HOC Hochschild Mining Plc

+-----------------------------------------------------+-------------------+-------------------+-----------+ 
| 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 

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