HispanicBusiness

The operating cost per tonne of ore processed in the first quarter of 2013 at the Flin Flon concentrator increased as expected by 22% compared to the same period in 2012, largely due to reduced ore throughput following closure of the Trout Lake mine. Operating costs at the Snow Lake concentrator for the first quarter of 2013 increased 27% from the same period in 2012 due to transitional work to process Lalor ore and additional manpower and training costs to prepare for increased concentrator throughput for the remainder of 2013. Hudbay expects its full year metal in concentrate production and unit costs will be within the guidance range.

Cash Flows

Operating cash flows before change in non-cash working capital were $12.3 million, reflecting a decrease of $30.0 million compared to 2012, mainly as a result of lower sales volumes, lower realized prices and reduced gold and silver cash receipts, within the quarter, as a result of the precious metals stream transaction in 2012.

Cash and cash equivalents decreased by $286.6 million from December 31, 2012 to $1,050.5 million as at March 31, 2013. This decrease was mainly driven by $201.3 million in capital expenditures primarily at the Lalor and Constancia projects, and interest and dividend payments of $26.7 million and $17.2 million, respectively.

As at March 31, 2013, Hudbay has total available liquidity of $1,536.0 million, comprised of $1,050.5 million in cash and cash equivalents, US$250.0 million in deposits to be received from Silver Wheaton and availability under its credit facility of $235.5 million net of outstanding letters of credit. These amounts do not include anticipated cash flow from operations. The company is also considering additional financing opportunities, including equipment financing for the Constancia mobile fleet.

Lalor

The company has invested approximately $338 million of its $794 million capital construction budget for the Lalor project to March 31, 2013 and has entered into an additional $84 million in commitments for the project.

During the first quarter of 2013, Hudbay hoisted 81,800 tonnes of ore from the ventilation shaft at Lalor at a copper grade of 0.57% and zinc grade of 9.94%. During the same period, underground project development continued to advance. The company's primary focus is to complete the 910 metre shaft station in the second quarter of 2013 and to continue to ramp to the 955 metre level, which the company expects to reach by the end of the third quarter of 2013. Hudbay is developing ore and waste handling systems as well as the dewatering areas on the 910 and 955 metre levels.

Given the nature of the Lalor project, Hudbay expects to refer to three phases of the Lalor project when determining commercial production for accounting purposes. The first phase of the project includes the main ventilation shaft and associated surface and underground workings that will contribute to the production of ore between 2012 and 2014. Hudbay commenced this phase of commercial production on April 1, 2013 with Lalor initial production contributing to profit starting at that time.

As of April 26, 2013 the main production shaft was sunk to approximately 710 metres and is approximately 72% complete. Hudbay expects shaft sinking to be completed in late 2013. Upon completion of sinking, the installation of the steel sets and guides as well as the headframe changeover will begin. Ore production is expected to transition from the ventilation shaft to the main production shaft by the fourth quarter of 2014, subject to receipt of required regulatory permits.