RNS Number:0048E
Hochschild Mining PLC
18 September 2007
18 September 2007
Hochschild Mining plc
Interim Results for the Six Months Ended 30 June 2007
Highlights:
* Completed capacity expansions at Ares, Arcata and Selene
* Commenced production at San Jose (Argentina), and subsequently at Moris
(Mexico) and Pallancata (Peru)
* Unit operating costs contained despite continued cost pressure in the
industry
* Corporate structure expanded in preparation for continued aggressive
growth
* Attributable after tax profit up 14% to $30 million based on our three
operations in Peru
* Attributable stated reserves increased by 15% in the first half of 2007
* Interim dividend of 2.0c per share payable on 19 October 2007
* On track to produce 26 million silver equivalent attributable ounces in
2007 with production from the three new operations in the second half
of this year
Highlights for the six months ended 30 June 2007
(presented before exceptional items unless stated)
Six months ended Six months ended
($ thousands, unless stated) 30 June 2007 30 June 2006 % change
-------------------------------------------------------------------------------
Silver production (koz) 5,633 5,468 3%
Gold production (koz) 90.70 102.88 (12)%
Revenue 121,021 100,813 20%
Adjusted EBITDA(1) 56,076 56,316 0%
Attributable after tax profit(2) 30,040 26,398 14%
Earnings per share (pro forma)(3) 0.10 0.09 14%
After exceptional items:
Attributable profit after tax 32,856 24,150 36%
Earnings per share (statutory) 0.11 0.11 -
-------------------------------------------------------------------------------
(1) Adjusted EBITDA is calculated as profit from continuing operations before
exceptional items, net finance costs and income tax plus depreciation,
amortization and exploration costs other than personnel and other expenses (see
reconciliation on page 9)
(2) Attributable after tax profit is calculated as the profit for the period
attributable to the equity shareholders of the company from continuing
operations before exceptional items
(3) The pro forma earnings per share calculation assumes that the number of
Ordinary Shares in issue immediately after Listing (being 307.35 million) had
been in issue from 1 January 2006
Chairman's comments
"I am delighted to be able to report a strong set of financial results for
Hochschild Mining, backed by an excellent operational performance and delivery
on all the projects that we set out for 2007. With three new operating mines in
our portfolio, we will begin to benefit from our significant investment in
growth in the second half of this year. Our outlook for gold and silver remains
positive and we are confident in our ability to achieve our target of producing
26 million silver equivalent ounces this year and 50 million by 2011."
Chairman's statement
The first six months of 2007 have been a period of significant progress for the
Hochschild Mining Group in which we have continued to deliver on the commitments
we made at the time of the IPO, with excellence and responsibility towards our
environment, employees and the surrounding communities.
In the first half of this year, we operated with three mines, Ares, Arcata and
Selene, and successfully completed capacity expansions at all of them. We also
commenced production at the San Jose mine in Argentina at the end of the second
quarter. More recently, we began production at the Moris mine in Mexico and the
Pallancata mine in Peru. Thus we have expanded from three operating mines in one
country to six operating mines in three countries.
With these developments, we remain firmly on track to meet our production target
of 26 million silver equivalent ounces in 2007.
Our results
Revenue from our three operations in Peru, Arcata, Ares and Selene, was up 20%
in the first half of 2007 to $121 million. We continued to feel the effects of
the legacy forward sale contracts; however, these have all since expired and
going forward our corporate policy is to remain 100% hedge free.
In the first half of this year, we successfully contained unit operating costs
in an environment where most of our industry is facing substantial cost
pressures. We continue to achieve low cash costs and high margins due to our
relatively high-grade deposits and our rigorous system of cost controls at all
our operations and projects.
We have made a series of investments in our corporate structure as part of our
transition from a privately owned company operating in one country to a publicly
listed entity with operations in multiple countries. We believe this increase in
administrative costs represents a step change, which will enable use to pursue
our strategy of aggressive growth.
Whilst this growth in administrative expenses has temporarily affected our
overall profitability, with adjusted EBITDA of $56 million being unchanged from
the same period despite a 19% increase in gross profit, we remain confident in
our ability to leverage this investment to grow the business and deliver
enhanced levels of profitability.
Our half year results and our ability to deliver on our growth strategy drive
our confidence for the business going forward and support our declaration of an
interim dividend of 2.0 cents per share.
Our exploration
We increased our attributable reserves by 15% in the first half of this year.
This has allowed us to increase our average reserve life to 4.1 years up from
3.7 at December 2006. While proving up reserves remains a costly endeavour in
underground mining, we are committed to achieving a 4.0 year minimum reserve
life at each of our operations.
Our Growth
Growth based on high-margin, cash generative, precious metals production in the
Americas remains at the core of our corporate strategy. We continue to emphasize
the importance of exploration as a means to increase our reserve and resource
base at a low cost per ounce and have committed substantial resources to our
exploration and geology program.
We are active in our joint venture approach, having entered into two new joint
ventures which we believe enhance the scale and diversity of our asset
portfolio. We are committed to remaining the partner of choice in Latin America
for junior exploration companies and believe our strategic alliance with EXMIN
Resources in Mexico exemplifies the way in which we can creatively combine
efforts with junior mining companies to achieve mutually beneficial results.
In addition, we plan to grow through mid-sized, bolt on acquisitions that fit
our niche strategy. Our objective is to strengthen our interest in specific
geological regions in the Americas by making anchor investments in strategic
mining districts and executing a cluster consolidation strategy.
We remain steadfast in our belief that an acquisition in today's market must
meet these objectives and add fundamental shareholder value in the long-term. We
have worked diligently in evaluating acquisition targets and have considered
several, regrettably, none of which meet our criteria for long-term value
creation. We continue to actively seek out and evaluate a number of other
acquisition opportunities and believe that in a short period of time one will
come into fruition.
Our outlook
Our outlook for gold and silver remains positive on the back of sustained global
demand for commodities, continued U.S. dollar weakness, growing financial
instability and a rise in international political tensions. In addition, we
believe that increasing investment demand coupled with positive demand-supply
fundamentals support our favouring these metals.
We continue to enjoy the benefits of our listing on the London Stock Exchange
with increasing visibility among the investor community and within the mining
industry. Since Listing, seven leading investment houses have initiated coverage
of Hochschild Mining.
We are delivering on our IPO commitments while building a strong project
pipeline of world class assets within the region. Our existing assets together
with the additional production from our three new mines during the second half
of this year give us confidence in our 2007 production target of 26 million
silver equivalent attributable ounces and provide a strong platform for future
growth.
Eduardo Hochschild
Executive Chairman
Enquiries:
Hochschild Mining plc
Wray Barber +44 (0)20 7152 6014
Head of Investor Relations
Finsbury
Robin Walker +44 (0)20 7251 3801
Public Relations
About Hochschild Mining plc:
Hochschild Mining plc (HOC.L for Reuters / HOC LN for Bloomberg) is a publicly
held company listed on the London Stock Exchange. Hochschild is a leading
precious metals company with a primary focus on the exploration, mining,
processing and sale of silver and gold. Hochschild currently operates five
underground epithermal vein mines, four located in southern Peru and one in
southern Argentina and one open pit mine in northern Mexico. Hochschild also has
one early stage development project in Mexico and fifteen long-term prospects
throughout Latin America. Hochschild has over forty years experience in the
mining of precious metal epithermal vein deposits.
For further information please visit www.hochschildmining.com
Operational review:
Production:
Ounces produced:
--------------------------------------------------------------------------------
Thousand ounces Six months ended Six months ended % change
30 June 2007 30 June 2006
--------------------------------------------------------------------------------
Silver
Arcata 2,631 2,094 26%
Ares 1,179 1,406 (16)%
Selene 1,822 1,967 (7)%
--------------------------------------------------------------------------------
Total silver 5,633 5,468 3%
--------------------------------------------------------------------------------
Gold
Arcata 6.75 4.96 36%
Ares 71.60 83.35 (14)%
Selene 12.35 14.57 (15)%
--------------------------------------------------------------------------------
Total gold 90.70 102.88 (12)%
--------------------------------------------------------------------------------
Total production for the first half of 2007 was 5.6 million ounces of silver and
91 thousand ounces of gold or 11 million silver equivalent ounces. This
production resulted from our three operating mines in Peru, Arcata, Ares and
Selene, and does not include our three new mines, San Jose, Moris and
Pallancata, all of which have already commenced production.
Expansions
We successfully completed the plant expansions at Ares, Arcata and Selene. The
Ares expansion, which took the plant from 280 ktpa to 325 ktpa, was finished in
the early part of this year. At Arcata, we expanded the plant from 350 ktpa to
420 ktpa in the second quarter and it is currently operating at full capacity.
At Selene, we recently completed the plant expansion taking capacity from 350
ktpa to 700 ktpa to accommodate the ore from our Pallancata project.
Silver production
Silver production increased 3% in the first half of 2007 compared to the same
period last year. This increase resulted from a 26% increase in silver
production at Arcata following the successful capacity expansion and a slight
increase in the head grade. Ares and Selene saw average head grades decline by
22% and 11%, respectively, resulting in lower overall silver production despite
the capacity expansion at both.
Gold production
Gold production decreased 12% in the first half of 2007 compared to the same
period in 2006. This decrease was the result of a decline in gold production
from both Ares and Selene attributable to the anticipated decline in head
grades, which was offset by a significant increase in gold production from
Arcata resulting from the increased capacity and a 2% increase in the head grade
of gold.
Costs:
Our relatively high-grade deposits, our corporate focus on operational
efficiency and our ability to mechanise our older operations have enabled us to
offset some of the global cost pressures faced by the industry. Going forward we
will strive to maintain a low cost profile although we expect a temporary
increase in units costs, while we ramp up our new operations and move into
additional countries.
Cash costs ($ per ounce)
--------------------------------------------------------------------------------
Six months ended Six months ended % change
30 June 2007 30 June 2006
--------------------------------------------------------------------------------
Co-product cash costs
Silver ($/oz) 3.92 3.27 20%
Gold ($/oz) 159 149 7%
--------------------------------------------------------------------------------
Our cash costs on a co-product basis, which are calculated by pro-rating the
total cash costs between the commodities based on sales revenue, increased 20%
and 7% for silver and gold, respectively. This increase was the result of lower
grades mined at both Ares and Selene and relatively flat consistent grades mined
at Arcata. The cash cost for silver was up more than that for gold as a result
of a greater percentage of revenue coming from silver sales.
Unit costs ($ per tonne)
In the first six months of 2007, our unit cost from our three mines, Arcata,
Ares and Selene, was $61.2 per tonne, which was up marginally compared to the
same period in 2006 (H1 2006: $58.5/tonne).
The unit cost at Arcata decreased 4% primarily due to lower mine costs and to a
lesser degree by lower plant and administration costs. The mine costs decreased
as a result of additional mechanisation of the operation, which enables us to
have fewer stoppes. Plant and administration unit costs decreased because of the
plant expansion.
The unit cost at Ares increased 7% due to increased plant costs associated with
the processing of dore. The cost of processing dore increased mainly because of
higher cost for reagents and greater cyanide consumption.
At Selene the unit costs increased 10% due to higher plant costs associated with
converting the Selene concentrate into dore at the Ares facility. Selling our
product as dore, as opposed to concentrate, generates benefits from both a cash
management standpoint and because of lower commercial deductions and selling
costs associated with selling dore. These benefits are already being appreciated
by the Group.
Exploration:
In the first six months of 2007 we increased our total exploration expenditure
118% to $10.8 million (H1 2006: $5.0 million). Total exploration expenditure
includes the costs in exploration expense as well as the exploration costs which
are capitalized on the balance sheet.
Exploration underpins our growth strategy and our significant budget confirms
our commitment to this area. Our exploration philosophy continues to focus on
maintaining a highly motivated, technically proficient, and well funded
exploration team while continuing to position ourselves as the partner of choice
for many junior mining companies throughout the region. Our strategic alliance
with EXMIN further exemplifies our commitment to expanding our exploration
efforts in the region. We believe this alliance favourably positions us in
Mexico and allows us to leverage EXMIN's expertise in the Sierra Madre gold belt
of north western Mexico.
Total exploration expenditure
--------------------------------------------------------------------------------
Six months ended Six months ended % change
($ thousands) 30 June 2007 30 June 2006
--------------------------------------------------------------------------------
Mine site exploration
Arcata 1,627 1,100 48%
Ares 223 1,118 (80)%
Selene 943 77 1125%
San Jose 745 - -
--------------------------------------------------------------------------------
Total mine site exploration 3,538 2,295 54%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Six months ended Six months ended % change
($ thousands) 30 June 2007 30 June 2006
--------------------------------------------------------------------------------
Prospective exploration
Peru 752 566 33%
Argentina 1,607 833 93%
Mexico 4,221 930 354%
Chile 638 341 87%
USA 25 - -
Other 18 - -
--------------------------------------------------------------------------------
Total prospective exploration 7,261 2,670 172%
--------------------------------------------------------------------------------
Total exploration expenditure 10,799 4,965 118%
--------------------------------------------------------------------------------
Mine site exploration:
In the first half of 2007, total mine site exploration expenditure amounted to
$3.5 million, which was a 54% increase over the same period of 2006 (H1 2006:
$2.3 million).
At Arcata, we successfully increased the reserves and resources by 56% and 17%,
respectively through continued exploration around the Mariana Vein system. This
vein system, which is located at the northern margin of the mineralized area,
includes the majority of reserves and supports the greater part of production.
The current reserve life at Arcata is 4.3 years based on production of 400 ktpa.
At Ares, we were able to replace the tonnes processed although at a slightly
lower grade. For this reason, the number of reserve and resource silver
equivalent ounces decreased by 13% and 12%, respectively in the first half of
2007. We believe we will continue to replace tonnes processed at Ares albeit at
varying grades for the foreseeable future. The current reserve life at Ares is
2.8 years based on 325 ktpa.
At Selene, our exploration expenditure was used to develop a 500 metre cross-cut
to the new Tumiri vein. The current reserve life at Selene is temporarily
understated at 2.0 years because it is based on current throughput of 440 ktpa,
which is the capacity designed to process the ore from both Selene and
Pallancata. Once Pallancata is producing at 350 ktpa, it will occupy additional
capacity at the Selene plant and, as a result, the reserve life will increase at
Selene.
At San Jose, we increased the reserves and resources by 29% and 16%,
respectively, which equates to a 9.5 year reserve life based on 286 ktpa. The
current exploration program is focused on expanding resources in the Frea, Kospi
and Odin veins, as well as testing mineralization of other targets. This level
of reserves and resources at San Jose provides a sufficient platform, which will
enable us to double capacity at the plant in the latter part of 2008.
Prospective exploration:
We increased the total expenditure on prospective exploration by 172% in the
first half of 2007 to $7.3 million (H1 2006: $2.7 million). Prospective
exploration is exploration on non-operational properties. This increase, we
believe, demonstrates our commitment to organic growth, which remains at the
core of our strategy.
At Pallancata, we modestly increased attributable reserves and resources 1% and
6%, respectively. The significant increase of reserves and resources at
Pallancata during the second half of 2006 (up 111% and 36% respectively) allowed
us to concentrate on other prospects and generative projects within Peru during
the first half of 2007.
At Moris, we have confirmed and validated the data obtained from the vendor when
we purchased the property last year. In addition, we have drilled 15 holes to
date in the old leach pads 8 of which have revealed positive results of
approximately 1.5 g/t gold. Metallurgical testing of the old leach pad material
is in process. The current reserve life at Moris based on a capacity of 1,060
ktpa is 2.8 years.
At San Felipe (70%), a joint venture with Grupo Serrana, we have undertaken an
accelerated exploration campaign in order to generate sufficient resources to
take the project into feasibility stage later this year.
Also in Mexico, we continue to explore the El Gachi property package (70%),
which is part of the San Felipe joint venture contract. El Gachi, which is only
60 kilometres from San Felipe, was explored by Anaconda and Penoles in the 1960s
and 1970s and unverified historic resources indicate resources of approximately
100 thousand tonnes at 400 to 500 grams silver and 15% to 20% lead and zinc.
During the first half of 2007, we advanced surface exploration in preparation
for drilling with initial samples returning expected results.
In Argentina, we signed a joint venture agreement with Mirasol Resources Ltd
which provides us the option to earn a 51% interest in the Santa Rita and
Claudia properties in the southern Patagonia. We have received all assays for
the Santa Rita project following our initial sampling. Following the receipt of
the drilling results, on 30 August 2007, we gave our formal notice of termination
and withdrawal from the joint venture agreement in respect of Santa Rita.
The Claudia property is adjacent to the Cerro Vanguardia mine and is hosted in
a similar regional setting (see our 2006 Annual Report for more information).
Geophysical data processing at Claudia is underway and we have several drill
ready targets which will be tested as soon as weather permits.
Also in Argentina, we signed a letter of intent with Cardero Resources and
subsequently exercised the option to earn up to a 70% interest in the Los
Manantiales gold property in Argentina. Mineralization at Los Manantiales
consists of low sulphidation epithermal vein systems hosted by Jurassic
andesitic volcanics.
We are proceeding with mapping and permitting in our Los Manantiales project
where we have assembled an 119,873 hectare land package around the past
producing Angela mine. We expect to drill test this exciting project early next
year.
Financial review:
Key financial performance indicators:
(presented before exceptional items unless stated)
--------------------------------------------------------------------------------
($ thousands, unless stated) Six months ended Six months ended % change
30 June 2007 30 June 2006
--------------------------------------------------------------------------------
Revenue 121,021 100,813 20%
Adjusted EBITDA(1) 56,076 56,316 0%
Attributable after tax profit(2) 30,040 26,398 14%
Earnings per share (pro forma)(3) 0.10 0.09 14%
Net cash generated from operating 21,421 34,358 (38)%
activities
Net debt / (net cash) (300,472) (405,541)
Working capital 24,864 (24,775)
After exceptional items:
Attributable profit after tax 32,856 24,150 36%
Earnings per share (statutory) 0.11 0.11 -
--------------------------------------------------------------------------------
(1) Adjusted EBITDA is calculated as profit from continuing operations before
exceptional items, net finance costs and income tax plus depreciation,
amortization and exploration costs other than personnel and other expenses (see
reconciliation on page 9)
(2) Attributable after tax profit is calculated as the profit for the period
attributable to the equity shareholders of the company from continuing
operations before exceptional items
(3) The pro forma earnings per share calculation assumes that the number of
Ordinary Shares in issue immediately after Listing (being 307.35 million) had
been in issue from 1 January 2006
Summary of financial performance
Financial information is presented in accordance with International Financial
Reporting Standards (IFRS) as adopted for use in the European Union. The
reporting currency of Hochschild Mining plc is US dollars. In our discussion of
financial performance we remove the effect of exceptional items, unless stated,
and in our income statement we show the results both pre and post such
exceptional items. Exceptional items are those items, which due to their nature
or the expected infrequency of the events giving rise to them, need to be
disclosed separately on the face of the income statement to enable a better
understanding of the financial performance of the Group and facilitate
comparison with prior years.
For the six months ended 30 June 2007, revenue, which was attributable to the
same three operations as in 2006, amounted to $121.0 million, a 20% increase
over the same period in 2006 (H1 2006: $100.8 million).
Revenue
--------------------------------------------------------------------------------
($ thousands) Six months ended Six months ended % change
30 June 2007 30 June 2006
--------------------------------------------------------------------------------
Silver revenue
Arcata 31,557 16,059 97%
Ares 16,550 11,887 39%
Selene 23,726 21,587 10%
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Total silver revenue 71,833 49,533 45%
--------------------------------------------------------------------------------
Gold revenue
Arcata 3,974 2,012 98%
Ares 37,695 40,996 (8)%
Selene 6,939 8,109 (14)%
Sipan - 4 -
--------------------------------------------------------------------------------
Total gold revenue 48,608 51,121 (5)%
--------------------------------------------------------------------------------
Other(1) 580 159 265%
--------------------------------------------------------------------------------
Total revenue 121,021 100,813 20%
--------------------------------------------------------------------------------
(1) Other revenue includes revenue from a base metal component in the concentrate
sold from the Arcata mine and services
Ounces sold
--------------------------------------------------------------------------------
Thousand ounces Six months ended Six months ended % change
30 June 2007 30 June 2006
--------------------------------------------------------------------------------
Silver ounces sold
Arcata 2,487 1,395 78%
Ares 1,317 1,473 (11)%
Selene 1,897 1,675 13%
--------------------------------------------------------------------------------
Total silver ounces sold 5,701 4,543 25%
--------------------------------------------------------------------------------
Gold ounces sold
Arcata 6.19 3.19 94%
Ares 77.02 88.23 (13)%
Selene 11.66 11.95 (2)%
--------------------------------------------------------------------------------
Total gold ounces sold 94.87 103.36 (8)%
--------------------------------------------------------------------------------
We had legacy forward sale contracts in place during the first half of 2007;
however, these have all since expired and going forward our corporate policy is
to remain one hundred percent hedge free.
Forward sale fixed price contracts
--------------------------------------------------------------------------------
Six months to Six months to
30 June 2007 30 June 2006
--------------------------------------------------------------------------------
Silver ounces delivered into fixed price contracts (koz) 772 1,279
Gold ounces delivered into fixed price contracts (koz) 56.7 48.8
Silver average sale price ($/oz) 12.6 10.9
Gold average sale price ($/oz) 512 495
Silver average spot price ($/oz) 13.3 11.0
Gold average spot price ($/oz) 659 591
--------------------------------------------------------------------------------
Our three operations, Arcata, Ares and Selene, were the only operations which
contributed to gross profit in the first half of 2006 and 2007. Gross profit
increased 19% to $79.0 million in the first half of 2007 (H1 2006: $66.2
million) driven by higher revenue and stable operating costs at these
operations.
In the first six months of 2007, our weighted average cost per tonne from our
three mines was $61.2 per tonne, which was up marginally compared to the same
period in 2006 (H1 2006: $58.5/tonne).
Administrative expenses totalled $30.1 million, up 91%, in the first six months
of 2007 compared to the same period of 2006 (H1 2006: $15.8 million). During the
first half of 2007, we incurred incremental expenses associated with the London
office which we did not have during the first half of last year and since the
Listing, we have made a series of investments related to hiring additional
personnel at all levels to build a strong platform from which to execute our
corporate strategy. We believe this increase represents a step change in
overhead expenses and is a reflection of the incremental costs associated with
being a public company with an aggressive growth strategy.
Profit from continuing operations before exceptional items, net finance costs
and income tax decreased 11% during the first six months of 2007 to $38.0
million (H1 2006: $42.7 million) impacted by the increase in administrative
expenses mentioned above.
In the first six months of 2007, adjusted EBITDA, which is calculated as profit
from continuing operations before exceptional items, net finance costs and
income tax plus depreciation, amortization and exploration costs other than
personnel and other expenses, was similar to last year at $56.1 million (H1
2006: $56.3 million).
Adjusted EBITDA reconciliation
--------------------------------------------------------------------------------
$ thousands Six months ended
Six months ended 30 June 2006
30 June 2007 (restated) % change
--------------------------------------------------------------------------------
Profit from continuing
operations before
exceptional
items, net finance costs
and income tax 38,133 42,712 (11)%
Operating margin 32% 42%
Plus:
Depreciation in Cost of
Goods Sold 8,983 7,462 20%
Depreciation in
Administrative Expenses 233 1,190 (80)%
Exploration Expense 11,005 6,857 60%
Minus:
Personnel and other in
Exploration Expense (2,278) (1,905) 20%
--------------------------------------------------------------------------------
Adjusted EBITDA 56,076 56,316 -
--------------------------------------------------------------------------------
Adjusted EBITDA margin 46% 56%
--------------------------------------------------------------------------------
Finance income increased significantly in the first half of 2007 to $10.4
million (H1 2006: $1.9 million) principally due to additional interest earned on
the net proceeds from the Listing. We currently earn an average return of 5.2%
on cash and cash equivalents.
The weighted average statutory income tax rate was 30.2% and 29.4% for the first
half of 2007 and 2006, respectively. This change is due to a change in the
weighting of profit and loss before tax in the various jurisdictions in which
the Group operates.
The effective tax rate for the first half of 2007 was 38% (H1 2006: 37%). The
effective tax rate was higher than the weighted average statutory tax rate as a
result of certain expenses which are not deductible for tax purposes and
deferred tax assets generated in the period but not recognized.
The significant exceptional item in the first half of 2007 of $4.2 million
(before a related tax charge of $1.2 million) corresponds to the change in fair
value of 2,475,355 warrants in Fortuna Silver Mine Inc. In the prior period the
exceptional items reduced reported profits by $2.2 million.
Attributable after tax profit from continuing operations of $32.9 million
increased by 36% in the first half of 2007 compared to the same period of 2006
(H1 2006: $24.2 million). This increase is the result of a combination of an
increase in gross profit offset by higher administrative costs, coupled with an
increase in finance income earned on the proceeds raised from the IPO, and the
gain on the Fortuna Silver Mine warrants.
For the purpose of the calculation of pro forma earnings per share for the
period ended 30 June 2006 it has been assumed that the number of Ordinary Shares
in issue immediately after the listing had been in issue from 1 January 2006.
The Directors believe that this pro forma EPS provides a more meaningful
comparison of the Group's ongoing business than using the statutory EPS which
would only reflect shares issued at the date of the Listing.
Dividends
The Directors recommend an interim dividend of US$0.02 per share amounting to
$7.3 million which will be paid on 19 October 2007. The final 2006 dividend of
US$0.0074 per share was paid on 6 July 2007.
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Dividend dates 2007
------------------------------------------------------------------------------
Ex-dividend date 26 September
Deadline for return of currency election forms 5 October
Record date 28 September
Payment date 19 October
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As stated at the time of the Listing, the Company's dividend policy takes into
account the profitability of the business and underlying growth in earnings of
the Company, as well as its capital requirements and cash flows, while
maintaining an appropriate level of dividend cover. Interim and final dividends
will be paid in the approximate proportions of one-third and two-thirds of the
total annual dividend, respectively.
Dividends will be declared in US dollars. Unless a shareholder elects to receive
dividends in US dollars, they will be paid in pounds sterling with the US dollar
dividend being converted into pound sterling at exchange rates prevailing at the
time of payment.
Cash flow & balance sheet review
Working capital
$ thousands As at 30 June 2007 As at 31 December 2006
------------------------------------------------------------------------------
Current assets
Inventories 20,148 16,533
Trade and other receivables 67,303 49,726
Current liabilities
Trade and other payables (46,487) (64,140)
Pre-shipment loans (16,100) (26,894)
------------------------------------------------------------------------------
Working capital 24,864 (24,775)
------------------------------------------------------------------------------
Our working capital position went from negative $25 million at 31 December 2006
to positive $25 million at 30 June 2007 primarily because of a decrease in cash
from trade and other receivables and from trade and other payables.
Trade and other receivables increased due to a higher tax credit at the San Jose
operation and an increase in the current portion of the project finance loan to
Minera Andes, our partner at San Jose. The decrease in trade and other payables
occurred as a result of repayment of payables used to finance the San Jose
project in Argentina. In addition, there was a decrease in pre-shipment loans,
which we use as a source of working capital. This decrease arose as we did not
require incremental working capital resource.
Net debt
------------------------------------------------------------------------------
$ thousands As at 30 June 2007 As at 31 December 2006
------------------------------------------------------------------------------
Cash and cash equivalents 355,760 435,543
Long term borrowings 54,981 27,114
Short term borrowings less 307 2,888
pre-shipment loans
------------------------------------------------------------------------------
Net debt / (net cash) (300,472) (405,541)
------------------------------------------------------------------------------
We continue to maintain a net cash position, although we believe our ability to
raise debt at the corporate level remains strong particularly following our
successful listing on the London Stock Exchange.
The San Jose project is financed by loans made by the joint venture partners
based on their pro-rata ownership. The loan made to Minera Santa Cruz by Minera
Andes, our joint venture partner, is not eliminated upon consolidation, thereby
increasing our long term borrowings.
Cash flow
------------------------------------------------------------------------------
$ thousands Six months ended Six months ended
30 June 2007 30 June 2006
------------------------------------------------------------------------------
Net cash generated from operating activities 21,421 34,358
Net cash used in investing activities 88,125 13,441
Cash flows used in financing activities 13,055 17,313
------------------------------------------------------------------------------
Net cash generated from operating activities decreased during the first half of
2007 primarily as a result of an increase in trade and other receivables. During
the same period, net cash used in investing activities increased due to
incremental capital expenditure and a loan to Minera Andes. Cash flows used in
financing activities decreased in the first half of 2007 because of an increase
in proceeds from borrowings although offset by in increase in dividends paid and
transaction costs associated with the IPO.
Interim Consolidated Income Statement
(Unaudited) (Unaudited - Restated)1 (Restated)(1)
6 months to 30 June 6 months to 30 June Year ended 31 December
2007 2006 2006
----------------------------------------------------------------------------------------------------------------------
Notes Before Excep- Total Before Excep- Total Before Excep- Total
excep- tional excep- tional excep- tional
tional items tional items tional items
items items items
----------------------------------------------------------------------------------------------------------------------
(in thousand of US dollars) (in thousand of US dollars) (in thousand of US dollars)
Continuing
operations
Revenue 4 121,021 - 121,021 100,813 - 100,813 211,246 - 211,246
Cost of sales (42,042) - (42,042) (34,571) - (34,571) (77,129) - (77,129)
----------------------------------------------------------------------------------------------------------------------
Gross profit 78,979 - 78,97 66,242 - 66,242 134,117 - 134,117
Administrative (30,127) - (30,127) (15,814) - (15,814) (38,738) - (38,738)
expenses
Exploration (11,005) - (11,005) (6,857) - (6,857) (17,621) - (17,621)
expenses
Selling (1,107) - (1,107) (1,366) - (1,366) (3,187) - (3,187)
expenses
Other income 5 2,322 - 2,322 1,796 172 1,968 5,022 346 5,368
Other expenses 5 (929) (174) (1,103) (1,289) (3,347) (4,636) (3,870) (6,495) (10,365)
----------------------------------------------------------------------------------------------------------------------
Profit from continuing 38,133 (174) 37,959 42,712 (3,175) 39,537 75,723 (6,149) 69,574
operations before net
finance costs and
income tax
Finance income 6 10,398 4,198 14,596 1,864 979 2,843 5,988 918 6,906
Finance costs 6 (3,663) - (3,663) (5,121) - (5,121) (12,037) - (12,037)
Foreign (729) - (729) (27) - (27) 353 - 353
exchange gain/(loss)
----------------------------------------------------------------------------------------------------------------------
Profit from continuing 44,139 4,024 48,163 39,428 (2,196) 37,232 70,027 (5,231) 64,796
operations before
income tax
Income tax 7 (16,736) (1,208) (17,944) (14,660) (52) (14,712) (29,440) 547 (28,893)
expense
----------------------------------------------------------------------------------------------------------------------
Profit for the 27,403 2,816 30,219 24,768 (2,248) 22,520 40,587 (4,684) 35,903
period
----------------------------------------------------------------------------------------------------------------------
Attributable to:
Equity shareholders 30,040 2,816 32,856 26,398 (2,248) 24,150 46,396 (4,684) 41,712
of the Company
Minority (2,637) - (2,637) (1,630) - (1,630) (5,809) - (5,809)
shareholders
----------------------------------------------------------------------------------------------------------------------
27,403 2,816 30,219 24,768 (2,248) 22,520 40,587 (4,684) 35,903
----------------------------------------------------------------------------------------------------------------------
Basic and 8 0.10 0.01 0.11 0.12 (0.01) 0.11 0.19 (0.02) 0.17
diluted earnings
per ordinary
share from
continuing
operations
(expressed in
U.S. dollars per
share)
----------------------------------------------------------------------------------------------------------------------
(1) For restatement of comparative figures, refer to note 2(c)
Interim Consolidated Balance Sheet
Notes (Unaudited) (Restated)(1)
As of 30 As of 31
June December
2007 2006
--------------------------------------------------------------------------------
(in thousand of US dollars)
ASSETS
Non-current assets
Property, plant and equipment 9 207,580 141,387
Goodwill 2,091 2,091
Available-for-sale financial assets 9,785 6,285
Trade and other receivables 30,486 17,427
Deferred income tax assets 12,069 7,920
--------------------------------------------------------------------------------
262,011 175,110
--------------------------------------------------------------------------------
Current assets
Inventories 20,148 16,533
Trade and other receivables 67,303 49,726
Derivative financial instruments 6,858 6,022
Cash and cash equivalents 10 355,760 435,543
--------------------------------------------------------------------------------
450,069 507,824
--------------------------------------------------------------------------------
Assets classified as held for sale - 345
--------------------------------------------------------------------------------
Total assets 712,080 683,279
--------------------------------------------------------------------------------
EQUITY AND LIABILITIES
Capital and reserves attributable to
shareholders of the Parent
Equity share capital (including 146,466 146,466
additional capital)
Share premium 395,928 396,156
Other reserves (202,548) (205,039)
Retained earnings 185,433 152,577
--------------------------------------------------------------------------------
525,279 490,160
--------------------------------------------------------------------------------
Minority interest 15,865 14,489
--------------------------------------------------------------------------------
Total equity 541,144 504,649
--------------------------------------------------------------------------------
Non-current liabilities
Trade and other payables 924 1,064
Borrowings 54,981 27,114
Provisions 29,738 28,690
Deferred income tax liabilities 6,394 4,026
--------------------------------------------------------------------------------
92,037 60,894
--------------------------------------------------------------------------------
Current liabilities
Trade and other payables 46,487 64,140
Derivative financial instruments 136 -
Borrowings 16,407 29,782
Provisions 7,005 11,385
Income tax payable 8,864 12,429
--------------------------------------------------------------------------------
78,899 117,736
--------------------------------------------------------------------------------
Total liabilities 170,936 178,630
--------------------------------------------------------------------------------
Total equity and liabilities 712,080 683,279
--------------------------------------------------------------------------------
(1) For restatement of comparative figures, refer to note 2(c)
Interim Consolidated Cash Flow Statement
Notes (Unaudited) (Unaudited - Restated) (Restated)
6 months to 6 months to Year ended
30 June 30 June 31 December
2007 2006 2006
--------------------------------------------------------------------------------
(in thousands of US dollars)
Cash flows from operating
activities
Cash generated from 12 26,347 51,195 128,071
operations
Interest received 9,982 4,067 2,576
Interest paid (974) (3,210) (9,163)
Payments of mine (1,071) (2,518) (5,426)
closure costs
Tax paid (12,863) (15,176) (26,010)
--------------------------------------------------------------------------------
Net cash generated 21,421 34,358 90,048
from operating activities
--------------------------------------------------------------------------------
Cash flows from investing
activities
Purchase of (66,862) (17,077) (65,704)
property, plant and
equipment
Purchase of (486) (1,300) (2,770)
available-for-sale
financial assets
Purchase of shares - (14) (240)
of Minera Colorada
S.A.C
Purchase of other - (5,867) (5,867)
financial assets at
fair value through
profit or loss
Purchase of assets - - (4,983)
and liabilities of
Mina Moris
Loan to Exmin S.A. (746) - (754)
de C.V.
Loan to Minera (20,076) - (9,800)
Andes Inc
Proceeds from other - 6,081 5,591
financial assets at
fair value through
profit or loss
Proceeds from sale - - 6,550
of
available-for-sale
financial assets
Proceeds from sale - - 3,801
of Mauricio
Hochschild & Cia.
Ltda. S.A.C.
(subsidiary)
Proceeds from sale - 4,500 4,500
of Caylloma mining
unit
Proceeds from sale 18 236 991
of property, plant
and equipment and
assets classified
as held for sale
Proceeds from sale - - 3,975
of supplies
Dividends received - - 147
--------------------------------------------------------------------------------
Net cash used in (88,152) (13,441) (64,563)
investing
activities
--------------------------------------------------------------------------------
Cash flows from
financing
activities
Proceeds of 86,156 61,997 77,014
borrowings
Repayment of (73,590) (77,266) (95,977)
borrowings
Dividends paid (16,281) (1,353) (58,375)
Capital - - 93
contribution
Proceeds from issue - - 515,245
of ordinary share
under Global offer
Transaction costs (11,722) - (33,989)
associated with
issue of shares
Purchase of shares - (20) (2)
from minority
shareholders
Capital 2,382 - 4,215
contribution from
minority
shareholders
Repayment of - (671) (671)
capital to minority
shareholders
--------------------------------------------------------------------------------
Cash flows (used (13,055) (17,313) 407,553
in) generated from
financing
activities
--------------------------------------------------------------------------------
Net (decrease)/ (79,786) 3,604 433,038
increase in cash
and cash
equivalents during
the period
Exchange difference 3 (28) 38
Cash and cash 435,543 2,467 2,467
equivalents at
beginning of period
--------------------------------------------------------------------------------
Cash and cash 10 355,760 6,043 435,543
equivalents at end
of period
--------------------------------------------------------------------------------
Interim Consolidated Statement of Changes in Equity
Other Reserves
--------------------
Equity Unrealised
share gain/(loss)on Capital and
capital available-for- reserves
(including sale Cumulative Total attributable to
additional Share financial translation Merger other Retained shareholders Minority Total
Notes capital) premium assets adjustment reserve reserves earnings of the Parent interest Equity
----------------------------------------------------------------------------------------------------------------------
(in thousands of US dollars)
Balance at 31 219,233 - 11,265 726 (210,046) (198,055) 28,198 49,376 (2,533) 46,843
December 2005
as reported
Adjustments due to
change in
accounting
policy 2 - - - 73 - 73 9,343 9,416 5,440 14,856
----------------------------------------------------------------------------------------------------------------------
Balance at 31
December 2005,
restated 219,233 - 11,265 799 (210,046) (197,982) 37,541 58,792 2,907 61,699
December 2005,
restated
Fair value gains
on available-
for-sale
financial
assets - - 13,351 - - 13,351 - 13,351 20 13,371
Deferred income
tax on
available-
for-sale
financial
assets - - (398) - - (398) - (398) - (398)
Fair value changes
transferred to
income statement
on disposal - - (22,844) - - (22,844) - (22,844) -(22,844)
Translation
adjustment
for the year - - - 2,834 - 2,834 - 2,834 142 2,976
----------------------------------------------------------------------------------------------------------------------
Net income
recognised
directly in equity - - (9,891) 2,834 - (7,057) - (7,057) 162 (6,895)
Profit for the
year - - - - - - 41,712 41,712 (5,809) 35,903
----------------------------------------------------------------------------------------------------------------------
Total recognised
income for 2006 - - (9,891) 2,834 - (7,057) 41,712 34,655 (5,647) 29,008
Shares issued 93 - - - - - - 93 - 93
Shares issued
under Global
offer 73,606 441,639 - - - - - 515,245 - 515,245
Transaction costs
associated with
issue of shares - (45,483) - - - - - (45,483) -(45,483)
Capital
reduction (146,466) - - - - - 146,466 - - -
Dividends 11 - - - - - - (73,142) (73,142) (298)(73,440)
Capital
contribution
from minority
shareholders - - - - - - - - 18,200 18,200
Purchase of shares
from minority
shareholders - - - - - - - - (2) (2)
Repayment of
capital to
minority
shareholders - - - - - - - - (671) (671)
----------------------------------------------------------------------------------------------------------------------
Balance at
31 December
2006,
restated 146,466 396,156 1,374 3,633 (210,046) (205,039) 152,577 490,160 14,489 504,649
----------------------------------------------------------------------------------------------------------------------
Fair value gains
on
available-
for-sale
financial
assets - - 2,935 - - 2,935 - 2,935 79 3,014
Deferred income
tax on
available-
for-sale
financial
assets - - (1,032) - - (1,032) - (1,032) - (1,032)
Translation
adjustment for
the period - - - 588 - 588 - 588 359 947
----------------------------------------------------------------------------------------------------------------------
Net income
recognised
directly in
equity - - 1,903 588 - 2,491 - 2,491 438 2,929
Profit for
the period - - - - - - 32,856 32,856 (2,637) 30,219
----------------------------------------------------------------------------------------------------------------------
Total recognised
income for June
2007 - - 1,903 588 - 2,491 32,856 35,347 (2,199) 33,148
Transaction costs
associated with
issue of shares - (228) - - - - - (228) - (228)
Capital
contribution from
minority
shareholders - - - - - - - - 3,575 3,575
----------------------------------------------------------------------------------------------------------------------
Balance at
30 June 2007 146,466 395,928 3,277 4,221 (210,046) (202,548) 185,433 525,279 15,865 541,144
----------------------------------------------------------------------------------------------------------------------
Balance at
31 December
2005 as
reported 219,233 - 11,265 726 (210,046) (198,055) 28,198 49,376 (2,533) 46,843
Adjustments due
to change
in accounting
policy 2 - - - 73 - 73 9,343 9,416 5,440 14,856
----------------------------------------------------------------------------------------------------------------------
Balance at
31 December
2005,
restated 219,233 - 11,265 799 (210,046) (197,982) 37,541 58,792 2,907 61,699
----------------------------------------------------------------------------------------------------------------------
Fair value
gains on
available-
for-sale
financial
assets - - 13,023 - - 13,023 - 13,023 - 13,023
Sale of
available-
for-sale
financial
assets - - (22,844) - - (22,844) - (22,844) -(22,844)
Translation
adjustment
for the
period - - - (289) - (289) - (289) 376 87
----------------------------------------------------------------------------------------------------------------------
Net income
recognised
directly in
equity - - (9,821) (289) - (10,110) - (10,110) 376 (9,734)
Profit for
the period - - - - - - 24,150 24,150 (1,630) 22,520
----------------------------------------------------------------------------------------------------------------------
Total recognised
income for
June 2006 - - (9,821) (289) - (10,110) 24,150 14,040 (1,254) 12,786
Dividends
paid - - - - - - (53,142) (53,142) (298)(53,440)
Capital
contribution
from
minority
shareholders - - - - - - - - 915 915
Repayment of
capital to
minority
shareholders - - - - - - - - (671) (671)
----------------------------------------------------------------------------------------------------------------------
Balance at
30 June
2006,
restated 219,233 - 1,444 510 (210,046) (208,092) 8,549 19,690 1,599 21,289
----------------------------------------------------------------------------------------------------------------------
Notes to the Interim Consolidated Financial Statements
1 Corporate Information
Hochschild Mining plc (hereinafter the "Company") is a public limited company
incorporated on 11 April 2006 under the Companies Act 1985 as a limited company
and registered in England and Wales with registered number 05777693. The
Company's registered address is 18 Hanover Square, London, W1S 1HX, United
Kingdom. Its ordinary shares are traded on the London Stock Exchange.
The Group's principal business is the mining, processing and sale of silver and
gold. The Group has three fully developed operating mines (Ares, Arcata and
Selene) located in Southern Peru. The Group also has a portfolio of projects
located across Peru, Mexico, Chile and Argentina at various stages of
development.
These group interim consolidated financial statements were approved for issue by
the Board of Directors on 5 September 2007.
2 Significant Accounting Policies
(a) Basis of preparation
The interim consolidated financial statements of the Group for the six months
ended 30 June 2007 have been prepared in accordance with IAS 34 Interim
Financial Reporting. Accordingly, the interim consolidated financial statements
do not include all the information required for full annual financial statements
and therefore, should be read in conjunction with the Group's annual
consolidated financial statements for the year 2006 as published in the 2006
Report to Shareholders.
The interim consolidated financial statements do not constitute statutory
accounts as defined in section 240 of the Companies Act 1985. The financial
information for the full year is based on the statutory accounts for the
financial year ended 31 December 2006. A copy of the statutory accounts for that
year, which were prepared in accordance with International Financial Reporting
Standards ('IFRS') issued by the International Accounting Standards Board
('IASB'), as adopted by the European Union up to 31 December 2006, has been
delivered to the Registrar of Companies. The auditors' report under section 235
of the Companies Act 1985 in relation to those accounts was unqualified.
The impact of the seasonality or cyclicality on operations is not regarded as
significant on the interim consolidated financial statements.
(b) Changes in accounting policies and presentation rules
The accounting policies adopted in the preparation of the interim consolidated
financial statements are consistent with those applied in the preparation of the
consolidated financial statement for the year ended 31 December 2006, except for
the effects of the change in the policy for accounting of exploration expenses
(see note 2(c) below).
The interim consolidated financial statements have been prepared on a historical
cost basis, except for certain classes of property, plant and equipment which
have been re-valued at 1 January 2003 to determine deemed cost, derivatives,
available-for-sale financial instruments and other financial assets at fair
value through profit and loss which have been measured at fair value. The
financial statements are presented in US dollars ($) and all monetary amounts
are rounded to the nearest thousand ($000) except when otherwise indicated.
(c) Change in accounting policy of capitalisation of exploration expense
During the period, management changed its accounting policy relating to
exploration and evaluation expenditure as outlined below:
* Projects in the development phase - Exploration and evaluation costs are
capitalised as tangible assets from the date that the Board authorises the
management to conduct a feasibility study. Previously, the Group would
commence capitalisation of these costs only from the date, the project's
feasibility study is approved and completed.
* Identification of resources - Costs incurred in converting inferred resources
to indicated and measured resources (of which reserves are a component) are
capitalised as incurred. Previously, these costs were expensed. Costs incurred
in identifying inferred resources continue to be expensed as incurred.
Management believes that this change in accounting policy will enable improved
matching of revenues and costs in the relevant period and thereby better reflect
the Group's economic performance. In addition, management believes that this
change will ensure consistency with its main peers, thereby enabling more
relevant comparisons to be made.
The Group has retrospectively applied this new policy from 1 January 2002, the
earliest date at which objective and reliable information existed in relation to
the nature of the exploration expenditure incurred, to enable them calculate
this adjustment.
The comparative amounts presented in this report have been restated in
accordance with the new accounting policy as follows:
(Unaudited - (Restated)
(Unaudited) Restated) Year ended
6 months to 6 months to Year ended 31 31 December
Income Statement 30 June 2006 30 June 2006 December 2006 2006
------------------------------------------------------------------------------
(in thousands of US dollars)
Continuing operations
Cost of sales (34,077) (34,571) (75,949) (77,129)
Gross profit 66,736 66,242 135,297 134,117
Exploration expenses (7,282) (6,857) (19,461) (17,621)
Profit from continuing 39,606 39,537 68,914 69,574
operations before net
finance costs and
income tax
Profit from continuing 37,301 37,232 64,136 64,796
operations before
income tax
Income tax expense (14,733) (14,712) (28,695) (28,893)
Profit for the period 22,568 22,520 35,441 35,903
from continuing
operations
Profit for the period 22,568 22,520 35,441 35,903
Attributable to:
Equity shareholders of 24,198 24,150 41,288 41,712
the Company
Minority shareholders (1,630) (1,630) (5,847) (5,809)
Basic and diluted 0.11 0.11 0.17 0.17
earnings per ordinary
share from continuing
operations (expressed
in US dollars per
share)
------------------------------------------------------------------------------
(Restated)
As of As of
31 December 31 December
2006 2006
---------------------------------------------------------------------------
(in thousand of US dollars)
ASSETS
Non-current assets
Property, plant and equipment 118,413 141,387
Deferred income tax assets 15,704 7,920
Total non-current assets 159,920 175,110
Current assets
Inventories 16,405 16,533
Total current assets 507,696 507,824
Total assets 667,961 683,279
EQUITY AND LIABILITIES
Capital and reserves attributable to
shareholders of the Parent
Other reserves (205,112) (205,039)
Retained earnings 142,810 152,577
Minority interest 9,011 14,489
Total equity 489,331 504,649
Total equity and liabilities 667,961 683,279
---------------------------------------------------------------------------
(d) Basis of consolidation
The consolidated financial statements set out the Group's financial position as
of 30 June 2007 and 31 December 2006 and its financial operations and cash flow
for the periods ended 30 June 2007, 31 December 2006 and 30 June 2006.
Consolidation rules adopted in the preparation of the interim consolidated
financial statements are consistent with those applied in the preparation of the
consolidated financial statements for the year ended 31 December 2006.
(e) Exceptional items
Exceptional items are those items, which due to their nature or the expected
infrequency of the events giving rise to them, need to be disclosed separately
on the face of the income statement to enable a better understanding of the
financial performance of the Group and facilitate comparison with prior years.
Exceptional items include goodwill impairments, assets held for sale
impairments, gain/(loss) from sale of property, plant and equipment, gain/(loss)
from sale of investments, gain/(loss) from sale of subsidiaries, gain/(loss)
from changes in the fair value of financial instruments, and the related tax
impact of these items.
(f) Comparatives
Where applicable, comparatives have been adjusted on the same basis as current
period figures.
For the restatement of comparative figures in relation to the change in
accounting policy for exploration expenditure refer to note 2 (c).
3 Segment Reporting
The Group's activities are principally related to mining operations which
involve exploration, production and sale of gold and silver. Products are
subject to the same risks and returns and are sold through the same distribution
channels. The Group has a number of activities that exist solely to support
mining operations including power generation and services. As such, the Group
has only one business segment as its primary reporting segment.
4 Revenue
(Unaudited) (Unaudited)
6 months to 6 months to Year ended
30 June 30 June 31 December
2007 2006 2006
---------------------------------------------------------------------------
(in thousands of US dollars)
Gold (from dore bars) 40,591 41,000 70,498
Silver (from dore bars) 26,951 11,887 23,929
Concentrate 53,423 47,885 116,751
Services 56 41 68
---------------------------------------------------------------------------
121,021 100,813 211,246
---------------------------------------------------------------------------
Concentrate is made up of:
(Unaudited) (Unaudited)
6 months to 6 months to Year ended
30 June 30 June 31 December
2007 2006 2006
---------------------------------------------------------------------------
(in thousands of US dollars)
Gold 8,017 10,121 21,953
Silver 44,882 37,646 94,208
Other minerals 524 118 590
---------------------------------------------------------------------------
Total concentrate 53,423 47,885 116,751
---------------------------------------------------------------------------
The total volumes of gold and silver sold are as follows:
(Unaudited) (Unaudited)
6 months to 6 months to Year ended
30 June 30 June 31 December
2007 2006 2006
---------------------------------------------------------------------------
(in thousands of ounces)
Gold 95 103 190
Silver 5,701 4,543 10,403
---------------------------------------------------------------------------
5 Other Income and Other Expenses
(Unaudited) (Unaudited) Year
ended 31
6 months to 6 months to December
30 June 30 June 2006
2007 2006
--------------------------------------------------------------------
(in thousands of US dollars)
Other income before exceptional
items:
Decrease in provision for mine closure(1) 740 1,024 2,812
Recovery of expenses 226 - 791
Income from mine concession 30 - 151
Lease rentals 73 36 90
Reversal of impairment of supplies 350 - -
Other 903 778 1,178
--------------------------------------------------------------------
2,322 1,796 5,022
--------------------------------------------------------------------
Exceptional items:
Gain on sale of supplies - - 252
Gain on sale of property, plant - 172 94
and equipment
--------------------------------------------------------------------
- 172 346
--------------------------------------------------------------------
2,322 1,968 5,368
--------------------------------------------------------------------
Other expenses before exceptional:
Penalty on cancellation of contract (13) - (971)
Loss on maintenance of equipment (274) (14) (369)
Provision for obsolescence of - - (377)
supplies
Impairment of Colorada assets - - (113)
Provision for claims (27) - (292)
Allowance SEAL/Electroperu - (58) (113)
Other (615) (1,217) (1,635)
--------------------------------------------------------------------
(929) (1,289) (3,870)
--------------------------------------------------------------------
Exceptional items:
Loss on sale of property, plant (47) - -
and equipment
Loss on sale of investments - (2,249) (2,249)
Loss on sale of MHC (subsidiary) - (991) (991)
Impairment of Sipan assets held - - (2,983)
for sale
Impairment of Colorada assets - - (230)
Loss on sale of Inmobiliaria CNP - (42) (42)
Loss on sale of supplies (127) (65) -
--------------------------------------------------------------------
(174) (3,347) (6,495)
--------------------------------------------------------------------
(1,103) (4,636) (10,365)
--------------------------------------------------------------------
(1) Decreases in provision for mine closure costs are recorded in "Other income"
where the mine to which it relates has fully depreciated the mine rehabilitation
asset but the closure and rehabilitation costs are yet to be incurred, and there
is a reduction in the estimate of the total mine closure cost.
6 Finance Income and Finance Cost
(Unaudited) (Unaudited) Year ended
6 months to 6 months to 31
30 June 30 June December
2007 2006 2006
---------------------------------------------------------------------
(in thousands of US dollars)
Finance income before exceptional:
Interest on time deposits(1) 9,241 125 4,053
Interest on loans to related - 1,250 1,226
parties
Interest on loans to minority 1,006 - -
shareholders(2)
Interest on loans to third parties 65 117 205
Interest received on bonds and - 217 217
equity securities
Dividends received - 147 147
---------------------------------------------------------------------
Other 86 8 140
---------------------------------------------------------------------
10,398 1,864 5,988
---------------------------------------------------------------------
Exceptional items:
Gain from changes in the fair value
of financial instruments(3) 4,198 979 918
---------------------------------------------------------------------
4,198 979 918
---------------------------------------------------------------------
14,596 2,843 6,906
---------------------------------------------------------------------
Finance costs:
Interest on bank loans and (2,557) (3,867) (8,832)
long-term debt
Unwind of discount rate (565) (499) (1,441)
Bank commissions (18) - (854)
Loss from changes in the fair value - (297) (345)
of financial instruments
Interest on loans from related - (9) (5)
parties
Other (523) (449) (560)
---------------------------------------------------------------------
(3,663) (5,121) (12,037)
---------------------------------------------------------------------
(1) Mainly generated for interest on liquidity funds, refer to note 10
(2) Corresponds to the interests related to the loans given by Hochschild Mining
Holdings Limited to Minera Andes Inc. for US$9,800,000 and US$20,090,000 with an
effective annual interest rate of LIBOR + 2.5 percent and LIBOR + 2.85 per cent,
respectively
(3) Mainly corresponds to the change in fair value of 2,475,355 warrants over the
same number of shares in Fortuna Silver Mine Inc. At 31 December 2006, expiry
dates of the warrants were 27 June 2007 and 17 November 2007 (for 862,117 and
1,613,238 warrants, respectively). In January 2007, the expiry dates were
changed to 27 June 2010 and 17 November 2010, respectively.
7 Income Tax Expense
--------------------------------------------------------------------
(Unaudited) (Unaudited) (Restated)
6 months to 6 months to Year ended
30 June 30 June 31 December
2007(1) 2006(1) 2006(1)
--------------------------------------------------------------------
(in thousands of US dollars)
Current tax from continuing 20,643 17,976 31,940
operations
Deferred income tax relating to (2,813) (5,210) (5,022)
origination and reversal of
timing differences from
continuing operations
Withholding taxes 114 1,946 1,975
--------------------------------------------------------------------
17,944 14,712 28,893
--------------------------------------------------------------------
(1) Amounts relating to items classified as exceptional items for the six-month
ending 30 June 2007, 30 June 2006 and for the year ended 31 December 2006 were
an expense of US$1,208,000, an expense of US$52,000 and an income of US$547,000,
respectively.
The weighted average statutory income is calculated as the average of the
statutory tax rates applicable in the countries in which the Group operates,
weighted by the profit/(loss) before tax of the subsidiaries in the respective
countries as included in the consolidated financial statements.
The changes in the weighted average statutory income tax rate is due to a change
in the weighting of profit/(loss) before tax in the various jurisdictions in
which the Group operates.
The tax on the Group's profit before tax differs from the theoretical amount
that would arise using the weighted average tax rate applicable to profits of
the consolidated companies as follows:
(Unaudited-
(Unaudited) Restated) (Restated)
6 months to 6 months to Year ended
30 June 30 June 31 December
2007 2006 2006
---------------------------------------------------------------------------
(in thousands of US dollars)
Income before tax from continuing 48,163 37,232 64,796
operations
At average statutory income tax 14,521 10,937 19,553
rate of 30.15% (29.38% and 30.18%
as of 30 June and 31 December 2006,
respectively)
Expenses not deductible for tax 1,559 1,726 4,124
purposes
Non-taxable income (319) (75) (170)
Recognition of previously - (312) -
unrecognised deferred tax assets
Deferred tax assets generated in 1,638 804 2,552
the period not recognised
Deferred tax on unremitted earnings 1,377 (508) 397
Withholding tax 114 1,946 1,975
Other (946) 194 462
---------------------------------------------------------------------------
Tax charge 17,944 14,712 28,893
---------------------------------------------------------------------------
8 Basic and diluted earnings per share
Earnings per share ("EPS") is calculated dividing profit for the year
attributable to equity shareholders of the Company by the weighted average
number of ordinary shares in issue during the period.
The Company has no dilutive potential ordinary shares.
As of 30 June 2007, 30 June 2006 and 31 December 2006, earnings per share have
been calculated as follows:
(Unaudited-
(Unaudited) Restated) (Restated)
6 months to 6 months to Year ended
30 June 30 June 31 December
2007 2006 2006
-----------------------------------------------------------------------------
Profit from continuing operations 32,856 24,150 41,712
attributable to equity holders of
the Company (US$000)
Weighted average number of ordinary 307,350 229,950 242,867
shares in issue ('000)
Basic and diluted earnings/(loss)
per share from:
Before exceptional items (US$) 0.10 0.12 0.19
Exceptional items (US$) 0.01 (0.01) (0.02)
Continuing operations (US$) 0.11 0.11 0.17
-----------------------------------------------------------------------------
9 Property, Plant and Equipment
During the six months ended 30 June 2007, the Group acquired assets with a cost
of US$76,384,000 (31 December 2006: US$78,779,000)
In addition, during the six months ended 30 June 2007 property, plant and
equipment has:
* increased by US$1,056,000 as a result of additions in mine closure assets;
* increased by US$119,000 as a result of foreign exchange movements
on translation;
* decreased by US$1,212,000 as a result of the adjustment to the
deferred consideration in Suyamarca;
* decreased by US$304,000 as a result of change in mine closure estimate;
* decreased by US$65,000 as a result of net disposal of assets;
* decreased by US$9,785,000 as a result of depreciation expense.
10 Cash and Cash Equivalents
(Unaudited) Year ended
As of 30 June 2007 31 December 2006
-------------------------------------------------------------------------
(in thousands of US dollars)
Cash in hand 214 997
Liquidity funds(1) 342,777 414,527
Current demand deposit 10,391 16,477
accounts(2)
Time deposits(3) 2,378 3,542
-------------------------------------------------------------------------
Cash and cash equivalents 355,760 435,543
considered for the cash flow
statement
-------------------------------------------------------------------------
(1) The liquidity funds are mainly invested in certificate of deposits, commercial
papers and floating rate notes with weighted average annual effective interest
rate of 5.16 percent and a weighted average maturity of 44 days as of 30 June
2007 (5.16 percent and 43 days as of December 31, 2006, respectively)
(2) Relates to bank accounts which are freely available and do not bear interest
(3) The effective interest rates as of 30 June 2007 and 31 December 2006 were 5.00
and 4.45 percent, respectively. These deposits have an average maturity of five
and three days, respectively
11 Dividends Paid and Proposed
Amount
--------------------------------------------------------------------------------
(in thousands of US dollars)
Year ended 31 December 2006
Total dividends paid or provided for during the year 73,440(1)
Total dividends declared after year-end and not provided for 2,275(2)
Six months ended 30 June 2007
Total dividends paid or provided for during the period -
Total dividends declared after period-end and not provided for 7,333
--------------------------------------------------------------------------------
(1) Corresponds to dividends paid or provided to former shareholder Dona Limited
(2) Corresponds to dividends declared after year-end and not provided to Pelham
Investment Corporation, Navajo Overseas Corporation and public shareholders
Dividends per share
The dividends declared in 2006 were US$73,142,000 (US$0.32 per share). A
dividend in respect of year ended 31 December 2006 of US$0.0074 per share,
amounting to a total dividend of US$2,274,821 was approved at the Company's
Annual General Meeting on 4 July 2007. These financial statements do not reflect
the dividend payable.
12 Notes to the Cash Flow Statement
(Unaudited-
(Unaudited) Restated) (Restated)
6 months to 6 months to Year ended
30 June 30 June 31 December
2007 2006 2006
-----------------------------------------------------------------------------
(in thousands of US dollars)
Reconciliation of profit for the period
to net cash generated from operating
activities
Profit for the period 30,219 22,520 35,903
Adjustments to reconcile group
operating profit to net cash
inflows from operating
activities:
Depreciation 9,216 8,652 18,690
Loss / (gain) on disposal of property,
plant and equipment and assets classified
as held for sale 47 (172) (94)
Impairment of Sipan assets held for sale - - 2,983
Impairment of Colorada assets - - 343
Loss on sale of available-for-sale
financial assets - 2,291 2,291
Loss (gain) on sale of supplies 127 - (252)
Loss on sale of MHC (subsidiary) - 991 991
Decrease in provision for mine closure (740) (1,024) (2,812)
Finance income (14,596) 2,843 (6,906)
Finance costs 3,663 5,121 12,037
Income tax expense 17,944 14,712 28,893
Provision for contingencies - - 292
Other 947 391 2,938
Increase (decrease) of cash flows from
operations due to changes in assets and
liabilities:
Trade and other receivables (20,497) (3,192) 24,615
Derivative financial instruments 3,498 (2,575) 3,845
Inventories (3,615) (3,596) (5,629)
Trade and other payables 2,972 3,377 5,135
Provisions (2,838) 856 4,808
-----------------------------------------------------------------------------
Cash generated from operations 26,347 51,195 128,071
-----------------------------------------------------------------------------
13 Commitments
(a) Gold and silver future contracts
Type of
Organisation Quantity contract Quotation Period
As of 30 As of 31
June December
2007 (ounces) 2006 (ounces) (US$/oz) From to
------------------------------------------------------------------------------------------------------------------
Gold
Citibank - 23,450 Flat Forward 415.93 August 2006 June 2007
Citibank - 36,600 Flat Forward 419.20 January 2007 June 2007
---------------------------------------------------------------
- 60,050
---------------------------------------------------------------
Silver
Standard Bank - 772,000 Min/Max 8.40/10.65 October 2006 March 2007
---------------------------------------------------------------
Total - 832,050
---------------------------------------------------------------
The contracts and commitments mentioned above are not fair valued in the books
as they were entered into for the purpose of the delivery of a non-financial
item in accordance with the Group's expected sales requirements.
Management had previously entered into fixed price sale contracts in accordance
with the terms and conditions of the loan agreements with the banks. Management
has now decided that the Group will not enter into any further commitments to
optimise and align average realisations with market prices in future.
(b) Mining rights purchase options
During the ordinary course of business, the Group enters into agreements to
carry out exploration under concessions held by third parties. Under the terms
of some of the agreements, the Group has the option to acquire the concession or
invest in the entity holding the concession. In order to exercise the option the
Group must satisfy certain financial and other obligations over the agreement
term. The options lapse in the event the Group does not meet the financial
requirements. At any point in time, the Group may cancel the agreements without
penalty.
The Group continually reviews its requirements under the agreements and
determines on an annual basis whether to proceed with the financial commitment.
The commitments at the balance sheet date are as follows:
As of As of
30 June 31 December
2007 2006
--------------------------------------------------------------------------
(in thousands of US dollars)
Commitment for the subsequent twelve months 1,849 1,210
Later than one year 30,153 22,539
--------------------------------------------------------------------------
(c) Ventura Gold Corp.
On 8 January 2007, the Group entered into a letter of intent with Ventura Gold
Corp ("Ventura") for Ventura to acquire an interest in the Inmaculada property,
located in Peru. Under the agreement, in order for Ventura to acquire an initial
51% controlling interest, Ventura shall complete a total of 15,000 metres of
drilling on the property and issue a total of one million of its common shares
to the Group within a three-year period.
Once Ventura acquires its 51% controlling interest, Ventura shall issue an
additional two million of its common shares to the Group within the next five
years. Additionally, the Group has the option to become the operator of the
project and buy back an 11% controlling interest in consideration for a payment
to Ventura of three times the total investment made in drilling and related
exploration work completed. If the Group does not exercise the aforementioned
option, Ventura may elect to increase its controlling interest by 19% upon the
completion of a feasibility study on the project.
As at 30 June 2007, the option joint venture agreement had not been signed but
the Group has already received 100,000 shares included in the 'Available-for-sale
financial assets' caption. The option joint venture agreement was subsequently
signed on 13 August 2007.
(d) Mirasol Resources Ltd.
On 21 February 2007, the Group signed the option and joint venture agreement
with Mirasol Resources Ltd. ("Mirasol") under the arrangements set forth in the
letter of intent signed on 18 September 2006. The Group will have the right to
acquire 51 percent interest in Santa Rita and Claudia projects by investing over
four years at least US$3.5 million, and US$6 million, respectively.
Additionally, the Group paid US$150,000 on the signing of the letter of intent
and has to make four annual payments of US$200,000 to Mirasol.
On 13 March 2007, Mirasol constituted, under the laws of Argentina, two
companies named "Cabo Sur" and "Punta Verde", which will hold the rights of
Claudia and Santa Rita properties, respectively. Until the exercise of Claudia
and Santa Rita options, Mirasol and the Group will own 99% and 1% of each of the
new companies, respectively.
(e) Cardero Resource Corp.
On 12 March 2007, the Group entered into a letter of intent with Cardero
Resource Corp. ("Cardero") in respect of an option and joint venture agreement
to explore and develop minerals at Los Manantiales property in Argentina. Under
the arrangements, the Group will have the right to acquire 60 percent interest
by incurring expenditures on exploration activities of US$3,500,000 in four
years.
At 30 June 2007, the Group has paid US$294,000 in order to permit Cardero to
acquire the properties from its former owner. This payment will be considered as
part of the required commitment.
The option and joint venture agreement has not been signed as of 30 June 2007.
(f) Geologix Explorations Inc.
On 26 April 2007, the Group entered into a letter of intent with Geologix
Exploration Inc. in respect of a joint venture for the exploration and
development of Silver Cloud property located in north-central Nevada, USA.
The Group has the option to acquire 70 percent interest in the venture by
investing in exploration and development an amount of US$4,100,000 during five
years, and making a mandatory payment of US$50,000 upon signing of the final
joint venture agreement.
As of 30 June 2007, the option and joint venture agreement has not been signed.
(g) Silver Standard Resources Inc.
On 31 May 2007, the Group entered into a letter of intent with Silver Standard
Resources Inc. in respect of an option and joint venture agreement to explore
and develop minerals in properties located in Chubut province, Argentina.
Under the arrangements, the Group will have the right to acquire 51 percent
interest by investing in exploration activities an amount of US$1,000,000 in
three years. At 30 June 2006, the option and joint venture agreement has not
been signed.
14 Subsequent events
(a) On 6 July 2007, the Group signed an Agreement with EXMIN Resources Inc.
("EXMIN"), pursuant to which the Group will provide certain funding arrangements
to EXMIN to allow it to comply with its obligations under the joint venture
agreement with the Group.
In compliance with the agreement, on 9 July 2007, the Group acquired 7,875,000
common shares of EXMIN for a total amount of US$3 million. In addition, on the
same date the Group converted an outstanding loan receivable from EXMIN of
US$1.5 million into 4,127,231 common shares.
(b) On 3 July 2007, the Group approved the executive long-term incentive
plan to recognise the performance of key employees and to ensure that the
long-term interest of these employees are aligned with the interest of
shareholders. The plan comprises an amount to be paid to participants depending
on the achievement of the three-year performance measures being: "expected",
"improved" or "excellent". Half of the award will be paid on 31 December 2010,
with the remaining half paid on 31 December 2011. The independent performance
measures included in the plan are
* Cumulative earnings per share
* Volume of production at the end of 2009
* Co-production cash cost
* Life of mine as of 31 December 2009
* Resources and reserves grade
* Share price
(c) As described in Note13 (c) on 13 August 2007, the Group signed the option and joint
venture agreement with Ventura.
(d) On 30 August 2007, the Group gave its formal notice of termination and withdrawal
from option and joint venture agreement with Mirasol in respect of Santa Rita.
Reserves & Resources
Attributable metal reserves
As at 30 June 2007
Reserve category Proved Probable Proved And Probable Ag Au Ag Au Ag Eq.
---------------------------------------------------------------------------------------------------
(t) (t) (t) (g/t) (g/t) (moz) (koz) (moz)
Arcata
Proved 1,207,398 478 1.29 18.6 50.0 21.6
Probable 498,740 559 1.29 9.0 20.6 10.2
Total 1,706,138 502 1.29 27.5 70.7 31.8
---------------------------------------------------------------------------------------------------
Ares
Proved 627,708 230 8.58 4.6 173.2 15.0
Probable 269,744 168 5.54 1.5 48.0 4.3
Total 897,452 211 7.67 6.1 221.2 19.4
---------------------------------------------------------------------------------------------------
Selene
Proved 780,495 289 2.00 7.3 50.1 10.3
Probable 89,865 233 1.03 0.7 3.0 0.9
Total 870,360 284 1.90 7.9 53.1 11.1
---------------------------------------------------------------------------------------------------
Pallancata
Proved 641,002 263 1.06 5.4 21.9 6.7
Probable 688,455 280 1.10 6.2 24.3 7.7
Total 1,329,457 272 1.08 11.6 46.2 14.4
---------------------------------------------------------------------------------------------------
San Jose
Proved 339,391 451 6.20 4.9 67.7 9.0
Probable 1,052,155 405 6.80 13.7 229.9 27.5
Total 1,391,546 416 6.65 18.6 297.6 36.5
---------------------------------------------------------------------------------------------------
Moris
Proved 1,273,582 4.5 1.72 0.2 70.3 4.4
Probable 767,974 4.3 1.16 0.1 28.7 1.8
Total 2,041,556 4.4 1.51 0.3 99.0 6.2
---------------------------------------------------------------------------------------------------
Total
Proved 4,869,576 262 2.77 41.0 433.3 67.0
Probable 3,366,933 287 3.28 31.1 354.6 52.4
Total 8,236,510 272 2.98 72.1 787.8 119.3
---------------------------------------------------------------------------------------------------
Attributable metal resources
As at 30 June 2007
Resource Measured
category Measured Indicated & Indicated Inferred Ag Au Zn Pb Cu Ag Eq Ag Au Zn Pb Cu
--------------------------------------------------------------------------------------------------------------------
(t) (t) (t) (t) (g/t) (g/t) (%) (%) (%) (g/t) (moz) (koz) (kt) (kt) (kt)
Arcata
Measured 1,151,358 545 1.48 -.- -.- -.- 633 20.2 54.8 -.- -.- -.-
Indicated 464,648 647 1.49 -.- -.- -.- 737 9.7 22.3 -.- -.- -.-
Total 1,616,005 574 1.48 -.- -.- -.- 663 29.8 77.1 -.- -.- -.-
Inferred 1,655,637 598 1.52 -.- -.- -.- 689 31.8 81.2 -.- -.- -.-
----------------------------------------------------------------------------------------------------------------------
Ares
Measured 614,694 249 9.31 -.- -.- -.- 808 4.9 184.1 -.- -.- -.-
Indicated 277,410 177 5.82 -.- -.- -.- 526 1.6 51.9 -.- -.- -.-
Total 892,104 227 8.23 -.- -.- -.- 720 6.5 236.0 -.- -.- -.-
Inferred 86,251 198 4.11 -.- -.- -.- 445 0.5 11.4 -.- -.- -.-
----------------------------------------------------------------------------------------------------------------------
Selene
Measured 770,576 312 2.15 -.- -.- -.- 441 7.7 53.3 -.- -.- -.-
Indicated 87,354 255 1.12 -.- -.- -.- 322 0.7 3.2 -.- -.- -.-
Total 857,930 306 2.05 -.- -.- -.- 429 8.4 56.5 -.- -.- -.-
Inferred 1,078,996 322 1.59 -.- -.- -.- 417 11.2 55.1 -.- -.- -.-
----------------------------------------------------------------------------------------------------------------------
Pallancata
Measured 583,181 318 1.26 -.- -.- -.- 394 6.0 23.7 -.- -.- -.-
Indicated 730,297 325 1.38 -.- -.- -.- 408 7.6 32.3 -.- -.- -.-
Total 1,313,478 322 1.33 -.- -.- -.- 401 13.6 56.0 -.- -.- -.-
Inferred 749,770 488 1.84 -.- -.- -.- 598 11.8 44.4 -.- -.- -.-
----------------------------------------------------------------------------------------------------------------------
San Jose
Measured 333,559 526 7.16 -.- -.- -.- 955 5.6 76.8 -.- -.- -.-
Indicated 894,539 484 8.10 -.- -.- -.- 970 13.9 232.8 -.- -.- -.-
Total 1,228,098 495 7.84 -.- -.- -.- 966 19.6 309.6 -.- -.- -.-
Inferred 119,791 442 7.69 -.- -.- -.- 903 1.7 29.6 -.- -.- -.-
----------------------------------------------------------------------------------------------------------------------
Moris
Measured 3,015,654 4.2 1.31 -.- -.- -.- 83 0.4 127.1 -.- -.- -.-
Indicated 218,661 4.5 1.15 -.- -.- -.- 73 0.0 8.1 -.- -.- -.-
Total 3,234,315 4.3 1.30 -.- -.- -.- 82 0.4 135.2 -.- -.- -.-
Inferred 37,476 4.1 0.88 -.- -.- -.- 57 0.0 1.1 -.- -.- -.-
----------------------------------------------------------------------------------------------------------------------
San Felipe
Measured 1,143,681 72 0.02 7.43 3.15 0.42 315 2.6 0.7 84.9 36.1 4.8
Indicated 482,527 68 0.02 7.15 3.34 0.42 305 1.1 0.3 34.5 16.1 2.0
Total 1,626,207 71 0.02 7.34 3.21 0.42 312 3.7 1.0 119.4 52.2 6.8
Inferred 234,259 56 0.01 7.30 3.52 0.30 289 0.4 0.1 17.1 8.2 0.7
----------------------------------------------------------------------------------------------------------------------
TOTAL
Measured 7,612,702 194 2.13 1.12 0.47 0.06 358 47.5 520.4 84.9 36.1 4.8
Indicated 3,155,435 341 3.46 1.09 0.51 0.06 585 34.6 350.9 34.5 16.1 2.0
Total 10,768,137 237 2.52 1.11 0.48 0.06 424 82.1 871.3 119.4 52.2 6.8
Inferred 3,962,179 451 1.75 0.43 0.21 0.02 569 57.4 222.9 17.1 8.2 0.7
----------------------------------------------------------------------------------------------------------------------
Note: Resources include undiscounted reserves, where reserves are attributable to JV partner, reserve figures reflect
the Company's ownership only no ore loss or dilution has been included, and stockpiled ore excluded.
Change in metal reserves and resources in silver equivalent ounces
Ag Equivalent Content (Million Ounces)
Operation Category December 2006 Depletion(1)Addition(2)June2007 Net Difference % change
------------------------------------------------------------------------------------------------------
Peru
------------------------------------------------------------------------------------------------------
Arcata Resource 60.6 10.6 71.1 10.6 17%
Reserve 20.4 (3.5) 14.9 31.8 11.4 56%
------------------------------------------------------------------------------------------------------
Ares Resource 24.9 (3.0) 21.9 (3.0) (12)%
Reserve 22.3 (5.8) 2.8 19.4 (3.0) (13)%
------------------------------------------------------------------------------------------------------
Selene Resource 25.2 1.1 26.3 1.1 4%
Reserve 12.3 (3.0) 1.8 11.1 (1.2) (10)%
------------------------------------------------------------------------------------------------------
Pallancata Resource 49.2 3.1 52.3 3.1 6%
Reserve 23.8 0.0 0.2 24.0 0.2 1%
------------------------------------------------------------------------------------------------------
Peru Totals: Resource 159.8 11.8 171.6 11.8 7%
Reserve 78.8 (12.2) 19.7 86.2 7.4 9%
------------------------------------------------------------------------------------------------------
Argentina
San Jose Resource 70.4 11.2 81.6 11.2 16%
Reserve 55.6 0.0 15.9 71.5 15.9 29%
------------------------------------------------------------------------------------------------------
Argentina Totals: Resource 70.4 11.2 81.6 11.2 16%
Reserve 55.6 0.0 15.9 71.5 15.9 29%
------------------------------------------------------------------------------------------------------
Mexico
Moris Resource 12.3 0.0 12.3 0.0 0%
Reserve 8.9 0.0 0.0 8.9 0.0 0%
------------------------------------------------------------------------------------------------------
San Felipe Resource 25.0 1.4 26.4 1.4 6%
Reserve 0.0 0.0 0.0 0.0 0.0 0%
------------------------------------------------------------------------------------------------------
Mexico Totals: Resource 37.3 1.4 38.7 1.4 4%
Reserve 8.9 0.0 0.0 8.9 0.0 0%
------------------------------------------------------------------------------------------------------
Totals: Resource 267.5 24.4 292.0 24.4 9%
Reserve 143.3 (12.2) 35.6 166.6 23.4 16%
------------------------------------------------------------------------------------------------------
(1) Depletion: reduction in reserves based on ore delivered to the mine plant
(2) Increase in reserves and resources due mainly to mine site exploration but
also to price increases
Change in attributable metal reserves and resources in silver equivalent ounces
Ag Equivalent Content (Million Ounces)
Operation Category Percentage Attributable December 2006 Att.1 June2007 Att. 1 Net Difference % change
---------------------------------------------------------------------------------------------------------------------
Peru
---------------------------------------------------------------------------------------------------------------------
Arcata Resource 100% 60.6 71.1 10.6 17%
Reserve 20.4 31.8 11.4 56%
---------------------------------------------------------------------------------------------------------------------
Ares Resource 100% 24.9 21.9 (3.0) (12)%
Reserve 22.3 19.4 (3.0) (13)%
---------------------------------------------------------------------------------------------------------------------
Selene Resource 100% 25.2 26.3 1.1 4%
Reserve 12.3 11.1 (1.2) (10)%
---------------------------------------------------------------------------------------------------------------------
Pallancata Resource 60% 29.5 31.4 1.8 6%
Reserve 14.3 14.4 0.1 1%
---------------------------------------------------------------------------------------------------------------------
Peru Totals: Resource 140.2 150.7 10.6 8%
Reserve 69.3 76.6 7.4 11%
Argentina
---------------------------------------------------------------------------------------------------------------------
San Jose Resource 51% 35.9 41.6 5.7 16%
Reserve 28.3 36.5 8.1 29%
---------------------------------------------------------------------------------------------------------------------
Argentina Totals: Resource 35.9 41.6 5.7 16%
Reserve 28.3 36.5 8.1 29%
Mexico
---------------------------------------------------------------------------------------------------------------------
Moris Resource 70% 8.6 8.6 0.0 0%
Reserve 6.2 6.2 0.0 0%
---------------------------------------------------------------------------------------------------------------------
San Felipe Resource 70% 17.5 18.5 1.0 6%
Reserve 0.0 0.0 0.0 0%
---------------------------------------------------------------------------------------------------------------------
Mexico Totals: Resource 26.1 27.1 1.0 4%
Reserve 6.2 6.2 0.0 0.0
---------------------------------------------------------------------------------------------------------------------
Totals: Resource 202.2 219.4 17 9%
Reserve 103.9 119.3 15 15%
---------------------------------------------------------------------------------------------------------------------
(1) Attributable reserves and resources based on the Group's percentage ownership of its joint venture projects
Production Information
Arcata
Six months ended Six months ended
30 June 2007 30 June 2006 % change
-----------------------------------------------------------------------------------
Ore production (tonnes) 176,513 135,526 30%
Average head grade silver (g/t) 532.86 542.02 (2)%
Average head grade gold (g/t) 1.38 1.35 2%
Concentrate produced (tonnes) 7,447 5,214 43%
Silver grade in concentrate (kg/t) 10.99 12.49 (12)%
Silver produced (koz) 2,631 2,094 26%
Gold produced (koz) 6.75 4.96 36%
Net silver sold (koz) 2,487 1,395 78%
Net gold sold (koz) 6.19 3.19 94%
-----------------------------------------------------------------------------------
Ares
Six months ended Six months ended
30 June 2007 30 June 2006 % change
-----------------------------------------------------------------------------------
Ore production(tonnes) 156,404 141,529 11%
Average head grade silver (g/t) 257.64 332.14 (22)%
Average head grade gold (g/t) 14.84 19.01 (22)%
Dore total (koz) 1,254.24 1,493.19 (16)%
Silver produced (koz) 1,179 1,406 (16)%
Gold produced (koz) 71.60 83.35 (14)%
Net silver sold (koz) 1,317 1,473 (11)%
Net gold sold (koz) 77.02 88.23 (13)%
-----------------------------------------------------------------------------------
Selene
Six months ended Six months ended
30 June 2007 30 June 2006 % change
-----------------------------------------------------------------------------------
Ore production (tonnes) 190,581 178,044 7%
Average head grade silver (g/t) 338.37 378.68 (11)%
Average head grade gold (g/t) 2.43 2.93 (17)%
Concentrate produced (tonnes) 1,808 1,977 (9)%
Silver grade in concentrate (kg/t) 31.75 30.95 3%
Silver produced (koz) 1,822 1,967 (7)%
Gold produced (koz) 12.35 14.57 (15)%
Net silver sold (koz) 1,897 1,675 13%
Net gold sold (koz) 11.66 11.95 (2)%
Glossary
Ag
Silver
Adjusted EBITDA
Adjusted EBITDA is calculated as profit from continuing operations before
exceptional items, net finance costs and income tax plus depreciation,
amortization and exploration costs other than personnel and other expenses
Au
Gold
Attributable after tax profit
Profit for the year before dividends attributable to the equity shareholders of
Hochschild Mining plc from continuing operations before exceptional items and
after minority interest
Average head grade
Average ore grade fed into the mill
Board
The board of directors of the Company
Company, Group or Hochschild
Hochschild Mining plc and its subsidiary undertakings
CSR Committee or Corporate Social Responsibility Committee
The corporate social responsibility committee of the Board
CSR
Corporate social responsibility
Cu
Copper
Directors
The directors of the Company
Dore
Dore bullion is an impure alloy of gold and silver and is generally the final
product of mining and processing; the dore bullion will be transported to be
refined to high purity metal
Dollar or $
United States dollars
Effective Tax Rate
Income tax expense as a percentage of profit from continuing operations before
income tax
EPS
The per-share (using the weighted average number of shares outstanding for the
period) profit available to equity shareholders of the Group from continuing
operations before exceptional items and after minority interest
eq
equivalent
Exceptional item
Events that are significant and which, due to their nature or the expected
infrequency of the events giving rise to them, need to be disclosed separately
GAAP
Generally Accepted Accounting Principles
g/t
Grams per metric tonne
IAS
International Accounting Standards
IASB
International Accounting Standards Board
IFRS
International Financial Reporting Standards
koz
Thousand ounces
kt
Thousand metric tonnes
ktpa
Thousand metric tonnes per annum
Listing or IPO (Initial Public Offering) or Global Offer
The listing of the Company's ordinary shares on the London Stock Exchange on 8
November 2006
LSE
London Stock Exchange
moz
Million ounces
Ordinary Shares
Ordinary shares of #0.25 each in the Company
Pb
Lead
Spot or spot price
The purchase price of a commodity at the current price, normally this is at a
discount to the long term contract price
t
tonne
Zn
Zinc
- ends -
This information is provided by RNS
The company news service from the London Stock Exchange
END
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