Share-based compensation

12 Months Ended

Dec. 31, 2020

Disclosure of terms and conditions of share-based payment arrangement [abstract]

24. Share-based compensation

(a) Cash-settled share-based compensation:

Hudbay has three cash-settled share-based compensation plans, as described below.

Deferred Share Units (DSU)

At December 31, 2020, the carrying amount and the intrinsic value of the outstanding liability related to the DSU plan was $8,719 (December 31, 2019 - $3,876) (note 19). The following table outlines information related to DSUs granted, expenses recognized and payments made during the year.

		Year ended
		Dec. 31, 2020		Dec. 31, 2019
Granted during the year:
Number of units		465,889		337,999
Weighted average price (C$/unit)	$	4.10	$	5.89
Expenses recognized during the year¹ (notes 6c)	$	5,149	$	1,157
Payments made during the year (note 19)	$	497	$	1,668

¹This expense relates to the grant of DSUs, as well as mark-to-market adjustments, and is presented within selling and administrative expenses on the consolidated income statements.

Restricted Share Units (RSU)

RSUs granted under the LTEP Plan may be settled in the form of Hudbay common shares or, at the option of the Company, the cash equivalent based on the market price of the common shares as of the vesting date. RSUs may also be granted under Hudbay's Share Unit Plan, however; the RSUs granted under the Share Unit Plan may only be settled in cash. Hudbay has historically settled all RSUs in cash. The Company has determined that the appropriate accounting treatment is to classify the RSUs as cash settled transactions.

At December 31, 2020, the carrying amount of the outstanding liability related to the RSU plan was $10,449 (December 31, 2019 - $5,477) (note 19). The following table outlines information related to RSUs granted, expenses recognized and payments made in the year.

		Year ended
		Dec. 31, 2020			Dec. 31, 2019
Number of units, beginning of year ¹		2,223,999			3,666,867
Number of units granted during the year		1,388,786			1,080,741
Credits for dividends		17,587			7,554
Number of units forfeited during the year		(44,678	)		(573,914	)
Number of units vested		(645,357	)		(1,957,249	)
Number of units, end of year¹		2,940,337			2,223,999
Weighted average price - granted (C$/unit)	$	3.98		$	8.98
Expenses recognized during the year² (note 6c)	$	6,750		$	1,557
Payments made during the year (note 19)	$	2,646		$	9,380

¹ Includes 738,002 and 616,397 units that have vested; however, are unreleased and unpaid as of December 31, 2020 and December 31, 2019, respectively.

²This net expense reflects recognition of RSU expense over the service period, as well as mark-to-market adjustments, and is presented mainly within cost of sales and selling and administrative expenses. Certain amounts related to the Arizona segment are capitalized.

Performance Share Units (PSU)

PSUs granted under the LTEP Plan may be settled in the form of Hudbay common shares or, at the option of the Company, the cash equivalent based on the market price of the common shares as of the vesting date. Hudbay has historically settled similar share-based compensation units in cash. The Company has determined that the appropriate accounting treatment is to classify the PSUs as cash settled transactions.

At December 31, 2020, the carrying amount of the outstanding liability related to PSU plan was $2,030 (December 31, 2019 - $0) (note 19). The following table outlines information related to PSUs granted, expenses recognized and payments made in the year.

		Year ended
		Dec. 31, 2020		Dec. 31, 2019
Number of units, beginning of year		—		—
Number of units granted during the year		1,089,569		—
Credits for dividends		6,046		—
Number of units, end of year		1,095,615		—
Weighted average price - granted (C$/unit)	$	3.97	$	—
Expenses recognized during the year (note 6c)	$	1,987	$	—
Payments made during the year (note 19)	$	—	$	—

(b) Equity-settled share-based compensation - stock options:

The Company's stock option plan was approved in June 2005 and amended in May 2008 (the "Plan"). Under the amended Plan, the Company may grant to employees, officers, directors or consultants of the Company or its affiliates options to purchase up to a maximum of 13 million common shares of Hudbay. The Company has determined that the appropriate accounting treatment is to classify the stock options as equity settled transactions.

During the year ended December 31, 2020, the Company granted 1,581,385 stock options (year ended December 31, 2019 - nil).

The following table presents the weighted average fair value assumptions used in the Black-Scholes valuation of these options:

For options granted during the year ended		Dec. 31, 2020
Weighted average share price at grant date (CAD)	$	3.77
Risk-free rate		1.14%
Expected dividend yield		0.5%
Expected stock price volatility (based on historical volatility)		57.0%
Expected life of option (months)		84
Weighted average per share fair value of stock options granted (CAD)	$	2.02

During the year ended December 31, 2020, 18,196 stock options were forfeited, which resulted in 1,563,189 options outstanding as of December 31, 2020. There are no stock options outstanding that are exercisable as at December 31, 2020.

Dec. 31, 2020

Range of
exercise prices
C$

Number of
options
outstanding

Weighted
average
remaining
contractual life
(years)

Weighted
average
exercise price
C$

Number of
options
exercisable

Weighted
average share
price at
exercise date
C$

$3.76 - $3.92

1,563,189

6.16

3.77

—

No options were granted under the Plan during the year ended December 31, 2019.

Hudbay estimates expected life of options and expected volatility based on historical data, which may differ from actual outcomes.

Year ended

Year ended

Dec. 31, 2020

Dec. 31, 2019

Number of

shares

subject to

option

Weighted-

average

exercise price

Number of

shares subject

to option

Weighted

average

exercise price

Balance, beginning of year

—

Number of units granted during the year

1,581,385

3.77

—

Forfeited

(18,196

)

3.76

—

Balance, end of year

1,563,189

3.77

—