RNS Number : 7777B
Hochschild Mining PLC
21 August 2008
21 August 2008
Hochschild Mining plc
Interim results for the six months ended 30 June 2008
Financial Highlights
* 92% increase in revenue to $231.8 million driven by increased production and prices
* 86% increase in adjusted EBITDA1 to $104.0 million
* 30% increase in pre-exceptional EPS to $0.132
* Contained unit cost per tonne inflation through increased throughput and operating efficiencies
* Interim dividend of 2.0� per share
Operational Highlights
* Acquisition of 50% interest in Liam Regional Joint Venture ("Liam JV") on 20 August 2008, a 282,000 hectare land package in southern
Peru
* Attributable production of 7.4 million ounces of silver and 74 thousand ounces of gold, a 7% increase in silver equivalent production
to 11.9 million ounces
* On track to achieve 2008 production target of 26 million attributable silver equivalent ounces
* 16% increase in reserves from 31 December 2007; Average mine life increased by 0.6 years
* Capacity expansions at Arcata, San Jos and Selene on schedule for completion in H2 2008
* Further development of cluster consolidation strategy: increased stake in Lake Shore Gold Corp. ("Lake Shore") to 40%
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Highlights for the six months ended 30 June 2008
($ millions, unless stated) Six months ended 30 Six months ended 30 June 2007 % change
June 2008
Attributable silver production 7,443 5,633 32%
(koz)
Attributable gold production 73.7 90.7 (19%)
(koz)
Revenue 231.8 121.0 92%
Adjusted EBITDA1 104.0 55.9 86%
Attributable profit after tax 38.9 29.9 30%
(before exceptionals)
Attributable profit after tax 32.7 32.9 (0.6%)
(after exceptionals)
Earnings per share (before 0.13 0.10 30%
exceptionals)2
Earnings per share (after 0.11 0.11 -
exceptionals)
1 Adjusted EBITDA is calculated as profit from continuing operations before exceptional items, net finance costs and income tax plus
depreciation, amortisation and exploration expenses other than personnel and other expenses.
2 Pre-exceptional EPS is the per-share (using the weighted average number of shares outstanding for the period) profit available to
equity shareholders of the Company from continuing operations before exceptional items.
Commenting on the results, Eduardo Hochschild, Executive Chairman, said:
"This is a year of consolidation for Hochschild Mining and I am pleased to announce solid interim results. We continue to deliver on our
growth strategy through capacity expansions, an aggressive exploration programme and by securing niche acquisitions in key mining districts.
With production on track and a stronger than ever project pipeline, I look to the future with confidence."
Miguel AramburEO, said:
"These results reflect strong production and effective cost management against a backdrop of higher precious metal prices and industry
cost pressures. Exploration continues to drive our business and we have made outstanding progress in this area. We have also secured a
number of exciting opportunities which support our cluster consolidation strategy including our strategic alliance with Lake Shore and the
Liam JV".
To view the full text of the announcement, please follow the link below;
http://www.rns-pdf.londonstockexchange.com/rns/7777B_1-2008-8-21.pdf
Enquiries:
Hochschild Mining plc
Isabel Lutgendorf +44 (0)20 7907 2934
Head of Investor Relations
Finsbury
Robin Walker +44 (0)20 7251 3801
Public Relations
About Hochschild Mining plc:
Hochschild Mining plc is a leading precious metals company listed on the London Stock Exchange (HOCM.L for Reuters / HOC LN for
Bloomberg) 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 development project in Mexico and over sixteen long-term prospects throughout the Americas. Hochschild has
over forty years experience in the mining of precious metal epithermal vein deposits. For further information please visit
www.hochschildmining.com
Chairman's Statement
We are pleased to announce strong financial results for the first six months of the year, underpinned by robust operational performance,
cost containment and continued focus on delivering shareholder value. These half year results and our proven ability to deliver on our
growth strategy drive our confidence in the business going forward and support our declaration of an interim dividend of 2.0 cents per
share.
The last 18 months has been a period of rapid change for Hochschild Mining. Since our IPO in November 2006, we have strengthened our
position in Peru, diversified into three new countries and implemented an extensive exploration programme to underpin future growth. We have
proven our operational capability, bringing three new mines into production within our first year as a public company and expanded plant
capacity at our three original operations, Arcata, Ares and Selene.
This year, we are undertaking further expansions at Arcata, Selene and San Jos, all of which are on schedule for completion in the
second half of 2008. When completed, these expansions will increase our throughput capacity by 29% and we will fully benefit from this
increase from 2009.
Strategy for growth
We continue to advance our growth strategy: maximising the potential of our existing operations through exploration and expansions and
bringing into production new, profitable precious metals projects throughout the Americas.
Supporting this strategy, we have secured a number of exciting opportunities in the first half of the year. We now have a 40% interest
in Lake Shore, providing us with exposure to reasonably priced, high-grade gold deposits in Canada. We anticipate that Lake Shore will
initiate production from its Timmins West property in 2009, with a steady ramp up over time which will positively impact our results.
We have also acquired full ownership of San Felipe, our development project in northern Mexico. The project team continues to work to
complete the feasibility study by the end of the year.
In addition, I am delighted to announce that we have reached an agreement to acquire a 50% interest in the Liam JV from subsidiaries of
Newmont Corporation for a total cash consideration of $33.3 million, funded entirely with existing cash. This transaction was completed on
20 August 2008 and is therefore not included in these results.
The Liam JV consists of over 282,000 hectares in the Tertiary Volcanic Belt of southern Peru, a region with significant mineral
potential located approximately 170 kilometres northwest of Arequipa. The acquisition has significant strategic importance for us and
exemplifies our cluster consolidation strategy. It is currently one of the largest single claim blocks in Peru and is in close proximity to
four of our existing operations; Arcata, Ares, Selene and Pallancata, enabling us to leverage our existing infrastructure and knowledge of
the regional geology. Maps are available on our website www.hochschildmining.com.
We remain extremely positive about our project pipeline which currently has over sixteen opportunities in Peru, Argentina, Mexico, Chile
and Canada at various stages of development. To ensure long term growth, we are continually evaluating new opportunities throughout the
Americas, with a clear focus on mid-sized, high-grade underground precious metals deposits in key mining districts.
Operational
Total attributable production for the first half of 2008 was 11.9 million silver equivalent ounces, comprising 7.4 million ounces of
silver and 74 thousand ounces of gold. As a result, we remain firmly on track to achieve our production target of 26 million attributable
silver equivalent ounces in 2008 (consisting of 16.9 moz Ag and 153 koz Au).
Cost control remains key to our business. We have been able to contain average unit cost per tonne inflation at our five underground
mines to 5.7% compared to the second half of 2007. This is considered the most meaningful period for comparative purposes since prior to
that time the Group had only three underground mines in operation compared to the five that we have today. Achieving such results in a
period where the industry is facing global cost pressures is testament to our ability to effectively manage costs and operate at optimum
efficiency.
As previously announced, we are undertaking measures to convert concentrate to dorat Arcata and San Jos. Production of dorreduces
working capital requirements and selling discounts.
Exploration
Exploration is at the heart of our business and we continue to commit substantial resources to our geology programme in order to
increase our reserve and resource base at a low cost per ounce. We had an outstanding first half of the year, increasing reserves by 16%
from 31 December 2007. We have also identified several new high grade veins at Arcata and San Jos. Proving up reserves remains a costly
endeavour and it is therefore common to have a short reserve life in underground mining. Despite this, we are committed to achieving a
minimum 4.0 year reserve life at all our operations, as stated at the time of the IPO. We have successfully improved our average reserve
life which currently stands at 4.5 years, compared to 3.9 years at the end of 2007. Excluding Moris, which is an open pit mine, our average
reserve life is 5.8 years.
Outlook
We are on track to deliver our 2008 production target of 26 million silver equivalent ounces. With our investment in acquisitions and
expansions, a stronger than ever project pipeline and rigorous cost controls we remain confident about the long term growth prospects of the
business.
Despite current market volatility, we continue to believe in the fundamentals for precious metals.
On behalf of the Board I would like to take this opportunity to thank all of our employees for their hard work, enthusiasm and ongoing
commitment to the business.
Eduardo Hochschild
Executive Chairman
______________________________________________________________________
Operational Review
Production
During the first six months of 2008 ("H1 2008"), we had six mines in operation, including five underground mines and one open pit mine.
Total attributable production during this period was 11.9 million silver equivalent ounces, comprising 7.4 million ounces of silver and 74
thousand ounces of gold. This represents an increase of 7% compared to the first six months of 2007 ("H1 2007") driven primarily by strong
silver production at Arcata, Pallancata and San Jos. As a result, we are on track to achieve our full year production target of 26 million
attributable silver equivalent ounces (16.9 moz Ag/153 koz Au).
Silver production
Attributable silver production increased 32% in the first six months of 2008 to 7.4 million ounces, driven primarily by strong silver
production at Arcata, Pallancata and San Jos. This was partially offset by weaker silver production at Selene and Ares due to anticipated
lower grades.
Gold production
Attributable gold production of 74 thousand ounces decreased in the first half by 19% compared to H1 2007 due to anticipated lower
grades at Ares and Selene, partially offset by the increase in production at our other operations.
Capacity expansions
In 2007, we successfully completed plant expansions at our three original operations, Arcata, Ares and Selene, demonstrating our ability
to deliver projects on schedule. This year, we are undertaking capacity expansions at Arcata, San Jos and Selene which will materially
increase our throughput capacity by 29%. Capacity at Arcata and San Jos will be expanded from 424 to 618 ktpa and from 265 to 530 ktpa
respectively. Throughput at the Selene plant, which processes ore from Pallancata, will increase from 706 to 1,059 ktpa in the fourth
quarter of 2008. These projects are proceeding as planned and are due to be completed in the second half of 2008 with full benefits accruing
in 2009.
Exploration
Greenfield exploration is a key focus for the Group, demonstrated by the amount of resources spent in this area which, in the first half
of 2008, amounted to $10.4 million. Over the past six months we have had significant exploration success with reserves up 16% from 31
December 2007, enabling us to increase our average reserve life to 4.5 years (31 December 2007: 3.9 years). We remain committed to achieving
a minimum 4.0 year reserve life at all our operations, despite the high costs associated with proving reserves in underground mining.
Excluding Moris, which is an open pit mine, our average reserve life is 5.8 years.
In line with our exploration practice and ongoing cost management processes, we periodically review cutoff prices to ensure we are
mining economic grades. We will report revised reserve and resource figures in our full year announcement.
Mine site exploration:
We have discovered a new vein at Arcata, the Nicole vein, located south of the Michelle vein and parallel to the Mariana vein. One
kilometre of the Nicole vein has been dimensioned and the last drill confirms that the structure is still open to the west with the last
drill hole hitting an intercept of 0.66 metres wide with 3.69 g/t Au & 1,921 g/t Ag. The full potential of the Nicole vein is still unknown
but drilling is ongoing. In addition, work continues on the Michelle vein where we have identified 0.3 million tonnes of resources with 2.2
g/t Au and 800 g/t Ag. Similarly, we have identified 0.3 million tonnes of resources on the Soledad vein with 1.8 g/t Au and 700 g/t Ag.
We are also undertaking exploration work in a new area of Ares with an initial drilling programme of 5,820 metres in the second half of
the year. The diamond drilling campaign is based on a comprehensive target definition study completed during H1 2008 and has resulted in the
discovery of a new structure which we are currently assessing.
We have also achieved positive exploration results at San Jos and, as at 31 July 2008, we had proved 560,000 tonnes of new resources
with average grades of 7.85 g/t Au and 570 g/t Ag (30% above budget). Two new structures, Odin and Ayel, have been identified within 200
metres of the Frea vein, which is currently in production. At least an additional 1 million tonnes of resources is expected from these new
structures. Drilling is ongoing at the Odin structure with 1,889 metres drilled and the structure remains open to the west. The last drill
SJD-475 had an interest of 2.55 metres wide with 20.56 g/t Au & 1919 g/t Ag. In addition, splits of the Frea vein have been identified with
very high grades. Drill hole SJD-477 intersected three different splits with 0.30 metres at 25.23 g/t Au and 4944.7 g/t Ag; 0.93 metres at
14.82 g/t Au and 1687.4 g/t Ag; and 1.30 metres at 13.30 g/t Au and 1531.85 g/t Ag.
Prospective exploration:
Liam JV
As mentioned above, we have reached an agreement to acquire a 50% interest in the Liam JV, currently one of the largest single claim
blocks in Peru. The acquisition has significant strategic importance and enables us to leverage our existing infrastructure and regional
knowledge.
To date, 38 exploration prospects have been identified and evaluated in the project area, nine of which have been drilled and include
both high and low sulphidation veins. Generative exploration was carried out in several areas of the property in 2007 and resulted in a
number of new, encouraging prospects. Of particular importance are the Cerro Crespo/Queshca, Aluja and Huacullo projects.
At Cerro Crespo/Queshca, a drilling programme comprising 88 holes covering a total of 13,735 metres has indicated gold and silver
mineralisation with silica, cross-cut by hydrothermal and magmatic breccias which commonly carry high-grade silver, greater than 1,000 g/t.
Queshca is located approximately one kilometre north of Cerro Crespo and is comprised of six zones of outcropping gold-silver mineralisation
with high-grade gold associated with late iron oxide fracture fillings. Drilling has shown the six zones to be possible remnants of an
eroded larger high-sulphidation system with the potential to discover additional, modest-sized, mineralised bodies.
Aluja is a well developed high-sulphidation alteration system hosted within pervasively alunite-quartz altered volcanic rocks. The
alteration area consists of variable silica types, including large areas of upper level, vapour-phase derived, granular silica which
suggests preservation of a possible mineralised system at depth. Over 2,300 samples have been collected from outcropping veins and a 24
kilometre access road and project camp were installed in 2007 which allowed field work to take place with significant results.
Huacullo is a low-sulphidation gold-silver vein system located 18 kilometres northwest of Cerro Crespo/Quescha. At Huacullo multiple
veins outcrop and are present over at least 800 metres of strike length. Previous drilling resulted in several significant silver and gold
intersections which were highlighted by 2.3 metres of 91.5 g/t silver and 11.5 g/t gold. Further field evaluation at Huacullo will continue
to test the size potential of the higher grade veins and possible shoots as well as test for additional veins.
San Felipe
San Felipe, our advanced development project in northern Mexico, is advancing towards feasibility with results expected by the end of
2008. In the second quarter, we acquired full ownership of San Felipe, commenced construction of the ramp and also secured water rights for
the project. During the month of June, 1,545 metres were drilled bringing the total drilled in 2008 to 9,620 metres. Two intercepts in the
Las Lamas vein showed 3.0 metres with 205 g/t Ag, 0.64% Pb, 10.99% Zn and 0.30% Cu and 1.6 metres 101 g/t Ag, 0.31% Pb, 9.17% Zn and 0.32%
Cu. Drilling continues and the goal is to realize at least four million tonnes of total indicated resources by the third quarter of 2008.
Work is currently underway at the Moctezuma project and drilling has commenced at El Gachi, both of which are located approximately 70
kilometres from San Felipe.
Azuca
A two-part drilling campaign is also underway at Azuca, one of the properties in our project pipeline which is wholly owned by
Hochschild and located in southern Peru, approximately 80 kilometres from Selene and Arcata. Infield drilling is ongoing at the western ore
shoot, while final permits are being obtained to begin a 7,500 metre drilling programme on the eastern ore shoot, with three drills already
on site. Our objective is to convert the potential already identified into measured and indicated resources by the end of the year. Given
the proximity of the asset to our existing operations, we envisage leveraging the infrastructure already in place at Selene to process the
Azuca ore should the project advance to an operational stage.
Risks:
The principal risks and uncertainties facing the Group in respect of the year to 31 December 2007 were set out in detail in the Risk
Management section of the Business Review in the 2007 Annual Report and in Note 38 to the 2007 Financial Statements. These risks continue to
apply to the Group in respect of the remaining six months of the current financial year.
The key risks disclosed in the 2007 Annual Report were categorised as:
- Financial risks which include foreign exchange risk and commodity prices;
- Operational risks including the risks associated with the completion of projects, reserve and resource
replacement and the retention of key personnel;
- Political, legal and regulatory risks; and
- Corporate Social Responsibility related risks including health, safety and environmental.
The 2007 Annual Report is available on www.hochschildmining.com
Financial review:
Revenue
Revenue in the first half of 2008 is up 92% on the corresponding period in 2007 due to the effect of higher volume sold and higher
prices of both silver and gold. All legacy forward sales contracts expired during the first half of 2007, allowing us to benefit from the
strong price environment for precious metals. Higher commercial discounts on the sale of concentrate from Arcata and San Jos affected
revenues during H1 2008 and, as a result, we are currently looking to convert all production at Arcata and San Jos to dor
Silver: revenue from silver increased 106% in the first half of 2008 to $148 million (H1 2007: $71.8 million). This change reflects a
higher realised silver price of US$16.70/oz (2007: US$12.60/oz) and a 55% increase in ounces sold.
Gold: revenue from gold increased 72% in the first half of 2008 to $83.7 million (H1 2007: $48.6 million). This figure has been impacted
by a decrease in ounces sold given the anticipated lower grades in Ares and Selene offset by a higher realised gold price of US$906/oz
(2007: US$512/oz).
Average sale prices realised
Six months to Six months to % change
30 June 2008 30 June 2007
Silver ($/oz) 16.7 12.6 33%
Gold ($/oz) 906 512 77%
Costs
Our corporate focus on cost control and operational efficiency, combined with our ability to optimise mining methods, have enabled us to
offset some of the global cost pressures faced by the industry. Average unit costs per tonne for our five underground mines increased 5.7%
from H2 2007 to H1 2008 (from $77.651 to $82.102). This is considered the most meaningful period for comparative purposes since, prior to
that time, the Group had three underground mines in operation, compared to the five that we have today.
1 Our weighted average unit cost in H1 2007 was $58.7 which, together with the average unit cost of $77.65 for H2 2007, results in a total
weighted average unit cost of $69.69 for 2007.
2 This figure excludes the pre-tax $2 million one-off cost of incorporating operations contractors in Peru onto our payroll during the first
half of 2008.
The calculation of weighted average costs excludes Moris as it is an open pit mine with a different operational and cost profile than
our underground operations. By including the Moris mine in our unit cost calculation, we would have seen an increase in our weighted average
unit cost per tonne of only 1.4% at H1 2008 compared to H2 2007.
When taking into account our three original mines (Arcata, Ares and Selene), the average unit cost per tonne increased 14.3% from $63.91
in H2 2007 to $73.05 in H1 2008. This increase results from higher costs associated with labour, materials, supplies and energy. Of the
$73.05 cost per tonne in H1 2008, $2.25 represents a bonus paid to contractors incorporated onto our payroll and is a non-recurring cost.
This change will benefit the Group by aligning the salaries and culture of front line workers and will reduce costs in the long term,
The year on year comparison when taking into account our three original mines is not meaningful given the impact of additional costs
associated with converting Selene's concentrate to dor
Our newest operation in Peru, Pallancata, was also partially affected by the non-recurring cost of the bonus paid to contractors and the
inflationary pressures experienced in Peru. In particular, the average unit cost per tonne at Pallancata increased 12.4% from $50.19 in H2
2007 to $56.40 in H1 2008. Average unit costs per tonne in Peru are expected to decrease by the end of 2008 due to the absorption of the
non-recurring costs in the first half of the year and the effect of the capacity expansions at Arcata and Selene.
The average unit cost per tonne at San Jos decreased 18.4% from $189.4 in H2 2007 to $154.6 in H1 2008 primarily as a result of
increased throughput and efficiency gains resulting from the stabilisation of the new plant processes and of the mine. The reduction in cost
per tonne was achieved despite increases in wages and overall inflation in Argentina. Average unit costs per tonne are expected to continue
to decrease during H2 2008 as we double throughput capacity at San Jos and implement further efficiencies.
We continue to implement cost containment and reduction measures to ensure the business operates at optimum efficiency.
As previously announced, we are undertaking measures to convert concentrate to dorat Arcata and San Jos. Production of dorreduces
working capital requirements and selling discounts.
Administrative Expenses
As anticipated, given the addition of three new operations in H2 2007, administrative expenses increased by $6.5 million to $35.9
million (H1 2007: $29.4 million). This increase was principally driven by additional personnel ($2.5 million), higher remuneration ($2.8
million), costs associated with the Executive Long Term Incentive Plan ($0.4 million), increased expenses in social development projects
involving communities close to Pallancata and Selene ($0.9 million), and higher travel expenses resulting from increased travel to the new
operations in Argentina, Mexico and Peru ($0.4 million).
Selling Expenses
Selling expenses increased by $2.5 million in the first half to $3.6 million (H1 2007: $1.1 million) due to transportation costs
resulting from the higher volume of concentrate produced at San Josand Arcata and the associated export taxes payable in Argentina. Export
taxes in Argentina are levied at 5% for dorand 10% for concentrate. Production at San Jos and Arcata will be migrating to dorduring 2009.
Exploration Expenses
Exploration expenses remained relatively constant in the first half of 2008 at $10.4 million compared to the first half of 2007 ($11.7
million). Exploration expenses are expected to increase in the second half of 2008 as drilling campaigns and other exploration work ramp up
in line with budget.
Impact of the Group's investments in joint ventures and associates
In the first half of 2008 the Group acquired a 39.99% interest in Lake Shore, a Canadian gold mining company listed on the Toronto Stock
Exchange, for a total consideration of $164 million. The acquisition fits with our niche strategy, providing access to reasonably priced,
high grade gold deposits in a mining friendly and mineral rich region of the Americas.
The Group's share of the loss of equity accounted investments in joint ventures and associates resulted in a loss of $4.9 million, which
has had an impact of $0.01 cents on our attributable EPS (from $0.14 cents to $0.13 cents) and of $4.1 million on attributable net earnings
before exceptional items (from $43.0 million to $38.8 million). These losses originated from our investments in a joint venture with
Southwestern Resources Corp. and International Minerals Corporation for the Pacapausa property ($2.1 million), Lake Shore Gold Corp. ($1.7
million) and Cabo Sur (US$1.1 million). Notwithstanding the losses recorded in the Income Statement due to this line item, we believe that
these investments are valuable components of our growth strategy and will have a positive impact in the medium term.
Profit from continuing operations
Profit from continuing operations before exceptional items, net finance costs and income tax increased by 98% to $75.4 million during
the first six months of 2008 from $38.0 million in H1 2007.
Adjusted EBITDA
Adjusted EBITDA increased by 86% over the period to $104.0 million (H1 2007: $55.9 million) mainly driven by higher revenues. Adjusted
EBITDA is calculated as profit from continuing operations before exceptional items, net finance costs and income tax plus depreciation,
amortisation and exploration costs other than personnel and other expenses.
Adjusted EBITDA reconciliation
$ thousands Six months ended 30 Six months ended 30 % change
June 2008 June 2007
Profit from continuing 75,428 38,006 98%
operations before exceptional
items, net finance costs and
income tax
Operating margin 33% 31% -
Plus:
Depreciation in Cost of Goods 17,938 8,983 100%
Sold
Depreciation in Administrative 509 233 118%
Expenses
Exploration Expense 10,362 11,693 (11%)
Share of exploration expense 4,512 - -
in associates and joint
ventures accounted under the
equity method
Minus: - - -
Personnel and other 4,731 2,982 59%
Exploration Expense
Adjusted EBITDA 104,018 55,933 86%
Adjusted EBITDA margin 45% 46% -
Finance income & costs
Finance income decreased by $5.0 million to $5.4 million (H1 2007: $10.4 million) driven by lower interest received from available funds
($5.1 million) following capital expenditure in our operations and acquisitions to secure our growth platform.
Finance costs increased $1.6 million to $5.2 million during the period due to the interest payments of $1.2 million, mainly associated
with the $200 million syndicated loan facility.
Income tax
The effective tax rate increased to 33% in June 2008 as compared to 31% in 2007, mainly due to the inclusion of the Group's share of
losses on its investments in joint ventures and associates against which no benefit can be recognised.
Foreign exchange gain
We have reported a foreign exchange gain of $1.9 million in Hochschild Mining plc generated primarily as a result of the acquisition of
shares in Lake Shore which was effected in Canadian dollars.
Exceptional items
Exceptional items of $6.1 million in the first half of 2008 include; a $2.8 million loss generated by the fair value adjustment of
warrants in Fortuna Silver Mines Inc (2007: gain of $4.2 million) and the impairments of $6.5 million and $0.2 million in the investments in
EXMIN and Mirasol, respectively. These losses were partially offset by a $1.6 million gain on the sale of Fortuna Silver Mines Inc. shares
and a $1.8 million tax credit originated from the losses described above.
Cash flow & balance sheet review:
Working capital
$ thousands As at 30 June 2008 As at 31 December 2007
Current assets
Inventories 55,245 47,012
Trade and other receivables 187,514 134,180
Current liabilities
Trade and other payables (60,883) (52,176)
Pre-shipment loans (38,360) (23,750)
Working capital 143,516 105,266
Our working capital position changed from $105.3 million at 31 December 2007 to $143.5 million at 30 June 2008, primarily due to a $53
million increase in trade and other receivables. This is mainly the result of higher commercial receivables, which increased by $32 million
due to higher sales of concentrate and higher VAT credits of Santa Cruz, MH Mexico and Suyamarca that increased by $22 million (H1 2007: $31
million). In addition, the $8 million increment in inventories, as a result of a higher amount of spare parts, was slightly offset by a
decrease in finished good inventories. All of these effects have been partially offset by higher payables resulting from a higher amount of
pre-shipment loans due to the increase in concentrate sold and higher accrued expenses.
Net debt
$ thousands As at 30 June 2008 As at 31 December 2007
Cash and cash equivalents 209,290 301,426
Long term borrowings 240,733 55,209
Short term borrowings less 29,970 9,419
pre-shipment loans
Net debt / (net cash) 61,413 (236,798)
We have fully drawn down the $200 million syndicated loan facility which was originally negotiated in February 2008. The facility
provides us with access to low cost funding and enabled us to secure part of the Lake Shore and Liam transactions (the Liam JV was signed on
20 August 2008). The remaining balance will enable us to pursue further acquisition opportunities which we believe fit our niche strategy
and add long term shareholder value. We believe that our existing mines and near term projects are fully funded with current cash on the
balance sheet together with future cash which will be generated from these operations.
Cash flow
$ thousands Six months ended 30 Six months ended 30 June 2007 Year ended
June 2008 31 December
2007
Net cash generated from 19,983 21,421 21,404
operating activities
Net cash used in investing (320,837) (88,152) (162,279)
activities
Cash flows generated/(used) in 208,711 (13,055) 6,698
financing activities
Net cash generated from operations during the first half of 2008 of $20 million was lower than in the equivalent period in 2007 mainly
due to higher working capital (H1 2008: $144 million compared to H1 2007: $25 million). The commencement of San Jos, Pallancata and Moris
and the capacity expansions at Arcata and Selene, which caused the increment in investment activities, will generate an increase in net cash
from operating activities during the second half of 2008.
Total capital expenditure
We continue to invest in our production platform to ensure we have the infrastructure in place for future growth. Capital expenditure
has increased by $65.0 million from H1 2007 to H1 2008 due to new investment projects in Peru, Argentina and Mexico. Industry inflation has
also impacted capital expenditure in the first half of 2008.
Capital expenditure1
$ thousands Six months ended Six months ended
30 June 2008 30 June 2007
Arcata 19,149 9,656
Ares 5,793 1,742
Selene 9,282 11,137
Pallancata 7,724 2,538
San Jos 29,687 45,410
Moris 1,402 5,311
San Felipe 57,501 8
Other (including capital advances) 10,845 582
Total 141,383 76,384
1 Includes additions in property, plant and equipment balance sheet account and excludes increases in closure of mine assets.
The increase in total capital expenditure is driven by the acquisition of 100% of the San Felipe project in Mexico for a total
consideration of $51.5 million. In addition, other fixed assets were acquired including water rights for the project at a cost of $1
million. The transaction closed on 4 June 2008 and was funded with existing cash.
Excluding the acquisition of San Felipe, the $88.9 million of capital expenditure at 30 June 2008 is primarily a result of the expansion
projects and mine developments at our operations (H1 2008: $20 million compared to H1 2007: $25 million). In addition, in February 2008 we
acquired from Cementos Pacasmayo S.A.C. the building for our corporate headquarters in Lima, Peru, for a total consideration of $3.6 million
(see note 13: related party transactions).
Dividends:
As a result of our strong financial performance, we are pleased to announce a dividend for the first six months of the year of 2 cents
per share.
Dividend dates 2008
Ex-dividend date 03 September
Record date 05 September
Deadline for return of currency election forms 09 September
Payment date 23 September
Dividends are 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.
Statement of Directors' responsibilities:
The Directors confirm that to the best of their knowledge:
(a) the condensed set of consolidated financial statements has been prepared in accordance with IAS 34 *Interim Financial Reporting*.
(b) the interim management report includes a fair review of the information required by DTR 4.2.7 R (being an indication of important
events that have occurred during the first six months of the financial year, and their impact on the half-yearly report and a description of
the principal risks and uncertainties for the remaining six months of the financial year); and
(c) the interim management report includes a fair review of the information required by DTR 4.2.8 R (being disclosure of related party
transactions that have taken place in the first six months of the financial year and that have materially affected the financial position or
the performance of the Group during the period and any changes in the related party transactions described in the last annual report that
could have a material effect on the financial position or performance of the Group in the first six months of the financial year).
The names of the current directors of Hochschild Mining plc are listed below:
Eduardo Hochschild - Executive Chairman
Roberto Dao - Deputy Chairman
Alberto Beeck - Non-Executive Director
Jorge Born Jr - Non-Executive Director
Malcolm Field - Non-Executive Director
Nigel Moore - Non-Executive Director
Dionisio Romero - Non-Executive Director
For and on behalf of the Board:
Roberto Dao
Deputy Chairman
20 August 2008
Independent Review Report to Hochschild Mining plc
We have been engaged by Hochschild Mining plc (the Company) to review the condensed set of consolidated financial statements in the
half-yearly financial report for the six months ended 30 June 2008 which comprises the interim condensed consolidated balance sheet, the
interim condensed consolidated income statement, the consolidated cash flow statement, the consolidated statement of changes in equity and
the related notes 1 to 16. We have read the other information contained in the half yearly financial report and considered whether it
contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the company in accordance with guidance contained in ISRE 2410 (UK and Ireland) "Review of Interim
Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the
conclusions we have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for
preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial
Services Authority.
As disclosed in note 2, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European
Union. The condensed set of consolidated financial statements included in this half-yearly financial report has been prepared in accordance
with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of consolidated financial statements in the
half-yearly financial report based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim
Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United
Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of consolidated financial
statements in the half-yearly financial report for the six months ended 30 June 2008 is not prepared, in all material respects, in
accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Services Authority.
Ernst & Young LLP
London
20 August 2008
The maintenance and integrity of the Hochschild Mining plc web site is the responsibility of the directors; the work carried out by the
auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may
have occurred to the financial information since it was initially presented on the web site. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Interim Consolidated Income Statement
Year ended 31 December Six-month
period ended 30 June Year ended 31 December
(Unaudited)
(Unaudited) 2007
2007 2008
2007
Before exceptional items Notes Before exceptional items Exceptional items Total Before exceptional items
Exceptional items Total Before exceptional items Exceptional items Exceptional items
(in thousand of US dollars) (in thousand of US dollars)
(in thousand of US dollars) (in thousand of US dollars)
Continuing operations
305,021 5 231,846 - 231,846 121,021 -
121,021 305,021 - -
(106,084 ) (100,134 ) - (100,134 ) (42,042 )
- (42,042 ) (106,084 ) - - )
198,937 131,712 - 131,712 78,979 -
78,979 198,937 - -
(69,167 ) (35,932 ) - (35,932 ) (29,439 )
- (29,439 ) (69,167 ) - - )
(26,728 ) (10,362 ) - (10,362 ) (11,693 )
- (11,693 ) (26,728 ) - - )
(2,780 ) (3,581 ) - (3,581 ) (1,107 )
- (1,107 ) (2,780 ) - - )
6,067 1,122 - 1,122 2,322 -
2,322 6,067 932 932
(2,399 ) (2,622 ) (47 ) (2,669 ) (1,056 )
(47 ) (1,103 ) (2,399 ) (1,501 ) (1,501 )
- (4,909 ) - (4,909 ) - -
- - - -
103,930 75,428 (47 ) 75,381 38,006
(47 ) 37,959 103,930 (569 ) (569 )
19,783 5,353 1,613 6,966 10,398
4,198 14,596 19,783 5,474 5,474
(7,517 ) (5,223 ) (9,461 ) (14,684 ) (3,663 )
- (3,663 ) (7,517 ) (71 ) (71 )
(4,363) 1,932 - 1,932 (729 ) -
(729 ) (4,363) - - )
111,833 77,490 (7,895 ) 69,595 44,012
4,151 48,163 111,833 4,834 4,834
(34,453 ) 7 (24,386 ) 1,754 (22,632 ) (16,705 )
(1,239 ) (17,944 ) (34,453 ) (1,299 ) (1,299 )
77,380 53,104 (6,141 ) 46,963 27,307
2,912 30,219 77,380 3,535 3,535
Attributable to:
81,538 38,859 (6,141 ) 32,718 29,944
2,912 32,856 81,538 3,535 3,535
(4,158 ) 14,245 - 14,245 (2,637 )
- (2,637 ) (4,158 ) - - )
77,380 53,104 (6,141 ) 46,963 27,307
2,912 30,219 77,380 3,535 3,535
Basic and diluted earnings per ordinary share from 8 0.11
0.11 0.28
continuing operations (expressed in U.S. dollars per
share)
Interim Consolidated Balance Sheet
Notes (Unaudited) As at 31
As at 30 December
June 2007
2008
(in thousand of US dollars)
ASSETS
Non-current assets
Property, plant and equipment 9 386,222 263,062
Intangibles 2,724 2,896
Investments accounted under equity method 4 162,313 -
Available-for-sale financial assets 10,442 15,100
Trade and other receivables 22,695 25,518
Income tax receivable 826 616
Deferred income tax assets 16,913 22,400
602,135 329,592
Current assets
Inventories 55,245 47,012
Trade and other receivables 187,514 134,180
Income tax receivable 1,231 1,003
Derivative financial instruments 6,280 8,039
Cash and cash equivalents 10 209,290 301,426
459,560 491,660
Total assets 1,061,695 821,252
EQUITY AND LIABILITIES
Capital and reserves attributable to shareholders of the Parent
Equity share capital 146,466 146,466
Share premium 395,928 395,928
Other reserves (206,553 ) (205,556)
Retained earnings 239,736 229,202
575,577 566,040
Minority interest 66,226 50,008
Total equity 641,803 616,048
Non-current liabilities
Trade and other payables 891 859
Borrowings 11 240,733 55,209
Provisions 32,204 30,821
Deferred income tax liabilities 9,098 9,091
282,926 95,980
Current liabilities
Trade and other payables 60,883 52,176
Borrowings 11 68,330 33,169
Provisions 3,996 13,029
Income tax payable 3,757 10,850
136,966 109,224
Total liabilities 419,892 205,204
Total equity and liabilities 1,061,695 821,252
Interim Consolidated Cash Flow Statement
Six-month period ended Year ended
30 June 31
December
Notes (Unaudited) (Unaudited) 2007
2008 2007
(in thousands of US dollars)
Cash flows from operating activities
Cash generated from operations 14 31,650 26,347 34,338
Interest received 4,804 9,982 18,390
Interest paid (1,269) (974) (1,217)
Payments of mine closure costs (623) (1,071) (2,023)
Tax paid (14,579) (12,863) (28,084)
Net cash generated from operating activities 19,983 21,421 21,404
Cash flows from investing activities
Purchase of property, plant and equipment (150,859) (66,862) (134,119)
Investment in an associate - Lake Shore 4 (163,997) - -
Purchase of available-for-sale financial assets (6,056) (486) (4,669)
Purchase of software licences - - (876)
Loan to Exmin S.A. de C.V. - (746) (746)
Loan to Minera Andes Inc. - (20,076) (22,036)
Proceeds from sale of property, plant and equipment 63 18 167
Other 12 - -
Net cash used in investing activities (320,837) (88,152) (162,279)
Cash flows from financing activities
Proceeds of borrowings 278,748 86,156 177,168
Repayment of borrowings (62,150) (73,590) (150,194)
Transaction costs associated with borrowing (2,408) - -
Dividends paid (22,384) (16,281) (24,729)
Transaction costs associated with issue of shares - (11,722) (11,722)
Capital contribution from minority shareholders 16,905 2,382 16,175
Net cash generated from/(used in) financing 208,711 (13,055) 6,698
activities
Net decrease in cash and cash equivalents during the (92,143) (79,786) (134,177)
period
Exchange difference 7 3 60
Cash and cash equivalents at beginning of period 301,426 435,543 435,543
Cash and cash equivalents at end of period 10 209,290 355,760 301,426
Interim Consolidated Statement of Changes in Equity
Other Reserves
Notes Equity share capital Share premium Unrealised
gain/(loss) on Cumulative translation adjustment Merger reserve Totalotherreserves Retained earnings
Capital and reserves attributable to shareholders of the Parent Capital and reserves attributable to Capital and
available-for-sale
financial assets
shareholders reserves
of the Parent attributable to
(in thousands of US dollars)
152,577 146,466 396,156 1,374
3,633 (210,046) (205,039) 152,577 490,160 490,160
490,160
- - - 1,415
- - 1,415 - 1,415 1,415
1,415
- - - (927)
- - (927) - (927) (927)
(927)
- - - -
(1,005) - (1,005) - (1,005) (1,005)
(1,005)
- - - 488
(1,005) - (517) - (517) (517)
(517)
85,073 - - -
- - - 85,073 85,073 85,073
85,073
85,073 - - 488
(1,005) - (517) 85,073 84,556 84,556
84,556
- - (228) -
- - - - (228) (228) (228)
(8,448) 12 - - -
- - - (8,448) (8,448) (8,448)
(8,448)
- - - -
- - - - - - -
- - - -
- - - - - - -
229,202 146,466 395,928 1,862
2,628 (210,046) (205,556) 229,202 566,040 566,040
566,040
- - - (2,639)
- - (2,639) - (2,639) (2,639)
(2,639)
- - - 916
- - 916 - 916 916 916
- - - 1,979
- - 1,979 - 1,979 1,979
1,979
- - - (151)
- - (151) - (151) (151)
(151)
- - - (1,613)
- - (1,613) - (1,613) (1,613)
(1,613)
- - - 390
- - 390 - 390 390 390
- - - -
121 - 121 - 121 121 121
- - - (1,118)
121 - (997) - (997) (997)
(997)
32,718 - - -
- - - 32,718 32,718 32,718
32,718
32,718 - - (1,118)
121 - (997) 32,718 31,721 31,721
31,721
- - - -
- - - - - - -
- - - -
- - - - - - -
(22,184) 12 - - -
- - - (22,184) (22,184) (22,184)
(22,184)
239,736 146,466 395,928 744
2,749 (210,046) (206,553) 239,736 575,577 575,577
575,577
152,577 146,466 396,156 1,374
3,633 (210,046) (205,039) 152,577 490,160 490,160
490,160
- - - 2,935
- - 2,935 - 2,935 2,935
2,935
- - - (1,032)
- - (1,032) - (1,032) (1,032)
(1,032)
- - - -
588 - 588 - 588 588 588
- - - 1,903
588 - 2,491 - 2,491 2,491
2,491
32,856 - - -
- - - 32,856 32,856 32,856
32,856
32,856 - - 1,903
588 2,491 32,856 35,347 35,347
35,347
- - (228) -
- - - - (228) (228) (228)
- - - -
- - - - - - -
185,433 146,466 395,928 3,277
4,221 (210,046) (202,548) 185,433 525,279 525,279
525,279
Notes to the Interim Condensed 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 office is located at 46
Albemarle Street, London W1S 4JL, 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 four operating mines (Ares, Arcata,
Selene, Pallancata) located in Southern Peru, one operating mine (San Jos) located in Argentina and one operating mine (Santa Maria de
Moris) located in Mexico. The Group also has a portfolio of projects located across Peru, Mexico, Chile, Argentina and Canada at various
stages of development.
These group condensed consolidated interim financial statements were approved for issue by the Board of Directors on 20 August 2008.
2 Significant Accounting Policies
(a) Basis of preparation
These consolidated financial statements set out the Group's financial position as at 30 June 2008 and 31 December 2007 and its financial
operations and cash flows for the periods ended 30 June 2008, 31 December 2007 and 30 June 2007.
These interim consolidated financial statements of the Group for the six months ended 30 June 2008 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 2007 as published in the 2007 Annual Report.
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 2007. 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 2007, 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 and
did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report and did not
contain a statement under s237(2) or s237(3) of the Companies Act 1985.
The impact of the seasonality or cyclicality on operations is not regarded as significant on the interim consolidated financial
statements.
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 and derivatives and available-for-sale financial
instruments 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.
(b) Changes in accounting policies and disclosures
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 2007, except for the adoption of the following
interpretations which had no impact on the financial position or performance of the Group.
* IFRIC 11 IFRS 2 - Group and Treasury Share Transactions.
This interpretation requires arrangements whereby an employee is granted rights to an entity's equity instruments, to be accounted for
as an equity-settled scheme, even if the entity buys the instruments from another party, or the shareholders provide the equity instruments
needed.
* IFRIC 14 IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction.
This interpretation provides guidance on how to asses the limit on the amount of surplus in a defined benefit scheme that can be
recognised as an asset under IAS 19 Employee Benefits.
(c) Comparatives
Where applicable, comparatives have been reclassified on the same basis as current period figures.
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. The Group has a portfolio of projects in various countries including Peru, Argentina, Mexico, Chile and
Canada. The geographical segment is the Group's secondary reporting format.
4 Acquisition of associate
Lake Shore
The Group acquired a 39.99% interest in Lake Shore, a gold mining company listed on the Toronto Stock Exchange for a total consideration
of US$163,997,000. The acquisition was made in the following tranches:
� 19.99% acquired through a share issue on 19 February 2008 for US$64,806,000;
� 15.00% acquired through a share issue on 13 June 2008 for US$78,029,000, and
� 5.00% acquired from a third party on 23 June 2008 for US$21,162,000.
The interest in Lake Shore gives the Group the right to exercise significant influence over that company. In compliance with the Group's
policy and IAS 28, the investment has been treated as an associate and accounted for using the equity method.
Management has provisionally assessed the fair value of the Group's interest in the assets and liabilities acquired as being
US$138,065,000, resulting in goodwill of US$25,932,000 on acquisition.
5 Revenue
Six-month period ended30 June Year ended31
December
(Unaudited)2008 (Unaudited)2007 2007
(in thousands of US dollars)
Gold (from dorbars) 64,815 40,591 105,975
Silver (from dorbars) 55,507 26,951 64,713
Concentrate 111,473 53,423 134,212
Services 51 56 121
231,846 121,021 305,021
Concentrate is made up of:
Six-month period ended30 June Year ended31
December
(Unaudited) (Unaudited )2007 2007
2008
(in thousands of US dollars)
Gold 18,898 8,017 19,275
Silver 92,538 44,882 114,127
Other minerals 37 524 810
Total concentrate 111,473 53,423 134,212
The total volume of gold and silver sold are as follows:
Six-month period ended30 June Year ended 31
December
(Unaudited)2008 (Unaudited )2007 2007
(in thousands of ounces)
Gold 92 95 198
Silver 8,842 5,701 13,670
6 Exceptional items
The Group recognised the following exceptional items:
Six-month period ended30 June Year ended31
December
(Unaudited)2008 (Unaudited)2007 2007
(in thousands of US dollars)
Other income:
Decrease in provision for mine * * 450
closure1
Recognition of assets on * * 482
restructuring2
* * 932
Other expenses:
Loss on sale of property, (47) (47) (467)
plant and equipment
Loss on sale of Sipan * * (1,034)
(subsidiary)3
(47) (47) (1,501)
Finance income:
Gain on sale of 1,613 * *
available-for-sale financial
assets4
Discount on purchase of EXMIN * * 1,143
shares5
Gain from changes in the fair * 4,198 4,331
value of financial
instruments6
1,613 4,198 5,474
Finance cost:
Loss from changes in the fair (2,757) * *
value of financial
instruments6
Impairment of (6,704) * (71)
available-for-sale financial
assets7
(9,461) * (71)
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. The amount recorded in 2007 represents a reduction in cost (being the VAT component now deemed to
be recoverable) due to the transfer of the mine rehabilitation provision from Minera Sipan to Minera Ares as part of the internal
restructuring prior to the disposal of Minera Sipan.
2 Represents VAT assets that will now be recoverable due to transfer of assets from Minera Sipan to Minera Ares as a result of the
internal restructuring.
3 On 28 December 2007, the Group's wholly owned subsidiary, Compa Minera Sipan was sold to Avignon Business Corporation (a third
party) for US$199,996. This disposal resulted in a loss to the Group of US$1,034,000.
4 Corresponds to the sale of 1,660,150 shares in Fortuna Silver Mines Inc. at a price of CAD$2 per share for a total consideration of
CAD$3,320,300 (US$3,321,450) resulting in an unrealised gain of US$1,613,000 which has been recycled from equity into the income statement.
5 On 9 July 2007 the Group acquired 7,875,000 common shares of EXMIN for US$3,000,000. In addition, on the same date, the Group
converted an outstanding loan receivable from EXMIN of US$1,570,000 into 4,127,231 common shares. These shares were acquired at a discount
of 20% to the market price, resulting in a gain on the issue of shares.
6 Mainly corresponds to the change in the fair value of 2,475,355 warrants over the same number of shares in Fortuna Silver Mine Inc.
The expiry date of the warrants is 27 June 2010 and 17 November 2010 (in respect of 862,117 and 1,613,238 warrants respectively).
7 Corresponds to the impairment of the investments in EXMIN Resources Inc. and Mirasol Resources Inc. shares, amounting to
US$6,511,000, and US$193,000, respectively.
7 Income Tax Expense
Six-month period ended30 June Year ended31
December
(Unaudited) (Unaudited) 20071
20081 20071
(in thousands of US dollars)
Current tax from continuing 15,091 20,643 44,933
operations
Deferred income tax relating 6,649 (2,813) (10,342)
to origination and reversal of
temporary differences from
continuing operations
Withholding taxes 892 114 1,161
Total taxation charge in the 22,632 17,944 35,752
income statement
1 Amounts relating to items classified as exceptional items for the six-months ended 30 June 2008, 30 June 2007 and for the year
ended 31 December 2007 were an income of US$1,754,000, an expense of US$1,239,000 and an expense of US$1,299,000 respectively.
8 Basic and diluted earnings per share
Earnings per share ("EPS") is calculated by dividing profit for the period attributable to equity shareholders of the Company by the
weighted average number of ordinary shares in issue during the period.
The Company has no potential dilutive ordinary shares.
As at 30 June 2008, 30 June 2007 and 31 December 2007, earnings per share has been calculated as follows:
Six-month period ended30 June Year ended
31
December
(Unaudited) (Unaudited) 2007
2008 2007
Profit from continuing 32,718 32,856 85,073
operations attributable to
equity holders of the Company
(US$000)
Weighted average number of 307,350 307,350 307,350
ordinary shares in issue
(*000)
Basic earnings/(loss) per
share from:
Before exceptional items (US$) 0.13 0.10 0.27
Exceptional items (US$) (0.02) 0.01 0.01
Continuing operations (US$) 0.11 0.11 0.28
9 Property, Plant and Equipment
Exploration and Mining properties Land and buildings Plant and equipment Vehicles
Mine closure asset Construction in Total
evaluation costs and development
progress and capital
costs
advances
US$(000)
Year ended 31 December 2007
Cost
At 1 January 2007 1,282 106,011 23,706 53,456 1,528
34,516 23,851 244,350
Additions 8,279 48,004 1,004 9,450 400
1,056 77,601 145,794
Change in discount rate _ _ _ _ _
2,611 _ 2,611
Disposals _ _ (110) (2,221) (104)
_ (6) (2,441)
Sale of subsidiary - Colorada _ _ _ (2) _
_ _ (2)
Change in mine closure _ _ _ _ _
105 _ 105
estimate
Transfers and other movements (3,535) 3,535 40,717 45,114 976
_ (86,807) _
Foreign exchange 8 161 118 149 24
_ (620) (160)
At 31 December 2007 6,034 157,711 65,435 105,946 2,824
38,288 14,019 390,257
Accumulated depreciation
At 1 January 2007 _ 37,360 9,417 24,554 528
31,104 _ 102,963
Depreciation for the year _ 12,665 3,548 8,767 421
599 _ 26,000
Disposals _ _ (110) (1,615) (82)
_ _ (1,807)
Sale of subsidiary - Colorada _ _ _ (2) _
_ _ (2)
Foreign exchange _ 2 3 45 (7)
_ (2) 41
At 31 December 2007 _ 50,027 12,858 31,749 860
31,703 (2) 127,195
Net book amount at 31 December 6,034 107,684 52,577 74,197 1,964
6,585 14,021 263,062
2007
Period ended 30 June 2008
Cost
At 1 January 2008 6,034 157,711 65,435 105,946 2,824
38,288 14,019 390,257
Additions1 57,920 19,582 3,690 4,069 226
_ 55,896 141,383
Change in discount rate _ _ _ _ _
205 _ 205
Disposals _ _ _ (117) (127)
_ _ (244)
Change in mine closure _ _ _ _ _
(367) _ (367)
estimate
Transfers and other movements (2,192) 1,052 9,237 15
_ (8,112) _
Foreign exchange 491 (17) (30) (3) 7
_ (2) 446
At 30 June 2008 64,445 175,084 70,147 119,132 2,945
38,126 61,801 531,680
Accumulated depreciation
At 1 January 2008 _ 50,027 12,858 31,749 860
31,703 (2) 127,195
Depreciation for the period _ 8,783 2,870 6,121 265
362 _ 18,401
Disposals _ _ _ (54) (77)
_ _ (131)
Foreign exchange _ (18) _ 7 2
_ 2 (7)
At 30 June 2008 _ 58,792 15,728 37,823 1,050
32,065 - 145,458
Net book amount at 30 June 64,445 116,292 54,419 81,309 1,895
6,061 61,801 386,222
2008
10 Cash and Cash Equivalents
(Unaudited) As at
As at 30 31 December
June 2008 2007
(in thousands of US dollars)
Cash at bank 143 539
Liquidity funds1 169,750 285,015
Current demand deposit accounts2 25,632 8,499
Time deposits3 13,765 7,373
Cash and cash equivalents considered for 209,290 301,426
the cash flow statement
1 The liquidity funds are mainly invested in certificate of deposits, commercial papers and floating rate notes with a weighted
average annual effective interest rate of 3.57% and a weighted average maturity of 45 days as at 30 June 2008 (5.09% and 34 days as at 31
December 2007 respectively).
2 Relates to bank accounts which are freely available and do not bear interest.
3 The effective interest rates as at 30 June 2008 were between 3% and 5%. As at 31 December 2007 the effective interest rate was
5.26%. These deposits have an average maturity of one and five days respectively.
The fair value of cash and cash equivalents approximates its book value.
11 Borrowings
(Unaudited) As at 31 December 2007
As at 30 June 2008
Non-current Current Non-current Current
US$(000)
Secured bank loans1 199,735 39,907 - 23,750
Bank overdrafts (unsecured) - 9 - -
Amount due to minority 40,998 26,205 55,209 9,299
shareholders2
Amounts due to related parties - 2,209 - 120
240,733 68,330 55,209 33,169
1 Secured bank loans
As at 30 June 2008, the balance corresponds to:
- Pre shipment loans for a total amount of US$16,218,000 in Compa Minera Ares, US$4,142,000 in Minera Suyamarca and US$18,000,000 in
Minera Santa Cruz. These obligations accrue an effective annual interest rate ranging from 5.8% to 6.85% and are guaranteed by the
inventories of the company.
- Leasing agreement with Banco de Credito for an amount of US$3,000,000 in Compa Minera Ares. This obligation accrues an effective
annual interest rate of 7.15%.
- Loan facility with a syndicate of lenders with JP Morgan Chase Bank N.A. acting as the administrative agent. The balance as at 30
June 2008 is comprised of the secured term loan facility of US$200,000,000 plus accrued interest of US$690,000 and net of transaction costs
of US$2,408,000. This obligation accrues an effective interest rate of 4.19% and is guaranteed by all the equity share capital, free and
clear of any liens, of Compa Minera Ares S.A.C.
As at 31 December 2007, the balance corresponds to:
- Pre shipment loans for a total amount of US$23,750,000 in Minera Suyamarca S.A.C. and Minera Santa Cruz. These obligations accrue
an effective annual interest rate ranging from 6.00% to 7.50% and are guaranteed by the inventories of the company.
2 Amount due to minority shareholders
As at 30 June 2008 the balance mainly corresponds to a loan from Minera Andes Inc. to Minera Santa Cruz S.A. for an amount of
US$59,574,000. There is also a loan of US$7,629,000 to Minera Santa Cruz S.A. from Minera Andes S.A. These loans have interest rates between
7.86% and 12%.
As at 31 December 2007 the balance mainly corresponds to a loan from Minera Andes Inc. to Minera Santa Cruz S.A. for an amount of
US$57,065,000. There is also a loan of US$7,358,000 to Minera Santa Cruz S.A. from Minera Andes S.A. These loans have interest rates between
7.86% and 12%.
12 Dividends Paid and Proposed
Amount
US$(000)
Year ended 31 December 2007
Total dividends paid during the year1 24,729
Total dividends declared after year-end and not provided for2 22,184
Six months ended 30 June 2008
Total dividends paid during the period2 22,384
Total dividends declared after period-end and not provided for 6,147
1 Corresponds to dividends paid or provided for during 2007 of US$8,448,000 and the payment of accrued dividends as at 31 December
2006 of US$16,281,000.
2 Corresponds to dividends declared after 31 December 2007 to Pelham Investment Corporation, Navajo Overseas Corporation and public
shareholders. Included in the total dividends paid during 2008 is US$200,000 payment to Dona Limited for dividends declared in 2006.
Dividends per share
A dividend in respect of the year ended 31 December 2007 of US$0.072 per share, amounting to US$22,184,667, was approved at the Annual
General Meeting held on 9 May 2008.
13 Related party transactions
During the period, in addition to the normal arrangements the Group has with its related parties, the Group purchased a building from
Cementos Pacasmayo, a company under common control to that of the Group, for US$3,622,000 representing an arms length purchase price.
14 Notes to the Cash Flow Statement
Six-month period ended30 June Year ended
31
December
(Unaudited) (Unaudited) 2007
2008 2007
(in thousands of US dollars)
Reconciliation of profit for the
period to net cash generated from
operating activities
Profit for the period 46,963 30,219 80,915
Adjustments to reconcile group
operating profit to net cash
inflows from operating
activities:
Depreciation 18,349 9,216 25,139
Amortisation of software licences 98 * 71
Loss on sale of property, plant 47 47 467
and equipment
Impairment of available-for-sale 6,704 * 71
financial assets
Gain on sale of (1,613) * *
available-for-sale financial
assets
Loss on sale of Sipan * * 1,034
(subsidiary)
Share of post tax losses of 4,909 * *
associates and joint ventures
accounted under equity method
Decrease in provision for mine * (740) (3,097)
closure
Finance income (5,353) (14,596) (25,257)
Finance costs (excluding 7,980 3,663 7,517
impairment of available-for-sale
financial assets)
Income tax expense 22,632 17,944 35,752
Provision for claims * * 27
Other 128 1,074 (185)
Increase/(decrease) of cash flows
from operations due to changes in
assets and liabilities:
Trade and other receivables (71,312) (20,497) (74,420)
Income tax receivable (438)
Derivative financial instruments (998) 3,498 2,314
Inventories (8,233) (3,615) (30,479)
Trade and other payables 19,013 2,972 10,480
Provisions (7,226) (2,838) 3,989
Cash generated from operations 31,650 26,347 34,338
15 Commitments
a) 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. Generally, 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, except where specified below.
The Group continually reviews its requirements under the agreements and determines on an annual basis whether to proceed with the
financial commitment. Based on management�s current intention regarding these projects, the commitments at the balance sheet date are as
follows:
As at As at
30 June 31
2008 December
2007
(in thousands of US dollars)
Commitment for the subsequent twelve months 2,481 2,675
Later than one year 25,981 59,355
b) Capital commitments
The future capital commitments of the Group are as follows:
As at As at
30 June 31
2008 December
2007
(in thousands of US dollars)
Peru 7,889 15,113
Argentina 31,907 -
Mexico 14,788 -
16 Subsequent events
* On 20 August 2008, the Group signed an assignment agreement with Newmont Peru Limited ('Newmont') by which Newmont assigned all of its
rights to acquire, explore and exploit, under its Venture Agreement with Southwestern Resources Corp. ('Southwestern'), the Liam properties
located in Peru, and transferred its 50% interest in the joint venture with Southwestern, to the Group for a consideration of
US$33,300,000.
Reserves & Resources
Attributable metal reserves
As at 30 June 2008
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 1,491,356 448 1.22 21.5 58.4 25.0
Probable 608,161 477 1.13 9.3 22.1 10.7
Total 2,099,517 456 1.19 30.8 80.6 35.6
Ares
Proved 513,809 182 5.54 3.0 91.6 8.5
Probable 311,354 139 5.01 1.4 50.2 4.4
Total 825,163 166 5.34 4.4 141.8 12.9
Selene
Proved 674,032 206 1.47 4.5 31.8 6.4
Probable 188,818 313 1.81 1.9 11.0 2.6
Total 862,850 229 1.54 6.4 42.8 8.9
Pallancata
Proved 2,693,091 329 1.25 28.4 108.4 35.0
Probable 832,123 332 1.15 8.9 30.8 10.7
Total 3,525,214 329 1.23 37.3 139.1 45.7
San Jos
Proved 417,103 433 5.97 5.8 80.1 10.6
Probable 886,298 417 6.01 11.9 171.2 22.2
Total 1,303,402 422 6.00 17.7 251.2 32.8
Moris
Proved 1,329,940 5 1.49 0.2 63.8 4.0
Probable 105,208 5 1.34 0.0 4.5 0.3
Total 1,435,148 5 1.48 0.2 68.3 4.3
Total
Proved 7,119,332 277 1.90 63.4 434.0 89.4
Probable 2,931,961 354 3.07 33.4 289.8 50.8
Total 10,051,293 300 2.24 96.8 723.8 140.2
Attributable metal resources
As at 30 June 2008
Resource category Measured Indicated Measured and Inferred Ag Au Zn Pb Cu Ag Eq Ag Au
Zn Pb Cu
indicated
(t) (t) (t) (t) (g/t) (g/t) (%) (%) (%) (g/t) (moz) (koz)
(kt) (kt) (kt)
Arcata
Measured 1,388,010 519 1.41 -.- -.- -.- 604 23.2 63.1
-.- -.- -.-
Indicated 557,482 560 1.33 -.- -.- -.- 640 10.0 23.8
-.- -.- -.-
Total 1,945,492 531 1.39 -.- -.- -.- 614 33.2 87.0
-.- -.- -.-
Inferred 2,027,182 445 1.26 -.- -.- -.- 521 29.0 82.4
-.- -.- -.-
Ares
Measured 525,436 192 5.83 -.- -.- -.- 542 3.2 98.5
-.- -.- -.-
Indicated 311,710 148 5.38 -.- -.- -.- 471 1.5 53.9
-.- -.- -.-
Total 837,146 176 5.66 -.- -.- -.- 515 4.7 152.4
-.- -.- -.-
Inferred 101,171 173 3.48 -.- -.- -.- 381 0.6 11.3
-.- -.- -.-
Selene
Measured 662,836 223 1.58 -.- -.- -.- 318 4.7 33.7
-.- -.- -.-
Indicated 191,278 330 1.91 -.- -.- -.- 445 2.0 11.7
-.- -.- -.-
Total 854,114 247 1.65 -.- -.- -.- 346 6.8 45.4
-.- -.- -.-
Inferred 952,580 204 1.01 -.- -.- -.- 264 6.2 30.8
-.- -.- -.-
Pallancata
Measured 2,344,333 383 1.46 -.- -.- -.- 470 28.8 109.9
-.- -.- -.-
Indicated 864,066 403 1.41 -.- -.- -.- 488 11.2 39.3
-.- -.- -.-
Total 3,208,399 388 1.45 -.- -.- -.- 475 40.1 149.2
-.- -.- -.-
Inferred 511,445 369 1.25 -.- -.- -.- 444 6.1 20.6
-.- -.- -.-
San Jos
Measured 382,622 507 8.63 -.- -.- -.- 1025 6.2 106.2
-.- -.- -.-
Indicated 891,803 483 6.46 -.- -.- -.- 870 13.8 185.1
-.- -.- -.-
Total 1,274,426 490 7.11 -.- -.- -.- 916 20.1 291.3
-.- -.- -.-
Inferred 464,902 356 5.33 -.- -.- -.- 676 5.3 79.7
-.- -.- -.-
Moris
Measured 1,911,730 5 1.31 -.- -.- -.- 83 0.3 80.6
-.- -.- -.-
Indicated 135,739 5 1.19 -.- -.- -.- 76 0.0 5.2
-.- -.- -.-
Total 2,047,469 5 1.30 -.- -.- -.- 83 0.3 85.8
-.- -.- -.-
Inferred 18,689 3 0.80 -.- -.- -.- 51 0.0 0.5
-.- -.- -.-
San Felipe
Measured 1,393,716 69 0.02 7.12 3.10 0.39 315 3.1 0.9
99.3 43.1 5.5
Indicated 1,079,248 67 0.06 6.34 3.06 0.35 292 2.3 2.1
68.4 33.0 3.8
Total 2,472,964 68 0.04 6.78 3.08 0.38 305 5.4 3.0
167.7 76.1 9.3
Inferred 1,084,812 68 0.20 5.68 2.64 0.18 264 2.4 6.9
61.6 28.6 1.9
TOTAL
Measured 8,608,683 251 1.78 1.15 0.50 0.06 398 69.6 492.9
99.3 43.1 5.5
Indicated 4,031,327 316 2.48 1.70 0.82 0.09 524 41.0 321.2
68.4 33.0 3.8
Total 12,640,010 272 2.00 1.33 0.60 0.07 438 110.6 814.0
167.7 76.1 9.3
Inferred 5,160,781 299 1.40 1.19 0.56 0.04 421 49.6 232.2
61.6 28.6 1.9
Note: Resources include undiscounted reserves, where resources are attributable to joint venture partner, resources 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 2007 Depletion (1) Addition(2) June 2008 Net difference % change
Peru
Arcata Resource 70.3 - 2.1 72.4 2.1 3%
Reserve 32.4 (4.7) 8.0 35.6 3.3 10%
Ares Resource 16.8 - (1.7) 15.1 (1.7) -10%
Reserve 14.6 (3.2) 1.4 12.9 (1.7) -12%
Selene Resource 18.5 - (0.9) 17.6 (0.9) -5%
Reserve 9.6 (1.6) 0.9 8.9 (0.7) -7%
Pallancata Resource 83.2 - 10.7 93.9 10.7 13%
Reserve 41.4 (1.9) 36.6 76.1 34.7 84%
Peru Totals: Resource 188.8 - 10.1 198.9 10.1 5%
Reserve 98.0 (11.4) 46.9 133.6 35.6 36%
Argentina
San Jos Resource 90.1 - 3.4 93.4 3.4 4%
Reserve 66.2 (4.2) 2.3 64.2 (1.9) -3%
Argentina Totals: Resource 90.1 - 3.4 93.4 3.4 4%
Reserve 66.2 (4.2) 2.3 64.2 (1.9) -3%
Mexico
Moris Resource 9.5 - (1.6) 7.8 (1.6) -17%
Reserve 7.7 (1.3) (0.3) 6.2 (1.6) -20%
San Felipe Resource 27.6 - 5.8 33.5 5.8 21%
Reserve - - - - - 0%
Mexico Totals: Resource 37.1 - 4.2 41.3 4.2 11%
Reserve 7.7 (1.3) (0.3) 6.2 (1.6) -20%
Totals: Resource 316.0 - 17.7 333.7 17.7 6%
Reserve 172.0 (16.9) 48.9 204.0 32.0 19%
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 December 2007 Att.1 June Net difference % change
attributable 2008
Att. 1
Peru
Arcata Resource 100% 70.3 72.4 2.1 3%
Reserve 32.4 35.6 3.3 10%
Ares Resource 100% 16.8 15.1 (1.7) -10%
Reserve 14.6 12.9 (1.7) -12%
Selene Resource 100% 18.5 17.6 (0.9) -5%
Reserve 9.6 8.9 (0.7) -7%
Pallancata Resource 60% 49.9 56.3 6.4 13%
Reserve 24.9 45.7 20.8 84%
Peru Totals: Resource 155.5 161.4 5.9 4%
Reserve 81.5 103.2 21.7 27%
Argentina - - - 0%
San Jos Resource 51% 45.9 47.7 1.7 4%
Reserve 33.7 32.8 (1.0) -3%
Argentina Totals: Resource 45.9 47.7 1.7 4%
Reserve 33.7 32.8 (1.0) -3%
Mexico - - - 0%
Moris Resource 70% 6.6 5.5 (1.2) -17%
Reserve 5.4 4.3 (1.1) -20%
San Felipe Resource 100% 19.3 33.5 14.1 73%
Reserve - - - 0%
Mexico Totals: Resource 26.0 38.9 13.0 50%
Reserve 5.4 4.3 (1.1) -20%
Totals: Resource 227.4 248.0 20.6 9%
Reserve 120.6 140.2 19.6 16%
1 Attributable reserves and resources based on the Group's percentage ownership of its joint venture projects
2 During the period the Group acquired an additional 30% interest in the San Felipe project increasing its interest to 100%
Lake Shore reserves and resources
Lake Shore Gold Corp. reported the following reserves and resources for the Timmins West development project on a 100% basis. Hochschild
holds a 40% stake in Lake Shore.
Resources
As of 30 June 2008
Resource category Indicated Inferred Uncut Grade Au
(t) (t) (g/t Au) (koz)
TOTAL
Indicated 3,268,000 12.29 1,291
Inferred 968,000 6.62 207
*Average cut (@ 90 g/t) grade is 8.62 g/t for indicated resources and 5.62 g/t for inferred resources. These grades contain 905k oz Au
and 175k oz Au respectively
** Prepared by LSG - audited by WGM November 2006. Quoted in SRK's October 2007 43-101 Report
Reserves (estimated)
As of 30 June 2008
Reserve category Probable Cut Grade Au
(t) (g/t Au) (koz)
TOTAL
Probable 3,387,000 7.59 826
* SRK also performed a sensitivity analysis based on the uncut Mineral Resource gold grades. The results were 3.8M tonnes at 10.4g/t Au
(1,200 koz)
** SRK October 2007 43-101 Report
Additionally, Lake Shore Gold has published the following historic non 43-101 compliant resources:
Exploration Bell creek Complex Indicated Inferred Grade Au
(t) (t) (g/t Au) (koz)
Bell Creek Mine (43-101 Compliant,
2004)*
Indicated 190,000 8.25 50.6
Inferred 346,000 7.70 85.9
Vogel Project (1999 CIM Historic
Resource) **
Indicated 642,000 12.2 261.2
Inferred 933,800 12.2 379.8
Schumacher Project (1997 Historic
Resource) **
Indicated 156,000 5.99 30.0
* The property contains NI 43-101 resource estimates done by previous owners.
** Lake Shore Gold states that "The resource estimates described in this presentation for the Vogel and Schumacher properties are
historic, and the company is not treating the estimates as National Instrument 43-101 defined resources. The company has not completed the
work necessary to verify the classification of the resources and therefore such historic estimates should not be relied upon."
Hochschild Mining plc does not accept any responsibility for the reproduction in this announcement of data relating to the reserves and
resources of Lake Shore Gold Corp., all of which have been derived from publicly available information. Whilst Hochschild Mining plc has
taken all reasonable care in reproducing and publishing this information, this information may contain technical inaccuracies, omissions or
typographical errors, for which Hochschild Mining plc assumes no responsibility.
Total Production Information
Arcata
Six months ended 30 June 2008 Six months ended 30 June 2007 % change
Ore production (tonnes) 228,561 176,513 29%
Average head grade silver 554.90 532.86 4%
(g/t)
Average head grade gold (g/t) 1.38 1.38 0%
Concentrate produced (tonnes) 8,376 7,447 12%
Silver grade in concentrate 13.49 10.99 23%
(kg/t)
Silver produced (koz) 3,633 2,631 38%
Gold produced (koz) 8.89 6.75 32%
Net silver sold (koz) 3,550 2,487 43%
Net gold sold (koz) 8.34 6.19 35%
Ares
Six months ended 30 June 2008 Six months ended 30 June 2007 % change
Ore production(tonnes) 165,715 156,404 6%
Average head grade silver 191.90 257.64 -26%
(g/t)
Average head grade gold (g/t) 6.68 14.84 -55%
Dortotal (koz) 937 1,254 -25%
Silver produced (koz) 900 1,179 -24%
Gold produced (koz) 33.75 71.60 -53%
Net silver sold (koz) 1 1,078 1,317 -18%
Net gold sold (koz) 2 37.66 77.02 -51%
1 Total sale figures for Ares include the sale of 132 koz of silver precipitates from San Jos.
2 Total sale figures for Ares include the sale of 1.97 koz of gold precipitates from San Jos.
Selene
Six months ended Six months ended % change
30 June 2008 30 June 2007
Ore production (tonnes) 176,868 190,581 -7%
Average head grade silver 214.23 338.37 -37%
(g/t)
Average head grade gold (g/t) 1.23 2.43 -49%
Concentrate produced (tonnes) 2,064 1,808 14%
Silver grade in concentrate 15.83 31.75 -50%
(kg/t)
Silver produced (koz) 1,039 1,822 -43%
Gold produced (koz) 5.59 12.35 -55%
Net silver sold (koz) 1,231 1,897 -35%
Net gold sold (koz) 6.41 11.66 -45%
Pallancata1
Six months ended 30 June 2008
Ore production (tonnes) 134,410
Average head grade silver (g/t) 339.64
Average head grade gold (g/t) 1.67
Concentrate produced (tonnes) 1,388
Silver grade in concentrate (kg/t) 29.77
Silver produced (koz) 1,329
Gold produced (koz) 5.16
Net silver sold (koz) 1,187
Net gold sold (koz) 4.57
1The Company has a 60% interest in Pallancata.
San Jos1
Six months ended 30 June 2008
Ore production (tonnes) 120,500
Average head grade silver (g/t) 652.57
Average head grade gold (g/t) 7.33
Silver produced (koz) 2,061
Gold produced (koz) 24.55
Net silver sold (koz) 2 2,608
Net gold sold (koz) 3 34.03
1 The Company has a 51% interest in San Jos
2 Total sale figures for San Jos include 835.20 koz of silver precipitates sold to Ares.
3 Total sale figures for San Jos include 13.06 koz of gold precipitates sold to Ares.
Moris1
Six months ended 30 June 2008
Ore production (tonnes) 387,063
Average head grade silver (g/t) 5.15
Average head grade gold (g/t) 1.63
Silver produced (koz) 32
Gold produced (koz) 14.08
Net silver sold (koz) 34
Net gold sold (koz) 14.50
1 The Company has a 70% interest in Moris.
Forward looking Statements
This announcement contains certain forward looking statements, including such statements within the meaning of Section 27A of the US
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In particular, such forward looking
statements may relate to matters such as the business, strategy, investments, production, major projects and their contribution to expected
production and other plans of Hochschild Mining plc and its current goals, assumptions and expectations relating to its future financial
condition, performance and results.
Forward-looking statements include, without limitation, statements typically containing words such as "intends", "expects",
"anticipates", "targets", "plans", "estimates" and words of similar import. By their nature, forward looking statements involve risks and
uncertainties because they relate to events and depend on circumstances that will or may occur in the future. Actual results, performance or
achievements of Hochschild Mining plc may be materially different from any future results, performance or achievements expressed or implied
by such forward looking statements. Factors that could cause or contribute to differences between the actual results, performance or
achievements of Hochschild Mining plc and current expectations include, but are not limited to, legislative, fiscal and regulatory
developments, competitive conditions, technological developments, exchange rate fluctuations and general economic conditions. These factors,
risks and uncertainties are referred to in the section of this announcement entitled 'Risks' which, in turn, refers to matters disclosed in the Risk Management section of the 2007 Annual Report. Past performance
is no guide to future performance and persons needing advice should consult an independent financial adviser.
The forward looking statements reflect knowledge and information available at the date of preparation of this announcement. Except as
required by the Listing Rules and applicable law, the Board of Hochschild Mining plc does not undertake any obligation to update or change
any forward looking statements to reflect events occurring after the date of this announcement. Nothing in this announcement should be
construed as a profit or production forecast.
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 expenses 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
Dor
Dorbullion is an impure alloy of gold and silver and is generally the final product of mining and processing; the dorbullion 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
Company from continuing operations before exceptional items
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
JV
Joint venture
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
LTIP
Long Term Incentive Plan
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
Shareholder Information
1. Company website
Hochschild Mining plc Interim and Annual Reports and results announcements are available via the internet on our website at
www.hochschildmining.com. Shareholders can also access the latest information about the Company and press announcements as they are
released, together with details of future events and how to obtain further information.
2. Registrars
Enquiries concerning shareholdings, dividends and changes in personal details should be referred to the Company's registrars, Capita as
detailed below.
By post:
Shareholder Services Department, Capita Registrars Limited, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU
By telephone:
- From the UK: 0871 664 0300 (Calls cost 10p per minute plus network extras)
- From overseas: +44 20 8639 3399
By fax: +44 (0)20 8639 2342
3. Currency option and dividend mandate
Shareholders wishing to receive their dividend in US dollars should contact the Company's registrars to request a currency election
form. This form should be completed and returned to the registrars by 9 September 2008 in respect of the 2008 interim dividend.
The Company's registrars can also arrange for the dividend to be paid directly into shareholders' UK bank accounts. To take advantage of
this facility in respect of the 2008 interim dividend, a dividend mandate form, also available from the Company's registrars, should be
completed and returned to the registrars by 9 September 2008. This arrangement is only available in respect of dividends paid in UK pounds
sterling. Shareholders who have already completed one or both of these forms need take no further action.
4. Investor Relations
For investor enquiries please contact Jane Flynn, Investor Relations Associate, by writing to the registered office address (given
below) or by telephone on 020 7907 2933 or by email at jane.flynn@hocplc.com
5. Financial Calendar
Dividend dates 2008
Ex-dividend date 03 September
Record date 05 September
Deadline for return of currency election forms 09 September
Payment date 23 September
Hochschild Mining plc
46 Albemarle Street
London
W1S 4JL
Registered in England and Wales
Registered Number: 05777693
This information is provided by RNS
The company news service from the London Stock Exchange
END
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