HOC Hochschild Mining Plc

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, 

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