Lalor Project

Lalor is a zinc, copper and gold project located near the town of Snow Lake in the province of Manitoba and is on track to be HudBay’s next big mine in northern Manitoba. Lalor is a volcanogenic massive sulfide (VMS) deposit, similar to other massive sulphide bodies in the Chisel Basin sequence and lies along the same stratigraphic horizon as the Chisel Lake and Chisel North deposits. The project is approximately three kilometers to the northwest of HudBay’s Chisel North mine.

Construction of an underground 3,200 meter production ramp from the Chisel North mine to the Lalor deposit began in December 2009. The ramp is expected to provide early production of zinc rich ore and access to the gold zones for additional underground exploration. A ventilation raise bore driven from surface provides fresh air for the ramp development.

The ramp is intended to extend to the base of the ventilation shaft, which is currently under development. It is expected to be completed in time to allow for production up the ventilation shaft in the second quarter of 2012.

In the third quarter of 2010, HudBay’s board of directors made a full commitment to the development of the Lalor project by authorizing the expenditures necessary to put the project into full production by 2015.

In addition to making a construction decision at Lalor, the company also began trade-off studies to determine whether to refurbish the existing Snow Lake concentrator or whether to construct a new concentrator at the mine site makes more economic sense. HudBay completed those studies in July 2011, which supported an enhanced production rate of 4,500 tonnes per day made possible by the construction of a new concentrator and paste backfill plant.

These improvements are expected to increase the company’s overall capital expenditure investment by $144 million for a total of $704 million, which includes approximately $120 million spent to date.

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The decision to build a new concentrator and paste backfill plant changed certain assumptions made in HudBay’s preliminary economic assessment with respect to Lalor, as disclosed when the company announced its full commitment to the project on August 4, 2010. These changes are outlined in the table below:

	Optimized Lalor	Lalor Aug. 4, 2010
Construction CAPEX	C$ 704M	C$ 560M
Annual Sustaining CAPEX	C$ 22M	C $15M
Production Rate	4,500 tpd	3,500 tpd
Mining Costs	$36 per tonne	$56 per tonne
Milling Costs	$16 per tonne	$24 per tonne
Metallurgy	95% Zn 86% Cu 66% Au 60% Ag	95% Zn 90% Cu 80% Au 75% Ag

Lalor Probable Mineral Reserves January 1, 2011

Category	Tonnes	Au (g/t)	Ag (g/t)	Cu (%)	Zn (%)
Probable	10,525,000	1.55	21.00	0.64	8.31

The mineral reserves at Lalor are estimated from the zinc-rich indicated mineral resource. The reserves are supported by an updated pre-feasibility study completed by HudBay in February 2011, which provides the basis for an economic project, without relying on gold and copper-gold mineralization in the inferred and potential conceptual estimate categories. The reserve statement supports the robust nature of the project and provides the economic justification for the development of the project. Further conversion of resource to reserve at Lalor is unlikely to occur in 2011 with efforts principally focused on construction and exploration. Construction efforts will focus on the completion of the access and exploration ramp from Chisel North, excavation of the Lalor ventilation raise and commencement of production shaft sinking.

The primary catalyst for future conversion of reserves at Lalor will be the establishment of underground exploration drill platforms from the ramp. The ramp is anticipated to reach the ore zones by the first quarter of 2012 to allow for underground diamond drilling to define the mining lines for the base metal zones. The exploration platforms are expected to be ready late 2012 and into 2013 for underground delineation drilling.

Lalor Project - Summary of Mineral Resource May 1, 2010

Zone	Category	Tonnes	Au (g/t)	Ag (g/t)	Cu (%)	Zn (%)
Base Metal	Indicated	2,552,000	1.04	27.07	0.29	5.72
Base Metal	Inferred	4,800,000	1.3	26.2	0.58	9.25
Gold Zone	Inferred	5,400,000	4.7	30.6	0.47	0.46

Lalor Project - Summary of Potential Conceptual Estimate May 1, 2010

Zone	Category	Tonnes (M)	Au (g/t)	Ag (g/t)	Cu (%)	Zn (%)
Gold Zone	Potential	5.1-6.1	4.3-5.1	23-27	0.2-0.4	0.2-0.4
Copper-Gold Zone	Potential	1.8-2.2	5.8-7.0	18-22	3.2-4.0	0.2-0.3

Exploration efforts at Lalor in 2011 will be focused on exploring the copper-gold zone down plunge, establishing geophysical platforms proximate to the deposit, and following up on existing geophysical anomalies. Three drills are currently operating in and around the project.

Reed Copper Project

Reed Lake is a high-grade near surface copper deposit that could be accessed via ramp with ore trucked to the Flin Flon concentrator. Permitting and pre-feasibility efforts will be conducted throughout 2011 with the expectation of a construction decision by year-end. HudBay owns a 70% interest in the Reed copper project and VMS Ventures Inc. (VMS Ventures) has a 70% interest in the project.

An NI 43-101 compliant resource was announced in the first quarter of 2011, which will allow HudBay to complete a prefeasibility study. Exploration at and around the Reed property will continue with efforts in the immediate future concentrated on near deposit geophysical anomalies as well as on completing required exploration on the adjacent option properties, which HudBay is earning into from its joint venture partner VMS Ventures Inc.

Category	Tonnes	Au (g/t)	Ag (g/t)	Cu (%)	Zn (%)
Indicated	2,550,000	0.64	7.86	4.52	0.91
Inferred	170,000	0.38	4.55	4.26	0.52

Click here to view a long section of the proposed mine plan at Reed

Chisel North Mine

• 213,600 tonnes produced in 2010

Snow Lake Concentrator

• Produces zinc concentrate from Chisel North mine
• 202,200 tonnes produced in 2010