zinc purchased of 10,852 tonnes (December 31, 2015 – 16,438 tonnes) that related to forward customer sales of zinc. Prices range from $1,514 to $2,343 per tonne (December 31, 2015 – $1,497 to $2,343) and settlement dates extended to December 2016. The aggregate fair value of the transactions at June 30, 2016 was net asset position of $2,598 (December 31, 2015 – a net liability position of $4,386).

29

HUDBAY MINERALS INC.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

(in thousands of US dollars, except where otherwise noted)

For the three and six months ended June 30, 2016 and 2015

(c) Embedded derivatives

Provisional pricing embedded derivatives

The Group records embedded derivatives related to provisional pricing in concentrate purchase, concentrate sale and certain other sale contracts. Under the terms of these contracts, prices are subject to final adjustment at the end of a future period after title transfers based on quoted market prices during the quotation period specified in the contract. The period between provisional pricing and final pricing is typically up to three months.

Provisional pricing embedded derivatives are presented in trade and other receivables when they relate to sales contracts and in trade and other payables when they relate to purchase contracts. At each reporting date, provisionally priced metals are marked to market based on the forward market price for the quotation period stipulated in the contract, with changes in fair value recognized in revenues for sales contracts and in cost of sales for purchase concentrate contracts. Cash flows related to provisional pricing embedded derivatives are classified in operating activities.

At June 30, 2016, the Group’s net position consisted of contracts awaiting final pricing for sales of 41,182 tonnes of copper (December 31, 2015 – 79,033 tonnes). In addition, at June 30, 2016, the Group’s net position consisted of contracts awaiting final pricing for sales of 14,654 ounces of gold and 107,933 ounces of silver (December 31, 2015 – 10,506 ounces of gold and 66,131 ounces of silver).

As at June 30, 2016, the Group’s provisionally priced copper, gold and silver sales subject to final settlement were recorded at average prices of $2.20/lb (December 31, 2015 – $2.14/lb), $1,320/oz (December 31, 2015 – $1,060/oz) and $18.60/oz (December 31, 2015 – $13.78/oz), respectively.

The aggregate fair value of the embedded derivatives within the copper concentrate sales contracts at June 30, 2016, was an asset position of $4,568 (December 31, 2015 – a liability of $13,653). The aggregate fair value of other embedded derivatives at June 30, 2016, was a liability position of $100 (December 31, 2015 – an asset position of $118).

22. Capital commitments

As at June 30, 2016, the Group had outstanding capital commitments in Canada of approximately $606 primarily related to a committed mobile equipment purchase, of which approximately $186 cannot be terminated by the Group, approximately $70,594 in Peru related to sustaining capital costs, all of which can be terminated by the Group and approximately $163,459 in Arizona, primarily related to its Rosemont project, of which approximately $79,662 cannot be terminated by the Group.

30

HUDBAY MINERALS INC.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

(in thousands of US dollars, except where otherwise noted)

For the three and six months ended June 30, 2016 and 2015

23. Supplementary cash flow information

(a) Change in non-cash working capital:

		Three months ended						Six months ended
		June 30,						June 30,
		2016			2015			2016			2015
Change in:
Trade and other receivables	$	81,708		$	(34,291	)	$	90,138		$	(45,915	)
Other financial assets/liabilities		(4,746	)		559			15,316			1,998
Inventories		(6,649	)		(37,765	)		191			(40,696	)
Prepaid expenses		218			(1,440	)		4,363			(1,273	)
Trade and other payables		(13,709	)		62,292			(35,875	)		61,136
Change in taxes payable/receivable, net		4,799			6,080			1,054			6,944
Taxes - ITC		(1,841	)		(2,487	)		(1,841	)		(3,398	)
Provisions and other liabilities		2,682			463			18,780			(1,972	)
	$	62,462		$	(6,589	)	$	92,126		$	(23,176	)

(b) Non-cash transactions:

During the six months ended June 30, 2016, the Group entered into the following non-cash investing and financing activities which are not reflected in the condensed consolidated interim statements of cash flows:

−

Remeasurements of the Group's decommissioning and restoration liabilities as at June 30, 2016 led to a net increase in related property, plant and equipment assets of $23,165 mainly as a result of the decline in the discount rate. For the six months ended June 30, 2015, such remeasurements led to increases in property, plant and equipment assets of $8,664.

−

Property, plant and equipment included an immaterial amount of additions which were not yet paid for as at June 30, 2016 (June 30, 2015 - $36,890). These purchases will be reflected in the condensed consolidated interim statements of cash flows in the periods payments are made. Property, plant and equipment also included $13,107 of additions related to capital additions under finance lease (June 30, 2015 - nil).

31

HUDBAY MINERALS INC.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

(in thousands of US dollars, except where otherwise noted)

For the three and six months ended June 30, 2016 and 2015

24. Segmented information

Three months ended June 30, 2016
									Corporate
									and other
		Manitoba		Peru		Arizona			activities			Total
Revenue from external customers	$	128,278	$	118,697	$	-		$	-		$	246,975
Cost of sales
Mine operating costs		78,872		56,066		-			-			134,938
Depreciation and amortization		31,716		32,030		-			-			63,746
Gross profit		17,690		30,601		-			-			48,291
Selling and administrative expenses		-		-		-			10,025			10,025
Exploration and evaluation		327		162		-			564			1,053
Other operating income and expenses		471		1,407		94			(88	)		1,884
Results from operating activities	$	16,892	$	29,032	$	(94	)	$	(10,501	)	$	35,329
Finance income												(581	)
Finance expenses												30,055
Other finance gains												(702	)
Profit before tax												6,557
Tax expense												12,260
Loss for the period											$	(5,703	)

Three months ended June 30, 2016
Additions to property, plant and equipment	$	16,130	$	32,663	$	5,243	$	-	$	54,036

32

HUDBAY MINERALS INC.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

(in thousands of US dollars, except where otherwise noted)

For the three and six months ended June 30, 2016 and 2015

Three months ended June 30, 2015
										Corporate
										and other
		Manitoba			Peru		Arizona			activities			Total
Revenue from external customers	$	116,064		$	34,825	$	-		$	-		$	150,889
Cost of sales
Mine operating costs		94,352			21,714		-			-			116,066
Depreciation and amortization		20,988			9,290		-			-			30,278
Gross profit		724			3,821		-			-			4,545
Selling and administrative expenses		581			-		-			10,165			10,746
Exploration and evaluation		1,606			295		-			187			2,088
Other operating income and expenses		(271	)		769		991			228			1,717
Asset impairment		19,916			-		-			-			19,916
Results from operating activities	$	(21,108	)	$	2,757	$	(991	)	$	(10,580	)	$	(29,922	)
Finance income													(393	)
Finance expenses													19,067
Other finance gains													(2,778	)
Loss before tax													(45,818	)
Tax recovery													(1,528	)
Loss for the period												$	(44,290	)

Three months ended June 30, 2015
Additions to property, plant and equipment	$	21,309	$	42,228	$	15,859	$	(53	)	$	79,343

33

HUDBAY MINERALS INC.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

(in thousands of US dollars, except where otherwise noted)

For the three and six months ended June 30, 2016 and 2015

Six months ended June 30, 2016
									Corporate
									and other
		Manitoba		Peru		Arizona			activities			Total
Revenue from external customers	$	239,730	$	260,870	$	-		$	-		$	500,600
Cost of sales
Mine operating costs		158,502		127,725		-			-			286,227
Depreciation and amortization		60,627		77,532		-			-			138,159
Gross profit		20,601		55,613		-			-			76,214
Selling and administrative expenses		-		-		-			18,368			18,368
Exploration and evaluation		659		389		-			1,158			2,206
Other operating expense		3,324		2,744		250			(166	)		6,152
Results from operating activities	$	16,618	$	52,480	$	(250	)	$	(19,360	)	$	49,488
Finance income												(1,135	)
Finance expenses												59,964
Other finance loss												990
Loss before tax												(10,331	)
Tax expense												11,160
Loss for the period											$	(21,491	)

June 30, 2016
								Corporate
								and other
		Manitoba		Peru		Arizona		activities		Total
Total assets	$	810,107	$	2,822,570	$	807,339	$	111,562	$	4,551,578
Total liabilities		552,889		900,545		155,158		1,171,730		2,780,322
Property, plant and equipment		656,337		2,476,536		785,345		4,921		3,923,139

Six months ended June 30, 2016
								Corporate
								and other
		Manitoba		Peru		Arizona		activities		Total
Additions to property, plant and equipment	$	40,149	$	55,925	$	16,733	$	18	$	112,825

34

HUDBAY MINERALS INC.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

(in thousands of US dollars, except where otherwise noted)

For the three and six months ended June 30, 2016 and 2015

Six months ended June 30, 2015
										Corporate
										and other
		Manitoba			Peru		Arizona			activities			Total
Revenue from external customers	$	244,777		$	34,825	$	-		$	-		$	279,602
Cost of sales
Mine operating costs		184,851			21,714		-			-			206,565
Depreciation and amortization		46,570			9,290		-			-			55,860
Gross profit		13,356			3,821		-			-			17,177
Selling and administrative expenses		1,018			-		-			18,906			19,924
Exploration and evaluation		3,303			703		-			412			4,418
Other operating income and expenses		47			2,146		2,989			(73	)		5,109
Asset Impairment		19,916			-		-			-			19,916
Results from operating activities	$	(10,928	)	$	972	$	(2,989	)	$	(19,245	)	$	(32,190	)
Finance income													(699	)
Finance expenses													22,558
Other finance losses													3,249
Loss before tax													(57,298	)
Tax expense													6,829
Loss for the period												$	(64,127	)

Six months ended June 30, 2015
								Corporate
								and other
		Manitoba		Peru		Arizona		activities		Total
Additions to property, plant and equipment	$	40,059	$	143,076	$	20,710	$	203,792	$	407,637

December 31, 2015
								Corporate
								and other
		Manitoba		Peru		Arizona		activities		Total
Total assets	$	765,159	$	2,832,384	$	783,487	$	98,555	$	4,479,585
Total liabilities		509,875		919,950		154,277		1,108,193		2,692,295
Property, plant and equipment		623,980		2,498,350		762,193		5,753		3,890,276

35

EX-99.3

The following table sets forth certain summary consolidated financial information for the three and six months ended June 30, 2016 and 2015 in respect of HudBay Minerals Inc. (“Hudbay”) and its subsidiaries, certain of which are guarantors in respect of Hudbay’s $920,000,000 aggregate principal amount of 9.5% senior unsecured notes (the “Notes”) due October 1, 2020. The Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis, by Hudbay’s existing and future subsidiaries, other than unrestricted subsidiaries and certain excluded subsidiaries that include subsidiaries that own the Constancia and Rosemont projects; the Notes are guaranteed by: Hudson Bay Mining and Smelting Co., Limited, Hudson Bay Exploration and Development Company Limited and HudBay Marketing & Sales Inc.

This disclosure is being provided pursuant to Part 13.4 of National Instrument 51-102. Additional continuous disclosure relating to Hudbay can be found on the System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com and on the Electronic Data Gathering, Analysis, and Retrieval system (“EDGAR”) at www.sec.gov.

For the three months ending June 30:
(000's)	Guarantor - Issuer		Guarantor - Credit Supporters		Non Guarantor - Others		Consolidating adjustments 1		Consolidated Hudbay total
Total revenue Profit (loss) continuing operations - attributable to owners Profit (loss) - attributable to owners	2016	2015	2016	2015	2016	2015	2016	2015	2016	2015
	- (7,171) (7,171)	- (2,724) (2,724)	128,278 (5,241) (5,241)	116,064 (38,139) (38,139)	118,697 2,652 2,652	34,825 (16,085) (16,085)	- 4,057 4,057	- 12,658 12,658	246,975 (5,703) (5,703)	150,889 (44,290) (44,290)

For the six months ending June 30:
(000's)	Guarantor - Issuer		Guarantor - Credit Supporters		Non Guarantor - Others		Consolidating adjustments 1		Consolidated Hudbay total
Total revenue Profit (loss) continuing operations - attributable to owners Profit (loss) - attributable to owners	2016	2015	2016	2015	2016	2015	2016	2015	2016	2015
	- (16,685) (16,685)	- (26,594) (26,594)	239,730 (22,887) (22,887)	244,777 (41,885) (41,885)	260,870 10,831 10,831	34,825 (22,781) (22,781)	- 7,250 7,250	- 27,133 27,133	500,600 (21,491) (21,491)	279,602 (64,127) (64,127)

As at June 30, 2016 and December 31, 2015:
(000's)	Guarantor - Issuer		Guarantor - Credit Supporters		Non Guarantor - Others		Consolidating adjustments 1		Consolidated Hudbay total
Current assets Non-current assets Current liabilities Non-current liabilities	2016	2015	2016	2015	2016	2015	2016	2015	2016	2015
	40,448 2,974,797 40,614 1,130,334	60,041 2,908,574 34,143 1,085,780	114,587 1,012,942 127,860 841,032	116,856 945,412 128,433 744,346	274,283 4,293,836 151,498 1,428,963	256,915 4,240,551 213,626 1,388,675	- (4,159,315) (3,519) (936,460)	1,366 (4,050,130) 1,363 (904,071)	429,318 4,122,260 316,453 2,463,869	435,178 4,044,407 377,565 2,314,730

¹ This column includes all necessary amounts to eliminate all intercompany balances between the Guarantor credit supporters and the non-guarantor others, and other adjustments to arrive at the information for Hudbay on a consolidated basis.

EX-99.4

FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
FULL CERTIFICATE

I, Alan Hair, President and Chief Executive Officer of HudBay Minerals Inc., certify the following:

1.	Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of HudBay Minerals Inc. (the “issuer”) for the interim period ended June 30, 2016.
2.	No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
3.	Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
4.	Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109
	Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.
5.	Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings

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

(i)	material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and
(ii)	information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and

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

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

5.3	N/A
6.	Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on April 1, 2016 and ended on June 30, 2016 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.

Date: July 27, 2016

(signed) Alan Hair

Alan Hair
President and Chief Executive Officer

EX-99.5

FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
FULL CERTIFICATE

I, David S. Bryson, Senior Vice President and Chief Financial Officer of HudBay Minerals Inc., certify the following:

1.	Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of HudBay Minerals Inc. (the “issuer”) for the interim period ended June 30, 2016.
2.	No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
3.	Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
4.	Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109
	Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.
5.	Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings

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

(i)	material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and
(ii)	information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and

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

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

5.2	N/A
5.3	N/A
6.	Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on April 1, 2016 and ended on June 30, 2016 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.

Date: July 27, 2016

(signed) David S. Bryson

David S. Bryson
Senior Vice President and Chief Financial Officer

EX-99.6

 

	TSX, NYSE – HBM
	2016 No. 13

Hudbay Announces Second Quarter 2016 Results

Toronto, Ontario, July 27, 2016 – HudBay Minerals Inc. (“Hudbay” or the “company”) (TSX, NYSE:HBM) today released its second quarter 2016 financial results. All amounts are in US dollars, unless otherwise noted.

Summary:

•   Increased production in both Peru and Manitoba across all metals compared to the second quarter of 2015

• Cost efficiencies and economies of scale resulted in consolidated cash cost, net of by-product credits, of $0.83 per pound and all-in sustaining cash cost, net of by-product credits, of $1.42 per pound¹

• Operating cash flow before changes in non-cash working capital increased to $75.1 million, or $0.32 per share, from $17.0 million, or $0.07 per share, in the second quarter of 2015¹

• Total liquidity increased to $293.5 million compared to $190.1 million at the end of the first quarter of 2016, including new commitments of $30.0 million under Hudbay’s revolving credit facilities

In the second quarter of 2016, cash generated from operating activities increased to $137.5 million from $10.4 million in the second quarter of 2015. In addition, operating cash flow before change in non-cash working capital increased to $75.1 million in the current quarter from $17.0 million in the same quarter of 2015. Operating cash flow in the quarter benefited from substantially higher copper and precious metals sales volumes due to the Constancia project reaching commercial production on April 30, 2015. The increase in sales volumes and associated economies of scale more than offset the decline in realized sales prices of copper and zinc metals compared to the same quarter last year.

“We continue to be pleased with Constancia’s strong operating performance and the cost efficiencies achieved at all of our operations, resulting in positive free cash flow generated from the business,” said Alan Hair, president and chief executive officer. “We remain on track to meet the cost reduction initiatives we announced earlier this year, as well as our production, operating and capital cost guidance for 2016.”

The net loss and loss per share in the second quarter of 2016 were $5.7 million and $0.02, respectively, compared to a net loss and loss per share of $44.3 million and $0.19, respectively, in the second quarter of 2015. In the comparable period last year, there was an asset impairment charge of $19.9 million as a result of the decision not to proceed with construction of the new concentrator at Lalor following the acquisition of the New Britannia mine and mill. Net loss and loss per share in the second quarter of 2016 was affected by, among other things, non-cash deferred tax adjustments of $8.4 million or negative $0.04 per share.

^{______________________________________
1} Cash cost and all-in sustaining cash cost, net of by-product credits, per pound of copper produced, operating cash flow before changes in non-cash working capital, and operating cash flow per share are not recognized under IFRS. For a detailed description of each of these non-IFRS financial performance measures, please see the discussion under “Non-IFRS Financial Performance Measures” beginning on page 5 of this news release.

	TSX, NYSE – HBM
	2016 No. 13

Notwithstanding lower copper and zinc realized prices, revenues nearly doubled and gross profit increased more than ten-fold compared to the same quarter last year as a result of higher sales volumes and cost optimization at Hudbay’s operations. As a result of production growth and ongoing cost optimization initiatives, consolidated cash cost, net of by-product credits, declined to $0.83 per pound of copper produced from $1.28 per pound in the second quarter of 2015. Similarly, incorporating sustaining capital, capitalized exploration, royalties and corporate general and administrative (“G&A”) costs, consolidated all-in sustaining cash cost, net of by-product credits, declined to $1.42 per pound from $2.28 per pound in the second quarter of 2015 and $1.80 per pound in the first quarter of 2016.

Sales of copper contained in concentrate lagged production in the second quarter of 2016 mainly as a result of a delay in loading a 20,000 tonne parcel of concentrate at the port of Matarani in Peru due to extended ocean swells in late June. Earnings per share and operating cash flow per share would have been approximately $0.02 and $0.05 higher, respectively, if this parcel had loaded prior to the end of the second quarter of 2016. Concentrate inventory at the Constancia mine site and the Matarani port are currently at normal working levels.

During the second quarter, a Canadian chartered bank joined the syndicate for Hudbay’s Canadian and Peruvian senior secured revolving credit facilities with $30.0 million in new commitments, bringing total commitments under the facilities to $530.0 million. Including this additional credit availability, cash flow generated from the business and collection of Peruvian sales tax refunds during the quarter, total liquidity at June 30, 2016 was $293.5 million, compared to $190.1 million at March 31, 2016.

A semi-annual dividend of $0.01 per share was declared on July 27, 2016. The dividend will be paid on September 30, 2016 to shareholders of record as of September 9, 2016.

Financial Condition ($000s)	Jun. 30, 2016	Dec. 31, 2015
Cash and cash equivalents	141,903	53,852
Total long-term debt	1,309,700	1,274,880
Net debt2	1,167,797	1,221,028
Working capital	112,865	57,613
Total assets	4,551,578	4,479,585
Equity	1,771,256	1,787,290

^{______________________________________
2} Net debt is not recognized under IFRS. For a detailed description of this non-IFRS financial performance measure, please see the discussion under “Non-IFRS Financial Performance Measures” beginning on page 5 of this news release.

2

	TSX, NYSE – HBM
	2016 No. 13

Financial Performance		Three months ended				Six months ended
($000s except per share and cash cost amounts)		June 30				June 30
		2016		2015		2016		2015
Revenue		246,975		150,889		500,600		279,602
Profit (loss) before tax		6,557		(45,818	)	(10,331	)	(57,298	)
Loss		(5,703	)	(44,290	)	(21,491	)	(64,127	)
Basic and diluted loss per share		(0.02	)	(0.19	)	(0.09	)	(0.27	)
Cash generated from operating activities		137,521		10,433		239,071		10,747
Operating cash flows before change in non-cash working capital1		75,059		17,022		146,945		33,923
Operating cash flow per share1		0.32		0.07		0.62		0.14
Cash cost per pound of copper produced, net of by-product credits1		0.83		1.28		0.97		1.33
All-in sustaining cash cost per pound of copper
produced, net of by-product credits1		1.42		2.28		1.59		2.39
Production
Contained metal in concentrate2
Copper	tonnes	45,892		36,212		84,771		51,220
Gold	oz	29,705		23,217		56,949		46,892
Silver	oz	996,511		779,364		1,719,427		1,090,232
Zinc	tonnes	26,456		23,486		49,832		46,392
Metal Sold
Payable metal in concentrate
Copper	tonnes	36,834		25,868		78,753		36,863
Gold	oz	26,755		15,175		44,472		27,525
Silver	oz	715,873		428,095		1,490,182		528,411
Refined zinc	tonnes	23,728		25,657		49,148		49,436

¹ Operating cash flow before change in non-cash working capital, operating cash flow per share, cash cost and all-in sustaining cash cost per pound of copper produced, net of by-product credits, are non-IFRS financial performance measures with no standardized definition under IFRS. For further information and a detailed reconciliation, please see page 5 of this news release.
² Metal reported in concentrate is prior to deductions associated with smelter contract terms.

Peru Operations Review

During the second quarter of 2016, Constancia mining operations and cost optimization continued as planned. Ore mined during the second quarter of 2016 slightly decreased compared to the first quarter of 2016 as ore production rates were aligned to mill throughput rates. Mined and milled copper grades in the second quarter of 2016 were 0.64% and 0.62%, respectively, which is slightly higher than the first quarter of 2016. Mill throughput during the second quarter of 2016 was affected by higher than expected liner wear in the semi-autogenous grinding (SAG) mills. The affected liners were successfully replaced in July 2016.

Optimization of plant performance remains the primary focus for Constancia. Total copper recovery in the second quarter of 2016 was 82.7%, compared to 81.8% in first quarter of 2016, as the metallurgy associated with the varying ore types is better understood.

During the second quarter of 2016, production of copper, gold and silver increased by 19%, 50% and 53%, respectively, compared to the first quarter of 2016. This growth is due to higher throughput, grades and recoveries at the mill.

3

	TSX, NYSE – HBM
	2016 No. 13

Combined unit operating costs for the second quarter of 2016 were $7.88 per tonne, within guidance expectations for 2016. Cash cost and sustaining cash cost, net of by-product credits, for the three months ended June 30, 2016 were $0.97 and $1.39 per pound of copper produced, respectively, a decrease of 16% and 7% from the first quarter of 2016, which reflects higher production and ongoing plant optimization and cost reduction initiatives.

The port expansion at Matarani was completed at the end of June 2016, which improved access to Hudbay’s designated pier and reduced port costs.

Manitoba Operations Review

Ore mined at Hudbay’s Manitoba mines during the second quarter of 2016 increased by 17% compared to the same period in 2015 as a result of increased production at Lalor and 777. Copper grades were higher at Reed as a result of the stopes mined. This was offset by lower copper grades at the 777 and Lalor mines, as expected. Silver grades in the second quarter of 2016 were in line with the same period in 2015, while zinc and gold grades were lower than the second quarter of 2015 by 8% and 11%, respectively.

Ore processed in the Flin Flon concentrator in the second quarter of 2016 was 17% higher than the same period in 2015 primarily as a result of higher production at the 777 mine. Gold and silver recoveries were higher in the second quarter of 2016 compared to the same period in 2015 as a result of higher head grades, while zinc recovery was slightly lower due to lower zinc head grades. Ore processed in the Snow Lake concentrator in the second quarter of 2016 was 15% higher than the same period in 2015 as a result of higher production at the Lalor mine.

During the second quarter of 2016, overall Manitoba production of copper, zinc, gold and silver were higher by 15%, 13%, 9% and 16%, respectively, as compared to the same period in 2015 as a result of higher mill throughput, offset by lower grades when compared to the same quarter in 2015.

Manitoba combined mine, mill and G&A unit operating costs in the second quarter of 2016 were 18% lower than in the same period in 2015 as a result of higher overall production and ongoing cost reduction initiatives, and were in line with full year guidance expectations.

Manitoba cash cost and sustaining cash cost, net of by-product credits, in the second quarter of 2016 was $0.37 and $1.10 per pound of copper produced, a decrease of 73% and 48%, respectively, compared to the same period in 2015. The decrease is largely the effect of decreased purchases of zinc concentrate for processing, a decrease in general support costs as a result of cost reduction initiatives, and a reduction in costs in US dollar terms as a result of the weaker Canadian dollar versus the US dollar. Cash cost and sustaining cash cost were also positively impacted by increased copper production and increased sales of precious metals.

4

	TSX, NYSE – HBM
	2016 No. 13

Non-IFRS Financial Performance Measures

Operating cash flow before change in non-cash working capital and operating cash flow per share are included in this news release because the company believes that they help investors and management to evaluate changes in cash flow generated from the various operations while, in the case of operating cash flow per share, taking into account changes in shares outstanding. Net debt is shown because it is a performance measure used by the company to assess its financial position. Cash cost, sustaining and all-in sustaining cash cost per pound of copper produced are shown because the company believes they help investors and management assess the performance of its operations, including the margin generated by the operations and the company. These measures do not have a meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers. These measures should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS and are not necessarily indicative of operating profit or cash flow from operations as determined under IFRS. Other companies may calculate these measures differently. For further details on these measures, including reconciliations to the most comparable IFRS measures, please refer to page 25 of Hudbay’s management’s discussion and analysis for the three and six months ended June 30, 2016 available on SEDAR at www.sedar.com and EDGAR at www.sec.gov.

Hudbay’s calculation of cash cost per pound of copper produced (“cash cost”) designates copper as the company’s primary metal of production as it has been, and is expected to be, the largest component of revenues. The calculation is presented in four manners:

• Cash cost, before by-product credits – This measure is gross of by-product revenues and is a function of the efforts and costs incurred to mine and process all ore mined. However, the measure divides this aggregate cost over only pounds of copper produced, Hudbay’s primary metal of production. This measure is generally less volatile from period to period, as it is not affected by changes in the price received for by- product metals. It is, however, significantly affected by the relative mix of copper concentrate and finished zinc production, and an increase in production of zinc metal will tend to result in an increase in cash cost under this measure.

• Cash cost, net of by-product credits – In order to calculate the net cost to produce and sell copper, the net of by-product credits measure subtracts the revenues realized from the sale of the metals other than copper. The by-product revenues from zinc, gold, and silver are significant and are integral to the economics of Hudbay’s operations. The economics that support Hudbay’s decision to produce and sell copper would be different if the company did not receive revenues from the other significant metals being extracted and processed. This measure provides management and investors with an indication of the minimum copper price consistent with positive operating cash flows and operating margins, assuming realized by-product metal prices are consistent with those prevailing during the reporting period. It also serves as an important operating statistic that management and investors utilize to measure the company’s operating performance versus that of its competitors. However, it is important to understand that if by-product metal prices decline alongside copper prices, the cash cost net of by-product credits would increase, requiring a higher copper price than that reported to maintain positive cash flows and operating margins.

• Sustaining cash cost, net of by-product credits – This measure is an extension of cash cost that includes sustaining capital expenditures, capitalized exploration and net smelter returns royalties. It does not include corporate G&A. It provides a more fulsome measurement of the cost of sustaining production than cash cost, which is focused on operating costs only.

5

	TSX, NYSE – HBM
	2016 No. 13

• All-in sustaining cash cost, net of by-product credits – This measure is an extension of sustaining cash cost that includes corporate G&A. Due to the inclusion of corporate G&A, all-in sustaining cash cost is presented on a consolidated basis only.

The table below presents a summary of cash cost and sustaining cash cost, net of by-product credits, by business unit in addition to consolidated all-in sustaining cash cost, net of by-product credits, for the three and six months ended June 30, 2016 and 2015. Totals may not add up correctly due to rounding.

	Peru				Manitoba				Consolidated
(In $ per pound of copper produced1 )	Three Months Ended June 30
	2016		2015		2016		2015		2016		2015
Cash cost, before by-product credits	1.07		1.24		3.46		4.60		1.65		2.42
By-product credits	(0.10	)	(0.01	)	(3.08	)	(3.23	)	(0.82	)	(1.14	)
Cash cost, net of by-product credits	0.97		1.23		0.37		1.37		0.83		1.28
Sustaining capital expenditures2	0.40		0.87		0.61		0.59		0.45		0.77
Capitalized exploration	-		-		0.04		0.07		0.01		0.02
Royalties	0.01		-		0.08		0.08		0.03		0.03
Sustaining cash cost, net of by-product credits	1.39		2.10		1.10		2.11		1.32		2.11
Corporate G&A	-		-		-		-		0.10		0.17
All-in sustaining cash cost, net of by-product credits	-		-		-		-		1.42		2.28

	Peru				Manitoba				Consolidated
(In $ per pound of copper produced1 )	Six Months Ended June 30
	2016		2015		2016		2015		2016		2015
Cash cost, before by-product credits	1.16		1.24		3.66		4.35		1.78		2.90
By-product credits	(0.11	)	(0.01	)	(2.93	)	(2.94	)	(0.80	)	(1.57	)
Cash cost, net of by-product credits	1.05		1.23		0.73		1.42		0.97		1.33
Sustaining capital expenditures2	0.36		0.87		0.84		0.66		0.48		0.76
Capitalized exploration	-		-		0.03		0.07		0.01		0.03
Royalties	0.02		-		0.07		0.06		0.03		0.04
Sustaining cash cost, net of by-product credits	1.44		2.10		1.67		2.20		1.49		2.16
Corporate G&A	-		-		-		-		0.10		0.23
All-in sustaining cash cost, net of by-product credits	-		-		-		-		1.59		2.39

¹ Contained copper in concentrate.
² Excludes costs associated with pre-commercial production output.

6

	TSX, NYSE – HBM
	2016 No. 13

Website Links

Hudbay:

www.hudbayminerals.com

Management’s Discussion and Analysis:

http://www.hudbayminerals.com/files/doc_financials/2016/Q2/MDAQ22016.pdf

Financial Statements:

http://www.hudbayminerals.com/files/doc_financials/2016/Q2/FSQ22016.pdf

Conference Call and Webcast

Date:	Thursday, July 28, 2016
Time:	10 a.m. ET
Webcast:	www.hudbayminerals.com
Dial in:	416-849-1847 or 1-866-530-1554
Replay:	647-436-0148 or 1-888-203-1112
Replay Passcode:	5000396#

The conference call replay will be available until 1 p.m. (Eastern Time) on August 4, 2016. An archived audio webcast of the call also will be available on Hudbay's website.

Qualified Person

The technical and scientific information in this news release related to the Constancia mine has been approved by Cashel Meagher, P. Geo, Hudbay’s Senior Vice President and Chief Operating Officer. The technical and scientific information related to all other sites and projects contained in this news release has been approved by Robert Carter, P. Eng, Hudbay’s Director, Business Development and Technical Services at the Manitoba Business Unit. Messrs. Meagher and Carter are qualified persons pursuant to NI 43-101. For a description of the key assumptions, parameters and methods used to estimate mineral reserves and resources, as well as data verification procedures and a general discussion of the extent to which the estimates of scientific and technical information may be affected by any known environmental, permitting, legal title, taxation, sociopolitical, marketing or other relevant factors, please see the Technical Reports for the company’s material properties as filed by Hudbay on SEDAR at www.sedar.com.

7

	TSX, NYSE – HBM
	2016 No. 13

Forward-Looking Information

This news release contains forward-looking information within the meaning of applicable Canadian and United States securities legislation. All information contained in this news release, other than statements of current and historical fact, is forward-looking information. Often, but not always, forward-looking information can be identified by the use of words such as “plans”, “expects”, “budget”, “guidance”, “scheduled”, “estimates”, “forecasts”, “strategy”, “target”, “intends”, “objective”, “goal”, “understands”, “anticipates” and “believes” (and variations of these or similar words) and statements that certain actions, events or results “may”, “could”, “would”, “should”, “might” “occur” or “be achieved” or “will be taken” (and variations of these or similar expressions). All of the forward-looking information in this news release is qualified by this cautionary note.

Forward-looking information includes, but is not limited to, production, cost and capital and exploration expenditure guidance, including anticipated capital and operating cost savings, anticipated production at the company’s mines and processing facilities, events that may affect its operations and development projects, the potential to refurbish the New Britannia mill and utilize it to process ore from the Lalor mine, anticipated cash flows from operations and related liquidity requirements, the anticipated effect of external factors on revenue, such as commodity prices, economic outlook, government regulation of mining operations, and business and acquisition strategies. Forward-looking information is not, and cannot be, a guarantee of future results or events. Forward-looking information is based on, among other things, opinions, assumptions, estimates and analyses that, while considered reasonable by us at the date the forward-looking information is provided, inherently are subject to significant risks, uncertainties, contingencies and other factors that may cause actual results and events to be materially different from those expressed or implied by the forward-looking information.

The material factors or assumptions that Hudbay identified and were applied by the company in drawing conclusions or making forecasts or projections set out in the forward-looking information include, but are not limited to:

•   the success of mining, processing, exploration and development activities;

•   the success of Hudbay’s cost reduction initiatives;

•   the accuracy of geological, mining and metallurgical estimates;

•   anticipated metals prices and the costs of production;

•   the supply and demand for metals that Hudbay produces;

•   the supply and availability of concentrate for Hudbay’s processing facilities;

•   the supply and availability of third party processing facilities for Hudbay’s concentrate;

•   the supply and availability of all forms of energy and fuels at reasonable prices;

•   the availability of transportation services at reasonable prices;

•   no significant unanticipated operational or technical difficulties;

• the execution of Hudbay’s business and growth strategies, including the success of its strategic investments and initiatives;

•   the availability of additional financing, if needed;

• the ability to complete project targets on time and on budget and other events that may affect Hudbay’s ability to develop its projects;

•   the timing and receipt of various regulatory and governmental approvals;

• the availability of personnel for Hudbay’s exploration, development and operational projects and ongoing employee relations;

•   the ability to secure required land rights to develop the Pampacancha deposit;

• maintaining good relations with the communities in which Hudbay operates, including the communities surrounding its Constancia mine and Rosemont project and First Nations communities surrounding its Lalor and Reed mines;

8

	TSX, NYSE – HBM
	2016 No. 13

•   no significant unanticipated challenges with stakeholders at Hudbay’s various projects;

• no significant unanticipated events or changes relating to regulatory, environmental, health and safety matters;

• no contests over title to Hudbay’s properties, including as a result of rights or claimed rights of aboriginal peoples;

•   the timing and possible outcome of pending litigation and no significant unanticipated litigation;

• certain tax matters, including, but not limited to current tax laws and regulations and the refund of certain value added taxes from the Canadian and Peruvian governments; and

• no significant and continuing adverse changes in general economic conditions or conditions in the financial markets (including commodity prices and foreign exchange rates).

The risks, uncertainties, contingencies and other factors that may cause actual results to differ materially from those expressed or implied by the forward-looking information may include, but are not limited to, risks generally associated with the mining industry, such as economic factors (including future commodity prices, currency fluctuations, energy prices and general cost escalation), uncertainties related to the development and operation of Hudbay’s projects (including risks associated with the economics and permitting of the Rosemont project and related legal challenges), risks related to the maturing nature of the 777 mine and its impact on the related Flin Flon metallurgical complex, dependence on key personnel and employee and union relations, risks related to political or social unrest or change, risks in respect of aboriginal and community relations, rights and title claims, operational risks and hazards, including unanticipated environmental, industrial and geological events and developments and the inability to insure against all risks, failure of plant, equipment, processes, transportation and other infrastructure to operate as anticipated, planned infrastructure improvements in Peru not being completed on schedule or as planned, compliance with government and environmental regulations, including permitting requirements and anti-bribery legislation, depletion of Hudbay’s reserves, volatile financial markets that may affect Hudbay’s ability to obtain additional financing on acceptable terms, the permitting and development of the Rosemont project not occurring as planned, the failure to obtain required approvals or clearances from government authorities on a timely basis, uncertainties related to the geology, continuity, grade and estimates of mineral reserves and resources, and the potential for variations in grade and recovery rates, uncertain costs of reclamation activities, the company’s ability to comply with its pension and other post-retirement obligations, Hudbay’s ability to abide by the covenants in its debt instruments and other material contracts, tax refunds, hedging transactions, as well as the risks discussed under the heading “Risk Factors” in the company’s most recent Annual Information Form.

Should one or more risk, uncertainty, contingency or other factor materialize or should any factor or assumption prove incorrect, actual results could vary materially from those expressed or implied in the forward-looking information. Accordingly, you should not place undue reliance on forward-looking information. Hudbay does not assume any obligation to update or revise any forward-looking information after the date of this news release or to explain any material difference between subsequent actual events and any forward-looking information, except as required by applicable law.

9

	TSX, NYSE – HBM
	2016 No. 13

Note to United States Investors

This news release has been prepared in accordance with the requirements of the securities laws in effect in Canada, which may differ materially from the requirements of United States securities laws applicable to U.S. issuers.

About Hudbay

Hudbay (TSX, NYSE: HBM) is an integrated mining company producing copper concentrate (containing copper, gold and silver) and zinc metal. With assets in North and South America, the company is focused on the discovery, production and marketing of base and precious metals. Through its subsidiaries, Hudbay owns four polymetallic mines, four ore concentrators and a zinc production facility in northern Manitoba and Saskatchewan (Canada) and Cusco (Peru) and a copper project in Arizona (United States). The company’s growth strategy is focused on the exploration and development of properties it already controls, as well as other mineral assets it may acquire that fit its strategic criteria. Hudbay’s vision is to become a top-tier operator of long-life, low cost mines in the Americas. Hudbay’s mission is to create sustainable value through the acquisition, development and operation of high-quality and growing long-life deposits in mining-friendly jurisdictions. 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. Hudbay also has warrants listed under the symbol “HBM.WT” on the Toronto Stock Exchange and “HBM/WS” on the New York Stock Exchange.

For further information, please contact:

Candace Brûlé
Director, Investor Relations
(416) 814-4387
candace.brule@hudbay.com

10