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Hudbay Continues to Deliver Record Results for Q4 and 2006

March 08, 2007

-- Revenue Exceeds $1 Billion for First Time in Company's History --

Q4 2006 Financial Highlights

  • Earnings increase 277% to $165.8 million
  • Basic earnings per share grows 154% to $1.32
  • Operating cash flow before non-cash working capital changes, climbed to $148.5 million
  • Revenue increases 81% to $313.1 million
  • Cash (less debt) $362.6 million at December 31, 2006
  • Cash cost per pound of zinc sold, net of by-product credits "negative" US$0.21
2006 Financial Highlights
  • Earnings increase 562% to $564.0 million
  • Basic earnings per share grows 412% to $5.32
  • Operating cash flow before non-cash working capital changes, climbed to $490.8 million
  • Revenue increases 73.2% to $1.129 billion
  • Cash cost per pound of zinc sold, net of by-product credits "negative" US$0.43
Corporate Highlights
  • Tender offer to purchase remaining senior secured notes – 94% successful
  • $37 million 2007 exploration program launched to drive future organic growth
  • $8.5 million Bur deposit expenditure launched for feasibility study
  • Annual 2006 production in line with guidance
  • Option on Jason mineral property exercised
  • January 1, 2007 Reserves and Resources replaces 2006 production

Winnipeg, Manitoba – March 8, 2007 - HudBay Minerals Inc. (TSX:HBM) (HudBay or the Company) today announced a 277% increase in earnings to $165.8 million or $1.32 per share on revenue of $313.1 million for the quarter ended December 31, 2006 (Q4 2006). This compares with earnings of $43.9 million on revenue of $173.1 million during the fourth quarter of 2005 (Q4 2005). Operating cash flow, before non-cash working capital changes, for Q4 2006 increased by 359% to $148.5 million compared to Q4 2005.

"The fourth quarter and 2006 have been remarkable for our Company," said Peter Jones, President & CEO. "In an environment of record high metal prices, we have delivered production results that are in-line with our guidance, and translate into financial performance that is unprecedented in our history. Our financial condition allows HudBay to consider ongoing organic growth as well as merger and acquisition opportunities."

The bracketed values that follow denote the comparative figures for the respective periods in 2005.

Q4 2006 Financial Results

Total revenue for Q4 2006 was $313.1 million ($173.1 million) from sales of 29,047 tonnes of zinc, including sales of 6,834 tonnes to our Zochem division, for production of zinc oxide (29,598 tonnes), 19,901 tonnes of cathode copper (17,644 tonnes), 22,112 ounces of gold (21,783 ounces), and 295,545 ounces of silver (358,434 ounces).

Realized metal prices in Q4 2006 averaged US$1.93/lb for zinc (US$0.51/lb); US$3.16/lb for copper (US$2.04/lb); US$603/oz. for gold (US$496/oz); US$11.59/oz. for silver (US$8.51/oz). The Canadian to US dollar exchange rate averaged $1.14 per US$1.00.

Operating costs for Q4 2006 were $163.7 million, an increase of approximately 34% compared with the same period in 2005. The increase is due primarily to an increase in concentrate purchase costs, higher employee profit sharing expenses and generally higher costs associated with production. HudBay's cash cost per pound of zinc sold, net of by-product credits was negative US$0.21 (positive US$0.23). A reconciliation of this non-GAAP measure is provided in the Company's 2006 MD&A.

Full Year 2006 Financial Results

For 2006 earnings increased by 562% to $564 million equating to basic earnings per share of $5.32 which is up 412% from a year earlier. In addition, operating cash flow, before non-cash working capital changes for the year increased 298% to $490.8 million compared to $123.2 million for the same period in 2005.

Total revenue for 2006 was $1,129 million ($652.0 million) from sales of 114,646 tonnes of zinc, (114,682 tonnes) including sales of 32,468 tonnes to our Zochem division, for production of zinc oxide, 79,395 tonnes of cathode copper (78,070 tonnes), 82,921 ounces of gold (95,511 ounces), and 1,195,142 ounces of silver (1,321,784 ounces).

Realized metal prices in 2006 averaged US$1.53/lb for zinc (US$0.65/lb); US$3.15/lb for copper (US$1.72/lb); US$603/oz. for gold (US$445/oz); US$11.13/oz. for silver (US$7.28/oz). The Canadian to US dollar exchange rate averaged $1.13 per US$1.00.

Operating costs for 2006 were $598.1 million, an increase of approximately 25% compared with the same period in 2005. The increase is due primarily to an increase in concentrate purchase costs, higher employee profit sharing expenses, and generally higher costs associated with production. HudBay's cash cost per pound of zinc sold, net of by-product credits was negative US$0.43 (positive US$0.16). A reconciliation of this non-GAAP measure is provided in the Company's 2006 MD&A.

Future Income and Mining Tax Assets

As a result of earnings over the last three years, in the fourth quarter of 2006, the Company fully recognized the future tax asset with the exception of timing differences for long-term obligations that relate primarily to closure. In 2007, as the Company utilizes the remaining tax pools, the benefit of which is shown as a future tax asset on the balance sheet, the value of this asset is expected to draw down and reflected as a non-cash income tax expense on the Company's income statement.

In the fourth quarter of 2006, the Company also recognized a mining tax asset based on three future years of its earnings. Three years are considered appropriate due to the uncertainties of future longer-term metal prices, exchange rates, the magnitude of prior losses, net operating earnings from non-Manitoba sources and the restricted rate of deductions for mining tax purposes. Factors to recognize a mining tax asset will continue to be reviewed as circumstances change. Similar to the above, the mining tax asset is expected to be drawn down during 2007 and that reduction will be reflected as a non-cash income tax expense.

For the year, the Company recorded a net benefit of taxes of $121.5 million, primarily related to the further increase in the income tax asset of $118.7 million, a recognition of a $28.1 million mining tax asset, and a benefit from the renunciation of $3.6 million flow-through shares, offset by a current mining tax expense of $28.9 million. In 2006, the mining tax pools sheltered approximately $51 million of mining tax, and the corporate income tax pools, after giving consideration to the deduction for additional mining taxes, sheltered approximately $167 million of income tax.

Corporate Highlights

Debt Repayment

In December 2006, HudBay successfully completed a tender offer for the majority of its outstanding 9 5/8% Senior Secured Notes due 2012 ("the Notes") of which approximately 94% were tendered to the offer. In February 2007, the Company defeased the remaining outstanding notes. The covenant defeasance involved the irrevocable deposit in trust by HBMS with The Bank of New York, as trustee, of approximately U.S. $3.3 million of U.S. government securities, such amount being sufficient to pay the principal of, and interest and premium on, the outstanding Notes to the redemption date of January 15, 2009. Pursuant to the terms of the indenture governing the Notes, the collateral securing the Notes will be released.

2007 Exploration Program

In December 2006, HudBay announced the launch of its 2007 exploration program with a budget of $45.2 million including advanced exploration on the Bur deposit, making it one of the largest exploration programs in Canada. The main focus of the program is the prolific Flin Flon greenstone belt that surrounds HudBay's Manitoba and Saskatchewan operations. Here the Company holds approximately 380,000 hectares and targets include electromagnetic anomalies, known mineral deposits and drilling of structural re-interpretations of previously mined orebodies. Outside the Flin Flon Greenstone Belt, exploration will aim to expand mineral reserves within the Balmat mine and to discover new ore bodies in the Balmat district where HudBay holds approximately 20,000 hectares. Exploration is also planned in the Yukon and in SW Ontario. Also included in the $45.2 million expenditure will be further exploration in the Company's four operating mines to continue to grow those orebodies.

Bur Deposit

In the fourth quarter, HudBay announced an investment of $8.5 million to advance its Bur deposit, near the Company's Snow Lake concentrator. The completion of the Bur project underground decline, 10,000 tonne ore sample and feasibility study is expected late in 2007. Based on exploration updates from March 20, 2006 and September 27, 2006, and assuming a positive feasibility study and production decision, the Bur deposit is targeted to provide incremental feed to HudBay's Snow Lake concentrator and the Flin Flon metallurgical plants for up to three years, producing an additional annual refined metal production of approximately 6,000 tonnes of copper, 20,000 tonnes of zinc, 2,000 oz. of gold and 45,000 oz. of silver.

Jason Property

In the first quarter of 2007, HudBay exercised its option to acquire 100% of the Jason lead/zinc mineral property (Jason Property) in the Yukon Territory from MacPass Resources Limited (MacPass). Under the terms of the option agreement entered into in 2006, HudBay made an initial payment of C$100,000 to MacPass with the balance of $0.9 million payable on exercise of the option to purchase during a six month due diligence period.

The Jason Property is located close to the Yukon-Northwest Territories border, approximately 400 km east of Whitehorse and is on the North Canol Road. The Jason Property is close to HudBay's 100% owned Tom Valley lead/zinc mineral property and the properties share a common airstrip. Both properties are at an advanced exploration stage and the Company anticipates completing the requirements of National Instrument 43-101 ("NI 43-101") and reporting the mineral resources of the two properties in the coming months.

Mineral Reserves and Resources

On January 31, 2007 HudBay announced its January 1, 2007 mineral reserves and mineral resources estimated in accordance with NI 43-101. Mineral reserves aggregate 22,785,000 tonnes. Separately, inferred mineral resources aggregate 3,244,000 tonnes. Both our mineral reserves and inferred mineral resources are contained in operating mines and have historically grown substantially as they are mined. This trend continued again with January 1, 2007 reserves and resources replacing the Company's 2006 production.

Select Financial and Operating Information

The following table sets out a summary of selected information for the Company as at and for the three-month periods ended December 31, 2006 and 2005, as well as for the year ended December 31, 2006, and 2005.

  1. Cash flow from operations of $423,926 excluding $66,871 of changes in non-cash working capital. Operating cash flow per common share is considered a non-GAAP measure.
  2. Non-GAAP reconciliation of cash cost per pound of zinc sold, net of by-product credits is available in the Company's 2006 MD&A.
  3. Production includes Balmat metal in concentrate and sales include Balmat payable metal in concentrate shipped (including to HBMS) for which proceeds are credited to capital as pre-commercial production revenues, and therefore not included in metals sold for financial reporting purposes.
  4. Excludes inventory changes prior to the contractual change with CMM.
  5. Cash and cash equivalents of $385,864 less current and long term portion of senior secured notes, Province of Manitoba loan and capital leases ($3,379, $10,835, and $9,011 respectively).
For further information, please see attached hereto, HudBay's 2006 financial statements together with Management's Discussion and Analysis of Operations and Financial Condition for the year ended December 31,2006. A copy of HudBay's 2006 financial statements as well as its MD&A are available under the profile of HudBay on SEDAR at www.sedar.com and on the HudBay website at www.hudbayminerals.com.

About HudBay Minerals Inc.

HudBay Minerals Inc. is an integrated mining company operating mines, concentrators and a metal production facility in northern Manitoba and Saskatchewan. HudBay also owns a zinc oxide production facility in Ontario, the White Pine copper refinery in Michigan and the Balmat zinc mine operations in New York state. HudBay is a member of the S&P/TSX Composite Index.

Forward Looking Information

This news release contains "forward-looking information", within the meaning of applicable Canadian securities legislation. Forward-looking information includes, but is not limited to, statements with respect to HudBay's future income and mining tax assets, exploration program, plans with respect to the Bur deposit and the Jason property. Generally, forward-looking information can be identified by the use of forward-looking terminology such as "plans", "seeks", "expects", "budget" or variations of such words or state that certain actions, events or results "may", "could", "will", "will be", "would be" or "is expected to be". Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of HudBay to be materially different from those expressed or implied by such forward-looking information, including risks associated with the mining industry such as economic factors, government regulation and approvals, environmental risks, success of exploration activities, future commodity prices, capital expenditures, risks related to acquisitions, changes in tax policy, requirements for additional capital, changes in project parameters as plans continue to be refined, conclusions of economic evaluations as well as those factors discussed in the section entitled "Risk Factors" in HudBay's Annual Information Form for the year ended December 31, 2005, available on www.sedar.com. Although HudBay has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information. HudBay does not undertake to update any forward-looking information, except in accordance with applicable securities laws.

To view the Management's Discussion and Analysis, please click the following link: http://www.ccnmatthews.com/docs/hbmmda7.pdf

To view the Financial Statements, please click the following link: http://www.ccnmatthews.com/docs/hbmifs.pdf

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