Hudbay Minerals Inc.: Exhibit 99.2 - Filed by newsfilecorp.com
HUDBAY MINERALS INC.
NOTICE OF ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that an annual and special meeting of shareholders (the "Meeting") of Hudbay Minerals Inc. ("Hudbay") will be held by way of a virtual meeting, accessible at https://web.lumiagm.com/268939109, on Wednesday, May 10, 2023 at 2:00 p.m. (Eastern Time), for the following purposes:
1. to receive Hudbay's audited consolidated financial statements for the years ended December 31, 2022 and 2021 and the auditor's report thereon;
2. to elect the directors of Hudbay;
3. to appoint Deloitte LLP as Hudbay's auditor for the ensuing year and to authorize the Board of Directors, upon the recommendation of the Audit Committee, to fix the auditor's remuneration;
4. to consider and, if deemed appropriate, to approve a non-binding advisory resolution on executive compensation; and
5. to transact such other business as may properly come before the Meeting or any postponement or adjournment thereof.
The specific details of the matters proposed to be put before the Meeting are set forth in the "Matters to be Acted Upon at the Meeting" in Hudbay's Management Information Circular dated April 3, 2023 (the "Circular").
Important Notice Regarding the Availability of Proxy Materials for the Meeting
We are using "notice and access" to deliver to shareholders the Circular, Hudbay's audited consolidated financial statements for the years ended December 31, 2022 and 2021 and management's discussion and analysis related thereto and any other proxy-related materials (collectively, the "Proxy-Related Materials") by providing electronic access to such documents instead of mailing paper copies. Notice and access is an environmentally friendly and cost-effective way to distribute these materials since it reduces printing, paper and postage.
The Proxy-Related Materials are available on our website at www.hudbayminerals.com/disclosure-centre, on the website of our transfer agent, TSX Trust Company, at https://docs.tsxtrust.com/2219 and under our profile on SEDAR at www.sedar.com and EDGAR at www.sec.gov/edgar.shtml. Please be sure to review the Circular before voting.
Should you wish to receive a paper copy of the Proxy-Related Materials or if you have any questions about notice and access, please contact our transfer agent, TSX Trust Company, by toll-free telephone at 1-866-600-5869 or by email at tsxtis@tmx.com. Paper copies of the Proxy-Related Materials will be made available free of charge. A paper copy will be sent to you within three business days of receiving your request if received in advance of the Meeting or within ten calendar days if a request is received on or after the date of the Meeting and within one year of date the Proxy-Related Materials were filed on SEDAR. If you wish to receive a paper copy of any of these documents before the May 8, 2023 voting deadline, please contact TSX Trust Company by May 1, 2023.
Important Notice Regarding the Virtual Meeting
Hudbay is once again holding the Meeting as a completely virtual meeting, which will be conducted via live webcast, where all shareholders regardless of geographic location will have an opportunity to participate at the Meeting.
Shareholders may vote their common shares online or by mail according to the directions on the form of proxy or voting instruction form, as applicable. Registered shareholders and duly appointed proxyholders will be able to attend, participate and vote at the Meeting online at https://web.lumiagm.com/268939109. Non-registered shareholders (being shareholders who hold their Shares through a broker, investment dealer, bank, trust company, custodian, nominee or other intermediary) who have not duly appointed themselves as proxyholder will not be able to vote at the Meeting. However, such non-registered shareholders may still attend the Meeting as guests.
Shareholders who are unable to attend the virtual Meeting are requested to complete, date, sign and return their form of proxy so that as large a representation as possible may be had at the Meeting.
Shareholders who wish to appoint a person other than the management nominees identified on the form of proxy or voting instruction form (including a non-registered shareholder who wishes to appoint themselves to attend) must carefully follow the instructions in the Circular and on their form of proxy or voting instruction form. These instructions include the additional step of registering such proxyholder with our transfer agent, TSX Trust Company, after submitting their form of proxy or voting instruction form. Failure to register the proxyholder with our transfer agent will result in the proxyholder not receiving a Control Number to participate in the Meeting and only being able to attend as a guest.
Hudbay's Board of Directors has fixed the close of business on March 21, 2023 as the record date, being the date for the determination of the registered shareholders entitled to receive notice of and vote at the Meeting or any postponement or adjournment thereof. Shareholders who acquire common shares after March 21, 2023 should make arrangements with the selling shareholder to direct how such common shares will be voted at the Meeting.
Proxies to be used or acted upon at the Meeting or any postponement or adjournment thereof must be deposited with Hudbay's transfer agent, TSX Trust Company, by completing and delivering the form of proxy in accordance with the instructions indicated thereon, no later than 2:00 p.m. (Eastern Time) on May 8, 2023 or 48 hours (excluding Saturdays, Sundays and holidays) before any postponement or adjournment of the Meeting. Late proxies may be accepted or rejected by the Chair of the Meeting in his discretion, and the Chair is under no obligation to accept or reject any particular late proxy. Note that non-registered shareholders should ensure that their voting instruction form is submitted in accordance with the timeline provided therein, which may be a date prior to the deadline on which proxies must be deposited.
DATED at Toronto, Ontario this 3rd day of April, 2023.
By Order of the Board of Directors
Cheryl Fiebelkorn
Assistant Corporate Secretary
TABLE OF CONTENTS
LETTER TO SHAREHOLDERS FROM THE CHAIR OF THE BOARD
Dear Shareholder,
In 2022, Hudbay began to realize the benefits of our recent brownfields investments at our operations in Manitoba and Peru and we were able to meet our production guidance for all metals, despite a challenging operating environment. Global inflationary pressures, the transition of our Manitoba workforce from Flin Flon to Snow Lake and political and social unrest in Peru at the end of the year were among the challenges we faced. Ultimately, these challenges affected our cost performance, but we are proud of the job that was done by management and our business units to mitigate the impacts.
We also took meaningful steps in 2022 to advance our priority organic growth and sustainability initiatives. We completed a robust preliminary economic assessment of our Copper World project in Arizona, executed a surface rights agreement to allow for the exploration of the highly prospective Maria Reyna and Caballito properties in Peru and released our 2030 greenhouse gas (GHG) reduction targets and a roadmap for achieving net zero GHG emissions by 2050.
Looking ahead, we are focused on disciplined capital allocation to achieve our strategic objectives.
Operating Performance in Peru and Manitoba
This year, our most significant operational achievement in Peru was fully integrating the Pampacancha deposit into Constancia's operations. Production from Pampacancha in 2022 would have been higher had we not implemented short term changes to the mine plan in the fourth quarter to mitigate the risks associated with logistical and supply chain disruptions in Peru. Our community relations and logistics teams did an admirable job of managing these challenges and ensuring Constancia continued to operate without interruption during this period. We are pleased to see that the situation in Peru is stabilizing and we are optimistic that we will be able to achieve our 2023 objectives, which include increased copper and gold production and advancing our plans to drill the Maria Reyna and Caballito properties.
In Manitoba, we ramped up the New Britannia mill to 1,500 tonnes per day and we expect it will consistently operate above nameplate capacity, with planned throughput of 1,650 tonnes per day. We also safely closed our 777 mine and surface infrastructure in Flin Flon and transitioned our people and equipment from Flin Flon to Snow Lake. Over the course of the year, we also took steps to ramp up production at the Lalor mine and are continuing to advance several key initiatives to increase the rate of production to better match our milling capacity at Stall and New Britannia.
Unlocking Value at Copper World
In Arizona, we published a very encouraging PEA for the Copper World project in June. The proposed first phase of the project has a 16-year mine life, is located entirely on Hudbay's private land and only requires state-level permits. Phase two of the project extends the mine life to 44 years through an expansion onto federal land to mine all of the deposits. Since the release of the PEA, we have continued to execute our strategy to de-risk the Copper World project and are nearing completion of a pre-feasibility study for Phase I of the project.
While we are very excited about the value the Copper World project can deliver, we are focused on a prudent approach to capital allocation. As part of Hudbay's disciplined financial planning approach to Copper World, we have identified three specific prerequisites that would need to be achieved prior to making an investment decision in the project: (i) receipt of all state level permits required for Phase I; (ii) completion of a definitive feasibility study with an internal rate of return of greater than 15%; and (iii) a prudent financing strategy focused on a minimum cash balance, maximum stated leverage, limited non-recourse project level debt and committed financial partners.
Continued Focus on Sustainability and Governance
Hudbay's commitment to sustainability is embedded in our operations and strategy and we took a significant step forward in 2022 with the release of our climate change initiatives. These initiatives include a commitment to achieve net zero GHG emissions by 2050 and the adoption of interim 2030 GHG reduction targets to help support this commitment. We set these targets after a comprehensive look at our existing operations, in which we identified commercially available reduction opportunities and emerging technologies that we believe will be economically feasible by 2030 without compromising the competitiveness of our operations and projects.
I am also pleased to report that 30% of our proposed director nominees this year are women and, if they are elected, we will once again achieve the gender diversity target set forth in our Diversity Policy. We recognize that diversity extends beyond gender, and beyond the Board, and we are committed to continued progress in this area.
Engaging with our Stakeholders
In late 2022, a number of my fellow directors and I were pleased to meet with certain of our largest shareholders as part of the Board's shareholder engagement program. Our shareholders were interested in hearing our perspectives on the recent changes to our senior management team and our growth and capital allocation strategy. We do our best to consider the interests of all our stakeholders, including shareholders, governments and community members.
With this in mind, I would like to specifically acknowledge the challenges this year presented for our community and employees in Flin Flon, Manitoba. After 18 years of steady production, the 777 mine closed and, as a result, 2023 will be the first year in Hudbay's history without a mine in development or operation in Flin Flon. Fortunately, many of these employees are continuing to work for Hudbay in Snow Lake, which is the current focus of our Manitoba operations.
To all of our employees, we thank you for all your hard work and dedication throughout the year and we look forward to your continued engagement as we work together to achieve our company objectives.
We encourage you to vote at our annual and special meeting of shareholders and we thank you for your continued support.
Stephen A. Lang
Chair, Board of Directors
MANAGEMENT INFORMATION CIRCULAR
This management information circular ("Circular") is furnished in connection with the solicitation of proxies by and on behalf of the management of Hudbay Minerals Inc. for use at the Annual and Special Meeting of Shareholders (the "Meeting") to be held on Wednesday, May 10, 2023 at 2:00 p.m. (Eastern Time), or at any postponement or adjournment thereof. The Meeting has been called for the purposes set forth in the Notice of Annual and Special Meeting of Shareholders (the "Notice of Meeting") that accompanies this Circular.
The Meeting will be held as a completely virtual meeting, which will be conducted via live webcast at https://web.lumiagm.com/268939109. Shareholders will not be able to attend the Meeting in person. A summary of the information shareholders will need to attend and participate at the Meeting online is provided in this Circular.
References in this Circular to "we", "us", "our" and similar terms, as well as references to "Hudbay", the "Company" and the "Corporation", refer to Hudbay Minerals Inc. and references to "Board" refer to our board of directors. Unless otherwise indicated, the information in this Circular is given as at April 3, 2023 and all dollar references in this Circular are to Canadian dollars, unless otherwise stated.
GENERAL PROXY INFORMATION
This Circular provides the information you need to vote at the Meeting.
- If you are a registered holder of our common shares (each, a "Hudbay Share"), a form of proxy has been sent to you that you can use to vote in advance of the Meeting, or you may vote online at our virtual Meeting as described in this Circular. The form of proxy is also available on our website at www.hudbayminerals.com/disclosure-centre, on the website of our transfer agent, TSX Trust Company, at https://docs.tsxtrust.com/2219, and under our profile on SEDAR at www.sedar.com and EDGAR at www.sec.gov/edgar.shtml.
- If you are a non-registered holder of Hudbay Shares and your Hudbay Shares are held by an intermediary (such as a broker or financial institution), you will receive a voting instruction form ("VIF") and should follow the instructions provided with such form.
To reduce printing and mailing costs and waste, Hudbay will use the "notice and access" delivery model ("Notice and Access") to conduct the solicitation of proxies in connection with this Circular. Proxies may also be solicited by telephone or other form of correspondence. The cost of preparing this Circular and other materials relating to the Meeting and the cost of soliciting proxies has been or will be borne by us. Hudbay will also pay the fees and costs of intermediaries for their services in transmitting proxy-related material in accordance with National Instrument 54-101 - Communication with Beneficial Owners of Securities of a Reporting Issuer ("NI 54-101"). This cost is expected to be nominal.
NOTICE AND ACCESS
Hudbay is using Notice and Access for both registered and non-registered owners of Hudbay Shares, which allows the Company to furnish proxy materials online to shareholders instead of mailing paper copies of such materials. Using Notice and Access, the Company can deliver proxy-related materials by (i) posting this Circular (and other proxy related materials) on a website other than SEDAR and (ii) sending a notice informing shareholders that this Circular and proxy related materials have been posted and explaining how to access such materials (the "N&A Notice").
On or around April 6, 2023, the Company will send to holders of Hudbay Shares as of the record date a notice package containing the N&A Notice and the relevant voting document (a form of proxy or VIF, as applicable). The N&A Notice will contain basic information about the Meeting and the matters to be voted on, instructions on how to access the proxy materials, including this Circular and Hudbay's audited consolidated financial statements for the years ended December 31, 2022 and 2021 and management's discussion and analysis related thereto (together with this Circular, the "Proxy-Related Materials"), an explanation of the Notice and Access process and details of how to obtain a paper copy of the Proxy-Related Materials upon request at no cost.
The Proxy-Related Materials are available on our website at www.hudbayminerals.com/disclosure-centre, on the website of our transfer agent, TSX Trust Company, at https://docs.tsxtrust.com/2219, and under our profile on SEDAR at www.sedar.com and EDGAR at www.sec.gov/edgar.shtml. Shareholders who want to receive a paper copy of the Proxy-Related Materials or who have questions about Notice and Access may contact our transfer agent, TSX Trust Company, by toll-free telephone at 1-866-600-5869 or by email at tsxtis@tmx.com. In order to receive a paper copy in time to vote before the Meeting, requests should be received by May 1, 2023.
VOTING INFORMATION
VOTING MATTERS
At the Meeting, shareholders are voting on the:
- appointment of our auditor for 2023 and the authorization of our Board, upon the recommendation of the Audit Committee, to fix the auditor's remuneration; and
- approval of a non-binding advisory resolution on executive compensation.
WHO CAN VOTE
The record date for the Meeting is March 21, 2023. Our transfer agent has prepared a list, as of the close of business on the record date, of the registered shareholders. A holder of Hudbay Shares whose name appears on such list is entitled to vote the shares on such list at the Meeting. Each Hudbay Share entitles the holder to one vote on each item of business identified in the Notice of Meeting.
VOTING YOUR COMMON SHARES AND PARTICIPATING AT THE MEETING
This year we are once again holding the Meeting as a completely virtual meeting, which will be conducted via live webcast, where all shareholders regardless of geographic location will have an opportunity to participate at the Meeting.
Shareholders are strongly advised to carefully read the voting and participation instructions below that are applicable to them as well as the Virtual AGM User Guide attached as Schedule "C" to this Circular.
Registered Shareholders
If you were a registered shareholder on the record date, you may vote online at the virtual Meeting at https://web.lumiagm.com/268939109. Click on 'I have a Control Number' and you will be prompted to enter your twelve-digit TSX Control Number and the password hudbay2023 (case sensitive). You must be connected to the internet at all times to be able to vote and it is your responsibility to make sure you stay connected for the entire Meeting. Registered shareholders on the record date who voted prior to the Meeting do not need to vote again during the Meeting.
Alternatively, you may give another person authority to represent you and vote your shares online at the virtual Meeting, as described below under the heading ''Voting Your Common Shares by Proxy''.
If a registered shareholder would like to ask a question at the Meeting, login using your TSX Control Number and select the messaging icon. Messages can be submitted at any time during the Q&A session up until the Chair closes the session. Type your message within the chat box in the top portion of the messaging screen. Once you are happy with your message click the send button.
Non-Registered Shareholders
It is possible that your Hudbay Shares are registered in the name of an intermediary, which is usually a trust company, securities broker or other financial institution. If your Hudbay Shares are registered in the name of an intermediary, you are a non-registered shareholder. Your intermediary is entitled to vote the Hudbay Shares held by it and beneficially owned by you on the record date. However, it must first seek your instructions as to how to vote your Hudbay Shares or otherwise make arrangements so that you may vote your Hudbay Shares directly. An intermediary is not entitled to vote the Hudbay Shares held by it without written instructions from the beneficial owner. As a non-registered shareholder, you may vote your Hudbay Shares through your intermediary or online at the virtual Meeting by taking the appropriate steps, which are the same for objecting beneficial owners ("OBO") and non-objecting beneficial owners ("NOBO") of Hudbay Shares. You are an OBO if you have not allowed your intermediary to disclose your ownership information to us. You are a NOBO if you have provided instructions to your intermediary to disclose your ownership information to us.
Please note that if you are a non-registered shareholder, regardless of whether you are a NOBO or an OBO, and you wish to vote online at the virtual Meeting, you will not be recognized at the Meeting for the purpose of voting Hudbay Shares registered in the name of an intermediary unless you appoint yourself as a proxyholder and register with our transfer agent, TSX Trust Company, by emailing tsxtrustproxyvoting@tmx.com the "Request for Control Number" form, which can be found at https://tsxtrust.com/resource/en/75 (see "Appointing a Proxyholder" below). In order to appoint yourself as proxyholder, you should follow the instructions on the VIF and, in so doing, specify your own name as the person whom you are appointing as proxy for the purposes of voting your Hudbay Shares. You are reminded that any voting instructions should be communicated to your intermediary in accordance with the procedures set out in the VIF well in advance of the May 8, 2023 deadline for the receipt of proxies.
If you are a non-registered shareholder and you would like to ask a question at the Meeting, login using the TSX Control Number you received when you appointed yourself a proxyholder and registered with our transfer agent, TSX Trust Company. Questions can be submitted at any time during the Q&A session up until the Chair closes the session by using the messaging icon. Type your message within the chat box in the top portion of the messaging screen. Once you are happy with your message click the send button.
Non-registered shareholders who have not duly appointed themselves as proxyholder will not be able to vote or ask questions at the Meeting, however such non-registered shareholders may still attend the Meeting as guests through the live webcast at https://web.lumiagm.com/268939109.
NOBOs and OBOs
NOBOs and OBOs should carefully review the instructions provided to them by their intermediary regarding how to provide voting instructions or how to obtain a proxy with respect to their Hudbay Shares. Such non-registered shareholders may also wish to contact their intermediary directly in order to obtain instructions regarding how to vote Hudbay Shares that they beneficially own. The Proxy-Related Materials will be sent by the Company indirectly to NOBOs and the Company intends to pay for intermediaries to deliver proxy-related materials and Form 54-101F7 (the request for voting instructions) to OBOs, in accordance with NI 54-101.
VOTING YOUR COMMON SHARES BY PROXY
If you will not be able to attend and vote online at the virtual Meeting, you may vote in advance by using the form of proxy or VIF that has been provided to you. A proxy or VIF must be properly completed in writing and must be executed by you or by your attorney authorized in writing.
Deadline for Proxies
Any proxy to be used at the Meeting must be received by Hudbay's transfer agent, TSX Trust Company, prior to 2:00 p.m. (Eastern Time) on May 8, 2023, or 48 hours (excluding Saturdays, Sundays and holidays) before any postponement or adjournment of the Meeting. Late proxies may be accepted or rejected by the Chair of the Meeting in his discretion, and the Chair is under no obligation to accept or reject any particular late proxy.
Registered shareholders may provide their voting instructions by any of the following means:
- by mail to TSX Trust Company, Suite 301, 100 Adelaide Street West, Toronto, Ontario M5H 4H1 (a pre-paid, pre-addressed return envelope is enclosed);
- by courier to TSX Trust Company, Suite 301, 100 Adelaide Street West, Toronto, Ontario M5H 4H1;
- by fax to +1-416-595-9593; or
- by internet at www.voteproxyonline.com.
Non-registered shareholders may provide their voting instructions by mail, by telephone or online at www.proxyvote.com by following the instructions provided to them in their VIF.
Your Proxy Vote
On the form of proxy, you can indicate how you want to vote your Hudbay Shares, or you can let your proxyholder decide for you.
All Hudbay Shares represented by properly completed proxies received by Hudbay's transfer agent, TSX Trust Company, no later than 2:00 p.m. (Eastern Time) on May 8, 2023 or 48 hours (excluding Saturdays, Sundays and holidays) before any postponement or adjournment of the Meeting will be voted for, against or withheld from voting, in accordance with your instructions as specified in the proxy. Late proxies may be accepted or rejected by the Chair of the Meeting in his discretion, and the Chair is under no obligation to accept or reject any particular late proxy.
If you give directions on how to vote your Hudbay Shares on your form of proxy, your proxyholder must vote your Hudbay Shares according to your instructions. If you have not specified how to vote on a particular matter on your form of proxy, your proxyholder can vote your Hudbay Shares as he or she sees fit. If neither you nor your proxyholder gives specific instructions, your Hudbay Shares will be voted as follows:
- FOR the election of each of the ten director nominees;
- FOR the appointment of Deloitte LLP as our auditor for 2023 and the authorization of the Board, upon the recommendation of the Audit Committee, to fix the auditor's remuneration; and
- FOR the non-binding advisory resolution approving our approach to executive compensation.
Appointing a Proxyholder
A proxyholder is the person you appoint to act on your behalf at the Meeting (including any postponement of the Meeting or continuation after an adjournment of the Meeting) and to vote your Hudbay Shares. You have the right to appoint a person or company other than the Hudbay representatives named as proxyholders to represent you at the Meeting. To do so, simply fill in the proxyholder's name in the blank space provided on the enclosed form of proxy. If you leave the space in the form of proxy blank, the persons designated in the form, who are our Chair and our President and Chief Executive Officer, are appointed to act as your proxyholder.
Shareholders who wish to appoint a person other than the management nominees identified on the form of proxy or VIF (including a non-registered shareholder who wishes to appoint themselves to attend) must carefully follow the instructions in the Circular and on their form of proxy or VIF. These instructions include the additional step of registering such proxyholder with our transfer agent, TSX Trust Company, by emailing tsxtrustproxyvoting@tmx.com the "Request for Control Number" form, which can be found at https://tsxtrust.com/resource/en/75, after submitting their form of proxy or VIF. Failure to register the proxyholder with our transfer agent will result in the proxyholder not receiving a Control Number to vote and participate at the Meeting. Such an unregistered proxyholder will only be able to attend the Meeting as a guest.
Revoking your Proxy
If you submit a form of proxy, you may revoke it at any time before it is used by doing any one of the following:
- you may send another form of proxy with a later date to our transfer agent, TSX Trust Company, but it must reach the transfer agent no later than 2:00 p.m. (Eastern Time) on May 8, 2023 or 48 hours (excluding Saturdays, Sundays and holidays) before any postponement or adjournment of the Meeting;
- you may deliver a signed written statement, stating that you want to revoke your form of proxy, to our Corporate Secretary no later than the last business day preceding the Meeting or any postponement or adjournment of the Meeting, at 25 York Street, Suite 800, Toronto, Ontario, M5J 2V5; or
- you may revoke your form of proxy in any other manner permitted by law.
If as a registered shareholder you are using your control number to log in to the Meeting, you will be provided the opportunity to vote by online ballot at the appropriate time on the matters put forth at the Meeting. If you have already voted by proxy and you vote again during the online ballot during the Meeting, your online vote during the Meeting will revoke your previously submitted proxy. If you have already voted by proxy and do not wish to revoke your previously submitted proxy, do not vote again during the online ballot vote.
Only registered shareholders have the right to revoke a proxy. Non-registered shareholders who wish to change their vote must make appropriate arrangements with their respective dealers or other intermediaries. Late proxies may be accepted or rejected by the Chair of the Meeting in his discretion, and the Chair is under no obligation to accept or reject any particular late proxy.
ADDITIONAL MATTERS PRESENTED AT THE MEETING
The form of proxy or VIF confers discretionary authority upon the persons named as proxyholders therein with respect to any amendments or variations to the matters identified in the Notice of Meeting and with respect to other matters that may properly come before the Meeting or any postponement or adjournment thereof. As of the date hereof, our management is not aware of any matters to be considered at the Meeting other than the matters described in the Notice of Meeting, or any amendments or variations to the matters described in such notice.
If you sign and return the VIF, your Hudbay Shares will be voted in accordance with your instructions and, with respect to any matter presented at the Meeting, or at any postponement or adjournment thereof, in addition, or as an amendment or variation to the matters described in the Notice of Meeting, in accordance with the discretionary authority provided therein.
You have the right to appoint a person or company other than the Hudbay representatives named as proxyholders to represent you at the Meeting. If you sign and return the form of proxy and do not appoint a proxyholder by filling in a name, the Hudbay representatives named as proxies will vote in their best judgment.
VOTING SHARES AND PRINCIPAL HOLDERS
The Hudbay Shares are the only shares which entitle shareholders to vote at the Meeting. The holders of Hudbay Shares are entitled to one vote per share. The presence of at least two people holding or representing by proxy at least 25% of the total number of votes attached to the issued common shares entitled to vote at the Meeting is necessary for a quorum at the Meeting.
As at March 15, 2023, 262,046,272 Hudbay Shares were issued and outstanding.
To the knowledge of the directors and executive officers of Hudbay, based upon filings made with Canadian and United States securities regulators on or before the date of this Circular, the persons who beneficially own, or control or direct, directly or indirectly, voting securities carrying more than 10% of the voting rights attached to any class of our voting securities are as follows:
|
Name
|
Number of Hudbay
Shares
|
% of Outstanding
Hudbay Shares
|
|
GMT Capital Corporation (U.S.)(1)
|
31,653,920
|
12.1%
|
1. According to GMT Capital Corp.'s Schedule 13G dated December 31, 2022 as filed on EDGAR on January 19, 2023.
NOTICE TO UNITED STATES SHAREHOLDERS
The solicitation of proxies by Hudbay is not subject to the requirements of Section 14(a) of the United States Securities Exchange Act of 1934, as amended (the "U.S. Exchange Act"), by virtue of an exemption applicable to proxy solicitations by "foreign private issuers" as defined in Rule 3b-4 promulgated under the U.S. Exchange Act. Accordingly, this Circular has been prepared in accordance with the applicable disclosure requirements in Canada. Shareholders in the United States should be aware that such requirements are different than those of the United States applicable to proxy statements under the U.S. Exchange Act.
MATTERS TO BE ACTED UPON AT THE MEETING
1. FINANCIAL STATEMENTS
Our audited consolidated financial statements for the years ended December 31, 2022 and 2021 and the auditor's report thereon will be presented at the Meeting.
2. ELECTION OF DIRECTORS
Our articles provide that the Board may consist of a minimum of six and a maximum of thirteen directors. Our Board is currently composed of eleven directors. The Board has determined to nominate each of the ten persons listed below for election as a director at the Meeting. All of the nominees are current members of our Board (See "Nominees for Election as Directors" below).
The Board recommends that shareholders vote FOR the election of each of the ten nominees as directors.
Each director elected to the Board at the Meeting shall hold office until the close of the next annual meeting of shareholders or until a successor has been elected or appointed in accordance with our articles and by-laws.
Majority Voting Requirement and Advance Notice By-Law
In early 2023, we amended our Corporate Governance Guidelines (a copy of which can be found at Schedule "A") to remove the majority voting policy governing the election of directors. We made this amendment following a change in the Canada Business Corporations Act (the "CBCA") that introduced a statutory majority voting requirement. As a CBCA corporation, each of our directors must be elected by a majority of the votes cast for them. Like our previous majority voting policy, this rule only applies to an uncontested election of directors, being an election where the number of director nominees does not exceed the number of directors to be elected and in respect of which no proxy material is circulated in support of one or more nominees who are not part of the slate supported by the Board.
In addition, our Advance Notice By-Law (a copy of which is available on SEDAR at www.sedar.com), ensures that all shareholders receive adequate notice of director nominations and sufficient time and information regarding nominees to make informed voting decisions. The Advance Notice By-Law fixes a deadline by which holders of record of Common Shares must submit director nominations to our secretary prior to any annual or special meeting of shareholders and sets forth the specific information that a shareholder must include in the written notice for an effective nomination to occur. Our Advance Notice By-Law is intended to facilitate an orderly and efficient process for the election of directors.
Each of the ten incumbent nominees listed below was elected as a director of Hudbay at our annual and special meeting of shareholders held on May 10, 2022 (the "2022 meeting"). We received proxies representing 194,862,090 Hudbay Shares in connection with the 2022 meeting representing 74.41% of our outstanding Common Shares. Based on these proxies, each director received the following favourable votes cast by proxy:
|
Director
|
Percentage of Favourable
Votes Cast by Proxy
|
Number of Favourable
Votes Cast by Proxy
|
|
Carol T. Banducci
|
99.63%
|
188,653,121
|
|
Igor A. Gonzales
|
99.63%
|
188,648,494
|
|
Sarah B. Kavanagh
|
98.99%
|
187,443,578
|
|
Carin S. Knickel
|
98.18%
|
185,910,085
|
|
Peter Kukielski
|
99.76%
|
188,889,364
|
|
George E. Lafond
|
99.65%
|
188,679,056
|
|
Stephen A. Lang
|
92.98%
|
176,053,789
|
|
Daniel Muñiz Quintanilla
|
99.66%
|
188,706,763
|
|
Colin Osborne
|
99.75%
|
188,873,199
|
|
David S. Smith
|
79.13%
|
149,837,441
|
Richard Howes, who was also elected as a director of Hudbay at the 2022 meeting and has served as a valued member of the Board since 2019, has decided not to stand for re-election. In connection with his appointment as President and CEO of Reunion Gold Corporation, Mr. Howes recently informed the Board's CGN Committee that he wished to conclude his tenure as a member of the Board effective as of the Meeting and not stand for re-election. Hudbay wishes to thank Mr. Howes for his years of dedicated service and contributions.
Nominees for Election as Directors
Unless authority to do so with respect to one or more directors is withheld, the persons named in the form of proxy intend to vote FOR the election of each of the ten nominees whose names are set forth below:
| Carol T. Banducci |
George E. Lafond |
| Igor A. Gonzales |
Stephen A. Lang |
| Sarah B. Kavanagh |
Daniel Muñiz Quintanilla |
| Carin S. Knickel |
Colin Osborne |
| Peter Kukielski |
David S. Smith |
We do not contemplate that any of the nominees will be unable to serve as a director, but if that should occur for any reason prior to the Meeting or any postponement or adjournment thereof, it is intended that discretionary authority shall be exercised by the persons named in the accompanying form of proxy to vote any proxy for the election of the remaining nominees and any other person or persons in place of any nominee or nominees unable to serve.
The following tables set forth biographical and other information on each proposed nominee.
|
CAROL T. BANDUCCI
|
|
|
Principal Occupation: Corporate Director
Ms. Banducci brings more than 30 years of business leadership experience built over a career which has included corporate and operational senior finance leadership roles with businesses operating around the world. At IAMGOLD Ms. Banducci helped shape and drive the strategy of a complex business operating successfully in challenging jurisdictions. She provided financial leadership and insight to ensure business operations and capital decisions were grounded in sound financial criteria. She also served as chair of Niobec Inc., a wholly-owned subsidiary of IAMGOLD, prior to orchestrating the sale of the business. She served previously as a senior leader of a major plastics and polymer producer, making important contributions to a restructuring and turnaround of the business and, once it was sold, provided leadership to comprehensive integration, restructuring and cost-improvement initiatives. Prior to this, Ms. Banducci served as Chief Financial Officer of Orica Explosives North America and ICI Explosives Canada & Latin America - a global business selling product in 35 countries.
Ms. Banducci has been recognized three times as one of "Canada's Most Powerful Women - Top 100" and in 2019 was inducted into the Women's Executive Network Hall of Fame. Also, in 2018, Ms. Banducci was recognized by Women in Mining as one of the 100 Global Inspirational Women in Mining. Ms. Banducci holds a Bachelor of Commerce from the University of Toronto and has also completed the Institute of Corporate Directors Program at the Rotman School of Business.
|
|
Mississauga, Ontario, Canada
|
|
Age
|
63
|
|
Director Since
|
2017
|
|
Independent
|
Yes
|
|
Hudbay Shares Held(1)
|
Nil
|
|
Deferred Share Units Held
|
191,331
|
|
Total Value of Hudbay Shares and DSUs(2)
|
$1,153,726
|
|
2022 Hudbay Board & Committee Membership
|
|
Event
|
Meetings
|
Attendance
|
|
Board
|
9 of 9
|
100%
|
| |
|
|
|
Audit Committee (Chair)
|
6 of 6
|
100%
|
| |
|
|
|
Compensation and Human Resources Committee
|
4 of 4
|
100%
|
| |
|
|
|
Environmental, Health, Safety and Sustainability Committee
|
3 of 3
|
100%
|
|
Other Public Board Directorships
|
Areas of Expertise/Experience(3):
|
|
ARC Resources Ltd. (2021 to Present)
Euro Ressources S.A.(4) (2009 to 2010; 2014 to 2019)
|
- CEO/Senior Officer
- Finance and M&A
- Mining/Resource Industry
- International Business
- Government Relations and Permitting
- Corporate Governance
- Risk Management
- Marketing
- Human Resources/Exec. Compensation
|
- Operations
- Safety
- Social, Communities and Culture
- Environment and Climate
|
| |
|
|
|
|
|
4. Euro Ressources S.A. is an indirect, majority owned subsidiary of IAMGOLD.
|
IGOR A. GONZALES
|
|
|
Principal Occupation: Chief Operating Officer of Appian Capital
Mr. Gonzales is from Cusco, Peru and has more than 40 years of experience in the mining industry. He joined Appian Capital as Chief Operating Officer in June 2020 following over three years as President and CEO of Sierra Metals. Prior to that, he was with Compañia de Minas Buenaventura S.A.A. from November 2014 to May 2017, serving as Vice President of Operations, and Barrick Gold Corporation from 1998 to 2013, serving as President of Barrick Gold South America for seven years, and later as Executive Vice President and Chief Operating Officer. Between 1980 and 1996, Mr. Gonzales served in various roles with Southern Peru Copper Corporation.
Mr. Gonzales has a Bachelor of Science degree in Chemical Engineering from the University of San Antonio Abad in Cusco, Peru, and was a Fulbright Scholar at the New Mexico Institute of Mining and Technology, where he earned a Master of Science degree in Extractive Metallurgy.
|
|
London, England
|
|
Age
|
68
|
|
Director Since
|
2013
|
|
Independent
|
Yes
|
|
Hudbay Shares Held(1)
|
Nil
|
|
Deferred Share Units Held
|
127,199
|
|
Total Value of Hudbay Shares and DSUs(2)
|
$767,010
|
|
2022 Hudbay Board & Committee Membership
|
|
Event
|
Meetings
|
Attendance
|
|
Board
|
9 of 9
|
100%
|
| |
|
|
|
Environmental, Health, Safety and Sustainability Committee
|
5 of 5
|
100%
|
| |
|
|
|
Technical Committee
|
6 of 6
|
100%
|
|
Other Public Board Directorships
|
Areas of Expertise/Experience(3):
|
|
Gatos Silver, Inc. (2020 to Present)
Harte Gold Corporation (2020 to 2021)
Sierra Metals Inc. (2013 to 2020)
|
- CEO/Senior Officer
- Mining/Resource Industry
- Operations
- International Business
- Government Relations and Permitting
- Safety
- Social, Communities and Culture
- Risk Management
- Marketing
|
- Finance and M&A
- Environment and Climate
- Human Resources/Exec. Compensation
|
| |
|
|
|
|
|
|
SARAH B. KAVANAGH
|
|
|
Principal Occupation: Corporate Director
Sarah B. Kavanagh is an experienced public company director. She has more than 30 years of capital markets experience and business leadership built over a long career in both senior investment banking and senior corporate financial roles in the United States and Canada.
Ms. Kavanagh is a corporate director and a former Commissioner at the Ontario Securities Commission, where she served from 2011 to 2016. Between 1999 and 2010, Ms. Kavanagh served in a number of senior investment banking roles at Scotia Capital Inc. She has also held senior financial positions in the corporate sector.
Ms. Kavanagh currently serves as a director and Chair of the Audit Committee of Bausch + Lomb, a director of Bausch Heath Companies, a director and Chair of the Audit Committee and the Nominating and Governance Committee of Cymax Technology Group, a director of AST and a director and Chair of the Audit Committee of Sustainable Development Technology Canada.
Ms. Kavanagh was awarded a leadership award by Women in Capital Markets in 2008 and was recognized as one of Canada's Most Powerful Women: Top 100 in the director category in 2015.
Ms. Kavanagh graduated from Harvard Business School with a Master's in Business Administration and received a Bachelor of Arts degree in Economics from Williams College in Williamstown, Massachusetts. Ms. Kavanagh completed the Directors Education Program at the Institute of Corporate Directors in 2011.
|
|
Toronto, Ontario, Canada
|
|
Age
|
66
|
|
Director Since
|
2013
|
|
Independent
|
Yes
|
|
Hudbay Shares Held(1)
|
Nil
|
|
Deferred Share Units Held
|
127,199
|
|
Total Value of Hudbay Shares and DSUs(2)
|
$767,010
|
|
2022 Hudbay Board & Committee Membership
|
|
Event
|
Meetings
|
Attendance
|
|
Board
|
9 of 9
|
100%
|
| |
|
|
|
Environmental, Health, Safety and Sustainability Committee (Chair)
|
5 of 5
|
100%
|
| |
|
|
|
Corporate Governance and Nominating Committee
|
4 of 4
|
100%
|
|
Other Public Board Directorships
|
Areas of Expertise/Experience(3):
|
|
Bausch + Lomb (2022 to Present)
Bausch Heath Companies Inc. (2016 to Present)
WPT Industrial Real Estate Investment Trust
(2013 to October 2021)
|
- CEO/Senior Officer
- Finance and M&A
- International Business
- Corporate Governance
- Risk Management
|
- Mining/ Resource Industry
- Safety
- Social, Communities and Culture
- Environment and Climate
- Human Resources/ Exec. Compensation
|
| |
|
|
|
|
|
|
CARIN S. KNICKEL
|
|
|
Principal Occupation: Corporate Director
Carin S. Knickel has over 30 years' of experience in the energy industry, holding senior operating, planning and business development positions throughout her career in the US and Europe, and leading the integration of businesses, processes and people following transactions.
Ms. Knickel spent over 30 years at ConocoPhillips, the world's largest independent exploration and production company, where she most recently served as Corporate Vice President, Global Human Resources from 2003 until her retirement in May 2012. She joined ConocoPhillips in 1979 and held various senior operating positions in wholesale marketing, refining, transportation and commercial trading as well as leadership roles in planning and business development throughout her career in the U.S. and Europe. She also transformed the human resources function from a disparate organization of five pre-merger companies to a global shared-service organization, delivering more than US$30 million in merger synergies. Prior to that, Ms. Knickel held roles as President of Specialty Businesses where she managed a portfolio of technology-based businesses with revenues of US$2.1 billion, and also served as Vice President, Carbon Businesses, where she was appointed to lead a start-up carbon fiber business, overseeing the first US$200 million demonstration plant.
Ms. Knickel currently serves as a director on the board of Vermilion Energy Inc. She also serves as a Trustee for the Colorado/Wyoming Chapter of the National Multiple Sclerosis Society and previously served as Chair. She holds a Bachelor of Science, Marketing from the University of Colorado and a Master of Science in Management from the Massachusetts Institute of Technology.
|
|
Golden, Colorado, United States
|
|
Age
|
66
|
|
Director Since
|
2015
|
|
Independent
|
Yes
|
|
Hudbay Shares Held(1)
|
26,825
|
|
Deferred Share Units Held
|
237,476
|
|
Total Value of Hudbay Shares and DSUs(2)
|
$1,593,735
|
|
2022 Hudbay Board & Committee Membership
|
|
Event
|
Meetings
|
Attendance
|
|
Board
|
8 of 9
|
89%
|
|
Compensation and Human Resources Committee (Chair)
|
7 of 7
|
100%
|
|
Corporate Governance and Nominating Committee
|
4 of 4
|
100%
|
|
Other Public Board Directorships
|
Areas of Expertise/Experience(3):
|
|
Vermillion Energy Inc. (2018 to Present)
Whiting Petroleum Corp. (2015 to 2020)
|
- CEO/Senior Officer
- Finance and M&A
- Mining/Resource Industry
- Operations
- International Business
- Safety
- Corporate Governance
- Human Resources/ Exec. Compensation
- Risk Management
|
- Social, Communities and Culture
- Environment and Climate
- Marketing
|
| |
|
|
|
|
|
|
PETER KUKIELSKI
|
|
|
Principal Occupation: President and Chief Executive Officer, Hudbay Minerals Inc.
Peter Kukielski was appointed President and Chief Executive Officer in January 2020 after serving as Interim Chief Executive Officer since July 2019. Mr. Kukielski has more than 30 years of extensive global experience within the base metals, precious metals and bulk materials sectors, having overseen operations across the globe for companies.
Mr. Kukielski was President and Chief Executive Officer of Nevsun Resources Ltd. from May 2017 until the acquisition of Nevsun in December 2018. From 2013 to 2017, Mr. Kukielski was Chief Executive Officer of Amenka Resources, a private company backed by Warbug Pincus to invest in global mining assets. From 2008 to 2013, he was the Chief Executive, Mining for ArcelorMittal, responsible for 27 operating mines and three major development projects, within 12 countries. From 2006 to 2008, Mr. Kukielski was the Chief Operating Officer of Teck Resources, responsible for the copper, zinc, gold and the metallurgical coal operations and projects. From 2001 to 2006, he was with Falconbridge (originally Noranda) in senior roles, including Chief Operating Officer, and in years prior he had various increasingly senior roles with other major mining companies, including experience in engineering, commissioning and operating significant mines in a wide variety of international jurisdictions.
Mr. Kukielski has a Master's of Science degree in Civil Engineering from Stanford University in California.
|
|
Toronto, Ontario, Canada
|
|
Age
|
66
|
|
Director Since
|
2019
|
|
Independent
|
No
|
|
Hudbay Shares Held(1)(5)
|
17,651
|
|
Deferred Share Units Held
|
189,321
|
|
Restricted Share Units Held
|
209,893
|
|
Performance Share Units Held
|
419,785
|
|
Total Value of Hudbay Shares and DSUs(2)
|
$5,044,993
|
|
2022 Hudbay Board & Committee Membership
|
|
Event
|
Meetings
|
Attendance
|
|
Board
|
9 of 9
|
100%
|
|
|
|
|
|
Other Public Board Directorships
|
Areas of Expertise/Experience(3):
|
|
Norsk Hydro ASA (2019 to Present)
Nevsun Resources Ltd. (2017 to 2018)
|
- CEO/Senior Officer
- Finance and M&A
- Mining/ Resource Industry
- Operations
- International Business
- Government Relations and Permitting
- Safety
- Corporate Governance
- Risk Management
- Marketing
|
- Social, Communities and Culture
- Environment and Climate
- Human Resources/ Exec. Compensation
|
| |
|
|
|
|
|
5. In addition, 49,503 Hudbay Shares are beneficially owned, directly or indirectly, by Mr. Kukielski's wife. These Hudbay Shares are excluded for purposes of determining Mr. Kukielski's compliance with our Share Ownership Guidelines and, for consistency, have been excluded from Mr. Kukielski's biographical information above. These shares are, however, publicly reported as shares over which Mr. Kukielski may have “direction or control” pursuant to National Instrument 55-104.
|
GEORGE E. LAFOND
|
|
|
Principal Occupation: Independent Strategic Advisor
Mr. Lafond is a strategic advisor. He works primarily with businesses, educational institutions, and social and cultural organizations. Prior to this, his recent experience includes serving as the Treaty Commissioner of Saskatchewan. He was appointed to this role in 2012 by the Government of Canada. His responsibilities as Treaty Commissioner involved public education, neutral convening and dialogue with Treaty parties, and durable resolution of conflict relating to Treaty rights and responsibilities. He was reappointed in 2014, serving for two terms total, completed in 2016. Mr. Lafond has done lifelong work to promote and support local and community-led economic development efforts.
In his current business advisory capacity, Mr. Lafond's work spans a range of sectors, and includes both early-stage ventures and established corporations. In the education sector, Mr. Lafond's work includes being an advisor to the President of the Saskatchewan Indian Institute of Technology. There, he helped create the first Indigenous Innovation Accelerator of its kind in Saskatchewan. He also advises Headwater Learning Solutions' Indigenous Education Initiative: Vision 2032.
Mr. Lafond holds a Bachelor of Education degree from the University of Saskatchewan and undertakes ongoing professional development and training in business, administration, negotiation and economic prosperity.
Mr. Lafond is a citizen of the Saskatchewan Muskeg Lake Cree Nation in Treaty Six Territory, and works with the community to support reconciliation, wellness, economic development, and innovation. In 2016 he received the Saskatchewan Order of Merit and in 2022, he received Queen Elizabeth II's Platinum Jubilee Medal.
|
|
Victoria, British Columbia, Canada
|
|
Age
|
64
|
|
Director Since
|
2022
|
|
Independent
|
Yes
|
|
Hudbay Shares Held(1)
|
Nil
|
|
Deferred Share Units Held
|
18,216
|
|
Total Value of Hudbay Shares and DSUs(2)
|
$109,842
|
|
2022 Hudbay Board & Committee Membership
|
|
Event
|
Meeting
|
Attendance
|
|
Board
|
6 of 6
|
100%
|
| |
|
|
|
Corporate Governance and Nominating Committee
|
2 of 2
|
100%
|
| |
|
|
|
Environmental, Health, Safety and Sustainability Committee
|
2 of 2
|
100%
|
|
Other Public Board Directorships
|
Areas of Expertise/Experience(3):
|
|
N/A
|
- CEO/Senior Officer
- Government Relations and Permitting
- Social, Communities and Culture
- Corporate Governance
- Human Resources/ Exec. Compensation
|
- Finance and M&A
- International Business
- Safety
- Environment and Climate
- Risk Management
- Marketing
|
| |
|
|
|
|
|
|
STEPHEN A. LANG
|
|
|
Principal Occupation: Corporate Director
Stephen A. Lang was appointed Chair of Hudbay's board of directors in October 2019. Stephen has over 40 years of experience in the mining industry, including engineering, development and production at gold, copper, coal and platinum group metals operations. He was Chief Executive Officer of Centerra Gold Inc. from 2008 to 2012 and served as Centerra's Board Chair from 2012 to 2019. Mr. Lang has also held senior operating positions at Stillwater Mining Company, Barrick Gold Corporation, Rio Algom Limited and Kinross Mining Corporation.
Mr. Lang holds a Bachelor of Science degree and a Master's degree in mining engineering from the University of Missouri-Rolla.
|
|
Columbia, Missouri, United States
|
|
Age
|
67
|
|
Director Since
|
2019
|
|
Independent
|
Yes
|
|
Hudbay Shares Held(1)
|
65,000
|
|
Deferred Share Units Held
|
115,588
|
|
Total Value of Hudbay Shares and DSUs(2)
|
$1,088,946
|
|
2022 Hudbay Board & Committee Membership
|
|
Event
|
Meetings
|
Attendance
|
|
Board
|
9 of 9
|
100%
|
| |
|
|
|
Compensation and Human Resources Committee
|
7 of 7
|
100%
|
| |
|
|
|
Corporate Governance and Nominating Committee
|
2 of 2
|
100%
|
| |
|
|
|
Technical Committee
|
6 of 6
|
100%
|
|
Other Public Board Directorships
|
Areas of Expertise/Experience(3):
|
|
Hycroft Mining Holding Corporation (2021 to Present)
Argonaut Gold Inc. (2020 to Present)
Bear Creek Mining Corporation (2014 to Present)
International Tower Hill Mines Ltd. (2014 to 2023)
Alio Gold Inc. (2014 to 2020)
Centerra Gold Inc. (2007 to 2020)
|
- CEO/Senior Officer
- Mining/Resource Industry
- Operations
- International Business
- Government Relations and Permitting
- Safety
- Corporate Governance
- Human Resources/ Exec. Compensation
|
- Finance and M&A
- Social, Communities and Culture
- Environment and Climate
- Risk Management
- Marketing
|
| |
|
|
|
|
|
|
DANIEL MUÑIZ QUINTANILLA
|
|
|
Principal Occupation: Corporate Director
Daniel Muñiz Quintanilla was formerly Managing Director and Executive Vice President of Americas Mining, the holding company of the Mining Division of Grupo Mexico, which has operations in Peru, Mexico, US and Spain.
Until July 2018, he was a member of the Board of Directors and Executive Vice President of Southern Copper, a subsidiary of Americas Mining, where he led several successful M&A, joint venture and other similar transactions leading to the acquisition and integration of several world-class assets into Grupo Mexico. Mr. Muñiz Quintanilla previously acted as Executive President & Chief Executive Officer of Industrial Minera Mexico S.A. de C.V., the Underground Mining Division of Grupo Mexico. He also acted as Chief Financial Officer of Grupo Mexico, during which time he successfully raised more than $10 billion for the company through a variety of securities, including bonds, structured bonds and project finance.
Mr. Muñiz Quintanilla holds a Masters degree in Business Administration from Instituto de Empresa in Madrid, Spain and a Masters degree in Financial Law from Georgetown University in Washington D.C. He also holds a Law Degree from Universidad Iberoamericana in Mexico City, Mexico.
|
|
Madrid, Spain
|
|
Age
|
49
|
|
Director Since
|
2019
|
|
Independent
|
Yes
|
|
Hudbay Shares Held(1)
|
10,000
|
|
Deferred Share Units Held
|
66,874
|
|
Total Value of Hudbay Shares and DSUs(2)
|
$463,550
|
|
2022 Hudbay Board & Committee Membership
|
|
Event
|
Meetings
|
Attendance
|
|
Board
|
9 of 9
|
100%
|
| |
|
|
|
Audit Committee
|
5 of 6
|
83%
|
| |
|
|
|
Environmental, Health, Safety and Sustainability Committee
|
5 of 5
|
100%
|
|
Other Public Board Directorships
|
Areas of Expertise/Experience(3):
|
|
Gatos Silver, Inc. (2021 to Present)
Brookfield Infrastructure Partners LP (2019 to Present)
|
- CEO/Senior Officer
- Finance and M&A
- Mining/Resource Industry
- International Business
- Government Relations and Permitting
- Risk Management
|
- Safety
- Social, Communities and Culture
- Environment and Climate
- Marketing
|
| |
|
|
|
|
|
|
COLIN OSBORNE
|
|
|
Principal Occupation: President and CEO, Samuel, Son & Co.
Colin Osborne is President and Chief Executive Officer of Samuel, Son & Co., Limited, a position he has held since 2019, and was recently elected to its board of directors. In his management role at Samuel, Mr. Osborne is responsible for the development and leadership of the Company's long-term strategy and growth plans. Within Samuel, Mr. Osborne has held a number of other roles, including President & Chief Operating Officer, President - Samuel Service Centers and Automotive and President - Samuel Manufacturing Division. Before joining Samuel in 2015, Mr. Osborne was President and Chief Executive Officer of Vicwest Inc, a publicly traded industrial products company with operations in North America, Europe, South America and installations on six continents. Earlier in his career, Mr. Osborne held senior leadership positions at Stelco Inc. including COO and EVP Strategy. Mr. Osborne has extensive board experience and previously sat on the boards of numerous public and private equity run businesses, including Strongco Inc. and TMS International. Mr. Osborne has also been active in the community, serving as Board Director of both Mohawk College and McMaster Innovation Park.
He holds a Bachelor of Engineering degree from McGill University and has completed the Executive Management Program from the Smith School of Business at Queen's University.
|
|
Burlington, Ontario, Canada
|
|
Age
|
58
|
|
Director Since
|
2018
|
|
Independent
|
Yes
|
|
Hudbay Shares Held(1)
|
25,000
|
|
Deferred Share Units Held
|
167,840
|
|
Total Value of Hudbay Shares and DSUs(2)
|
$1,162,825
|
|
2022 Hudbay Board & Committee Membership
|
|
Event
|
Meetings
|
Attendance
|
|
Board
|
8 of 9
|
89%
|
| |
|
|
|
Technical Committee (Chair)
|
6 of 6
|
100%
|
| |
|
|
|
Audit Committee
|
2 of 2
|
100%
|
| |
|
|
|
|
Environmental, Health, Safety and Sustainability Committee
|
2 of 2
|
100%
|
|
|
Other Public Board Directorships
|
Areas of Expertise/Experience(3):
|
|
N/A
|
- CEO/Senior Officer
- Finance and M&A
- Mining/Resource Industry
- Operations
- International Business
- Safety
- Risk Management
|
- Government Relations and Permitting
- Environment and Climate
- Corporate Governance
- Human Resources/ Exec. Compensation
- Marketing
|
| |
|
|
|
|
|
|
DAVID S. SMITH
|
|
|
Principal Occupation: Corporate Director
David S. Smith is a Corporate Director who has had a career on both the finance and the supply sides of business within the mining sector, with extensive international exposure.
Mr. Smith has more than 35 years of financial and executive leadership experience. Mr. Smith served as the Chief Financial Officer and Executive Vice President of Finning International Inc., a major equipment supplier to the mining industry with significant operations in Canada and South America, from 2009 to 2014. Prior to joining Finning, Mr. Smith served as Chief Financial Officer and Vice President of Ballard Power Systems, Inc. from 2002 to 2009. Previously, he spent 16 years with Placer Dome Inc. (now Barrick) in various senior positions and 4 years with PriceWaterhouseCoopers.
Mr. Smith is currently a director of IAMGOLD Corp and Northwest Copper Corp and is the Chair of the Board of Governors of Collingwood School. Mr. Smith has previously served on other public mining company boards of directors, specifically, Pretium Resources Inc. (acquired by Newcrest Mining), Nevsun Resources Ltd. (acquired by Zijin Mining Group Limited), Dominion Diamonds Corp. (acquired by the Washington Companies) and Paramount Gold Nevada.
Mr. Smith holds a Bachelor's of Science degree in Business Administration, Accounting from California State University, Sacramento and has completed the Institute of Corporate Directors, Directors Education Program (ICD.D).
|
|
West Vancouver, British Columbia, Canada
|
|
Age
|
64
|
|
Director Since
|
2019
|
|
Independent
|
Yes
|
|
Hudbay Shares Held(0F[1])
|
25,500
|
|
Deferred Share Units Held
|
66,874
|
|
Total Value of Hudbay Shares and DSUs(1F[2])
|
$557,015
|
|
2022 Hudbay Board & Committee Membership
|
|
Event
|
Meetings
|
Attendance
|
|
Board
|
9 of 9
|
100%
|
| |
|
|
|
Corporate Governance and Nominating Committee (Chair)
|
4 of 4
|
100%
|
| |
|
|
|
Audit Committee
|
4 of 4
|
100%
|
| |
|
|
|
Compensation and Human Resources Committee
|
3 of 3
|
100%
|
|
Other Public Board Directorships
|
Areas of Expertise/Experience(3):
|
|
NorthWest Copper Corp. (2022 to Present)
IAMGOLD Corporation (2022 to Present)
Pretium Resources Inc. (2017 to 2022)
Nevsun Resources Ltd. (2017 to 2018)
Paramount Gold Nevada Corp. (2015 to 2018)
|
- CEO/Senior Officer
- Finance and M&A
- Mining/ Resource Industry
- International Business
- Corporate Governance
- Human Resources/ Exec. Compensation
- Risk Management
|
- Operations
- Government Relations and Permitting
- Safety
- Social, Communities and Culture
- Environment and Climate
- Marketing
|
| |
|
|
|
|
|
____________________________________________
1. The Hudbay Shares indicated for each Hudbay Nominee are those beneficially owned, directly or indirectly, or over which control or direction is exercised, by the nominee as at March 15, 2023. The information about Hudbay Shares over which control or direction is exercised, not being within the knowledge of Hudbay, has been furnished by the respective Hudbay Nominee. Unless otherwise indicated, beneficial ownership is direct and the Hudbay Nominee has sole voting and investment power.
2. Based on the $6.03 closing price of Hudbay Shares on the Toronto Stock Exchange on March 15, 2023.
3. A shaded bullet indicates a high level of experience or expertise in the subject area and an unshaded bullet indicates some or limited experience in the subject area.
Corporate Cease Trade Orders or Bankruptcies
Other than as disclosed below, to the best of our knowledge, no nominee is, or has been within ten years before the date of this Circular, a director, chief executive officer or chief financial officer of any company that was:
• subject to an order that was issued while the nominee was acting in the capacity as director, chief executive officer or chief financial officer;
• subject to an order that was issued after the nominee ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that occurred while that person was acting in the capacity as director, chief executive officer or chief financial officer;
• is, or has been within the ten years before the date of this Circular, a director or executive officer of any company that, while the nominee was acting in that capacity, or within a year of the nominee ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets; or
• has, within the ten years before the date of this Circular, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the nominee.
Stephen A. Lang was a director of Hycroft Mining Corporation ("Hycroft"), (formerly Allied Nevada Gold Corp.) which, on March 10, 2015, together with certain of its direct and indirect subsidiaries, filed voluntary petitions of relief under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware (the "Delaware Bankruptcy Court"). On October 8, 2015, Hycroft's Plan of Reorganization was approved by the Delaware Bankruptcy Court, and effective October 22, 2015, Hycroft completed its financial restructuring process and emerged from Chapter 11 bankruptcy.
Carin S. Knickel was a director of Whiting Petroleum Corporation ("Whiting"), which together with certain subsidiaries, commenced voluntary Chapter 11 cases under the United States Bankruptcy Code on March 31, 2020. On September 1, 2020, Whiting announced that it had successfully completed its financial restructuring and emerged from Chapter 11 protection. Whiting officially concluded its reorganization after completing all required actions and satisfying the remaining conditions to its Plan of Reorganization.
Igor Gonzales and Daniel Muñiz Quintanilla are directors of Gatos Silver, Inc. ("Gatos"). On April 1, 2022, the Ontario Securities Commission issued a management cease trade order against the CEO and CFO of Gatos ordering each such executive officer to cease trading in the securities of Gatos until Gatos completed its annual continuous disclosure filings for the year ended December 31, 2021 as required by Ontario securities laws. Additional management cease trade orders were issued by the Ontario Securities Commission on April 12, 2022 and July 7, 2022 in connection with certain other delays in Gatos' financial reporting. Such management cease trade orders remain in effect as of the date hereof.
Penalties or Sanctions
To the best of our knowledge, no nominee has been subject to (i) any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority, or (ii) any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable investor in deciding whether to vote for the nominee.
3. APPOINTMENT OF AUDITOR
Unless authority to do so is withheld, the persons named in the accompanying form of proxy intend to vote FOR the appointment of Deloitte LLP ("Deloitte"), as our auditor until the close of our next annual meeting of shareholders and the authorization of the Board, upon the recommendation of the Audit Committee, to fix the remuneration of the auditor.
Deloitte was first appointed as our auditor on May 6, 2005. For the year ended December 31, 2022, Deloitte was paid $2,417,063 for audit services, $114,396 for audit-related services and $97,500 for other services. Deloitte was not paid any fees for tax-related services in 2022. All non-audit services provided by Deloitte are subject to pre-approval by our Audit Committee.
Additional information regarding the compensation of Deloitte is contained in our Annual Information Form for the year ended December 31, 2022 under the heading "Audit Committee Disclosure - Remuneration of Auditor". Our Annual Information Form may be found on our website at www.hudbay.com, on SEDAR at www.sedar.com and EDGAR at www.sec.gov/edgar.shtml.
The Board recommends that shareholders vote FOR the appointment of Deloitte as Hudbay's auditor and the authorization of the Board, upon the recommendation of the Audit Committee, to fix the auditor's remuneration.
4. SAY ON PAY ADVISORY VOTE
Hudbay's compensation model is designed to: (i) provide competitive compensation to attract and retain talented high-achievers and appropriately incent them to achieve our strategic and operational objectives; and (ii) align the interests of our executives with the long-term interests of our shareholders. Detailed disclosure of Hudbay's executive compensation program can be found under the heading "Statement of Executive Compensation" found later in this Circular.
The Board has adopted a non-binding advisory vote relating to executive compensation to solicit feedback from shareholders on our approach to executive compensation. As a formal opportunity to provide their views on the disclosed objectives of Hudbay's compensation model, shareholders are asked to review and vote in a non-binding, advisory manner, on the following resolution:
"BE IT RESOLVED, on an advisory basis and not to diminish the role and responsibilities of the Board, that the shareholders accept the approach to executive compensation disclosed in the Circular."
As an advisory vote, the resolution will not be binding on the Board. However, the Compensation and Human Resources Committee and the Board will take the results of the vote into account, as appropriate, when considering future compensation policies, procedures and decisions, all of which are to be consistent with Hudbay's compensation philosophy (see the "Statement of Executive Compensation" for details).
Hudbay will disclose the results of the Say-on-Pay advisory vote as part of its report on voting results for the meeting.
The Board recommends that shareholders vote FOR the advisory resolution approving Hudbay's approach to executive compensation.
STATEMENT OF CORPORATE GOVERNANCE PRACTICES
Our Board believes that sound corporate governance practices are essential to the effective management of Hudbay and the protection of its employees, shareholders and other stakeholders. Our Board oversees the management of our business and affairs with a view to ensuring that shareholder value is enhanced without compromising our commitment to environmental, social and governance ("ESG") principles and the highest standards of ethical conduct.
Our Board has adopted corporate governance policies and procedures to assist it in fulfilling this oversight role. The Board fulfills its mandate directly and through its Committees. The directors are kept informed of our operations at regular and special Board and Committee meetings as well as through reports and discussions with management. We believe Hudbay is best served by a Board that functions independently of management and is informed and engaged.
Our Corporate Governance and Nominating ("CGN") Committee regularly monitors our corporate governance policies and procedures with a view to ensuring that they continue to guide the Board and management to act in the best interests of Hudbay and our stakeholders.
Our Corporate Governance Guidelines (including the Board Charter), which were updated in 2023, are set out in Schedule "A" to this Circular and can be viewed at our website at www.hudbay.com. The following is a description of Hudbay's corporate governance practices as approved by the Board.
| Highlights of Hudbay's Corporate Governance Practices |
| ✓ |
Board Independence: |
The Chair and all of Hudbay's directors, other than Mr. Kukielski, are independent; the Committees of the Board are composed entirely of independent directors; and independent directors meet without management present at all regular Board and Committee meetings. |
| ✓ |
Gender and Diversity: |
Hudbay has a written policy for the identification and nomination of director candidates who are diverse in all respects, including gender, and the policy sets a target for the Company to have at least 30% female directors on the Board. |
| ✓ |
Majority Voting and Advance Notice: |
Hudbay is subject to a statutory majority voting requirement for uncontested director elections and has adopted an advance notice by-law that provides advance notice requirements for director elections. |
| ✓ |
Board Composition and Skills: |
The Board has developed a nuanced skills matrix that is used by the CGN Committee to evaluate the current composition and strengths of the Board as well as the skills and experience that should be sought in new director nominees. |
| ✓ |
Director Education: |
The Board regularly receives presentations on educational topics and strategy and visits our operations and key development projects. In addition, Board members receive a membership with the Institute of Corporate Directors and are encouraged to make use of the educational and training programs available. |
| ✓ |
No Overboarding: |
The Chair of the Board must approve any other directorships held by our directors and only one of our directors currently sits on the board of more than two other reporting issuers. |
| ✓ |
Prohibition on Multiple Interlocking Directorships: |
Directors are prohibited from having more than one interlocking directorship without the approval of the CGN Committee. Only two of our directors have an interlocking directorship and sit together on the board of another reporting issuer.
|
| ✓ |
Ethical Business Conduct: |
Hudbay is committed to conducting business honestly, ethically and fairly and has adopted a Code of Business Conduct and Ethics, a Global Supplier Due Diligence Policy and Supplier and Customer Codes of Conduct and regularly carries out certification and training programs with regard to its key compliance policies. |
| ✓ |
Disclosure Policy: |
Hudbay has a Disclosure Policy that requires the company to provide timely disclosure of material information in a manner that is broadly accessible on a non-exclusionary basis. Hudbay's Disclosure Committee reviews and supervises the preparation of all public disclosure and is responsible for ensuring that information is disclosed in accordance with the Disclosure Policy. |
| ✓ |
Risk Management: |
Hudbay has a formal risk management program whereby the Board and its Committees have each been assigned responsibility for the oversight of certain of the principal risks facing the company and receive quarterly reporting from management on the monitoring and management of those risks. In addition, Hudbay has an internal audit function that is responsible for establishing a flexible, risk-based annual audit plan and reports to the Audit Committee. |
| ✓ |
Shareholder Engagement: |
The Board is committed to a dialogue with our shareholders and other stakeholders about our commitment to corporate governance, ESG practices, executive compensation program and other matters of interest and has adopted a Shareholder Engagement Policy with this in mind. |
| ✓ |
Succession Planning: |
Hudbay has a formal process for succession planning for its executive officers, with the Board overseeing CEO succession and the Compensation and Human Resources Committee overseeing management's succession plans for other executives and critical skill areas for the Company. |
| ✓ |
ESG Oversight and Governance: |
The EHSS Committee has been delegated oversight authority over the Company's sustainability strategy, risks, opportunities and policies, and other Committees have been delegated oversight over other ESG matters such as tailings, diversity and inclusion and corporate governance. |
| ✓ |
Board and Committee Evaluations: |
A formal evaluation of the performance and effectiveness of the Board and its Committees is carried out annually under the supervision of the CGN Committee. |
| ✓ |
Related Party Transactions |
The CGN Committee is responsible for reviewing all related party transactions, regardless of whether such transactions are reportable under applicable securities regulations. |
BOARD OF DIRECTORS: THE ROLE OF THE BOARD
The Board mandate has been formalized in a written Board Charter that sets out specific responsibilities, which include:
• satisfying itself as to the integrity of the Chief Executive Officer and other senior officers and that the Chief Executive Officer and other senior officers create a culture of integrity throughout the Company;
• reviewing and approving the strategic plan and business objectives that are submitted by senior management and monitoring the implementation by senior management of the strategic plan;
• reviewing the principal strategic, operational, reporting, ESG and compliance risks for Hudbay and overseeing, with the assistance of the Audit Committee, the implementation and monitoring of appropriate risk management systems and monitoring of risks;
• ensuring, with the assistance of the CGN Committee, the effective functioning of the Board and its Committees in compliance with applicable corporate governance requirements, and that such compliance is reviewed periodically by the CGN Committee;
• ensuring internal controls and management information systems are in place and are evaluated and reviewed periodically on the initiative of the Audit Committee;
• assessing the performance of senior management, including monitoring the establishment of appropriate systems for succession planning (including the development of policies and principles for Chief Executive Officer selection and performance reviews) and periodically monitoring the compensation levels of the members of senior management based on the determinations and recommendations made by the Compensation and Human Resources Committee;
• ensuring we have in place a policy for effective communication with shareholders, other stakeholders and the public generally; and
• reviewing and, where appropriate, approving the recommendations made by the various Committees, including the selection of nominees for election to the Board, appointment of directors to fill vacancies on the Board, appointment of members of the various Committees and establishing the form and amount of director compensation.
Independence
For a director to be considered independent under the policies of the Canadian Securities Administrators, he or she must have no direct or indirect material relationship with us, being a relationship that could, in the view of the Board, reasonably be expected to interfere with the exercise of his or her independent judgment, and must not be in any relationship deemed to be not independent pursuant to such policies. To assist in determining the independence of directors for purposes that include compliance with applicable legal and regulatory requirements and policies, the Board has adopted certain categorical standards, which are part of our Corporate Governance Guidelines.
With the assistance of the CGN Committee, the Board has considered the relationship to Hudbay of each of the nominees for election by the shareholders and has determined that nine of the ten directors nominated for election at the Meeting are independent. The following table sets out the relationship of the nominees for election as directors to Hudbay.
| Name |
Independent |
Non-Independent |
Reason for Non-Independent
Status |
| Carol T. Banducci |
✓ |
|
|
| Igor A. Gonzales |
✓ |
|
|
| Sarah B. Kavanagh |
✓ |
|
|
| Carin S. Knickel |
✓ |
|
|
| Peter Kukielski |
|
✓ |
President and CEO of Hudbay |
| George E. Lafond |
✓ |
|
|
| Stephen A. Lang |
✓ |
|
|
| Daniel Muñiz Quintanilla |
✓ |
|
|
| Colin Osborne |
✓ |
|
|
| David S. Smith |
✓ |
|
|
Restrictions on Board Membership at Other Entities
Our Corporate Governance Guidelines prohibit our directors from having more than one interlocking directorship (being one in which two or more of our directors sit together on the board of another reporting issuer), without the approval of our CGN Committee. Only two of our directors have an interlocking directorship and sit together on the board of another reporting issuer.
Our Corporate Governance Guidelines do not restrict the number of public company boards on which our directors may sit. However, our Code of Business Conduct and Ethics requires that the Chair approve any other directorships held by our directors. In addition, directors are expected to devote the required time and effort to discharge their obligations as members of the Board. Currently, only one of our directors sits on the boards of more than two other reporting issuers.
For more information about the nominees for election at the Meeting, including a listing of the reporting issuers on whose boards our nominee directors sit, see above under the heading "Election of Directors - Nominees for Election as Directors".
Independent Chair
In addition to having a majority of independent directors, the Board has adopted a variety of procedures to allow for the independent functioning of the Board from management. Those procedures include having a Chair who is an independent director with a formal mandate to assist the Board in fulfilling its duties effectively, efficiently and independent of management. The responsibilities of the Chair include acting as a liaison between the Board and the Chief Executive Officer, working with the Chief Executive Officer to ensure that the Board is appropriately involved in approving and supervising Hudbay's strategy and recommending procedures to enhance the work of the Board. The Board has also adopted a position description for the Chair of each of the Board Committees. The full position descriptions of the Board Chair and the Chair of each Committee, including a complete list of their responsibilities, which have been approved by the Board, are available on our website at www.hudbay.com.
CEO Position Description
The Board has approved a position description for the Chief Executive Officer (available on our website at www.hudbay.com), which delegates to the CEO the responsibility for providing strategic leadership and vision by working with the Board and the senior management team to establish, implement and oversee our long-range goals, strategies, plans and policies, subject to the direction and oversight of the Board. The Chief Executive Officer reports formally to the Board, as well as less formally through discussions with members of the Board, to advise the Board on a timely basis of management's current and proposed courses of action. The Board exercises its responsibility for oversight through the approval of all material decisions and initiatives affecting Hudbay.
Board Composition and Skills
The CGN Committee, which is composed entirely of independent directors, assists the Board in identifying skills and areas of expertise that are desirable to add to the Board, assists the Board by identifying individuals qualified to become members of the Board, and recommends to the Board nominees for election to the Board in annual meetings, and directors to be appointed to each Committee and as the Chair of each Committee. These activities are informed, in part, through the formal Board evaluation process that is carried out annually by the CGN Committee, as described under "Board and Committee Evaluations" below.
In assessing individual director nominees, the CGN Committee considers, in addition to the skills and expertise highlighted in the Board skills matrix, the following criteria: (i) judgment and character; (ii) diversity of the Board, including diversity of gender, viewpoints, backgrounds, experiences and other demographics (and the target for at least 30% women directors as described in our Diversity Policy below); and (iii) the extent to which the interplay of a nominee's expertise, skills, knowledge and experience with that of other members of the Board will build a Board that is effective, collegial and responsive to our needs.
The following Board skills matrix sets out the skills and expertise that the Board considers important to fulfill its oversight role in respect of Hudbay, the specific skills and expertise of each director nominee and the current strengths of the Board as a whole. Each director is required to complete a self-assessment of his or her skills and such data is compiled into the matrix. The Board skills matrix is maintained to identify and evaluate the competencies and skills of its members based on the individual experience and background of each director and to identify areas for strengthening the Board, if any, and address them through the recruitment of new members.
|
|
|
|
|
|
|
|
|
|
|
|
|
CEO/Senior Officer
|
⬤
|
⬤
|
⬤
|
⬤
|
⬤
|
⬤
|
⬤
|
⬤
|
⬤
|
⬤
|
|
Finance and M&A
|
⬤
|
O
|
⬤
|
⬤
|
⬤
|
O
|
O
|
⬤
|
⬤
|
⬤
|
|
Mining/Resource Industry
|
⬤
|
⬤
|
O
|
⬤
|
⬤
|
|
⬤
|
⬤
|
⬤
|
⬤
|
|
Operations
|
O
|
⬤
|
|
⬤
|
⬤
|
|
⬤
|
|
⬤
|
O
|
|
International Business
|
⬤
|
⬤
|
⬤
|
⬤
|
⬤
|
O
|
⬤
|
⬤
|
⬤
|
⬤
|
|
Government Relations and Permitting
|
⬤
|
⬤
|
|
|
⬤
|
⬤
|
⬤
|
⬤
|
O
|
O
|
|
ESG - Safety
|
O
|
⬤
|
O
|
⬤
|
⬤
|
O
|
⬤
|
O
|
⬤
|
O
|
|
ESG - Social, Communities and Culture
|
O
|
⬤
|
O
|
O
|
O
|
⬤
|
O
|
O
|
|
O
|
|
ESG - Environment and Climate
|
O
|
O
|
O
|
O
|
O
|
O
|
O
|
O
|
O
|
O
|
|
ESG - Corporate Governance
|
⬤
|
|
⬤
|
⬤
|
⬤
|
⬤
|
⬤
|
|
O
|
⬤
|
|
Human Resources/ Executive Compensation
|
⬤
|
O
|
O
|
⬤
|
O
|
⬤
|
⬤
|
|
O
|
⬤
|
|
Risk Management
|
⬤
|
⬤
|
⬤
|
⬤
|
⬤
|
O
|
O
|
⬤
|
⬤
|
⬤
|
|
Marketing
|
⬤
|
⬤
|
|
O
|
⬤
|
O
|
O
|
O
|
O
|
O
|
1. ⬤ Indicates a high degree of experience or expertise in the subject area.
2. O Indicates some or limited experience in the subject area.
Board and Committee Evaluations
Annually, under the supervision of the CGN Committee, the directors conduct a formal evaluation of the performance and effectiveness of the Board and its Committees. As part of this process, each director and members of senior management are interviewed by a member of the CGN Committee to assess the performance of the Board, its Committees and the individual directors, the independence of the Board, its relationship with senior management, the performance of the Chair, the Board's role in shaping the company's strategic priorities and culture and any other issues of concern. The results of these interviews were reviewed by the CGN Committee at its meeting on January 19, 2023, then reported to the Board by the Chair of the CGN Committee. A formal written report is circulated to the directors and members of senior management, and the Chair of the CGN Committee, the Board Chair and the President and CEO work to ensure the recommendations contained in the report are implemented.
Members of each Committee are also provided questionnaires that deal with the performance of the Committee and its Chair and ask the Committee members to raise any matters of concern. The results of these questionnaires are discussed during in camera sessions of the Committees.
Age and Term Limits; Focus on Board Renewal
We do not have age or term limits for service on the Board. Instead, the Board focuses on monitoring the effectiveness and composition of the Board, including considerations related to any skills gaps and the need for renewal and diversity. As part of the Board's annual evaluation process, the CGN Committee receives feedback on the performance of each individual director and the Board will ask directors who are no longer able to contribute effectively to step down from the Board.
Related Party Transactions
Our Corporate Governance Guidelines delegate responsibility to the CGN Committee to review transactions between the Company and any related party, regardless of whether the transactions are reportable pursuant to securities regulations. After considering advice from the CGN Committee, the Board shall review, and, if appropriate, approve or ratify, such related party transactions. For purposes of the guidelines, a "related party transaction" is any transaction in which the Company was or is to be a participant and in which any related party has a direct or indirect material interest, other than transactions that (i) are available to all employees generally, (ii) involve compensation of executive officers or directors duly authorized by the appropriate Board committee, or (iii) involve reimbursement of expenses in accordance with the Company's established policies.
Board and Committee Meetings and Attendance
The Board meets a minimum of four times per year and as otherwise required. Most Committees meet quarterly, or more frequently as deemed necessary by the applicable committee. The frequency of meetings and nature of each meeting agenda depend on the business and affairs that Hudbay faces from time to time.
The following table provides details regarding director attendance at Board and committee meetings held during the year ended December 31, 2022.
|
Directors
|
Board of
Directors
|
Audit
Committee
|
Compensation &
Human
Resources
Committee
|
Corporate
Governance &
Nominating
Committee
|
EHSS
Committee
|
Technical
Committee
|
Totals
|
|
Meetings
attended
|
Meetings
attended
|
Meetings
attended
|
Meetings
attended
|
Meetings
attended
|
Meetings
attended
|
Meetings
attended
|
Overall %
Attendance
|
|
Carol T. Banducci
|
9 of 9
|
6 of 6
|
4 of 4
|
|
3 of 3
|
|
22
|
100%
|
|
Igor A. Gonzales
|
9 of 9
|
|
|
|
5 of 5
|
6 of 6
|
20
|
100%
|
|
Richard Howes
|
9 of 9
|
|
7 of 7
|
|
|
6 of 6
|
22
|
100%
|
|
Sarah B. Kavanagh
|
9 of 9
|
|
|
4 of 4
|
5 of 5
|
|
18
|
100%
|
|
Carin S. Knickel
|
8 of 9
|
|
7 of 7
|
4 of 4
|
|
|
19
|
95%
|
|
Peter Kukielski
|
9 of 9
|
|
|
|
|
|
9
|
100%
|
|
George E. Lafond
|
6 of 6
|
|
|
2 of 2
|
2 of 2
|
|
10
|
100%
|
|
Stephen A. Lang
|
9 of 9
|
|
7 of 7
|
2 of 2
|
|
6 of 6
|
24
|
100%
|
|
Daniel Muñiz Quintanilla
|
9 of 9
|
5 of 6
|
|
|
5 of 5
|
|
19
|
95%
|
|
Colin Osborne
|
8 of 9
|
2 of 2
|
|
|
2 of 2
|
6 of 6
|
18
|
95%
|
|
David S. Smith
|
9 of 9
|
4 of 4
|
3 of 3
|
4 of 4
|
|
|
20
|
100%
|
In Camera Sessions without Management
The independent members of the Board meet without management in in camera sessions at all regular Board meetings. During the year ended December 31, 2022, the Board held in camera sessions of the independent directors at eight Board meetings. In addition, all of the committees hold in camera sessions without the presence of management at each regular meeting.
Director Orientation and Continuing Education
Senior management, working with the Board, provides appropriate orientation and education for new directors to familiarize them with Hudbay and its business. New directors are provided with a comprehensive series of documents which includes, among other things, information about the duties and obligations of directors (including copies of the Code of Business Conduct and Ethics, Governance Guidelines and Board Charter, Committee charters and Hudbay policies), descriptions of our organizational structure, operational reports, strategic plans, compensation plans, investor presentations and copies of our most recent core public disclosure documents. New directors are expected to meet with members of senior management and attend site visits at our key properties within a short period after joining the Board. New directors are also invited to sit in on meetings of Committees of which they are not a member to get a sense of how these Committees operate.
Our directors are encouraged to attend third party educational programs and our Board members receive a membership with the Institute of Corporate Directors, where they have access to educational materials and are invited to training seminars throughout the year. In addition, we frequently include a director education topic on the agenda at Board meetings and dinners. This typically involves presentations to the Board by members of management and third party advisors in respect of our business and operations, corporate development, strategy, legal and regulatory matters, ESG topics and industry trends and practices.
The following were among the educational and strategic presentations made to our Board in 2022:
| Date |
Topic |
Attendees |
| February 23, 2022 |
Manitoba Transition Update - senior management provided the Board with an in depth update on the Flin Flon closure and transition planning process. |
Full Board |
| May 9, 2022 |
Disclosure Considerations related to Hudbay's Foreign Private Issuer Status - external counsel provided the Board with an educational presentation on disclosure considerations related to Hudbay's foreign private issuer status and recent developments in US securities laws. |
Full Board |
| August 8, 2022 |
Evolving Landscape of Supply Chain Standards - a representative from Mining Association of Canada provided the Board with an educational presentation on the evolving landscape of supply chain standards impacting mining companies. |
Full Board |
| August 8, 2022 |
Strategy Session - senior management provided the Board with an in depth review of the company's strategic plans and priorities and the Board received an educational presentation on market considerations from a Canadian bank. |
Full Board |
| November 2, 2022 |
Perspectives on US Midterm Elections and Potential Implications for Hudbay - two of Hudbay's consultants provided the Board with their perspectives on the US midterm elections and potential implications for Hudbay's business in the United States. |
Full Board |
The following were among the training and education the Board Committees received in 2022:
| Date |
Topic |
Attendees |
| February 22, 2022 |
Workplace, Health and Safety: Fatality and Catastrophic Injury Prevention - management provided Board attendees with a presentation on workplace, health and safety: fatality and catastrophic injury prevention. |
EHSS Committee members, plus Messrs. Howes, Kukielski, Lang and Smith and Ms. Knickel |
| April 21, 2022 |
Deep Dive Review of Copper World Complex Preliminary Economic Assessment - management provided Board attendees with a detailed review of the initial results of the preliminary economic assessment of the Copper World project. |
Technical Committee members, plus Messrs. Kukielski, Muniz and Smith and Mmes. Kavanagh and Knickel |
| May 4, 2022 |
Industry Cyber Risk - a representative from Deloitte provided Board attendees with a presentation on the evolving cyber security landscape and cyber risk management practices. |
Audit Committee members, plus Messrs. Howes, Kukielski, Lang and Smith and Ms. Knickel |
| May 4, 2022 |
Current Landscape of Human Rights Due Diligence Legislation - external counsel provided Board attendees with an overview of human rights legislative trends, including legislative proposals in certain jurisdictions in respect of mandatory due diligence. |
EHSS Committee members, plus Messrs. Howes, Kukielski, Lang and Smith and Ms. Knickel |
| July 29, 2022 |
Nature Based Financial Disclosure - representatives from Blackrock provided Board attendees with a presentation on recent developments related to climate and nature based disclosure. |
EHSS Committee members plus Messrs. Howes, Kukielski, Lang and Smith and Ms. Knickel |
| November 2, 2022 |
Evolving Tailings Standards - a representative from the Mining Association of Canada provided Board attendees with a presentation on international tailings standards. |
EHSS Committee members plus Messrs. Howes, Kukielski, Lang and Smith and Ms. Knickel |
In addition, in September 2022, members of the Board's Technical Committee visited the Company's Constancia mine in Peru. During the site visit, the committee members received a tour of the Constancia operations and exploration properties, received management presentations and met with members of the operations team.
STRATEGIC PLANNING
The Board recognizes that one of its primary responsibilities is to provide direction and oversight to management in pursuit of the Company's strategy. Senior management, led by the CEO, is responsible for presenting strategy plans to the Board for approval, and pursuing strategic opportunities and business objectives. The Board recognizes that consideration of the Company's strategy and strategic opportunities must be an ongoing conversation with management and company strategy is discussed with management at every regular Board meeting. In addition, the Board held a meeting in August 2022 that focused solely on strategy.
RISK MANAGEMENT
A key element of the Board's responsibilities is to review the principal strategic, operational, ESG, reporting and compliance risks for the Company and oversee, with the assistance of the Audit Committee, the implementation and monitoring of appropriate risk management systems and the monitoring of risks.
The Board provides overall governance of the risk management function by:
• approving the Company's risk management policy;
• setting the risk appetite associated with Hudbay's strategy and corporate objectives;
• ensuring, with the assistance of the Audit Committee, that senior management has instituted and is operating a system that identifies, assesses, mitigates and communicates the principal risks the Company faces; and
• monitoring, with the assistance of the Board's committees, the management of the Company's principal risks.
The Audit Committee oversees the design and ongoing review of the Company's risk management system. In this capacity, the Audit Committee is responsible for reviewing and overseeing our risk management policy and approving a formalized, disciplined and integrated enterprise risk management ("ERM") process that is developed by senior management and, as appropriate, the Board and its Committees, to monitor, manage and report principal risks.
Each of the Board's committees is responsible for monitoring the critical risks assigned to it by the Board, periodically reviewing with management how those risks are being managed (including the actions that have been taken by management to mitigate the risks) and communicating findings to the full Board. By way of example, cyber security risks are overseen by the Audit Committee, as it has responsibility for reviewing and monitoring the information technology risks facing the Company, and climate-related risks are overseen by the EHSS Committee, as it has responsibility for monitoring sustainability-related risks. Oversight of the Company's current Tier 1 Risks is allocated among the Board and its committees as follows:
|
Hudbay's Tier 1 Risks and Board / Committee Oversight
|
|
|
Tier 1 Risk Category
|
Board/Committee Oversight
|
|
|
Copper World Project
|
Technical Committee
|
|
|
Community and Political Relations
|
EHSS Committee
|
|
|
Cyber Security
|
Audit Committee
|
|
|
Macroeconomics (Metal Prices, Foreign Exchange and Interest Rates)
|
Audit Committee
|
|
|
Access to Capital
|
Audit Committee
|
|
|
Operating Performance (Volume, Equipment Availability and Cost)
|
Technical Committee
|
|
|
Operating Performance (Safety and Security)
|
EHSS Committee
|
|
|
Taxation and Tax Planning (Mining Royalties and Income)
|
Audit Committee
|
|
|
Tailings Management (Dam Breach and Discharges)
|
Technical Committee
|
|
|
Tailings Management Systems (Dam Breach and Discharges)
|
EHSS Committee
|
|
|
Strategic and Business Planning
|
Board
|
|
|
Reputation Management
|
Board
|
|
|
Reserves and Resources, Life of Mine and Capital Allocation Planning
|
Technical Committee
|
|
|
Succession Planning Recruitment and Retention
|
Compensation and Human Resources Committee
|
|
|
Concentrate Shipping (Environment & Safety)
|
EHSS Committee
|
|
|
Concentrate Shipping (Transport & Logistics)
|
Technical Committee
|
|
|
Supply Chain (Consumables)
|
Technical Committee
|
Among its responsibilities, Hudbay management is responsible for:
• Conducting business in accordance with the risk appetite set by the Board,
• Integrating risk management into strategic business planning, budget and resource allocation, operating performance, and human resources, financial and compliance processes, and
• Actively monitoring and managing principal business risks.
In addition, our Executive Director, Internal Audit and Compliance is responsible for establishing a flexible, risk-based annual internal audit plan to determine the priorities of the internal audit function, consistent with Hudbay's strategic plan and aligned with the ERM program, including but not limited to risk registers and risk appetite and tolerance levels. The Audit Committee approves the annual internal audit plan.
DIVERSITY AND INCLUSION
Our Corporate Governance Guidelines (a copy of which can be found at Schedule "A") include a written policy for the identification and nomination of director candidates who are diverse in many respects, including gender. The Board has also approved a standalone written Diversity Policy to supplement our Corporate Governance Guidelines.
Our Diversity Policy seeks to ensure a diverse representation of women and other designated groups (Aboriginal peoples, persons with disabilities and visible minorities) among the members of our Board and senior management. To ensure sustained progress in this regard, the Diversity Policy was updated in early 2021 to include a target for the Company to have at least 30% women directors on the Board. This policy confirms the Board's commitment to diversity and inclusion as part of our core values and to setting a "tone at the top" that leads to greater diversity on the Board, in senior management and across the organization.
The CGN Committee is responsible for ensuring the objectives of our Diversity Policy are applied when recommending changes to the composition of the Board. Consistent with the Board's stated intention to bring the percentage of women on the Board back into compliance with the target set forth in the Diversity Policy, 30% of the director nominees proposed by the CGN Committee for election this year are women.
Pursuant to our Diversity Policy, in assessing individual director nominees, the CGN Committee considers, among other things, relevant skills and expertise, judgment and character, diversity (including diversity of gender, viewpoints, backgrounds, experiences and other demographics, such as the representation of Aboriginal peoples, persons with disabilities and visible minorities), and the extent to which the interplay of an individual's expertise, skills, knowledge and experience with that of other members of the Board will build a board that is effective, diverse, collegial and responsive to the needs of the Company. In addition, when engaging search firms to identify candidates for the Board, the CGN Committee is responsible for ensuring the objectives of our Diversity Policy are applied and may, in certain circumstances, instruct a search firm to focus on identifying only those candidates from one or more underrepresented groups that have the specific skills and expertise required to complement the current composition of the Board.
The CEO is tasked with ensuring the objectives of our Diversity Policy are applied with respect to senior management positions.
Although we do not have specific targets regarding directors and executive officers for each of the designated groups, we have a target of at least 30% women directors and believe that our Diversity Policy and Corporate Governance Guidelines, together with our other diversity and inclusion initiatives described below, encourage our CGN Committee and management to consider the current number of women and members of other designated groups when selecting director candidates and members of senior management.
Diversity and Inclusion Initiatives
In 2020, Hudbay management formed a Diversity and Inclusion Committee (the "D&I Committee"). The D&I Committee was formed shortly after Hudbay's President and Chief Executive Officer, Peter Kukielski, joined other senior executives in Canada in signing a pledge (known as the BlackNorth Pledge) to end systemic racism and create opportunities for all of those in the underrepresented BIPOC (Black, Indigenous and People of Colour) community. The D&I Committee consists of a group of employees at the corporate office that expressed a desire to foster and advance Hudbay's commitment to diversity, equity and inclusion throughout the organization. Since that time, the D&I Committee has developed a Diversity and Inclusion Policy ("D&I Policy"), arranged for targeted charitable corporate donations and worked collaboratively with the HR group and business units on various diversity, equity and inclusion and culture initiatives. These initiatives have included Indigenous awareness training, diversity, equity and inclusion training, employee engagement and culture surveys and guest speakers.
In 2021, our Peru Business Unit launched its own diversity, equity and inclusion ("DE&I") program called "Nuestras Voces" (Our Voices). The acronym VOICES represents the following focus areas for fostering a workplace where everyone feels welcome and thrives:
• Values - Our values in action foster a DE&I work environment
• Openness - We promote being a role model in inclusive leadership
• Inclusion - All communities and interest groups are valued
• Confident - Develop a psychologically safe environment
• Education - Promote, develop and generate opportunities through education
• Sustainable - Empower schools in the Chumbivilcas province through access to quality learning
The program aims to support the overall people strategy goal of creating a more diverse, equitable and inclusive organization and increasing the percentage of women in the workforce to 30%. One initiative launched under this program - Hatun Warmi (which translates from Quechua to "Great Women") - is aimed exclusively at providing women from the local communities near the Constancia mine with the training necessary to obtain an operator's license for mining equipment. To date, eleven women have graduated and joined our permanent workforce. Twelve new participants started the program in September 2022. Another successful initiative was the community co-op concentrate transport program, which has resulted in approximately 30% of our concentrate production from Constancia now being transported by the local communities.
To promote gender diversity in the Manitoba Business Unit, the Hudbay Women's Network ("HBWN"), was founded in 2018 by two female employees in our Manitoba Business Unit. The HBWN's founding principle is gender inclusion, and its goal is to support, connect and empower Hudbay employees by providing a vehicle for professional growth and a strong voice. The HBWN is supported by our female directors, who have met with the HBWN to share their experiences and provide mentoring.
Measuring our Success
Hudbay intends to measure the effectiveness of its Diversity Policy and our other diversity and inclusion initiatives by looking at the increase in female representation and representation of other designated groups on the Board and in senior management positions over time and assessing the input received from employees through our engagement surveys.
The Board presently has three female directors, Carol T. Banducci, Sarah B. Kavanagh and Carin S. Knickel, representing 30% of our nominee directors, and three additional directors, representing a further 30% of our nominees, who identify as part of other designated groups.
The Board and senior management recognize the need for increased diversity among senior management, including greater representation of female and BIPOC individuals. Consideration of executive appointments occurs in the context of our succession planning framework, which identifies potential successors for our current executives. While we are committed to ensuring diverse candidates are considered for executive roles, this will best be achieved by bringing in diverse and talented people to all levels of our organization and ensuring that they are given every opportunity to flourish and advance within the organization.
In furtherance of this goal, in 2022, we created a two-year development program for those who have consistently performed at a high level and have the potential to move into a more senior leadership role in the next two years. Currently, approximately 42% of our participants in the development program are women. Another program is exclusively focused on building female leaders. In 2023, two women from Hudbay (one from corporate office and one from the Manitoba Business Unit) will participate in an external networking and leadership development program for women in mining. The year-long program combines three face-to-face meetings held in Canada with several virtual sessions for women who work in historically male-dominated industries to connect, share experiences and further develop their leadership skills.
The number and percentage of our ten nominee directors who are women or identify as a member of a designated group is as follows:
|
Designated Groups
|
Number of
Directors
|
Percentage of
Directors
|
|
Women
|
3
|
30%
|
|
Indigenous peoples
|
1
|
10%
|
|
Visible minorities
|
2
|
20%
|
|
Total Designated group members
|
6
|
60%
|
The number and percentage of our thirteen executive officers who are women or identify as a member of another designated group is as follows:
|
Designated Groups
|
Number of
Executive Officers
|
Percentage of
Executive Officers
|
|
Women
|
1
|
7.5%
|
|
Visible minorities
|
2
|
15%
|
|
Total Designated group members
|
3
|
23%
|
SUCCESSION PLANNING FOR EXECUTIVE OFFICERS
Hudbay has a formal process for succession planning for its executive officers. The Chief Executive Officer is responsible for overseeing the succession planning process for all executive roles and critical skills roles below the CEO level. As part of this process, an employee's manager-once-removed (the manager of the employee's manager) is accountable for planning, assessing and monitoring the identification and development of successors to management and other key roles. Results are compiled by the Human Resources group and discussed among senior management, following which a formal succession plan is prepared and reported to the Compensation and Human Resources Committee and Board.
The robust nature of our succession planning process was demonstrated in 2022 when, following the departure of their predecessors, Andre Lauzon was appointed as Chief Operating Officer and Eugene Lei was appointed as Chief Financial Officer. Our ability to fill two senior leadership roles through internal promotions speaks to our bench strength and our commitment to supporting our people.
CEO succession planning is discussed during in camera meetings of the Compensation and Human Resources Committee and the full Board. At these meetings, the Compensation and Human Resources Committee and Board consider candidates with long-term potential to serve as Hudbay's CEO and they also identify candidates who could step into the role immediately in the event the CEO departs unexpectedly or becomes temporarily incapacitated.
ESG OVERSIGHT
Hudbay believes that continuously improving how we manage the social, environmental and economic risks, impacts and opportunities associated with our activities is critical for our long-term success. Our focus on sustainability helps us meet stakeholder expectations, benefit from positive developments and manage challenging circumstances.
Social, environmental and economic sustainability are embedded into Hudbay's overall management approach, and governance of these matters starts at the Board level. The EHSS Committee has been delegated oversight authority over the Company's strategy, compliance and management systems related to health and safety, environmental matters, climate-related matters, reclamation and closure matters, community and stakeholder relationships (including social licence and the engagement of Indigenous peoples) and human rights (including Indigenous rights) ("Sustainability Matters") and other committees have been delegated oversight of other ESG matters such as tailings, organizational culture, diversity and inclusion and corporate governance. Senior management has responsibility for the Company's overall sustainability governance processes while Business Unit and operations leaders are responsible for achieving and maintaining sustainable operations. Each operation has specialist personnel who are dedicated to the day-to-day management of health, safety, environmental, community relations and other social and human rights matters.
Climate-Related Governance and Risks
Our EHSS Committee is responsible for assisting the Board with its oversight of the design, implementation and effectiveness of the Company's strategy with respect to Sustainability Matters, including, without limitation, the adoption of any targets to reduce greenhouse gas emissions and any strategic plans to address other climate-related and nature-based risks and opportunities. In addition, the EHSS Committee is responsible for the monitoring of climate-related risks and other emerging nature-based risks and management is accountable for reporting these risks to the EHSS Committee through, among other processes, the ERM program. To make these accountabilities clear, our EHSS Committee Charter was updated in 2023.
Climate-Related Strategy and Targets
In 2021, we initiated a roadmap to identify and manage opportunities to reduce greenhouse gas ("GHG") emissions in alignment with global decarbonization goals. We regularly reported on this roadmap to the EHSS Committee and, in December 2022, we announced our commitment to achieve net zero GHG emissions by 2050 and the adoption of interim 2030 GHG reduction targets to support this commitment. Our GHG reduction targets were developed following a thorough review of our existing emissions and evaluation of reduction opportunities that are achievable without compromising the long-term economics of our operations and projects.
While our operations are well-positioned in the lower half of the global GHG emissions curve for copper operations, we recognize our role in mitigating climate change. Hudbay's GHG emissions reduction plan includes the following initiatives:
- Pursuing a 50% reduction in absolute Scope 1 and Scope 2 emissions from existing operations by 2030 (compared to 2021)
- Achieving net zero total emissions by 2050
- Reporting on material Scope 3 emissions in the near-term
- Assessing acquisitions and new projects against corporate emissions targets
- Continuing to be transparent with GHG performance data disclosure, including reporting total GHG emissions and GHG intensity
- Evaluating new technologies as they become commercially available and economically viable
Hudbay has been reporting global GHG emissions data and performance to the CDP Climate questionnaire for more than 10 years. The company's 2021 Annual Sustainability Report maps our CDP responses to the Task Force on Climate-related Financial Disclosures recommendations. Hudbay also aligns with the Mining Association of Canada's Towards Sustainable Mining ("TSM") environmental protocols, including the updated TSM Climate Change Protocol.
Towards Sustainable Mining Program
As a member of the Mining Association of Canada, Hudbay participates in its TSM program, a leading sustainability standard in the mining industry. The TSM program is based on guiding principles and supported by a set of tools and performance indicators to ensure key mining risks are effectively managed. Participation in TSM supports accountability, transparency and credibility by evaluating and publicly reporting our performance across the following protocols and frameworks:
- Indigenous and Community Relationships
- Climate Change
- Tailings Management
- Biodiversity Conservation Management
- Safety and Health
- Crisis Management and Communications Planning
- Water Stewardship
- Preventing Child and Forced Labour
- Mine Closure Framework
The TSM protocols and frameworks are incorporated into our overall management systems and company standards. Although we are only required to implement the program at our Canadian operations, we commit to implementing the program at all of our operations. The goal is for each facility to achieve a minimum of Level A - which is considered good performance and demonstrates that commitments and accountabilities are in place and consistent with the protocol - in all performance areas.
Tailings Governance
Our Tailings Governance Charter specifies the governance that supports the safe, efficient and effective management of tailings facilities. Each site or business unit employs a tailings management system that supports the day-to-day activities - such as planning, monitoring, risk identification and reporting - associated with the safe management of tailings design, construction and operation.
One important requirement in the TSM protocol is that a company's governance defines and documents accountability and responsibility for tailings management. Our Accountable Executive Officer ("AEO"), who is our Chief Operating Officer, has the authority and responsibility to engage with Hudbay's Board on any issues related to tailings management. Each business unit Vice President has similar accountabilities to the AEO for facilities within their business unit. A Tailings Governance Team ("TGT"), composed of individuals from the business units and relevant corporate functions, serves in a monitoring and advisory role to assist the AEO in the design and implementation of appropriate processes to carry out the required third-party reviews and provide information to the AEO.
To support our tailings management initiatives, in early 2023, we created a new role and appointed a Vice President, Business Planning and Reclamation. This new member of our management team is responsible for assisting our Chief Operating Officer and Technical Services team with the planning and oversight of tailings facilities in line with TSM requirements, Canadian Dam Association guidelines and regional legislation. In addition, this individual will be responsible for developing a strategy for the approval and execution of monitoring and reclamation activities for non-producing mines and facilities, which is an area of focus following the closure of our Flin Flon operations.
Key third-party roles include the following:
• Independent peer review board ("IPRB") - a panel of qualified and experienced individuals, who have not been directly involved with the design or operation of the facility, evaluates the technical aspects of TSFs at least annually (and typically twice per year - one being a site visit and the other a teleconference) throughout the mine lifecycle. The IPRB's findings are reported by management to the Board's Technical Committee and the Technical Committee Chair may elect to meet with management and the IPRB as needed.
• Engineer of record ("EOR") - a qualified individual who verifies that the facilities are designed, constructed and performing in accordance with performance objectives and all applicable guidelines, standards and regulatory requirements.
• Dam safety review provider - an external expert conducts dam safety reviews ("DSRs"), independent of the IPRB and EOR, every five years, as per the recommendation of the Canadian Dam Association's Dam Safety Guidelines.
Annual tailings management reviews at our operating sites assess compliance with our Tailings Governance Charter and the TSM protocol. The review findings are reported to our Technical Committee, which oversees tailings management on behalf of the Board.
Sustainability Reporting
Hudbay has long believed that transparently disclosing our sustainability performance is good business and essential to earning and maintaining stakeholder trust. We have published an Annual Sustainability Report since 2004. Our 2022 Annual Sustainability Report will be published in the second quarter of 2023 and our 2021 report is available on our website at www.hudbay.com.
For several years, Hudbay has published its ESG disclosures in accordance with the GRI (Global Reporting Initiative) guidelines and standards. We have also participated in CDP's annual questionnaires on our greenhouse gas emissions, water management practices and forest-related risks and opportunities.
For many years, the GRI and CDP have been considered two of the most credible and widely adopted sustainability/ESG reporting frameworks. However, two other frameworks have recently emerged that reflect how reporting is evolving to include issues of interest to investors and other stakeholders. The Sustainability Accounting Standards Board ("SASB") created a standardized methodology for reporting sustainability information that is material to investors and for allowing stakeholders to compare peer performance within an industry. The Task Force on Climate-related Financial Disclosures ("TCFD") framework seeks to provide stakeholders in the financial markets (e.g., investors, lenders, insurers and regulators) climate-related information useful to decision making.
As investor interest in ESG matters increases, SASB and TCFD are emerging as equally credible standards and frameworks to GRI. As a result, our 2022 Annual Sustainability Report disclosures will continue to be mapped to the GRI, the SASB Metals & Mining industry standard and the TCFD.
Because the multiple frameworks may have an unintended result of creating complexity and becoming onerous, there are several efforts underway to converge the various sustainability reporting standards into a single reporting framework. We are monitoring these developments, as well as the proposal from securities regulators to disclose climate-related information in our continuous disclosure filings, as we continuously improve our reporting disclosures and transparency on our performance.
ETHICAL BUSINESS CONDUCT
As part of its commitment to maintaining the highest ethical standards, the Board has adopted a Code of Business Conduct and Ethics. The Code applies to all of our directors, officers and employees, our subsidiaries and affiliates and other persons in similar relationships with those entities. The Code addresses such matters as compliance with laws, conflicts of interest, confidential information, protection and proper use of Hudbay assets, fair dealing, rules and regulations and the reporting of illegal and unethical behaviour, including laws prohibiting improper payments to government officials.
In addition, we have adopted a Certification Policy, in accordance with which new employees must read the Code when hired or appointed and acknowledge that they will abide by the Code. The Certification Policy also requires that all directors, officers and active employees across the organization annually certify their understanding of the Code and acknowledge that they will abide by the Code. We regularly conduct training sessions across the organization relating to applicable laws prohibiting bribery, to ensure that employees, especially those who may interact with government and other third parties, understand such laws and know how to comply with them. In early 2023, we completed an online certification campaign in which all active employees were provided copies of the Code and our key compliance policies (including anti-corruption policies) and asked to e-sign the policies to certify their understanding of the policies and their compliance therewith. In addition, targeted compliance training was carried out by our Peruvian business unit's compliance function in 2022, which training included virtual training of members of the community relations, government relations and institutional relations teams, as well as specific training in relation to the recruitment and onboarding of former government employees.
As part of our ongoing commitment to ethical business conduct, in 2022 we also completed a comprehensive review of our anti-bribery and corruption policies, which resulted in updates to our Code of Business Conduct and other related compliance policies. We also engaged a third party expert to carry out an anti-corruption risk assessment and review of Hudbay Peru's compliance program. The review found that Hudbay Peru has a comprehensive and mature compliance program that is appropriately designed for the potential risks the company faces. It also identified certain potential enhancements to the program that could be considered, which we are evaluating.
The Board has also adopted a Statement on Anti-Corruption, which was updated in March 2022, to further demonstrate our commitment to conducting business honestly, ethically and in compliance with the laws of the jurisdictions in which we operate and have assets. In addition, our Global Supplier Due Diligence Policy and our supplier and customer codes of conduct are intended to ensure that we and our subsidiaries transact with suppliers and customers who share our expectations for ethical conduct and compliance with laws.
We encourage personnel who become aware of a conflict or potential conflict or departure from the Code to bring it to the attention of a supervisor or department head. The Board has adopted a Whistleblower Policy for employees and others to report concerns regarding, among other things, violations of the Code or anti-bribery legislation or concerns regarding financial statement disclosure issues, accounting, internal accounting controls or auditing matters. These concerns may be reported to the Chair of the Audit Committee, who will promptly conduct or assign an individual, who may be a member of senior management or another person, to conduct a thorough investigation of the complaint. In addition, under the Whistleblower Policy, Hudbay has a third-party hotline and website that allows individuals to report any concerns about inappropriate business conduct confidentially and anonymously. These concerns can be reported online, by mail or by phone.
The Board, through the Audit Committee, monitors compliance with the Code. Hudbay's Senior Vice President, Legal and Organizational Effectiveness provides day-to-day management over Hudbay's global compliance with the Code and other core policies, including management of our Whistleblower Policy and program, and reporting quarterly on such matters to the Audit Committee.
Any waivers of the Code for directors or members of senior management may only be granted by the Board. The Board did not grant any waiver of the Code in 2022. In the unlikely event of such a waiver, it will be disclosed to shareholders as required by applicable law.
A copy of the Code may be accessed on our website at www.hudbay.com or on Hudbay's profile on SEDAR at www.sedar.com and EDGAR at www.sec.gov/edgar. Copies of the Whistleblower Policy, Supplier Code of Conduct and Ethics, Customer Code of Conduct and Ethics and our Statement on Anti-Corruption may be accessed on our website at www.hudbay.com.
SHAREHOLDER ENGAGEMENT
We communicate with our shareholders in a wide variety of ways, including through our website, news releases and other public disclosure documents, investor presentations, industry conferences and meetings with our shareholders. We also hold conference calls in respect of quarterly earnings releases and major corporate developments and such calls are open to be heard by the public. Details of the notice of time, place, general substance and method of accessing any such call and instructions as to where the public will be able to access archived audio webcasts of the call are broadly disseminated.
The Board of Directors is committed to engaging in constructive communications with our shareholders and the Board maintains a Shareholder Engagement Policy, which is available on our website at www.hudbay.com. In addition to our annual general meeting, during which shareholders have the opportunity to interact with our directors, the policy expresses our directors' interest in meeting with key shareholders to discuss specific matters of mutual interest and concern. As part of these efforts, in 2022, our Board Chair reached out to our 25 largest shareholders and offered to meet with such shareholders without management present to discuss governance topics of interest. This resulted in meetings between our Board Chair and certain other committee chairs with shareholders representing, in aggregate, approximately 11% of the Company's outstanding shares.
Shareholders may also initiate communication directly with the Board by contacting our Chair by mail or email at:
Hudbay Minerals Inc.
Attention: Chair of the Board
25 York Street, Suite 800
Toronto, Ontario, Canada M5J 2V5
Email: Chair@hudbay.com
Our Chair and other members of our Board and management team continue to be in frequent contact with many of our shareholders and remain committed to constructive engagement with all shareholders.
DISCLOSURE POLICY
In addition to our timely and continuous disclosure obligations under applicable law, we also have a formal policy for dealing with analysts, shareholders and the media. Our Disclosure Policy is intended to ensure that we provide timely disclosure of material information in a manner that is broadly accessible on a non-exclusionary basis by all market participants.
Hudbay's management has established a Disclosure Committee that is responsible for ensuring that information is disclosed in accordance with the Disclosure Policy and otherwise in accordance with applicable securities laws. The members of the Disclosure Committee generally include the President and Chief Executive Officer, the Chief Financial Officer, the Chief Operating Officer, the Senior Vice President, Legal and Organizational Effectiveness, the Vice President, Investor Relations and such other members of senior management deemed appropriate from time to time by the Disclosure Committee.
The Disclosure Committee reviews and supervises the preparation of all news releases and public filings prior to their release, oversees the disclosure of information on our website and assists Hudbay management with their evaluation of the effectiveness of our disclosure controls. In addition, the Board gives final approval of material disclosure items and all news releases and public filings disclosing Hudbay's financial performance are reviewed by the Audit Committee, which ultimately recommends such disclosure for approval by the Board.
COMMITTEES OF THE BOARD
The Board has established five standing Committees to assist it in discharging its mandate. The roles of the five standing Committees are outlined below and their charters may be viewed on our website at www.hudbay.com.
Independence of Committees
The members of the Board's Committees are appointed by the Board upon the recommendation of the CGN Committee. All of our directors who are currently members of Committees of the Board are independent directors within the meaning of applicable securities laws and the categorical standards set out in our Corporate Governance Guidelines.
Audit Committee
Members: Carol T. Banducci (Chair), Daniel Muñiz Quintanilla and David S. Smith.
The duties of the Audit Committee include making recommendations to the Board with respect to our quarterly and annual financial results, including management's discussion and analysis thereof, and reporting to the Board any issues of which the Audit Committee is aware respecting the quality or integrity of our financial statements, any significant financial reporting issues and judgments made in connection with the preparation of our financial statements and the adequacy of our internal controls. The Audit Committee also oversees the performance of our independent auditor and the scope of its audit, as well as our internal audit function and our ERM, information technology, cyber security and insurance programs. The Audit Committee receives regular reports from management on internal audit, risk management, information technology, cyber security, tax strategy, insurance, litigation, compliance with the Code, pension plans and other matters. In addition, the Audit Committee is responsible for overseeing investigations into any complaints received by our third-party whistleblower service and for ensuring that appropriate resources are allocated to such investigations.
The Audit Committee meets at least quarterly and meets separately with senior management, the independent auditor and internal audit group as appropriate. All regular meetings of the Audit Committee include a session at which only members of the Audit Committee are present, a session at which the head of internal audit is present with the Audit Committee without other members of management and a session at which only representatives of the independent auditor are present with the Audit Committee.
None of the members of the Audit Committee may serve on the audit committee of more than three reporting issuers in addition to Hudbay without the prior approval of the Audit Committee, the CGN Committee and the Board. No member of the Audit Committee serves on the audit committee of more than two other reporting issuers.
Information about the remuneration of the independent auditor for the last two years is contained in Hudbay's Annual Information Form ("AIF") for the year ended December 31, 2022 under the heading "Audit Committee Disclosure" and a copy of the Audit Committee's charter is attached as Schedule "C" to the AIF. Our AIF may be found on SEDAR at www.sedar.com and EDGAR at www.sec.gov/edgar.
Compensation and Human Resources Committee
Members: Carin S. Knickel (Chair), Carol T. Banducci, Richard Howes and Stephen A. Lang.
The Compensation and Human Resources Committee assists the Board in discharging its responsibilities relating to recruitment, development and retention of senior management, performance evaluations and compensation of senior management, senior management and critical skills succession planning, compensation structure for the Board and senior management, including salaries, annual and long-term incentive plans and share ownership guidelines.
In 2022, the Committee's activities included reviewing the Company's return to work strategy, reviewing the Company's human resources and organizational effectiveness strategy, including plans for a high potential employee leadership program and developing the Company's culture, diversity and inclusion initiatives, and reviewing the Company's succession planning strategy for executive officers and critical skills employees.
For a detailed discussion of the role of the Compensation and Human Resources Committee and its activities in 2022, including its oversight of executive compensation and its review of Hudbay's 2022 performance against the corporate scorecard, see "Statement of Executive Compensation".
Corporate Governance and Nominating Committee
Members: David S. Smith (Chair), Sarah B. Kavanagh, Carin S. Knickel and George E. Lafond.
The CGN Committee makes recommendations to the Board as to the size of the Board, standards for director independence, nominees for election as directors, the composition of Committees and development of appropriate corporate governance policies and guidelines. In addition, it is responsible for administering the Code and the Confidentiality and Insider Trading Policy, conducting annual interviews of the Board and senior management and reporting on their conclusions to the Board as part of the Board evaluation process, managing the Board's shareholder engagement activities, reviewing the relationship between the Board and senior management and undertaking such other initiatives that may be necessary or desirable to enable the Board to provide effective corporate governance. The CGN Committee views its most important role as assessing the Board's ability to make effective decisions and ensuring the effective governance of Hudbay.
The CGN Committee's activities over the past year included recommending certain updates to our compliance and governance policies, reviewing the Company's foreign private issuer status and making recommendations to the Board with regards to Board composition and nominees for election as directors as set forth in this Circular.
Environmental, Health, Safety and Sustainability Committee
Members: Sarah B. Kavanagh (Chair), Igor A. Gonzales, George E. Lafond, Daniel Muñiz Quintanilla and Colin Osborne.
The purpose of the Environmental, Health, Safety and Sustainability Committee (the "EHSS Committee") is to assist the Board in discharging its responsibilities relating to its oversight of Sustainability Matters. This includes oversight of the Company's compliance with applicable legal, regulatory and voluntarily adopted standards related to Sustainability Matters; the design, implementation and effectiveness of the Company's strategy with respect to Sustainability Matters; the development and implementation by management of policies, programs and systems related to the monitoring and external reporting of the Company's performance in relation to Sustainability Matters; the monitoring of risks related to Sustainability Matters, including, without limitation, climate-related risks and other emerging nature-based risks; and the monitoring of significant international and local developments in relevant policies, regulations and trends related to Sustainability Matters.
The EHSS Committee receives quarterly reports from management, which include reports on health and safety incidents that occurred during the quarter across all of our operations, as well as measures taken to reduce the likelihood of such incidents occurring in the future, any non-compliances with applicable environmental regulations, and any internal and external environmental, health and safety audits conducted during the quarter. In addition, it is responsible for ensuring management promotes a culture of environmental and community responsibility and ensuring that, with respect to matters under our control, we operate in a climate that fosters the improvement of socio-economic conditions in the communities in which we operate. The EHSS Committee also receives regular reports on our management systems at our operations and reviews and recommends our Annual Sustainability Report for approval.
In 2022, the EHSS Committee's activities also included receiving director education on Sustainability Matters and receiving regular reports from management on the Flin Flon closure process and the development of our GHG reduction strategy.
Technical Committee
Members: Colin Osborne (Chair), Igor A. Gonzales, Richard Howes and Stephen A. Lang.
The Technical Committee assists the Board in its oversight of technical and operational matters, including receiving regular updates from management on key technical and operational issues and initiatives, overseeing reserve/resource calculations, reviewing operational budgets, receiving reports on production and cost performance, assessing our systems and processes for reviewing technical risks and technical controls in place at our operations, and discussing with management the technical merits of proposed acquisition targets and significant operational initiatives proposed to be undertaken.
In 2022, the Technical Committee's activities included receiving regular reports on our brownfield projects in Snow Lake and Peru, our tailings management activities, our exploration activities in Manitoba, Peru and Arizona, including our exploration strategy for Maria Reyna and Caballito, reviewing the results of management's due diligence on certain corporate development opportunities and reviewing the technical merits of those opportunities, and a special session during which management provided a detailed review of the Preliminary Economic Assessment of the Copper World project.
THE NEW YORK STOCK EXCHANGE CORPORATE GOVERNANCE LISTING STANDARDS
We, as a "foreign private issuer" in the United States, may rely on home jurisdiction listing standards for compliance with the New York Stock Exchange ("NYSE") Corporate Governance Listing Standards but must comply with the following NYSE rules: (i) the requirement (Section 303A.06) that the Audit Committee meet the standards of Rule 10A 3; (ii) the requirement (Section 303A.11) that we disclose in our annual report or on our website any significant differences between our corporate governance practices and the NYSE listing standards; (iii) the requirement (Section 303A.12(b)) that our CEO notify the NYSE in writing after any executive officer becomes aware of any non-compliance with the applicable provisions of NYSE Corporate Governance Listing Standards; and (iv) the requirement (section 303A.12(c)) that we submit an executed annual written affirmation affirming our compliance with audit committee requirements of Rule 10A 3 or, as may be required from time to time, an interim written affirmation to the NYSE in the event of certain changes to the Audit Committee membership or a member's independence.
As required by the NYSE, a statement of the significant differences between our current corporate governance practices and those currently required for U.S. companies listed on the NYSE is available on our website at www.hudbay.com.
STATEMENT OF EXECUTIVE COMPENSATION
MESSAGE FROM THE CHAIR OF THE COMPENSATION AND HUMAN RESOURCES COMMITTEE
Fellow Shareholders,
Hudbay's Compensation and Human Resources Committee is pleased to provide you with this report on the Company's executive compensation, along with a description of how our executives' compensation outcomes are consistent with the Company's performance.
Performance in 2022 - Growing Production in the Face of Challenges
During 2022, Hudbay began to realize the benefits of $250 million in brownfields investments at our operations in Peru and Manitoba. Hudbay met its 2022 production guidance for all metals after our first full year of mining the higher grade Pampacancha deposit in Peru and ramping up our New Britannia gold mill in Manitoba to 1,500 tonnes per day.
Our production success was not without its difficulties, however, as our operating costs were subject to global inflationary pressures that had effects well beyond the mining sector. In Peru, our operations were impacted late in the year by political and social unrest that disrupted our supply chains and transportation routes. Our community relations and logistics teams did an admirable job of managing these challenges, and unit operating costs at our Constancia mine were within our 2022 guidance range. However, our Manitoba costs were above guidance. This was due in part to inflationary pressures, but our costs were also impacted by the transition of a large segment of our Manitoba workforce to our Lalor operations in Snow Lake following the planned closure of our 777 mine. The 777 closure marked the end of over 90 years of continuous mining in Flin Flon, and we are grateful for the support of the community and our workforce throughout the transition.
We had substantial exploration success in 2022, with reserves being added at Constancia and Lalor. We also completed an initial resource estimate at our Llaguen deposit in Peru, acquired surface rights at very prospective exploration properties near our operations in Peru, and had continued exploration success at our Copper World project in Arizona. We released a very promising preliminary economic assessment for Copper World in 2022 and the team is hard at work on a pre-feasibility study, which is expected to be released in mid-2023.
Copper produced by Hudbay plays an important role as the world transitions to a low carbon future. Copper is used in renewable energy sources, energy storage and electrified vehicles. Hudbay's operations are already positioned in the lower half of the Greenhouse Gas (GHG) emissions curve for copper mining operations. However, we believe we must do better, and in 2022 we committed to reducing our Scope 1 and Scope 2 GHG emissions by 50% by 2030, and to achieving net zero total emissions by 2050.
2022 Compensation Decisions & Outcomes
At the beginning of each year, the Committee spends a considerable amount of time with management developing the corporate scorecard that is used in determining short-term incentive (STIP) awards. The corporate scorecard sets the tone for the year, as it reflects the Company's short-term strategic and operational objectives. Our corporate scorecard for 2022 focused on production and costs, cash flow generation, safety, advancing the Copper World project, ramping up our New Britannia mill, exploration success and the development and publication of our GHG reduction targets.
The overall 2022 scorecard result was 90/100, which the Committee believes reflects strong performance by the Company in most matters under its own control, while recognizing the impact on overall corporate performance of higher costs and lower cash flows.
A Focus on our Culture
Each year the Board identifies key areas in which it would like management to focus its attention. In 2022, the Board asked our CEO, Peter Kukielski, to assess Hudbay's corporate culture and identify areas that require attention to ensure the company has a culture that will support its long-term success. After surveying employees across the organization, it became clear that the Company's strengths include being an open and collaborative organization with ready access to leaders, which enables nimble decision making. Among the steps taken to strengthen the Company's culture and further employee engagement in 2022 were the design and launch of a high-potential employee leadership development program, and initial steps toward a comprehensive supervisory training program at our operations. In 2023, management will implement additional plans to strengthen the critical elements of our culture.
Looking Ahead
Management will continue to focus on production and managing costs, safety, cash flow generation, reducing GHG emissions and the achievement of strategic objectives, all of which will be reflected in the company's 2023 scorecard. The key to success in these areas is our people and we are unwavering in our commitment to creating a culture in which our people are engaged by meaningful work in pursuit of common goals that will lead to our company's success. This starts with our executive team. As a result, part of our focus is on designing an executive compensation program that rewards performance and incents our management to support a winning culture. We believe that our executive compensation programs and decisions taken in these programs in 2022 have accomplished these objectives. The Committee would be happy to discuss these matters further with our shareholders and we will be available at our annual shareholders' meeting to answer any of your questions.
Sincerely,
Carin S. Knickel
Chair of the Compensation and Human Resources Committee
Below we provide an overview of our approach to executive compensation and summaries of 2022 pay decisions and changes to our executive and director compensation programs for 2023. Please refer to the section titled "Compensation Discussion and Analysis" in this Circular for further details.
COMPENSATION PHILOSOPHY
Our executive compensation philosophy is to:
- provide competitive compensation to attract and retain a talented and high-achieving executive team;
- appropriately incent our executives to achieve our strategic and operational objectives; and
- align the interests of our executives with the long-term interests of our shareholders.
Accordingly, our compensation program is structured with the following elements in mind:
- a significant portion of total compensation is variable and "at risk" and linked to corporate and individual achievements tied to our strategic plan;
- our compensation program, along with our equity ownership guidelines and employee share purchase plan, fosters share ownership among our executive team; and
- we generally target our executives' compensation at the market median.
COMMITMENT TO TRANSPARENCY, GOOD GOVERNANCE AND RISK MITIGATION
The Compensation and Human Resources Committee and the Board are committed to good governance, transparent disclosure and a productive dialogue with our shareholders about our executive compensation program. The Committee considers the risks associated with our compensation policies and practices and is comfortable that they are not likely to have a material adverse effect on Hudbay.
The following list highlights key policies and practices that have been adopted by Hudbay, which we believe are in the best interest of shareholders and align with corporate governance best practices:
What We Do
✓ Say on Pay: We hold an annual advisory “Say on Pay” vote on executive compensation. Last year, our “Say on Pay” vote received support from approximately 94% of shareholders who voted on the matter
✓ Shareholder Engagement: The Board has adopted a Shareholder Engagement Policy and is committed to maintaining an active dialogue with our shareholders about executive compensation
✓ Performance Objective Setting: The Board’s oversight of the performance objective setting process reduces the possibility of excessive risk taking and ensures performance objectives are aligned with corporate strategy
✓ Corporate Scorecard: The Board adopts an annual corporate scorecard, including a scoring system with specific financial, operating, ESG and growth/strategy targets for assessing Hudbay’s performance
✓ Balanced Scorecard: A balanced number of annual performance objectives limits the impact any particular activity could have on the overall corporate performance score
✓ Equity Incentives Emphasize Longer-Term Performance: PSU and RSU awards vest after three years and options remain exercisable for seven years; this motivates longer-term performance
✓ Independent Compensation Consultant: The Committee engages an independent compensation consultant who helps the Committee ensure our compensation levels and practices are reasonable and prudent while remaining competitive
✓ Anti-Hedging Policy: Our Confidentiality and Insider Trading Policy prohibits our executives from hedging against declines in their equity-based compensation and trading during our blackout periods
✓ Double Trigger on Change of Control: A “double trigger” is included in our executive employment agreements so that severance payments are due upon a Change of Control only if employment is also terminated
✓ Equity Ownership Guidelines: Executives are required to comply with our equity ownership guidelines including a requirement for the CEO to own equity equal to at least 3x his base salary
✓ Clawback Policy: The Board has adopted a “clawback” policy that requires the reimbursement of excess incentive-based compensation received by executive officers in the event of (i) materially non-compliant financial statements; or (ii) a wrongful act by an executive officer
SUMMARY OF KEY ELEMENTS OF EXECUTIVE COMPENSATION
Our executives' "total direct compensation" consists of base salary, an annual short-term incentive cash bonus (STIP) and long-term equity-based incentives (LTIP).
|
Compensation
Element
|
Description and Rationale
|
|
Fixed Compensation
|
|
Base Salary
|
- Cash compensation that serves as competitive, stable income; enables attraction and retention
|
|
Variable Compensation
|
|
Short-Term Incentive Plan (STIP)
|
- Annual cash bonus based on corporate and individual performance
- Links compensation to corporate performance (measuring operational, ESG, financial, and growth/strategy metrics) and individual performance, which motivates executives to achieve our objectives
|
|
Long-Term Incentive Plan (LTIP)
|
- Mix of Performance Share Units (PSUs), Restricted Share Units (RSUs) and share options, with an emphasis on our mid- to long-term performance
- Aligns the interests of executives and shareholders
- Encourages longer-term retention
|
In 2022, approximately 79% of our CEO's and an average of approximately 67% of our non-CEO NEOs' target total direct compensation was variable and at-risk.
PAY OUTCOMES FOR 2022
Our corporate scorecard, used to determine a corporate performance score that is applied in the calculation of STIP payments, includes performance categories based on operational, ESG, financial and growth/strategic performance. The table below summarizes the results for Hudbay's 2022 corporate scorecard. More details can be found in "Components of Hudbay's Executive Compensation Program - Short-Term Incentive Plan (STIP)".
| |
Metric |
2022 Score |
| Operations and Financial |
Production
(aggregate Cu eq. tonnes in concentrate) |
6.6/10 |
Cost Performance
($/tonne of ore produced) |
0/10 |
| Operating Cash Flow |
0/10 |
| ESG |
Greenhouse Gas Reductions |
12.5/10 |
Safety
(Total Recordable Injury Frequency Rate) |
10/10 |
| Community Relations - Peru |
10/5 |
| Growth and Strategy |
Copper World/Rosemont |
12.5/10 |
| Snow Lake Production |
2.5/10 |
| Advance Mason Project |
5/5 |
| Reserves / Resources |
3.75/5 |
| Exploration |
10/5 |
| Achievement of Strategic Objectives |
10/10 |
| Response to Unforeseen Circumstances |
7.5/5 |
| |
Total Score |
90 / 100 |
Our corporate score for 2022 was 90/100. In 2021, our corporate score was 113/100 and in 2020 it was 127/100.
For 2023, our corporate scorecard will again include a combination of performance categories based on operations, ESG, financial performance and growth/strategy.
Long-Term Incentive Plan Design
The Compensation and Human Resources Committee oversees our long-term incentive program (LTIP) with the objective of ensuring the alignment of our LTIP outcomes with the shareholder experience and our mid- to long-term performance and strategic goals.
For the LTIP award made in February 2022, the Board approved a grant comprising:
- PSUs which vest after three years and are performance-conditioned based on a mix of relative total shareholder return, as to 75% of the grant, and return on invested capital as to 25% of the grant;
- RSUs, which vest after three years; and
- Options, which vest ratably over three years and remain exercisable for seven years.
CEO COMPENSATION
2022 Compensation
Peter Kukielski's target compensation as President and CEO was set with reference to the median compensation paid to the CEOs in our compensation benchmarking group. The actual total direct compensation received by Mr. Kukielski in respect of 2022 is shown in the table below:
|
Name
|
Base
Salary
($)
|
Target
STIP
|
Target
LTIP
|
Combined
Corporate
and
Individual
STIP Score
|
Actual STIP
($)
|
LTIP
Value
($)
|
Actual Total
Direct
Compensation
($)
|
|
Peter Kukielski
|
940,287
|
120%
|
250%
|
92%
|
1,038,077
|
2,350,718
|
4,329,082
|
1. The LTIP value is comprised of 50% PSUs, 25% RSUs and 25% Options, as described in "2022 CEO LTIP Award", below.
Eighty percent of our CEO's STIP is based on the corporate score and twenty percent is based on his individual performance objectives. Mr. Kukielski's 2022 objectives were focused on enhancing investor relations, reviewing strategy, advancing ESG initiatives and enhancing our company culture. His performance against these objectives was assessed as 100/100 which, when combined with the corporate performance score, resulted in a combined score of 92%.
Equity Ownership
As shown in the table below, Mr. Kukielski's total equity ownership, consisting of Hudbay shares, RSUs, PSUs and deferred share units ("DSUs"), had an aggregate market value of $5,045,000 as at March 15, 2023.
|
Name
|
Hudbay
Shares
($)
|
RSUs
($)
|
PSUs
($)
|
DSUs
($)
|
Total Market
Value of Equity
Securities
($)
|
|
Peter Kukielski
|
106,435
|
1,265,655
|
2,531,298
|
1,141,605
|
5,044,993
|
Note:
1. Based on the $6.03 closing price of Hudbay Shares on the Toronto Stock Exchange on March 15, 2023. |
Compensation Discussion and Analysis
COMPENSATION AND HUMAN RESOURCES COMMITTEE
Membership and Relevant Experience
The members of the Compensation and Human Resources Committee (the "Committee") are Carin S. Knickel (Chair), Carol T. Banducci, Richard Howes and Stephen A. Lang. Each member is independent within the meaning of National Instrument 58-101 - Disclosure of Corporate Governance Practices. In addition, each member brings relevant and diverse experience, which provides the Committee with the proper context to assess the suitability of our compensation policies and practices.
- Ms. Knickel, the Chair of the Committee, has served on the compensation committees of Rosetta Resources, Whiting Petroleum and Vermilion Energy. She has significant resource industry and executive compensation experience, including serving as Corporate Vice President, Global Human Resources of ConocoPhillips from 2003 until her retirement in May 2012. While in this role, Ms. Knickel was the senior management representative assisting and advising ConocoPhillips' Compensation Committee. She joined ConocoPhillips in 1979 and held various senior operating, planning, and business development positions throughout her career in the U.S. and Europe.
- Ms. Banducci joined IAMGOLD Corporation in 2007 and served as Executive Vice President and Chief Financial Officer until her retirement in 2021. Ms. Banducci has extensive finance experience, and as a member of IAMGOLD's senior leadership team she was involved in decision making that impacted all areas of the company's business along with participating in executive compensation reviews with management and the Board of Directors. In addition, Ms. Banducci serves as a corporate director and has been involved in consideration of executive compensation matters in her role as a director of ARC Resources and Citibank Canada.
- Mr. Howes has over 40 years of experience in the mining industry and was appointed President and CEO of Reunion Gold Corporation, effective January 1, 2023. Mr. Howes retired as President and Chief Executive Officer of Dundee Precious Metals Inc. in May 2020. He joined Dundee Precious Metals in 2009 and held senior positions until his appointment as President and Chief Executive Officer in April 2013. He serves as Board Chair and is a member of the Compensation Committee at Torex Gold Resources Inc. and a member of the Compensation Committee at Anaconda Mining Inc.
- Mr. Lang was Chief Executive Officer of Centerra Gold Inc. from 2008 to 2012 and served as Centerra's Board Chair from 2012 to 2019. He has over 40 years of experience in the mining industry, including engineering, development and production at gold, copper, coal and platinum group metals operations. He has served on the Compensation Committees of Alio Gold Inc., International Tower Hill Mines Ltd. and Centerra Gold Inc.
Committee Mandate
The Committee assists the Board in discharging its responsibilities relating to recruitment, development and retention of senior management, officer appointments, performance evaluations of senior management, succession planning, compensation structure for the Board and senior management, including salaries, annual and long-term incentive plans and share ownership guidelines.
The responsibilities of the Committee, as set forth in its Charter, are available on our website at www.hudbay.com.
EXECUTIVE COMPENSATION OVERVIEW
Named Executive Officers
For 2022, our Named Executive Officers, referred to as our NEOs, were:
- Peter Kukielski, President and Chief Executive Officer (CEO);
- Eugene Lei, Chief Financial Officer;
- Andre Lauzon, Chief Operating Officer;
- Patrick Donnelly, Senior Vice President, Legal and Organizational Effectiveness;
- Javier Del Rio, Senior Vice President, South America and USA; and
- Steve Douglas, former Senior Vice President and Chief Financial Officer.
Mr. Douglas departed Hudbay in October 2022 and was replaced as Chief Financial Officer by Mr. Lei, who previously served as Senior Vice President, Corporate Development and Strategy.
Compensation Philosophy
Our executive compensation philosophy is to:
- provide competitive compensation to attract and retain a talented and high-achieving executive team;
- appropriately incent our executives to achieve our strategic and operational objectives; and
- align the interests of our executives with the long-term interests of our shareholders.
Accordingly, and as outlined throughout this Compensation Discussion and Analysis, our compensation program is structured with the following elements in mind:
- a significant portion of total compensation is variable and "at risk" and linked to corporate and individual achievements tied to our strategic plan;
- our compensation program, along with our equity ownership guidelines and employee share purchase plan, fosters share ownership among our executive team; and
- we generally target our executive's compensation at the market median.
Compensation Comparator Group
The compensation comparator group shown below was approved by the Committee in 2021, for the purpose of determining where our executives were compensated in relation to their peers to facilitate decisions for 2022 target pay levels. Compensation for our Vice Presidents (including Mr. Del Rio who, at the time, was our Vice President, South America and USA) was determined using industry surveys and internal considerations. The criteria used to develop the compensation comparator group are as follows:
|
Criteria
|
Rationale
|
|
Mid-tier base and precious metals companies
|
Reflective of the market for executive talent and other personnel who possess the specialized skills and knowledge required to run a sophisticated mining company. Similarly-sized precious metals companies have been included among the comparators because they compete for the same talent as Hudbay.
|
|
Similar size and scope (as defined by a range of 1/3x to 3x our revenue or total assets)
|
Capturing companies of a similar size and asset base.
|
|
Publicly listed and headquartered in Canada, the U.S., or Australia
|
Comparable talent market and compensation programs.
|
|
Compensation Comparator Group
|
*Relative positioning as at December 31, 2022. |
|
Alamos Gold Inc.
|
|
B2Gold Corporation
|
|
Centerra Gold Inc.
|
|
Eldorado Gold Corporation
|
|
Hecla Mining Company
|
|
IAMGOLD Corporation
|
|
Kinross Gold Corporation
|
|
Lundin Mining Corporation
|
|
New Gold Inc.
|
|
OZ Minerals Limited
|
|
Pan American Silver Corp.
|
|
SSR Mining Inc.
|
|
Yamana Gold Inc.
|
Compensation Governance
Committee Activities
Since August 2021, the Committee has undertaken the following activities related to the 2022 and 2023 compensation process:
|
Executive Compensation Benchmarking Review
|
- Approved the updated comparator group used to benchmark executive compensation
- Oversaw compensation benchmarking for our executives for the purpose of determining 2022 and 2023 target pay levels
- Reviewed compensation and governance trends specific to the mining industry
|
|
Compensation Recommendations
|
- Made recommendations to the Board with respect to 2022 and 2023 target compensation levels.
- Made recommendations to the Board in respect of the compensation awarded to our named executive officers in respect of 2022 performance
- Approved the compensation awarded to our Vice Presidents in respect of 2022 performance
|
|
Annual Cash Incentive (STIP)
|
- Reviewed management's recommendations regarding our 2022 performance and results under the corporate scorecard for recommendation to the Board
|
|
Long-Term Incentives (LTIP)
|
- Monitored the performance of outstanding PSUs, including current-year and overall performance against the comparator group, along with performance against the return on invested capital ("ROIC") metric and approved the payout of PSUs granted in 2020 (see "Components of Hudbay's Executive Compensation Program - Long-Term Incentive Plan (LTIP)")
- Reviewed the approach to calculating relative total shareholder return performance with respect to our PSUs
|
|
Compensation Disclosure
|
- Reviewed and recommended for the Board's approval the Statement of Executive Compensation included in this information circular
|
|
Leadership and Organizational Effectiveness
|
- Oversaw management's succession planning process for the Chief Financial Officer and Chief Operating Officer transitions, senior leaders and other key employees
- Oversaw the ongoing implementation of our Organizational Effectiveness initiatives
- Reviewed management's updated Human Resources and Organizational Effectiveness strategy
|
|
Risk Oversight
|
- Reviewed quarterly management updates on risk drivers and mitigation plans related to succession planning, recruitment and retention and collective bargaining
|
|
In Camera Sessions
|
- The Committee holds in camera sessions without management or its independent compensation consultant present at every meeting
|
Roles of Management and Independent Advisor
The Committee works closely with our management team and the Committee's independent advisor in overseeing the activities outlined below.
|
Management
|
Members of senior management assist the Committee by compiling information to be used in its determinations, including:
- Recommending a peer group for compensation benchmarking
- Reporting to the Committee on compensation and succession planning and retention related risks
- Providing an overview of compensation practices of industry peers
- Drafting of proposed corporate scorecards, objectives, and associated targets
- Providing input on our achievement relative to corporate and individual objectives
- Providing a summary of historical compensation levels, methods of compensation, and realized / realizable compensation
- Compilation of compensation data for the purposes of disclosure in this information circular
- Preparing and presenting updated management succession plans
- Preparing and presenting an updated Human Resources and Organizational Effectiveness strategy
- Providing feedback on the CEO's performance against his annual objectives
- Reporting to the Committee on employee turnover, diversity programs, retention, collective bargaining and other human resources matters
The Committee also relies on the CEO to review the performance of his direct reports and make recommendations to the Committee in this regard.
|
|
Independent Advisor
|
To assist in carrying out its duties, the Committee has the authority to retain and receive advice from legal and other advisors as it determines necessary, including the use of compensation consultants.
Since 2009, the Committee has retained Hugessen Consulting Inc. to provide it with independent advice on executive and director compensation, incentive plan design, and related governance matters. The nature and scope of services provided by Hugessen to the Committee in 2022 included:
- Advice regarding pay comparator group and NEO compensation levels
- Information regarding compensation and related governance trends in the mining industry
- Reviewing and providing advice to the Committee regarding management-prepared materials and recommendations
- Providing analysis of CEO realized and realizable pay levels
- Providing analysis of STIP and LTIP performance measures
The Committee reviews and considers the information and advice provided by Hugessen, among other factors, when it makes its recommendations to the Board for approval. The Board, however, makes the ultimate decisions with respect to executive compensation after considering the Committee's recommendations. Hugessen does not provide any services to management directly and work conducted by Hugessen raises no conflicts of interest. Any services provided by Hugessen requires Committee pre-approval and the Chair of the Committee approves all invoices for work performed by Hugessen. The Committee reviews Hugessen's performance at least annually.
|
The table below outlines the fees paid to Hugessen over the last two years for executive compensation related services. Hugessen did not provide any other services in either year.
| 2022 |
2021 |
Executive Compensation
Related Fees |
All Other Fees |
Executive Compensation
Related Fees |
All Other Fees |
| $93,253 |
Nil |
$85,211 |
Nil |
Compensation Risk Management
Commitment to Transparency, Good Governance, and Risk Mitigation
The Committee and the Board are committed to good governance, transparent disclosure and a productive dialogue with our shareholders regarding our executive compensation program. The Committee considers the risks associated with our compensation policies and practices and is comfortable that they are not likely to have a material adverse effect on Hudbay.
Our Audit Committee has been tasked by the Board with overseeing our Enterprise Risk Management program. As part of this program, key risks that could impact us are identified and assessed, and mitigation plans are put in place. Succession planning, recruitment and retention have been identified as key risks and the Compensation and Human Resources Committee receives quarterly updates on the risk drivers and mitigation plans in respect of these risks.
Clawback Policy
The Board has adopted an incentive-based compensation clawback policy (a "clawback policy"), which was recently amended to ensure compliance with recent SEC rule changes. The clawback policy is summarized below.
|
Element
|
Our Policy
|
|
Incentive-Based Compensation subject to Clawback
|
|
|
Eligible Executive Officers
|
- CEO, Chief Financial Officer, Chief Operating Officer, all Senior Vice Presidents and all Vice Presidents
|
|
Lookback Period
|
- The three-year period preceding the date on which the Company (a) determines it is required to restate materially non-compliant financial statements or (b) discovers the Executive Officer has been involved in a wrongful act
|
|
Excess Incentive-Based Compensation
|
- the amount by which any Incentive-Based Compensation based on erroneous or inaccurate data in materially non-compliant financial statements exceeds the amount of Incentive-Based Compensation that would have been awarded based on the subsequent restatement or correction of such materially non-compliant financial statements; or
- the amount by which any Incentive-Based Compensation that is awarded following a wrongful act of the Executive Officer of which the Board was not aware exceeds the amount of any Incentive-Based Compensation that would have been approved had the Board been aware of an Executive Officer's involvement in a wrongful act
|
|
Triggering Events
|
- The Board shall require repayment of any Excess Incentive-Based Compensation awarded to any current or former Eligible Executive Officer during the current period and the Lookback Period in the event of materially non-compliant financial statements that require a restatement
- The Board may require repayment of any Excess Incentive-Based Compensation awarded to any current or former Eligible Executive Officer during the current period and the Lookback Period in the event of:
• materially non-compliant financial statements that do not require a restatement; or
• if the Board determines in its sole discretion that the Executive Officer has been involved in any wrongful act
|
Equity Ownership Guidelines
To align executive and shareholder interests, the Board has established a policy that requires executives to own a minimum number of Hudbay shares and share units, as follows:
|
Element
|
Our Policy
|
|
Ownership Requirement
|
- CEO: 3x base salary
- Chief Financial Officer, Chief Operating Officer and all Senior Vice Presidents: 2x base salary
- All Vice Presidents: 1x base salary
|
|
Units Counted and Basis of Valuation
|
- Common shares
- Share units (vested and unvested PSUs and RSUs)
- Valued based on cost of acquisition or value at time of grant
|
|
Timeframe to meet Ownership Requirement
|
- Four years from appointment as an officer
- Four years from any base salary increase to meet additional requirement
- Executive is not permitted to sell shares until requirement is met
|
Equity ownership guidelines also apply to our directors, as described under "Director Compensation" below.
Our current NEOs' progress in meeting our share ownership guidelines as at March 15, 2023 is shown in the following table:
|
Name(1)
|
Share
Ownership
Guideline
(as multiple of
base salary)
|
Equity Ownership
Requirement
($)
|
Total Equity Ownership(2)
|
Value of Equity
Ownership as a
Percentage of
Requirement
|
|
Share Units
($)
|
Hudbay
Shares
($)
|
|
Peter Kukielski
|
3x
|
2,933,697
|
6,159,305
|
105,886
|
214%
|
|
Andre Lauzon
|
2x
|
1,112,800
|
1,653,918
|
216,945
|
168%
|
|
Eugene Lei
|
2x
|
1,060,800
|
1,747,330
|
1,064,403
|
265%
|
|
Patrick Donnelly
|
2x
|
927,792
|
1,345,992
|
642,250
|
214%
|
|
Javier Del Rio(3)
|
1x
|
559,909
|
1,839,777
|
276,247
|
378%
|
1. Mr. Douglas departed the Company in October 2022 and is not included in this table.
2. Includes the grant date value of share units held and the acquisition value of Hudbay Shares held. In the case of Mr. Kukielski, the total under "Share Units" includes deferred share units that he was awarded prior to his appointment as permanent CEO in early 2020.
3. As at March 15, 2023, Mr. Del Rio was our Vice President, South America and USA and, as at such date, was not bound by the Company's Senior Vice President share ownership guidelines.
COMPONENTS OF HUDBAY'S EXECUTIVE COMPENSATION PROGRAM
Summary of Elements of Executive Compensation
The following table provides a summary of the key elements of our executive compensation program, which we believe form an appropriate mix of compensation:
| Compensation Element |
Description and Rationale |
| Fixed Compensation |
| Base Salary |
- Annual cash compensation which serves as competitive, stable income and enables attraction and retention
|
| Retirement Benefits |
- Pension plan which rewards executives for long service to Hudbay and enables attraction and retention
|
| Variable Compensation |
| Short-Term Incentive Plan (STIP) |
- Annual cash bonus based on corporate and individual performance
- Links compensation to corporate performance (measuring operational, ESG, financial and growth and strategy metrics) and individual performance, which motivates executives to achieve our annual objectives
|
| Long-Term Incentive Plan (LTIP) |
- Mix of Performance Share Units (PSUs), Restricted Share Units (RSUs) and share options, with an emphasis on our mid- to long-term performance
- Aligns the interests of executives and shareholders
- Encourages longer-term retention
|
| Other |
| Employee Share Purchase Plan |
- Voluntary program whereby participants may contribute a portion of their salary to acquire Hudbay shares, with a matching contribution from Hudbay
- Motivates, attracts and encourages retention of executives and other employees, and aligns their interests with those of our shareholders
|
| Perquisites and Other Benefits |
- May include fitness memberships, comprehensive medical examinations, life and accident insurance, parking, and other subsidies and entitlements for executives who have been asked to relocate at Hudbay's request
- Represents an investment in the health and wellbeing of our executives and otherwise supports attraction and retention
- Do not represent a material portion of overall compensation
|
Base Salary
The Committee believes that our executives' base salaries must be sufficiently competitive to enable recruitment and encourage retention. However, reflecting our emphasis on variable and at-risk compensation, our executives' base salaries remain a relatively low portion of their overall total direct compensation. The Committee generally targets our NEOs' base salaries at the median of the comparator group.
The 2022 and 2023 base salaries of our NEOs are shown below.
| Executive(1) |
2022 Base Salary
($) |
2023 Base Salary
($) |
| Peter Kukielski |
940,287 |
977,899 |
| Andre Lauzon |
520,000 |
556,400 |
| Eugene Lei |
510,000 |
530,400 |
| Patrick Donnelly |
454,760 |
463,896 |
| Javier Del Rio(2) |
528,216 |
559,909 |
1. Mr. Douglas departed the Company in October 2022 and is not included in this table.
2. Mr. Del Rio's base salary is paid in US dollars. For purposes of the table above, Mr. Del Rio's salary has been converted into Canadian dollars at an exchange rate of US$1.3544 per $1.00. For clarity, Mr. Del Rio earned a base salary of US$390,000 in 2022 and is scheduled to earn a base salary of US$413,400 in 2023.
Short-Term Incentive Plan (STIP)
The STIP is an annual cash bonus based on a combination of corporate and individual performance throughout the year. Target STIP awards are denominated as a percentage of base salary and actual awards can range from 0% of target for performance outcomes that fall significantly below expectations to 200% of target for superior performance.
Corporate performance in a given year is measured using our Corporate Scorecard, as described in more detail below. Our CEO's annual STIP award is based 80% on corporate performance and 20% on individual performance and our non-CEO NEOs' STIP is based 70% on corporate performance and 30% on individual performance. Individual performance is assessed each year by the Committee, in consultation with the CEO. A summary of our NEOs' individual performance assessments can be found in "Determination of 2022 Individual Performance Scores".
2022 Corporate Scorecard
At the start of each year, the Board, upon the recommendation of the Committee, adopts the Corporate Scorecard, which sets forth key performance objectives that guide and motivate our executives as they carry out Hudbay's strategy over the course of the year. Management is expected to be rigorous in their goal-setting as the Committee is very reluctant to make adjustments to any performance objectives during the year. Performance is monitored throughout the year, and at year-end, the Committee assesses the Company's performance against each scorecard objective and considers all relevant factors, both positive and negative. While the Committee retains discretion to ensure that scorecard results are fair, they use this discretion cautiously and, where practical, use scorecard metrics that are objectively measurable so the use of discretion can be minimized.
Our 2022 corporate scorecard included performance categories based on operational, ESG, financial and growth/strategic performance. Although Hudbay met its production guidance in Peru and Manitoba, operating costs were affected by global inflationary pressures, along with the impacts of the 777 mine closure in Manitoba and political and social upheaval in Peru. While Hudbay's cash flows were affected, the company enjoyed strong performance in a number of areas, as it ramped up its New Britannia mill in Manitoba and mined the higher grade Pampacancha deposit in Peru. We also enjoyed substantial exploration success, with new reserves added in Manitoba and Peru, an initial resource estimate at our Llaguen deposit in Peru and securing surface rights agreements at the very prospective Maria Reyna and Caballito deposits near Constancia.
We also made strides in our ESG performance. Our community relations team in Peru performed admirably in the face of protests and blockades across the country that were directed at the national government. We managed to keep Constancia operating throughout the year thanks to their tireless efforts. In addition, in December 2022, we announced the adoption of Greenhouse Gas emissions reduction targets, including a 50% reduction by 2030 and a commitment to net zero in 2050.
The overall result in our 2022 scorecard was 90/100. In assessing our score, the Committee did not apply discretion to adjust the score in any quantitative category and used thoughtful judgment on the qualitative metrics.
The 2022 Corporate Scorecard and the key factors that influenced the scores in each performance category are set forth below.
| |
Metric |
Performance Measures / Objectives |
2022 Results &
Commentary |
2022
Score |
Operations
|
Production
(aggregate Cu eq. tonnes in concentrate) |
|
185 kt |
6.6/10 |
Cost Performance
($/tonne of ore produced)(1) |
Peru:
US$12.90
US$11.50
US$10.10
Combined:
US$69.52
US$66.20
US$62.89
|
Peru: US$12.87
Manitoba: $194
|
0/10 |
| Snow Lake Operations |
New Britannia average 1,500 tpd Q2-Q4
Threshold plus Lalor at 5,300tpd by Dec. 31
Lalor at 5,300tpd by Oct. 31 plus average 1,500tpd at New Britannia at budgeted recovery
|
Met threshold |
2.5/5 |
ESG
|
Safety
(Total Recordable Injury Frequency Rate)(2) |
|
Peru: 0.2
Manitoba: 4.3
|
10/10 |
Community
Relations |
< 2 weeks of operational shutdown due to community/political activity
< 1 week of operational shutdown due to community/political activity
No operational shutdown due to community/political activity
|
Met top out; operations continued notwithstanding roadblocks throughout Peru |
10/5 |
| Greenhouse Gas Reductions |
Public disclosure of net zero commitment, and action plan for 50% reduction by 2030
Threshold plus adopt specific Scope 1 and Scope 2 targets with identified accountabilities for 2030 goals
Target plus disclosure of Copper World PEA efforts to comply with 2030 targets
|
Target met plus Copper World PEA contemplates significant carbon emissions reduction |
12.5/10 |
1. Cost Performance is based upon the Company's combined unit cost per tonne of ore. Combined unit cost is a non-IFRS financial performance measure with no standardized definition under IFRS. For further information and a detailed reconciliation of the Company's combined unit cost, please see the discussion under the heading "Non-IFRS Financial Performance Measures" beginning on page 54 of Company's management's discussion and analysis of results of operations and financial condition for the year ended December 31, 2022, a copy of which is available on the Company's SEDAR and EDGAR profiles.
2. Results are weighted 50/50 between Manitoba and Peru.
| |
Metric |
Performance Measures / Objectives |
2022 Results &
Commentary |
2022
Score |
| Financial |
Operating Cash Flow (Actual before change in non-cash working capital) |
50%
$412 M
100%
$550 M
200%
$687 M
|
US$380M |
0/10 |
| Growth and Strategy |
Copper World/ Rosemont |
Complete air and aquifer permit applications
Complete PEA in H1 and pre-feasibility by year-end
Meet target; performance against top-out to be assessed based on receipt of permits and management of reputational issues
|
PEA published mid-year. Pre-feasibility studies were completed with additional testing planned. Strong management of reputational issues |
12.5/10 |
Reserves /
Resources |
One year of resource discovery to replace mined Constancia and Lalor reserve or two years of new resources at either mine
One year of reserve replacement at Constancia and Lalor
or two years of reserve replacement at either mine
Two years of reserve replacement at Constancia and Lalor
|
1 year of reserve replacement at Lalor plus additional resources:
50% of Constancia reserves replaced plus Constancia Norte resources
|
3.75/5 |
| Exploration |
To be assessed subjectively
Testing of best available exploration targets and repopulation of pipeline to ensure future opportunities
Significant new discovery or significant expansion/ improvement of existing property (grade/tonnes/ economics) to the extent that it results in a substantially improved opportunity
|
- Initial resource at Llaguen
- Increase in Copper World resources
- Surface rights agreements in Peru
- New targets in Snow Lake
|
10/5 |
|
Advance Mason Project
|
New stakeholder engagement strategy adopted
Threshold plus execute exploration plan
Receive support from key stakeholders for strategic initiatives
|
Met target |
5/5 |
| Achievement of Strategic Objectives |
Assessed against strategic priorities set out at the start of the year |
Strong alignment with Board on strategy; published financial pre-requisites for Copper World sanctioning; positive drill results at Flin Flon tailings; increased focus on capital allocation; completed Stall Phase 1 feasibility study; advanced work on company culture |
10/10 |
| Response to Unforeseen Circumstances |
Assessed based on performance against such unforeseen circumstances |
Managed supply chain challenges with COVID-19; managed Peru political uncertainty with minimal impacts; maintained social license in Manitoba post-777 closure |
7.5/5 |
|
|
|
Total Score |
90/100 |
Long-Term Incentive Plan (LTIP)
Overview of Design
As stated in our compensation philosophy, the Committee believes that long-term, equity-based compensation should form a significant portion of our NEOs' overall compensation in order to provide a strong link between compensation, performance and total shareholder returns.
The Compensation and Human Resources Committee oversees our LTIP with the objective of ensuring the alignment of our LTIP outcomes with the shareholder experience and our mid- to long-term performance and strategic goals. Our LTIP design includes a mix of equity incentives for our NEOs involving PSUs, RSUs and share options ("options").
For the grant made to our NEOs in February 2022, the percentage of the overall grant allocated to each of these LTIP vehicles was as follows:
|
|
Performance Share Units ("PSUs")
|
- Cliff vest after 3 years based on the achievement of a performance multiplier with a payout range of 0% - 200%
- Performance is based on relative TSR (75%) and ROIC (25%)
- Settled in cash or common shares
|
|
|
|
Restricted Share Units ("RSUs")
|
- Cliff vest after 3 years
- No front-end performance conditions
- Settled in cash or common shares
|
|
|
|
Options
|
- Vest on a ratable basis over 3 years (i.e., 1/3 per year)
- 7-year term
- Upon exercise, settled in shares issued from Hudbay's treasury
|
LTIP awards are granted at a target value, being a percentage of base salary determined by the Board. The award is then multiplied by the percentage of the overall LTIP grant allocated to PSUs, RSUs, and options, then divided by (in the case of PSUs and RSUs) the share price at the time of grant, or (in the case of options) the price of an option at the time of grant (as determined by the Committee using a Black-Scholes valuation methodology). An example of how the target LTIP grant applies to Mr. Kukielski's 2022 award is as follows:
|
Mr. Kukielski's 2022 LTIP Compensation
|
|
|
|
|
|
|
|
|
|
|
|
$940,287
Mr. Kukielski's 2022 Base Salary
|
|
250%
($2,350,718)
Mr. Kukielski's 2022 Target LTIP Grant as a % of Base Salary
|
|
50%
Target PSU Mix
of LTIP
|
|
Share Price at Date of Grant:
$9.82
|
|
Target PSU Grant Size:
119,690 units
|
|
|
|
|
|
|
|
|
x
|
x
|
25%
Target RSU Mix
of LTIP
|
÷
|
=
|
Target RSU Grant Size:
59,845 units
|
|
|
|
|
|
|
|
|
|
|
|
25%
Target Option Mix
of LTIP
|
|
Option Value at Date of Grant:
$5.53
|
|
Target Option Grant Size:
106,271 units
|
| |
|
|
|
|
|
|
|
|
Performance Share Units
PSUs are notional units that are redeemable for a Hudbay common share or a cash amount equal to the value of a common share at the vesting date. PSUs will vest at the end of three years. The units are subject to performance and vesting conditions such that all units will be forfeited if a threshold level of performance is not met. Conversely, additional units will be granted (to a maximum of 200% of the initial grant) if performance over the three-year vesting period is above the target. The performance conditions are based (as to 75% of the PSUs) on total shareholder return compared to a peer group (Relative TSR) and (as to 25%) return on invested capital (ROIC). The Committee believes that the use of Relative TSR and ROIC in the PSUs will align pay outcomes with the shareholder experience and encourage effective capital allocation.
Relative TSR Multiplier (75% of PSUs)
The number of PSUs that vest is determined in part by reference to total shareholder return ("Hudbay TSR") generated by the Company over the performance period, as compared to a peer group (the "Performance Peer Group"). The Performance Peer Group for 2022 consists of the following base metals mining issuers:
| 2022 Performance Peer Group |
| Antofagasta plc |
Capstone Mining Corp. |
Copper Mountain |
Ero Copper Corp. |
| First Quantum Minerals Ltd. |
Freeport McMoran |
Imperial Metals Corporation |
Lundin Mining Corporation |
| Nexa Resources S.A. |
Oz Minerals Limited |
Taseko Mines |
Teck Resources |
| |
Turquoise Hill Resources Ltd. |
|
The Relative TSR multiplier will be calculated over the performance period with reference to both the annual Relative TSR and a three-year cumulative Relative TSR, on a combined basis as follows:
- 10% annual Relative TSR for year 1 of the Performance Period
- 10% annual Relative TSR for year 2 of the Performance Period
- 10% annual Relative TSR for year 3 of the Performance Period
- 70% three-year cumulative Relative TSR for the Performance Period
The calculation of the Hudbay TSR and the peer group TSR will include the appreciation of the price of the respective shares along with payments of dividends and other returns of value.
The Relative TSR Multiplier for a specific period is calculated as follows, linearly interpolated for performance between the specified levels:
| Performance Level |
Performance Objective |
Relative TSR Multiplier |
| Maximum |
Hudbay TSR is 25% or more above the median TSR of the Performance Peer Group |
200% |
| Target |
Hudbay TSR is equal to the median TSR of the Performance Peer Group |
100% |
| Minimum |
Hudbay TSR is 25% or more below the median TSR of the Performance Peer Group |
0% |
Return on Invested Capital (ROIC) Multiplier (25% of PSUs)
ROIC is determined by way of a single three-year average, calculated as follows:
|
ROIC =
|
Σ (3 years of Adjusted NOPAT)
|
/ 3
|
|
13-quarter average Invested Capital
|
|
Where "Adjusted NOPAT" is equal to:
Net Income (loss) for the year
Add: tax expense, less cash taxes paid
Add: net finance expense
Add: exploration expense
Adjust for: impairment losses/reversals (in the discretion of the Committee)
Adjust for: other gains/losses and non-recurring items (in the discretion of the Committee)
|
and "Invested Capital" is equal to:
Property, plant & equipment
Add: goodwill on depreciable assets
Subtract: exploration and evaluation assets
Subtract: capital works in progress
Add: current assets
Subtract: current liabilities
Subtract: cash and short-term investments
|
The ROIC Multiplier for a specific period shall be calculated as follows:
| Performance Level |
Performance Objective |
ROIC Multiplier |
| Maximum |
Hudbay's ROIC is equal to or greater than 10% |
200% |
| Target |
Hudbay's ROIC is equal to 6.5% |
100% |
| Threshold |
Hudbay's ROIC is equal to 5% |
50% |
| Minimum |
Hudbay's ROIC is less than 5% |
0% |
The ROIC Multiplier will be linearly interpolated for amounts between (a) 5% and 6.5%, and (b) 6.5% and 10%. Targets were set with reference to current and past performance and a view to improve return on invested capital. The targets will be reviewed each year.
Restricted Share Units
Restricted Share Units are like PSUs in that they are notional units that are redeemable for a Hudbay common share or a cash amount equal to the value of a common share at the vesting date. However, they are not subject to performance conditions that can increase or decrease the number of units that vest. Instead, the only vesting condition is time in that the units vest at the end of three years provided the recipient remains employed by the Company at the time of vesting.
Options
Share options are widely used as a minority component in an LTIP program, both among our mining peers and among TSX60 issuers. The Committee believes using share options as a balanced component of the LTIP mix will support the attraction and retention of members of the executive and broader management team.
The options vest in equal installments over three years and will remain exercisable for seven years.
The PSUs and RSUs granted in early 2022 were granted under Hudbay's Long-Term Equity Plan and the options were granted under our Share Option Plan. Summaries of these plans are included at Schedule "B".
2023 LTIP Grant
For the LTIP grant made to our NEOs in February 2023, the grants involved the same blend of PSUs, RSUs and options as were issued in 2022, in each case with substantially the same terms as in 2022.
Other Compensation and Perquisites
Retirement Benefits
In addition to rewarding employees for long service to Hudbay, the Committee recognizes that retirement benefits are required to make our compensation program competitive. For details on our retirement plans, see "Description of Pension Plans".
Employee Share Purchase Plan
We maintain an Employee Share Purchase Plan ("ESPP") for our executives and other eligible employees. Pursuant to the ESPP, participants may contribute between 1% and 10% of their pre-tax base salary to acquire Hudbay shares, which are acquired through open-market purchases. We make a matching contribution of 75% of the participant's contribution, one-third of which is immediately applied toward the tax withholding obligation on our contribution. Shares purchased with our contribution may not be sold for 12 months and participants are subject to further restrictions on the number of transactions they may make and changes in their elected contribution.
Perquisites and Other Benefits
Perquisites and other benefits are intentionally limited and may include fitness memberships, comprehensive medical examinations, life and accident insurance, parking and other subsidies and entitlements for executives who relocate at Hudbay's request.
CEO COMPENSATION
2022 Compensation
Mr. Kukielski's target compensation as President and CEO was set with reference to the median compensation paid to the CEOs in our compensation benchmarking group. The actual total direct compensation received by Mr. Kukielski in respect of 2022 is shown in the table below:
| Name |
Base
Salary
($) |
Target
STIP
|
Target
LTIP
|
Combined
Performance
Score |
Actual
STIP
($) |
LTIP
Value
($) |
Actual Total
Direct
Compensation
($) |
| Peter Kukielski |
940,287 |
120% |
250% |
92% |
1,038,077 |
2,350,718 |
4,329,082 |
1. Mr. Kukielski's actual STIP award is based on his weighted average performance score, being 20% individual and 80% corporate.
2. The LTIP value is comprised of 50% PSUs, 25% RSUs and 25% Options, as described in "2022 CEO LTIP Award", below.
Eighty percent of our CEO's STIP is based on the corporate score and twenty percent is based on his individual performance objectives. Mr. Kukielski's 2022 objectives were focused on enhancing investor relations, reviewing strategy, advancing ESG initiatives and enhancing our company culture. His performance against these objectives was assessed as 100/100 which, when combined with the corporate performance score, resulted in a combined score of 92%.
The factors underlying Mr. Kukielski's performance score are as follows:
|
Name
|
Individual
Performance
Scores
|
Decision Factors
|
|
Peter Kukielski
|
100/100
|
- Showed leadership with strong and transparent communications with internal and external stakeholders, resulting in strong support and engagement
- Built consensus on strategic approach with full support of Board, while continuing to maintain focus on balance sheet and cash flow
- Managed 777 closure and transition of workforce to Snow Lake, along with advancement of Copper World to PEA/PFS soon after initial discovery
- Led senior leadership transition according to succession plans with Chief Financial Officer and Chief Operating Officer appointments
- Leading efforts to define and enhance corporate culture; completion of employee engagement action planning and third-party corporate culture survey
|
2022 CEO STIP Award
The following table shows the target and actual STIP awarded to Mr. Kukielski with respect to his 2022 performance.
|
Name
|
2022 Base
Salary
($)
|
2022 Target STIP
|
Annual Performance Score
|
Weighted
Average
Performance
Score
|
2022 STIP
Award
|
|
(%)
|
($)
|
Corporate
Performance
Score
(80%)
|
Individual
Performance
Score
(20%)
|
|
|
[A]
|
[B]
|
[C] =[A]x[B]
|
|
|
[D]
|
[C]x[D]
|
|
Peter Kukielski
|
940,287
|
120%
|
1,128,344
|
90%
|
100%
|
92%
|
1,038,077
|
2022 CEO LTIP Award
The table below shows the LTIP grant made to Mr. Kukielski in early 2022 as part of his 2022 compensation.
|
Name
|
2022
Base
Salary
($)
|
Target LTIP
|
Amount
of Target
Allocated
to PSUs
($)
|
Amount
of Target
Allocated
to RSUs
($)
|
Amount
of Target
Allocated
to
Options
($)
|
#
PSUs
Granted
|
#
RSUs
Granted
|
#
Options
Granted
|
|
(%)
|
($)
|
|
|
[A]
|
[B]
|
[C]=[A]x[B]
|
|
|
|
|
|
|
|
Peter Kukielski
|
940,287
|
250%
|
2,350,718
|
1,175,359
|
587,679
|
587,679
|
119,690
|
59,845
|
106,271
|
1. The unit price to determine the number of RSUs and PSUs granted was $9.82 and was based on the trailing five-day average price of the Hudbay Shares.
2. The unit price to determine the number of options granted was $5.53 and was based upon a Black-Scholes valuation methodology. The exercise price of the options is $9.92 per share.
CEO Realized/Realizable Compensation
As part of its annual process, the Committee reviews a report on the realized and realizable pay of our CEO, which outlines the differences between his target pay and the compensation actually earned and vested (realized compensation) plus the current value of LTIP awards that have not yet vested (realizable). The table below illustrates our CEO's target total compensation compared to his realized/realizable compensation for the three completed years since his appointment as CEO in 2020. The table also shows Hudbay's total shareholder return for the period, which enables a comparison of Mr. Kukielski's compensation against the shareholders' experience. This provides the Committee with perspective on the pay-for-performance linkage over time, which provides context about the effectiveness of current pay programs and helps to inform future compensation decisions.
Table Assumptions:
1. Finalized FY 2020 PSU payout factor of 27%.
2. ROIC performance factors for FY 2021 and FY 2022 PSUs assumed at target.
3. TSR performance factors for FY 2021 and FY 2022 PSUs: completed performance periods reflect their actual performance factor, cumulative performance portion tracking measured as of December 31, 2022, future annual performance periods assumed at target.
4. All equity valued using the closing price of Hudbay Shares on the Toronto Stock Exchange of $6.84 on December 30, 2022, being the final trading day of 2022.
COMPENSATION OF NON-CEO NEOS
2022 Target Total Direct Compensation
The table below shows the target total direct compensation for Messrs. Lei, Lauzon, Donnelly and Del Rio for 2022.
|
Name
|
Base
Salary
($)
|
Target
STIP
(%)
|
Target Total
Cash
Compensation
($)
|
Target
LTIP
(%)
|
Target Total
LTIP Value
($)
|
Target Total
Direct
Compensation
($)
|
|
Eugene Lei(1)
|
496,549
|
82.2%(2)
|
904,966
|
150%(3)
|
739,161
|
1,644,127
|
|
Andre Lauzon(4)
|
520,000
|
90%
|
988,000
|
170%
|
884,000
|
1,872,000
|
|
Patrick Donnelly
|
454,760
|
70%
|
773,092
|
120%
|
545,712
|
1,318,804
|
|
Javier Del Rio(5)
|
528,216
|
50%
|
792,324
|
100%
|
528,216
|
1,320,540
|
1. Mr. Lei was appointed as Chief Financial Officer effective October 13, 2022. Prior to such appointment, Mr. Lei's base salary was equal to $492,774 and after such appointment, Mr. Lei's base salary increased to $510,000. In the table above, Mr. Lei's base salary denotes the actual prorated base salary for Mr. Lei in 2022.
2. Prior to Mr. Lei's appointment as Chief Financial Officer, Mr. Lei's Target STIP was 80% and after such appointment, Mr. Lei's Target STIP was 90%. In the table above, Mr. Lei's Target STIP denotes the actual prorated Target STIP for Mr. Lei for 2022, which was approximately 82.2%, rounded to the nearest decimal.
3. Mr. Lei's Target LTIP is listed as 150% and is based on a base salary of $492,774, which is the Target LTIP and base salary in place prior to his appointment as Chief Financial Officer as the LTIP was granted prior to October 13, 2022.
4. Mr. Lauzon was appointed as Chief Operating Officer effective as of January 4, 2022 and the Target STIP and LTIP percentages, respectively, referenced here reflect the percentages in effect as of such date.
5. Mr. Del Rio's base salary is paid in US dollars. For purposes of the table above, Mr. Del Rio's salary has been converted into Canadian dollars at an exchange rate of US$1.3544 per $1.00. For clarity, Mr. Del Rio earned a base salary of US$390,000 in 2022.
Determination of 2022 Individual Performance Scores
The individual performance score for each of our non-CEO NEOs other than Mr. Del Rio is weighted at 30% of their overall annual performance score. Mr. Del Rio was a Vice President at the time the STIP was granted, and his individual performance score was weighted at 40% of his overall performance score. In determining individual performance scores, the Committee considers recommendations made by the CEO with reference to key elements of their performance within their respective areas of responsibility.
The following table shows the individual performance score of each non-CEO NEO, as well as the decision factors that were considered by the Committee in determining such scores. Mr. Douglas departed in October 2022 before the Committee assessed our NEO's individual performance and is therefore excluded from the table.
|
Name
|
Individual
Performance
Scores
|
Decision Factors
|
|
Eugene Lei
|
120/100
|
- Led development of updated strategic plan
- Strong and consistent guidance and contribution as a member of Copper World project team, culminating in successful rollout of Copper World PEA
- Further enhanced relationships with current and prospective investors and bond holders
- Championed reinvigorated company focus on cash flow and deleveraging
- Designed "3-P" plan with pre-requisites for the sustainable development of Copper World, with clearly articulated financial targets
|
|
Andre Lauzon
|
120/100
|
- Provided transparent oversight of operational performance in a challenging year
- Managed transition of Manitoba operations to a single mine operation, while successfully ramping up gold production at the New Britannia Mill
- Established multi-disciplinary team focused on capital allocation consistent with achieving the company's business objectives
- Remained focused on strong safety culture in Peru and Manitoba despite challenges posed by COVID-19 and the Manitoba workforce transition
- Oversaw strong stakeholder relations in the face of different challenges in Peru, Arizona and Manitoba
|
|
Patrick Donnelly
|
110/100
|
- Led legal team efforts on corporate development and financing matters
- Oversaw comprehensive third-party review of global anti-corruption compliance program
- Updated Human Resources/Organizational Effectiveness strategy presented to senior management and the Compensation and Human Resources Committee
- Oversaw design of new high-potential employee program
- Led corporate culture initiatives, including employee engagement action planning and third party culture survey
|
|
Javier Del Rio
|
125/100
|
- Led the South America and USA Business Units, responsible for overall operations and projects and ensuring the South America and USA Business Units embrace Hudbay's vision and values and conduct business in a safe, ethical, culturally sensitive, environmentally sound and profitable manner
- Led legal strategies to maintain and secure permits in relation to the Copper World project
- Led Copper World PEA and pre-feasibility studies
- Oversaw management of community and government relations in Peru during period of social and political unrest
|
2022 STIP Awards
The following table shows the actual STIP awarded to Messrs. Lei, Lauzon, Donnelly and Del Rio with respect to their 2022 performance.
|
Name
|
2022 Base
Salary
($)
|
2022 Target STIP
|
Annual Performance Score
|
Weighted
Average
Performance
Score
|
2022 STIP
Award
($)
|
|
(%)
|
Target STIP
($)
|
Corporate
Performance
Score
(70%)
|
Individual
Performance
Score
(30%)
|
|
|
[A]
|
[B]
|
[C] =[A]x[B]
|
|
|
[D]
|
[C]x[D]
|
|
Eugene Lei(1)
|
496,549
|
82.2%(2)
|
408,417
|
90%
|
120%
|
99%
|
404,333
|
|
Andre Lauzon
|
520,000
|
90%
|
468,000
|
90%
|
120%
|
99%
|
463,320
|
|
Patrick Donnelly
|
454,760
|
70%
|
318,332
|
90%
|
110%
|
96%
|
305,599
|
|
Javier Del Rio(3)
|
528,216
|
50%
|
264,108
|
90%
|
125%
|
104%
|
274,672
|
1. Mr. Lei was appointed as Chief Financial Officer effective October 13, 2022. Prior to such appointment, Mr. Lei's base salary was equal to $492,774 and after such appointment, Mr. Lei's base salary increased to $510,000. In the table above, Mr. Lei's base salary denotes the actual prorated base salary for Mr. Lei in 2022.
2. Prior to Mr. Lei's appointment as Chief Financial Officer, Mr. Lei's Target STIP was 80% and after such appointment, Mr. Lei's Target STIP was 90%. In the table above, Mr. Lei's Target STIP denotes the actual prorated Target STIP for Mr. Lei for 2022, which was approximately 82.2%, rounded to the nearest decimal.
3. Mr. Del Rio's STIP was determined based 60% on the corporate score and 40% on his individual score. Additionally, Mr. Del Rio's base salary and STIP Award is paid in US dollars. For purposes of the table above, Mr. Del Rio's base salary and 2022 STIP Award have been converted into Canadian dollars at an exchange rate of US$1.3544 per $1.00. For clarity, Mr. Del Rio earned a base salary of US$390,000 in 2022 and a 2022 STIP Award of approximately US$202,800.
2022 LTIP Awards
While the STIP payment made to our senior executives was made in early 2023, it is based on achievement of corporate and individual performance objectives in 2022 and therefore is considered compensation in respect of 2022. LTIP grants on the other hand are forward-looking, in that they are meant to encourage performance over the period in which the grant remains outstanding. As a result, the LTIP grant made to our executives in early 2022 is considered to be 2022 compensation.
|
Name(1)
|
2022 Base
Salary
($)
|
Target LTIP
|
Amount
of Target
Allocated
to PSUs
($)
|
Amount
of Target
Allocated
to RSUs
($)
|
Amount
of Target
Allocated
to Options
($)
|
#
PSUs
Granted(2)
|
#
RSUs
Granted(2)
|
#
Options
Granted(3)
|
|
(%)
|
($)
|
|
|
[A]
|
[B]
|
[C]=[A]x[B]
|
|
|
|
|
|
|
|
Eugene Lei(4)
|
496,549
|
150%(5)
|
739,161
|
369,581
|
184,790
|
184,790
|
37,636
|
18,818
|
33,416
|
|
Andre Lauzon
|
520,000
|
170%
|
884,000
|
442,000
|
221,000
|
221,000
|
45,010
|
22,505
|
39,964
|
|
Patrick Donnelly
|
454,760
|
120%
|
545,712
|
272,856
|
136,428
|
136,428
|
27,786
|
13,893
|
24,671
|
|
Javier Del Rio(6)(7)(8)
|
528,216
|
100%
|
528,216
|
247,611
|
123,806
|
123,806
|
25,215
|
12,607
|
22,388
|
1. Mr. Douglas departed the Company in October 2022 and is therefore excluded from the table above.
2. The unit price to determine the number of PSUs and RSUs granted was $9.82 and was based on the trailing five-day average price of the Hudbay shares.
3. The unit price to determine the number of options granted was $5.53 and was based upon a Black-Scholes valuation methodology. The exercise price of the options is $9.92 per share.
4. Mr. Lei was appointed as Chief Financial Officer effective October 13, 2022. Prior to such appointment, Mr. Lei's base salary was equal to $492,774 and after such appointment, Mr. Lei's base salary increased to $510,000. In the table above, Mr. Lei's base salary denotes the actual prorated base salary for Mr. Lei in 2022.
5. Mr. Lei's Target LTIP is listed as 150% and is based on a base salary of $492,774, which is the Target LTIP and base salary in place prior to his appointment as Chief Financial Officer as the LTIP was granted prior to October 13, 2022.
6. Excludes a special grant to Mr. Del Rio of 64,654 RSUs in February 2022, issued concurrently with the Company's LTIP grant and with a value of $634,900, being equal to US$500,000 on the date of issuance using the prevailing exchange rate of US$1.2698 per $1.00. See "Summary Compensation Table" below.
7. Mr. Del Rio received his 2022 base salary in US dollars and for purposes of the table above, Mr. Del Rio's base salary has been converted into Canadian dollars at an exchange rate of US$1.3544 per $1.00.
8. Mr. Del Rio's actual LTIP issuances (being equal to $495,222) differ from his Target LTIP (being equal to $528,216) due to the prevailing exchange rate at the time of LTIP issuance versus the prevailing exchange rate to determine Mr. Del Rio's base salary.
2022 Total Direct Compensation
The table below shows the actual total direct compensation for Messrs. Lei, Lauzon, Donnelly and Del Rio for 2022.
|
Name(1)
|
2022 Base
Salary
($)
|
Actual STIP
($)
|
Total Cash
Compensation
($)
|
LTIP Value
($)(2)
|
Total Direct
Compensation
($)
|
|
Eugene Lei(3)
|
496,549
|
404,333
|
900,882
|
739,161
|
1,640,043
|
|
Andre Lauzon
|
520,000
|
463,320
|
983,320
|
884,000
|
1,867,320
|
|
Patrick Donnelly
|
454,760
|
305,599
|
760,359
|
545,712
|
1,306,071
|
|
Javier Del Rio(4)(5)(6)
|
528,216
|
274,672
|
802,888
|
495,222
|
1,298,110
|
1. Mr. Douglas departed the Company in October 2022 and is therefore excluded from the table above.
2. Other than as described below in respect of Mr. Del Rio, the LTIP value is comprised of 50% PSUs, 25% RSUs and 25% Options, as described in "2022 LTIP Awards", above.
3. Mr. Lei was appointed as Chief Financial Officer effective October 13, 2022. Prior to such appointment, Mr. Lei's base salary was equal to $492,774 and after such appointment, Mr. Lei's base salary increased to $510,000. In the table above, Mr. Lei's base salary denotes the actual prorated base salary for Mr. Lei in 2022.
4. Mr. Del Rio's STIP is determined based 60% on the corporate score and 40% on his individual score. Additionally, Mr. Del Rio's base salary and STIP Award are paid in US dollars. For purposes of the table above, Mr. Del Rio's base salary and 2022 STIP Award have been converted into Canadian dollars at an exchange rate of US$1.3544 per $1.00. For clarity, Mr. Del Rio earned a base salary of US$390,000 in 2022 and a 2022 STIP Award of approximately US$202,800.
5. Mr. Del Rio's actual LTIP issuances (being equal to $495,222) differ from his Target LTIP (being equal to $528,216) due to the prevailing exchange rate at the time of LTIP issuance versus the prevailing exchange rate to determine Mr. Del Rio's base salary.
6. Excludes a special grant to Mr. Del Rio of 64,654 RSUs in February 2022, issued concurrently with the Company's LTIP grant and with a value of $634,900, being equal to US$500,000 on the date of issuance using the prevailing exchange rate from such date of US$1.2698 per $1.00. See "Summary Compensation Table" below.
PERFORMANCE GRAPHS
Shareholder Experience
The following graph compares the yearly percentage change in the cumulative total shareholder return on the Toronto Stock Exchange for $100 invested in Hudbay Shares on December 31, 2017 against the cumulative total shareholder return of the S&P/TSX Composite Index, relative year-over-year changes in copper price, and the median performance of a custom index consisting of the following peers: Antofagasta, Capstone Mining, Copper Mountain, Ero Copper, First Quantum, Freeport McMoRan, Imperial Metals, Lundin Mining, Nexa Resources, Oz Minerals, Taseko Mines, Teck Resources and Turquoise Hill.
| (in Cdn. $) |
2017 |
2018 |
2019 |
2020 |
2021 |
2022 |
| |
|
|
|
|
|
|
| |
|
|
|
|
|
|
| Hudbay Minerals Inc. (TSX) |
100 |
58 |
49 |
81 |
83 |
63 |
| S&P/TSX Composite Index |
100 |
91 |
112 |
118 |
148 |
139 |
| Custom Group (median performance) |
100 |
63 |
70 |
143 |
152 |
162 |
| Copper Price (USD) |
100 |
83 |
86 |
108 |
135 |
117 |
The trend shown in this graph is generally consistent with the realized and realizable compensation of our executive officers over the same period, as the value of vesting LTIP awards is directly linked to our share price performance. In 2018 and 2019, our corporate scorecard included a modifier that adjusted scores upward or downward based on our relative TSR against a group of copper-producing peers. Our negative TSR in those years was reflected in our corporate score and resulted in reduced STIP and LTIP awards in those years. Starting in 2020, we introduced PSUs into our LTIP program and removed the TSR modifier from our corporate scorecard. From that point forward, our executive compensation more closely matched our share price performance, particularly relative to our peers as the number of PSUs that vest will be reduced in periods when our relative share price is behind that of the peer group, and the value of awards that do vest is determined by our share price at the time of vesting.
Executive Compensation Tables
Summary Compensation Table
The following table shows the compensation received in or in respect of the financial years ended December 31, 2022, 2021 and 2020 by each of the NEOs. In the annual incentive plan column of our Summary Compensation Table, the awards disclosed for 2022, 2021 and 2020 are the STIP amounts approved by the Board and awarded in early 2023, 2022 and 2021, respectively, in respect of the prior year's performance.
As described above under "Long-Term Incentive Plan (LTIP)", LTIP awards are granted at their target value and the ultimate value to be realized from LTIP awards is based entirely on the Company's future performance, starting in the grant year. As such, the "Share-based awards" and "Option awards" in the Summary Compensation Table for 2020, 2021 and 2022 represent the grant date value of the RSUs and PSUs (in the case of share-based awards) and share options (in the case of option awards) that were granted in February 2020, February 2021, and February 2022 respectively, and are considered part of each NEO's 2020, 2021 and 2022 compensation.
Name and principal
position |
Year |
Salary
($) |
Share-
based
awards(1)
($) |
Option
awards
($) |
Non-equity incentive
plan compensation |
Pension
Value(2)
($) |
All other
compensation(3)
($) |
Total
compensation
($) |
Annual
incentive
plan ($) |
Long-term
incentive
plan ($) |
Peter Kukielski(4)
President and CEO |
2022
2021
2020 |
940,287
912,900
896,860 |
1,763,038
1,711,688
1,678,125 |
587,679
570,563
559,375 |
1,038,077
1,242,274
1,370,424 |
-
-
- |
112,834
109,548
102,973 |
205,667
123,178
600,411 |
4,647,582
4,670,151
5,208,168 |
Eugene Lei(5)
Chief Financial Officer |
2022
2021
2020 |
496,549
473,821
464,530 |
554,371
533,048
452,917 |
184,790
177,683
150,972 |
404,333
441,980
475,307 |
-
-
- |
232,546
160,257
163,401 |
112,350
108,758
169,967 |
1,984,939
1,895,547
1,877,094 |
Andre Lauzon(6)
Chief Operating Officer |
2022
2021
2020 |
520,000
401,190
434,990 |
663,000
268,905
274,870 |
221,000
89,635
91,623 |
463,320
259,682
183,918 |
-
-
- |
62,400
48,266
50,614 |
323,789
299,326
307,227 |
2,253,509
1,367,004
1,343,242 |
Patrick Donnelly(7)
Senior Vice President, Legal and Organizational Effectiveness |
2022
2021
2020 |
454,760
441,515
432,860 |
409,284
397,363
389,572 |
136,428
132,454
129,857 |
305,599
360,364
382,992 |
-
-
- |
114,459
110,967
120,506 |
78,985
72,068
80,502 |
1,499,515
1,514,731
1,536,289 |
Javier Del Rio
Senior Vice President, South America and USA |
2022
2021
2020 |
528,216
464,194
464,131 |
1,006,317(8)
353,701
293,013 |
123,806
117,900
97,671 |
274,672
295,349
287,746 |
-
-
- |
-
-
- |
579,031
555,757
345,725 |
2,512,042
1,786,901
1,488,286 |
Steve Douglas(9)
Former Senior Vice President and Chief Financial Officer |
2022
2021
2020 |
496,409
612,000
302,275 |
803,709
780,300
765,000 |
267,903
260,100
255,000 |
-
617,447
341,850 |
-
-
- |
59,569
73,440
36,273 |
749,281
76,370
25,776 |
2,376,871
2,419,657
1,726,174 |
1. Share-based awards represent RSUs and PSUs granted in each year. PSUs are subject to a multiplier based on future performance as discussed under "Long Term Incentive Plan (LTIP)".
2. Mr. Del Rio ceased accruing pensionable service at June 13, 2017 due to the foreign service limits prescribed by the provisions of the Company's defined benefit plan and, therefore, Mr. Del Rio had his benefit frozen as of June 13, 2017.
3. Only Mr. Lauzon and Mr. Del Rio received perquisites in 2022, 2021 and 2020 that in the aggregate amounted to greater than $50,000 in each year, in connection with their 2022 appointments to Chief Operating Officer and Vice President, South America and USA, respectively, and relocations resulting from such appointments. Mr. Lauzon received the following perquisites during 2022, 2021 and 2020, which totaled approximately $218,119, $226,344 and $237,319, respectively: relocation payments and relocation costs, expat allowances and housing allowances. Mr. Del Rio received the following perquisites during 2022, 2021 and 2020, which totaled approximately $456,754, $383,457 and $303,699, respectively: relocation payments, expat allowances, travel allowances and housing allowances. Mr. Kukielski received perquisites in 2020 that in the aggregate amounted to greater than $50,000. Mr. Kukielski received the following perquisites during 2020 in connection with his appointment as permanent CEO which totaled $238,190: relocation payments, relocation costs and life and long-term disability insurance. In addition to perquisites, amounts in this column include vacation pay, company contributions under our Employee Share Purchase Plan, and the payment of dividend equivalents on share units held by the NEOs. In the case of Mr. Kukielski, the amount in this column also includes the DSU compensation he received in his capacity as an independent director and interim CEO up to January 22, 2020 and the additional DSUs he received in 2020 worth $250,138 upon being appointed permanent CEO. In the case of Mr. Lei, the amount in this column also includes the $100,000 in compensation he received for acting as Interim Chief Financial Officer in 2020 prior to the appointment of Mr. Douglas.
4. Mr. Kukielski's salary in 2020 includes $55,000, representing the prorated monthly compensation he received as interim CEO up to January 22, 2020 when he was appointed permanent CEO, and the prorated amount of his annual salary as CEO for the remainder of 2020.
5. Mr. Lei was appointed as Chief Financial Officer effective October 13, 2022. Prior to such appointment, Mr. Lei's base salary was equal to $492,774 and after such appointment, Mr. Lei's base salary increased to $510,000. In the table above, Mr. Lei's base salary denotes the actual prorated base salary for Mr. Lei in 2022.
6. Mr. Lauzon was appointed as Chief Operating Officer effective January 4, 2022. Prior to such date, Mr. Lauzon served as Vice President, Arizona Business Unit and, while serving in such role, received his base salary in US dollars. Therefore, for the purposes of the table above, Mr. Lauzon's base salaries in 2021 and 2020 have each been converted into Canadian dollars at the applicable prevailing exchange rate.
7. Mr. Donnelly was appointed as Senior Vice President, Legal & Organizational Effectiveness effective May 30, 2022.
8. Includes a special grant to Mr. Del Rio of 64,654 RSUs in February 2022, issued concurrently with the Company's LTIP grant and with a value of $634,900, being equal to US$500,000 on the date of issuance using the prevailing exchange rate of US$1.2698 per $1.00. This special grant was made to Mr. Del Rio in connection with his promotion in 2022 to Vice President, South America & USA and as a retention incentive given his valued role in the organization.
9. Mr. Douglas departed the Company in October 2022. The $749,281 of "Other Compensation" paid to Mr. Douglas represents the portion of Mr. Douglas' aggregate termination payment that was paid in 2022.
Incentive Plan Awards
The following table provides information regarding the incentive plan awards for each NEO outstanding as of December 31, 2022.
Outstanding Option-based Awards and Share-based Awards
| Name |
Grant Date |
Option-based Awards |
Share-based Awards |
Number of
securities
underlying
unexercised
options
(#)(3) |
Option
exercise
price
($) |
Option
expiration
date |
Value of
unexercised
in-the-money
options
($)(1) |
Number of
shares or units
of shares that
have not vested
(#)(2)(5) |
Market or
payout value of
share-based
awards that
have not vested
($)(1)(5) |
Market or
payout value of
vested share-
based awards
not paid out or
distributed
($) |
Peter Kukielski(4) |
28-Feb-2022 |
106,271 |
9.92 |
28-Feb-2029 |
Nil |
120,022 PSUs |
1,231,426 |
- |
| + 60,011 RSUs |
| 180,033 SUs |
| 25-Feb-2021 |
94,152 |
10.42 |
25-Feb-2028 |
Nil |
114,274 PSUs |
1,172,449 |
- |
| + 57,137 RSUs |
| 171,411 SUs |
| 25-Feb-2020 |
92,306 |
3.76 |
25-Feb-2027 |
Nil |
284,329 PSUs |
2,917,209 |
- |
| + 142,164 RSUs |
| 426,493 SUs |
Eugene Lei |
28-Feb-2022 |
33,416 |
9.92 |
28-Feb-2029 |
Nil |
37,740 PSUs |
387,217 |
- |
| + 18,870 RSUs |
| 56,611 SUs |
| 25-Feb-2021 |
29,321 |
10.42 |
25-Feb-2028 |
Nil |
35,587 PSUs |
365,117 |
- |
| + 17,793 RSUs |
| 53,380 SUs |
| 25-Feb-2020 |
74,739 |
3.76 |
25-Feb-2027 |
153,464 |
76,738 PSUs |
787,338 |
- |
| + 38,370 RSUs |
| 115,108 SUs |
Andre Lauzon
|
28-Feb-2022 |
39,964 |
9.92 |
28-Feb-2029 |
Nil |
45,135 PSUs |
463,084 |
- |
| + 22,567 RSUs |
| 67,702 SUs |
| 25-Feb-2021 |
14,791 |
10.42 |
25-Feb-2028 |
Nil |
17,953 PSUs |
184,195 |
- |
| + 8,976 RSUs |
| 26,929 SUs |
| 25-Feb-2020 |
45,358 |
3.76 |
25-Feb-2027 |
93,133 |
46,572 PSUs |
477,829 |
- |
| + 23,286 RSUs |
| 69,858 SUs |
Patrick Donnelly |
28-Feb-2022 |
24,671 |
9.92 |
28-Feb-2029 |
Nil |
27,863 PSUs |
285,875 |
- |
| + 13,932 RSUs |
| 41,795 SUs |
| 25-Feb-2021 |
21,857 |
10.42 |
25-Feb-2028 |
Nil |
26,528 PSUs |
272,180 |
- |
| + 13,264 RSUs |
| 39,792 SUs |
| 25-Feb-2020 |
42,858 |
3.76 |
25-Feb-2027 |
65,998 |
66,006 PSUs |
677,220 |
- |
| + 33,003 RSUs |
| 99,009 SUs |
Javier Del Rio |
28-Feb-2022 |
22,388 |
9.92 |
28-Feb-2029 |
Nil |
25,285 PSUs |
702,881 |
- |
| + 77,475 RSUs |
| 102,760 SUs |
| 25-Feb-2021 |
19,456 |
10.42 |
25-Feb-2028 |
Nil |
23,613 PSUs |
242,272 |
- |
| + 11,807 RSUs |
| 35,420 SUs |
| 25-Feb-2020 |
16,118 |
3.76 |
25-Feb-2027 |
Nil |
49,646 PSUs |
509,364 |
- |
| + 24,822 RSUs |
| 74,468 SUs |
1. Based on the closing price of Hudbay Shares on the Toronto Stock Exchange of $6.84 on December 30, 2022, being the final trading day of 2022.
2. Reflects the number of PSUs and RSUs that have not vested. The actual number of PSUs that vest on the applicable entitlement date may be greater or less than the number presented in this table based on the multiplier effect described in this CD&A. "SUs" refer to share units, being the sum of PSUs and RSUs.
3. Excludes options which have been exercised.
4. In the case of Mr. Kukielski, this excludes the value of vested DSUs he was awarded prior to his appointment as permanent CEO.
5. With respect to the award granted on February 25, 2020, the PSUs and RSUs, which cliff vest in three years, vested on February 25, 2023.
Incentive Plan Awards Vested, Earned or Realized in 2022
The following table provides information regarding the value on pay-out or vesting of incentive plan awards for the financial year ended December 31, 2022.
| Name |
Value vested during the year ($) |
Non-equity
incentive plan
compensation -
Value earned during
the year(4)
($) |
Value vested and
value earned during
the year
($) |
Total Share-
Based Awards(1) |
Options(2)(3) |
| Peter Kukielski |
- |
568,605 |
1,038,077 |
1,606,682 |
| Eugene Lei |
- |
153,464 |
403,333 |
556,797 |
| Andre Lauzon |
- |
93,135 |
463,320 |
556,455 |
| Patrick Donnelly |
- |
132,001 |
305,599 |
437,600 |
| Javier Del Rio |
- |
99,283 |
274,672 |
373,955 |
1. No PSUs or RSUs awarded to the Company's NEOs vested during 2022.
2. The amount represents the aggregate dollar value that would have been realized if the options had been exercised on the vesting date, based on the difference between the closing price of Hudbay Shares on the Toronto Stock Exchange on the vesting date and the exercise price. The vesting date for one third of the 2020 options that were granted to Messrs. Kukielski, Lei, Lauzon, Donnelly and Del Rio was February 25, 2022 where the closing price was $9.92 and the exercise price was $3.76. The vesting date for one third of the 2021 options that were granted to Messrs. Kukielski, Lei, Lauzon, Donnelly and Del Rio was February 25, 2022 where the closing price was $9.92 and the exercise price was $10.42. Therefore, there was no value vested with respect to the 2021 options in 2022.
3. Mr. Kukielski and Mr. Del Rio realized $258,973 and $46,086, respectively, as a result of option exercises in 2022. Mr. Lei, Mr. Lauzon and Mr. Donnelly did not exercise any options in 2022.
4. Represents the annual STIP awarded in respect of 2022.
Pension Plan Benefits: Defined Benefit Plan
| Name(1) |
Number
of years
credited
service
(#) |
Annual benefits |
Opening
present
value of
defined
benefit
obligation
($) |
Compensatory
change
($)(2) |
Non-
Compensatory
change
($) |
Closing
present value
of defined
benefit
obligation
($) |
At year
end
($) |
At age 65
($) |
| Peter Kukielski |
- |
- |
- |
- |
- |
- |
- |
| Eugene Lei |
10.3 |
93,470 |
279,650 |
1,547,131 |
220,359 |
(644,899) |
1,122,591 |
| Andre Lauzon |
- |
- |
- |
- |
- |
- |
- |
| Patrick Donnelly |
14.1 |
118,581 |
238,565 |
1,890,751 |
114,459 |
(561,313) |
1,443,897 |
| Javier Del Rio |
7.1 |
35,318 |
35,318 |
527,447 |
- |
(100,631) |
426,816 |
| Steve Douglas |
- |
- |
- |
- |
- |
- |
- |
1. The Company's defined benefit plan was previously closed to new entrants. As such, Messrs. Kukielski, Lauzon and Douglas participate in the Company's defined contribution plan, as described below.
2. Mr. Del Rio ceased accruing pensionable service at June 13, 2017 due to the foreign service limits prescribed by the provisions of the Company's defined benefit plan and, therefore, Mr. Del Rio had his benefit frozen as of June 13, 2017 and his compensatory change is therefore nil.
Defined Contribution Plans(1)(2)(3)
| Name |
Accumulated value
at start of year
($) |
Compensatory
change in value
($) |
Non-Compensatory
change in value
($) |
Accumulated value
at year end
($) |
| Peter Kukielski |
225,109 |
112,834 |
(15,311) |
322,632 |
| Eugene Lei |
89,879 |
12,187 |
1,870 |
103,936 |
| Andre Lauzon |
131,132 |
62,400 |
(13,452) |
180,080 |
| Patrick Donnelly |
- |
- |
- |
- |
| Javier Del Rio |
- |
- |
- |
- |
| Steve Douglas |
120,697 |
59,569 |
(5,234) |
175,032 |
1. Messrs. Donnelly and Del Rio do not participate in the Company's defined contribution plan.
2. NEOs may make a one-time irreversible election to receive all or a portion of their future annual incentive bonuses as supplementary pension credits under the supplemental pension plan - see "Summary of Elements of Executive Compensation - Retirement Benefits." The amounts included for Mr. Lei represent the compensatory change in value in respect of the amount of his annual incentive bonus that he has elected to receive as a supplementary pension credit.
3. For Messrs. Kukielski, Lauzon and Douglas, this represents their pension benefits under the defined contribution plan, known as the MPP, including top-up amounts credited to a supplemental plan in respect of employer contributions that exceed the statutory maximum. See "Summary of Elements of Executive Compensation - Retirement Benefits".
RETIREMENT BENEFITS
Messrs. Lei, Donnelly and Del Rio participate in our defined benefit pension plan, although Mr. Del Rio ceased accruing pensionable service at June 13, 2017 due to the foreign service limits prescribed by the provisions of our defined benefit plan and, therefore, Mr. Del Rio had his benefit frozen as of June 13, 2017. Our defined benefit pension plan was closed to new participants in 2015.
The defined benefit plan is based on 2% of the average of the member's earnings during the 36 consecutive months of continuous service within the ten-year period immediately preceding the member's retirement, death or termination of continuous service in which the highest average is attained, multiplied by the member's credited service. The benefit is normally payable at age 62 but can be paid up to 10 years earlier on a reduced basis (reduction of 4.8% per year for each year that retirement precedes age 62). Members in the pension plan may elect to make optional ancillary contributions to the plan in order to enhance the ancillary features of their pension. The cost of additional benefits is fully paid by the member and contributions cannot exceed an annual maximum of the lesser of 9% of the member's earnings, or $22,126 for 2022.
The formula contains a partial offset for the Canada Pension Plan benefit. The pension is payable for life with a guaranteed period of five years. Pensions in excess of the Income Tax Act (Canada) maximum pension limits are provided under the defined benefit component of our supplemental pension plan. Our defined benefit plan has been closed off to new entrants and all new non-unionized employees and executives in Canada participate in our defined contribution pension plan.
Messrs. Kukielski and Lauzon participate in our Money Purchase Plan ("MPP"), a defined contribution pension plan. Under the MPP, they receive an annual employer contribution equal to 12% of their base salaries. The MPP does not permit voluntary contributions by executives. When the statutory annual maximum contribution is reached, the balance of the employer contribution is credited to a notional account that is indexed to actual fund performance and secured by a letter of credit.
NEOs may also make a one-time irreversible election to reduce their eligibility to participate in all or a portion of the annual incentive bonus plan (STIP) in exchange for eligibility for supplementary pension credits under the defined contribution component of our supplemental pension plan. Supplementary pension credits are determined and awarded at the same time as annual incentive bonuses. The accounts are notional accounts which are secured with a letter of credit held in trust by a financial institution. The accounts are credited with interest equal to the annual yield rate of Government of Canada marketable bonds with average yields over 10 years. We do not match or otherwise make contributions to this defined contribution component of the supplemental pension plan.
Separately, Mr. Del Rio has elected to join our 401(k) retirement savings program in the United States, pursuant to which the Company will match 50% of the first 6% of Mr. Del Rio's voluntary contributions, subject to the contribution limits set by the IRS.
Employment Agreements
Each of our current NEOs is party to an employment agreement with our Company. The NEOs' employment agreements establish their base salary and right to participate in our annual incentive bonus, long-term incentive, pension and benefit plans. The tables below summarize the payments and benefits to which our CEO and other NEOs are entitled under their respective employment agreements following their involuntary termination without cause, or resignation for certain specified events, defined as "good reason", including but not limited to a substantial change in the employment conditions or duties of the NEO that adversely affects the extent, nature or status of his responsibilities, any material reduction in the NEO's base salary, any transaction that results in a change in the status of Hudbay as a publicly-listed entity to one that is privately held, following which he is not appointed to continue in the same role, or any requirement that the NEO relocate. Under the NEOs' employment agreements, a termination without cause following a change of control is not treated differently than a termination without cause in other circumstances.
Each of our NEOs is required by their respective employment agreements to not solicit officers, employees or agents of Hudbay for 12 months following the termination of their employment and they are also required to maintain the confidentiality of our confidential information. In addition, Mr. Kukielski is subject to a non-compete provision, which requires that, for six months following his voluntary or involuntary departure from the Company, he will not serve as an officer, employee, contractor or service provider to a competitor in the jurisdictions where the Company carries on business.
Termination Entitlements: CEO
|
Payment/Benefit
|
CEO's Entitlement on Termination
|
|
Salary and STIP to the date of termination
|
All salary earned and not paid to the date of termination, plus a prorated STIP grant at target for the period from January 1 of the year of termination to the date of termination
|
|
Base salary
|
An amount equal to 24 months' base salary.
|
|
Lump sum payment (STIP)
|
An amount equal to two times the average annual incentive bonus earned over the two most recently completed fiscal years immediately preceding the termination date.
|
|
Pension and benefit plans
|
Entitled to continue to receive benefits for 24 months (except for those in respect of which the applicable plans do not permit ongoing participation following the termination of employment)
|
|
Vesting of equity awards
|
All unvested RSUs and PSUs shall become immediately vested and any previously vested options shall remain exercisable for 60 days.
|
Termination Entitlements: Non-CEO NEOs
|
Payment/Benefit
|
NEOs' Entitlement on Termination
|
|
Salary and STIP to the date of termination
|
All salary earned and not paid to the date of termination, plus a prorated STIP grant at target for the period from January 1 of the year of termination to the date of termination.
|
|
Lump sum payment (base salary)
|
An amount equal to 24 months' base salary, except for Mr. Del Rio who, at the time, would have been entitled to receive an amount equal to 12 months' base salary.
|
|
Lump sum payment (STIP)
|
An amount equal to two times the average annual incentive bonus earned over the two most recently completed fiscal years immediately preceding the termination date, except for Mr. Del Rio who, at the time, would have been entitled to receive an amount equal to the average incentive bonus earned over the two most recently completed fiscal years immediately preceding the termination date.
|
|
Pension and benefit plans
|
Entitled to continue to participate for 24 months or receive a lump sum payment equal to the premium contributions and pension entitlements during the 24 month period, except for Mr. Del Rio who, at the time, would have been entitled to continue to participate for 12 months or receive a lump sum payment equal to the premium contributions and pension entitlements during the 12 month period.
|
|
Vesting of equity awards
|
All unvested RSUs, PSUs and options shall become immediately vested and any vested options shall remain exercisable for 60 days.
|
Payments on Termination
The following table provides details regarding the estimated payments to each of the NEOs as at December 31, 2022 assuming termination without cause on that date:
|
Name(1)
|
Prorated
STIP to Date
of
Termination
($)
|
Severance
(Multiple of
Base
Salary)
($)
|
Severance
(Multiple of
Average
Bonus)
($)
|
Severance
(Value of
Benefits)
($)
|
Value of
Immediately
Vested Share
Units
($)(2)
|
Total
($)
|
|
Peter Kukielski(3)
|
1,128,344
|
1,880,574
|
2,612,698
|
348,770
|
5,321,084
|
11,291,470
|
|
Eugene Lei
|
408,417
|
1,020,000
|
917,288
|
190,839
|
1,693,136
|
4,229,680
|
|
Andre Lauzon
|
468,000
|
1,040,000
|
443,600
|
187,444
|
1,218,241
|
3,357,285
|
|
Patrick Donnelly
|
318,332
|
909,520
|
743,356
|
235,179
|
1,301,273
|
3,507,660
|
|
Javier Del Rio
|
264,108
|
528,216
|
291,547
|
56,774
|
1,454,517
|
2,595,162
|
1. Mr. Douglas departed the Company in October 2022 and is therefore excluded from the table above.
2. This represents the market value of the share unit (RSU and PSU) awards and the "in the money" value of all unexercised options, in each case, granted in 2020, 2021 and 2022, based on the closing price of the Hudbay Shares on the Toronto Stock Exchange of $6.84 on December 30, 2022, being the final trading day of 2022. For further information, see "Executive Compensation Tables - Incentive Plan Awards" above.
3. In the case of Mr. Kukielski, this excludes the value of vested DSUs he was awarded prior to his appointment as permanent CEO.
Double-Trigger Payment on Termination
None of our NEOs are entitled to any payments or accelerated vesting of equity based awards in a circumstance where there is a change of control and they are not terminated or they do not resign for "good reason", as described in more detail under "Employment Agreements" above. Such entitlements will only arise if their employment is terminated.
Director Compensation
Our director compensation program compensates non-executive directors (for purposes of this section, "Directors") for the time and effort they are expected to devote to Company matters. Executive directors (currently only our CEO) are compensated in their capacity as executives only and do not receive additional compensation for serving on the Board.
2022 Director Compensation
In 2021, the Committee conducted its biennial review of director compensation levels and structure. No changes were made to our directors' compensation following the 2021 review, as the Committee concluded Hudbay's directors were fairly paid and increases to director compensation structure were not advisable. The next such review will be conducted in 2023, following which our directors' compensation will be evaluated with the applicable peer group.
The fees payable to our directors are shown in the table below:
| Pay Component |
Component |
2022 Compensation |
| Director Fees |
Annual Cash Retainer |
$85,000 |
| Annual Equity Retainer |
$116,000 |
| Board Chair Fees |
Annual Cash Retainer |
$157,500 |
| Annual Equity Retainer |
$157,500 |
| Committee Chair Retainers |
Audit |
$30,000 |
| Compensation & HR |
$20,000 |
| Corporate Governance |
$15,000 |
| Technical |
$25,000 |
| EHSS |
$15,000 |
Equity-based compensation for our Directors is awarded in the form of deferred share units (DSUs). DSUs, which are granted pursuant to our Directors' Deferred Share Unit Plan, track the value of the Hudbay Shares. DSUs are vested at the time of grant but they are not paid out until after a Director departs from the Board, at which time they are paid out in cash equal to the number of DSUs held multiplied by the price of the Hudbay Shares at the time the DSUs are paid. When dividends are paid on our Hudbay Shares, holders of DSUs receive dividend equivalents, which entitle the holder to a number of additional DSUs equal to the number of DSUs held multiplied by the per share amount of the dividend, divided by the price of our common shares at the time the dividend is paid. Ensuring that Directors have an equity interest in Hudbay helps to align the interests of our Directors with the long-term interests of our shareholders and is consistent with our desire to implement best practices in our compensation programs. To further align their interests with those of our shareholders, Directors may elect to have all or a portion of their cash retainer and other fees payable to them in DSUs.
Director Compensation Table
The following table sets out the compensation paid to each of our Directors in respect of the year ended December 31, 2022.
|
Name
|
Fees earned
($)(1)
|
Share-based
awards
($)(2)
|
All other
compensation
($)(3)
|
Total
($)
|
|
Carol T. Banducci
|
-
|
231,000
|
3,274
|
234,274
|
|
Igor A. Gonzales
|
85,000
|
116,000
|
2,265
|
203,265
|
|
Richard Howes
|
85,000
|
116,000
|
1,732
|
202,732
|
|
Sarah B. Kavanagh
|
100,000
|
116,000
|
2,265
|
218,265
|
|
Carin S. Knickel
|
52,500
|
168,500
|
4,379
|
225,379
|
|
George E. Lafond(4)
|
12,963
|
109,648
|
44
|
122,655
|
|
Stephen A. Lang
|
97,500
|
217,500
|
1,795
|
316,795
|
|
Daniel Muñiz Quintanilla
|
85,000
|
116,000
|
1,061
|
202,061
|
|
Colin Osborne
|
-
|
226,000
|
2,817
|
228,817
|
|
David S. Smith
|
100,000
|
116,000
|
1,061
|
217,061
|
1. Represents fees and retainers paid in cash. Directors can elect to have all or a portion of their cash retainers and meeting fees paid to them in DSUs.
2. Represents fees and retainers paid in DSUs. The DSUs are vested at the time of grant and become payable to the directors upon their departure from the Board.
3. Represents amounts paid in additional DSUs as dividend equivalents following payments of our $0.01 per share dividend on March 25, 2022 and September 23, 2022.
4. George E. Lafond was elected as a Director of the Company on May 10, 2022.
Value on Pay-Out or Vesting of Incentive Plan Awards
| Name |
Option-based awards - Value
vested during the year
($) |
Share-based awards - Value
vested during the year
($)(1) |
| Carol T. Banducci |
- |
231,000 |
| Igor A. Gonzales |
- |
116,000 |
| Richard Howes |
- |
116,000 |
| Sarah B. Kavanagh |
- |
116,000 |
| Carin S. Knickel |
- |
168,500 |
| George E. Lafond |
- |
109,648 |
| Stephen A. Lang |
- |
217,500 |
| Daniel Muñiz Quintanilla |
- |
116,000 |
| Colin Osborne |
- |
226,000 |
| David S. Smith |
- |
116,000 |
1. Represents the amount of DSUs granted to each director in respect of 2022 pursuant to our Directors' DSU plan (excluding amounts paid in additional DSUs as dividend equivalents). DSUs are vested at the time of grant. For greater certainty, DSUs are not paid out until a Director departs from the Board. No share options have been granted to the current Directors and, accordingly, none of the Directors hold unvested equity awards.
Outstanding Share-Based Awards
The following table provides information regarding the share-based awards for each director outstanding as of December 31, 2022.
| Name |
Grant
Date |
Number of
securities
underlying
options at
the date of
grant
(#) |
Number of
securities
underlying
unexercised
options
(#) |
Option
exercise
price
($) |
Option
expiration
date |
Value of
unexercised
in-the-
money
options
($) |
Number of
shares or
units of
shares that
have not
vested
(#) |
Market or
payout value
of share-
based
awards that
have not
vested
($) |
Market or
payout value
of vested
share-based
awards not
paid out or
distributed
($)(1) |
| Carol T. Banducci |
- |
- |
- |
- |
- |
- |
- |
- |
1,260,056 |
| Igor A. Gonzales |
- |
- |
- |
- |
- |
- |
- |
- |
845,616 |
| Richard Howes |
- |
- |
- |
- |
- |
- |
- |
- |
662,980 |
| Sarah B. Kavanagh |
- |
- |
- |
- |
- |
- |
- |
- |
845,616 |
| Carin S. Knickel |
- |
- |
- |
- |
- |
- |
- |
- |
1,599,910 |
| George E. Lafond |
- |
- |
- |
- |
- |
- |
- |
- |
86,741 |
| Stephen A. Lang |
- |
- |
- |
- |
- |
- |
- |
- |
744,818 |
| Daniel Muñiz Quintanilla |
- |
- |
- |
- |
- |
- |
- |
- |
432,991 |
| Colin Osborne |
- |
- |
- |
- |
- |
- |
- |
- |
1,100,432 |
| David S. Smith |
- |
- |
- |
- |
- |
- |
- |
- |
432,991 |
1. Based on the closing price of Hudbay Shares on the Toronto Stock Exchange of $6.84 on December 30, 2022, being the final trading day of 2022.
EQUITY OWNERSHIP GUIDELINES FOR DIRECTORS
The Corporate Governance Guidelines adopted by the Board impose minimum equity ownership requirements on the directors, pursuant to which each director will be required to acquire Hudbay Shares or DSUs having an initial acquisition or grant date value equal to three times the aggregate value of his or her annual cash and equity retainer. For the purpose of determining the value of shares and share units held, the holdings will be based on the cost of acquisition or value at the time of grant.
Directors are expected to achieve this level of ownership within five years from the date they become directors and when there is an increase to the annual retainer, directors are required to achieve the increased minimum equity ownership level within two years of the effective date of the increase. Therefore, Messrs. Howes, Lang, Quintanilla, Smith and Lafond are not yet required to fully comply with the Company's equity ownership guidelines for directors as they were elected within the last five years.
The Directors' progress in meeting our equity ownership guidelines as at March 15, 2023 is shown in the table below. As Mr. Howes will not be standing for re-election, we have removed him from the chart below.
|
Name
|
Value of Equity
Required
($)
|
Total Equity
Ownership(1)
($)
|
In Compliance
with Guidelines?
|
Effective Time
for Required
Compliance(2)
|
|
Carol T. Banducci
|
603,000
|
1,238,888
|
Yes
|
-
|
|
Igor A. Gonzales
|
603,000
|
854,609
|
Yes
|
-
|
|
Sarah B. Kavanagh
|
603,000
|
854,609
|
Yes
|
-
|
|
Carin S. Knickel
|
603,000
|
1,687,156
|
Yes
|
-
|
|
George E. Lafond
|
603,000
|
109,692
|
In Progress
|
2027
|
|
Stephen A. Lang
|
945,000
|
921,530
|
In Progress
|
2024
|
|
Daniel Muñiz Quintanilla
|
603,000
|
453,231
|
In Progress
|
2024
|
|
Colin Osborne
|
603,000
|
1,219,646
|
Yes
|
-
|
|
David S. Smith
|
603,000
|
578,170
|
In Progress
|
2024
|
1. Includes the grant date value of DSUs held and the acquisition value of common shares held.
2. Messrs. Lang, Quintanilla and Smith joined the Board in 2019 and Mr. Lafond joined the Board in 2022 and, as such, have until 2024 and 2027, respectively, to achieve the required value of equity.
3. Based on the $6.03 closing price of Hudbay Shares on the Toronto Stock Exchange on March 15, 2023.
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information concerning our equity compensation plans as at December 31, 2022.
|
Plan Category
|
Number of securities to
be issued upon
exercise of outstanding
options, warrants and
rights(2)
|
Weighted average
exercise price of
outstanding options,
warrants and rights(3)
($)
|
Number of securities
remaining available for
future issuance under
equity compensation
plans(2)
|
|
Equity compensation plans approved by securityholders(1)
|
4,984,413
|
$7.38
|
10,645,908
|
|
Equity compensation plans not approved by securityholders
|
-
|
-
|
-
|
|
Total
|
4,984,413
|
$7.38
|
10,645,908
|
1. Includes the Share Option Plan and LTEP, as approved by our shareholders at our 2008 and 2016 annual and special meetings, respectively.
2. Assumes that all of the outstanding share units under our LTEP will be settled by the issuance of Hudbay Shares.
3. Reflects the weighted average exercise price of the 1,528,760 options that were outstanding as at December 31, 2022.
The annual burn rate(1) for each of our equity compensation plans over the past three fiscal years is set out in the table below:
|
Equity Compensation Plan
|
2022
|
2021
|
2020
|
|
Share Option Plan
|
0.23%
|
0.19%
|
0.60%
|
|
LTEP
|
0.43%
|
0.35%
|
0.95%
|
1. The annual burn rate in respect of each equity compensation plan is calculated according to Section 613(d) of the TSX Company Manual. The number of securities granted under the LTEP plan in the years ended December 31, 2022 and 2021 and used in the annual burn rate calculation could increase in the future as a result of the multiplier effect on the Performance Share Units granted thereunder. See "Long-Term Incentive Plan (LTIP)".
If all of the 4,984,413 share units and options outstanding under our LTEP and Share Option Plan, respectively, as at December 31, 2022 were settled by the issuance of Hudbay Shares, the Hudbay Shares issued upon such settlement would have represented approximately 1.90% of our issued and outstanding Hudbay Shares as at such date.
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
None of our directors or executive officers are aware of any material interest, direct or indirect, of any person who: (i) has been a director or executive officer of Hudbay at any time since the beginning of the Company's last financial year; (ii) is a proposed nominee for election; or (iii) is an associate or affiliate of any person described in (i) or (ii), in any of the matters to be acted upon at the Meeting other than the election of directors.
INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS
None of our current or former directors, executive officers or employees or those of any of our subsidiaries had any indebtedness outstanding to Hudbay or any of our subsidiaries during the year ended December 31, 2022 or as at the date hereof. Additionally, Hudbay has not provided any guarantee, support agreement, letter of credit or other similar arrangement or undertaking in respect of any indebtedness of any such person to any other person or entity.
INTEREST OF INFORMED PERSONS IN MATERIAL TRANSACTIONS
To the knowledge of the directors and executive officers of Hudbay, no "informed person", any proposed nominee or any associate or affiliate of any informed person or proposed nominee, has had any material interest, direct or indirect, in any transaction since January 1, 2022, or has had any such interest in any proposed transaction that has materially affected us or would materially affect us or any of our subsidiaries. "Informed Person" means (a) a director or executive officer of Hudbay, (b) a director or executive officer of a person or company that is itself an informed person or subsidiary of Hudbay, (c) any person or company who beneficially owns, or controls or directs, directly or indirectly, Hudbay Shares carrying more than 10% of the voting rights attached to all of the Hudbay Shares, and (d) Hudbay, if we have purchased, redeemed or otherwise acquired any of our securities, for so long as we hold any of our securities.
DIRECTORS' AND OFFICERS' INSURANCE AND INDEMNIFICATION
We have purchased insurance for the benefit of the directors and officers of Hudbay and its subsidiaries against any liability incurred by them in their capacity as directors and officers, subject to certain limitations contained in the CBCA. The annual premium for such insurance is US$1,726,704. The policy provides an annual aggregate coverage limit of US$80 million in the policy year.
In accordance with the provisions of the CBCA, our By-law provides that we will indemnify a director or officer, a former director or officer, or another individual who acts or acted at our request as a director or officer, or an individual acting in a similar capacity, of another entity, against all costs, charges and expenses, including an amount paid to settle an action or to satisfy a judgment, reasonably incurred in respect of any civil, criminal, administrative, investigative or other proceeding to which the individual is involved because of the association with us or other entity, if:
- the individual acted honestly and in good faith with a view to our best interests or, as the case may be, to the best interests of the other entity for which the individual acted as a director or officer or in a similar capacity at our request; and
- in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, the individual has reasonable grounds for believing that the individual's conduct was lawful.
We have entered into indemnification agreements with each of our directors and officers, which agreements provide that we undertake and agree to indemnify the director or officer to the fullest extent permitted by law, against any reasonable expense that the director may suffer or incur in respect of any claim, action, suit or proceeding (including, without limitation, any claim, demand, suit, proceeding, inquiry, hearing, discovery or investigation whether civil, criminal, administrative or investigative and whether brought by or on behalf of us or otherwise) involving the director or officer or to which the director or officer is made party and which arises as a direct or indirect result of the director or officer being or having been a director or officer of Hudbay, including any act or thing done or not done in the director's capacity as director or officer provided the director has acted as set out above in accordance with our By-law.
If we become liable under the terms of our By-law or the indemnification agreements, the insurance coverage will extend to such liability; however, each claim will be subject to a deductible of US$5,000,000.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We file reports and other information with the Canadian Securities Administrators. These reports and information are available to the public free of charge on SEDAR at www.sedar.com and EDGAR at www.sec.gov/edgar.shtml. Financial information is provided in our audited comparative consolidated financial statements and management's discussion and analysis for the year ended December 31, 2022, which can be found on SEDAR at www.sedar.com and EDGAR at www.sec.gov/edgar.shtml. Our shareholders may also request copies of these documents from our Corporate Secretary by telephone at (416) 362-8181 or by e-mail at info@hudbay.com.
DIRECTORS' APPROVAL
The contents of this Circular and the sending thereof to our shareholders have been approved by the Board of Directors of Hudbay Minerals Inc.
By Order of the Board of Directors
Stephen A. Lang, Chair
April 3, 2023
SCHEDULE "A"
HUDBAY MINERALS INC.
(the "Company")
CORPORATE GOVERNANCE GUIDELINES AND BOARD MANDATE
Introduction
The Board of Directors is committed to fulfilling its statutory mandate to supervise the management of the business and affairs of the Company with the highest standards of ethical conduct and in the best interests of the Company and its shareholders. The Board of Directors, acting on the recommendation of its Corporate Governance and Nominating Committee, has adopted these corporate governance guidelines to promote the effective functioning of the Board of Directors and its committees, to promote the interests of shareholders, and to establish a common set of expectations as to how the Board of Directors, its various committees, individual directors and senior management should perform their functions. These guidelines are intended to provide a flexible framework within which the Board of Directors may carry out these functions.
Guidelines
Board of Directors' Responsibilities
The business and affairs of the Company are managed by or under the supervision of the Board of Directors in accordance with applicable legislation and regulatory requirements. The responsibility of the Board of Directors is to provide direction and oversight. The Board of Directors approves the strategic direction of the Company and oversees the performance of the Company's business and senior management. The senior management of the Company is responsible for presenting strategic plans to the Board of Directors for review and approval and for implementing the Company's strategic direction.
In performing their duties, the primary responsibility of the directors is to exercise their business judgment in what they reasonably believe to be the best interests of the Company and to perform their duties of care and loyalty. In discharging that obligation, directors should be entitled to rely on the honesty and the integrity of the Company's senior management and outside advisors and auditors. The directors also should be entitled to have the Company purchase reasonable directors' and officers' liability insurance on their behalf, and to the benefits of indemnification to the fullest extent permitted by applicable law and to exculpation as provided by applicable law.
In fulfilling its statutory mandate and discharging its duty of stewardship of the Company, the Board of Directors assumes responsibility for those matters set forth in its Charter (which also is its mandate), a copy of which is attached as Schedule 1.
Board of Directors' Size
It is the current view of the Board of Directors that the Board of Directors should consist of no more than 13 members to facilitate its effective functioning. The Board of Directors will annually assess, after consideration of any advice or input of the Corporate Governance and Nominating Committee, the appropriate number of directors.
Chair of the Board of Directors
The Chair should be a director who is independent and not a member of senior management who is appointed by the Board of Directors.
Board Selection and Diversity
The Corporate Governance and Nominating Committee is responsible for identifying and recommending to the Board of Directors individuals qualified to become members of the Board of Directors. In assessing individual director nominees, the Corporate Governance and Nominating Committee considers:
- relevant skills and expertise that enable each director to make a meaningful contribution to the Board of Directors and to the Company, including in areas such as leadership, mining, finance and mergers and acquisitions, operations, international business, government relations, environment, health, safety and sustainability, human resources and executive compensation, corporate governance, risk management, marketing and legal and regulatory,
- diversity, including diversity of gender, viewpoints, backgrounds, experiences and other demographics, and
- the extent to which the interplay of an individual's expertise, skills, knowledge and experience with that of other members of the Board of Directors will build a board that is effective, diverse, collegial and responsive to the needs of the Company.
The Corporate Governance and Nominating Committee will review the Board of Directors' skills matrix to help identify areas for strengthening the Board of Directors, if any, and address them through the recruitment of new members. In addition to its own search for director nominees, the Corporate Governance and Nominating Committee may engage experienced and independent external consultants. When engaging the services of search consultants, the Corporate Governance and Nominating Committee instructs them to have broad selection criteria that include a mix of skills and expertise, and to identify candidates who are diverse in all aspects, including gender.
The Corporate Governance and Nominating Committee also will be responsible for initially assessing whether a candidate would be independent (and in that process applying the Categorical Standards for Determining Independence of Directors that are appended to the Board of Directors Charter) and advising the Board of Directors of that assessment. The Corporate Governance and Nominating Committee also will be responsible for assessing from time to time, and shall conduct inquiries in that regard on no less than an annual basis, the independence of each member of the Board of Directors, and shall make recommendations to the Board of Directors in respect of the constitution of the Board of Directors and its committees resulting therefrom.
The Board of Directors, taking into consideration the recommendations of the Corporate Governance and Nominating Committee, will be responsible for selecting the nominees for election to the Board of Directors, for appointing directors to fill vacancies, and determining whether a nominee or appointee is independent.
Continuation as a Director
The Board of Directors does not believe it is appropriate to have an arbitrary age or term limit for service on the Board. Instead, the Board will focus on renewal and will be vigilant in monitoring the performance of each director and ask directors who are no longer able to contribute effectively due to age or other factors to step down from the Board.
When a director's principal occupation or business association changes substantially from the position he or she held when originally invited to join the Board of Directors (determined by reference to factors such as country of principal residence, industry affiliation, etc.), that director should tender a letter of proposed resignation to the Chair of the Corporate Governance and Nominating Committee. The Corporate Governance and Nominating Committee will review that director's continuation on the Board of Directors and recommend to the Board of Directors whether, in light of all the circumstances, the Board of Directors should accept the proposed resignation or request that the director continue to serve.
Committee Membership
Directors are expected to sit on committees of the Board of Directors. Each of the Audit Committee, the Compensation and Human Resources Committee, the Corporate Governance and Nominating Committee, the Environmental, Health, Safety and Sustainability Committee and the Technical Committee will be composed of no fewer than three members, each of whom will satisfy the membership criteria set out in the relevant committee charter. Members of committees will be appointed by the Board of Directors upon the recommendation of the Corporate Governance and Nominating Committee. The Board of Directors, taking into account the recommendation of the Corporate Governance and Nominating Committee, generally will designate one member of each committee as chair of that committee. Membership on these committees, including the person serving as Chair, should be changed from time to time in order to allow for new perspectives, keeping in mind the skills required to serve on each committee.
Evaluating Board of Directors and Committee Performance
The Board of Directors and each committee under the guidance and direction of the Corporate Governance and Nominating Committee will:
- Conduct an annual self-evaluation; and
- Periodically review and assess the adequacy of its Charter and the position description for the Chair and recommend any improvements to the Corporate Governance and Nominating Committee for recommendation to the Board of Directors.
Authority to make minor technical amendments to the Charter may be made by the head of the Legal group, who will report any such amendments to the Board of Directors, or the relevant committee, at its next regular meeting.
Board of Directors and Committee Meetings
Quorum for the transaction of business at any meeting of the Board of Directors or committee, as the case may be, shall be a majority of the number of members or such greater number as the Board or committee shall by resolution determine. The powers of the board or committee, as the case may be, may be exercised at a meeting at which a quorum is present in person or by telephone or other electronic means or by a resolution signed by all members entitled to vote on that resolution. Each member (including the Chair) is entitled to one (but only one) vote in any proceedings.
Meetings of the Board of Directors or committee, as the case may be, shall be held from time to time and at such place as the Chair of the Board or committee (or any two directors) may request upon 48 hours prior notice (if the notice is mailed) or 24 hour notice (if the notice is given personally or delivered by means of electronic communication). The notice period may be waived by a quorum of the Board or the committee.
An agenda for each meeting of the Board of Directors and each committee meeting will be provided to each director and each member of the relevant committee, respectively. Any director or member of a committee may suggest the inclusion of subjects on the agenda of meetings of the Board of Directors or a committee, respectively.
Each director and each member of a committee is free to raise, at any meeting of the Board of Directors or a committee, subjects that are not on the agenda for that meeting.
Materials provided to the directors for meetings of the Board of Directors and committee meetings should provide the information needed, and should be distributed sufficiently in advance, for the directors and members of the committee, respectively, to engage in informed discussion and make an informed judgment.
To ensure free and open discussion and communication among directors, the independent directors will meet in executive session (with no members of senior management or non-independent directors present) after every regularly scheduled meeting of the Board of Directors and otherwise as those directors determine. The Chair will preside at these executive sessions, unless the directors present at such meetings determine otherwise. Any interested party may communicate directly with the Chair, who may invite such person to address an executive session.
Unless the Chair of a committee otherwise determines, the agenda, materials and minutes for each committee meeting will be available on request to all directors, and all directors will be free to attend any committee meeting. All meetings of a committee will have a session in which the members of the committee will meet with no non-committee members present and, at any time in a meeting of a committee, directors who are not members may be asked to leave the meeting to ensure free and open discussion and communication among members of the committee. Directors who are not members of a committee will not be compensated for attending meetings of that committee.
Director Compensation
As provided for in the Compensation and Human Resources Committee's Charter, the form and amount of director compensation will be determined by the Board of Directors upon the recommendation of the Compensation and Human Resources Committee from time to time. In discharging this duty, the Compensation and Human Resources Committee shall endeavor to adhere to the following principles: compensation should fairly pay non-employee directors for work required in a company of the Company's size and scope; compensation should align such directors' interests with the long-term interests of the Company's shareholders; and the structure of non-employee director compensation should be simple, transparent and easy for shareholders to understand.
Share Ownership Guidelines
Each director is required to acquire common shares of the Company having an initial acquisition value equal to three times his or her annual retainer. Directors are expected to achieve this level of ownership within five years from the date they become directors. Directors may apply the deferred share units that they receive as payment for all or part of their annual retainer towards this minimum equity ownership requirement. If the annual retainer is increased, all directors are required to achieve the increased minimum equity ownership level within two years of the effective date of the increase in the annual retainer. For greater certainty, the determination as to whether a director has met this minimum equity ownership level will be made with reference to the value of the common shares (or deferred share units) at the time of their acquisition, and not the then current market price.
Expectations of Directors
The Board of Directors has developed a number of specific expectations of directors to promote the discharge by the directors of their responsibilities and to promote the efficient conduct of the Board of Directors.
Commitment and Attendance. All directors should strive to attend all meetings of the Board of Directors and the committees of which they are members. Attendance by telephone or video conference may be used when necessary to facilitate a director's attendance.
Participation in Meetings. Each director should be sufficiently familiar with the business of the Company, including its financial statements and capital structure, and the risks and the competition it faces, to ensure active and effective participation in the deliberations of the Board of Directors and of each committee on which he or she serves. Each director is expected to review meeting materials in advance of the meeting.
Loyalty and Ethics. In their roles as directors, all directors owe a duty of loyalty to the Company. This duty of loyalty mandates that the best interests of the Company take precedence over any other interest possessed by a director. Directors should conduct themselves in accordance with the Company's Code of Business Conduct and Ethics and other applicable policies and procedures.
Interlocking Directorships. Without the approval of the Corporate Governance and Nominating Committee, no director should serve on more than one other public company board of directors on which another director of the Company serves.
Succession Planning. The Board of Directors should conduct an annual review of management succession planning. The entire Board of Directors will work with the Compensation and Human Resources Committee to nominate and evaluate potential successors to the Chief Executive Officer. The Chief Executive Officer should at all times make available his or her recommendations and evaluations of potential successors, along with a review of any development plans recommended for such individuals.
Contact with Senior Management and Employees. All directors should be free to contact the Chief Executive Officer and other members of the Company's senior management at any time to discuss any aspect of the Company's business. The Board of Directors expects that there will be frequent opportunities for directors to meet with the Chief Executive Officer and other members of senior management in meetings of the Board of Directors and committees, or in other formal or informal settings.
Confidentiality. The proceedings and deliberations of the Board of Directors and its committees are confidential. Each director will maintain the confidentiality of information received in connection with his or her service as a director.
Orientation and Continuing Education
Senior management, working with the Board of Directors, will provide appropriate orientation and education for new directors to familiarize them with the Company and its business, as well as the expected contribution of individual directors. All new directors will participate in this program orientation and education, which should be completed within four months of a director first joining the Board of Directors. In addition, senior management will schedule periodic presentations for the Board of Directors to ensure they are aware of major business trends and industry practices.
Shareholder Engagement
The Board of Directors is committed to engaging in constructive communications with the Company's shareholders. As a result, the Board of Directors, acting on the recommendation of the Corporate Governance and Nominating Committee, has adopted a Shareholder Engagement Policy in order to promote open and sustained dialogue with the Company's shareholders.
Review of Related Party Transactions
The Corporate Governance and Nominating Committee shall review transactions between the Company and any related party, regardless of whether the transactions are reportable pursuant to securities regulations. After considering advice from the Corporate Governance and Nominating Committee, the Board of Directors shall review, and, if appropriate, approve or ratify, such related party transactions. For purposes of these guidelines, a "related party transaction" is any transaction in which the Company was or is to be a participant and in which any related party has a direct or indirect material interest, other than transactions that (i) are available to all employees generally, (ii) involve compensation of executive officers or directors duly authorized by the appropriate Board committee, or (iii) involve reimbursement of expenses in accordance with the Company's established policies.
For purposes of these guidelines, a "related party" is any person who is, or at any time since the beginning of the Company's last fiscal year was, an executive officer or director (including in each case nominees for director), any shareholder owning in excess of five percent of the Company's outstanding common shares, or an immediate family member (as defined in the Categorical Standards for Determining Independence of Directors) of an executive officer, director, nominee for director, or five percent shareholder.
Disclosure
These guidelines shall be made available on the Company's website.
SCHEDULE "1"
HUDBAY MINERALS INC.
(the "Company")
BOARD OF DIRECTORS CHARTER
Purpose
The Board of Directors is elected by the Company's shareholders to supervise the management of the business and affairs of the Company, in the best interests of the Company. The Board of Directors shall:
- Satisfy itself as to the integrity of the Chief Executive Officer and other senior officers and that the Chief Executive Officer and other senior officers create a culture of integrity throughout the Company.
- Review and approve the strategic plan and business objectives of the Company that are submitted by senior management and monitor the implementation by senior management of the strategic plan. During at least one meeting each year, the Board of Directors will review the Company's long term strategic plans and the principal issues that the Company expects to face in the future.
- Review the principal strategic, operational, reporting, environmental, social and governance ("ESG") and compliance risks for the Company and oversee, with the assistance of the Audit Committee, the implementation and monitoring of appropriate risk management systems and the monitoring of risks.
- Ensure, with the assistance of the Corporate Governance and Nominating Committee, the effective functioning of the Board of Directors and its committees in compliance with the corporate governance requirements of applicable legislation, and that such compliance is reviewed periodically by the Corporate Governance and Nominating Committee.
- Ensure internal controls and management information systems for the Company are in place and are evaluated and reviewed periodically on the initiative of the Audit Committee.
- Assess the performance of the Company's senior management, including monitoring the establishment of appropriate systems for succession planning (including the development of policies and principles for Chief Executive Officer selection and performance review and policies regarding succession in an emergency or upon retirement of the Chief Executive Officer) and for periodically monitoring the compensation levels of such senior management based on determinations and recommendations made by the Compensation and Human Resources Committee.
- Ensure that the Company has in place a policy for effective communication with shareholders, other stakeholders and the public generally.
- Review and, where appropriate, approve the recommendations made by the various committees of the Board of Directors, including, without limitation, to: select nominees for election to the Board of Directors; appoint directors to fill vacancies on the Board of Directors; appoint members of the various committees of the Board of Directors; and, establish the form and amount of director compensation.
Composition
The Board of Directors should be diverse in gender, viewpoints, backgrounds and other demographics and collectively should possess a broad range of skills, expertise, industry and other knowledge, and business and other experience useful to the effective oversight of the Company's business. A majority of the Board of Directors should meet the independence requirements of applicable legislation, regulatory requirements and policies of the Canadian Securities Administrators. The Board of Directors has adopted a set of categorical standards for determining whether directors satisfy those requirements for independence. A copy of those standards is attached as Appendix "A" to this Circular. The Board of Directors, upon the recommendation of the Corporate Governance and Nominating Committee, shall designate the Chair by majority vote of the Board of Directors.
Committees
The Board of Directors may delegate authority to individual directors and committees where the Board of Directors determines it is appropriate to do so. The Board of Directors expects to accomplish a substantial amount of its work through committees and shall form at least the following four committees: the Audit Committee, the Compensation and Human Resources Committee, the Corporate Governance and Nominating Committee and the Environmental Health, Safety and Sustainability Committee. The Board of Directors may, from time to time, establish or maintain additional standing or special committees as it determines to be necessary or appropriate. Each committee should have a written charter and should report regularly to the Board of Directors, summarizing the committee's actions and any significant issues considered by the committee.
Independent Advice
In discharging its mandate, the Board of Directors shall have the authority to retain (and authorize the payment by the Company of) and receive advice from special legal, accounting or other advisors as the Board of Directors determines to be necessary to permit it to carry out its duties.
Flexible Framework
This Charter is a broad policy statement and is intended to be part of the Board of Directors' flexible governance framework. While this Charter should comply with all applicable law and the Company's articles and by-laws, this mandate does not create any legally binding obligations on, the Board of Directors, any committee of the Board of Directors, any director or the Company.
APPENDIX "A"
HUDBAY MINERALS INC.
(the "Company")
CATEGORICAL STANDARDS FOR DETERMINING INDEPENDENCE OF DIRECTORS
For a director to be considered independent under the policies of the Canadian Securities Administrators, he or she must have no direct or indirect material relationship with the Company, being a relationship that could, in the view of the Board of Directors, reasonably interfere with the exercise of a Director's independent judgment.
The Board of Directors, upon the recommendation of the Corporate Governance and Nominating Committee, has considered the types of relationships that could reasonably be expected to be relevant to the independence of a director of the Company. The Board of Directors has determined that:
1. A director's interests and relationships arising solely from his or her (or any immediate family members'1) shareholdings in the Company are not, in and of themselves, a bar to independence.
2. Unless a specific determination to the contrary is made by the Corporate Governance and Nominating Committee as a result of there being another direct or indirect material relationship with the Company, a director will be independent unless currently, or at any time within the past three years, he or she or any immediate family member:
• Employment. Is (or has been) an officer or employee (or, in the case of an immediate family member, an executive officer) or (in the case of the director only) an affiliate 2 of the Company or any of its subsidiaries or affiliates (collectively, the "Company Group") or is actively involved in the day-to-day management of the Company;
• Direct Compensation. Receives (or has received) direct compensation during any twelve-month period from the Company Group (other than director fees and committee fees and pension or other forms of deferred compensation for prior service, provided it is not contingent on continued service)3;
• Auditor Relationship. Is (or has been) a partner or employee of a firm that is the Company's internal or independent auditor (provided that in the case of an immediate family member, he or she participates in its audit, assurance or tax compliance (but not tax planning practice)) and if during that time, he or she or an immediate family member was a partner or employee of that firm but no longer is such, he or she or the immediate family member personally worked on the Company's audit;
• Material Commercial Relationship. Has (or has had), or is an executive officer, employee or significant shareholder of a person that has (or has had), a significant commercial relationship with the Company Group.
Notes:
1. A (i) spouse, parent, child, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law, or (ii) any person (other than domestic employees) who shares that director's home.
2. A company is a subsidiary of another company if it is controlled, directly or indirectly, by that other company (through one or more intermediaries or otherwise). An "Affiliate" of a person is a person that, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with the first person.
3. Employment as an interim chair or an interim Chief Executive Officer need not preclude a director from being considered independent following the end of that employment. Receipt of compensation by an immediate family member need not preclude a director from being independent if that family member is a non-executive employee.
• Cross-Compensation Committee Link. Is employed as an executive officer of another entity whose compensation committee (or similar body) during that period of employment included a current executive officer of the Company.
• Material Association. Has (or has had) a close association with an executive officer of the Company.
Notwithstanding the foregoing, no director will be considered independent if applicable securities legislation, rules or regulations expressly prohibit such person from being considered independent.
SCHEDULE "B"
HUDBAY MINERALS INC.
(the "Company")
LONG TERM EQUITY PLAN ("LTEP")
LONG-TERM EQUITY PLAN ("LTEP")
Each grant of share units under the LTEP is evidenced by a grant letter, which may contain terms and conditions in addition to the terms and conditions of the LTEP.
The table below provides a summary of the principal terms of the LTEP. For additional detail, please refer to the full text of the LTEP, which can be found on SEDAR at www.sedar.com and EDGAR at www.sec.gov/edgar.shtml.
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Provision
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Description
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Term / Entitlement Date
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Although share units do not have a fixed term, the LTEP provides that the entitlement date, being the date on which share units vest and settle, is a date that is no later than December 31 of the third calendar year following the year in which the services corresponding to such share unit awards were performed.
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Market Price
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The LTEP provides that the market price of common shares (the "Market Price") is the five day average of the closing price of the common shares on the TSX ending on the last trading day immediately preceding the grant date or entitlement date.
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Settlement
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Subject to the terms of the LTEP and the applicable share unit grant letter, on the entitlement date a share unit award will entitle the Participant to a payment in fully paid common shares or, at our option, the cash equivalent of such common shares.
The cash equivalent of common shares issuable pursuant to a share unit award is determined by multiplying the applicable number of share units by the Market Price on the applicable date.
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Insider Participation Limit
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The LTEP limits insider participation such that the maximum number of common shares (i) issuable, at any time, and (ii) issued within any one-year period, to insiders, under the LTEP and any other security based compensation arrangement of ours, is 10% of the total number of common shares then issued and outstanding.
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Resignation and Termination
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The LTEP provides that, in the event a participant who is an employee: (A) is terminated without cause, all share units credited to such Participant immediately vest and become payable on the date of termination; or (B) resigns or is terminated for cause, all share units credited to such Participant immediately terminate.
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Change of Control
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If a change of control occurs and a participant ceases to be an eligible employee within 12 months of such change of control (other than in connection with a termination for cause or resignation), all outstanding share units of such Participant will immediately vest.
In the event of our wind-up, dissolution or liquidation, all share units outstanding will immediately vest.
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Provision
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Description
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Amendment Procedure
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The LTEP provides that, without shareholder approval, the Board may make the following amendments to the LTEP:
(a) amendments of a housekeeping nature;
(b) an addition or a change to the vesting provisions of the LTEP;
(c) a change to the termination provisions of a share unit or the LTEP;
(d) amendments to reflect changes to applicable securities laws; and
(e) amendments to ensure that the share units granted under the LTEP comply with any provisions respecting income tax and other laws in force in any country or jurisdiction of which a participant to whom a share unit has been granted may from time to time be resident or a citizen.
All other amendments require shareholder approval.
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Dividends
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Each participant under the LTEP is granted additional share units equal to the aggregate amount of dividends that would have been paid to the participant if the share units in the participant's account, if any, had been common shares, based on the Market Price of a common share on such date.
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Assignment
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Except pursuant to a will or by the laws of descent and distribution, share units are not assignable or transferable.
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SHARE OPTION PLAN SUMMARY
The table below provides a summary of the principal terms of our Share Option Plan. For additional detail, please refer to the full text of the plan, which can be found on SEDAR at www.sedar.com and EDGAR at www.sec.gov/edgar.shtml.
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Provision
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Description
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Term/ Vesting
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The Board shall receive recommendations of management and shall determine those Eligible Persons to whom Options should be granted, the number of Options to be granted, the vesting of the Options, the expiry of the Options and any other terms and conditions of the grant.
In the event the Board makes no specific determination as to the terms of an option, the default terms are as follows:
- Options shall expire after a period of five years.
- 1/3 of the Option grant shall vest after one year; 1/3 of the Option grant shall vest after two years; and 1/3 after three years
- if the expiration date for an Option falls within a Blackout Period or within nine Business Days following the expiration of a Blackout Period, such expiration date shall be automatically extended without any further act or formality to that date which is the tenth Business Day after the end of the Blackout Period.
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Market Price
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The Option Plan provides that the exercise price of an Option shall not be less than the Market Price, which price is defined as the closing price of the common shares on the last trading date prior to the date on which the Option grant is approved by the Board; provided that if such Board approval occurs during a Blackout Period then such last trading date shall be deemed to be the trading date immediately preceding the date the Blackout Period expires.
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Cashless Exercise
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The Company may permit an Optionee to elect to pay the Option Price by authorizing a third party to sell Shares (or a sufficient portion of such Shares) acquired upon exercise of the Option and remit to the Company a sufficient portion of the sale proceeds to pay the entire Option Price and any tax withholding resulting from such exercise.
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Insider Participation Limit
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The Option Plan limits insider participation such that the maximum number of shares (i) issuable at any time and (ii) issued within any one-year period, to insiders under the Option Plan and any other security based compensation arrangement is 10% of the total number of common shares then issued and outstanding.
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Termination and Retirement
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The Option Plan provides that, in the event a participant is (i) terminated without cause, any vested Options granted to such participant will cease to be exercisable within a period of 60 days after the termination date or such longer period as determined by the Board (and the Board has the discretion to allow unvested Options to vest on the termination date or in accordance with any vesting schedule); and (ii) terminated for cause, each Option will cease to be exercisable immediately upon the termination date.
The Option Plan is silent with respect to which of the above provisions applies in the event of Resignation.
The Option Plan provides that, in the event of Retirement, the Options shall continue to vest and be exercisable in the normal course during the term of the Option.
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Change of Control
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If the Board determines a change of control is imminent, the Company may give written notice to all Option holders advising them that, within 30 days of receiving such notice, each holder must advise the Board whether it desires to exercise its Options (including those that have not yet vested) prior to the closing of the change of control transaction. If the holder fails to notify the Board of its intent to exercise within such 30 day period, all rights of the holder will terminate so long as the proposed transaction is completed within 180 days.
If a change of control occurs and the Option Plan remains in effect and an Option holder is subject to termination within 12 months (other than "for cause" or as a result of Resignation), all Options outstanding shall immediately become exercisable.
If a change of control occurs and the Option Plan does not continue (and isn't replaced), or in the event of a wind-up, dissolution or liquidation, all Options shall immediately become exercisable.
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Amendment Procedure
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Subject to receipt of any required regulatory approval, the Board may, in its sole discretion, make the following amendments to the Option Plan:
(a) amending typographical, clerical and grammatical errors;
(b) reflecting changes to applicable securities laws;
(c) changing the termination provisions of an Option or the Option Plan which do not entail an extension beyond the original expiry date;
(d) including the addition of a cashless exercise feature, payable in cash or securities, which provides for a full deduction of the number of underlying securities from the Plan reserve; and
(e) ensuring that the Options granted under the Plan will comply with any provisions respecting income tax and other laws in force in any country or jurisdiction of which a Optionee may from time to time be resident or a citizen.
Notwithstanding the foregoing, the Company shall obtain requisite shareholder approval in respect of amendments to the Option Plan, to the extent such approvals are required by any applicable laws or regulations.
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Assignment
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Upon written notice from an Eligible Individual, any Option that might otherwise be granted to that Eligible Individual will be granted, in whole or in part, to an RRSP or a Holding Company. Otherwise, an Option is personal to the Optionee and is non-assignable.
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SCHEDULE "C"
VIRTUAL AGM USER GUIDE 2023
If you do not have a control number, you will not be able to participate, vote or ask questions at the Meeting. You may listen only as a Guest.
To obtain a control number, you must appoint yourself as a proxyholder and register with our transfer agent, TSX Trust Company, using the instructions set out in the management information circular.
Attending the Meeting:
This year we will be conducting a virtual AGM, giving you the opportunity to attend the AGM online, using your smartphone, tablet or computer. You will be able to view a live audio webcast of the meeting, ask the board questions and submit your votes in real time.
By participating online, registered shareholders, non-registered shareholders and guests will be able to listen to a live audio cast of the meeting. Registered shareholders and non-registered shareholders with a registered control number may also ask questions online.
If you have voting rights, select "Login". and enter your Control Number provided on your form of proxy or voting information form ("VIF").
Go to: https://web.lumiagm.com/268939109
Meeting ID: 2628939109
Password: hudbay2023
Guests
If you do not have voting rights, select "Guest" and fill in the form.
Registered shareholders with voting rights
If you were a registered shareholder on the record date, you may vote online by clicking on 'I have a Control Number' and entering your twelve digit TSX Control Number on your Form of Proxy and the password hudbay2023 (case sensitive).
Non-registered shareholders with voting rights
If you are a non-registered shareholder (being a shareholder who holds their shares through a broker, investment dealer, bank, trust company, custodian, nominee or other intermediary) you should carefully follow the instructions set out on your VIF and in the management information circular to appoint and register yourself as proxy.
You will not be recognized at the Meeting for the purpose of voting shares registered in the name of an intermediary unless you appoint yourself as a proxyholder and register with our transfer agent, TSX Trust Company, by emailing tsxtrustproxyvoting@tmx.com the "Request for Control Number" form, which can be found at https://tsxtrust.com/resource/en/75.
Participating at the Meeting:
When successfully authenticated, the info screen will be displayed. You can view company information, ask questions and watch the audio webcast.
Navigation
If you would like to watch the audio webcast press the broadcast icon. If viewing on a computer, the audio webcast will appear at the side automatically once the meeting has started.
Voting
Once the voting has opened, the resolutions and voting choices will be displayed.
To vote, simply select your voting direction from the options shown on screen. A confirmation message will appear to show that your vote has been received. To change your vote, simply select another direction. If you wish to cancel your vote, please press Cancel.
Questions
Any voting member attending the meeting is eligible to ask questions.
If you would like to ask a question, select the messaging icon. Messages can be submitted at any time during the Q&A session up until the Chair closes the session. Type your message within the chat box in the top portion of the messaging screen. Once you are happy with your message click the send button.
For assistance, please send an email to lumicanada@lumiglobal.com or dial 1-866-449-3664.
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2023 MANAGEMENT INFORMATION CIRCULAR | 101
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