22. Pension obligations

Hudbay maintains non-contributory and contributory defined benefit pension plans for certain of its employees.

The Company uses a December 31 measurement date for all of its plans. For Hudbay's significant plans, the most recent actuarial valuations filed for funding purposes were performed during 2025 using the latest data available as at December 31, 2024. For these plans, the next actuarial valuation required for funding purposes will be performed during 2026 using the data as of December 31, 2025.

Movements in the present value of the defined benefit obligation in the current and previous years were as follows:

The defined benefit obligation closing balance, by member group, is as follows:

Movements in the fair value of the pension plan assets in the current and previous years were as follows:

The amount included in the consolidated balance sheets arising from the entity's obligation in respect of its defined benefit plans is as follows:

Reflected in the consolidated balance sheets as follows:

 

Pension expense is as follows:

Remeasurement on the net defined benefit liability:

Pension amounts recognized include those directly related to production of inventory; such amounts are recognized initially as costs of inventory and are expensed in the consolidated statements of income within cost of sales upon sale of the inventory.

The current service cost, the interest cost and administration cost for the year are included in the employee benefits expense. The remeasurement of the net defined benefit liability is included in OCI.

The defined benefit pension plans typically expose Hudbay to actuarial risks such as: investment risk, interest rate risk, longevity risk and salary risk.

The principal assumptions used for the purposes of the actuarial valuations were as follows:

Hudbay reviews the assumptions used to measure pension costs (including the discount rate) on an annual basis. Economic and market conditions at the measurement date affect these assumptions from year to year. In determining the discount rate, Hudbay uses the cash flow approach.

Significant actuarial assumptions for the determination of the defined benefit obligation are discount rate, expected salary increase and mortality. The sensitivity analysis below has been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting periods, while holding other assumptions constant:

- If the discount rate is 50 basis points higher (lower), the defined benefit obligation would decrease by $8.1 million (increase by $9.2 million).

- If the expected salary growth increases (decreases) by 1%, the defined benefit obligation would increase by $1.1 million (decrease by $1.0 million).

- If the life expectancy increases (decreases) by one year for both men and women, the defined benefit obligation would increase by $0.8 million (decrease by $0.8 million).

The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation liability recognized in the consolidated balance sheets.

The Company's main pension plans are registered federally with the Office of the Superintendent of Financial Institution and with the Canada Revenue Agency. The registered pension plans are governed in accordance with the Pension Benefits Standards Act and the Income Tax Act. The sponsor contributes the amount needed to maintain adequate funding as dictated by the prevailing regulations.

Expected employer contribution to the pension plans for the fiscal year ending December 31, 2025 is $1.6 million.

The average duration of the pension obligation at December 31, 2025 is 17.6 years (2024 - 18.7 years). This number can be broken down as follows:

- Active members: 19.0 years (2024: 19.8 years)

- Deferred members: 19.0 years (2024: 17.8 years)

- Retired members: 8.4 years (2024: 9.4 years)

Asset-Liability-Matching studies are performed periodically to analyze the investment policies in terms of risk and-return profiles.

The pension plans do not invest directly in either securities or property/real estate of the Company.

With the exception of fixed income investments and certain equity instruments, the plan assets are actively managed by investment managers, with the goal of attaining returns that potentially outperform passively managed investments. Within appropriate limits, the actual composition of the invested funds may vary from the prescribed investment mix.

The following is a summary of the fair value classification levels for investment: