TIDMHOC
RNS Number : 4244P
Hochschild Mining PLC
25 March 2009
25 March 2009
Hochschild Mining plc
Preliminary Results for the twelve months ended 31 December 2008
Operational Highlights
* 2008 production target achieved; attributable production of 26.1 million silver
equivalent ounces
* Increase in plant capacity of 29% year-on-year; all mine expansions completed on
schedule
* Delivered on M&A strategy with the strategic acquisitions of 40% of Lake Shore
Gold, 100% of San Felipe, 50% of Liam JV, 15% of GRC1
* Signed agreement to acquire 100% of Southwestern Resources Corp for $17.5
million2
* Continued focus on producing profitable ounces: 2009 production target set at 28
million attributable silver equivalent ounces; 7% increase over 2008 production
Financial Highlights
* 42% increase in revenue to $433.8 million
* Solid financial position with a year end cash balance of $116.1 million
* Swiftly acted to address volatile market conditions by reducing costs and
conserving cash holdings
* Contained unit cost per tonne inflation through increased throughput and
operating efficiencies
* Financial results impacted by $45 million of exceptional items, including an
impairment of $34.7 million relating to fixed assets
* Pre-exceptional EPS down from $0.27 to $0.08 following anticipated lower grades
at Ares and Selene and cost inflation
* Proposed dividend of $0.02 per share, bringing the total dividend to $0.04 per
share
+---------------+----------+----------+--------+
| ($ | 12 | 12 | % |
| millions, | months | months | change |
| unless | to 31 | to 31 | |
| stated) | December | December | |
| | 2008 | 2007 | |
+---------------+----------+----------+--------+
| Attributable | 16,941 | 13,588 | 25% |
| silver | | | |
| production | | | |
| (koz) | | | |
+---------------+----------+----------+--------+
| Attributable | 153 | 201 | (24%) |
| gold | | | |
| production | | | |
| (koz) | | | |
+---------------+----------+----------+--------+
| Revenue | 433,779 | 305,021 | 42% |
+---------------+----------+----------+--------+
| Adjusted | 142,292 | 147,606 | (4%) |
| EBITDA3 | | | |
+---------------+----------+----------+--------+
| Attributable | 24,643 | 81,538 | (70%) |
| profit after | | | |
| tax (before | | | |
| exceptionals) | | | |
+---------------+----------+----------+--------+
| Attributable | (19,003) | 85,073 | (122%) |
| profit after | | | |
| tax (after | | | |
| exceptionals) | | | |
+---------------+----------+----------+--------+
| Earnings | 0.08 | 0.27 | (70%) |
| per | | | |
| share | | | |
| (before | | | |
| exceptionals) | | | |
+---------------+----------+----------+--------+
| Earnings | (0.06) | 0.28 | (121%) |
| per | | | |
| share | | | |
| (after | | | |
| exceptionals) | | | |
+---------------+----------+----------+--------+
1 10% of Gold Resource Corp ("GRC") was acquired on 26 February 2009
2 Agreement signed on 23 March 2009 and is subject to the approval of
Southwestern's shareholders
3 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.
Eduardo Hochschild, Executive Chairman of Hochschild Mining commented:
"We have delivered a creditable performance in a volatile trading climate. I am
pleased that, despite difficult conditions, we have once again achieved all our
operational targets, completing expansions at three of our six mines and
increasing capacity by 29%. Our 2009 production target is 28 million silver
equivalent ounces, representing a 7% increase on 2008.
We may face volatile markets but the cost saving measures we swiftly implemented
at the end of last year ensure that we are in a sound financial position and
well placed to deliver our long term growth strategy. With solid assets, an
excellent project pipeline and an enthusiastic and dedicated management team, we
are well positioned for the coming year."
=------------------------------------------------------------------------------
=----------------------------------------
A conference call will be held at 9.30am (London time) on Wednesday 25 March
2009 for analysts and investors.
Dial in details as follows:
UK+44 (0)203 037 9098
A recording of the conference call will be available for one week following its
conclusion, accessible from the following telephone numbers:
UK+44 (0)208 196 1998
Access code: 7521788#
_____________________________________________________________________
+------------+-----------------+
| Enquiries: | |
+------------+-----------------+
| | |
+------------+-----------------+
| Hochschild | |
| Mining plc | |
+------------+-----------------+
| Isabel | +44 |
| Lütgendorf | (0)20 |
| | 7907 2934 |
+------------+-----------------+
| Head | |
| of | |
| Investor | |
| Relations | |
+------------+-----------------+
| | |
+------------+-----------------+
| Ignacio | +511 437 6007 |
| Rosado | |
+------------+-----------------+
| Chief | |
| Financial | |
| Officer | |
+------------+-----------------+
| | |
+------------+-----------------+
| Finsbury | |
+------------+-----------------+
| Robin | +44 |
| Walker | (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
has over forty years experience in the mining of precious metal epithermal vein
deposits and currently operates five underground epithermal vein mines, four
located in southern Peru, one in southern Argentina and one open pit mine in
northern Mexico. Hochschild also has numerous long-term prospects throughout the
Americas.
Chairman's Statement
2008 was a challenging year. The global economy was heavily impacted by the
financial crisis in 2008 and many companies struggled to survive. Whilst the
economic turmoil was certainly negative for Hochschild in the short term, it
also gave us the opportunity to focus on what has always been our priority - to
produce profitable ounces.
Precious metals prices, particularly silver, fell sharply during the second half
of the year. While other mining companies were waiting for prices to adjust, we
were aggressively making plans to prepare the business for future challenges. In
November, we announced a number of measures to ensure that we continued to mine
profitable ounces, including: 150 redundancies, a freeze on non-essential capex,
cuts in our exploration budget and the delay of San Felipe, our zinc project in
northern Mexico. At the end of 2008 and in the first three months of 2009, we
sold forward 10.7 million ounces of our 2009 silver equivalent production
(comprised of 8.9 million ounces of silver and 30 thousand ounces of gold) to
ensure a more stable cash flow which will fund operating capex and future M&A
initiatives.
In our forty years as underground miners, this is not the first time that we
have needed to react to volatile precious metals prices. The speed at which we
implemented these changes shows that we are well prepared to address price
volatility. In 2009, prices have readjusted and we are now a leaner, fitter
company, benefiting from an improving price environment.
Revenue for the year increased by 42% to $433.8 million whilst operating profit
decreased by 17% to $86.3 million, mostly due to lower realisable silver
prices, the anticipated decline in average grades at Ares and Selene, cost
inflation and higher treatment charges. As a consequence, pre-exceptional EPS
has decreased from $0.27 to $0.08. Our results were also significantly impacted
by $45 million of exceptional items, including an impairment of $34.7 million
relating to fixed assets (Selene, Moris and San Felipe).
We continue to enjoy a healthy balance sheet with a year end cash balance of
$116.1 million. This, in conjunction with cash generated from our operations and
more stable inflows guaranteed by our short term forward sales, will allow us to
pursue our growth strategy: maximising profit through organic
growth, exploration and carefully selected acquisitions.
Organic growth
I am very proud to say that we have delivered on all our production targets
since our IPO in 2006. We produced 26.1 million silver equivalent ounces in 2008
and we are now the world's third largest primary silver producer.
Our 2008 production target was set at a challenging level and meeting it has not
been an easy feat in a year when we were also expanding three of our six
operations - Arcata (+46%), Selene (+50%) and San José (+100%). All our plant
expansions were successfully completed on time and since the IPO, overall
production capacity has more than doubled. Including Moris, our only open pit
mine, production capacity has increased by 264%.
As industry costs increased, we had to be particularly vigilant with regard to
unit cost per tonne inflation, which was contained at an increase of 14.3%.
Including Moris, unit cost per tonne was flat year on year. This has been
achieved through a mix of strong operational management, sound planning and
efficient procurement.
Exploration growth
In addition to the exploration success achieved at our existing operations, we
are also confident about a number of projects in our pipeline which are
delivering positive results. Since January 2008, our exploration efforts have
been led by Raymond Jannas, the new Vice President of Exploration & Geology who
has over 30 years experience in this field mainly working in the
Americas. Raymond is responsible for driving forward the exploration effort for
the Group and developing our pipeline for future growth.
Azuca
Azuca is a 100% owned project located in southern Peru, in close proximity to
our existing operations. In 2008 we identified two laterally extensive
mineralized vein systems which have resulted in the development of a significant
inferred resource totalling 1.8 million metric tonnes at 327 g/t Ag and 1.34 g/t
Au, containing 23.3 million silver equivalent ounces. Drilling extensions at the
Azuca and Canela veins look very promising and we believe that there is a high
probability that an additional resource will be defined in 2009.
Encrucijada
Encrucijada, which is located in Chile, is a joint venture project with Andina
Minerals Inc, in which we can earn a 60% interest. In 2008 we achieved some
particularly encouraging results as a result of a first-pass core drilling
program. The most promising vein intercepts include; 1.4mt at 3.87 g/t Au, 344
g/t Ag (538 g/t Ag equivalent); 1.6mt at 2.47 g/t Au, 85 g/t Ag (209 g/t Ag
equivalent), 0.2mt at 0.9 g/t gold and 2,378 g/t silver (2,422 g/t
silver-equivalent) in separate drill holes. In 2009, we plan to expand our
drilling program to evaluate two new targets.
M&A growth
In 2008, we continued to execute our cluster consolidation strategy by securing
bolt-on acquisitions, joint ventures and strategic investments in a number of
key mining districts, investing a total of $254 million during the year. Our 40%
investment in Lake Shore Gold is an example of this strategy, providing us with
a phased, low-risk exposure to high-grade gold deposits in a mineral rich region
of Canada and adding a new cluster to our portfolio.
In June 2008, the Group acquired 100% of the San Felipe project, our advanced
development project in northern Mexico, for $51.5 million. As a result of
declining zinc prices in the second half of the year and our commitment to
reduce capex, in November we decided to delay the development of this project.
However, we remain confident about the long term potential of San Felipe and
will continue to review the timing of the project.
In Peru, we purchased 50% of Liam, a joint venture (JV) with Southwestern
Resources Corp. ("Southwestern"). Southwestern is a Canadian listed mineral
exploration company with a number of gold, silver and base metals projects in
southern Peru. The Liam JV comprises a 282,000 hectare land package in very
close proximity to our four existing operations. In 2009, we entered into a
binding agreement to acquire the remaining 50% of the Liam JV through the
purchase of 100% of Southwestern, for a total cash consideration of $17.5
million. The acquisition, which is subject to the approval of Southwestern's
shareholders, consolidates our position in one of our key operational clusters
and enables us to leverage our existing infrastructure and knowledge of the
regional geology.
In Mexico, we entered into a strategic alliance with Gold Resource Corporation
("GRC") and after the year end, we increased our ownership interest in GRC from
5% to 15%. GRC is a precious metals mining company with a number of high grade
development and exploration projects in southern Mexico, including El Aguila
which is scheduled to begin production in 2009.
We also made an offer to acquire Minera Andes or its stake in the San José
project, in order to ensure that the project would be fully financed. Although
our offer was not accepted, Minera Andes was able to meet its obligations at San
José by other means. We look forward to working with Minera Andes to continue to
develop the operation and realise its full potential.
With a solid balance sheet, we are well positioned to benefit from current
market opportunities and looking forward, we expect to continue growing through
carefully selected M&A.
Responsible mining
Efficient operations can only be achieved through good community support and we
are dedicated to maintaining the highest standards of corporate and social
responsibility. We are committed to the safety of all our employees and have
made significant progress over the past year. In 2008, we reduced our accident
frequency rate by 24% compared to 2007. Nonetheless, it is with deep regret that
I report one mine fatality in 2008. We are addressing the underlying safety
deficiencies that led to the occurrence of this tragic event.
The impact of market conditions on our full year results means that the 8%
profit sharing that our Peruvian employees are entitled to under Peruvian law
will be lower and this is creating a challenge for us. As announced on 23 March
2009, mining industry workers in Peru in general are expecting profit sharing to
remain at similar levels to previous years and, as a result, there has been
industrial action at our four Peruvian operations. The stoppage is not currently
impacting our full year production target and we remain confident that a
negotiated solution can be reached.
Board changes
During the year, we announced the appointments of Miguel Aramburú, CEO and
Ignacio Rosado, CFO to the board of directors. I would like to thank them and
all our employees for the hard work that has enabled Hochschild Mining to
progress on its strategic goals.
I would also like to take this opportunity to thank Alberto Beeck, who stepped
down from the Board of Directors in September 2008, for his significant
contribution to the Group.
Dividend
Despite the cashflow generated by the Company, the board has agreed that in the
current climate, it is sensible to conserve cash and ensure that the business is
well funded to further its growth strategy. It has therefore concluded that a
reduced dividend of $0.02 per ordinary share is proposed for the six months to
31 December 2008, resulting in a total dividend for the year of $0.04 per
ordinary share. We will keep dividend policy under review to ensure that we
manage the business in a way that maximises long term shareholder return.
Outlook
Going into 2009, Hochschild is a leaner, fitter company that is well positioned
to face the challenges ahead, with a firm focus on producing profitable ounces.
Our attributable production target for 2009 is 28 million silver equivalent
ounces (at the Company's current conversion ratio of 60:1), comprising
approximately 19.1 million ounces of silver and 148.2 thousand ounces of gold,
representing a year-on-year increase of 7%. In addition, Lake Shore Gold is
targeting 30,000 ounces of gold in 2009 which would equate to 0.72 million
attributable silver equivalent ounces. We remain extremely optimistic about Lake
Shore Gold's growth profile.
We expect unit cost per tonne to decrease due to expansions and lower projected
input prices. We will continue to responsibly manage our operations and will not
hesitate to close or put into care and maintenance mines that are considered
uneconomic.
The financial crisis continues to have an impact on the sector and we believe
that this creates interesting opportunities for a company with Hochschild's
financial strength and established record as a partner of choice in the
Americas. We will continue to take a disciplined approach to M&A, focusing on
mid sized, underground precious metals projects in the Americas, preferably
located around existing clusters.
In order to ensure more stable cashflow to fund operating capex and future M&A,
we sold forward 10.7 million ounces of our 2009 silver equivalent production
during late 2008 and early 2009. The fundamentals for silver and gold are strong
and we therefore remain extremely positive about the long term prospects for
precious metals and have not sold forward any of our 2010 production. At this
time we do not plan to undertake any further forward sales contracts for 2009
production.
The measures we swiftly implemented at the end of last year ensure that we are
in a sound financial position and well placed to deliver our long term growth
strategy. Our focus will continue to be on producing profitable ounces and
expanding the business through appropriate investment and acquisition. With our
solid assets, excellent project pipeline and professional and dedicated
management team, we are well positioned for the coming year.
Eduardo Hochschild
Executive Chairman
OPERATIONAL REVIEW
Production
In line with guidance for the year, the Company achieved total attributable
silver production of 26.1 million ounces, comprising 16.9 million ounces of
silver and 152.9 thousand ounces of gold.
Attributable silver production increased 25% year-on-year representing strong
silver production at Arcata, Pallancata and San José. Attributable gold
production decreased by 24% due to anticipated lower grades at Ares and Selene,
but this was partially offset by an increase in production at our other
operations.
For further information on production, see tables on pages 47 to 49.
As a result of the expansions completed in 2008, the Group's plant capacity has
increased by 29%, with full benefits to accrue in 2009. Capacity at San José
doubled to 530 ktpa while Arcata's capacity has been expanded by over 46% from
424 to 618 ktpa. Throughput at the Selene plant, which also processes ore from
Pallancata, has increased by 50% from 706 to 1,059 ktpa. Hochschild has more
than doubled plant capacity since its IPO in November 2006 demonstrating once
again its ability to deliver projects on schedule. Including Moris, our only
open pit mine, production capacity increased by 263%.
Hochschild's attributable production target for 2009 is 28 million attributable
silver equivalent ounces (at the Company's current conversion ratio of 60:1),
comprising approximately 19.1 million ounces of silver and 148.2 thousand ounces
of gold. This represents a year-on-year increase of 7%. The 2009 production
target of 28 million silver equivalent ounces only forecasts Selene's production
through to June. See page 8 for further detail on Selene.
In addition to the Group's production of 28 million attributable silver
equivalent ounces, Lake Shore Gold, in which we have a 40% investment, is
expected to produce up to 30,000 ounces of gold in 2009 (which would equate to
0.72 million attributable silver equivalent ounces). We remain optimistic about
Lake Shore Gold's growth profile.
To ensure that we are mining profitable ounces, we have increased cut-off grades
in our underground mines by an average of 18%. This has impacted our reserve
base as marginally economic ore is excluded from reserves. The combined effect
of the change in cut-off grades and the increase in capacity implemented last
year, resulted in a decrease in average mine life from 4.6 to 3.2 years* based
on reserves as at 31 December 2008. However, we remain committed to replenishing
and expanding our resource base and we have an extremely successful record of
converting resources to reserves.
*Reserve life of mine relates to our underground operations. Moris, our only
open pit mine, has a different operational profile and is therefore not included
Peru
Arcata
Production and sales
+--------------------------+---------------+---------------+---------------+
| | Year ended 31 | Year ended 31 | % change |
| | December 2008 | December 2007 | |
+--------------------------+---------------+---------------+---------------+
| Ore production (tonnes) | 557,870 | 415,400 | 34% |
+--------------------------+---------------+---------------+---------------+
| Average head grade | 571.37 | 560.04 | 2% |
| silver (g/t) | | | |
+--------------------------+---------------+---------------+---------------+
| Average head grade gold | 1.53 | 1.43 | 7% |
| (g/t) | | | |
+--------------------------+---------------+---------------+---------------+
| Concentrate produced | 20,639 | 16,665 | 24% |
| (tonnes) | | | |
+--------------------------+---------------+---------------+---------------+
| Silver grade in | 13.94 | 12.12 | 15% |
| concentrate (kg/t) | | | |
+--------------------------+---------------+---------------+---------------+
| Gold grade in | 0.04 | 0.03 | 33% |
| concentrate (kg/t) | | | |
+--------------------------+---------------+---------------+---------------+
| Silver produced (koz) | 9,032 | 6,553 | 38% |
+--------------------------+---------------+---------------+---------------+
| Gold produced (koz) | 24.04 | 16.48 | 46% |
+--------------------------+---------------+---------------+---------------+
| Silver sold (koz) | 8,564 | 6,544 | 31% |
+--------------------------+---------------+---------------+---------------+
| Gold sold (koz) | 22.36 | 15.50 | 44% |
+--------------------------+---------------+---------------+---------------+
Arcata enjoyed another successful year with silver production up 38% and gold
production up 46% year on year. These increases were a result of the plant
expansion completed during the year as well as consistent grades and recoveries.
In 2008, we sold Arcata's concentrate production to Peñoles, Traxys, Cormin,
Louis Dreyfus and a small fraction to Doe Run.
Exploration
+---------------------------+-------------------+--------------------+----------+
| Stated on an attributable | As at | As at | % change |
| basis | 31 December 2008* | 31 December 2007 | |
+---------------------------+-------------------+--------------------+----------+
| Resources | 3.94 mt @ 583 g/t | 3.58 mt @ 526 g/t | |
| | Ag & 1.75 g/t Au | Ag & 1.41 g/t Au | |
+---------------------------+-------------------+--------------------+----------+
| Resource (moz Ag eq) | 87.2 | 70.3 | 24% |
+---------------------------+-------------------+--------------------+----------+
| Reserves | 1.61 mt @ 541 g/t | 1.84 mt @ 476 g/t | |
| | Ag & 1.62 g/t Au | Ag & 1.19 g/t Au | |
+---------------------------+-------------------+--------------------+----------+
| Reserve (moz Ag eq) | 33.1 | 32.4 | 2% |
+---------------------------+-------------------+--------------------+----------+
*2008 reserve and resource figures are not comparable to 2007 due to the
increase in cut-off grades
During 2008, we incorporated 1,112,254 metric tonnes with 1.4 g/t Au and 525 g/t
Ag (21.7 million ounces of silver equivalent) into indicated resources and
1,032,896 metric tonnes with 1.4 g/t Au and 517 g/t Ag (19.8 million ounces of
silver equivalent) into reserves. We continue to increase reserves and resources
in the Mariana, Julia, Michelle, Soledad, Ramal Marion, Nicole and Soledad Norte
veins. We are also exploring two new veins, Rosita and Luz and secondary
structures mainly between Marion and Macarena (35,251 metres drilled in 132
holes; 4,478 metres of underground workings). Exploration potential is open at
depth and along strike for these veins.
The 2009 exploration programme focuses on adding new reserves and resources
primarily in the Rosita, Luz, Mariana and Nicole veins, as well as exploring new
targets north of the Mariana structure through underground workings and
drilling.
Ares
Production and sales
+-----------------------------------+--------------------+--------------------+--------------------+
| | Year ended 31 | Year ended 31 | % change |
| | December 2008 | December 2007 | |
+-----------------------------------+--------------------+--------------------+--------------------+
| Ore production (tonnes) | 347,910 | 333,800 | 4% |
+-----------------------------------+--------------------+--------------------+--------------------+
| Average head grade silver (g/t) | 156.95 | 279.25 | (44%) |
+-----------------------------------+--------------------+--------------------+--------------------+
| Average head grade gold (g/t) | 6.06 | 14.57 | (58%) |
+-----------------------------------+--------------------+--------------------+--------------------+
| Doré total (koz) | 1,608 | 2,593 | (38%) |
+-----------------------------------+--------------------+--------------------+--------------------+
| Silver produced (koz) | 1,538 | 2,701 | (43%) |
+-----------------------------------+--------------------+--------------------+--------------------+
| Gold produced (koz) | 64.16 | 149.98 | (57%) |
+-----------------------------------+--------------------+--------------------+--------------------+
| Silver sold (koz) | 2,398 | 2,880 | (17%) |
+-----------------------------------+--------------------+--------------------+--------------------+
| Gold sold (koz) | 77.44 | 157.77 | (51%) |
+-----------------------------------+--------------------+--------------------+--------------------+
As anticipated and previously disclosed, the average reserve grade at Ares is
declining due to the ageing and geological nature of the deposit. As a
consequence, gold and silver production decreased 57% and 43% respectively. Ares
produces 100% doré, all of which was sold to Johnson Matthey in 2008.
Exploration
+----------------------------+------------------+------------------+-------------+
| Stated on an attributable | As at | As at | % change |
| basis | 31 December | 31 December 2007 | |
| | 2008* | | |
+----------------------------+------------------+------------------+-------------+
| Resources | 1.02 mt @ 183 | 0.96 mt @ 191 | |
| | g/t Ag & 5.89 | g/t Ag & 5.89 | |
| | g/t Au | g/t Au | |
+----------------------------+------------------+------------------+-------------+
| Resource (moz Ag eq) | 17.5 | 16.8 | 4% |
+----------------------------+------------------+------------------+-------------+
| Reserves | 0.65 mt @ 120 | 0.84 mt @ 183 | |
| | g/t Ag & 4.86 | g/t Ag & 5.94 | |
| | g/t Au | g/t Au | |
+----------------------------+------------------+------------------+-------------+
| Reserve (moz Ag eq) | 8.6 | 14.6 | (41%) |
+----------------------------+------------------+------------------+-------------+
*2008 reserve and resource figures are not comparable to 2007 due to the
increase in cut-off grades
During 2008 we drilled 5,690 metres and developed 1,062 metres of underground
workings that resulted in 178,954 metric tonnes with 5.1 g/t Au and 96 g/t Ag
(2.3 million ounces of silver equivalent). We are continuing to replace the ore
in splays and tensional structures in the Victoria vein system.
We tested a new geological model with 19 drill holes (6,226 metres) exploring
the Apolo, Maria, Teresa and Tania vein targets, sub-parallel to the major
success at the main Victoria system. In 2009, our exploration efforts will focus
on developing resources and reserves at the Isabel, Tania and Maruja veins,
located north of Victoria.
Selene
Production and sales
+--------------------------+---------------+---------------+---------------+
| | Year ended 31 | Year ended 31 | % change |
| | December 2008 | December 2007 | |
+--------------------------+---------------+---------------+---------------+
| Ore production (tonnes) | 269,150 | 413,622 | (35%) |
+--------------------------+---------------+---------------+---------------+
| Average head grade | 209.52 | 295.79 | (29%) |
| silver (g/t) | | | |
+--------------------------+---------------+---------------+---------------+
| Average head grade gold | 1.21 | 2.01 | (40%) |
| (g/t) | | | |
+--------------------------+---------------+---------------+---------------+
| Concentrate produced | 3,201 | 4,010 | (20%) |
| (tonnes) | | | |
+--------------------------+---------------+---------------+---------------+
| Silver grade in | 15.04 | 26.83 | (44%) |
| concentrate (kg/t) | | | |
+--------------------------+---------------+---------------+---------------+
| Gold grade in | 0.08 | 0.17 | (53%) |
| concentrate (kg/t) | | | |
+--------------------------+---------------+---------------+---------------+
| Silver produced (koz) | 1,579 | 3,414 | (54%) |
+--------------------------+---------------+---------------+---------------+
| Gold produced (koz) | 8.50 | 21.62 | (61%) |
+--------------------------+---------------+---------------+---------------+
| Silver sold (koz) | 1,929 | 3,644 | (47%) |
+--------------------------+---------------+---------------+---------------+
| Gold sold (koz) | 9.93 | 22.03 | (55%) |
+--------------------------+---------------+---------------+---------------+
As anticipated and previously disclosed, the average reserve grade at Selene is
declining due to the ageing and geological nature of the deposit. As a
consequence, gold and silver production decreased 61% and 54% respectively.
Selene produced an average of 22,000 tonnes of ore per month in 2008; however,
this number is expected to decrease to approximately 15,000 tonnes per month in
2009. Although Selene has 1.2 million tonnes of total resources, a high level of
capital expenditure would be required to extract these ounces. As announced in
our Q408 Production Report in January 2009, the Company's focus for 2009 is to
deliver profitable production and we will therefore reduce production, close, or
put into care and maintenance any mines that are considered uneconomic. As a
consequence, Selene is under consideration for closure. Selene's plant, which
was upgraded during the year, will continue to process ore from Pallancata. The
2009 production target of 28 million silver equivalent ounces only forecasts
Selene's production through to June with a significant decline in tonnage over
this 6 month period.
In 2008, more than 60% of Selene's production was converted into doré at the
Ares plant and sold to Johnson Matthey. The remaining concentrate was sold on a
spot basis primarily to Teck Cominco, Norddeutsche Affinerie AG and in blends
with Arcata to Cormin.
Exploration
+----------------------------+------------------+------------------+-------------+
| Stated on an attributable | As at | As at | % change |
| basis | 31 December | 31 December 2007 | |
| | 2008* | | |
+----------------------------+------------------+------------------+-------------+
| Resources | 1.20 mt @ 248 | 1.79 mt @ 241 | |
| | g/t Ag & 1.35 | g/t Ag & 1.34 | |
| | g/t Au | g/t Au | |
+----------------------------+------------------+------------------+-------------+
| Resource (moz Ag eq) | 12.7 | 18.5 | (31%) |
+----------------------------+------------------+------------------+-------------+
| Reserves | 0.13 mt @ 268 | 0.81 mt @ 269 | |
| | g/t Ag & 2.00 | g/t Ag & 1.68 | |
| | g/t Au | g/t Au | |
+----------------------------+------------------+------------------+-------------+
| Reserve (moz Ag eq) | 1.6 | 9.6 | (83%) |
+----------------------------+------------------+------------------+-------------+
*2008 reserve and resource figures are not comparable to 2007 due to the
increase in cut-off grades
During 2008, we executed 11,335 metres of diamond drilling at the Martha-Eva,
Tumiri, Timida, Explorador and Pucanta veins. We achieved a minor development of
resources, converting 290,716 metric tonnes at 1.5 g/t Au and 189 g/t Ag (2.6
million ounces silver equivalent) into reserves. However, grades are lower than
those historically found at Selene due to the ageing nature of the mine. As the
exploration results have deteriorated over time, in 2009 we will focus on
compiling all geological information and re-interpreting the data to define
possible new drill targets.
Pallancata
Production and sales
+--------------------------+---------------+---------------+---------------+
| | Year ended 31 | Year ended 31 | % change |
| | December 2008 | December 2007 | |
+--------------------------+---------------+---------------+---------------+
| Ore production (tonnes) | 468,125 | 78,335 | 498% |
+--------------------------+---------------+---------------+---------------+
| Average head grade | 312.18 | 310.02 | 1% |
| silver (g/t) | | | |
+--------------------------+---------------+---------------+---------------+
| Average head grade gold | 1.49 | 1.49 | 0% |
| (g/t) | | | |
+--------------------------+---------------+---------------+---------------+
| Concentrate produced | 4,265 | 638 | 568% |
| (tonnes) | | | |
+--------------------------+---------------+---------------+---------------+
| Silver grade in | 30.54 | 34.28 | (11%) |
| concentrate (kg/t) | | | |
+--------------------------+---------------+---------------+---------------+
| Gold grade in | 0.12 | 0.13 | (8%) |
| concentrate (kg/t) | | | |
+--------------------------+---------------+---------------+---------------+
| Silver produced (koz) | 4,188 | 704 | 495% |
+--------------------------+---------------+---------------+---------------+
| Gold produced (koz) | 16.16 | 2.76 | 486% |
+--------------------------+---------------+---------------+---------------+
| Silver sold (koz) | 3,852 | 550 | 600% |
+--------------------------+---------------+---------------+---------------+
| Gold sold (koz) | 14.81 | 2.03 | 630% |
+--------------------------+---------------+---------------+---------------+
Pallancata, which commenced production in the third quarter of 2007, is a
venture with International Minerals Corporation ("IMC") in which we control 60%
and act as the mine operator. Pallancata exemplifies our cluster consolidation
strategy. Its close proximity to Selene enables us to leverage existing
infrastructure as ore from the operation is transported 22 kilometres to the
plant at Selene for processing. Selene's plant was expanded in 2008 from 2,000
to 3,000 tpd to accommodate the anticipated growth in production at Pallancata.
Pallancata recorded strong production results in its first full year of
operation, with silver and gold production increasing 495% and 486% year on
year to 4,188 koz and 16.16 koz respectively.
In 2008 the silver/gold concentrate from Pallancata was sold to Teck Cominco.
Exploration
+-----------------------------+------------------+------------------+----------+
| Stated on an attributable | As at | As at | % change |
| basis | 31 December | 31 December 2007 | |
| | 2008* | | |
+-----------------------------+------------------+------------------+----------+
| Resources | 3.32 mt @ 411 | 3.22 mt @ 397 | |
| | g/t Ag & 1.68 | g/t Ag & 1.42 | |
| | g/t Au | g/t Au | |
+-----------------------------+------------------+------------------+----------+
| Resource (moz Ag eq) | 54.6 | 49.9 | 9% |
+-----------------------------+------------------+------------------+----------+
| Reserves | 2.58 mt @ 366 | 2.13 mt @ 289 | |
| | g/t Ag & 1.51 | g/t Ag & 1.24 | |
| | g/t Au | g/t Au | |
+-----------------------------+------------------+------------------+----------+
| Reserve (moz Ag eq) | 37.8 | 24.9 | 52% |
+-----------------------------+------------------+------------------+----------+
*2008 reserve and resource figures are not comparable to 2007 due to the
increase in cut-off grades
Underground workings at the Pallancata Central, Ramal Central, Cimoide 1, María
and Sofía veins resulted in a major conversion of resources into reserves of
3,080,459 metric tonnes at 1.3 g/t Au and 396 g/t Ag (47.5 million ounces of
silver equivalent).
In addition, we drilled 5,332 metres in 67 drill holes at the Pallancata-Oeste,
Pallancata-Central veins and associated secondary structures, developing an
inferred resource of 699,102 metric tonnes at 1.4 g/t Au and 368 g/t Ag (10.1
million ounces of silver equivalent).
The 2009 exploration program will focus on 15,220 metres of drilling at the
Virgen del Carmen, San Javier and Mariana that have high grade silver potential.
Argentina
San José
Production and sales
+-----------------------------------+--------------------+--------------------+--------------------+
| | Year ended 31 | Year ended 31 | % change |
| | December 2008 | December 2007 | |
+-----------------------------------+--------------------+--------------------+--------------------+
| Ore production (tonnes) | 295,963 | 92,974 | 218% |
+-----------------------------------+--------------------+--------------------+--------------------+
| Average head grade silver (g/t) | 559.11 | 538.38 | 4% |
+-----------------------------------+--------------------+--------------------+--------------------+
| Average head grade gold (g/t) | 6.69 | 7.08 | (6%) |
+-----------------------------------+--------------------+--------------------+--------------------+
| Silver produced (koz) | 4,381 | 958 | 357% |
+-----------------------------------+--------------------+--------------------+--------------------+
| Gold produced (koz) | 54.26 | 14.96 | 263% |
+-----------------------------------+--------------------+--------------------+--------------------+
| Silver sold (koz) | 4,588 | 92 | 4,887% |
+-----------------------------------+--------------------+--------------------+--------------------+
| Gold sold (koz) | 57.70 | 1.49 | 3,772% |
+-----------------------------------+--------------------+--------------------+--------------------+
San José, the Group's operation in Argentina, commenced production in the second
quarter of 2007. San José is a venture with Minera Andes in which we control 51%
and act as the mine operator. We remain very positive about the potential at San
José, reflected by the plant expansion undertaken in 2008 which doubled capacity
from 750 to 1,500 tonnes per day.
Inventories were higher than expected in the fourth quarter primarily due to a
temporary furnace malfunction which has now been resolved. In addition, sales
were impacted by the early closure of a customer's refinery for the Christmas
holiday period.
After the year end, we made an offer to acquire Minera Andes or its stake in the
San José project, in order to ensure that the project would be fully financed.
Although our offer was not accepted, Minera Andes was able to meet its
obligations at San José by other means.
In 2008, we sold the doré produced at San José to Argor Heraeus S.A., a licensed
trader, smelter and assayer based in Switzerland. The concentrate produced at
the operation was sold to Norddeutsche Affinerie AG.
Exploration
+----------------------------+------------------+------------------+-------------+
| Stated on an attributable | As at | As at | % change |
| basis | 31 December | 31 December 2007 | |
| | 2008* | | |
+----------------------------+------------------+------------------+-------------+
| Resources | 1.68 mt @ 467 | 1.59 mt @ 473 | |
| | g/t Ag & 7.30 | g/t Ag & 7.09 | |
| | g/t Au | g/t Au | |
+----------------------------+------------------+------------------+-------------+
| Resource (moz Ag eq) | 49.0 | 45.9 | 7% |
+----------------------------+------------------+------------------+-------------+
| Reserves | 0.83 mt @ 522 | 1.37 mt @ 403 | |
| | g/t Ag & 7.90 | g/t Ag & 6.01 | |
| | g/t Au | g/t Au | |
+----------------------------+------------------+------------------+-------------+
| Reserve (moz Ag eq) | 26.7 | 33.7 | (21%) |
+----------------------------+------------------+------------------+-------------+
*2008 reserve and resource figures are not comparable to 2007 due to the
increase in cut-off grades and methodology
In 2008 we drilled 14,453 metres in 60 drill holes along the Odin, Ayellen and
Ramal Frea veins. Another 4,24 metres in 20 holes were drilled at extensions of
the Huevos Verdes, Frea and Kospi veins increasing the mineralization potential
of these structures.
Mexico
Moris
Production and sales
+-----------------------------------+--------------------+--------------------+--------------------+
| | Year ended 31 | Year ended 31 | % change |
| | December 2008 | December 2007 | |
+-----------------------------------+--------------------+--------------------+--------------------+
| Ore production (tonnes) | 876,148 | 338,304 | 159% |
+-----------------------------------+--------------------+--------------------+--------------------+
| Average head grade silver (g/t) | 5.71 | 4.69 | 22% |
+-----------------------------------+--------------------+--------------------+--------------------+
| Average head grade gold (g/t) | 1.57 | 1.65 | (5%) |
+-----------------------------------+--------------------+--------------------+--------------------+
| Silver produced (koz) | 65.07 | 12.63 | 415% |
+-----------------------------------+--------------------+--------------------+--------------------+
| Gold produced (koz) | 26.85 | 5.58 | 381% |
+-----------------------------------+--------------------+--------------------+--------------------+
| Silver sold (koz) | 68.27 | 6.44 | 960% |
+-----------------------------------+--------------------+--------------------+--------------------+
| Gold sold (koz) | 28.01 | 3.26 | 759% |
+-----------------------------------+--------------------+--------------------+--------------------+
Moris, which commenced production in August 2007, is a venture with EXMIN in
which we control 70% and act as the mine operator. Moris is the Group's only
open pit mine but provided a key stepping stone into Mexico, which is of key
strategic importance to the Group.
Production at the operation more than doubled to 876 thousand tonnes in 2008.
Gold recoveries at Moris are expected to increase in 2009 as a result of a more
stable plant process. In 2008, we sold all of the gold/silver doré produced at
Moris to Johnson Matthey.
Exploration
+----------------------------+------------------+------------------+-------------+
| Stated on an attributable | As at | As at | % change |
| basis | 31 December 2008 | 31 December 2007 | |
+----------------------------+------------------+------------------+-------------+
| Resources | 2.10 mt @ 5 g/t | 2.44 mt @ 5 g/t | |
| | Ag & 1.26 g/t Au | Ag & 1.33 g/t Au | |
+----------------------------+------------------+------------------+-------------+
| Resource (moz Ag eq.) | 5.4 | 6.6 | (18%) |
+----------------------------+------------------+------------------+-------------+
| Reserves | 1.24 mt @ 5 g/t | 1.77 mt @ 5 g/t | |
| | Ag & 1.44 g/t Au | Ag & 1.50 g/t Au | |
+----------------------------+------------------+------------------+-------------+
| Reserve (moz Ag eq.) | 3.6 | 5.4 | (33%) |
+----------------------------+------------------+------------------+-------------+
Acquisitions and investments
Expansion through investment and acquisition is a key element of our strategy.
We have maintained our disciplined approach in 2008, focusing on mid-sized,
underground precious metals projects in the Americas, particularly in our
existing clusters, which we believe will create long term shareholder value.
During 2008 and in early 2009, we secured a number of strategic investments in
key mining districts with a total spend of $284.5 million, of which $254 million
was invested during 2008.
In the first half of 2008 we acquired 40% of Lake Shore Gold for a total of $164
million, providing us with exposure to reasonably priced, high-grade gold
deposits in the Timmins mining district of Northern Ontario, Canada. The company
has a strong pipeline of projects, from grass roots through to advanced
exploration as well as a proprietary database of exploration targets and is
expected to produce up to 30,000 ounces of gold in 2009 (which would equate to
0.72 million attributable silver equivalent ounces). We view this as an
important strategic investment and have three positions on the board.
In 2009 we participated in Lake Shore Gold's equity financing and maintained our
ownership at 40% by investing a further $18.5 million. Proceeds from the
financing will be used for underground rehabilitation and development work at
the company's 100% owned Bell Creek mine and Vogel properties in support of an
advanced underground exploration program, exploration expenditures at the
Timmins, Thunder Creek, Casa Berardi and other exploration properties, and for
general corporate purposes.
In June 2008 we acquired 100% of the San Felipe project, our advanced
development project in northern Mexico. As a result of declining zinc prices in
the second half of the year and our commitment to reduce capex, in November we
decided to delay the development of this project. However, we remain confident
about the long term potential of San Felipe and will continue to review the
timing of the project.
In line with our cluster strategy, we further consolidated our position in
southern Peru via the acquisition of a 50% interest in the Liam JV with
Southwestern for a total consideration of US$33.3 million. The 282,000 hectare
property has significant strategic importance for Hochschild as it is in close
proximity to our four existing operations; Arcata, Ares, Selene and
Pallancata. The acquisition was completed in August 2008.
In 2009, we entered into a binding agreement, subject to the approval of
Southwestern's shareholders, to acquire the remaining 50% of the Liam JV through
the purchase of 100% of Southwestern, for a total cash consideration of $17.5
million. Southwestern is a Canadian listed mineral exploration company with a
number of gold, silver and base metals projects in southern Peru. The
acquisition consolidates our position in one of our key operational clusters and
enables us to leverage our existing infrastructure and knowledge of the regional
geology.
In November 2008, we made a $5 million investment in Gold Resource Corp, an
underground precious metals mining company with a number of high grade
development and exploration projects in southern Mexico. We have subsequently
exercised our option to invest a further $13 million in GRC and as a result we
now hold 15% of the company and are extremely confident about the potential of
the business.
Exploration
We remain committed to our long term goal of achieving a resource and reserve
life of 4.0 years at each of our operations and in 2008 spent $23.8 million on
exploration.
We remain extremely positive about our project pipeline which currently has
numerous opportunities in Peru, Argentina, Mexico, Chile and Canada at various
stages of development. We are constantly evaluating opportunities, with a clear
focus on mid-sized, high grade, underground precious metals deposits in key
mining districts:
Peru
Azuca
Azuca is a 100% owned project located in southern Peru, in close proximity to
our existing operations. Successful exploration at Azuca during 2008 has
identified two laterally extensive mineralised vein systems; Azuca and Canela.
Additional mineralised vein systems have been identified at the property and
their continuity and metal content will be confirmed in 2009.
Core drilling of approximately 15,000 metres in 53 holes at this exciting new
discovery resulted in the development of a significant resource in the inferred
category along two ore shoots in the Azuca vein, totalling 1,776,034 metric
tonnes at 327 g/t Ag and 1.34g/t Au (408 g/t Ag-equivalent) containing 23.3
million ounces of silver-equivalent.
Drilling to the east of Azuca and along the Canela vein looks very promising,
indicating that there is potential for additional resource to be defined in
2009. Metallurgical recoveries are slightly above 90% for both gold and silver.
Liam JV
To date, 38 prospects have been identified and partially evaluated.
The most important is the Crespo project where previous exploration led to the
drilling of approximately 6,400 metres in 41 holes. Drilling results have
allowed the internal calculation of a mineralised potential at Crespo of 12.5
million metric tonnes at 0.77 g/t Au and 39.4 g/t Ag, containing 0.4 moz Au and
15.8 moz Ag. Initial core drilling focused on defining distinct zones containing
structures with higher grade mineralization (above 300g/t Ag equivalent). A
total of 352 metres was completed in 6 holes. Results include 14.5 metres at 328
g/t Ag equivalent and 11 metres at 327 g/t Ag equivalent.
Data review, core re-logging and preliminary exploration work were also carried
out at the Huacullo, Astana-Farallón and Ibel prospects. These areas will be a
significant part of the 2009 generative program in Peru.
Inmaculada
The Inmaculada project is part of a JV agreement with Ventura Gold, in which
Hochschild has a 49% ownership interest. Ventura Gold recently reported the
first independent inferred mineral resource estimate at the Inmaculada project
as per National Instrument 43-101 by Micon of 3.7 million tonnes at an average
grade of 4.0 g/t Au and 139 g/t Ag containing 483,000 ounces Au and 16.6 million
ounces Ag (as at 5 January 2009).
Chile
Encrucijada
Encrucijada is part of a JV agreement with Andina Minerals Inc, signed in
February 2008, in which Hochschild can earn a 60% interest in the property.
Detailed surface exploration has defined four areas of interest (Millaray,
Central, Curicala and Norte). A first pass core drilling program was completed
in the Millaray area totalling 1,561 million tonnes in 10 holes. The Quillay and
Millaray veins have been recognised at above 400 metres along strike and to 130
million tonnes depth. In 2009, detailed exploration will be performed at the
Central, Curicala and Norte areas to define drillable targets for follow-up.
Vaquillas project
A joint venture letter of intent with Iron Creek Capital Corp. to explore the
precious metal properties within their Vaquillas project was signed in September
2008. Under the terms of the agreement Hochschild can earn-in a 60% interest in
the Vaquillas project by contributing $6.75 million over a 5 year period. Field
work started during the first week in October on the Inti claims followed by a
2,100 metre reverse circulation drill program (9 holes) that was completed in
December. Sample results from the drilling program show no significant
mineralization, with the exception of drill hole 3 which intersected 1m of 326
g/t Ag. The remaining targets will be explored during 2009.
FINANCIAL REVIEW
Key performance indicators:
(before exceptional items, unless otherwise indicated)
+-----------------------------------------------------+-------------------+-------------------+-----------+
| US$(000) unless otherwise indicated | Year ended 31 | Year ended 31 | % change |
| | December 2008 | December 2007 | |
+-----------------------------------------------------+-------------------+-------------------+-----------+
| Revenue | 433,779 | 305,021 | 42% |
+-----------------------------------------------------+-------------------+-------------------+-----------+
| Attributable silver production (koz) | 16,941 | 13,588 | 25% |
+-----------------------------------------------------+-------------------+-------------------+-----------+
| Attributable gold production (koz) | 153 | 201 | (24%) |
+-----------------------------------------------------+-------------------+-------------------+-----------+
| Cash costs ($/oz Ag co-product)1 | 7.05 | 4.40 | 60% |
+-----------------------------------------------------+-------------------+-------------------+-----------+
| Cash costs ($/oz Au co-product)1 | 469 | 212 | 121% |
+-----------------------------------------------------+-------------------+-------------------+-----------+
| Adjusted EBITDA2 | 142,292 | 147,606 | (4%) |
+-----------------------------------------------------+-------------------+-------------------+-----------+
| Earnings per share | $0.08 | $0.27 | (70%) |
+-----------------------------------------------------+-------------------+-------------------+-----------+
| Cash flow from operating activities | 78,641 | 21,404 | 267% |
+-----------------------------------------------------+-------------------+-------------------+-----------+
| Reserve life of mine (years)3 | 3.2 | 4.6 | (30%) |
+-----------------------------------------------------+-------------------+-------------------+-----------+
1 Cash costs are calculated to include cost of sales, treatment charges, and
selling expenses less depreciation included in cost of sales. The calculation
used in 2007 has been adjusted to include: (i) the termination benefits of mine
workers (this amount was previously included in administrative expenses) and
(ii) a change in the allocation of depreciation and amortisation in cost of
sales.
2 Adjusted EBITDA is calculated as profit from continuing operations before
exceptional items, net finance income/(cost), foreign exchange (loss)/gain and
income tax plus depreciation, amortisation and exploration costs other than
personnel and other expenses.
3 Reserve life of mine relates to our underground operations. Moris, our only
open pit mine, has a different operational profile and is therefore not included
The reporting currency of Hochschild Mining plc is U.S. dollars. In our
discussion of financial performance we remove the effect of exceptional items,
unless otherwise indicated, 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 to
facilitate comparison with prior years.
Revenue
Full year revenue from continuing operations, net of commercial discounts,
increased by 42% to $433.8 million (2007: $305.0 million), comprising silver
revenue of $264.1 million and gold revenue of $169.2 million. The increase was
mainly as a result of a higher amount of silver ounces sold and higher gold
prices. In 2008, silver accounted for 61% and gold for 39% of consolidated
revenue compared to 59% and 41% respectively in 2007. Gross revenue increased
46% to $463.4 million in 2008 (2007: $317.4 million).
Silver: Gross revenue from silver increased 52% in 2008 to $288.8 million (2007:
$190.5 million). This change reflects a 50% increase in total ounces sold,
partly offset by lower realised silver prices, which were down 2% year on year.
The total amount of silver ounces sold in 2008 was 20,593 koz (2007: 13,717
koz).
Gold: Gross revenue from gold increased 38% in 2008 to $174.6 million (2007:
$126.8 million). This change was a result of higher realised gold prices, up 35%
in 2008. The total amount of gold ounces sold in 2008 was 198.3 koz in 2008
(2007: 202.1 koz).
Commercial discounts: Commercial discounts mostly refer to refinery charges for
processing mineral ore and are discounted from revenue on a per tonne or per
ounce basis. In 2008, commercial discounts were $30.2 million representing a
127% increase on 2007. This was partly due to the Group producing a higher
amount of concentrate in 2008 resulting from a full year's production at both
Pallancata and San José (which commenced production in Q3 2007). In addition, we
incurred higher treatment charges for concentrate in most mines given the less
favourable market conditions. The ratio of commercial discounts to gross revenue
increased from 4% in 2007 to 7% in 2008.
Revenue by mine
+------------+----------+----------+--------+
| US$(000) | Year | Year | % |
| unless | ended | ended | change |
| otherwise | 31 | 31 | |
| indicated | December | December | |
| | 2008 | 2007 | |
+------------+----------+----------+--------+
| Silver | | | |
| revenue | | | |
+------------+----------+----------+--------+
| Arcata | 119,284 | 94,754 | |
+------------+----------+----------+--------+
| Ares | 38,196 | 38,078 | |
+------------+----------+----------+--------+
| Selene | 29,168 | 48,593 | |
+------------+----------+----------+--------+
| Pallancata | 48,207 | 8,342 | |
+------------+----------+----------+--------+
| San | 52,942 | 744 | |
| José | | | |
+------------+----------+----------+--------+
| Moris | 992 | 26 | |
+------------+----------+----------+--------+
| Commercial | (24,712) | (11,697) | 111% |
| discounts | | | |
+------------+----------+----------+--------+
| Net | 264,077 | 178,840 | 48% |
| silver | | | |
| revenue | | | |
+------------+----------+----------+--------+
| Gold | | | |
| revenue | | | |
+------------+----------+----------+--------+
| Arcata | 20,344 | 11,924 | |
| | | | |
+------------+----------+----------+--------+
| Ares | 67,899 | 97,469 | |
+------------+----------+----------+--------+
| Selene | 8,714 | 14,807 | |
+------------+----------+----------+--------+
| Pallancata | 13,214 | 1,749 | |
+------------+----------+----------+--------+
| San | 40,095 | 532 | |
| José | | | |
+------------+----------+----------+--------+
| Moris | 24,380 | 347 | |
+------------+----------+----------+--------+
| Commercial | (5,423) | (1,578) | 244% |
| discounts | | | |
+------------+----------+----------+--------+
| Net | 169,223 | 125,250 | 35% |
| gold | | | |
| revenue | | | |
+------------+----------+----------+--------+
| | | | |
+------------+----------+----------+--------+
| Other | 479 | 931 | (49%) |
| revenue1 | | | |
+------------+----------+----------+--------+
| Total | 433,779 | 305,021 | 42% |
| revenue | | | |
+------------+----------+----------+--------+
| | | | |
+------------+----------+----------+--------+
1Other revenue includes revenue from base metal components in the concentrate
sold from the Arcata mine net of commercial discounts and revenue from sale of
energy.
Average realisable prices
Average realisable precious metals prices, which include commercial discounts,
for the twelve months to 31 December 2008 were $853.28/oz for gold and $12.82/oz
for silver. The average realisable price for the year was negatively impacted by
the significant fall in precious metals prices in the second half of 2008 when
silver decreased by an average of 39% and gold by 7%.
+--------+----------+----------+--------+
| | Twelve | Twelve | % |
| | months | months | change |
| | to | to | |
| | 31 | 31 | |
| | December | December | |
| | 2008 | 2007 | |
+--------+----------+----------+--------+
| Silver | $12.82 | $13.08 | (2%) |
| ($/oz) | | | |
+--------+----------+----------+--------+
| Gold | $853.28 | $634.30 | 35% |
| ($/oz) | | | |
+--------+----------+----------+--------+
Forward sales contracts
The Group sold forward 778 koz of its silver 2008 production at $10.63/oz and
1.9 koz of its gold 2008 production at $840/oz. Both forward sales matured in
January 2009.
In addition, the Group has sold forward a total of 10.7 million ounces of its
2009 silver equivalent production comprised of 8.9 million ounces of silver at
an average price of $12.09/oz and 30.0 thousand ounces of gold at an average
price of $972/oz.
Of the total amount sold forward, 3.3 million silver ounces and 1.9 thousand
gold ounces were sold in December 2008 and the remaining 6.4 million silver
ounces and 30.0 thousand gold ounces were sold forward in Q1 2009.
None of 2010's production has been sold forward. At this time, management does
not plan to undertake any further forward sales contracts for 2009 production.
The decision to sell forward a portion of 2009 production was driven by the
desire for more stable cash flows which will fund operating capex and future
M&A. We remain positive about the long term prospects for silver and gold but in
light of current market conditions, we believe that it is prudent to focus on
cash preservation in the current financial year.
Costs
Management remains focused on cost control and during 2008 a series of
productivity measures were implemented including plant expansions, changes in
mining methods and procurement initiatives. This has enabled us to offset some
of the industry cost inflation experienced in 2008, which was particularly
prevalent in the first half of the year.
In our underground mining operations, unit cost per tonne increased by an
average of 14.3% from $69.7 in 2007 to $79.7 in 2008. As previously indicated,
the increase was driven by industry cost inflation associated with labour,
materials (explosives, reagents and steel inputs), energy and supplies.
Including Moris, our only open pit operation which has different cost profile to
our underground mines, the Group's unit cost per tonne was flat year on year at
$59.9 (2007: $59.7).
During the year, the average unit cost per tonne for our three original mines
(Ares, Arcata and Selene), was $70.8 representing an annual increase of 16.4%.
This cost increase was mainly a result of higher prices of key inputs, such as
cyanide, energy, explosives and steel balls as well as higher energy costs.
Our fourth operation in Peru, Pallancata, was also affected by industry
inflationary pressure, with unit cost per tonne increasing 5.8% mostly due to
higher energy and maintenance costs.
In San José, unit cost per tonne decreased by 16.6% in 2008 as a result of
increased throughput and efficiency gains resulting from the optimisation of
production processes at both the mine and plant. This reduction was achieved
despite increases in overall inflation in Argentina (7.2% in 2008) and higher
energy costs.
In Mexico, the average unit cost per tonne at Moris decreased by 2.2% to $18.0.
Depreciation and amortisation, which is included in costs of sales, increased
from $24.7 million in 2007 to $41.4 million in 2008. This increase was driven by
the Group's higher production in 2008 and also by its greater net asset base,
with six mines in operation as opposed to three in 2007.
Cash costs
Co-product cash costs include cost of sales, commercial deductions and selling
expenses, less depreciation included in cost of sales. Silver/gold cash costs
are total cash costs multiplied by the percentage of revenue from silver/gold,
divided by the number of silver/gold ounces sold in the year. Cash costs for the
year increased from $4.40 to $7.05 per ounce for silver and from $212 to
$469 per ounce for gold. The increase is mainly explained by i) the expected
decline in extracted grades, especially at Ares and Selene, which accounted for
approximately 79% of the total increase of silver cash cost and 53% of the total
increase of gold cash cost; and ii) the higher commercial discounts due to less
favourable market conditions that represent approximately 11% of the increment
of silver cash cost and 8% of the increase of gold cash cost.
By product cash costs include cost of sales, commercial deductions and selling
expenses, less depreciation included in cost of sales. Silver/gold cash costs
are total cash costs less revenue from gold/silver, divided by the number of
silver/gold ounces sold in the year.
By product cash costs for the period were $3.09 per silver ounce and ($255) per
gold ounce. (2007: ($1.80) per silver ounce and ($445) per gold ounce).
Administrative expenses
Administrative expenses before exceptional items totalled $68.8 million in 2008
(2007: $68.8 million). On a post exceptional basis, administrative expenses
increased 1.6% to $69.9 million in 2008 (2007: $68.8 million). This was due to
the one off termination benefit associated with the reduction in the Group's
corporate workforce which occurred in the last quarter of 2008. This initiative,
which involved 102 redundancies in administrative positions (150 positions in
total), was one of a series of measures undertaken by management to reduce
operating costs and preserve cash.
Selling expenses
Selling expenses increased by $8.5 million to $11.3 million in 2008 (2007: $2.8
million) as a result of:
i) Higher transportation costs due to the higher volume of concentrate sold at
Arcata, San Jose and Pallancata as a result of capacity expansions and a full
year production in the case of San José and Pallancata;
ii) Increased sales in Argentina resulting in higher export duties. Export
duties in Argentina are levied at 10% of revenue for concentrate and 5% of
revenue for doré.
Profit from continuing operations
Profit from continuing operations before exceptional items, net finance cost,
foreign exchange loss and income tax totalled $86.3 million in 2008,
representing an annual decrease of 17% (2007: $103.9 million). The decrease is
primarily the result of the expected decline in grades at Ares and Selene,
higher production costs and commercial discounts, and higher depreciation and
amortisation (as detailed above). Profit from continuing operations was also
negatively impacted by higher selling expenses, partly offset by increased
revenue generated by higher gold prices and a greater amount of silver ounces
sold.
Adjusted EBITDA
Adjusted EBITDA is calculated as profit from continuing operations before
exceptional items, net finance cost, foreign exchange loss and income tax plus
depreciation, amortisation and exploration costs other than personnel and other
expenses. Adjusted EBITDA decreased by 4% over the year to $142.3 million (2007:
$147.6 million) mainly as a result of a decrease in profit from continuing
operations as explained above.
Adjusted EBITDA reconciliation
+----------------+----------+----------+--------+
| US$(000) | Year | Year | % |
| unless | ended | ended | change |
| otherwise | 31 | 31 | |
| indicated | December | December | |
| | 2008 | 2007 | |
+----------------+----------+----------+--------+
| Profit | 86,268 | 103,930 | (17%) |
| from | | | |
| continuing | | | |
| operations | | | |
| before | | | |
| exceptional | | | |
| items, net | | | |
| finance | | | |
| income / | | | |
| (cost), | | | |
| foreign | | | |
| exchange | | | |
| gain / | | | |
| (loss) and | | | |
| income tax | | | |
+----------------+----------+----------+--------+
| Operating | 20% | 34% | |
| margin | | | |
+----------------+----------+----------+--------+
| Depreciation | 41,373 | 24,685 | 68% |
| and | | | |
| amortisation | | | |
| in cost of | | | |
| sales | | | |
+----------------+----------+----------+--------+
| Depreciation | 1,125 | 525 | 114% |
| and | | | |
| amortisation | | | |
| in | | | |
| administrative | | | |
| expenses | | | |
+----------------+----------+----------+--------+
| Exploration | 23,841 | 26,890 | (11%) |
| expenses | | | |
+----------------+----------+----------+--------+
| Personnel | 10,315 | 8,424 | 22% |
| and other | | | |
| exploration | | | |
| expenses | | | |
+----------------+----------+----------+--------+
| Adjusted | 142,292 | 147,606 | (4%) |
| EBITDA | | | |
+----------------+----------+----------+--------+
| Adjusted | 33% | 48% | |
| EBITDA | | | |
| margin | | | |
+----------------+----------+----------+--------+
Exploration expenses
In 2008, exploration expenses decreased 11% to $23.8 million (2007: $26.9
million) as a result of the Group's decision, announced in November 2008, to
reduce expenditure. This mainly affected greenfield expenditure which decreased
to $8.8 million (2007: $13.9 million). However, we remain committed to advancing
existing projects and prospects and have therefore maintained our expenditure on
brownfield and advanced project exploration, which increased by 7% to $4.3
million (2007: $4.0 million).
Impact of the Group's investments in joint ventures and associates
The Group's share of the loss of equity accounted investments in joint ventures
and associates resulted in a loss of $8.2 million, which has had an impact of
$7.4 million on attributable net earnings before exceptional items and $0.02 on
EPS. This loss comprises the Group's share of post-tax losses of its associate,
Lake Shore Gold (US$3.9 million) and its share of post tax losses of joint
venture companies formed to develop the Pacapausa ($2.1 million) and Claudia
($2.2 million) projects.
Notwithstanding these 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.
Finance income & costs
Finance income decreased 53% to $9.4 million in 2008 (2007: $19.8 million)
mainly due to lower interest on time deposits ($11.2 million) as a result of
lower average cash balances ($160 million) and lower gains from changes in the
fair value of financial instruments.
Finance costs increased from $7.5 million to $18.8 million during the period
primarily due to interest on the $200 million syndicated loan facility which was
drawn down during the year.
Foreign exchange loss
The Group recognised a foreign exchange loss of $7.1 million in 2008 (2007: $4.4
million loss), as a result of transactions in other currencies than functional
currency. The devaluation of the Peruvian sol (5%) had an impact of ($4.1)
million; the Argentinean peso (10%) had an impact of ($3.9) million; and the
Mexican peso (27%) had an impact of ($0.7) million. These losses were partially
offset by a foreign exchange gain of $1.6 million in the UK generated by
primarily as a result of the acquisition of shares in Lake Shore Gold which was
effected in Canadian dollars.
Income tax
The pre-exceptional effective income tax rate in 2008 is 48.4%, compared to
30.8% in 2007. The increase in the effective income tax rate has been driven
primarily by the following factors:
+-----------+--------------------------------------------------------------------+
| | |
+-----------+--------------------------------------------------------------------+
| i) | The reduction in profit following the lower grades and increased |
| | costs at the mines has resulted in less tax being paid to the |
| | authorities compared to the prior year. However, items for which |
| | no tax relief is created (such as the tax losses arising in |
| | exploration companies, for which no deferred tax asset can be |
| | recognised, and non-deductible expenditure) did not reduce by a |
| | similar amount, and as a result they are a larger percentage of |
| | prima facie tax expense (profit before tax multiplied by the |
| | weighted average statutory tax rate) than they were in the |
| | previous year. This has resulted in a 9% increase in the |
| | pre-exceptional effective tax rate. |
| | |
+-----------+--------------------------------------------------------------------+
| ii) | The significant decline in the Mexican and Argentinean pesos, and |
| | the Peruvian soles (being the currencies in which tax calculated |
| | and levied in the Group's operations), against the US dollar has |
| | resulted in the recognition of additional deferred tax |
| | liabilities, and tax being paid on taxable exchange gains which |
| | arose in the local operations. The effect of the devaluation of |
| | the local currencies was to increase the pre-exceptional effective |
| | tax rate by 7%. |
| | |
+-----------+--------------------------------------------------------------------+
| On a post-exceptional basis, the effective tax rate for the Group was 243.8%. |
| The significant increase over the post-exceptional effective tax rate for the |
| previous year was the result of: |
| |
+--------------------------------------------------------------------------------+
| i) | The factors discussed above, and |
| | |
+-----------+--------------------------------------------------------------------+
| ii) | The impairments of the San Felipe project, and the investments in |
| | EXMIN and Electrum Capital for which there was no deferred tax |
| | relief (refer to the "Exceptional items" discussion below). |
| | |
+-----------+--------------------------------------------------------------------+
| However, the actual amount of current tax expense in 2008 was $13.1 million |
| compared to $44.9 million in 2007. |
| |
+--------------------------------------------------------------------------------+
| Exceptional items |
| |
+--------------------------------------------------------------------------------+
| Exceptional items, after tax, totalled $45 million in 2008. This mainly |
| includes; |
| |
+--------------------------------------------------------------------------------+
| i) | Impairment of fixed assets: Selene, Moris and San Felipe were |
| | impaired by a total consideration of $29.6 million, after tax; |
| | |
+-----------+--------------------------------------------------------------------+
| ii) | Impairment of financial investments in: EXMIN $8.2 million and |
| | Electrum Capital $2.6 million; and |
| | |
+-----------+--------------------------------------------------------------------+
| iii) | Other exceptional items include: the loss from changes in the fair |
| | value of financial instruments of $4.7 million, after tax, |
| | termination benefits of $1.1 million and impairments on accounts |
| | receivable of $1.3 million. In addition, the Group recorded a |
| | credit of $3.9 million mainly as a result of gains on Gold |
| | Resources' options ($2.3 million) and on the sale of Fortuna |
| | silver shares ($1.3 million). |
+-----------+--------------------------------------------------------------------+
Impairments of fixed assets
The Group conducts an impairment review every time indicators of impairment
exist, as required by IFRS. Impairment indicators include: declines in metal
prices; increases in costs, royalties or taxes; falling grades; lower reserves;
production cut backs and significant project development over-runs. The presence
of one or more indicators does not necessarily mean that the asset would be
impaired but that it must be tested for impairment. Impairment testing should be
performed at an individual asset or cash-generating unit level.
Given the impact of lower precious metals prices in the second half of 2008 and
the production and cost profiles of some of our operations, we have recorded a
total impairment charge of $34.7 million in 2008 (before tax) and $29.6 million
after tax which has an impact of $0.09 on the EPS.
Selene has been written down by $13.7 million due to declining grades at the
mine and the high level of capital required to extract economic tonnage. Moris
has been written down by $5.7 million as a result of the small reserve and
resource base at the operation.
In addition, we have recorded an impairment charge of $15.4 million for the San
Felipe project, which was delayed as a result of declining zinc prices in the
second half of the year and our commitment to conserve cash holdings. We remain
confident about the long term value of San Felipe and will continue to review
the timing of the project.
Dividends
The directors recommend a final dividend of $0.02 per ordinary share which,
subject to shareholder approval at the 2009 AGM, will be paid on 28 May 2009 to
those shareholders appearing on the register on 1 May 2009. Dividends are
declared in US dollars. Unless a shareholder elects to receive dividends in US
dollars, they will be paid in pounds sterling with the US dollar dividend
converted into pound sterling at exchange rates prevailing at the time of
payment. Our dividend policy takes into account the profitability of the
business and the underlying growth in earnings of the Company, as well as its
capital requirements and cash flow.
+-------------+--------+
| Dividend | 2009 |
| dates | |
+-------------+--------+
| Ex-dividend | 29 |
| date | April |
+-------------+--------+
| Record | 1 May |
| date | |
+-------------+--------+
| Deadline | 5 May |
| for | |
| return | |
| of | |
| currency | |
| election | |
| forms | |
+-------------+--------+
| Payment | 28 May |
| date | |
+-------------+--------+
Balance sheet & cash flow review
Working capital:
+----------------------------------+--------------------+--------------------+
| US$(000) unless otherwise | As at | As at |
| indicated | 31 December 2008 | 31 December 2007 |
+----------------------------------+--------------------+--------------------+
| Current assets | | |
+----------------------------------+--------------------+--------------------+
| Inventories | 49,220 | 47,012 |
+----------------------------------+--------------------+--------------------+
| Trade and other receivables | 123,726 | 134,180 |
+----------------------------------+--------------------+--------------------+
| Current liabilities | | |
+----------------------------------+--------------------+--------------------+
| Trade and other payables | 82,291 | 52,176 |
+----------------------------------+--------------------+--------------------+
| Pre-shipment loans | 49,660 | 23,750 |
+----------------------------------+--------------------+--------------------+
| Working capital | 40,995 | 105,266 |
+----------------------------------+--------------------+--------------------+
The change in the working capital position resulted from a significant increase
in trade and other payables from $52.2 million as at 31 December 2007 to $82.3
million as at 31 December 2008 and from an increase in pre-shipment loans from
$23.8 million as at 31 December 2007 to $49.7 million as at 31 December 2008.
Trade payables and other payables increased mainly as a consequence of increased
production and higher salaries payable, as well as an increase in taxes and
contributions.
Receivables were lower at the end of 2008 because of a decrease in trade
receivables and the reclassification of a portion of a loan to Minera Andes from
current receivables to non current receivables. The decrease was partially
offset by higher prepaid expenses and VAT in Minera Suyamarca and Minera Santa
Cruz.
The reduction in trade receivables is mainly explained by the change in our
customers' base and selling contract terms. Trade accounts receivable comprised
of amounts receivable from Cormin, Louis Dreyfus, Sudamericana Trading and
Norddeutsche Affinerie.
Cashflow
Total cash decreased $184.4 million in 2008 (2007: $134.2 million decrease).
Cash flow from operating activities increased by 267% to $78.6 million mainly as
a result of lower working capital. The increase in cash flow from operations was
offset by the outflows resulting from investing activities, which totalled
$475.8 million in 2008 comparing to $162.3 in 2007. 2008 investments included:
40% of Lake Shore Gold ($164 million), 50% of the Liam JV ($33.3million), 100%
in San Felipe ($51.5 million) and 5% of Gold Resource Corp. ($5 million). In
2008, the Group incurred a higher amount of capital expenditure in operating
units due to plant expansions at San José, Arcata and Selene.
Total capital expenditure:
We continue to invest in our production platform to ensure we have the
infrastructure in place for future growth. In 2008, capital expenditure was $311
million (2007: $145 million) due to new investments in Peru, Argentina and
Mexico. Industry inflation has also impacted capital expenditure in 2008.
+------------------------------------+--------------------+--------------------+
| US$(000) unless otherwise | Year ended | Year ended |
| indicated | 31 December 2008 | 31 December 2007 |
+------------------------------------+--------------------+--------------------+
| Arcata | 43,977 | 22,750 |
+------------------------------------+--------------------+--------------------+
| Ares | 10,438 | 3,705 |
+------------------------------------+--------------------+--------------------+
| Selene | 47,226 | 27,497 |
+------------------------------------+--------------------+--------------------+
| Pallancata1 | 14,619 | 12,190 |
+------------------------------------+--------------------+--------------------+
| San José1 | 80,398 | 62,752 |
+------------------------------------+--------------------+--------------------+
| Moris1 | 2,234 | 12,099 |
+------------------------------------+--------------------+--------------------+
| San Felipe1 | 63,318 | 667 |
+------------------------------------+--------------------+--------------------+
| Other | 49,061 | 3,078 |
+------------------------------------+--------------------+--------------------+
| Total | 311,271 | 144,738 |
+------------------------------------+--------------------+--------------------+
1 Represents 100% of capital expenditure
The increase of $166.6 million of capital expenditure in 2008 is primarily a
result of the mine developments and expansion projects at San José, Arcata and
Selene. This increase was also driven by the acquisition of 100% of San Felipe
($51.5 million) and 50% of the Liam JV ($33.3million).
Net debt:
+---------------------------------------+------------------+------------------+
| US$(000) unless otherwise indicated | As at | As at |
| | 31 December 2008 | 31 December 2007 |
+---------------------------------------+------------------+------------------+
| Cash and cash equivalents | 116,147 | 301,426 |
+---------------------------------------+------------------+------------------+
| Long term borrowings | 231,692 | 55,209 |
+---------------------------------------+------------------+------------------+
| Short term borrowings less | 48,410 | 9,419 |
| pre-shipment loans | | |
+---------------------------------------+------------------+------------------+
| Net debt/(net cash) | 163,955 | (236,798) |
+---------------------------------------+------------------+------------------+
As a result of the syndicated loan facility of $200 million, the Group's balance
sheet changed from a net cash position of $236.8 million to a net debt position
of $164.0 million. Part of the facility was used for M&A as described under the
cash flow section.
The decrease in cash and cash equivalents from $301 million to $116 million was
mainly explained by the increase in capital expenditure in 2008 due to plant
expansions at Arcata, Selene and San José.
=------------------------------------------------------------------------------
=----------------------------------------
A conference call will be held at 9.30am (London time) on Wednesday 25 March
2009 for analysts and investors.
Dial in details as follows:
UK+44 (0)203 037 9098
A recording of the conference call will be available for one week following its
conclusion, accessible from the following telephone numbers:
UK+44 (0)208 196 1998
Access code: 7521788#
_____________________________________________________________________
+------------+-----------------+
| Enquiries: | |
+------------+-----------------+
| | |
+------------+-----------------+
| Hochschild | |
| Mining plc | |
+------------+-----------------+
| Isabel | +44 |
| Lütgendorf | (0)20 |
| | 7907 2934 |
+------------+-----------------+
| Head | |
| of | |
| Investor | |
| Relations | |
+------------+-----------------+
| | |
+------------+-----------------+
| Ignacio | +511 437 6007 |
| Rosado | |
+------------+-----------------+
| Chief | |
| Financial | |
| Officer | |
+------------+-----------------+
| | |
+------------+-----------------+
| Finsbury | |
+------------+-----------------+
| Robin | +44 |
| Walker | (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
has over forty years experience in the mining of precious metal epithermal vein
deposits and currently operates five underground epithermal vein mines, four
located in southern Peru, one in southern Argentina and one open pit mine in
northern Mexico. Hochschild also has numerous long-term prospects throughout the
Americas.
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. 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, 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 forecast.
Consolidated Income Statement
+-----------------------+--+-------------+--+-------------+--+----------+--+-------------+--+-------------+--+----------+--+
| | | Year ended 31 December 2008 | | Year ended 31 December 2007 | |
+-----------------------+--+--------------------------------------------+--+--------------------------------------------+--+
| | | Before | |Exceptional | | Total | | Before | |Exceptional | | Total | |
| | |exceptional | | items | | | |exceptional | | items | | | |
| | | items | | | | | | items | | | | | |
+-----------------------+--+-------------+--+-------------+--+----------+--+-------------+--+-------------+--+----------+--+
| | | US$ (000) |
+-----------------------+--+-----------------------------------------------------------------------------------------------+
| Continuing operations | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
+-----------------------+--+-------------+--+-------------+--+----------+--+-------------+--+-------------+--+----------+--+
| Revenue | | 433,779 | | - | | 433,779 | | 305,021 | | - | | 305,021 | |
+-----------------------+--+-------------+--+-------------+--+----------+--+-------------+--+-------------+--+----------+--+
| Cost of sales | | (240,441 | )| (234 | )| (240,675 | )| (106,272 | )| - | | (106,272 | )|
+-----------------------+--+-------------+--+-------------+--+----------+--+-------------+--+-------------+--+----------+--+
| Gross profit | | 193,338 | | (234 | )| 193,104 | | 198,749 | | - | | 198,749 | |
+-----------------------+--+-------------+--+-------------+--+----------+--+-------------+--+-------------+--+----------+--+
| Administrative | | (68,751 | )| (1,127 | )| (69,878 | )| (68,817 | )| - | | (68,817 | )|
| expenses | | | | | | | | | | | | | |
+-----------------------+--+-------------+--+-------------+--+----------+--+-------------+--+-------------+--+----------+--+
| Exploration expenses | | (23,841 | )| (69 | )| (23,910 | )| (26,890 | )| - | | (26,890 | )|
+-----------------------+--+-------------+--+-------------+--+----------+--+-------------+--+-------------+--+----------+--+
| Selling expenses | | (11,257 | )| - | | (11,257 | )| (2,780 | )| - | | (2,780 | )|
+-----------------------+--+-------------+--+-------------+--+----------+--+-------------+--+-------------+--+----------+--+
| Other income | | 5,025 | | 252 | | 5,277 | | 5,695 | | 932 | | 6,627 | |
+-----------------------+--+-------------+--+-------------+--+----------+--+-------------+--+-------------+--+----------+--+
| Other expenses | | (8,246 | )| (1,984 | )| (10,230 | )| (2,027 | )| (1,501 | )| (3,528 | )|
+-----------------------+--+-------------+--+-------------+--+----------+--+-------------+--+-------------+--+----------+--+
| Impairment of | | - | | (34,706) | | (34,706 | )| - | | - | | - | |
| property, plant and | | | | | | | | | | | | | |
| equipment | | | | | | | | | | | | | |
+-----------------------+--+-------------+--+-------------+--+----------+--+-------------+--+-------------+--+----------+--+
| Profit from | | 86,268 | | (37,868 | )| 48,400 | | 103,930 | | (569 | )| 103,361 | |
| continuing operations | | | | | | | | | | | | | |
| before net finance | | | | | | | | | | | | | |
| income/(cost), | | | | | | | | | | | | | |
| foreign exchange loss | | | | | | | | | | | | | |
| and income tax | | | | | | | | | | | | | |
+-----------------------+--+-------------+--+-------------+--+----------+--+-------------+--+-------------+--+----------+--+
| Share of post tax | | (8,214 | )| - | | (8,214 | )| - | | - | | - | |
| losses of associates | | | | | | | | | | | | | |
| and joint ventures | | | | | | | | | | | | | |
| accounted under | | | | | | | | | | | | | |
| equity method | | | | | | | | | | | | | |
+-----------------------+--+-------------+--+-------------+--+----------+--+-------------+--+-------------+--+----------+--+
| Finance income | | 9,382 | | 3,914 | | 13,296 | | 19,783 | | 5,474 | | 25,257 | |
+-----------------------+--+-------------+--+-------------+--+----------+--+-------------+--+-------------+--+----------+--+
| Finance costs | | (18,833 | )| (18,088 | )| (36,921 | )| (7,517 | )| (71 | )| (7,588 | )|
+-----------------------+--+-------------+--+-------------+--+----------+--+-------------+--+-------------+--+----------+--+
| Foreign exchange loss | | (7,161 | )| - | | (7,161 | )| (4,363 | )| - | | (4,363 | )|
+-----------------------+--+-------------+--+-------------+--+----------+--+-------------+--+-------------+--+----------+--+
| Profit/(loss) from | | 61,442 | | (52,042 | )| 9,400 | | 111,833 | | 4,834 | | 116,667 | |
| continuing operations | | | | | | | | | | | | | |
| before income tax | | | | | | | | | | | | | |
+-----------------------+--+-------------+--+-------------+--+----------+--+-------------+--+-------------+--+----------+--+
| Income tax expense | | (29,762 | )| 6,848 | | (22,914 | )| (34,453 | )| (1,299 | )| (35,752 | )|
+-----------------------+--+-------------+--+-------------+--+----------+--+-------------+--+-------------+--+----------+--+
| Profit/(loss) for the | | 31,680 | | (45,194 | )| (13,514 | )| 77,380 | | 3,535 | | 80,915 | |
| year from continuing | | | | | | | | | | | | | |
| operations | | | | | | | | | | | | | |
+-----------------------+--+-------------+--+-------------+--+----------+--+-------------+--+-------------+--+----------+--+
| Attributable to: | | | | | | | | | | | | | |
+-----------------------+--+-------------+--+-------------+--+----------+--+-------------+--+-------------+--+----------+--+
| Equity shareholders | | 24,643 | | (43,646 | )| (19,003 | )| 81,538 | | 3,535 | | 85,073 | |
| of the Company | | | | | | | | | | | | | |
+-----------------------+--+-------------+--+-------------+--+----------+--+-------------+--+-------------+--+----------+--+
| Minority shareholders | | 7,037 | | (1,548 | )| 5,489 | | (4,158 | )| - | | (4,158 | )|
+-----------------------+--+-------------+--+-------------+--+----------+--+-------------+--+-------------+--+----------+--+
| | | 31,680 | | (45,194 | )| (13,514 | )| 77,380 | | 3,535 | | 80,915 | |
+-----------------------+--+-------------+--+-------------+--+----------+--+-------------+--+-------------+--+----------+--+
| Basic and diluted | | 0.08 | | (0.14 | )| (0.06 | )| 0.27 | | 0.01 | | 0.28 | |
| earnings per ordinary | | | | | | | | | | | | | |
| share from continuing | | | | | | | | | | | | | |
| operations and for | | | | | | | | | | | | | |
| the year (expressed | | | | | | | | | | | | | |
| in U.S. dollars per | | | | | | | | | | | | | |
| share) | | | | | | | | | | | | | |
+-----------------------+--+-------------+--+-------------+--+----------+--+-------------+--+-------------+--+----------+--+
Consolidated Balance Sheet
+-----------------------------------------------+--+-----------+--+----------+--+
| | | As at 31 December | |
+-----------------------------------------------+--+-------------------------+--+
| | | 2008 | | 2007 | |
+-----------------------------------------------+--+-----------+--+----------+--+
| | | US$(000) |
+-----------------------------------------------+--+----------------------------+
| ASSETS | | | | | |
+-----------------------------------------------+--+-----------+--+----------+--+
| Non-current assets | | | | | |
+-----------------------------------------------+--+-----------+--+----------+--+
| Property, plant and equipment | | 488,984 | | 263,062 | |
+-----------------------------------------------+--+-----------+--+----------+--+
| Intangible assets | | 2,668 | | 2,896 | |
+-----------------------------------------------+--+-----------+--+----------+--+
| Investments accounted under equity method | | 136,019 | | - | |
+-----------------------------------------------+--+-----------+--+----------+--+
| Available-for-sale financial assets | | 17,794 | | 15,100 | |
+-----------------------------------------------+--+-----------+--+----------+--+
| Trade and other receivables | | 38,304 | | 25,518 | |
+-----------------------------------------------+--+-----------+--+----------+--+
| Income tax receivable | | 802 | | 616 | |
+-----------------------------------------------+--+-----------+--+----------+--+
| Deferred income tax assets | | 20,795 | | 22,400 | |
+-----------------------------------------------+--+-----------+--+----------+--+
| | | 705,366 | | 329,592 | |
+-----------------------------------------------+--+-----------+--+----------+--+
| Current assets | | | | | |
+-----------------------------------------------+--+-----------+--+----------+--+
| Inventories | | 49,220 | | 47,012 | |
+-----------------------------------------------+--+-----------+--+----------+--+
| Trade and other receivables | | 123,726 | | 134,180 | |
+-----------------------------------------------+--+-----------+--+----------+--+
| Income tax receivable | | 14,470 | | 1,003 | |
+-----------------------------------------------+--+-----------+--+----------+--+
| Financial assets at fair value through profit | | 5,569 | | 8,039 | |
| and loss | | | | | |
+-----------------------------------------------+--+-----------+--+----------+--+
| Cash and cash equivalents | | 116,147 | | 301,426 | |
+-----------------------------------------------+--+-----------+--+----------+--+
| | | 309,132 | | 491,660 | |
+-----------------------------------------------+--+-----------+--+----------+--+
| Total assets | | 1,014,498 | | 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 | | (250,831 | )| (205,556 | )|
+-----------------------------------------------+--+-----------+--+----------+--+
| Retained earnings | | 182,612 | | 229,202 | |
+-----------------------------------------------+--+-----------+--+----------+--+
| | | 474,175 | | 566,040 | |
+-----------------------------------------------+--+-----------+--+----------+--+
| Minority interest | | 68,843 | | 50,008 | |
+-----------------------------------------------+--+-----------+--+----------+--+
| Total equity | | 543,018 | | 616,048 | |
+-----------------------------------------------+--+-----------+--+----------+--+
| Non-current liabilities | | | | | |
+-----------------------------------------------+--+-----------+--+----------+--+
| Trade and other payables | | 627 | | 859 | |
+-----------------------------------------------+--+-----------+--+----------+--+
| Borrowings | | 231,692 | | 55,209 | |
+-----------------------------------------------+--+-----------+--+----------+--+
| Provisions | | 37,687 | | 30,821 | |
+-----------------------------------------------+--+-----------+--+----------+--+
| Deferred income tax liabilities | | 15,839 | | 9,091 | |
+-----------------------------------------------+--+-----------+--+----------+--+
| | | 285,845 | | 95,980 | |
+-----------------------------------------------+--+-----------+--+----------+--+
| Current liabilities | | | | | |
+-----------------------------------------------+--+-----------+--+----------+--+
| Trade and other payables | | 82,291 | | 52,176 | |
+-----------------------------------------------+--+-----------+--+----------+--+
| Borrowings | | 98,070 | | 33,169 | |
+-----------------------------------------------+--+-----------+--+----------+--+
| Provisions | | 4,277 | | 13,029 | |
+-----------------------------------------------+--+-----------+--+----------+--+
| Income tax payable | | 997 | | 10,850 | |
+-----------------------------------------------+--+-----------+--+----------+--+
| | | 185,635 | | 109,224 | |
+-----------------------------------------------+--+-----------+--+----------+--+
| Total liabilities | | 471,480 | | 205,204 | |
+-----------------------------------------------+--+-----------+--+----------+--+
| Total equity and liabilities | | 1,014,498 | | 821,252 | |
+-----------------------------------------------+--+-----------+--+----------+--+
Consolidated Cash Flow Statement
+-----------------------------------------------+--+----------+--+----------+--+
| | |Year ended 31 December | |
+-----------------------------------------------+--+------------------------+--+
| | | 2008 | | 2007 | |
+-----------------------------------------------+--+----------+--+----------+--+
| | | US$(000) |
+-----------------------------------------------+--+---------------------------+
| Cash flows from operating activities | | | | | |
+-----------------------------------------------+--+----------+--+----------+--+
| Cash generated from operations | | 102,167 | | 34,338 | |
+-----------------------------------------------+--+----------+--+----------+--+
| Interest received | | 7,512 | | 18,390 | |
+-----------------------------------------------+--+----------+--+----------+--+
| Interest paid | | (4,302 | )| (1,217 | )|
+-----------------------------------------------+--+----------+--+----------+--+
| Payments of mine closure costs | | (1,476 | )| (2,023 | )|
+-----------------------------------------------+--+----------+--+----------+--+
| Tax paid | | (25,260 | )| (28,084 | )|
+-----------------------------------------------+--+----------+--+----------+--+
| Net cash generated from operating activities | | 78,641 | | 21,404 | |
+-----------------------------------------------+--+----------+--+----------+--+
| Cash flows from investing activities | | | | | |
+-----------------------------------------------+--+----------+--+----------+--+
| Purchase of property, plant and equipment | | (296,027 | )| (134,119 | )|
+-----------------------------------------------+--+----------+--+----------+--+
| Investment in an associate | | (164,211 | )| - | |
+-----------------------------------------------+--+----------+--+----------+--+
| Purchase of available-for-sale financial | | (19,240 | )| (4,669 | )|
| assets | | | | | |
+-----------------------------------------------+--+----------+--+----------+--+
| Purchase of software licences | | (37 | )| (876 | )|
+-----------------------------------------------+--+----------+--+----------+--+
| Loan to Exmin, S.A. de C.V. | | - | | (746 | )|
+-----------------------------------------------+--+----------+--+----------+--+
| Loan to Minera Andes Inc. | | - | | (22,036 | )|
+-----------------------------------------------+--+----------+--+----------+--+
| Proceeds from sale of available-for-sale | | 3,321 | | - | |
| financial assets | | | | | |
+-----------------------------------------------+--+----------+--+----------+--+
| Proceeds from sale of property, plant and | | 392 | | 167 | |
| equipment | | | | | |
+-----------------------------------------------+--+----------+--+----------+--+
| Other | | 12 | | - | |
+-----------------------------------------------+--+----------+--+----------+--+
| Net cash used in investing activities | | (475,790 | )| (162,279 | )|
+-----------------------------------------------+--+----------+--+----------+--+
| Cash flows from financing activities | | | | | |
+-----------------------------------------------+--+----------+--+----------+--+
| Proceeds of borrowings | | 484,041 | | 177,168 | |
+-----------------------------------------------+--+----------+--+----------+--+
| Repayment of borrowings | | (257,300 | )| (150,194 | )|
+-----------------------------------------------+--+----------+--+----------+--+
| Transaction costs associated with borrowing | | (2,408 | )| - | |
+-----------------------------------------------+--+----------+--+----------+--+
| Dividends paid | | (28,531 | )| (24,729 | )|
+-----------------------------------------------+--+----------+--+----------+--+
| Transaction costs associated with issue of | | - | | (11,722 | )|
| shares | | | | | |
+-----------------------------------------------+--+----------+--+----------+--+
| Capital contribution from minority | | 16,926 | | 16,175 | |
| shareholders | | | | | |
+-----------------------------------------------+--+----------+--+----------+--+
| Cash flows generated from financing | | 212,728 | | 6,698 | |
| activities | | | | | |
+-----------------------------------------------+--+----------+--+----------+--+
| Net decrease in cash and cash equivalents | | (184,421 | )| (134,177 | )|
| during the year | | | | | |
+-----------------------------------------------+--+----------+--+----------+--+
| Exchange difference | | (858 | )| 60 | |
+-----------------------------------------------+--+----------+--+----------+--+
| Cash and cash equivalents at beginning of | | 301,426 | | 435,543 | |
| year | | | | | |
+-----------------------------------------------+--+----------+--+----------+--+
| Cash and cash equivalents at end of year | | 116,147 | | 301,426 | |
+-----------------------------------------------+--+----------+--+----------+--+
Consolidated Statement of Changes in Equity
+---------------------------+-+---------+-+---------+-+--------------------+-+--------------------+---------+-+----------+-+----------+-+----------+-+--------------+-+----------+-+----------+-+--------------------+
| | | | | | | Other reserves | | | | | | | | | | | |
+---------------------------+-+---------+-+---------+-+------------------------------------------------------------------+-+----------+-+----------+-+--------------+-+----------+-+----------+----------------------+
| | | Equity | | Share | | Unrealised | | Cumulative translation | | Merger | | Total | |Retained | | Capital | |Minority | | Total | |
| | | share | |premium | | gain/(loss) | | adjustment | | reserve | | Other | |earnings | | and | |interest | | Equity | |
| | |capital | | | | on | | | | | |reserves | | | | reserves | | | | | |
| | | | | | |available-for-sale | | | | | | | | | |attributable | | | | | |
| | | | | | | financial assets | | | | | | | | | | to | | | | | |
| | | | | | | | | | | | | | | | |shareholders | | | | | |
| | | | | | | | | | | | | | | | | of the | | | | | |
| | | | | | | | | | | | | | | | | Parent | | | | | |
+---------------------------+-+---------+-+---------+-+--------------------+-+------------------------------+-+----------+-+----------+-+----------+-+--------------+-+----------+-+----------+----------------------+
| | | US$(000) |
+---------------------------+-+--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------+
| Balance at 1 January 2007 | | 146,466 | | 396,156 | | 1,374 | | 3,633 | | (210,046 | )| (205,039 | )| 152,577 | | 490,160 | | 14,489 | | 504,649 | |
+---------------------------+-+---------+-+---------+-+--------------------+----------------------+---------+-+----------+-+----------+-+----------+-+--------------+-+----------+-+----------+-+
| Fair value gains on | | - | | - | | 1,415 | | - | | - | | 1,415 | | - | | 1,415 | | 87 | | 1,502 | |
| available-for-sale | | | | | | | | | | | | | | | | | | | | | |
| financial assets | | | | | | | | | | | | | | | | | | | | | |
+---------------------------+-+---------+-+---------+-+--------------------+----------------------+---------+-+----------+-+----------+-+----------+-+--------------+-+----------+-+----------+-+
| Deferred income tax on | | - | | - | | (927 | ) | - | | - | | (927 | )| - | | (927 | )| - | | (927 | )|
| available-for-sale | | | | | | | | | | | | | | | | | | | | | |
| financial assets | | | | | | | | | | | | | | | | | | | | | |
+---------------------------+-+---------+-+---------+-+--------------------+----------------------+---------+-+----------+-+----------+-+----------+-+--------------+-+----------+-+----------+-+
| Translation adjustment | | - | | - | | - | | (1,005 | )| - | | (1,005 | )| - | | (1,005 | )| 882 | | (123 | )|
| for the year | | | | | | | | | | | | | | | | | | | | | |
+---------------------------+-+---------+-+---------+-+--------------------+----------------------+---------+-+----------+-+----------+-+----------+-+--------------+-+----------+-+----------+-+
| Net income recognised | | - | | - | | 488 | | (1,005 | )| - | | (517 | )| - | | (517 | )| 969 | | 452 | |
| directly in equity | | | | | | | | | | | | | | | | | | | | | |
+---------------------------+-+---------+-+---------+-+--------------------+----------------------+---------+-+----------+-+----------+-+----------+-+--------------+-+----------+-+----------+-+
| Profit for the year | | - | | - | | - | | - | | - | | - | | 85,073 | | 85,073 | | (4,158 | )| 80,915 | |
+---------------------------+-+---------+-+---------+-+--------------------+----------------------+---------+-+----------+-+----------+-+----------+-+--------------+-+----------+-+----------+-+
| Total recognised income | | - | | - | | 488 | | (1,005 | )| - | | (517 | )| 85,073 | | 84,556 | | (3,189 | )| 81,367 | |
| for 2007 | | | | | | | | | | | | | | | | | | | | | |
+---------------------------+-+---------+-+---------+-+--------------------+----------------------+---------+-+----------+-+----------+-+----------+-+--------------+-+----------+-+----------+-+
| Transaction costs | | - | | (228 | )| - | | - | | - | | - | | - | | (228 | )| - | | (228 | )|
| associated with issue of | | | | | | | | | | | | | | | | | | | | | |
| shares | | | | | | | | | | | | | | | | | | | | | |
+---------------------------+-+---------+-+---------+-+--------------------+----------------------+---------+-+----------+-+----------+-+----------+-+--------------+-+----------+-+----------+-+
| Dividends | | - | | - | | - | | - | | - | | - | | (8,448 | )| (8,448 | )| - | | (8,448 | )|
+---------------------------+-+---------+-+---------+-+--------------------+----------------------+---------+-+----------+-+----------+-+----------+-+--------------+-+----------+-+----------+-+
| Adjustment to deferred | | - | | - | | - | | - | | - | | - | | - | | - | | 5,627 | | 5,627 | |
| consideration (a) | | | | | | | | | | | | | | | | | | | | | |
+---------------------------+-+---------+-+---------+-+--------------------+----------------------+---------+-+----------+-+----------+-+----------+-+--------------+-+----------+-+----------+-+
| Capital contribution from | | - | | - | | - | | - | | - | | - | | - | | - | | 33,081 | | 33,081 | |
| minority shareholders | | | | | | | | | | | | | | | | | | | | | |
+---------------------------+-+---------+-+---------+-+--------------------+----------------------+---------+-+----------+-+----------+-+----------+-+--------------+-+----------+-+----------+-+
| Balance at 31 December | | 146,466 | | 395,928 | | 1,862 | | 2,628 | | (210,046 | )| (205,556 | )| 229,202 | | 566,040 | | 50,008 | | 616,048 | |
| 2007 | | | | | | | | | | | | | | | | | | | | | |
+---------------------------+-+---------+-+---------+-+--------------------+----------------------+---------+-+----------+-+----------+-+----------+-+--------------+-+----------+-+----------+-+
| Net fair value losses on | | - | | - | | (3,306 | ) | - | | - | | (3,306 | )| - | | (3,306 | )| (127 | )| (3,433 | )|
| available-for-sale | | | | | | | | | | | | | | | | | | | | | |
| financial assets | | | | | | | | | | | | | | | | | | | | | |
+---------------------------+-+---------+-+---------+-+--------------------+----------------------+---------+-+----------+-+----------+-+----------+-+--------------+-+----------+-+----------+-+
| Deferred income tax on | | - | | - | | 390 | | - | | - | | 390 | | - | | 390 | | 35 | | 425 | |
| available-for-sale | | | | | | | | | | | | | | | | | | | | | |
| financial assets | | | | | | | | | | | | | | | | | | | | | |
+---------------------------+-+---------+-+---------+-+--------------------+----------------------+---------+-+----------+-+----------+-+----------+-+--------------+-+----------+-+----------+-+
| Recycling of fair value | | - | | - | | 1,979 | | - | | - | | 1,979 | | - | | 1,979 | | - | | 1,979 | |
| losses on impairment of | | | | | | | | | | | | | | | | | | | | | |
| available-for-sale | | | | | | | | | | | | | | | | | | | | | |
| financial assets | | | | | | | | | | | | | | | | | | | | | |
+---------------------------+-+---------+-+---------+-+--------------------+----------------------+---------+-+----------+-+----------+-+----------+-+--------------+-+----------+-+----------+-+
| Deferred income tax on | | - | | - | | (151 | ) | - | | - | | (151 | )| - | | (151 | )| - | | (151 | )|
| impairment of | | | | | | | | | | | | | | | | | | | | | |
| available-for-sale | | | | | | | | | | | | | | | | | | | | | |
| financial assets | | | | | | | | | | | | | | | | | | | | | |
+---------------------------+-+---------+-+---------+-+--------------------+----------------------+---------+-+----------+-+----------+-+----------+-+--------------+-+----------+-+----------+-+
| Recycling of realised | | - | | - | | (1,562 | ) | - | | - | | (1,562 | )| - | | (1,562 | )| (51 | )| (1,613 | )|
| fair value gains on | | | | | | | | | | | | | | | | | | | | | |
| available-for-sale | | | | | | | | | | | | | | | | | | | | | |
| financial assets | | | | | | | | | | | | | | | | | | | | | |
+---------------------------+-+---------+-+---------+-+--------------------+----------------------+---------+-+----------+-+----------+-+----------+-+--------------+-+----------+-+----------+-+
| Deferred income tax on | | - | | - | | 378 | | - | | - | | 378 | | - | | 378 | | 12 | | 390 | |
| realised fair value gains | | | | | | | | | | | | | | | | | | | | | |
| on available-for-sale | | | | | | | | | | | | | | | | | | | | | |
| financial assets | | | | | | | | | | | | | | | | | | | | | |
+---------------------------+-+---------+-+---------+-+--------------------+----------------------+---------+-+----------+-+----------+-+----------+-+--------------+-+----------+-+----------+-+
| Share in gains directly | | - | | - | | - | | - | | - | | - | | 620 | | 620 | | - | | 620 | |
| recognised in equity by | | | | | | | | | | | | | | | | | | | | | |
| associates | | | | | | | | | | | | | | | | | | | | | |
+---------------------------+-+---------+-+---------+-+--------------------+----------------------+---------+-+----------+-+----------+-+----------+-+--------------+-+----------+-+----------+-+
| Translation adjustment | | - | | - | | - | | (43,003 | )| - | | (43,003 | )| - | | (43,003 | )| (76 | )| (43,079 | )|
| for the year | | | | | | | | | | | | | | | | | | | | | |
+---------------------------+-+---------+-+---------+-+--------------------+----------------------+---------+-+----------+-+----------+-+----------+-+--------------+-+----------+-+----------+-+
| Net income recognised | | - | | - | | (2,272 | ) | (43,003 | )| - | | (45,275 | )| 620 | | (44,655 | )| (207 | )| (44,862 | )|
| directly in equity | | | | | | | | | | | | | | | | | | | | | |
+---------------------------+-+---------+-+---------+-+--------------------+----------------------+---------+-+----------+-+----------+-+----------+-+--------------+-+----------+-+----------+-+
| (Loss)/profit for the | | - | | - | | - | | - | | - | | - | | (19,003 | )| (19,003 | )| 5,489 | | (13,514 | )|
| year | | | | | | | | | | | | | | | | | | | | | |
+---------------------------+-+---------+-+---------+-+--------------------+----------------------+---------+-+----------+-+----------+-+----------+-+--------------+-+----------+-+----------+-+
| Total recognised income | | - | | - | | (2,272 | ) | (43,003 | )| - | | (45,275 | )| (18,383 | )| (63,658 | )| 5,282 | | (58,376 | )|
| for 2008 | | | | | | | | | | | | | | | | | | | | | |
+---------------------------+-+---------+-+---------+-+--------------------+----------------------+---------+-+----------+-+----------+-+----------+-+--------------+-+----------+-+----------+-+
| Dividends | | - | | - | | - | | - | | - | | - | | (28,331 | )| (28,331 | )| - | | (28,331 | )|
+---------------------------+-+---------+-+---------+-+--------------------+----------------------+---------+-+----------+-+----------+-+----------+-+--------------+-+----------+-+----------+-+
| Adjustment to deferred | | - | | - | | - | | - | | - | | - | | - | | - | | 1,220 | | 1,220 | |
| consideration (a) | | | | | | | | | | | | | | | | | | | | | |
+---------------------------+-+---------+-+---------+-+--------------------+----------------------+---------+-+----------+-+----------+-+----------+-+--------------+-+----------+-+----------+-+
| Expiration of dividends | | - | | - | | - | | - | | - | | - | | 124 | | 124 | | 4 | | 128 | |
| payable | | | | | | | | | | | | | | | | | | | | | |
+---------------------------+-+---------+-+---------+-+--------------------+----------------------+---------+-+----------+-+----------+-+----------+-+--------------+-+----------+-+----------+-+
| Capital contribution from | | - | | - | | - | | - | | - | | - | | - | | - | | 12,329 | | 12,329 | |
| minority shareholders | | | | | | | | | | | | | | | | | | | | | |
+---------------------------+-+---------+-+---------+-+--------------------+----------------------+---------+-+----------+-+----------+-+----------+-+--------------+-+----------+-+----------+-+
| Balance at 31 December | | 146,466 | | 395,928 | | (410 | ) | (40,375 | )| (210,046 | )| (250,831 | )| 182,612 | | 474,175 | | 68,843 | | 543,018 | |
| 2008 | | | | | | | | | | | | | | | | | | | | | |
+---------------------------+-+---------+-+---------+-+--------------------+-+--------------------+---------+-+----------+-+----------+-+----------+-+--------------+-+----------+-+----------+-+--------------------+
(a)This amount represents the increase in the minority interest's share of the
assets of Pallancata, following the Group's investment during the year in
accordance with the agreement signed with Minera Oro Vega S.A.C.
Notes to the Financial Statements
The financial information for the year ended 31 December 2008 and 2007 contained
in this document does not constitute statutory accounts as defined in section
240 of the Companies Act 1985. The financial information for the years ended 31
December 2008 and 2007 have been extracted from the consolidated financial
statements of Hochschild Mining plc for the year ended 31 December 2008 which
have been approved by the directors on 24 March 2009 and will be delivered to
the Registrar of Companies in due course. The auditor's report on those
financial statements was unqualified and did not contain a statement under
section 237 of the Companies Act 1985.
1 Significant accounting policies
(a) Basis of preparation
The accounting policies adopted in the preparation of the financial information
are consistent with those applied to the year ended 31 December 2007 except for
the adoption of new and amended standards.
Adoption of new and amended standards
The Group has adopted the following new and amended IFRS and IFRIC
interpretations during the year. Adoption of these revised standards and
interpretations did not have any effect on the financial performance or position
of the Group.
· ?IFRIC 11, IFRS 2 'Group and Treasury Shares Transactions', applicable for
annual periods beginning on or after 1 March 2007.
· ?IFRIC 14, IAS 19, 'The Limit on a Defined Benefit Asset, Minimum Funding
Requirements and their interaction', applicable for annual periods beginning on
or after 1 January 2008.
· ?Amendment to IAS 39 and IFRS 7 'Reclassification of Financial Assets'.
(b) Exceptional items
Exceptional items are those significant 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 mainly include:
· Impairments of assets, including goodwill, assets held for sale, and property,
plant and equipment;
· Gains or losses arising on the disposal of subsidiaries, investments or
property, plant and equipment;
· Fair value gains or losses arising on financial instruments not held in the
normal course of trading;
· ?Any gain or loss resulting from any restructuring within the Group, and
· ?The related tax impacts of these items.
(c) Comparatives
Where applicable, certain comparatives have been reclassified to present them in
a comparable manner to the current period's figures.
2 Segment Reporting
The Group's activities are principally related to mining operations which
involve the 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
operates in various countries including Peru, Argentina, Mexico, Chile and
Canada. Therefore, the geographical segment is the Group's secondary reporting
format.
Transfer prices between geographical segments are set on an arm´s length basis
in a manner similar to that used for third parties. Segment revenue, segment
expense and segment results include transfers between business segments. Those
transfers are eliminated in consolidation.
(a) Revenue
Revenue for the year is allocated based on the country in which the customer is
located.
+----------------------------------------------+--+----------+--+----------+--+
| | |Year ended 31 December | |
+----------------------------------------------+--+------------------------+--+
| | | 2008 | | 2007 | |
+----------------------------------------------+--+----------+--+----------+--+
| | | US$(000) | |
+----------------------------------------------+--+------------------------+--+
| External customer | | | | | |
+----------------------------------------------+--+----------+--+----------+--+
| USA | | 130,631 | | 158,092 | |
+----------------------------------------------+--+----------+--+----------+--+
| Peru | | 125,171 | | 48,147 | |
+----------------------------------------------+--+----------+--+----------+--+
| Mexico | | 15 | | 47,919 | |
+----------------------------------------------+--+----------+--+----------+--+
| Belgium | | 6,011 | | 22,415 | |
+----------------------------------------------+--+----------+--+----------+--+
| Canada | | 50,465 | | 9,606 | |
+----------------------------------------------+--+----------+--+----------+--+
| Germany | | 54,570 | | 9,370 | |
+----------------------------------------------+--+----------+--+----------+--+
| Switzerland | | 66,883 | | - | |
+----------------------------------------------+--+----------+--+----------+--+
| United Kingdom | | - | | 8,202 | |
+----------------------------------------------+--+----------+--+----------+--+
| Chile | | 33 | | 1,270 | |
+----------------------------------------------+--+----------+--+----------+--+
| | | 433,779 | | 305,021 | |
+----------------------------------------------+--+----------+--+----------+--+
| Inter-segment | | | | | |
+----------------------------------------------+--+----------+--+----------+--+
| Peru | | 25,164 | | - | |
+----------------------------------------------+--+----------+--+----------+--+
| Mexico | | 4,455 | | - | |
+----------------------------------------------+--+----------+--+----------+--+
| | | 463,398 | | 305,021 | |
+----------------------------------------------+--+----------+--+----------+--+
The allocation of revenue based on the country in which the asset is located is
as follows.
+----------------------------------------------+--+----------+--+----------+--+
| | |Year ended 31 December | |
+----------------------------------------------+--+------------------------+--+
| | | 2008 | | 2007 | |
+----------------------------------------------+--+----------+--+----------+--+
| | | US$(000) | |
+----------------------------------------------+--+------------------------+--+
| External customer | | | | | |
+----------------------------------------------+--+----------+--+----------+--+
| Peru | | 319,516 | | 303,377 | |
+----------------------------------------------+--+----------+--+----------+--+
| Argentina | | 88,891 | | 1,270 | |
+----------------------------------------------+--+----------+--+----------+--+
| Mexico | | 25,372 | | 374 | |
+----------------------------------------------+--+----------+--+----------+--+
| | | 433,779 | | 305,021 | |
+----------------------------------------------+--+----------+--+----------+--+
| Inter-segment | | | | | |
+----------------------------------------------+--+----------+--+----------+--+
| Peru | | 2,359 | | - | |
+----------------------------------------------+--+----------+--+----------+--+
| Mexico | | 4,455 | | - | |
+----------------------------------------------+--+----------+--+----------+--+
| Argentina | | 22,805 | | - | |
+----------------------------------------------+--+----------+--+----------+--+
| | | 463,398 | | 305,021 | |
+----------------------------------------------+--+----------+--+----------+--+
(b) Profit/(loss) for the year from continuing operations
Profit/(loss) for year is based on country of operation as follows:
+--------------+--+-------------+--+-------------+--+---------+--+-------------+--+-------------+--+---------+--+
| | | Year ended 31 December 2008 | | Year ended 31 December 2007 | |
+--------------+--+-------------------------------------------+--+-------------------------------------------+--+
| | | Before | |Exceptional | | Total | | Before | |Exceptional | | Total | |
| | |exceptional | | items | | | |exceptional | | items | | | |
| | | items | | | | | | items | | | | | |
+--------------+--+-------------+--+-------------+--+---------+--+-------------+--+-------------+--+---------+--+
| | | US$(000) | |
+--------------+--+------------------------------------------------------------------------------------------+--+
| Peru | | 71,070 | | (14,111 | )| 56,959 | | 94,415 | | 2,454 | | 96,869 | |
+--------------+--+-------------+--+-------------+--+---------+--+-------------+--+-------------+--+---------+--+
| Cayman | | - | | - | | - | | 68 | | 393 | | 461 | |
| Islands | | | | | | | | | | | | | |
+--------------+--+-------------+--+-------------+--+---------+--+-------------+--+-------------+--+---------+--+
| Argentina | | (13,925 | )| (29 | )| (13,954 | )| (5,689 | )| - | | (5,689 | )|
+--------------+--+-------------+--+-------------+--+---------+--+-------------+--+-------------+--+---------+--+
| Mexico | | (8,249 | )| (20,776 | )| (29,025 | )| (11,403 | )| - | | (11,403 | )|
+--------------+--+-------------+--+-------------+--+---------+--+-------------+--+-------------+--+---------+--+
| Chile | | (5,593 | )| - | | (5,593 | )| (2,718 | )| - | | (2,718 | )|
+--------------+--+-------------+--+-------------+--+---------+--+-------------+--+-------------+--+---------+--+
| USA | | (10 | )| (7 | )| (17 | )| (1,212 | )| 8 | | (1,204 | )|
+--------------+--+-------------+--+-------------+--+---------+--+-------------+--+-------------+--+---------+--+
| United | | (11,613 | )| (10,271 | )| (21,884 | )| 3,919 | | 680 | | 4,599 | |
| Kingdom | | | | | | | | | | | | | |
+--------------+--+-------------+--+-------------+--+---------+--+-------------+--+-------------+--+---------+--+
| | | 31,680 | | (45,194 | )| (13,514 | )| 77,380 | | 3,535 | | 80,915 | |
+--------------+--+-------------+--+-------------+--+---------+--+-------------+--+-------------+--+---------+--+
+--------+------------------+
| 3 | Acquisitions |
+--------+------------------+
| (a) | Acquisition |
| | of jointly |
| | controlled |
| | assets |
+--------+------------------+
| | Liam |
+--------+------------------+
| | 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$33,333,333. |
+--------+------------------+
| | Under |
| | the |
| | terms |
| | of the |
| | agreement, |
| | the Group |
| | and |
| | Southwestern |
| | will each |
| | contribute |
| | 50% of the |
| | exploration |
| | funding. In |
| | addition, |
| | when the |
| | technical |
| | committee |
| | determines |
| | that any of |
| | the |
| | properties |
| | or group of |
| | properties |
| | constitutes |
| | a viable |
| | project, a |
| | new company |
| | will be |
| | incorporated |
| | and the |
| | Group may |
| | elect to |
| | increase its |
| | interest up |
| | to 70% in |
| | the new |
| | company by |
| | producing a |
| | feasibility |
| | study and |
| | financing |
| | 100% of the |
| | costs to |
| | initiate |
| | commercial |
| | production. |
+--------+------------------+
| | A |
| | total |
| | of 38 |
| | exploration |
| | prospects |
| | have been |
| | identified |
| | and |
| | evaluated |
| | in the |
| | project |
| | area with |
| | Crespo |
| | project |
| | being the |
| | most |
| | important |
| | property |
| | which is in |
| | the |
| | inferred |
| | mineral |
| | resource |
| | category. |
| | The |
| | investment |
| | of |
| | US$33,333,333 |
| | was made |
| | mainly to |
| | acquire the |
| | Crespo |
| | resources and |
| | immediately |
| | commence an |
| | exploration |
| | programme to |
| | transform |
| | these |
| | inferred |
| | resources |
| | into |
| | reserves. The |
| | consideration |
| | has been |
| | allocated to |
| | the mining |
| | rights and |
| | the |
| | subsequent |
| | investment of |
| | US$197,000 |
| | during 2008 |
| | has been |
| | capitalised |
| | within |
| | exploration |
| | and |
| | evaluation |
| | costs. |
+--------+------------------+
| | |
+--------+------------------+
| (b) | Acquisition |
| | of assets |
+--------+------------------+
| | San |
| | Felipe |
+--------+------------------+
| | On 15 |
| | May |
| | 2006 |
| | the |
| | Group |
| | signed |
| | a |
| | joint |
| | venture |
| | agreement |
| | which |
| | gave the |
| | Group the |
| | right to |
| | earn a |
| | 70% |
| | interest |
| | in the |
| | San |
| | Felipe |
| | project |
| | once |
| | investment |
| | thresholds |
| | in |
| | exploration |
| | and mine |
| | development |
| | of |
| | US$33,300,000 |
| | were met. |
+--------+------------------+
| | On 4 |
| | June |
| | 2008 |
| | the |
| | Group |
| | acquired |
| | the 100% |
| | ownership |
| | of the |
| | San |
| | Felipe |
| | project |
| | in Mexico |
| | for a |
| | total |
| | consideration |
| | of |
| | US$51,500,000 |
| | payable to |
| | its former |
| | local |
| | partner, |
| | Grupo Serrana |
| | S.A. de C.V. |
+--------+------------------+
| | With |
| | the |
| | acquisition |
| | of the San |
| | Felipe |
| | project, |
| | the |
| | original |
| | joint |
| | venture |
| | agreement |
| | was |
| | terminated. |
| | As at the |
| | acquisition |
| | date, the |
| | Group had |
| | invested |
| | approximately |
| | US$8,800,000 |
| | in the |
| | property |
| | which has |
| | been expensed |
| | to the income |
| | statement in |
| | accordance |
| | with the |
| | Group's |
| | accounting |
| | policy (see |
| | also note |
| | 15). |
+--------+------------------+
| | Further |
| | on 4 |
| | June |
| | 2008, |
| | the |
| | Group |
| | acquired |
| | a group |
| | of |
| | assets |
| | related |
| | to the |
| | project |
| | for a |
| | total |
| | consideration |
| | of |
| | US$1,000,000 |
| | payable to |
| | Grupo Serrana |
| | S.A. de C.V. |
+--------+------------------+
| | |
+--------+------------------+
| (c) | Acquisition |
| | of |
| | associates |
+--------+------------------+
| | Lake |
| | Shore |
| | Gold |
| | Corp. |
+--------+------------------+
| | During |
| | 2008, |
| | the |
| | Group |
| | acquired |
| | a 39.99% |
| | interest |
| | in Lake |
| | Shore |
| | Gold |
| | Corp. |
| | ('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 |
| | assessed |
| | the fair |
| | value of |
| | the |
| | Group's |
| | interest |
| | in the |
| | assets and |
| | liabilities |
| | acquired as |
| | being |
| | US$151,698,000, |
| | resulting in |
| | goodwill of |
| | US$12,513,000 |
| | on acquisition. |
| | The fair value |
| | includes |
| | transaction |
| | costs incurred |
| | by the Group of |
| | US$214,000. |
+--------+------------------+
4Finance income and finance costs
+--------------------+-+-------------+--+-------------+--+---------+--+-------------+--+-------------+--+--------+-+
| | | Year ended 31 December 2008 | | Year ended 31 December 2007 | |
+--------------------+-+-------------------------------------------+--+------------------------------------------+-+
| | | Before | |Exceptional | | Total | | Before | |Exceptional | | Total | |
| | |exceptional | | items | | | |exceptional | | items | | | |
| | | items | | | | | | items | | | | | |
+--------------------+-+-------------+--+-------------+--+---------+--+-------------+--+-------------+--+--------+-+
| | | US$(000) | |
+--------------------+-+-----------------------------------------------------------------------------------------+-+
| Finance | | | | | | | | | | | | | |
| income: | | | | | | | | | | | | | |
+--------------------+-+-------------+--+-------------+--+---------+--+-------------+--+-------------+--+--------+-+
| Interest on | | 5,934 | | - | | 5,934 | | 17,169 | | - | | 17,169 | |
| time | | | | | | | | | | | | | |
| deposits(a) | | | | | | | | | | | | | |
+--------------------+-+-------------+--+-------------+--+---------+--+-------------+--+-------------+--+--------+-+
| Gain from | | 304 | | 2,301 | | 2,605 | | - | | 4,331 | | 4,331 | |
| changes in the | | | | | | | | | | | | | |
| fair value of | | | | | | | | | | | | | |
| financial | | | | | | | | | | | | | |
| instruments(b) | | | | | | | | | | | | | |
+--------------------+-+-------------+--+-------------+--+---------+--+-------------+--+-------------+--+--------+-+
| Gain on sale | | - | | 1,613 | | 1,613 | | - | | - | | - | |
| of | | | | | | | | | | | | | |
| available-for-sale | | | | | | | | | | | | | |
| financial | | | | | | | | | | | | | |
| assets(c) | | | | | | | | | | | | | |
+--------------------+-+-------------+--+-------------+--+---------+--+-------------+--+-------------+--+--------+-+
| Interest on | | 2,623 | | - | | 2,623 | | 2,324 | | - | | 2,324 | |
| loans to | | | | | | | | | | | | | |
| minority | | | | | | | | | | | | | |
| shareholders | | | | | | | | | | | | | |
+--------------------+-+-------------+--+-------------+--+---------+--+-------------+--+-------------+--+--------+-+
| Discount on | | - | | - | | - | | - | | 1,143 | | 1,143 | |
| purchase of | | | | | | | | | | | | | |
| EXMIN | | | | | | | | | | | | | |
| shares(d) | | | | | | | | | | | | | |
+--------------------+-+-------------+--+-------------+--+---------+--+-------------+--+-------------+--+--------+-+
| Interest on | | 47 | | - | | 47 | | 118 | | - | | 118 | |
| loans to third | | | | | | | | | | | | | |
| parties | | | | | | | | | | | | | |
+--------------------+-+-------------+--+-------------+--+---------+--+-------------+--+-------------+--+--------+-+
| Other | | 474 | | - | | 474 | | 172 | | - | | 172 | |
+--------------------+-+-------------+--+-------------+--+---------+--+-------------+--+-------------+--+--------+-+
| | | 9,382 | | 3,914 | | 13,296 | | 19,783 | | 5,474 | | 25,257 | |
+--------------------+-+-------------+--+-------------+--+---------+--+-------------+--+-------------+--+--------+-+
| Finance costs: | | | | | | | | | | | | | |
+--------------------+-+-------------+--+-------------+--+---------+--+-------------+--+-------------+--+--------+-+
| Interest on | | (13,387 | )| - | | (13,387 | )| (5,966 | )| - | | (5,966 | )|
| bank loans and | | | | | | | | | | | | | |
| long-term debt | | | | | | | | | | | | | |
+--------------------+-+-------------+--+-------------+--+---------+--+-------------+--+-------------+--+--------+-+
| Unwind of | | (4,590 | )| - | | (4,590 | )| (1,227 | )| - | | (1,227 | )|
| discount | | | | | | | | | | | | | |
| rate(e) | | | | | | | | | | | | | |
+--------------------+-+-------------+--+-------------+--+---------+--+-------------+--+-------------+--+--------+-+
| Loss from | | - | | (6,246 | )| (6,246 | )| - | | - | | - | |
| changes in the | | | | | | | | | | | | | |
| fair value of | | | | | | | | | | | | | |
| financial | | | | | | | | | | | | | |
| instruments(f) | | | | | | | | | | | | | |
+--------------------+-+-------------+--+-------------+--+---------+--+-------------+--+-------------+--+--------+-+
| Impairment of | | - | | (11,421 | )| (11,421 | )| - | | (71 | )| (71 | )|
| available-for-sale | | | | | | | | | | | | | |
| financial | | | | | | | | | | | | | |
| assets(g) | | | | | | | | | | | | | |
+--------------------+-+-------------+--+-------------+--+---------+--+-------------+--+-------------+--+--------+-+
| Premium paid | | - | | (421 | )| (421 | )| - | | - | | - | |
| on purchase of | | | | | | | | | | | | | |
| available-for-sale | | | | | | | | | | | | | |
| financial | | | | | | | | | | | | | |
| assets(h) | | | | | | | | | | | | | |
+--------------------+-+-------------+--+-------------+--+---------+--+-------------+--+-------------+--+--------+-+
| Other | | (856 | )| - | | (856 | )| (324 | )| - | | (324 | )|
+--------------------+-+-------------+--+-------------+--+---------+--+-------------+--+-------------+--+--------+-+
| | | (18,833 | )| (18,088 | )| (36,921 | )| (7,517 | ) | (71 | )| (7,588 | )|
+--------------------+-+-------------+--+-------------+--+---------+--+-------------+--+-------------+--+--------+-+
+--------+-----------------+
| (a) | Mainly |
| | corresponds |
| | to interest |
| | on |
| | liquidity |
| | funds. |
+--------+-----------------+
| (b) | In |
| | 2008 |
| | the |
| | amount |
| | corresponds |
| | to the |
| | change in |
| | the fair |
| | value of an |
| | option over |
| | 4,330,000 |
| | shares of |
| | Gold |
| | Resource |
| | Corp. and a |
| | gain of |
| | US$304,000 |
| | due to |
| | changes in |
| | the fair |
| | value of |
| | derivative |
| | instruments |
| | according |
| | to the |
| | contracts |
| | signed in |
| | December |
| | 2008 with |
| | Citibank |
| | and INTL |
| | Commodities |
| | Inc. with |
| | the |
| | intention |
| | to remove |
| | the risk of |
| | the |
| | fluctuations |
| | in metal |
| | prices. In |
| | 2007 this |
| | amount |
| | related |
| | mainly to |
| | the change |
| | in the fair |
| | value of |
| | 2,475,355 |
| | warrants |
| | over the |
| | same number |
| | of shares in |
| | Fortuna |
| | Silver Mine |
| | Inc. |
+--------+-----------------+
| (c) | 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 a |
| | realised gain |
| | of |
| | US$1,613,000 |
| | which has been |
| | recycled from |
| | equity into |
| | the income |
| | statement. |
+--------+-----------------+
| (d) | 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. The |
| | common shares |
| | were acquired |
| | at a discount |
| | of 20% to the |
| | market price, |
| | resulting in |
| | a gain on the |
| | issue of |
| | shares. |
+--------+-----------------+
| (e) | Corresponds |
| | to the |
| | unwind of |
| | the |
| | discount on |
| | the |
| | provision |
| | for mine |
| | closure of |
| | US$669,000 |
| | (2007: |
| | US$1,134,000) |
| | and the |
| | unwind of |
| | discount on |
| | VAT of Minera |
| | Santa Cruz of |
| | US$3,921,000 |
| | (2007: |
| | US$93,000). |
+--------+-----------------+
| (f) | Mainly |
| | corresponds |
| | to the |
| | change in |
| | fair value |
| | of warrants |
| | in Fortuna |
| | Silver Mine |
| | Inc. of |
| | US$6,245,000. |
+--------+-----------------+
| (g) | Corresponds |
| | to the |
| | impairment |
| | of the |
| | investment |
| | in the |
| | shares of |
| | EXMIN |
| | Resources |
| | Inc. |
| | (US$8,229,000), |
| | Mirasol |
| | Resources Inc. |
| | (US$323,000), |
| | Electrum |
| | Capital Inc. |
| | (US$2,637,000), |
| | Fortuna River |
| | (US$157,000) |
| | and Ventura |
| | Gold Corp. |
| | (US$75,000). |
+--------+-----------------+
| (h) | Corresponds |
| | to the |
| | premium |
| | paid on the |
| | acquisition |
| | of the |
| | shares of |
| | Iron Creek |
| | Capital |
| | Corp. and |
| | Mariana |
| | Resources |
| | Ltd. |
| | amounting |
| | to |
| | US$173,000 |
| | and |
| | US$248,000 |
| | respectively. |
+--------+-----------------+
5Income tax expense
+----------------+-+-------------+--+-------------+--+--------+--+-------------+--+-------------+--+---------+--+
| | | Year ended 31 December 2008 | | Year ended 31 December 2007 | |
+----------------+-+------------------------------------------+--+-------------------------------------------+--+
| | | Before | |Exceptional | | Total | | Before | |Exceptional | | Total | |
| | |exceptional | | items(a) | | | |exceptional | | items | | | |
| | | items | | | | | | items | | | | | |
+----------------+-+-------------+--+-------------+--+--------+--+-------------+--+-------------+--+---------+--+
| | | US$(000) | |
+----------------+-+-----------------------------------------------------------------------------------------+--+
| Current tax: | | | | | | | | | | | | | |
+----------------+-+-------------+--+-------------+--+--------+--+-------------+--+-------------+--+---------+--+
| Current tax | | 13,058 | | (56 | )| 13,002 | | 44,933 | | - | | 44,933 | |
| charge from | | | | | | | | | | | | | |
| continuing | | | | | | | | | | | | | |
| operations | | | | | | | | | | | | | |
+----------------+-+-------------+--+-------------+--+--------+--+-------------+--+-------------+--+---------+--+
| | | 13,058 | | (56 | )| 13,002 | | 44,933 | | - | | 44,933 | |
+----------------+-+-------------+--+-------------+--+--------+--+-------------+--+-------------+--+---------+--+
| Deferred | | | | | | | | | | | | | |
| taxation: | | | | | | | | | | | | | |
+----------------+-+-------------+--+-------------+--+--------+--+-------------+--+-------------+--+---------+--+
| Origination and | 15,809 | | (6,792 | )| 9,017 | | (11,641 | )| 1,299 | | (10,342 | )|
| reversal of | | | | | | | | | | | | |
| temporary | | | | | | | | | | | | |
| differences from | | | | | | | | | | | | |
| continuing | | | | | | | | | | | | |
| operations | | | | | | | | | | | | |
+------------------+-------------+--+-------------+--+--------+--+-------------+--+-------------+--+---------+--+
| | | 15,809 | | (6,792 | )| 9,017 | | (11,641 | )| 1,299 | | (10,342 | )|
+----------------+-+-------------+--+-------------+--+--------+--+-------------+--+-------------+--+---------+--+
| | | | | | | | | | | | | | |
+----------------+-+-------------+--+-------------+--+--------+--+-------------+--+-------------+--+---------+--+
| Withholding | | 895 | | - | | 895 | | 1,161 | | - | | 1,161 | |
| taxes | | | | | | | | | | | | | |
+----------------+-+-------------+--+-------------+--+--------+--+-------------+--+-------------+--+---------+--+
| Total taxation | | 29,762 | | (6,848 | )| 22,914 | | 34,453 | | 1,299 | | 35,752 | |
| charge in the | | | | | | | | | | | | | |
| income | | | | | | | | | | | | | |
| statement | | | | | | | | | | | | | |
+----------------+-+-------------+--+-------------+--+--------+--+-------------+--+-------------+--+---------+--+
+--------+-------------+
| (a) | This |
| | amount |
| | corresponds |
| | to the |
| | related tax |
| | impact of |
| | exceptional |
| | items. |
+--------+-------------+
The weighted average statutory income tax rate was 40.6% for 2008 and 29.7% for
2007. This 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 Group companies in their respective countries as included in the
consolidated financial statements.
The change 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 total taxation charge on the Group's profit before tax differs from the
theoretical amount that would arise using the weighted average tax rate
applicable to the consolidated profits of the Group companies as follows:
+----------------------------------------------+--+----------+--+----------+--+
| | |Year ended 31 December | |
+----------------------------------------------+--+------------------------+--+
| | | 2008 | | 2007 | |
+----------------------------------------------+--+----------+--+----------+--+
| | | US$(000) |
+----------------------------------------------+--+---------------------------+
| Profit from continuing operations before | | 9,400 | | 116,667 | |
| income tax | | | | | |
+----------------------------------------------+--+----------+--+----------+--+
| | | | | | |
+----------------------------------------------+--+----------+--+----------+--+
| At average statutory income tax rate of | | 3,818 | | 34,598 | |
| 40.6% (2007: 29.7%) | | | | | |
+----------------------------------------------+--+----------+--+----------+--+
| Expenses not deductible for tax purposes | | 5,315 | | 2,381 | |
+----------------------------------------------+--+----------+--+----------+--+
| Non-taxable income | | (2,055 | )| (505 | )|
+----------------------------------------------+--+----------+--+----------+--+
| Deferred tax recognised on special | | (6,063 | )| (4,479 | )|
| investment regime(a) | | | | | |
+----------------------------------------------+--+----------+--+----------+--+
| Recognition of previously unrecognised | | (1,102 | )| (2,917 | )|
| deferred tax assets(b) | | | | | |
+----------------------------------------------+--+----------+--+----------+--+
| Non-taxable share of losses of associates | | 2,534 | | - | |
+----------------------------------------------+--+----------+--+----------+--+
| Net deferred tax assets generated in the | | 13,871 | | 5,214 | |
| year not recognised(c) | | | | | |
+----------------------------------------------+--+----------+--+----------+--+
| Change in tax regime(d) | | (1,544) | | 3,403 | |
+----------------------------------------------+--+----------+--+----------+--+
| Change in statutory Income Tax Rate(e) | | 786 | | - | |
+----------------------------------------------+--+----------+--+----------+--+
| Recognition of deferred tax assets on | | - | | (767 | )|
| restructuring | | | | | |
+----------------------------------------------+--+----------+--+----------+--+
| Foreign exchange rate effect(f) | | 7,731 | | (1,611 | )|
+----------------------------------------------+--+----------+--+----------+--+
| Other | | (377 | )| 435 | |
+----------------------------------------------+--+----------+--+----------+--+
| At average effective income tax rate of | | 22,914 | | 35,752 | |
| 243.8% (2007: 30.6%) | | | | | |
+----------------------------------------------+--+----------+--+----------+--+
| | | | | | |
+----------------------------------------------+--+----------+--+----------+--+
| Taxation charge attributable to continuing | | 22,914 | | 35,752 | |
| operations | | | | | |
+----------------------------------------------+--+----------+--+----------+--+
| Total taxation charge in the income | | 22,914 | | 35,752 | |
| statement | | | | | |
+----------------------------------------------+--+----------+--+----------+--+
+--------+-------------+
| (a) | Corresponds |
| | to the |
| | deferred |
| | tax income |
| | asset |
| | recognised |
| | for the |
| | additional |
| | tax losses |
| | generated |
| | during the |
| | year |
| | arising |
| | from the |
| | double |
| | deduction |
| | claimed for |
| | tax |
| | purposes by |
| | Minera |
| | Santa Cruz |
| | during the |
| | year.(refer |
| | to note (i) |
| | below). |
+--------+-------------+
| (b) | Mainly |
| | corresponds |
| | to the tax |
| | effect of |
| | certain |
| | mine |
| | closure |
| | expenses |
| | which are |
| | now |
| | expected to |
| | be |
| | deductible |
| | against |
| | taxable |
| | income, |
| | when |
| | incurred. |
+--------+-------------+
| (c) | Deferred |
| | tax |
| | assets |
| | generated |
| | in the |
| | year not |
| | recognised |
| | are |
| | comprised |
| | of: |
+--------+-------------+
+--------------------+---------+---------+
| | As at 31 |
| | December |
+--------------------+-------------------+
| | 2008 | 2007 |
+--------------------+---------+---------+
| | US$(000) |
+--------------------+-------------------+
| Tax | 3,851 | 4,672 |
| losses | | |
| not | | |
| recognised | | |
+--------------------+---------+---------+
| Impairment | 3,234 | - |
| of | | |
| available-for-sale | | |
| financial assets | | |
+--------------------+---------+---------+
| Impairment | | |
| of the San | | |
| Felipe | | |
| project | | |
| 4,350 - | | |
+--------------------+---------+---------+
| Provision | 1,483 | 542 |
| for mine | | |
| closure | | |
+--------------------+---------+---------+
| Write-off | 364 | - |
| of bank | | |
| account | | |
+--------------------+---------+---------+
| Change | 341 | - |
| in | | |
| fair | | |
| value | | |
| of | | |
| derivative | | |
| instruments | | |
+--------------------+---------+---------+
| Other | 248 | - |
+--------------------+---------+---------+
| | 13,871 | 5,214 |
+--------------------+---------+---------+
+--------+-------------+
| (d) | Corresponds |
| | to the |
| | effect of |
| | the change |
| | in the |
| | Mexican tax |
| | regime |
| | (refer to |
| | note (ii) |
| | below). |
+--------+-------------+
| (e) | Corresponds |
| | to an |
| | increase in |
| | the |
| | statutory |
| | corporate |
| | income tax |
| | rate for |
| | the Arcata |
| | mining unit |
| | from 30% to |
| | 32% with |
| | effect from |
| | 1 January |
| | 2009 |
+--------+-------------+
| (f) | Mainly |
| | corresponds |
| | to the |
| | foreign |
| | exchange |
| | effect from |
| | converting |
| | tax bases |
| | and |
| | monetary |
| | items from |
| | local |
| | currency to |
| | the |
| | functional |
| | currency |
+--------+-------------+
+----------+------------------+
| (i) | Special |
| | investment |
| | regime |
+----------+------------------+
| | Minera |
| | Santa |
| | Cruz |
| | benefits |
| | from a |
| | special |
| | investment |
| | regime |
| | that |
| | allows for |
| | a double |
| | deduction |
| | in the |
| | calculation |
| | of its |
| | corporate |
| | income tax |
| | liability |
| | for all |
| | costs |
| | relating to |
| | prospecting, |
| | exploration |
| | and |
| | metallurgical |
| | analysis, |
| | pilot plants |
| | and other |
| | expenses |
| | incurred |
| | prior to the |
| | completion of |
| | the |
| | feasibility |
| | studies for |
| | mining |
| | projects. In |
| | this regard, |
| | the total |
| | investment |
| | eligible for |
| | additional |
| | deduction |
| | amounts to |
| | approximately |
| | 95,061,000 |
| | Argentinian |
| | pesos |
| | (US$27,853,000) |
| | as at 31 |
| | December 2008 |
| | (2007: |
| | 79,680,000 |
| | Argentinian |
| | pesos |
| | (US$25,596,000). |
| | As this |
| | additional |
| | deduction does |
| | not affect |
| | either taxable |
| | profit or |
| | accounting |
| | profit on |
| | initial |
| | recognition, no |
| | deferred tax was |
| | recognised in |
| | accordance with |
| | IAS 12 'Income |
| | Taxes'. However |
| | under the |
| | Argentinian tax |
| | regime, |
| | following |
| | commencement of |
| | operations in |
| | 2007, this |
| | amount could be |
| | claimed in equal |
| | amounts over 1 |
| | to 5 years. At |
| | 31 December |
| | 2007, the Group |
| | decided to make |
| | this claim over |
| | 2 years, |
| | resulting in 50% |
| | of the available |
| | deduction being |
| | included in the |
| | tax losses for |
| | the year 2007. |
| | In 2008 the |
| | Group included |
| | in the tax |
| | losses of the |
| | year 54,797,000 |
| | Argentinian |
| | pesos |
| | (US$17,324,000). |
| | This amount |
| | includes the |
| | remaining 50% of |
| | eligible costs |
| | calculated as at |
| | 31 December 2007 |
| | of 79,680,000 |
| | Argentinian |
| | pesos plus |
| | 15,381,000 |
| | Argentinian |
| | pesos of |
| | additional |
| | eligible costs. |
| | The balance of |
| | the eligible |
| | costs of |
| | 1,582,000 |
| | Argentinean |
| | pesos |
| | (US$464,000) |
| | will be claimed |
| | in 2009. |
+----------+------------------+
| (ii) | Change |
| | in |
| | Mexican |
| | tax |
| | regime |
+----------+------------------+
| | On 28 |
| | September |
| | 2007, the |
| | Mexican |
| | Government |
| | enacted a |
| | bill for |
| | tax reform |
| | that |
| | significantly |
| | changed the |
| | current |
| | income tax |
| | structure in |
| | Mexico. |
| | Effective |
| | from 1 |
| | January 2008, |
| | the tax |
| | reform |
| | requires |
| | companies to |
| | pay tax equal |
| | to the |
| | greater of |
| | the tax |
| | charge |
| | calculated |
| | under the new |
| | flat rate |
| | business tax |
| | ("IETU" as |
| | abbreviated |
| | in Spanish) |
| | or the tax |
| | change |
| | calculated |
| | under the |
| | current |
| | income |
| | corporate tax |
| | regime ("ISR" |
| | as |
| | abbreviated |
| | in Spanish). |
| | The Group has |
| | performed an |
| | analysis of |
| | the future |
| | impact of |
| | this tax |
| | reform on its |
| | Mexican |
| | companies and |
| | has |
| | determined |
| | that Santa |
| | Maria de |
| | Moris S.A. de |
| | C.V. (the |
| | operator of |
| | the Moris |
| | mine) will be |
| | required to |
| | pay IETU in |
| | each period |
| | until the end |
| | of the mine's |
| | life. |
| | Therefore, as |
| | at 31 |
| | December 2007 |
| | the Group |
| | recognised a |
| | deferred tax |
| | liability in |
| | connection |
| | with IETU of |
| | US$3,403,000 |
| | due to the |
| | resulting |
| | reduction in |
| | the amount of |
| | capital |
| | allowances |
| | arising on |
| | the |
| | investment in |
| | the mine to |
| | date. As at |
| | 31 December |
| | 2008 the IETU |
| | deferred tax |
| | liability had |
| | decreased by |
| | US$1,554,000 |
| | to US$ |
| | 1,859,000. |
+----------+ +
| | |
+----------+------------------+
6 Property, plant and equipment
+------------------+-+-------------+-+-------------+-+-----------+-+--------------+-+----------+-+---------+-+--------------+-+---------+-+
| |
+------------------+
| | |Exploration | | Mining | | Land | | Plant | |Vehicles | | Mine | |Construction | | Total | |
| | | and | | properties | | and | | and | | | |closure | | in progress | | | |
| | | evaluation | | and | |buildings | |equipment(a) | | | | asset | | and capital | | | |
| | | costs | |development | | | | | | | | | | advances | | | |
| | | | | costs | | | | | | | | | | | | | |
+------------------+-+-------------+-+-------------+-+-----------+-+--------------+-+----------+-+---------+-+--------------+-+---------+-+
| | | US$(000) | |
+------------------+-+------------------------------------------------------------------------------------------------------------------+-+
| Year ended 31 | | | | | | | | | | | | | | | | | |
| December 2007 | | | | | | | | | | | | | | | | | |
+------------------+-+-------------+-+-------------+-+-----------+-+--------------+-+----------+-+---------+-+--------------+-+---------+-+
| Cost | | | | | | | | | | | | | | | | | |
+------------------+-+-------------+-+-------------+-+-----------+-+--------------+-+----------+-+---------+-+--------------+-+---------+-+
| At 1 January | | 1,282 | | 106,011 | | 23,706 | | 53,456 | | 1,528 | | 34,516 | | 23,851 | | 244,350 | |
| 2007 | | | | | | | | | | | | | | | | | |
+------------------+-+-------------+-+-------------+-+-----------+-+--------------+-+----------+-+---------+-+--------------+-+---------+-+
| Additions | | 8,279 | | 48,004 | | 1,004 | | 9,450 | | 400 | | 1,056 | | 77,601 | | 145,794 | |
+------------------+-+-------------+-+-------------+-+-----------+-+--------------+-+----------+-+---------+-+--------------+-+---------+-+
| Change in | | _ | | _ | | _ | | _ | | _ | | 2,611 | | _ | | 2,611 | |
| discount rate | | | | | | | | | | | | | | | | | |
+------------------+-+-------------+-+-------------+-+-----------+-+--------------+-+----------+-+---------+-+--------------+-+---------+-+
| Disposals | | _ | | _ | | (110 | )| (2,221 | )| (104 | )| _ | | (6 | )| (2,441 | )|
+------------------+-+-------------+-+-------------+-+-----------+-+--------------+-+----------+-+---------+-+--------------+-+---------+-+
| Sale of | | _ | | _ | | _ | | (2 | )| _ | | _ | | _ | | (2 | )|
| subsidiary - | | | | | | | | | | | | | | | | | |
| Colorada | | | | | | | | | | | | | | | | | |
+------------------+-+-------------+-+-------------+-+-----------+-+--------------+-+----------+-+---------+-+--------------+-+---------+-+
| Change in mine | | _ | | _ | | _ | | _ | | _ | | 105 | | _ | | 105 | |
| closure estimate | | | | | | | | | | | | | | | | | |
+------------------+-+-------------+-+-------------+-+-----------+-+--------------+-+----------+-+---------+-+--------------+-+---------+-+
| Transfers and | | (3,535) | | 3,535 | | 40,717 | | 45,114 | | 976 | | _ | | (86,807 | )| _ | |
| other movements | | | | | | | | | | | | | | | | | |
+------------------+-+-------------+-+-------------+-+-----------+-+--------------+-+----------+-+---------+-+--------------+-+---------+-+
| Foreign exchange | | 8 | | 161 | | 118 | | 149 | | 24 | | _ | | (618 | )| (158 | )|
+------------------+-+-------------+-+-------------+-+-----------+-+--------------+-+----------+-+---------+-+--------------+-+---------+-+
| At 31 December | | 6,034 | | 157,711 | | 65,435 | | 105,946 | | 2,824 | | 38,288 | | 14,021 | | 390,259 | |
| 2007 | | | | | | | | | | | | | | | | | |
+------------------+-+-------------+-+-------------+-+-----------+-+--------------+-+----------+-+---------+-+--------------+-+---------+-+
| Accumulated | | | | | | | | | | | | | | | | | |
| depreciation | | | | | | | | | | | | | | | | | |
+------------------+-+-------------+-+-------------+-+-----------+-+--------------+-+----------+-+---------+-+--------------+-+---------+-+
| At 1 January | | _ | | 37,360 | | 9,417 | | 24,554 | | 528 | | 31,104 | | _ | | 102,963 | |
| 2007 | | | | | | | | | | | | | | | | | |
+------------------+-+-------------+-+-------------+-+-----------+-+--------------+-+----------+-+---------+-+--------------+-+---------+-+
| Depreciation for | | _ | | 12,665 | | 3,548 | | 8,767 | | 421 | | 599 | | _ | | 26,000 | |
| the year | | | | | | | | | | | | | | | | | |
+------------------+-+-------------+-+-------------+-+-----------+-+--------------+-+----------+-+---------+-+--------------+-+---------+-+
| Disposals | | _ | | _ | | (110 | )| (1,615 | )| (82) | | _ | | _ | | (1,807 | )|
+------------------+-+-------------+-+-------------+-+-----------+-+--------------+-+----------+-+---------+-+--------------+-+---------+-+
| Sale of | | _ | | _ | | _ | | (2 | )| _ | | _ | | _ | | (2 | )|
| subsidiary - | | | | | | | | | | | | | | | | | |
| Colorada | | | | | | | | | | | | | | | | | |
+------------------+-+-------------+-+-------------+-+-----------+-+--------------+-+----------+-+---------+-+--------------+-+---------+-+
| Foreign exchange | | _ | | 2 | | 3 | | 45 | | (7 | )| _ | | _ | | 43 | |
+------------------+-+-------------+-+-------------+-+-----------+-+--------------+-+----------+-+---------+-+--------------+-+---------+-+
| At 31 December | | _ | | 50,027 | | 12,858 | | 31,749 | | 860 | | 31,703 | | _ | | 127,197 | |
| 2007 | | | | | | | | | | | | | | | | | |
+------------------+-+-------------+-+-------------+-+-----------+-+--------------+-+----------+-+---------+-+--------------+-+---------+-+
| Net book amount | | 6,034 | | 107,684 | | 52,577 | | 74,197 | | 1,964 | | 6,585 | | 14,021 | | 263,062 | |
| at 31 December | | | | | | | | | | | | | | | | | |
| 2007 | | | | | | | | | | | | | | | | | |
+------------------+-+-------------+-+-------------+-+-----------+-+--------------+-+----------+-+---------+-+--------------+-+---------+-+
| Year ended 31 | | | | | | | | | | | | | | | | | |
| December 2008 | | | | | | | | | | | | | | | | | |
+------------------+-+-------------+-+-------------+-+-----------+-+--------------+-+----------+-+---------+-+--------------+-+---------+-+
| Cost | | | | | | | | | | | | | | | | | |
+------------------+-+-------------+-+-------------+-+-----------+-+--------------+-+----------+-+---------+-+--------------+-+---------+-+
| At 1 January | | 6,034 | | 157,711 | | 65,435 | | 105,946 | | 2,824 | | 38,288 | | 14,021 | | 390,259 | |
| 2008 | | | | | | | | | | | | | | | | | |
+------------------+-+-------------+-+-------------+-+-----------+-+--------------+-+----------+-+---------+-+--------------+-+---------+-+
| Additions | | 68,311 | | 79,496 | | 4,253 | | 9,375 | | 77 | | _ | | 149,759 | | 311,271 | |
+------------------+-+-------------+-+-------------+-+-----------+-+--------------+-+----------+-+---------+-+--------------+-+---------+-+
| Change in | | _ | | _ | | _ | | _ | | _ | | 3,113 | | _ | | 3,113 | |
| discount rate | | | | | | | | | | | | | | | | | |
+------------------+-+-------------+-+-------------+-+-----------+-+--------------+-+----------+-+---------+-+--------------+-+---------+-+
| Disposals | | _ | | _ | | _ | | (120 | )| (158 | )| _ | | _ | | (278 | )|
+------------------+-+-------------+-+-------------+-+-----------+-+--------------+-+----------+-+---------+-+--------------+-+---------+-+
| Write-off | | _ | | _ | | _ | | (24 | )| _ | | _ | | _ | | (24 | )|
+------------------+-+-------------+-+-------------+-+-----------+-+--------------+-+----------+-+---------+-+--------------+-+---------+-+
| Change in mine | | _ | | _ | | _ | | _ | | _ | | 280 | | _ | | 280 | |
| closure estimate | | | | | | | | | | | | | | | | | |
+------------------+-+-------------+-+-------------+-+-----------+-+--------------+-+----------+-+---------+-+--------------+-+---------+-+
| Transfers and | | (2,960 | )| 768 | | 30,748 | | 68,535 | | 746 | | _ | | (97,837 | )| _ | |
| other movements | | | | | | | | | | | | | | | | | |
+------------------+-+-------------+-+-------------+-+-----------+-+--------------+-+----------+-+---------+-+--------------+-+---------+-+
| Sales during | | _ | | (125 | )| _ | | _ | | _ | | _ | | _ | | (125 | )|
| preoperating | | | | | | | | | | | | | | | | | |
| stage in Minera | | | | | | | | | | | | | | | | | |
| Santa Cruz | | | | | | | | | | | | | | | | | |
+------------------+-+-------------+-+-------------+-+-----------+-+--------------+-+----------+-+---------+-+--------------+-+---------+-+
| Foreign exchange | | (10,905 | )| (32 | )| (43 | )| (467 | )| (69 | )| _ | | (10 | )| (11,526 | )|
+------------------+-+-------------+-+-------------+-+-----------+-+--------------+-+----------+-+---------+-+--------------+-+---------+-+
| At 31 December | | 60,480 | | 237,818 | | 100,393 | | 183,245 | | 3,420 | | 41,681 | | 65,933 | | 692,970 | |
| 2008 | | | | | | | | | | | | | | | | | |
+------------------+-+-------------+-+-------------+-+-----------+-+--------------+-+----------+-+---------+-+--------------+-+---------+-+
| Accumulated | | | | | | | | | | | | | | | | | |
| depreciation and | | | | | | | | | | | | | | | | | |
| impairment | | | | | | | | | | | | | | | | | |
+------------------+-+-------------+-+-------------+-+-----------+-+--------------+-+----------+-+---------+-+--------------+-+---------+-+
| At 1 January | | _ | | 50,027 | | 12,858 | | 31,749 | | 860 | | 31,703 | | _ | | 127,197 | |
| 2008 | | | | | | | | | | | | | | | | | |
+------------------+-+-------------+-+-------------+-+-----------+-+--------------+-+----------+-+---------+-+--------------+-+---------+-+
| Depreciation for | | _ | | 19,732 | | 7,697 | | 13,729 | | 455 | | 730 | | _ | | 42,343 | |
| the year | | | | | | | | | | | | | | | | | |
+------------------+-+-------------+-+-------------+-+-----------+-+--------------+-+----------+-+---------+-+--------------+-+---------+-+
| Impairment(b) | | 15,754 | | 10,076 | | 754 | | 6,286 | | 105 | | 943 | | 788 | | 34,706 | |
+------------------+-+-------------+-+-------------+-+-----------+-+--------------+-+----------+-+---------+-+--------------+-+---------+-+
| Disposals | | _ | | _ | | _ | | (54 | )| (84) | | _ | | _ | | (138 | )|
+------------------+-+-------------+-+-------------+-+-----------+-+--------------+-+----------+-+---------+-+--------------+-+---------+-+
| Write-off | | _ | | _ | | _ | | (4 | )| _ | | _ | | _ | | (4 | )|
+------------------+-+-------------+-+-------------+-+-----------+-+--------------+-+----------+-+---------+-+--------------+-+---------+-+
| Sales during | | _ | | (12 | )| _ | | _ | | _ | | _ | | _ | | (12 | )|
| preoperating | | | | | | | | | | | | | | | | | |
| stage in Minera | | | | | | | | | | | | | | | | | |
| Santa Cruz | | | | | | | | | | | | | | | | | |
+------------------+-+-------------+-+-------------+-+-----------+-+--------------+-+----------+-+---------+-+--------------+-+---------+-+
| Foreign exchange | | _ | | _ | | 2 | | (78 | )| (30 | )| _ | | _ | | (106 | )|
+------------------+-+-------------+-+-------------+-+-----------+-+--------------+-+----------+-+---------+-+--------------+-+---------+-+
| At 31 December | | 15,754 | | 79,823 | | 21,311 | | 51,628 | | 1,306 | | 33,376 | | 788 | | 203,986 | |
| 2008 | | | | | | | | | | | | | | | | | |
+------------------+-+-------------+-+-------------+-+-----------+-+--------------+-+----------+-+---------+-+--------------+-+---------+-+
| Net book amount | | 44,726 | | 157,995 | | 79,082 | | 131,617 | | 2,114 | | 8,305 | | 65,145 | | 488,984 | |
| at 31 December | | | | | | | | | | | | | | | | | |
| 2008 | | | | | | | | | | | | | | | | | |
+------------------+-+-------------+-+-------------+-+-----------+-+--------------+-+----------+-+---------+-+--------------+-+---------+-+
+----------+-----------------+
| a) | The |
| | carrying |
| | value of |
| | plant |
| | and |
| | equipment |
| | held |
| | under |
| | finance |
| | leases at |
| | 31 |
| | December |
| | 2008 was |
| | US$7,482,000. |
| | Additions |
| | during the |
| | year include |
| | US$7,872,000 |
| | of plant and |
| | equipment |
| | under finance |
| | leases. |
| | Leased assets |
| | are pledged |
| | as security |
| | for the |
| | related |
| | finance |
| | lease. |
+----------+-----------------+
| b) | The |
| | amount |
| | of |
| | impairment |
| | losses |
| | recognised |
| | in profit |
| | and loss |
| | during the |
| | period was |
| | US$34,706,000. |
| | As a result of |
| | the impairment |
| | testing, the |
| | Group has |
| | impaired the |
| | Selene mine by |
| | US$ |
| | 13,651,000, |
| | the Moris mine |
| | by US$ |
| | 5,652,000 and |
| | the San Felipe |
| | project by |
| | US$15,403,000. |
| | The triggers |
| | for the |
| | impairment |
| | test were |
| | primarily the |
| | effect of the |
| | current |
| | economic |
| | environment |
| | and |
| | significantly |
| | reduced gold, |
| | silver and |
| | zinc prices. |
| | The Group |
| | tested all its |
| | mining units |
| | for |
| | impairment: |
| | Arcata, Ares, |
| | Selene, |
| | Pallancata, |
| | San José, |
| | Santa Maria de |
| | Moris and its |
| | project San |
| | Felipe. In |
| | assessing |
| | whether |
| | impairment is |
| | required to |
| | the carrying |
| | value of the |
| | assets related |
| | to each mining |
| | unit, its |
| | carrying value |
| | is compared |
| | with its |
| | recoverable |
| | amount. The |
| | recoverable |
| | amount is the |
| | higher of the |
| | asset´s fair |
| | value less |
| | costs to sell |
| | and the value |
| | in use. Given |
| | the nature of |
| | the Group´s |
| | activities, |
| | information on |
| | the fair value |
| | of an asset is |
| | usually |
| | difficult to |
| | obtain unless |
| | negotiations |
| | with potential |
| | purchasers or |
| | similar |
| | transactions |
| | are taking |
| | place. |
| | Consequently, |
| | unless |
| | indicated |
| | otherwise, the |
| | recoverable |
| | amount used in |
| | assessing the |
| | impairment |
| | charges |
| | described |
| | below is value |
| | in use. The |
| | Group |
| | generally |
| | estimates |
| | value in use |
| | using a |
| | discounted |
| | cash flow |
| | model for each |
| | mining unit |
| | covering its |
| | remaining |
| | useful life. |
+----------+-----------------+
| | The |
| | calculation |
| | of value in |
| | use is most |
| | sensitive |
| | to the |
| | following |
| | assumptions: |
+----------+-----------------+
| | * Commodity |
| | prices - |
| | Commodity |
| | prices of |
| | gold and |
| | silver are |
| | based on |
| | external |
| | market |
| | consensus |
| | forecasts. |
| | Gold prices |
| | range from |
| | US$750 to |
| | US$879, |
| | silver |
| | prices range |
| | from |
| | US$11.84 to |
| | US$13.00 and |
| | zinc prices |
| | range from |
| | US$1.521 to |
| | US$1.984. |
| | * |
| | Estimation |
| | of reserves |
| | and |
| | resources - |
| | Reserves and |
| | resources |
| | are based on |
| | management's |
| | estimate |
| | using |
| | appropriate |
| | exploration |
| | and |
| | evaluation |
| | techniques.* |
| | Production |
| | volumes and |
| | grades - |
| | Tonnage |
| | produced was |
| | estimated at |
| | plant capacity |
| | with twelve |
| | days of |
| | maintenance |
| | per year. * |
| | Capital |
| | expenditure - |
| | The cash flows |
| | for each |
| | mining unit |
| | include |
| | capital |
| | expenditures |
| | to maintain |
| | the mine and |
| | to convert |
| | resources to |
| | reserves.* |
| | Operating |
| | costs - Costs |
| | are based on |
| | historical |
| | information |
| | from previous |
| | years and |
| | current market |
| | conditions. |
| | * |
| | Discount rates |
| | - The cash |
| | flows are |
| | discounted at |
| | real pre-tax |
| | rates that |
| | reflect the |
| | current market |
| | assessments of |
| | the time value |
| | of money and |
| | the risks |
| | specific to |
| | the |
| | cash-generating |
| | unit. These |
| | rates are based |
| | on the weighted |
| | average cost of |
| | capital |
| | specific to |
| | each |
| | cash-generating |
| | unit. |
| | |
+----------+-----------------+
+----------------+--+----------+--+----------+
| |
+----------------+
| Mining unit | | Real | | Real |
| | | pre-tax | |post-tax |
| | |discount | | rate |
| | | rate | | |
+----------------+--+----------+--+----------+
| | | % | | % |
+----------------+--+----------+--+----------+
| Arcata | | 20.5% | | 5.1% |
+----------------+--+----------+--+----------+
| Ares | | 28.5% | | 5.1% |
+----------------+--+----------+--+----------+
| Selene | | 5.0% | | 5.1% |
+----------------+--+----------+--+----------+
| Pallancata | | 18.5% | | 5.1% |
+----------------+--+----------+--+----------+
| San José | | 17.0% | | 9.2% |
+----------------+--+----------+--+----------+
| Santa Maria de | | 19.0% | | 4.3% |
| Moris | | | | |
+----------------+--+----------+--+----------+
| San Felipe | | 11.5% | | 8.2% |
+----------------+--+----------+--+----------+
7Subsequent events
(a) On 25 February 2009 the Group exercised its option to purchase further
4,330,000 shares of Gold Resource Corporation for approximately US$12,900,000
(US$3 per share), representing a 41% discount to the closing price of the same
date. Alter the purchase the Group owns 14.6% interest in Gold Resource
Corporation.
(b) On 6 March 2009 the Group served a notice of termination of the existing
commercial agreement to Argor Heraeus. We are in the process of seeking more
favourable commercial terms for the Group from alternative customers.
(c) On 9 March 2009 the Group acquired 14,900,000 shares of its associate Lake
Shore Gold for CAD$23,100,000 (approximately US$18,000,000) as part of its
commitment to participate in the bought-deal financing agreement entered by Lake
Shore Gold to raise approximately CAD$60,000,000. The proceeds from the
financing will be used for the advancement of Lake Shore Gold's mineral
projects. After completion of the transaction, the Group's ownership in
Lake Shore Gold is maintained at 40%.
(d) On 23 March 2009 the Group signed a definitive Arrangement Agreement to
acquire all the outstanding shares of Southwestern Resources Corp.
("Southwestern"), a Canadian listed mineral exploration company with a number of
gold, silver and base metals projects in southern Peru, for a total cash
consideration of US$17,600,000 (US$0.39 per share). Southwestern is the
strategic partner of the Group in the Liam and Pacapausa joint ventures. With
the acquisition, the Group will own the remaining 50% of the Liam joint venture
property and increase its interest in the Pacapausa joint venture from 30% to
80%. This transaction is subject to the approval of Southwestern's shareholders
which is expected to occur by 8 May 2009.
Reserves & Resources (Audited by IMC Group Consulting Limited)
Attributable metal reserves
As at 31 December 2008*
+----------------+-----------+-----------+------------------+---------+---------+--+-------+--------+--------+
| Reserve | Proved | Probable | Proved And | Ag | Au | | Ag | Au | Ag |
| category | | | probable | | | | | | Eq. |
+----------------+-----------+-----------+------------------+---------+---------+--+-------+--------+--------+
| | (t) | (t) | (t) | (g/t) | (g/t) | | (moz) | (koz) | (moz) |
+----------------+-----------+-----------+------------------+---------+---------+--+-------+--------+--------+
| Arcata | | | | | | | | | |
+----------------+-----------+-----------+------------------+---------+---------+--+-------+--------+--------+
| Proved | 929,683 | | | 575 | 1.80 | | 17.19 | 53.78 | 20.42 |
+----------------+-----------+-----------+------------------+---------+---------+--+-------+--------+--------+
| Probable | | 681,241 | | 495 | 1.38 | | 10.85 | 30.20 | 12.66 |
+----------------+-----------+-----------+------------------+---------+---------+--+-------+--------+--------+
| Total | | | 1,610,924 | 541 | 1.62 | | 28.04 | 83.98 | 33.08 |
+----------------+-----------+-----------+------------------+---------+---------+--+-------+--------+--------+
| Ares | | | | | | | | | |
+----------------+-----------+-----------+------------------+---------+---------+--+-------+--------+--------+
| Proved | 464,180 | | | 124 | 5.01 | | 1.84 | 74.77 | 6.33 |
+----------------+-----------+-----------+------------------+---------+---------+--+-------+--------+--------+
| Probable | | 185,225 | | 112 | 4.49 | | 0.67 | 26.72 | 2.27 |
+----------------+-----------+-----------+------------------+---------+---------+--+-------+--------+--------+
| Total | | | 649,405 | 120 | 4.86 | | 2.51 | 101.49 | 8.60 |
+----------------+-----------+-----------+------------------+---------+---------+--+-------+--------+--------+
| Selene | | | | | | | | | |
+----------------+-----------+-----------+------------------+---------+---------+--+-------+--------+--------+
| Proved | 75,686 | | | 275 | 2.04 | | 0.67 | 4.97 | 0.97 |
+----------------+-----------+-----------+------------------+---------+---------+--+-------+--------+--------+
| Probable | | 51,662 | | 257 | 1.94 | | 0.43 | 3.22 | 0.62 |
+----------------+-----------+-----------+------------------+---------+---------+--+-------+--------+--------+
| Total | | | 127,348 | 268 | 2.00 | | 1.10 | 8.19 | 1.59 |
+----------------+-----------+-----------+------------------+---------+---------+--+-------+--------+--------+
| Pallancata | | | | | | | | | |
+----------------+-----------+-----------+------------------+---------+---------+--+-------+--------+--------+
| Proved | 1,179,218 | | | 380 | 1.60 | | 14.40 | 60.70 | 18.04 |
+----------------+-----------+-----------+------------------+---------+---------+--+-------+--------+--------+
| Probable | | 1,402,004 | | 354 | 1.43 | | 15.94 | 64.31 | 19.80 |
+----------------+-----------+-----------+------------------+---------+---------+--+-------+--------+--------+
| Total | | | 2,581,222 | 366 | 1.51 | | 30.34 | 125.02 | 37.84 |
+----------------+-----------+-----------+------------------+---------+---------+--+-------+--------+--------+
| San José | | | | | | | | | |
+----------------+-----------+-----------+------------------+---------+---------+--+-------+--------+--------+
| Proved | 264,461 | | | 508 | 7.92 | | 4.32 | 67.36 | 8.36 |
+----------------+-----------+-----------+------------------+---------+---------+--+-------+--------+--------+
| Probable | | 567,958 | | 529 | 7.90 | | 9.65 | 144.17 | 18.30 |
+----------------+-----------+-----------+------------------+---------+---------+--+-------+--------+--------+
| Total | | | 832,419 | 522 | 7.90 | | 13.97 | 211.53 | 26.66 |
+----------------+-----------+-----------+------------------+---------+---------+--+-------+--------+--------+
| Moris | | | | | | | | | |
+----------------+-----------+-----------+------------------+---------+---------+--+-------+--------+--------+
| Proved | 1,132,556 | | | 4.60 | 1.44 | | 0.18 | 57.39 | 3.63 |
+----------------+-----------+-----------+------------------+---------+---------+--+-------+--------+--------+
| Probable | | 106,982 | | | | | 0.00 | 0.00 | 0.00 |
+----------------+-----------+-----------+------------------+---------+---------+--+-------+--------+--------+
| Total | | | 1,239,538 | 4.60 | 1.44 | | 0.18 | 57.39 | 3.63 |
+----------------+-----------+-----------+------------------+---------+---------+--+-------+--------+--------+
| Total | | | | | | | | | |
+----------------+-----------+-----------+------------------+---------+---------+--+-------+--------+--------+
| Proved | 4,152,766 | | | 289 | 2.39 | | 38.60 | 318.97 | 57.74 |
+----------------+-----------+-----------+------------------+---------+---------+--+-------+--------+--------+
| Probable | | 2,888,091 | | 404 | 2.89 | | 37.53 | 268.63 | 53.65 |
+----------------+-----------+-----------+------------------+---------+---------+--+-------+--------+--------+
| Total | | | 7,040,857 | 336 | 2.60 | | 76.13 | 587.60 | 111.39 |
+----------------+-----------+-----------+------------------+---------+---------+--+-------+--------+--------+
Note: Where reserves are attributable to joint venture partner, reserve figures
reflect the Company's ownership only. Includes discounts for ore loss and
dilution.
*2008 reserve and resource figures are not comparable to 2007 due to the
increase in cut-off grades
Attributable metal resources (Audited by IMC Group Consulting Limited)
As at 31 December 2008*
+------------+-----------+------------+------------+-----------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+---------+
| Resource | Measured | Indicated | Measured | Inferred | Ag | Au | Zn | Pb | Cu | Ag Eq | | Ag | Au | Zn | Pb | Cu |
| category | | | and | | | | | | | | | | | | | |
| | | | indicated | | | | | | | | | | | | | |
+------------+-----------+------------+------------+-----------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+---------+
| | (t) | (t) | (t) | (t) | (g/t) | (g/t) | (%) | (%) | (%) | (g/t) | | (moz) | (koz) | (kt) | (kt) | (kt) |
+------------+-----------+------------+------------+-----------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+---------+
| Arcata | | | | | | | | | | | | | | | | |
+------------+-----------+------------+------------+-----------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+---------+
| Measured | 1,302,535 | | | | 662 | 2.06 | -.- | -.- | -.- | 786 | | 27.73 | 86.17 | -.- | -.- | -.- |
+------------+-----------+------------+------------+-----------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+---------+
| Indicated | | 822,655 | | | 601 | 1.67 | -.- | -.- | -.- | 701 | | 15.90 | 44.23 | -.- | -.- | -.- |
+------------+-----------+------------+------------+-----------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+---------+
| Total | | | 2,125,190 | | 639 | 1.91 | -.- | -.- | -.- | 753 | | 43.63 | 130.40 | -.- | -.- | -.- |
+------------+-----------+------------+------------+-----------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+---------+
| Inferred | | | | 1,815,443 | 519 | 1.56 | -.- | -.- | -.- | 613 | | 30.29 | 90.97 | -.- | -.- | -.- |
+------------+-----------+------------+------------+-----------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+---------+
| Ares | | | | | | | | | | | | | | | | |
+------------+-----------+------------+------------+-----------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+---------+
| Measured | 512,061 | | | | 167 | 7.10 | -.- | -.- | -.- | 593 | | 2.74 | 116.90 | -.- | -.- | -.- |
+------------+-----------+------------+------------+-----------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+---------+
| Indicated | | 206,473 | | | 148 | 5.66 | -.- | -.- | -.- | 488 | | 0.98 | 37.60 | -.- | -.- | -.- |
+------------+-----------+------------+------------+-----------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+---------+
| Total | | | 718,534 | | 161 | 6.69 | -.- | -.- | -.- | 563 | | 3.73 | 154.51 | -.- | -.- | -.- |
+------------+-----------+------------+------------+-----------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+---------+
| Inferred | | | | 298,881 | 236 | 3.96 | -.- | -.- | -.- | 473 | | 2.26 | 38.06 | -.- | -.- | -.- |
+------------+-----------+------------+------------+-----------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+---------+
| Selene | | | | | | | | | | | | | | | | |
+------------+-----------+------------+------------+-----------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+---------+
| Measured | 190,853 | | | | 338 | 2.15 | -.- | -.- | -.- | 467 | | 2.07 | 13.18 | -.- | -.- | -.- |
+------------+-----------+------------+------------+-----------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+---------+
| Indicated | | 99,317 | | | 274 | 1.68 | -.- | -.- | -.- | 375 | | 0.88 | 5.35 | -.- | -.- | -.- |
+------------+-----------+------------+------------+-----------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+---------+
| Total | | | 290,170 | | 316 | 1.99 | -.- | -.- | -.- | 435 | | 2.95 | 18.53 | -.- | -.- | -.- |
+------------+-----------+------------+------------+-----------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+---------+
| Inferred | | | | 912,951 | 227 | 1.15 | -.- | -.- | -.- | 296 | | 6.66 | 33.76 | -.- | -.- | -.- |
+------------+-----------+------------+------------+-----------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+---------+
| Pallancata | | | | | | | | | | | | | | | | |
+------------+-----------+------------+------------+-----------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+---------+
| Measured | 1,180,769 | | | | 431 | 1.82 | -.- | -.- | -.- | 540 | | 16.36 | 69.03 | -.- | -.- | -.- |
+------------+-----------+------------+------------+-----------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+---------+
| Indicated | | 1,401,686 | | | 402 | 1.63 | -.- | -.- | -.- | 500 | | 18.12 | 73.54 | -.- | -.- | -.- |
+------------+-----------+------------+------------+-----------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+---------+
| Total | | | 2,582,455 | | 415 | 1.72 | -.- | -.- | -.- | 518 | | 34.48 | 142.57 | -.- | -.- | -.- |
+------------+-----------+------------+------------+-----------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+---------+
| Inferred | | | | 734,346 | 395 | 1.57 | -.- | -.- | -.- | 488 | | 9.31 | 36.97 | -.- | -.- | -.- |
+------------+-----------+------------+------------+-----------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+---------+
| San | | | | | | | | | | | | | | | | |
| José | | | | | | | | | | | | | | | | |
+------------+-----------+------------+------------+-----------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+---------+
| Measured | 263,331 | | | | 581 | 8.96 | -.- | -.- | -.- | 1,119 | | 4.92 | 75.89 | -.- | -.- | -.- |
+------------+-----------+------------+------------+-----------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+---------+
| Indicated | | 879,679 | | | 515 | 7.77 | -.- | -.- | -.- | 981 | | 14.57 | 219.66 | -.- | -.- | -.- |
+------------+-----------+------------+------------+-----------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+---------+
| Total | | | 1,143,010 | | 530 | 8.04 | -.- | -.- | -.- | 1,013 | | 19.49 | 295.55 | -.- | -.- | -.- |
+------------+-----------+------------+------------+-----------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+---------+
| Inferred | | | | 540,305 | 333 | 5.72 | -.- | -.- | -.- | 676 | | 5.78 | 99.33 | -.- | -.- | -.- |
+------------+-----------+------------+------------+-----------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+---------+
| Moris | | | | | | | | | | | | | | | | |
+------------+-----------+------------+------------+-----------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+---------+
| Measured | 1,675,682 | | | | 4.48 | 1.28 | -.- | -.- | -.- | 81 | | 0.24 | 68.80 | -.- | -.- | -.- |
+------------+-----------+------------+------------+-----------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+---------+
| Indicated | | 131,776 | | | 4.44 | 1.19 | -.- | -.- | -.- | 76 | | 0.02 | 5.06 | -.- | -.- | -.- |
+------------+-----------+------------+------------+-----------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+---------+
| Total | | | 1,807,458 | | 4.48 | 1.27 | -.- | -.- | -.- | 81 | | 0.26 | 73.86 | -.- | -.- | -.- |
+------------+-----------+------------+------------+-----------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+---------+
| Inferred | | | | 294,288 | 4.81 | 1.22 | -.- | -.- | -.- | 78 | | 0.05 | 11.50 | -.- | -.- | -.- |
+------------+-----------+------------+------------+-----------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+---------+
| Azuca | | | | | | | | | | | | | | | | |
+------------+-----------+------------+------------+-----------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+---------+
| Measured | -.- | | | | -.- | -.- | -.- | -.- | -.- | -.- | | -.- | -.- | -.- | -.- | -.- |
+------------+-----------+------------+------------+-----------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+---------+
| Indicated | | -.- | | | -.- | -.- | -.- | -.- | -.- | -.- | | -.- | -.- | -.- | -.- | -.- |
+------------+-----------+------------+------------+-----------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+---------+
| Total | | | -.- | | -.- | -.- | -.- | -.- | -.- | -.- | | -.- | -.- | -.- | -.- | -.- |
+------------+-----------+------------+------------+-----------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+---------+
| Inferred | | | | 1,776,034 | 327 | 1.34 | -.- | -.- | -.- | 408 | | 18.69 | 76.41 | -.- | -.- | -.- |
+------------+-----------+------------+------------+-----------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+---------+
| San | | | | | | | | | | | | | | | | |
| Felipe | | | | | | | | | | | | | | | | |
+------------+-----------+------------+------------+-----------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+---------+
| Measured | 1,393,716 | | | | 69 | 0.02 | 7.12 | 3.10 | 0.39 | 315 | | 3.09 | 0.88 | 99.26 | 43.15 | 5.50 |
+------------+-----------+------------+------------+-----------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+---------+
| Indicated | | 1,354,261 | | | 82 | 0.06 | 6.14 | 2.73 | 0.31 | 295 | | 3.59 | 2.45 | 83.18 | 36.97 | 4.24 |
+------------+-----------+------------+------------+-----------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+---------+
| Total | | | 2,747,977 | | 76 | 0.04 | 6.64 | 2.92 | 0.35 | 305 | | 6.68 | 3.33 | 182.45 | 80.12 | 9.74 |
+------------+-----------+------------+------------+-----------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+---------+
| Inferred | | | | 1,257,731 | 84 | 0.05 | 6.18 | 2.26 | 0.19 | 283 | | 3.42 | 1.89 | 77.76 | 28.47 | 2.34 |
+------------+-----------+------------+------------+-----------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+---------+
| TOTAL | | | | | | | | | | | | | | | | |
+------------+-----------+------------+------------+-----------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+---------+
| Measured | 6,518,948 | | | | 273 | 2.06 | 1.52 | 0.66 | 0.08 | 448 | | 57.15 | 430.86 | 99.26 | 43.15 | 5.50 |
+------------+-----------+------------+------------+-----------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+---------+
| Indicated | | 4,895,848 | | | 343 | 2.46 | 1.70 | 0.76 | 0.09 | 549 | | 54.06 | 387.90 | 83.18 | 36.97 | 4.24 |
+------------+-----------+------------+------------+-----------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+---------+
| Total | | | 11,414,795 | | 303 | 2.23 | 1.60 | 0.70 | 0.09 | 492 | | 111.21 | 818.76 | 182.45 | 80.12 | 9.74 |
+------------+-----------+------------+------------+-----------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+---------+
| Inferred | | | | 7,629,979 | 312 | 1.59 | 1.02 | 0.37 | 0.03 | 439 | | 76.46 | 388.89 | 77.76 | 28.47 | 2.34 |
+------------+-----------+------------+------------+-----------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+---------+
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.
*2008 reserve and resource figures are not comparable to 2007 due to the
increase in cut-off grades
Change in metal reserves and resources in silver equivalent ounces*
+-------------+----------+----------+----------------+-----------+----------+------------+----------+
| Ag equivalent content (million ounces) |
+---------------------------------------------------------------------------------------------------+
| Operation | Category |December |Production (1) |Movements |December | Net |% change |
| | | 2007 | | (2) | 2008 |difference | |
+-------------+----------+----------+----------------+-----------+----------+------------+----------+
| Peru | | | | | | | |
+-------------+----------+----------+----------------+-----------+----------+------------+----------+
| Arcata | Resource | 70.3 | | 16.9 | 87.2 | 16.9 | 24% |
+-------------+----------+----------+----------------+-----------+----------+------------+----------+
| | Reserve | 32.4 | -12.0 | 12.7 | 33.1 | 0.7 | 2% |
+-------------+----------+----------+----------------+-----------+----------+------------+----------+
| Ares | Resource | 16.8 | | 0.7 | 17.5 | 0.7 | 4% |
+-------------+----------+----------+----------------+-----------+----------+------------+----------+
| | Reserve | 14.6 | -5.3 | -0.7 | 8.6 | -6.0 | (41%) |
+-------------+----------+----------+----------------+-----------+----------+------------+----------+
| Selene | Resource | 18.5 | | -5.8 | 12.7 | -5.8 | (31%) |
+-------------+----------+----------+----------------+-----------+----------+------------+----------+
| | Reserve | 9.6 | -2.9 | -5.1 | 1.6 | -8.0 | (83%) |
+-------------+----------+----------+----------------+-----------+----------+------------+----------+
| Pallancata | Resource | 83.2 | | 7.8 | 90.9 | 7.8 | 9% |
+-------------+----------+----------+----------------+-----------+----------+------------+----------+
| | Reserve | 41.4 | -5.9 | 27.6 | 63.1 | 21.6 | 52% |
+-------------+----------+----------+----------------+-----------+----------+------------+----------+
| Peru Total: | Resource | 188.8 | | 19.7 | 208.4 | 19.7 | 10% |
+-------------+----------+----------+----------------+-----------+----------+------------+----------+
| | Reserve | 98.0 | -26.2 | 34.5 | 106.3 | 8.3 | 8% |
+-------------+----------+----------+----------------+-----------+----------+------------+----------+
| Argentina | | | | | | | |
+-------------+----------+----------+----------------+-----------+----------+------------+----------+
| San José | Resource | 90.1 | | 5.9 | 96.0 | 5.9 | 7% |
+-------------+----------+----------+----------------+-----------+----------+------------+----------+
| | Reserve | 66.2 | -9.6 | -4.3 | 52.3 | -13.9 | (21%) |
+-------------+----------+----------+----------------+-----------+----------+------------+----------+
| Argentina | Resource | 90.1 | | 5.9 | 96.0 | 5.9 | 7% |
| Total: | | | | | | | |
+-------------+----------+----------+----------------+-----------+----------+------------+----------+
| | Reserve | 66.2 | -9.6 | -4.3 | 52.3 | -13.9 | (21%) |
+-------------+----------+----------+----------------+-----------+----------+------------+----------+
| Mexico | | | | | | | |
+-------------+----------+----------+----------------+-----------+----------+------------+----------+
| Moris | Resource | 9.5 | | -1.7 | 7.8 | -1.7 | (18%) |
+-------------+----------+----------+----------------+-----------+----------+------------+----------+
| | Reserve | 7.7 | -3.1 | 0.5 | 5.2 | -2.6 | (33%) |
+-------------+----------+----------+----------------+-----------+----------+------------+----------+
| San Felipe | Resource | 27.6 | | 10.8 | 38.5 | 10.8 | 39% |
+-------------+----------+----------+----------------+-----------+----------+------------+----------+
| | Reserve | | 0.0 | 0.0 | | 0.0 | 0% |
+-------------+----------+----------+----------------+-----------+----------+------------+----------+
| Mexico | Resource | 37.1 | | 9.1 | 46.2 | 9.1 | 25% |
| Total: | | | | | | | |
+-------------+----------+----------+----------------+-----------+----------+------------+----------+
| | Reserve | 7.7 | -3.1 | 0.5 | 5.2 | -2.6 | (33%) |
+-------------+----------+----------+----------------+-----------+----------+------------+----------+
| Total: | Resource | 316.0 | | 34.7 | 350.6 | 34.7 | 11% |
+-------------+----------+----------+----------------+-----------+----------+------------+----------+
| | Reserve | 172.0 | -38.9 | 30.7 | 163.8 | -8.2 | (5%) |
+-------------+----------+----------+----------------+-----------+----------+------------+----------+
1 Production: 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.
*2008 reserve and resource figures are not comparable to 2007 due to the
increase in cut-off grades introduced
Change in attributable metal reserves and resources in silver equivalent ounces
+-------------+----------+--------------+----------+----------+------------+----------+
| Ag equivalent content (million ounces) |
+-------------------------------------------------------------------------------------+
| Operation | Category | Percentage |December |December | Net |% change |
| | |attributable | 2007 | 2008 |difference | |
| | | | Att.1 | Att. 1 | | |
+-------------+----------+--------------+----------+----------+------------+----------+
| Peru | | | | | | |
+-------------+----------+--------------+----------+----------+------------+----------+
| Arcata | Resource | 100% | 70.3 | 87.2 | 16.9 | 24% |
+-------------+----------+--------------+----------+----------+------------+----------+
| | Reserve | | 32.4 | 33.1 | 0.7 | 2% |
+-------------+----------+--------------+----------+----------+------------+----------+
| Ares | Resource | 100% | 16.8 | 17.5 | 0.7 | 4% |
+-------------+----------+--------------+----------+----------+------------+----------+
| | Reserve | | 14.6 | 8.6 | -6.0 | (41%) |
+-------------+----------+--------------+----------+----------+------------+----------+
| Selene | Resource | 100% | 18.5 | 12.7 | -5.8 | (31%) |
+-------------+----------+--------------+----------+----------+------------+----------+
| | Reserve | | 9.6 | 1.6 | -8.0 | (83%) |
+-------------+----------+--------------+----------+----------+------------+----------+
| Pallancata | Resource | 60% | 49.9 | 54.6 | 4.7 | 9% |
+-------------+----------+--------------+----------+----------+------------+----------+
| | Reserve | | 24.9 | 37.8 | 13.0 | 52% |
+-------------+----------+--------------+----------+----------+------------+----------+
| Peru Total: | Resource | | 155.5 | 172.1 | 16.6 | 11% |
+-------------+----------+--------------+----------+----------+------------+----------+
| | Reserve | | 81.5 | 81.1 | -0.4 | 0% |
+-------------+----------+--------------+----------+----------+------------+----------+
| Argentina | | | | | | |
+-------------+----------+--------------+----------+----------+------------+----------+
| San José | Resource | 51% | 45.9 | 49.0 | 3.0 | 7% |
+-------------+----------+--------------+----------+----------+------------+----------+
| | Reserve | | 33.7 | 26.7 | -7.1 | (21%) |
+-------------+----------+--------------+----------+----------+------------+----------+
| Argentina | Resource | | 45.9 | 49.0 | 3.0 | 7% |
| Total: | | | | | | |
+-------------+----------+--------------+----------+----------+------------+----------+
| | Reserve | | 33.7 | 26.7 | -7.1 | (21%) |
+-------------+----------+--------------+----------+----------+------------+----------+
| Mexico | | | | | | |
+-------------+----------+--------------+----------+----------+------------+----------+
| Moris | Resource | 70% | 6.6 | 5.4 | -1.2 | (18%) |
+-------------+----------+--------------+----------+----------+------------+----------+
| | Reserve | | 5.4 | 3.6 | -1.8 | (33%) |
+-------------+----------+--------------+----------+----------+------------+----------+
| San Felipe | Resource | 100% | 27.6 | 38.5 | 10.8 | 39% |
+-------------+----------+--------------+----------+----------+------------+----------+
| | Reserve | | 0.0 | 0.0 | 0.0 | 0% |
+-------------+----------+--------------+----------+----------+------------+----------+
| Mexico | Resource | | 34.3 | 43.9 | 9.6 | 28% |
| Total: | | | | | | |
+-------------+----------+--------------+----------+----------+------------+----------+
| | Reserve | | 5.4 | 3.6 | -1.8 | (33%) |
+-------------+----------+--------------+----------+----------+------------+----------+
| Total: | Resource | | 235.7 | 264.9 | 29.2 | 12% |
+-------------+----------+--------------+----------+----------+------------+----------+
| | Reserve | | 120.6 | 111.4 | -9.2 | (8%) |
+-------------+----------+--------------+----------+----------+------------+----------+
1 Attributable reserves and resources based on the Group's percentage ownership
of its joint venture projects.
*2008 reserve and resource figures are not comparable to 2007 due to the
increase in cut-off grades
TOTAL GROUP PRODUCTION1
+--------------------------+----------------+--------------+---------+
| | Year ended 31 | Year ended | % |
| | December 2008 | 31 December | change |
| | | 2007 | |
+--------------------------+----------------+--------------+---------+
| Silver production (koz) | 20,782 | 14,343 | 45% |
+--------------------------+----------------+--------------+---------+
| Gold production (koz) | 193.97 | 211.38 | (8%) |
+--------------------------+----------------+--------------+---------+
| Total silver equivalent | 32,421 | 27,026 | 20% |
| (koz) | | | |
+--------------------------+----------------+--------------+---------+
| Total gold equivalent | 540.34 | 450.43 | 20% |
| (koz) | | | |
+--------------------------+----------------+--------------+---------+
| Silver sold (koz) | 20,593 | 13,717 | 50% |
+--------------------------+----------------+--------------+---------+
| Gold sold (koz) | 198.32 | 202.10 | (2%) |
+--------------------------+----------------+--------------+---------+
1 Total production includes 100% of all production, including production
attributable to joint venture partners at Moris, San José and Pallancata.
ATTRIBUTABLE GROUP PRODUCTION1
+--------------------------+----------------+--------------+---------+
| | Year ended 31 | Year ended | % |
| | December 2008 | 31 December | change |
| | | 2007 | |
+--------------------------+----------------+--------------+---------+
| Silver production (koz) | 16,941 | 13,588 | 25% |
+--------------------------+----------------+--------------+---------+
| Gold production (koz) | 152.86 | 201.27 | (24%) |
+--------------------------+----------------+--------------+---------+
| Attrib. silver | 26,113 | 25,665 | 2% |
| equivalent (koz) | | | |
+--------------------------+----------------+--------------+---------+
| Attrib. gold equivalent | 435.22 | 427.74 | 2% |
| (koz) | | | |
+--------------------------+----------------+--------------+---------+
1 Attributable production includes 100% of all production from Arcata, Ares and
Selene, 60% from Pallancata, 51% from San José and 70% from Moris.
2008 PRODUCTION BY MINE
ARCATA
+--------------------------+---------------+---------------+---------------+
| Product | Year ended 31 | Year ended 31 | % change |
| | December 2008 | December 2007 | |
+--------------------------+---------------+---------------+---------------+
| Ore production (tonnes) | 557,870 | 415,400 | 34% |
+--------------------------+---------------+---------------+---------------+
| Average head grade | 571.37 | 560.04 | 2% |
| silver (g/t) | | | |
+--------------------------+---------------+---------------+---------------+
| Average head grade gold | 1.53 | 1.43 | 7% |
| (g/t) | | | |
+--------------------------+---------------+---------------+---------------+
| Concentrate produced | 20,639 | 16,665 | 24% |
| (tonnes) | | | |
+--------------------------+---------------+---------------+---------------+
| Silver grade in | 13.94 | 12.12 | 15% |
| concentrate (kg/t) | | | |
+--------------------------+---------------+---------------+---------------+
| Gold grade in | 0.04 | 0.03 | 33% |
| concentrate (kg/t) | | | |
+--------------------------+---------------+---------------+---------------+
| Silver produced (koz) | 9,032 | 6,553 | 38% |
+--------------------------+---------------+---------------+---------------+
| Gold produced (koz) | 24.04 | 16.48 | 46% |
+--------------------------+---------------+---------------+---------------+
| Silver sold (koz) | 8,564.32 | 6,544 | 31% |
+--------------------------+---------------+---------------+---------------+
| Gold sold (koz) | 22.36 | 15.50 | 44% |
+--------------------------+---------------+---------------+---------------+
ARES
+-----------------------------------+--------------------+--------------------+--------------------+
| Product | Year ended 31 | Year ended 31 | % change |
| | December 2008 | December 2007 | |
+-----------------------------------+--------------------+--------------------+--------------------+
| Ore production (tonnes) | 347,910 | 333,800 | 4% |
+-----------------------------------+--------------------+--------------------+--------------------+
| Average head grade silver (g/t) | 156.95 | 279.25 | (44%) |
+-----------------------------------+--------------------+--------------------+--------------------+
| Average head grade gold (g/t) | 6.06 | 14.57 | (58%) |
+-----------------------------------+--------------------+--------------------+--------------------+
| Doré total (koz) | 1,608 | 2,593 | (38%) |
+-----------------------------------+--------------------+--------------------+--------------------+
| Silver produced (koz) | 1,538 | 2,701 | (43%) |
+-----------------------------------+--------------------+--------------------+--------------------+
| Gold produced (koz) | 64.16 | 149.98 | (57%) |
+-----------------------------------+--------------------+--------------------+--------------------+
| Silver sold (koz)1 | 2,398.32 | 2,880 | (17%) |
+-----------------------------------+--------------------+--------------------+--------------------+
| Gold sold (koz)2 | 77.44 | 157.77 | (51%) |
+-----------------------------------+--------------------+--------------------+--------------------+
1Total sale figures for Ares include the sale of 746 koz of silver precipitates
from San José.
2 Total sale figures for Ares include the sale of 11.14 koz of gold precipitates
from San José.
SELENE
+--------------------------+---------------+---------------+---------------+
| Product | Year ended 31 | Year ended 31 | % change |
| | December 2008 | December 2007 | |
+--------------------------+---------------+---------------+---------------+
| Ore production (tonnes) | 269,150 | 413,622 | (35%) |
+--------------------------+---------------+---------------+---------------+
| Average head grade | 209.52 | 295.79 | (29%) |
| silver (g/t) | | | |
+--------------------------+---------------+---------------+---------------+
| Average head grade gold | 1.21 | 2.01 | (40%) |
| (g/t) | | | |
+--------------------------+---------------+---------------+---------------+
| Concentrate produced | 3,201 | 4,010 | (20%) |
| (tonnes) | | | |
+--------------------------+---------------+---------------+---------------+
| Silver grade in | 15.04 | 26.83 | (44%) |
| concentrate (kg/t) | | | |
+--------------------------+---------------+---------------+---------------+
| Gold grade in | 0.08 | 0.17 | (53%) |
| concentrate (kg/t) | | | |
+--------------------------+---------------+---------------+---------------+
| Silver produced (koz) | 1,579 | 3,414 | (54%) |
+--------------------------+---------------+---------------+---------------+
| Gold produced (koz) | 8.50 | 21.62 | (61%) |
+--------------------------+---------------+---------------+---------------+
| Silver sold (koz) | 1,928.77 | 3,644 | (47%) |
+--------------------------+---------------+---------------+---------------+
| Gold sold (koz) | 9.93 | 22.03 | (55%) |
+--------------------------+---------------+---------------+---------------+
PALLANCATA1
+--------------------------+---------------+---------------+---------------+
| Product | Year ended 31 | Year ended 31 | % change |
| | December 2008 | December 2007 | |
+--------------------------+---------------+---------------+---------------+
| Ore production (tonnes) | 468,125 | 78,335 | 498% |
+--------------------------+---------------+---------------+---------------+
| Average head grade | 312.18 | 310.02 | 1% |
| silver (g/t) | | | |
+--------------------------+---------------+---------------+---------------+
| Average head grade gold | 1.49 | 1.49 | 0% |
| (g/t) | | | |
+--------------------------+---------------+---------------+---------------+
| Concentrate produced | 4,265 | 638 | 568% |
| (tonnes) | | | |
+--------------------------+---------------+---------------+---------------+
| Silver grade in | 30.54 | 34.28 | (11%) |
| concentrate (kg/t) | | | |
+--------------------------+---------------+---------------+---------------+
| Gold grade in | 0.12 | 0.13 | (8%) |
| concentrate (kg/t) | | | |
+--------------------------+---------------+---------------+---------------+
| Silver produced (koz) | 4,188 | 704 | 495% |
+--------------------------+---------------+---------------+---------------+
| Gold produced (koz) | 16.16 | 2.76 | 486% |
+--------------------------+---------------+---------------+---------------+
| Silver sold (koz) | 3852.09 | 550 | 600% |
+--------------------------+---------------+---------------+---------------+
| Gold sold (koz) | 14.81 | 2.03 | 630% |
+--------------------------+---------------+---------------+---------------+
1 The Company has a 60% interest in Pallancata.
SAN JOSE1
+-----------------------------------+--------------------+--------------------+--------------------+
| Product | Year ended 31 | Year ended 31 | % change |
| | December 2008 | December 2007 | |
+-----------------------------------+--------------------+--------------------+--------------------+
| Ore production (tonnes) | 295,963 | 92,974 | 218% |
+-----------------------------------+--------------------+--------------------+--------------------+
| Average head grade silver (g/t) | 559.11 | 538.38 | 4% |
+-----------------------------------+--------------------+--------------------+--------------------+
| Average head grade gold (g/t) | 6.69 | 7.08 | (6%) |
+-----------------------------------+--------------------+--------------------+--------------------+
| Silver produced (koz) | 4,381 | 958 | 357% |
+-----------------------------------+--------------------+--------------------+--------------------+
| Gold produced (koz) | 54.26 | 14.96 | 263% |
+-----------------------------------+--------------------+--------------------+--------------------+
| Silver sold (koz) | 4588 | 92 | 4894% |
+-----------------------------------+--------------------+--------------------+--------------------+
| Gold sold (koz) | 57.70 | 1.49 | 3764% |
+-----------------------------------+--------------------+--------------------+--------------------+
1 The Company has a 51% interest in San José.
MORIS1
+-----------------------------------+--------------------+--------------------+--------------------+
| Product | Year ended 31 | Year ended 31 | % change |
| | December 2008 | December 2007 | |
+-----------------------------------+--------------------+--------------------+--------------------+
| Ore production (tonnes) | 876,148 | 338,304 | 159% |
+-----------------------------------+--------------------+--------------------+--------------------+
| Average head grade silver (g/t) | 5.71 | 4.69 | 22% |
+-----------------------------------+--------------------+--------------------+--------------------+
| Average head grade gold (g/t) | 1.57 | 1.65 | (5%) |
+-----------------------------------+--------------------+--------------------+--------------------+
| Silver produced (koz) | 65.07 | 12.63 | 415% |
+-----------------------------------+--------------------+--------------------+--------------------+
| Gold produced (koz) | 26.847 | 5.5795 | 381% |
+-----------------------------------+--------------------+--------------------+--------------------+
| Silver sold (koz) | 68.27 | 6.44 | 960% |
+-----------------------------------+--------------------+--------------------+--------------------+
| Gold sold (koz) | 28.01 | 3.26 | 760% |
+-----------------------------------+--------------------+--------------------+--------------------+
1 The Company has a 70% interest in Moris.
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
Corporate social responsibility
Cu
Copper
Directors
The directors of the Company
Doré
Doré bullion is an impure alloy of gold and silver and is generally the final
product of mining and processing; the doré 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 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
moz
Million ounces
Ordinary Shares
Ordinary shares of GBP0.25 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
This information is provided by RNS
The company news service from the London Stock Exchange
END
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