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Financial instruments
 12 Months Ended
Dec. 31, 2021
Disclosure of detailed information about financial instruments [abstract]  
Financial instruments [Text Block]

26. Financial instruments

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

The following presents the fair value ("FV") and carrying value ("CV") of Hudbay's financial instruments and non-financial derivatives:

    Dec. 31, 2021     Dec. 31, 2020  
    FV     CV     FV     CV  
Financial assets at amortized cost                        
Cash1 $ 270,989   $ 270,989   $ 439,135   $ 439,135  
Restricted cash1   437     437     337     337  
Fair value through profit or loss                        
Trade and other receivables 1, 2, 3   172,890     172,890     114,381     114,381  
Non-hedge derivative assets 4   7,430     7,430     2,736     2,736  
Investments 5   11,158     11,158     15,669     15,669  
Total financial assets $ 462,904   $ 462,904   $ 572,258   $ 572,258  
Financial liabilities at amortized cost                        
Trade and other payables1, 2   189,179     189,179     209,413     209,413  
Deferred Rosemont acquisition consideration 8   27,518     27,518     25,961     25,961  
Agreements with communities 6   33,947     36,273     41,912     40,787  
Wheaton refund liability10   5,424     5,424     -     -  
Senior unsecured notes 7   1,239,018     1,185,805     1,277,124     1,139,695  
Fair value through profit or loss                        
Gold prepayment liability 9   140,008     140,008     137,031     137,031  
Non-hedge derivative liabilities 4   12,451     12,451     15,312     15,312  
Total financial liabilities $ 1,647,545   $ 1,596,658   $ 1,706,753   $ 1,568,199  

1 Cash, 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 tax and other statutory amounts.

3 Trade and other receivables contain receivables including provisionally priced receivables classified as FVTPL and various other items at amortized cost. The fair value of provisionally priced receivables is determined using forward metals prices which is a level 2 valuation method.

4 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.

5 All investments are carried at their fair value, which is determined using quoted market bid prices in active markets for listed shares.

6 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.

7 Fair value of the senior unsecured notes (note 16) has been determined using the quoted market price at the period end. Fair value incorporates the fair value of the prepayment option embedded derivative. The carrying value of this embedded derivative is at FVTPL (2021: nil; 2020: $49,754) and has been determined using a binomial tree/lattice approach based on the Hull-White single factor interest rate term structure model.

8 Discounted value based on a risk adjusted discount rate.

9 The gold prepayment liability (note 14) is designated as fair value through profit or loss under the fair value option. Gains and losses related to the Company's own credit risk have been recorded at fair value through other comprehensive income. The fair value adjustment recorded in other comprehensive income for the year ended December 31, 2021 was a loss of $2,684 (year ended December 31, 2020 was a loss of $1,885).
10 Discounted value based on a market rate at inception of the applicable Wheaton contract (note 17).

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.

December 31, 2021   Level 1     Level 2     Level 3     Total  
Financial assets measured at fair value                        
Financial assets at FVTPL:                        
Non-hedge derivatives $ -   $ 7,430   $ -   $ 7,430  
Investments   11,158     -     -     11,158  
  $ 11,158   $ 7,430   $ -   $ 18,588  
Financial liabilities measured at fair value                        
Financial liabilities at FVTPL:                        
Non-hedge derivatives $ -   $ 12,451   $ -   $ 12,451  
Gold prepayment liability   -     140,008     -     140,008  
Financial liabilities at amortized cost:                        
Agreements with communities   -     -     33,947     33,947  
Wheaton refund liability   -     -     5,424     5,424  
Senior unsecured notes   1,239,018     -     -     1,239,018  
  $ 1,239,018   $ 152,459   $ 39,371   $ 1,430,848  
December 31, 2020   Level 1     Level 2     Level 3     Total  
Financial assets measured at fair value                        
Financial assets at FVTPL:                        
Non-hedge derivatives $ -   $ 2,736   $ -   $ 2,736  
Investments   15,669     -     -     15,669  
  $ 15,669   $ 2,736   $ -   $ 18,405  
Financial liabilities measured at fair value                        
Financial liabilities at FVTPL:                        
Non-hedge derivatives $ -   $ 15,312   $ -   $ 15,312  
Gold prepayment liability   -     137,031     -     137,031  
Financial liabilities at amortized cost:                        
Agreements with communities   -     -     41,912     41,912  
Senior unsecured notes   1,277,124     -     -     1,277,124  
  $ 1,277,124   $ 152,343   $ 41,912   $ 1,471,379  

 

The Company'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 year ended December 31, 2021 and year ended December 31, 2020, Hudbay did not make any such transfers.

The following valuation techniques are used for instruments categorized in Levels 2 and 3:

- Non-hedge derivatives (Level 2) - These contracts have been fair valued using observable forward commodity prices corresponding to the maturity of the contract.

- Gold prepayment liability (Level 2) - This contract have been fair valued using observable gold forward prices corresponding to the delivery date of gold ounces in the contract along with an estimate of credit risk for similar instruments.

- Agreements with communities (Level 3) - These contracts have been fair valued using an applicable credit-risk adjusted discount rate and foreign exchange rates.

- Wheaton refund liability (Level 3) - This liability has been fair valued using 777 reserve and resources estimates which management believes will be converted to reserves, future commodity price estimates, estimated timing of deliveries of precious metals to Wheaton and a 9.0% discount rate inherent in the original stream agreement.

Reasonable changes to inputs of financial instruments categorized as Level 3 were insignificant.

(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 December 31, 2021, Hudbay had 72.8 million pounds of net copper swaps outstanding at an effective average price of $4.34/lb and settling across January to April 2022. As at December 31, 2020, Hudbay had 43.4 million pounds of net copper swaps outstanding at an effective average price of $3.22/lb and settling across January to April 2021. The aggregate fair value of the transactions at December 31, 2021 was a liability of $5,440 (December 31, 2020 - a liability position of $13,198).

Transactions involving derivatives are with large multi-national financial institutions that Hudbay believes to be credit worthy.

Non-hedge derivative zinc contracts

Hudbay enters into future dated fixed price sales contracts with zinc customers and, to ensure that the Company 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 December 31, 2021, Hudbay held contracts for forward zinc purchased of 3.1 million pounds (December 31, 2020 - 3.5 million pounds) that related to forward customer sales of zinc. Prices range from $1.44/lb to $1.52/lb (December 31, 2020 - $0.87/lb to $1.30/lb) and settlement dates extend to June 2022. The aggregate fair value of the transactions at December 31, 2021 was a net asset position of $419 (December 31, 2020 - a net asset position of $622).

(c) Provisionally priced receivables

Changes in fair value of provisionally priced receivables

Hudbay records changes in fair value of provisionally priced receivables 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.

Changes in fair value of provisionally priced receivables 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 revenue for sales contracts and in inventory or cost of sales for purchase concentrate contracts. Cash flows related to changes in fair value of provisionally priced receivables are classified in operating activities.

As at December 31, 2021 and December 31, 2020, Hudbay's net position consisted of contracts awaiting final pricing which are as indicated below:

Metal in
concentrate		     Sales awaiting final pricing     Average YTD price ($/unit)  
Unit   Dec. 31, 2021     Dec. 31, 2020     Dec. 31, 2021     Dec. 31, 2020  
Copper pounds
(in thousands) 		  75,681     47,901     4.42     3.52  
Gold oz   27,304     18,106     1,828     1,894  
Silver oz   125,800     123,380     23.33     26.35  

The aggregate fair value of provisionally priced receivables within the copper and zinc concentrate sales contracts at December 31, 2021, was an asset position of $6,500 (December 31, 2020 - an asset position of $21,295).

(d) Embedded derivatives

Prepayment option embedded derivative

The senior unsecured notes (note 16) may contain prepayment options, which represent embedded derivatives that may require bifurcation from the host contract. When bifurcation is required, the embedded derivatives are measured at fair value, with changes in the fair value being recognized as change in fair value of financial instruments on the consolidated income statements (note 5g). Neither the 2026 Notes nor the 2029 Notes contain embedded derivatives that require bifurcation from the host contract. The fair value of the embedded derivative at December 31, 2021 was nil (December 31, 2020 - $49,754).

(e) Other financial liabilities

Gold prepayment liability

The gold prepayment liability (note 14) requires settlement by physical delivery of gold ounces or equivalent gold credits. The fair value of the financial liability at December 31, 2021 was a liability of $140,008 (December 31, 2020 - $137,031).

(f) Financial risk management

Hudbay's financial risk management activities are governed by Board-approved policies addressing risk identification, hedging authorization procedures and limits and reporting. The Company's policy objective, when hedging activities are undertaken, is to reduce the volatility of future profit and cash flow within the strategic and economic goals of Hudbay. From time to time, the Company employs derivative financial instruments, including forward and option contracts, to manage risk originating from exposures to commodity price risk, foreign exchange risk and interest rate risk. Significant derivative transactions are approved by the Board of Directors, and hedge accounting is applied when certain criteria have been met. Hudbay does not use derivative financial instruments for trading or speculation purposes. The following is a discussion of the Company's risk exposures.

(i) Market risk

Market risk is the risk that changes in market prices, including foreign exchange rates, commodity prices, share prices, and interest rates will cause fluctuations in the fair value or future cash flows of a financial instrument.

Foreign currency risk

Hudbay's primary exposure to foreign currency risk arises from:

- Translation of Canadian dollar denominated costs and, to a lesser extent, Peruvian soles cost into US dollars. Substantially all of the Company's revenue are denominated in US dollars, while the majority of its operating costs are denominated in either the Canadian dollar or Peruvian sol. Generally, with gross profit, appreciation of the US dollar relative to the Canadian dollar will increase Hudbay's profit.

- Translation of foreign currency denominated cash and cash equivalents, trade and other receivables, trade and other payables, as well as other financial liabilities. Appreciation of the US dollar relative to a foreign currency will decrease the net asset value of these balances once they have been translated to US dollars, resulting in foreign currency translation losses on foreign currency denominated assets and gains on foreign currency denominated liabilities.

The Manitoba segment's primary financial instrument foreign currency exposure is on US denominated cash and cash equivalents, trade and other receivables and other financial liabilities. The Peru segment's primary financial instrument foreign currency exposure is on Peruvian soles cash and cash equivalents, trade and other payables and other financial liabilities.

The Company's exposure to foreign currency risk was as follows based on notional financial instrument amounts stated in US equivalent dollars:

    Dec. 31, 2021     Dec. 31, 2020  
    CAD1     USD2     PEN3     CAD1     USD2     PEN3  
Cash $ 10,627   $ 34,439   $ 6,992   $ 7,791   $ 3,895   $ 4,141  
Trade and other receivables   595     71,458     36,470     31     43,316     36,951  
Other financial assets   11,158     -     -     15,669     -     -  
Trade and other payables   (6,347 )   (3,001 )   (17,006 )   (6,104 )   (1,419 )   (34,622 )
Other financial liabilities   -     -     (36,273 )   -     -     (40,787 )
  $ 16,033   $ 102,896   $ (9,817 ) $ 17,387   $ 45,792   $ (34,317 )

1 HMI is exposed to foreign currency risk on CAD.

2 The Manitoba segment is exposed to foreign currency risk on USD.

3 The Peru segment is exposed to foreign currency risk on PEN.

The following sensitivity analysis for foreign currency risk relates solely to financial instruments and non-financial derivatives that were outstanding as at the year-end date; each sensitivity calculation assumes all other variables are held constant. This analysis is based on values as at December 31, 2021 and does not reflect the overall effect that changes in market variables would have on the Company's operating results.

December 31, 2021 Change of:   Would have changed
2021 after-tax profit by:		  
USD/CAD exchange rate1 + 10% $ 4.8     million  
USD/CAD exchange rate1 - 10%   (5.7 )   million  
USD/PEN exchange rate2 + 10%   0.6     million  
USD/PEN exchange rate2 - 10%   (0.7 )   million  
December 31, 2020 Change of:   Would have changed
2020 after-tax profit by:		  
USD/CAD exchange rate1 + 10% $ 1.1     million  
USD/CAD exchange rate1 - 10%   (1.4 )   million  
USD/PEN exchange rate2 + 10%   2.0     million  
USD/PEN exchange rate2 - 10%   (2.5 )   million  

1 Effect on profit due to foreign currency remeasurements of balances denominated in a currency different from a Hudbay subsidiary's functional currency.
2 Effect on profit due to foreign currency remeasurement of balances denominated in Peruvian Sol.

Commodity price risk

Hudbay is exposed to market risk from prices for the commodities the Company produces and sells, such as copper, zinc, gold and silver. From time to time, Hudbay maintains price protection programs and conducts commodity price risk management through the use of derivative contracts. The following sensitivity analysis for commodity price risk relates solely to financial instruments and non-financial derivatives that were outstanding as at the year-end date; each sensitivity calculation assumes all other variables are held constant. This analysis is based on values as at December 31, 2021 and does not reflect the overall effect that changes in market variables would have on the Company's operating results.

December 31, 2021 Change of:   Would have changed
2021 after-tax profit by:		  
Copper prices ($/lb)1 + $0.30 $ 0.5     million  
Copper prices ($/lb)1 - $0.30   (0.5 )   million  
Zinc prices ($/lb)2 + $0.10   0.2     million  
Zinc prices ($/lb)2 - $0.10   (0.2 )   million  
December 31, 2020 Change of:   Would have changed
2020 after-tax profit by:		  
Copper prices ($/lb)1 + $0.30 $ (1.4 )   million  
Copper prices ($/lb)1 - $0.30   1.4     million  
Zinc prices ($/lb)2 + $0.10   0.3     million  
Zinc prices ($/lb)2 - $0.10   (0.3 )   million  

1 Effect on profit due to provisional pricing derivatives (note 26c) and copper fixed for floating swaps (note 26b).
2 Effect on non-hedge zinc derivatives (note 26b).

Share price risk

Hudbay is exposed to market risk from share prices of the Company's investments in listed Canadian metals and mining entities. These investments are made to foster strategic relationships, in connection with joint venture agreements and for investment purposes. Management monitors the value of these investments for the purposes of determining whether to add or reduce Hudbay's positions. The following sensitivity analysis of share price risk relates solely to financial instruments that were outstanding as at the year-end date; each sensitivity calculation assumes all other variables are held constant. This analysis is based on values as at December 31, 2021 and does not reflect the overall effect that changes in market variables would have on the Company's finance expenses.

December 31, 2021 Change of:   Would have changed 2021
after-tax profit by:		  
Share prices + 25% $ 2.8     million  
Share prices - 25%   (2.8 )   million  
December 31, 2020 Change of:   Would have changed 2020
after-tax profit by:		  
Share prices + 25% $ 3.9     million  
Share prices -25%   (3.9 )   million  

Interest rate risk

Hudbay is exposed to the following interest rate risks:

- cash flow interest rate risk on its cash and cash equivalents;

- fair value interest rate risk on any embedded derivative associated with its senior notes; and,

- interest rate risk on its senior secured revolving credit facilities.

The only relevant risks at December 31, 2021 is interest rate risk on its cash and cash equivalents. The senior secured revolving credit facilities remain undrawn as at December 31, 2021. Neither the 2026 Notes nor the 2029 Notes contain embedded derivatives that require bifurcation from the host contract.

The only material of these risks at December 31, 2020 was the embedded derivative associated with the 2025 Notes.

This analysis only quantifies the impact of the embedded derivative on the senior notes and the interest rate risk on cash based on values as at December 31, 2021 and 2020 and does not reflect the overall effect that changes in market variables would have on the Company's finance expenses.

December 31, 2021 Change of:   Would have changed
2021 after-tax profit by:		  
Interest rates + 2.00% $ 5.4     million  
Interest rates - 2.00%   (5.4 )   million  
December 31, 2020 Change of:   Would have changed
2020 after-tax profit by:		  
Interest rates + 2.00% $ (29.2 )   million  
Interest rates - 2.00%   39.7     million  

 

(ii) Credit risk

Credit risk is the risk of financial loss to Hudbay if a customer or counterparty to a financial instrument fails to meet its obligations. The Company's maximum exposure to credit risk at the reporting date is represented by the carrying amount, net of any impairment losses recognized, of financial assets and non-financial derivative assets recorded on the consolidated balance sheets. Refer to note 26a.

A large portion of Hudbay's cash are on deposits with major Schedule 1 Canadian banks. Deposits with Schedule 1 Canadian banks represented 76% of total cash as at December 31, 2021 (2020 - 90%). Hudbay's investment policy requires it to comply with a list of approved investments, concentration and maturity limits, as well as credit quality. Credit concentrations in the Company's short-term investments are monitored on an ongoing basis.

Transactions involving derivatives are with counterparties Hudbay believes to be creditworthy.

Management has a credit policy in place that requires the Company to obtain credit insurance from an investment grade credit insurance provider to mitigate exposure to credit risk in its receivables. At December 31, 2021, approximately 96% of Hudbay's trade receivables were insured or payable by letters of credit (2020 - 95% were insured or payable by letters of credit). Insured receivables have a credit insurance deductible of 10%. The deductible and any additional exposure to credit risk is monitored and approved on an ongoing basis.

Two customers accounted for approximately 29% and 23% of total trade receivables as at December 31, 2021 (2020 - two customers accounted for approximately 40% and 16% of total trade receivables). Credit risk for these customers is assessed as medium to low. As at December 31, 2021, none of the Company's trade receivables were aged more than 30 days (2020 - nil).

(iii) Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its obligations associated with financial liabilities. Hudbay's objective is to maintain sufficient liquid resources to meet operational and investing requirements.

The following summarizes the contractual undiscounted cash flows of the Company's non-derivative and derivative financial liabilities, including any interest payments, by remaining contractual maturity and financial assets used to manage liquidity risk. The table includes all instruments held at the reporting date for which payments had been contractually agreed at the reporting date. The undiscounted amounts shown are gross amounts, unless the liabilities will be settled net. Amounts in foreign currency are translated at the closing rate at the reporting date. When a counterparty has a choice of when an amount is paid, the liability is allocated to the earliest possible time period.

Dec. 31, 2021   Carrying
amount		     Contractual
cash flows		     12 months
or less		     13 - 36
months		     37 - 60
months		     More than
60 months		  
Assets used to manage liquidity risk                          
Cash $ 270,989   $ 270,989   $ 270,989   $ -   $ -   $ -  
Restricted cash   437     437     437     -     -     -  
Trade and other receivables   172,890     172,890     172,890     -     -     -  
Non-hedge derivative assets   7,430     7,430     7,430     -     -     -  
  $ 451,746   $ 451,746   $ 451,746   $ -   $ -   $ -  
Non-derivative financial liabilities                          
Trade and other payables, including embedded derivatives $ (189,179 ) $ (189,179 ) $ (189,179 ) $ -   $ -   $ -  
Agreements with communities 1   (36,273 )   (52,497 )   (9,282 )   (9,719 )   (5,220 )   (28,276 )
Deferred Rosemont acquisition consideration   (27,518 )   (30,000 )   (10,000 )   (20,000 )   -     -  
Long-term debt   (1,185,805 )   (1,614,686 )   (68,348 )   (136,696 )   (717,767 )   (691,875 )
Gold prepayment obligation 2   (140,008 )   (140,008 )   (71,394 )   (68,614 )   -     -  
Wheaton refund liability   (5,424 )   (78,500 )   -     -     -     (78,500 )
  $ (1,584,207 ) $ (2,104,870 ) $ (348,203 ) $ (235,029 ) $ (722,987 ) $ (798,651 )
Derivative financial liabilities                          
Non hedge derivative contracts $ (12,451 ) $ (12,451 ) $ (12,451 ) $ -   $ -   $ -  
  $ (12,451 ) $ (12,451 ) $ (12,451 ) $ -   $ -   $ -  

1 Represents the Peru community agreement obligation, excluding interest.
2 Discounted.

Dec. 31, 2020   Carrying
amount		     Contractual
cash flows		     12 months or
less		     13 - 36
months		     37 - 60
months		     More than 60
months		  
Assets used to manage liquidity risk                          
Cash $ 439,135   $ 439,135   $ 439,135   $ -   $ -   $ -  
Restricted cash   337     337     337                    
Trade and other receivables   114,381     114,381     114,381     -     -     -  
Non-hedge derivative assets   2,736     2,736     2,736     -     -     -  
  $ 556,589   $ 556,589   $ 556,589   $ -   $ -   $ -  
Non-derivative financial liabilities                          
Trade and other payables, including embedded derivatives $ (209,413 ) $ (209,413 ) $ (209,413 ) $ -   $ -   $ -  
Agreements with communities 1   (40,787 ) $ (58,837 )   (12,097 )   (9,483 )   (6,578 )   (30,679 )
Deferred Rosemont acquisition consideration   (25,961 ) $ (30,000 )   -     (20,000 )   (10,000 )   -  
Long-term debt, including embedded derivatives   (1,139,695 ) $ (1,726,904 )   (87,966 )   (168,188 )   (742,125 )   (728,625 )
Gold prepayment obligation 2   (137,031 )   (137,031 )   -     (137,031 )   -     -  
  $ (1,552,887 ) $ (2,162,185 ) $ (309,476 ) $ (334,702 ) $ (758,703 ) $ (759,304 )
Derivative financial liabilities                          
Non-hedge derivative contracts $ (15,312 ) $ (15,312 ) $ (15,312 ) $ -   $ -   $ -  
  $ (15,312 ) $ (15,312 ) $ (15,312 ) $ -   $ -   $ -  

1 Represents the Peru community agreement obligation, excluding interest.
2 Discounted.