(a) Cash-settled share-based compensation:

Hudbay has three cash-settled share-based compensation plans, as described below.

Deferred Share Units (DSU)

At December 31, 2025, the carrying amount and the intrinsic value of the outstanding liability related to the DSU plan was $21.5 million (December 31, 2024 - $12.3 million) (note 21). The following table outlines information related to DSUs granted, expenses recognized and payments made during the year.

¹ This expense relates to the grant of DSUs, as well as mark-to-market adjustments, and is presented within selling and administrative expenses on the consolidated statements of income.

Restricted Share Units (RSU)

RSUs granted under the LTEP Plan may be settled in the form of Hudbay common shares or, at the option of the Company, the cash equivalent based on the market price of the common shares as of the vesting date. RSUs may also be granted under Hudbay's Share Unit Plan; however, the RSUs granted under the Share Unit Plan may only be settled in cash. Hudbay has historically settled all RSUs in cash. The Company has determined that the appropriate accounting treatment is to classify the RSUs as cash settled transactions.

At December 31, 2025, the carrying amount of the outstanding liability related to the RSU plan was $26.1 million (December 31, 2024 - $9.6 million) (note 21). The following table outlines information related to RSUs granted, expenses recognized and payments made in the year.             

¹ This net expense reflects recognition of RSU expense over the service period, as well as mark-to-market adjustments, and is presented mainly within cost of sales and selling and administrative expenses. Certain amounts related to the Arizona segment are capitalized.

Performance Share Units (PSU)

PSUs granted under the LTEP Plan may be settled in the form of Hudbay common shares or, at the option of the Company, the cash equivalent based on the market price of the common shares as of the vesting date. Hudbay has historically settled similar share-based compensation units in cash. The Company has determined that the appropriate accounting treatment is to classify the PSUs as cash settled transactions. The PSUs contain a performance based multiplier element which will be computed upon vesting.

At December 31, 2025, the carrying amount of the outstanding liability related to PSU plan was $26.9 million (December 31, 2024 - $5.5 million) (note 21). The following table outlines information related to PSUs granted, expenses recognized and payments made in the year.             

 

(b) Equity-settled share-based compensation

Stock Options

The Company's stock option plan was approved in June 2005 and amended in May 2008 (the "Plan"). Under the amended Plan, the Company may grant to employees, officers, directors or consultants of the Company or its affiliates options to purchase up to a maximum of 13 million common shares of Hudbay. The Company has determined that the appropriate accounting treatment is to classify the stock options as equity settled transactions.

During the year ended December 31, 2025, the Company granted 828,720 stock options (year ended December 31, 2024 - 902,874).

The following table outlines the changes in the number of stock options outstanding:

The following table presents the weighted average fair value assumptions used in the Black-Scholes valuation of these options:

 

The following table outlines stock options outstanding and exercisable:

Hudbay estimates expected life of options and expected volatility based on historical data, which may differ from actual outcomes.

Warrants

The following table outlines the changes in the number of Hudbay warrants outstanding: