TIDMHOC
RNS Number : 0705J
Hochschild Mining PLC
24 March 2010
___________________________________________________________________________
24 March 2010
Hochschild Mining plc
Preliminary Results for the twelve months ended 31 December 2009
Strategic & Operational Highlights
· Record full year production, up 8%, achieving target of 28m attributable
silver equivalent ounces
· 11% reduction in unit cost per tonne - exceeding 2009 target of 5%
· Continued delivery of M&A strategy:
· $172.9 million invested in Lake Shore Gold, increasing the Group's stake
to 38%1
· $58.5 million invested in Gold Resource Corp, increasing the Group's
stake to 29%2
· Acquisition of Southwestern Resources completed for $19.2 million
· Resource life of mine for main operations up 20% to 7.1 years3
· 2010 exploration budget up 75% to $50 million
· 2010 production target of 29 million silver equivalent ounces, including
2.7 million silver equivalent ounces from Hochschild's interests in Lake Shore
Gold and Gold Resource Corp
· Directorate and management appointments
Financial Highlights
· 24% increase in revenue to $539.7 million
· Administrative expenses down by 26% to $51.1 million
· Record attributable profit after tax of $98.1 million, positively
impacted by an exceptional one-off gain of $42.3 million relating to the Lake
Shore Gold/West Timmins Mining transaction
· EPS up from $(0.08) to $0.31
· Solid financial position with year end cash balance of $77.8 million
· Proposed dividend of $0.02 per share, bringing the total dividend to
$0.04 per share
· $85.7 million pre-payment of $200 million syndicated loan facility
· $260 million convertible bond offering and equity placing4
+---------------+----------+----------+--------+
| ($ | 12 | 12 | % |
| millions, | months | months | change |
| unless | to | to | |
| stated) | 31 | 31 | |
| | December | December | |
| | 2009 | 2008 | |
+---------------+----------+----------+--------+
| Attributable | 18,754 | 16,941 | 11% |
| silver | | | |
| production | | | |
| (koz) | | | |
+---------------+----------+----------+--------+
| Attributable | 156.8 | 152.9 | 3% |
| gold | | | |
| production | | | |
| (koz) | | | |
+---------------+----------+----------+--------+
| Revenue | 539,741 | 433,779 | 24% |
+---------------+----------+----------+--------+
| Adjusted | 249,869 | 142,292 | 76% |
| EBITDA* | | | |
+---------------+----------+----------+--------+
| Attributable | 52,892 | 15,782 | 235% |
| profit after | | | |
| tax (before | | | |
| exceptionals) | | | |
+---------------+----------+----------+--------+
| Attributable | 98,080 | (24,718) | n/a |
| profit after | | | |
| tax (after | | | |
| exceptionals) | | | |
+---------------+----------+----------+--------+
| Earnings | 0.17 | 0.05 | 240% |
| per | | | |
| share | | | |
| (before | | | |
| exceptionals) | | | |
| 5 | | | |
+---------------+----------+----------+--------+
| Earnings | 0.31 | (0.08) | n/a |
| per | | | |
| share | | | |
| (after | | | |
| exceptionals) | | | |
| 5 | | | |
+---------------+----------+----------+--------+
*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.
_______________________________
1 On a fully diluted basis, Hochschild's equity interest at 31 December 2009 was
35.7%. In addition, to date in 2010, $4.9m has been invested increasing
Hochschild's stake to 35.9%. On an outstanding basis, Hochschild´s interest
increased from 37.4% to 37.7% in 2010.
2 On a fully diluted basis, Hochschild's equity interest at 31 December 2009 was
25.0%. In addition, to date in 2010, $9.5m has been invested, increasing
Hochschild's stake to 26.7%. On an outstanding basis, Hochschild´s interest
increased from 27.0% to 28.7% in 2010.
3 Main operations are Arcata, Pallancata and San José. Resource life of mine
includes the Company's reported reserves
4 Gross proceeds
5 Restated to reflect changes in the depreciation calculation (see note 2)
Eduardo Hochschild, Executive Chairman of Hochschild Mining commented:
"This has been a year of delivery for Hochschild with strong financial results
and an excellent operational performance. We have delivered record production,
exceeded our cost reduction target with an 11% saving and decreased
administrative expenses by 26%. We delivered on our M&A strategy with continued
investments in Lake Shore Gold and Gold Resource Corp as well as the acquisition
of Southwestern Resources. We have made solid progress on exploration with
resource life of mine extending to 7.1 years and Azuca's resources almost
doubling to 44.1 million silver equivalent ounces.
It is with regret that the board has accepted the resignation of Miguel
Aramburú, CEO, who is leaving Hochschild for personal reasons, and Ignacio
Rosado, CFO, who is leaving to further develop his career by pursuing a CEO
role. I would like to thank them both for their enormous dedication over a
number of years as well as for their contribution in delivering yet another
strong set of results.
I would like to welcome Ignacio Bustamante and Ramón Barúa as CEO and CFO,
respectively. Both are experienced, well qualified professionals who will
continue to develop and deliver our strategy going forward.
With a sound financial position, experienced management team and a positive
outlook for precious metals, we are well placed to continue to deliver our long
term growth strategy."
=------------------------------------------------------------------------------
=----------------------------------------
A conference call will be held at 9.30am (London time) on Wednesday 24 March
2010 for analysts and investors.
Dial in details as follows:
UK (& International) +44 (0) 203 003 2666
A recording of the conference call will be available for one week following its
conclusion, accessible from the following telephone numbers:
UK +44 (0) 208 198 1996
Access code: 7993057#
_________________________________________________________________________
Enquiries:
Hochschild Mining plc
Isabel Lütgendorf
+44 (0)20 7907 2934
Head of Investor Relations
Ignacio Rosado
+511 437 6007
Chief Financial Officer
Finsbury
Faeth Birch
Robin Walker
+44 (0)20 7251 3801
Public Relations
_________________________________________________________________________
About Hochschild Mining plc:
Hochschild Mining plc is a leading precious metals company listed on the London
Stock Exchange (HOCM.L for Reuters / HOC LN for Bloomberg) with a primary focus
on the exploration, mining, processing and sale of silver and gold. Hochschild
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. For further details, please visit the Company's website at
www.hochschildmining.com.
Chairman's Statement
After implementing a number of measures to deal with challenging market
conditions in 2008, we entered 2009 with a firm focus on producing profitable
ounces and a clear strategy for growth. Now, 12 months later, I am proud to say
that 2009 has been a year of delivery for Hochschild Mining. Our strategy is
supported by three pillars - organic, M&A, and exploration growth and we have
delivered in each area with record production, continued strategic investments
and an expanding portfolio of assets.
Operationally, we are as strong as ever with five mines in three countries,
producing a total of 24.6 million ounces of silver and 211.6 thousand ounces of
gold. Our results continue to benefit from the plant expansions completed at the
end of 2008, which increased capacity by 29%. A continued focus on cost control
has resulted in an impressive 11% decrease in unit cost per tonne at our
underground mines, demonstrating management's ability to adapt quickly to
changes in the price environment.
On the M&A side, we supported the merger between Lake Shore Gold Corporation
("Lake Shore Gold") and West Timmins Mining ("WTM") investing a further $91.1
million in the enlarged company6 and bringing our ownership to 38% on an
outstanding basis. We have also delivered on our strategy by continuing to
invest in Gold Resource Corporation ("GRC"), which started production in early
2010. The two companies have impressive production targets and, in aggregate,
have a market capitalisation of $1,463.3 million, valuing Hochschild's stakes at
$504.5 million7.
This has also been a year of delivery for our exploration team, with Azuca
doubling resources to 44.1 million silver equivalent ounces and Crespo reporting
resources of 44.7 million silver equivalent ounces, following extensive drilling
campaigns. Azuca has the potential to be our next mine and an addition to our
Peruvian operational cluster. We are in the process of initiating a scoping
study at this project.
Resource life of mine (which includes reserves) for our three main operations;
Arcata, Pallancata and San José increased by 20% from 5.9 to 7.1 years, whilst
reserve life of mine has been maintained at 3.3 years. Our total attributable
resource tonnage including all our operations, main projects and investments8,
has more than doubled from 20.7 million to 43.6 million whilst contained silver
equivalent ounces, on an attributable basis, increased from 313.4 million to
402.8 million.
We have delivered a strong set of financial results with revenue for the year up
24% to $539.7 million. Operating profit more than doubled to $153.6 million and,
as a consequence, pre-exceptional EPS has increased from $0.05 to $0.17. Our
results were also significantly impacted by $44.7 million of exceptional items,
including a one-off gain of $42.3 million relating to the Lake Shore Gold/WTM
transaction, bringing our post exceptional EPS to $0.31. Higher realised prices
combined with lower costs allowed operating cash flow to more than double to
$200.5 million.
In October 2009, we successfully raised $260 million9 through an equity placing
and bond offering which provided us with increased financial flexibility and
funded some of the investments mentioned above. Our ability to raise capital
during a time when financial markets have been relatively unstable reflects
investor support for our strategy and confidence in our growth prospects.
We continue to enjoy a healthy balance sheet with a year end cash balance of
$77.8 million. This, in conjunction with cash generated from our operations will
allow us to pursue our growth strategy going forward.
Organic growth
I am very proud to say that we have continued to deliver on our production
targets since the IPO. 2009 was our best year so far, with record attributable
production of 28.2 million attributable silver equivalent ounces - consolidating
our position as the world's third largest primary silver producer. Results were
particularly strong at Pallancata, where both silver and gold production doubled
year-on-year and at San José, where silver and gold production increased 14% and
42% respectively.
Whilst we delivered on production, management were also particularly focused on
cost control, and as mentioned above, unit cost per tonne decreased by 11%
during the year. Including Moris, our only open pit mine, the reduction was even
more impressive with a 15% saving. We have also lowered our administrative
_______________________________
6 Amount invested from December 2009 to March 2010 following completion of the
Lake Shore Gold/WTM transaction
7 As at 19 March 2010 on an outstanding basis
8 Arcata, Pallancata, San José, Moris, Ares, Azuca, Crespo, Lake Shore Gold,
Inmaculada and San Felipe
9 Gross proceeds
expenses by $17.7 million, including a 28% reduction in personnel expenses and a
34% decrease in professional fees.
M&A growth
In 2009, 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 $239.5 million during the year.
As I mentioned earlier, Lake Shore Gold and GRC are important strategic
investments for Hochschild and provide exposure to impressive production
potential and long term growth.
We were fully supportive of Lake Shore Gold's merger with WTM which created the
new large-scale, wholly-owned Timmins West Gold Mine Complex, an extension of
the world class Timmins gold mining trend. Lake Shore Gold has announced an
updated production target of 65,000 ounces of gold (3.9 million silver
equivalent ounces) in 2010, building production over the following three years
with the potential to produce 350,000 ounces (21 million silver equivalent
ounces) by 2013.
To date, we have invested $63.5 million in GRC, increasing our ownership to
29%10. Our investment in the company gives us access to high grade, low cost
ounces expanding our operational cluster in southern Mexico, a mining friendly
country with significant mineral potential. GRC started production in February
2010 with a production target of 70,000 ounces of gold (4.2 million silver
equivalent ounces) in the first 12 months of operation.
During the year we have also completed the strategic acquisition of Southwestern
Resources Corp ("SWG"), a Canadian mineral exploration company for $19.2
million. The acquisition consolidated our position in southern Peru by adding a
number of early stage projects to our pipeline including Crespo and Josnitoro.
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.
Azuca is a 3,000 hectare project located in southern Peru, only 50km northwest
of Arcata and within Hochschild's operational cluster. During 2009, we undertook
26,240 metres of drilling and doubled resources, with 3.7 million tonnes at
287.7 g/t Ag and 1.3 g/t Au. As mentioned above, Azuca has the potential to be
our next mine and in 2010 we have initiated a scoping study, with a feasibility
study to follow.
We have also made progress in Crespo, a low grade gold/silver disseminated
deposit in our Peruvian cluster. Hochschild's drilling programme, which is
focused on increasing resources, has identified significant high grade ore
bodies and as at 31 December 2009, Crespo reported resources of 44.7 million
silver equivalent ounces, with 17.8 million tonnes at 38.8 g/t Ag and 0.7 g/t
Au.
In 2009, we also made progress at Victoria in northern Chile, which is part of a
partnership with Iron Creek Capital Corp. During the year, 28 drill holes
totalling 7,626 metres were completed and anomalous gold and silver
mineralisation was encountered in all drill holes with significant intercepts.
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 2009, we reduced our accident
frequency rate by 9% compared to 2008. Nonetheless, it is with deep regret that
I report three mine fatalities in 2009. We have addressed the underlying safety
deficiencies that led to the occurrence of these tragic events and we continue
to view any fatalities as unacceptable.
_______________________________
10 On a fully diluted basis, Hochschild's equity interest at 31 December 2009
was 25.0%. In addition, during 2010, $9.5m has been invested, increasing
Hochschild's stake to 26.7%. On an outstanding basis, Hochschild´s interest
increased from 27.0% to 28.7% in 2010
Board and management changes
During the year we welcomed a new Non Executive Director, Fred Vinton, to the
Board. Fred has over 30 years' banking and commercial experience and brings a
wide range of knowledge and skills to Hochschild.
It is with sadness that the Board has accepted the resignation of Miguel
Aramburú, who wishes to step down as CEO for personal reasons, with effect from
1 April 2010. I would like to thank Miguel for his enormous contribution to the
Company over the last fifteen years and particularly his successful tenure as
CEO. I also want to thank him for his dedication to the business and, personally
speaking, for his friendship over this period. Ignacio Bustamante, COO, will
succeed Miguel Aramburú as CEO and as an Executive Director from 1 April 2010.
Ernesto Balarezo, currently head of our Peruvian operations will assume the role
of VP of Operations with effect from 1 April 2010.
The board also regrettably announces that it has accepted the resignation of
Ignacio Rosado, CFO, who is leaving the Company with effect from 31 May 2010 to
develop his career further by pursuing a CEO role. During his tenure as CFO,
Ignacio has played a key role in the execution of Hochschild's strategy ensuring
a strong financial platform and the continued delivery of the Company's
objectives. I would also like to thank Ignacio for his significant contribution
over the years and I wish him well in his future career. Ignacio will be
succeeded by Ramón Barúa, currently CEO of Fosfatos del Pacifico and previously
General Manager of Hochschild's Mexican operations.
I would also like to take this opportunity to thank all our employees for the
hard work that has enabled Hochschild to progress its strategic goals.
Dividend
The board has declared a final dividend of $0.02per ordinary share resulting in
a total dividend for the year of $0.04 per ordinary share. We will keep dividend
policy under review in accordance with the capital availability and requirements
of the business.
Outlook
We entered 2010 with a solid foundation for continued growth and a positive
precious metals outlook. Our production target for 2010 is 29 million silver
equivalent ounces. Production from existing operations is expected to be 26.3
million attributable silver equivalent ounces comprising approximately 17.6
million ounces of silver and 145,000 ounces of gold. The target also includes
2.7 million silver equivalent ounces from our interests in Lake Shore Gold and
GRC.
In 2010, the Company expects Arcata's silver grades to be at similar levels to
Q409 as accessible mine areas will continue to have narrower veins and changing
geotechnical conditions. As anticipated, production and grades at the Company's
ageing mine Ares will continue to decline, with closure expected in the second
half of 2010.
We take an extremely rigorous approach to managing costs that are within our
control and we are currently undertaking a number of initiatives which will
contribute to cost containment. However, management expects an increase in unit
cost per tonne at our underground mines of around 10% in 2010, mostly as a
result of inflation related to labour and supply costs. At Ares, given the
ageing nature of the deposit, operating costs are expected to increase through
to its expected closure in the second half of 2010.
The Company is pleased to announce that it is significantly increasing its
exploration spend from $28.6 million in 2009 to $50 million in 2010. The
exploration programme will focus on extending the life of Hochschild's existing
operations and identifying high-quality, early stage precious metal projects
which will provide cost effective growth.
With $77.8 million in cash at the end of 2009, 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.
Eduardo Hochschild
Executive Chairman
23 March 2010
OPERATING REVIEW
Production
Hochschild successfully achieved its full year production target, producing a
record 28.2 million attributable silver equivalent ounces in 2009, representing
an 8% increase year-on-year. This comprises 18.8 million attributable ounces of
silver, up 11% and 156.8 thousand attributable ounces of gold, up 3%.
Attributable silver production was primarily driven by strong performance at our
main mines (Arcata, Pallancata and San José), which benefited from the
expansions successfully completed in the second half of 2008. The increase in
attributable gold production was also primarily a result of the above, partially
offset by declining production at Ares.
Life of mine
Hochschild remains committed to maximising the life of its main underground
operations with the long term objective of achieving a minimum 8 year total
resource life, including a 4 year reserve life. To support this goal, the
Company is increasing its investment in brownfield exploration to $20 million in
2010.
As at 31 December 2009, resource life of mine (which includes reserves)
increased by 20% from 5.9 to 7.1 years, whilst reserve life of mine has been
maintained at 3.3 years11. Our total attributable resource tonnage including all
our operations, main projects and investments12, has more than doubled from 20.7
million to 43.6 million whilst contained silver equivalent ounces, on an
attributable basis, increased from 313.4 million to 402.8 million.
Main operations
Arcata: Peru
Production and sales
Arcata, Hochschild's flagship silver mine, enjoyed another successful year with
silver and gold production up 6% and 19% respectively. These increases were
driven primarily by the plant expansion completed in 2008 which increased
capacity by 46% to 1,750 tonnes per day.
In 2009, Arcata's concentrate production was sold to Cormin, Louis Dreyfus,
Teck, Korea Zinc, MRI Trading AG and a small fraction to Doe Run.
+----------------------+-----------------+-----------------+--------+
| Total production | 12 | 12 | % |
| | mths | mths | change |
| | 2009 | 2008 | |
+----------------------+-----------------+-----------------+--------+
| Ore production | 643,059 | 557,870 | 15 |
| (tonnes) | | | |
+----------------------+-----------------+-----------------+--------+
| Average head grade | 503 | 571 | -12 |
| silver (g/t) | | | |
+----------------------+-----------------+-----------------+--------+
| Average head grade | 1.56 | 1.53 | 2 |
| gold (g/t) | | | |
+----------------------+-----------------+-----------------+--------+
| Concentrate produced | 22,352 | 20,639 | 8 |
| (tonnes) | | | |
+----------------------+-----------------+-----------------+--------+
| Silver grade in | 13.36 | 13.94 | -4 |
| concentrate (kg/t) | | | |
+----------------------+-----------------+-----------------+--------+
| Gold grade in | 0.04 | 0.04 | - |
| concentrate (kg/t) | | | |
+----------------------+-----------------+-----------------+--------+
| Silver produced | 9,542 | 9,032 | 6 |
| (koz) | | | |
+----------------------+-----------------+-----------------+--------+
| Gold produced (koz) | 28.64 | 24.04 | 19 |
+----------------------+-----------------+-----------------+--------+
| Silver sold (koz) | 8,748 | 8,564 | 2 |
+----------------------+-----------------+-----------------+--------+
| Gold sold (koz) | 26.02 | 22.36 | 16 |
+----------------------+-----------------+-----------------+--------+
_______________________________
11 Reserve life of mine relates to Hochschild's three main underground
operations: Arcata, Pallancata and San José. 2008 numbers have been restated to
reflect 2009 capacity.
12 Arcata, Pallancata, San José, Moris, Ares, Azuca, Crespo, Lake Shore Gold,
Inmaculada and San Felipe
Exploration
The drilling programme at Arcata delivered positive results in 2009 with the
discovery of three new mineralised structures in close proximity to the
property's existing Mariana vein. The Company continues to increase resources at
the Ramal, Julia and Soledad veins through diamond drilling.
The focus for the 2010 brownfield programme will be to evaluate new targets and
develop resources in areas where potential mineralisation was identified in
2009.
+-----------------------+--------------+--------------+----------+
| Stated on an | As at | As at | % change |
| attributable basis | 31 December | 31 December | |
| | 2009 | 2008 | |
+-----------------------+--------------+--------------+----------+
| Resources | 4.56 mt @ | 3.94 mt @ | |
| | 456 g/t Ag & | 583 g/t Ag & | |
| | 1.42 g/t Au | 1.75 g/t Au | |
+-----------------------+--------------+--------------+----------+
| Resource (moz Ag eq) | 79.4 | 87.2 | (9%) |
+-----------------------+--------------+--------------+----------+
| Reserves | 1.87 mt @ | 1.61 mt @ | |
| | 417 g/t Ag & | 541 g/t Ag & | |
| | 1.31 g/t Au | 1.62 g/t Au | |
+-----------------------+--------------+--------------+----------+
| Reserve (moz Ag eq) | 29.8 | 33.1 | (10%) |
+-----------------------+--------------+--------------+----------+
Pallancata: Peru
Production and sales
Pallancata, which commenced production in 2007, is a joint venture with
International Minerals Corporation ("IMC") in which Hochschild controls 60% and
is the mine operator. Ore from Pallancata is transported 22 kilometres to the
Selene plant for processing, demonstrating the Company's cluster consolidation
strategy.
Pallancata recorded strong results in 2009 with silver and gold production
doubling year-on-year to 8,420 koz of silver and 31.97 koz of gold. This was
mainly a result of the plant expansion completed in 2008 which increased
Selene's processing capacity from 2,000 to 3,000 tonnes per day, as well as the
use of Selene's full capacity to process the ore from Pallancata.
In 2009 the silver/gold concentrate from Pallancata was sold to Teck and
Aurubis.
+----------------------+---------+---------+--------+
| Total production[1] | 12 | 12 | % |
| | mths | mths | change |
| | 2009 | 2008 | |
+----------------------+---------+---------+--------+
| Ore production | 922,521 | 468,125 | 97 |
| (tonnes) | | | |
+----------------------+---------+---------+--------+
| Average head grade | 327 | 312 | 5 |
| silver (g/t) | | | |
+----------------------+---------+---------+--------+
| Average head grade | 1.43 | 1.49 | -4 |
| gold (g/t) | | | |
+----------------------+---------+---------+--------+
| Concentrate produced | 7,684 | 4,265 | 80 |
| (tonnes) | | | |
+----------------------+---------+---------+--------+
| Silver grade in | 34.09 | 30.54 | 12 |
| concentrate (kg/t) | | | |
+----------------------+---------+---------+--------+
| Gold grade in | 0.13 | 0.12 | 8 |
| concentrate (kg/t) | | | |
+----------------------+---------+---------+--------+
| Silver produced | 8,420 | 4,188 | 101 |
| (koz) | | | |
+----------------------+---------+---------+--------+
| Gold produced (koz) | 31.97 | 16.16 | 98 |
+----------------------+---------+---------+--------+
| Silver sold (koz) | 8,147 | 3,852 | 112 |
+----------------------+---------+---------+--------+
| Gold sold (koz) | 29.77 | 14.81 | 101 |
+----------------------+---------+---------+--------+
1 The Company has a 60% interest in Pallancata.
Exploration
At Pallancata in Peru, the Company is mainly focused on the newly discovered
eastern extension of the main Pallacata vein and on the Virgen del Carmen vein.
Wide spaced drilling at the Pallancata east vein defined mineralisation with
intercepts including 3 metres at 829 g/t of silver and 2.5 g/t of gold.
Underground mine preparation is progressing well with the Santa Angela ramp
scheduled for completion in June 2010.
The focus for the 2010 brownfield programme will be to define resources along
the Pallancata east vein and to explore new targets.
+-----------------------+--------------+--------------+----------+
| Stated on an | As at | As at | % change |
| attributable basis | 31 December | 31 December | |
| | 2009 | 2008 | |
+-----------------------+--------------+--------------+----------+
| Resources | 3.97 mt @ | 3.32 mt @ | |
| | 409 g/t Ag & | 411 g/t Ag & | |
| | 1.73 g/t Au | 1.68 g/t Au | |
+-----------------------+--------------+--------------+----------+
| Resource (moz Ag eq) | 65.3 | 54.6 | 20% |
+-----------------------+--------------+--------------+----------+
| Reserves | 2.35 mt @ | 2.58 mt @ | |
| | 354 g/t Ag & | 366 g/t Ag & | |
| | 1.52 g/t Au | 1.51 g/t Au | |
+-----------------------+--------------+--------------+----------+
| Reserve (moz Ag eq) | 33.5 | 37.8 | (11%) |
+-----------------------+--------------+--------------+----------+
San José: Argentina
Production and sales
The Group's operation in Argentina, San José, commenced production in 2007 and
is a joint venture with Minera Andes in which Hochschild controls 51% and acts
as the mine operator.
San José reported strong results in 2009, with production up 14% and 42% year on
year, for silver and gold respectively. This is mainly a result of the plant
expansion undertaken in 2008, which doubled capacity from 750 to 1,500 tonnes
per day and also due to the high grade Kospi vein, which was brought into
production at the end of June 2009. The Kospi vein contributed over 80,000
tonnes of ore to the mine's production and is positively impacting the grade
profile of the operation.
In 2009, the doré produced at San José was sold to Argor Heraeus S.A. and
Johnson Matthey Inc. The concentrate produced at the operation was sold to
Cormin, Aurubis and LS-Nikko.
+---------------------------+---------+---------+--------+
| Total production1 | 12 | 12 | % |
| | mths | mths | change |
| | 2009 | 2008 | |
+---------------------------+---------+---------+--------+
| Ore production (tonnes) | 460,971 | 295,963 | 56 |
+---------------------------+---------+---------+--------+
| Average head grade silver | 398 | 559 | -29 |
| (g/t) | | | |
+---------------------------+---------+---------+--------+
| Average head grade gold | 6.19 | 6.69 | -7 |
| (g/t) | | | |
+---------------------------+---------+---------+--------+
| Silver produced (koz) | 4,998 | 4,381 | 14 |
+---------------------------+---------+---------+--------+
| Gold produced (koz) | 77.08 | 54.26 | 42 |
+---------------------------+---------+---------+--------+
| Silver sold (koz) | 5,072 | 4,588 | 11 |
+---------------------------+---------+---------+--------+
| Gold sold (koz) | 77.22 | 57.70 | 34 |
+---------------------------+---------+---------+--------+
1The Company has a 51% interest in San José.
Exploration
In Argentina, the Company has discovered two new split vein systems of the Kospi
and Ayelen structures at San José which are rapidly being drilled to increase
the resource and reserve base of the operation. Results included 1.5 metres at
1,376 g/t silver and 60.9 g/t gold and 1 metre at 655 g/t silver and 5.8 g/t
gold.
The focus for the 2010 brownfield programme will be to evaluate the new Aguas
Vivas target located 10 kilometres from the San José operation, to develop
resources at the Saavedra target and to extend knowledge of the vein geology.
+-----------------------+--------------+--------------+----------+
| Stated on an | As at | As at | % change |
| attributable basis | 31 December | 31 December | |
| | 2009 | 2008 | |
+-----------------------+--------------+--------------+----------+
| Resources | 2.26 mt @ | 1.68 mt @ | |
| | 406 g/t Ag & | 467 g/t Ag & | |
| | 6.08 g/t Au | 7.30 g/t Au | |
+-----------------------+--------------+--------------+----------+
| Resource (moz Ag eq) | 56.1 | 49.0 | 14% |
+-----------------------+--------------+--------------+----------+
| Reserves | 0.78 mt @ | 0.83 mt @ | |
| | 454 g/t Ag & | 522 g/t Ag & | |
| | 7.32 g/t Au | 7.90 g/t Au | |
+-----------------------+--------------+--------------+----------+
| Reserve (moz Ag eq) | 22.3 | 26.7 | (16%) |
+-----------------------+--------------+--------------+----------+
Other operations
Ares: Peru
Production and sales
As anticipated and previously disclosed, the average reserve grade at Ares is
declining due to the geological nature of the deposit and the ageing of the mine
and, as a consequence, gold and silver production decreased 34% and 41%
respectively year on year. In line with the Company's focus on producing
profitable ounces, Ares is expected to close in the second half of 2010.
Ares produces 100% doré, all of which was sold to Johnson Matthey in 2009.
+----------------------+---------+---------+---------+
| Total production | 12 | 12 | % |
| | mths | mths | change |
| | 2009 | 2008 | |
+----------------------+---------+---------+---------+
| Ore production | 341,273 | 347,910 | -2 |
| (tonnes) | | | |
+----------------------+---------+---------+---------+
| Average head grade | 96 | 157 | -39 |
| silver (g/t) | | | |
+----------------------+---------+---------+---------+
| Average head grade | 4.17 | 6.06 | -31 |
| gold (g/t) | | | |
+----------------------+---------+---------+---------+
| Doré total (koz) | 947 | 1,608 | -41 |
+----------------------+---------+---------+---------+
| Silver produced | 900 | 1,538 | -41 |
| (koz) | | | |
+----------------------+---------+---------+---------+
| Gold produced (koz) | 42.59 | 64.16 | -34 |
+----------------------+---------+---------+---------+
| Silver sold (koz) | 873 | 2,398 | -64 |
+----------------------+---------+---------+---------+
| Gold sold (koz) | 41.82 | 77.44 | -46 |
+----------------------+---------+---------+---------+
Moris: Mexico
Production and sales
Moris, which is 100% owned, is the Group's only open pit mine and provided a key
stepping stone into Mexico, which is of key strategic importance to the Group.
Moris produced 97 thousand ounces of silver and 28.34 thousand ounces of gold in
2009 and has an estimated one year mine life, with expected closure in 2011.
In 2009, all of the gold/silver doré produced at Moris was sold to Johnson
Matthey.
+----------------------+-----------+---------+--------+
| Total production | 12 | 12 | % |
| | mths | mths | change |
| | 2009 | 2008 | |
+----------------------+-----------+---------+--------+
| Ore production | 1,282,461 | 876,148 | 46 |
| (tonnes) | | | |
+----------------------+-----------+---------+--------+
| Average head grade | 5.02 | 5.71 | -12 |
| silver (g/t) | | | |
+----------------------+-----------+---------+--------+
| Average head grade | 1.38 | 1.57 | -12 |
| gold (g/t) | | | |
+----------------------+-----------+---------+--------+
| Silver produced | 97 | 65 | 49 |
| (koz) | | | |
+----------------------+-----------+---------+--------+
| Gold produced (koz) | 28.34 | 26.85 | 6 |
+----------------------+-----------+---------+--------+
| Silver sold (koz) | 87 | 68 | 28 |
+----------------------+-----------+---------+--------+
| Gold sold (koz) | 26.29 | 28.01 | -6 |
+----------------------+-----------+---------+--------+
Selene: Peru
Production and sales
As previously reported, Selene's mine ceased production at the end of May 2009
due to the high level of capital expenditure required to extract profitable
ounces. Selene's plant, which was upgraded during the year, continues to process
ore from the Pallancata operation, which is located approximately 22 kilometres
from Selene.
In 2009, approximately a quarter of Selene's production was converted into doré
at the Ares plant and sold to Johnson Matthey. The remaining production was
treated as concentrate and sold on a spot basis primarily to Aurubis and Teck.
+----------------------+---------+---------+--------+
| Total production1 | 12 | 12 | % |
| | mths | mths | change |
| | 2009 | 2008 | |
+----------------------+---------+---------+--------+
| Ore production | 109,893 | 269,150 | -59 |
| (tonnes) | | | |
+----------------------+---------+---------+--------+
| Average head grade | 217 | 210 | 3 |
| silver (g/t) | | | |
+----------------------+---------+---------+--------+
| Average head grade | 1.09 | 1.21 | -10 |
| gold (g/t) | | | |
+----------------------+---------+---------+--------+
| Concentrate produced | 1,057 | 3,201 | -67 |
| (tonnes) | | | |
+----------------------+---------+---------+--------+
| Silver grade in | 18.55 | 15.04 | 23 |
| concentrate (kg/t) | | | |
+----------------------+---------+---------+--------+
| Gold grade in | 0.09 | 0.08 | 13 |
| concentrate (kg/t) | | | |
+----------------------+---------+---------+--------+
| Silver produced | 628 | 1,579 | -60 |
| (koz) | | | |
+----------------------+---------+---------+--------+
| Gold produced (koz) | 3.02 | 8.50 | -64 |
+----------------------+---------+---------+--------+
| Silver sold (koz) | 636 | 1,929 | -67 |
+----------------------+---------+---------+--------+
| Gold sold (koz) | 2.96 | 9.93 | -70 |
+----------------------+---------+---------+--------+
1Selene was closed on 28 May 2009
ACQUISITIONS & INVESTMENTS
Growth through investment and acquisition is a key element of Hochschild's
strategy. The Company has maintained its disciplined approach in 2009, focusing
on high grade, underground precious metals assets in the Americas, which have
the potential to create long term shareholder value. The Company is continually
evaluating opportunities with particular interest in existing operational
clusters: the highlands of southern Peru, southern Mexico, the Argentine
Patagonia, northern Chile and the Timmins region in Canada, as well as in other
new mineral rich regions of the Americas.
In October 2009, the Company undertook a successful capital raising to provide
the increased financial flexibility to pursue its acquisition strategy and
during the year secured a number of strategic investments with a total spend of
$239.5 million:
Lake Shore Gold
In August 2009, Lake Shore Gold Corp. ("Lake Shore Gold"), announced a
definitive business combination agreement to acquire all of the outstanding
common shares of West Timmins Mining Inc. ("WTM"). The transaction created the
new large-scale, wholly-owned Timmins West Gold Mine Complex, an extension of
the world class Timmins gold mining trend which has supplied approximately 70
million ounces of gold over the last century. As a result of the business
combination, Hochschild's 40% stake in Lake Shore Gold was diluted to
approximately 27% (on an outstanding basis).
In line with its stated strategy, Hochschild invested a further $172.8 million13
in Lake Shore Gold following the announcement of the WTM transaction, increasing
its stake to 38% (36% on a fully diluted basis). This included the purchase of
WTM shares totalling $63.8 million.
Lake Shore Gold is progressing towards commercial gold production at its Timmins
Mine, expected during the fourth quarter of 2010, and is advancing towards its
objective of becoming a mid-tier gold producer. Lake Shore Gold has announced an
updated production target of 65,000 ounces of gold (3.9 million silver
equivalent ounces) in 2010, building production over the following three years
with the potential to produce 350,000 ounces (21 million silver equivalent
ounces) by 2013.
Since its initial acquisition in February 2008, Hochschild has invested a total
of $336.9 million in Lake Shore Gold reflecting its confidence in the
significant production potential and long-term growth of the company. Lake Shore
Gold has a current market capitalisation of approximately $936.4 million,
valuing Hochschild's investment at $353.0 million.13
Lake Shore Gold is an important strategic investment for Hochschild and it
maintains three positions on the company's board.
Gold Resource Corp
In 2009, Hochschild invested $49.0 million in Gold Resource Corporation ("GRC"),
increasing its ownership from 5% to 27% (on an outstanding basis). In March
2010, the Company further increased its ownership to 29% bringing its total
investment in the Company to $63.5 million. GRC is an underground precious
metals mining company with a number of prime development projects in Mexico's
southern state of Oaxaca,including a 100% interest in five potential high-grade
gold and silver properties. This additional investment increases Hochschild's
exposure to GRC's high grade, low cost ounces and expands the Company's southern
Mexico operational cluster.
GRC commenced production from its El Aguila operation in February 2010 and has a
stated production target of 70,000 ounces of gold (4.2 million silver equivalent
ounces) in the first year of operation. In addition, GRC is accelerating the
underground mine development at Arista, a gold and silver polymetalic deposit
which is one of three high grade deposits discovered to date at the El Aguila
project.
GRC has a current market capitalisation of approximately $526.9 million, valuing
Hochschild's investment at $151.4 million14. GRC is also an important strategic
investment for Hochschild and it maintains one position on the company's board.
Southwestern Resources Corp
_______________________________
13 Amount invested from August 2009 to March 2010 following announcement of the
Lake Shore Gold/WTM merger. In 2009, the Company invested $168m. In 2010, the
Company invested $4.9 million
14 As at 19 March 2010 on an outstanding basis
In March 2009, Hochschild completed the strategic acquisition of Southwestern
Resources Corp ("SWG"), a Canadian mineral exploration company for $19.2
million. The acquisition consolidated the Company's position in southern Peru by
adding a number of early stage gold, silver and base metals projects to its
pipeline including 100% ownership of the Liam property, of which the Company
originally acquired a 50% interest in August 2008. The 282,000 hectare land
package is in close proximity to Hochschild's existing operational cluster:
Arcata, Ares andPallancata and therefore enables the Group to leverage existing
infrastructure and knowledge of the regional geology.
Hochschild's exploration team is currently evaluating numerous exploration
targets at Liam as well as other properties included in the acquisition, and is
progressing drilling in areas which have reported positive results, including
Crespo and Cristo Los Andes.
The SWG land package included an increased stake in the Pacapausa project which
comprises 7,933 hectares of exploration concessions and is a potential satellite
source of material for Hochschild's Pallancata operation as well as 50% of
Millo, a high grade deposit located adjacent to Hochschild's 100% owned Azuca
project.
The SWG acquisition also included a 37% stake in Zincore Metals Inc ("Zincore"),
a listed mining exploration company with zinc projects in Peru. On 5 March 2010,
Hochschild divested its interest in Zincore for total proceeds of C$10.3 million
as it did not constitute a core asset for the Company. The purchase of SWG also
included minor stakes in Empire Petroleum, Northern Superior and Lara
Exploration, which have a combined value of $2.0 million15, as well as in copper
projects Jasperoide and Alpacocha.
Other acquisitions & investments
During the year, the Company also undertook a number of smaller investments in
early stage exploration companies and joint ventures which provide the potential
for cost effective future growth.
In October 2009, Hochschild signed an agreement with Mariana Resources in which
it already holds an 11% stake following its $1.5 million investment in December
2008. The agreement builds on the relationship between the two companies and
provides Hochschild with additional exposure to a number of Mariana's projects.
Under the terms of the agreement, Hochschild has the right to explore three
adjoining prospective gold and silver properties totalling 13,455 hectares,
located in the Santa Cruz area in the western sector of the Deseado Massif in
southern Argentina. These tenements consist of Mariana's Amigos I and Amigos II
license areas and Hochschild's San Augustin joint venture property with Iamgold
which are located approximately 110 kilometres south of the Company's San José
operation. Hochschild can increase its interest to 70% by committing 60% of the
$3 million exploration budget within two years and by taking the project to a
pre-feasibility stage.
_______________________________
15 As at February 2010
EXPLORATION REVIEW
Exploration is a vital part of Hochschild's growth strategy and the Company
continues to commit significant investment to its geological programme. In 2009,
the Company invested $28.6 million in this area and is increasing spend to $50
million in 2010.
Hochschild's exploration is focused in two areas; mine-site exploration &
advanced projects (brownfield), which is aimed at increasing reserves and
resources at a low cost per ounce, and early stage exploration (greenfield),
which focuses on finding new, high-quality deposits.
Brownfield exploration
In addition to Hochschild's mine site exploration programme, which is focused in
and around the Company's current mines, the Company also invests in other
advanced stage projects, either located in or around one of the Group's existing
clusters or in new mining friendly districts. The Company currently has two
projects located within its southern Peru operational cluster:
Azuca
Azuca is a 100% owned project located in southern Peru, near the Company's
existing operational cluster. Mineralisation is present in intermediate
sulfidation silver and gold epithermal quartz veins. The Company is moving the
project towards a scoping study and during 2009 undertook 26,240 metres of
drilling achieving a significant increase in its resource base to 3.7 million
tonnes at 288 g/t silver and 1.3 g/t gold, corresponding to 44.1 million silver
equivalent ounces. Azuca's location, 50 kilometres from Hochschild's Arcata
operation, could realise economies of scale due to the close proximity of
existing plant and transport infrastructure.
Crespo
The Crespo project in southern Peru is 100% owned as a result of the
Southwestern acquisition in 2009. Crespo is a low grade gold and silver
disseminated deposit with 17.8 million tonnes at 38.8 g/t silver and 0.7 g/t
gold, corresponding to 44.7 million silver equivalent ounces. Hochschild's
drilling program, which is focused on increasing resources, reported the best
historical intercept of the project with 76 metres at 1.0 g/t Au and 95 g/t Ag,
including 7.4 metres at 11.9 g/t Au and 1,050 g/t Ag. Further drilling will be
undertaken in 2010 to increase resources along strike of this high-grade
intercept. Underground workings will help delineate the ore geometry, evaluate
the high grade irregular ore bodies identified in the drilling and complete
metallurgical testing towards a scoping study.
Greenfield exploration
The Company is continually evaluating new opportunities throughout Argentina,
Chile, Mexico and Peru and has an extremely active project pipeline.
Projects enter the Company's pipeline either by way of internal discovery or
through joint venture and are subject to a strict evaluation process to ensure
that investment is targeted towards quality assets that will ultimately be
brought to production. All opportunities are ranked and prioritised based on
specific criteria and any project that does not meet the Company's requirements
is farmed out or dropped. Projects are either 100% owned or allow Hochschild to
earn into majority ownership over time.
Victoria
In Q409, Hochschild reported positive drilling results at the Vaquillas target
in northern Chile, which is part of the Victoria project with Iron Creek Capital
Corpwhere Hochschild has the right to earn-in 60% by completing $6 million of
work on the property. The project lies along the prolific Domeyko fault zone in
Region II, 120 kilometres east of the costal town of Taltal. During 2009, 28
drill holes totalling 7,626 metres were completed which, together with previous
drilling results, suggest that the Vaquillas project has potential for
high-grade gold and silver veins, as well as bulk-tonnage low-grade gold and
silver mineralisation. In December 2009, the Victoria project, which covers
29,050 hectares,was expanded to include Iron Creek's remaining properties in
their adjoining porphyry copper project, representing an additional 17,000
hectares.
In addition, Hochschild will advance various early stage projects in southern
Peru, such as Josnitoro, Astana Farallón and Cerro Blanco. In Argentina, the
Company is focused in the Patagonia region and commenced drilling at the La
Flora project in late 2009 with the Mosquito and Los Pinos vein systems
following in 2010. In central Mexico, Hochschild is undertaking work in early
exploration projects and is expecting to complete a first pass drilling
programme at Mercurio.
FINANCIAL REVIEW
Key performance indicators:
(before exceptional items, unless otherwise indicated)
+----------------------------------+-----------+-----------+--------+
| US$(000) unless otherwise | Year | Year | % |
| indicated | ended 31 | ended 31 | change |
| | December | December | |
| | 2009 | 2008 | |
+----------------------------------+-----------+-----------+--------+
| Net Revenue | 539,741 | 433,779 | 24% |
+----------------------------------+-----------+-----------+--------+
| Attributable silver production | 18,754 | 16,941 | 11% |
| (koz) | | | |
+----------------------------------+-----------+-----------+--------+
| Attributable gold production | 157 | 153 | 3% |
| (koz) | | | |
+----------------------------------+-----------+-----------+--------+
| Cash costs ($/oz Ag co-product)1 | 7.11 | 7.05 | 1% |
+----------------------------------+-----------+-----------+--------+
| Cash costs ($/oz Au co-product)1 | 476 | 469 | 1% |
+----------------------------------+-----------+-----------+--------+
| Adjusted EBITDA2 | 249,869 | 142,292 | 76% |
+----------------------------------+-----------+-----------+--------+
| Earnings per share3 | $0.17 | $0.05 | 240% |
+----------------------------------+-----------+-----------+--------+
| Earnings per share (after | $ 0.31 | $(0.08) | n/a |
| exceptionals)3 | | | |
+----------------------------------+-----------+-----------+--------+
| Cash flow from operating | 200,524 | 78,641 | 155% |
| activities | | | |
+----------------------------------+-----------+-----------+--------+
| Reserve life of mine (years)4 | 3.3 | 3.3 | - |
+----------------------------------+-----------+-----------+--------+
1 Cash costs are calculated to include cost of sales, treatment charges, and
selling expenses before exceptional items less depreciation included in cost of
sales.
2 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.
3 2008 EPS figures have been restated to reflect changes in the depreciation
calculation (see note 2).
4 Reserve life of mine relates to our three main underground operations: Arcata,
Pallancata and San Jose.2008 figure was restated to reflect the Pallancata´s
2009 capacity.
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
Gross revenue: Gross revenue from continuing operations increased 27% to $589.9
million in 2009 (2008: $463.4 million) as a result of higher production and
higher metal prices during the year.
Silver: Gross revenue from silver increased 32% in 2009 to $382.4 million (2008:
$288.8 million) as a result of increased production following the H208 capacity
expansions at Arcata, Pallancata and San José, as well as higher prices. The
total amount of silver ounces sold in 2009 was 23,563 koz (2008: 20,593 koz).
Gold: Gross revenue from gold increased 19% in 2009 to $207.5 million (2008:
$174.6 million) also as a result of increased production following capacity
expansions at Arcata, Pallancata and San José as well as higher prices. The
total amount of gold ounces sold in 2009 was 204.1 koz (2008: 198.3 koz).
Commercial discounts: Commercial discounts primarily refer to refinery charges
for processing mineral ore and are discounted from revenue on a per tonne or per
ounce basis. In 2009, the Group recorded commercial discounts of $50.4 million,
up $20.3 million on 2008. This was as a result of the capacity expansions
completed in 2008 which led to higher volumes and, consequently, higher
commercial discounts at Pallancata and San José. In addition, the Company
experienced higher treatment charges at Arcata. Consequently, the ratio of
commercial discounts to gross revenue in 2009 increased to 8.5% (2008: 6.5%).
For 2010, the company has secured improved commercial terms relating to
concentrate sales.
Net revenue: Revenue from continuing operations, net of commercial discounts,
increased by 24% to $539.7 million, comprising silver revenue of $341.5 million
and gold revenue of $198.0 million. In 2009, silver accounted for 63% and gold
37% of the Company's consolidated revenue compared to 61% and 39% respectively
in 2008.
Revenue by mine
+------------+----------+----------+--------+
| US$(000) | Year | Year | % |
| unless | ended | ended | change |
| otherwise | 31 | 31 | |
| indicated | December | December | |
| | 2009 | 2008 | |
+------------+----------+----------+--------+
| Silver | | | |
| revenue | | | |
+------------+----------+----------+--------+
| Arcata | 141,816 | 119,284 | 19% |
+------------+----------+----------+--------+
| Ares | 13,038 | 38,196 | (66%) |
+------------+----------+----------+--------+
| Selene | 8,805 | 29,168 | (70%) |
+------------+----------+----------+--------+
| Pallancata | 139,125 | 48,207 | 189% |
+------------+----------+----------+--------+
| San | 78,352 | 52,942 | 48% |
| José | | | |
+------------+----------+----------+--------+
| Moris | 1,245 | 992 | 26% |
+------------+----------+----------+--------+
| Commercial | (40,904) | (24,712) | 66% |
| discounts | | | |
+------------+----------+----------+--------+
| Net | 341,477 | 264,077 | 29% |
| silver | | | |
| revenue | | | |
+------------+----------+----------+--------+
| Gold | | | |
| revenue | | | |
+------------+----------+----------+--------+
| Arcata | 27,364 | 20,344 | 35% |
| | | | |
+------------+----------+----------+--------+
| Ares | 40,278 | 67,899 | (41%) |
+------------+----------+----------+--------+
| Selene | 2,819 | 8,714 | (68%) |
+------------+----------+----------+--------+
| Pallancata | 32,443 | 13,214 | 146% |
+------------+----------+----------+--------+
| San | 79,430 | 40,095 | 98% |
| José | | | |
+------------+----------+----------+--------+
| Moris | 25,195 | 24,380 | 3% |
+------------+----------+----------+--------+
| Commercial | (9,492) | (5,423) | 75% |
| discounts | | | |
+------------+----------+----------+--------+
| Net | 198,037 | 169,223 | 17% |
| gold | | | |
| revenue | | | |
+------------+----------+----------+--------+
| | | | |
+------------+----------+----------+--------+
| Other | 227 | 479 | (53%) |
| revenue1 | | | |
+------------+----------+----------+--------+
| Net | 539,741 | 433,779 | 24% |
| 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.
Net average realised sale prices1
+--------+----------+----------+--------+
| | Twelve | Twelve | % |
| | months | months | change |
| | to | to | |
| | 31 | 31 | |
| | December | December | |
| | 2009 | 2008 | |
+--------+----------+----------+--------+
| Silver | $14.49 | $12.82 | 13% |
| ($/oz) | | | |
+--------+----------+----------+--------+
| Gold | $970.33 | $853.28 | 14% |
| ($/oz) | | | |
+--------+----------+----------+--------+
1Net average realisable prices include commercial discounts.
Costs
Hochschild is committed to producing profitable ounces and diligently
controlling costs. The Company committed to reducing unit cost per tonne at its
underground operations by 5% in 2009 and has exceeded this target with a full
year reduction of 11%, bringing unit cost from $79.7 in 2008 to $71.2 in 2009.
Including Moris, the Group's only open pit mine, unit cost per tonne decreased
15% to $51.1.
These savings are mainly a result of the economies of scale achieved by the
capacity expansions completed last year and cost control measures implemented
during the year as well as external factors such as the devaluation of local
currencies.
Depreciation and amortisation within production cost increased to $83.4 million
(2008: $59.6 million) as a consequence of higher capital expenditure and higher
throughput related to the significant expansions completed by the Group in the
last three years. During the year the depreciation calculations were amended and
the 2008 depreciation charge was restated.
Cash costs
Co-product cash costs include cost of sales, commercial deductions and selling
expenses before exceptional items, 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.
Silver and gold cash costs increased from $7.05 to $7.11 per ounce and $469 to
$476 per ounce respectively. The increase was mainly explained by higher
commercial discounts and selling expenses and lower extracted grades.
By-product cash costs include cost of sales, commercial deductions and selling
expenses before exceptional items, 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 $2.43 per silver ounce (2008: $3.08 per ounce) and
($576) per gold ounce (2008: ($256) per gold ounce).
Administrative expenses
Administrative expenses before exceptional items decreased by 26% from $68.8
million to $51.1 million as a result of the measures undertaken by management at
the end of 2008 to reduce expenses and preserve cash. These included a 28%
reduction in personnel expenses, which decreased from $35.5 to $25.4 million and
a 34% reduction in professional fees, decreasing from $10.0 to $6.6 million.
Exploration expenses
Exploration expenses, which primarily relate to greenfield exploration,
decreased to $19.9 million in 2009 (2008: $23.8 million) as a result of the
Group's decision to reduce expenditure and preserve cash following the
deterioration in market conditions at the end of 2008.
In addition to exploration expenses, the Group capitalises part of its
brownfield exploration, which mostly relates to costs incurred converting
potential resource to the inferred or measured and indicated category. In 2009,
the Group capitalised $8.6 million relating to brownfield exploration compared
to $6.7 million in 2008.
The Company is pleased to announce that it is significantly increasing its total
exploration planned expenditure (including greenfield and brownfield investment)
by 75% to $50 million in 2010. The exploration programme will focus on
identifying high-quality, early stage precious metal projects which will provide
cost effective growth and also on extending the life of Hochschild's existing
operations.
Selling expenses
Selling expenses increased to $21.0 million (2008: $11.3 million) mainly as a
result of the higher volume of concentrate sold at San José and Pallancata. The
increase was also a result of higher export duties relating to higher production
and metal prices in San José (export duties in Argentina are levied at 10% of
revenue for concentrate and 5% of revenue for doré).
Other income/expenses
Other income before exceptional items decreased marginally from $5.0 million in
2008 to $4.5 million in 2009.
Other expenses before exceptional items increased to $19.3 million (2008: $8.2
million) and are mainly comprised of a non cash $11.8 million increase in the
provision for mine closure relating to Selene and Sipan and other expenses such
as a labour contingency ($1.8 million), a loss on sale of other assets ($1.6
million) and provision for obsolescence of supplies ($1.1 million).
Profit from continuing operations
Profit from continuing operations before exceptional items, net finance costs
and income tax increased to $153.6 million (2008: $70.1 million) as a result of
the effects detailed above.
Impact of the Group's investments in joint ventures and associates
An associate is an entity in which Hochschild has significant influence but not
control. The Group accounts for the following entities as associates: Lake Shore
Gold (35.7%)16, GRC (25.0%)1, Zincore (36.8%), Cabo Sur (51%) and Minas
Pacapausa (80%). The Group's investments in associates are accounted for using
the equity method of accounting.
Hochschild's share of the profit after tax of the associate totalled $7.6
million in 2009 compared to an $8.2 million loss in 2008. The 2009 profit
included a $9.2 million gain in Lake Shore Gold mainly due to a progressive
decrease in the statutory income tax rate in Canada and the subsequent impact on
the deferred tax liability recognised on Hochschild's acquisitions of Lake Shore
Gold and Lake Shore Gold's acquisition of WTM. This gain was partially offset by
the share of net losses in GRC ($1 million) and Zincore ($0.4 million).
Adjusted EBITDA
Adjusted EBITDA is calculated as profit from continuing operations before
exceptional items, net finance costs and income tax excluding depreciation,
amortisation and exploration costs other than personnel and other expenses.
Adjusted EBITDA increased by 76% over the period to $249.9 million (2008: $142.3
million) primarily driven by higher sales, lower costs and lower administrative
expenses, which were partially offset by higher selling and other expenses.
+----------------+----------+----------+--------+
| US$(000) | Year | Year | % |
| unless | ended | ended | change |
| otherwise | 31 | 31 | |
| indicated | December | December | |
| | 2009 | 2008 | |
+----------------+----------+----------+--------+
| Profit | | | |
| from | | | |
| continuing | | | |
| operations | 153,600 | 70,101 | 119% |
| before | | | |
| exceptional | | | |
| items, net | | | |
| finance | | | |
| cost, | | | |
| foreign | | | |
| exchange | | | |
| loss and | | | |
| income tax | | | |
+----------------+----------+----------+--------+
| Operating | 28% | 16% | |
| margin | | | |
+----------------+----------+----------+--------+
| Depreciation | | | |
| and | 85,789 | 57,540 | 49% |
| amortisation | | | |
| in cost of | | | |
| sales | | | |
+----------------+----------+----------+--------+
| Depreciation | | | |
| and | 796 | 1,125 | (29%) |
| amortisation | | | |
| in | | | |
| administrative | | | |
| expenses | | | |
+----------------+----------+----------+--------+
| Exploration | 19,941 | 23,841 | (16%) |
| expenses | | | |
+----------------+----------+----------+--------+
| Personnel | | | (1%) |
| and other | 10,257 | 10,315 | |
| exploration | | | |
| expenses | | | |
+----------------+----------+----------+--------+
| Adjusted | 249,869 | 142,292 | 76% |
| EBITDA | | | |
+----------------+----------+----------+--------+
| Adjusted | 46% | 33% | |
| EBITDA | | | |
| margin | | | |
+----------------+----------+----------+--------+
Finance income
Finance income before exceptional items decreased by 32% to $6.4 million (2008:
$9.4 million) mainly as a result of the lower rate of interest on the Company's
liquidity funds. In 2009, the Company reported a weighted average annual
effective interest rate of 0.71% on these funds compared to 3.98% in 2008.
Finance costs
Finance costs before exceptional items of $46.0 million (2008: $18.8 million)
include a realised loss of $26.0 million relating to the Group's 2009 forward
sales contracts. It also includes an unrealised loss of $2.5 million
_______________________________
16 On a fully diluted basis.
relating to the Company's 2010 'zero cost collar' which was secured in mid 2009
to ensure an ongoing level of cash flow stability. The collar relates to 5.2
million ounces of the Company's 2010 silver production with an average 'floor'
at $12.7/oz and an average 'cap' at $19.7/oz.
The company recorded an interest expense of $15.6 million related mainly to the
outstanding syndicated loan ($114.3 million) and the convertible bond issued in
August 2009 ($115 million). In July 2009, the Group fixed the interest rate on
the syndicated loan at 2.75%.
Foreign exchange losses
The Group recognised a foreign exchange loss of $0.3 million (2008: $7.2 million
loss) as a result of transactions in currencies other than the functional
currency.
Income tax
The Company's pre-exceptional effective tax rate decreased to 36.8% in 2009
(2008: 54.7%) mainly as a result of:
(i) A lower proportion of non-deductible expenses and non-recognised tax
losses to profit before income tax
(ii) A lower negative tax effect from the conversion of the tax bases of
local currencies to US dollars
(iii) A non taxable gain of $6.8 million in Hochschild´s share on results
of associates
(iv) A gain of $4.2 million as a result of tax restructuring in Mexico
These effects were partially offset by
(v) A $2.4 million provision related to tax credits in the Project
Finance loan in Santa Cruz. (See note 7, (8) for further details).
(vi) A negative tax effect of $5.5 million due to lower expenses allowed
for double deductions in Argentina. (See note 7, (i) for further details).
(vii) A negative impact of $3.5 million related to the increase in mine
closure provision.
In addition, the post-exceptional effective tax rate decreased to 21.6% (2008:
847.6%) primarily driven by a non-taxable income of $74.4 million in 2009
including a $42.3 million gain from the merger between Lake Shore Gold and WTM,
a $12.1 million gain on the exchange of WTM shares for Lake Shore Gold shares, a
$7.7 million gain on the Southwestern acquisition and finance income of $7.4
million relating to GRC.
Exceptional items
Exceptional items totalled $44.7 million after tax (2008: ($42.0 million). This
mainly includes:
Positive exceptional items principally include:
+-------------+----------+----------------------------------------+
| | $ | Description of main ítems |
+-------------+----------+----------------------------------------+
| Impact of | 39.6 | In November 2009, Lake Shore Gold |
| the | million | acquired all of the outstanding common |
| Group's | | shares of WTM creating a new |
| investments | | large-scale, wholly-owned Timmins West |
| in joint | | Gold Mine Complex. As a consequence of |
| ventures | | this all-share transaction, |
| and | | Hochschild's 40.0% stake in Lake Shore |
| associates | | Gold was diluted to approximately |
| | | 26.1%. Upon completion of the business |
| | | combination between Lake Shore Gold |
| | | and WTM, Lake Shore Gold´s equity |
| | | value increased by $386 million. As a |
| | | result, Hochschild recognised an |
| | | exceptional gain of $42.3 million in |
| | | 2009, reflecting its share of the |
| | | increased equity value of Lake Shore |
| | | Gold, net of the loss on the dilution |
| | | of Hochschild's interest in Lake Shore |
| | | Gold. |
| | | |
| | | In December, after the Group acquired |
| | | an additional interest in Lake Shore |
| | | Gold of 3.9%, Lake Shore Gold issued a |
| | | package of shares, options and |
| | | warrants. As a result, Hochschild´s |
| | | stake of 36.1% was diluted to 35.7% |
| | | and the Group recognised an |
| | | exceptional loss of $4.5 million. |
+-------------+----------+----------------------------------------+
| Finance | 22.3 | The Company reported finance income of |
| Income | million | $28.7 million (2008: $13.3 million) |
| | | due to the $12.1 million gain |
| | | generated from the exchange of shares |
| | | held in West Timmins Mining for shares |
| | | in Lake Shore Gold and the $7.4 |
| | | million gain realised from the |
| | | exercise of options held in GRC. (See |
| | | note 6 for further details). |
+-------------+----------+----------------------------------------+
| Other | 8.8 | Other income increased to $13.3 |
| income | million | million (2008: $5.3 million). This was |
| | | mainly generated due to a gain of $7.7 |
| | | million arising from the acquisition |
| | | of Southwestern Resources as a result |
| | | of the difference between the total |
| | | acquisition cost of $19.3 million and |
| | | the fair value of the net assets of |
| | | $26.9 million on the acquisition date. |
+-------------+----------+----------------------------------------+
Negative exceptional items principally include:
+------------+---------+----------------------------------------+
| | $ | Description of main ítems |
+------------+---------+----------------------------------------+
| Impairment | 26.7 | |
| of fixed | million | In 2009, Hochschild has recorded a |
| assets1 | | total impairment charge before tax of |
| | | $26.7 million, mainly as a result of: |
| | | |
| | | Ares - The Group has impaired the |
| | | carrying amount of the assets related |
| | | to the Ares mine by $15.3 million, due |
| | | to the mine's expected closure in the |
| | | second half of 2010 and the resulting |
| | | revision to the remaining recoverable |
| | | reserves and resources. |
| | | |
| | | Liam - In the first half of 2009, the |
| | | Liam property was written down by |
| | | $10.0 million following a reassessment |
| | | of the value of the property which was |
| | | acquired in August 2008 for a total |
| | | consideration of $33.3 million. |
| | | |
| | | Selene - As a result of the closure of |
| | | the Selene mine in June 2009, the |
| | | Company has written down the remaining |
| | | net book value of assets of $4.8 |
| | | million. |
| | | |
| | | Reversal of impairment - In June 2009, |
| | | the Company reported an impairment |
| | | charge of $5.7 million for Moris due |
| | | to the small reserve and resource base |
| | | at the operation. However, following |
| | | the positive price environment during |
| | | the year, this impairment has been |
| | | reversed and the Company is therefore |
| | | reporting an exceptional gain of $3.4 |
| | | million. |
| | | |
| | | After tax, the total impairment charge |
| | | was $17.7 million representing an |
| | | impact of $0.06 on EPS. |
| | | |
+------------+---------+----------------------------------------+
| Cost of | $6.9 | One-off bonus paid to workers at the |
| sales | million | Peruvian mines as a result of the |
| | | negotiations with workers which were |
| | | successfully resolved in March 2009 |
+------------+---------+----------------------------------------+
1 Impairment testing should be performed at an individual asset or
cash-generating unit level. As required by IFRS, the Group conducts an
impairment review on an annual basis every time any goodwill was allocated to an
asset and every time indicators of impairment exist. 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. See notes 9 & 10 for further details.
Cash flow & balance sheet review:
Cash flow:
+---------------------+-----------+-----------+--------+
| $ | 12 | 12 | Change |
| thousands | months | months | |
| | ended | ended | |
| | 31 | 31 | |
| | December | December | |
| | 2009 | 2008 | |
+---------------------+-----------+-----------+--------+
| Net | 200,524 | 78,641 | 155% |
| cash | | | |
| generated | | | |
| from | | | |
| operating | | | |
| activities | | | |
+---------------------+-----------+-----------+--------+
| Net | (373,021) | (475,790) | (22%) |
| cash | | | |
| used | | | |
| in | | | |
| investing | | | |
| activities | | | |
+---------------------+-----------+-----------+--------+
| Cash | 134,443 | 212,728 | (37%) |
| flows | | | |
| generated/(used) | | | |
| in financing | | | |
| activities | | | |
+---------------------+-----------+-----------+--------+
| Net | (38,054) | (184,421) | (79%) |
| (decrease)/increase | | | |
| in cash and cash | | | |
| equivalents during | | | |
| the period | | | |
+---------------------+-----------+-----------+--------+
Total cash decreased to $38.1 million (2008: $184.4 million) driven by
significant M&A activity. This was partially offset by strong operating cashflow
as well as the capital raising undertaken in October 2009.
Cash flow from operating activities increased 155% to $200.5 million (2008 $78.6
million) as a consequence of higher production and prices and lower production
costs and administrative expenses.
Cash outflows used in investing activities of $373.0 million (2008: $475.8
million) were comprised of investment in M&A, which totalled $239.5 million
including $168.0 million in Lake Shore Gold, $49.0 million in Gold Resource Corp
and $19.2 million in Southwestern Resources. In addition, the Company invested
($141.0 million) in PP&E.
Cash generated from financing activities increased to $134.4 million (2008:
$212.7 million) as a result of the capital raising completed in October 2009
which included gross proceeds of $145 million from the equity placing and $115
million from the convertible bond offering. This was partially offset by
Hochschild's repayment of $85.7 million of its $200 million syndicated loan.
Working capital:
+-------------+----------+------------------------+--------+
| $ | 12 | 12 | |
| millions | months | months | |
| | ended | ended | |
| | 31 | 31 | |
| | December | December | |
| | 2009 | 2008 | |
+-------------+----------+------------------------+--------+
| Trade | 168.0 | 162.0 | |
| and | | | |
| other | | | |
| receivables | | | |
+-------------+----------+------------------------+--------+
| Inventories | 45.8 | 51.9 | |
+-------------+----------+------------------------+--------+
| Derivative | (1.9) | 5.6 | |
| financial | | | |
| instruments | | | |
+-------------+----------+------------------------+--------+
| Income | (10.8) | 14.3 | |
| tax | | | |
+-------------+----------+------------------------+--------+
| Trade | (135.2) | (124.9) | |
| and | | | |
| other | | | |
| payables | | | |
+-------------+----------+------------------------+--------+
| Working | 66.0 | 108.8 | |
| capital | | | |
+-------------+----------+------------------------+--------+
The Company's working capital position decreased to $66.0 million (2008: $108.8
million), primarily as a result of higher trade and income tax payables.
Net debt:
+---------------------------------+---------------+---------------+
| US$(000) unless otherwise | As at | As at |
| indicated | 31 December | 31 December |
| | 2009 | 2008 |
+---------------------------------+---------------+---------------+
| Cash and cash equivalents | 77,844 | 116,147 |
+---------------------------------+---------------+---------------+
| Long term borrowings | 219,681 | 231,692 |
+---------------------------------+---------------+---------------+
| Short term borrowings less | 84,158 | 48,410 |
| pre-shipment loans | | |
+---------------------------------+---------------+---------------+
| Net debt/(net cash) | 225,995 | 163,955 |
+---------------------------------+---------------+---------------+
Net debt increased to $226.0 million (2008: $164.0 million) as a result of the
issuance of the $115 million convertible bond, partially offset by the $85.7
million repayment of the Company's $200 million syndicated loan and lower cash
balance as a consequence of a strong M&A activity.
Capital expenditure1
+------------------------------+----------------+----------------+
| US$(000) unless otherwise | Year ended | Year ended |
| indicated | 31 December | 31 December |
| | 2009 | 2008 |
+------------------------------+----------------+----------------+
| Arcata | 29,688 | 43,977 |
+------------------------------+----------------+----------------+
| Ares | 3,484 | 10,438 |
+------------------------------+----------------+----------------+
| Selene | 16,579 | 47,226 |
+------------------------------+----------------+----------------+
| Pallancata1 | 24,117 | 14,619 |
+------------------------------+----------------+----------------+
| San José1 | 26,113 | 80,398 |
+------------------------------+----------------+----------------+
| Moris1 | 480 | 2,234 |
+------------------------------+----------------+----------------+
| San Felipe1 | 150 | 63,318 |
+------------------------------+----------------+----------------+
| Other | 7,924 | 49,061 |
+------------------------------+----------------+----------------+
| Total | 108,535 | 311,271 |
+------------------------------+----------------+----------------+
1 Includes additions in property, plant and equipment and evaluation and
exploration assets and excludes increases in closure of mine assets.
2009 capital expenditure of $108.5 million (2008: $311.3 million) includes mine
developments of $51.0 million, equipment of $48.9 million and exploration of
$8.6 million. The year-on-year decrease is mainly explained by the completion of
capacity expansions at the Company's Arcata, Pallancata and San José operations
in 2008.
Mine closure provision
The Group has updated its mine closure provision from $39.0 million to $61.3
million, partly as a result of the plant expansions completed in 2008 and also
to ensure that it continues to fully comply with government requirements. From
the $22.3 million increase, $11.8 million refers to mines that are already
closed and is recorded under other expenses in the income statement, whilst
$15.2 million refer to current operations and is recorded under provisions in
the statement of financial position. These effects were partially offset by the
expenditure in mine rehabilitation during the year and the change in discount
rate. (See note 13 for further details).
Dividends:
The directors recommend a final dividend of $0.02 per ordinary share which,
subject to shareholder approval at the 2010 AGM, will be paid on 27 May 2010 to
those shareholders appearing on the register on 30 April 2010. If approved, this
will result in a total dividend for the year of $0.04 per share. 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 | 2010 |
| dates | |
+-------------+--------+
| Ex-dividend | 28 |
| date | April |
+-------------+--------+
| Record | 30 |
| date | April |
+-------------+--------+
| Deadline | 4 May |
| for | |
| return | |
| of | |
| currency | |
| election | |
| forms | |
+-------------+--------+
| Payment | 27 May |
| date | |
+-------------+--------+
------------------------------------------------------------------------------
=-----------------------------------------
A conference call will be held at 9.30am (London time) on Wednesday 24 March
2010 for analysts and investors.
Dial in details as follows:
UK (& International) +44 (0) 203 003 2666
A recording of the conference call will be available for one week following its
conclusion, accessible from the following telephone numbers:
UK +44 (0) 208 198 1996
Access code: 7993057#
_____________________________________________________________________
Enquiries:
Hochschild Mining plc
Isabel Lütgendorf
+44 (0)20 7907 2934
Head of Investor Relations
Ignacio Rosado
+511 437 6007
Chief Financial Officer
Finsbury
Robin Walker
+44 (0)20 7251 3801
Public Relations
__________________________________________________________________
About Hochschild Mining plc:
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.
Directors
The names and biographical details of the Directors serving at
the date of this report are listed in the 2009 Annual Report.
Statement of Directors' responsibilities
The Directors confirm that to the best of their knowledge:
- the financial statements, prepared in accordance with the applicable set of
accounting standards, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company and the undertakings
included in the consolidation taken as a whole; and
- the Management report includes a fair review of the development and
performance of the business and the position of the Company and the undertakings
included in the consolidation taken as a whole, together with a description of
the principal risks and uncertainties that they face.
Consolidated income statement
For the year ended 31 December 2009
+------------------------+-------+----------+------+-------------+------+----------+--------------+-------------+------+----------+
| | | Year ended 31 | Year ended 31 December 2008 | |
| | | December 2009 | | |
+------------------------+------------------+---------------------------+----------------------------------------------+----------+
| | Notes | Before | Exceptional | Total | (Restated)1 | (Restated)1 | (Restated)1 |
| | | exceptional | items | US$000 | Before | Exceptional | Total |
| | | items | US$000 | | exceptional | items | US$000 |
| | | US$000 | | | items | US$000 | |
| | | | | | US$000 | | |
+------------------------+-------+-----------------+-------------+-----------------+--------------+-------------+-----------------+
| Continuing operations | | | | | | | |
+------------------------+-------+-----------------+-------------+-----------------+--------------+-------------+-----------------+
| Revenue | | 539,741 | - | 539,741 | 433,779 | - | 433,779 |
+------------------------+-------+-----------------+-------------+-----------------+--------------+-------------+-----------------+
| Cost of sales | | (279,298) | (6,918) | (286,216) | (256,608) | (234) | (256,842) |
+------------------------+-------+-----------------+-------------+-----------------+--------------+-------------+-----------------+
| Gross profit | | 260,443 | (6,918) | 253,525 | 177,171 | (234) | 176,937 |
+------------------------+-------+-----------------+-------------+-----------------+--------------+-------------+-----------------+
| Administrative | | (51,068) | - | (51,068) | (68,751) | (1,127) | (69,878) |
| expenses | | | | | | | |
+------------------------+-------+-----------------+-------------+-----------------+--------------+-------------+-----------------+
| Exploration expenses | | (19,941) | (1,049) | (20,990) | (23,841) | (69) | (23,910) |
+------------------------+-------+-----------------+-------------+-----------------+--------------+-------------+-----------------+
| Selling expenses | | (21,005) | - | (21,005) | (11,257) | - | (11,257) |
+------------------------+-------+-----------------+-------------+-----------------+--------------+-------------+-----------------+
| Other income | 5 | 4,501 | 8,782 | 13,283 | 5,025 | 252 | 5,277 |
+------------------------+-------+-----------------+-------------+-----------------+--------------+-------------+-----------------+
| Other expenses | 5 | (19,330) | (1,247) | (20,577) | (8,246) | (1,984) | (10,230) |
+------------------------+-------+-----------------+-------------+-----------------+--------------+-------------+-----------------+
| Impairment and | 9 | - | (26,713) | (26,713) | - | (30,212) | (30,212) |
| write-off of assets | | | | | | | |
| (net) | | | | | | | |
+------------------------+-------+-----------------+-------------+-----------------+--------------+-------------+-----------------+
| Profit from continuing | | 153,600 | (27,145) | 126,455 | 70,101 | (33,374) | 36,727 |
| operations before net | | | | | | | |
| finance income/(cost), | | | | | | | |
| foreign exchange loss | | | | | | | |
| and income tax | | | | | | | |
+------------------------+-------+-----------------+-------------+-----------------+--------------+-------------+-----------------+
| Share of post tax | 4,11 | 7,617 | 39,606 | 47,223 | (8,214) | - | (8,214) |
| losses of associates | | | | | | | |
| and joint ventures | | | | | | | |
| accounted under equity | | | | | | | |
| method | | | | | | | |
+------------------------+-------+-----------------+-------------+-----------------+--------------+-------------+-----------------+
| Finance income | 6 | 6,384 | 22,300 | 28,684 | 9,382 | 3,914 | 13,296 |
+------------------------+-------+-----------------+-------------+-----------------+--------------+-------------+-----------------+
| Finance costs | 6,12 | (46,040) | (1,256) | (47,296) | (18,833) | (18,088) | (36,921) |
+------------------------+-------+-----------------+-------------+-----------------+--------------+-------------+-----------------+
| Foreign exchange loss | | (256) | - | (256) | (7,161) | - | (7,161) |
+------------------------+-------+-----------------+-------------+-----------------+--------------+-------------+-----------------+
| Profit/(loss) from | | 121,305 | 33,505 | 154,810 | 45,275 | (47,548) | (2,273) |
| continuing operations | | | | | | | |
| before income tax | | | | | | | |
+------------------------+-------+-----------------+-------------+-----------------+--------------+-------------+-----------------+
| Income tax expense | 7 | (44,688) | 11,218 | (33,470) | (24,767) | 5,500 | (19,267) |
+------------------------+-------+-----------------+-------------+-----------------+--------------+-------------+-----------------+
| Profit/(loss) for the | | 76,617 | 44,723 | 121,340 | 20,508 | (42,048) | (21,540) |
| year from continuing | | | | | | | |
| operations | | | | | | | |
+------------------------+-------+-----------------+-------------+-----------------+--------------+-------------+-----------------+
| Attributable to: | | | | | | | |
+------------------------+-------+-----------------+-------------+-----------------+--------------+-------------+-----------------+
| Equity shareholders of | | 52,892 | 45,188 | 98,080 | 15,782 | (40,500) | (24,718) |
| the Company | | | | | | | |
+------------------------+-------+-----------------+-------------+-----------------+--------------+-------------+-----------------+
| Minority shareholders | | 23,725 | (465) | 23,260 | 4,726 | (1,548) | 3,178 |
+------------------------+-------+-----------------+-------------+-----------------+--------------+-------------+-----------------+
| | | 76,617 | 44,723 | 121,340 | 20,508 | (42,048) | (21,540) |
+------------------------+-------+-----------------+-------------+-----------------+--------------+-------------+-----------------+
| Basic earnings per | 8 | 0.17 | 0.14 | 0.31 | 0.05 | (0.13) | (0.08) |
| Ordinary Share from | | | | | | | |
| continuing operations | | | | | | | |
| and for the year | | | | | | | |
| (expressed in US | | | | | | | |
| dollars per share) | | | | | | | |
+------------------------+-------+-----------------+-------------+-----------------+--------------+-------------+-----------------+
| Diluted earnings per | 8 | 0.17 | 0.14 | 0.31 | 0.05 | (0.13) | (0.08) |
| Ordinary Share from | | | | | | | |
| continuing operations | | | | | | | |
| and for the year | | | | | | | |
| (expressed in US | | | | | | | |
| dollars per share) | | | | | | | |
+------------------------+-------+-----------------+-------------+-----------------+--------------+-------------+-----------------+
| | | | | | | | | | | |
+------------------------+-------+----------+------+-------------+------+----------+--------------+-------------+------+----------+
1 Certain numbers shown here do not correspond to the 2008 financial statements
and reflect adjustments made as detailed in note 2.
Consolidated statement of comprehensive income
For the year ended 31 December 2009
+----------------------------------------------------+-------+---------+-----------+----------+
| | | Year ended 31 December |
| | | |
+----------------------------------------------------+-------+--------------------------------+
| | Notes | 2009 | 2008 | |
| | | US$000 | US$000 | |
+----------------------------------------------------+-------+---------+-----------+----------+
| Profit for the year | | 121,340 | (21,540)1 | |
+----------------------------------------------------+-------+---------+-----------+----------+
| Other comprehensive income | | | | |
+----------------------------------------------------+-------+---------+-----------+----------+
| Exchange differences on translating foreign | | 25,707 | (43,079) | |
| operations | | | | |
+----------------------------------------------------+-------+---------+-----------+----------+
| Change in fair value of available-for-sale | | 4,313 | (1,454) | |
| financial assets | | | | |
+----------------------------------------------------+-------+---------+-----------+----------+
| Recycling of the gain on Fortuna Silver Mines | | (623) | (1,613) | |
+----------------------------------------------------+-------+---------+-----------+----------+
| Change in fair value of cash flow hedges taken to | | (13) | - | |
| equity | | | | |
+----------------------------------------------------+-------+---------+-----------+----------+
| Share in gains directly recognised in equity by | | - | 620 | |
| associates | | | | |
+----------------------------------------------------+-------+---------+-----------+----------+
| Income tax relating to components of other | | 71 | 664 | |
| comprehensive income | | | | |
+----------------------------------------------------+-------+---------+-----------+----------+
| Other comprehensive income for the period, net of | | 29,455 | (44,862) | |
| tax | | | | |
+----------------------------------------------------+-------+---------+-----------+----------+
| Total comprehensive income for the year | | 150,795 | (66,402) | |
+----------------------------------------------------+-------+---------+-----------+----------+
| Total comprehensive income attributable to | | | | |
+----------------------------------------------------+-------+---------+-----------+----------+
| Equity shareholders of the Company | | 127,558 | (69,373) | |
+----------------------------------------------------+-------+---------+-----------+----------+
| Minority interests | | 23,237 | 2,971 | |
+----------------------------------------------------+-------+---------+-----------+----------+
| | | 150,795 | (66,402) | |
+----------------------------------------------------+-------+---------+-----------+----------+
1 This number shownhere does not correspond to the 2008 financial statements and
reflect adjustments made as detailed in note 2.
Consolidated statement of FINANCIAL POSITION
As at 31 December 2009
+-------------------------------------+--------+-----------+-------------+-------------+
| | Notes | As at | (Restated)1 | (Restated)1 |
| | | 31 | As at 31 | As at 1 |
| | | December | December | January |
| | | 2009 | 2008 | 2008 |
| | | US$000 | US$000 | US$000 |
+-------------------------------------+--------+-----------+-------------+-------------+
| ASSETS | | | | |
+-------------------------------------+--------+-----------+-------------+-------------+
| Non-current assets | | | | |
+-------------------------------------+--------+-----------+-------------+-------------+
| Property, plant and equipment | 9 | 438,958 | 416,565 | 243,027 |
+-------------------------------------+--------+-----------+-------------+-------------+
| Evaluation and exploration assets | 10 | 55,828 | 44,726 | 6,034 |
+-------------------------------------+--------+-----------+-------------+-------------+
| Intangible assets | | 22,425 | 2,668 | 2,896 |
+-------------------------------------+--------+-----------+-------------+-------------+
| Investments accounted under equity | 11 | 450,665 | 136,019 | - |
| method | | | | |
+-------------------------------------+--------+-----------+-------------+-------------+
| Available-for-sale financial assets | | 19,181 | 17,794 | 15,100 |
| | | | | |
+-------------------------------------+--------+-----------+-------------+-------------+
| Trade and other receivables | | 3,150 | 38,304 | 25,518 |
+-------------------------------------+--------+-----------+-------------+-------------+
| Income tax receivable | | 1,302 | 802 | 616 |
+-------------------------------------+--------+-----------+-------------+-------------+
| Deferred income tax assets | | 15,852 | 21,811 | 26,162 |
+-------------------------------------+--------+-----------+-------------+-------------+
| | | 1,007,361 | 678,689 | 319,353 |
+-------------------------------------+--------+-----------+-------------+-------------+
| Current assets | | | | |
+-------------------------------------+--------+-----------+-------------+-------------+
| Inventories | | 45,813 | 51,855 | 47,628 |
+-------------------------------------+--------+-----------+-------------+-------------+
| Trade and other receivables | | 164,864 | 123,726 | 134,180 |
+-------------------------------------+--------+-----------+-------------+-------------+
| Income tax receivable | | 9,280 | 14,470 | 1,003 |
+-------------------------------------+--------+-----------+-------------+-------------+
| Financial assets at fair value | | 695 | 5,569 | 8,039 |
| through profit and loss | | | | |
+-------------------------------------+--------+-----------+-------------+-------------+
| Cash and cash equivalents | | 77,844 | 116,147 | 301,426 |
+-------------------------------------+--------+-----------+-------------+-------------+
| | | 298,496 | 311,767 | 492,276 |
+-------------------------------------+--------+-----------+-------------+-------------+
| Total assets | | 1,305,857 | 990,456 | 811,629 |
+-------------------------------------+--------+-----------+-------------+-------------+
| EQUITY AND LIABILITIES | | | | |
+-------------------------------------+--------+-----------+-------------+-------------+
| Capital and reserves attributable | | | | |
| to shareholders of the Parent | | | | |
+-------------------------------------+--------+-----------+-------------+-------------+
| Equity share capital | | 158,637 | 146,466 | 146,466 |
+-------------------------------------+--------+-----------+-------------+-------------+
| Share premium | | 395,928 | 395,928 | 395,928 |
+-------------------------------------+--------+-----------+-------------+-------------+
| Other reserves | | (212,921) | (250,831) | (205,556) |
+-------------------------------------+--------+-----------+-------------+-------------+
| Retained earnings | | 385,700 | 167,767 | 220,072 |
+-------------------------------------+--------+-----------+-------------+-------------+
| | | 727,344 | 459,330 | 556,910 |
+-------------------------------------+--------+-----------+-------------+-------------+
| Minority interest | | 76,126 | 66,293 | 49,769 |
+-------------------------------------+--------+-----------+-------------+-------------+
| Total equity | | 803,470 | 525,623 | 606,679 |
+-------------------------------------+--------+-----------+-------------+-------------+
| Non-current liabilities | | | | |
+-------------------------------------+--------+-----------+-------------+-------------+
| Trade and other payables | | 81 | 627 | 859 |
+-------------------------------------+--------+-----------+-------------+-------------+
| Borrowings | 12 | 219,681 | 231,692 | 55,209 |
+-------------------------------------+--------+-----------+-------------+-------------+
| Provisions | 13 | 55,176 | 37,687 | 30,821 |
+-------------------------------------+--------+-----------+-------------+-------------+
| Deferred income tax liabilities | | 10,662 | 9,192 | 8,837 |
+-------------------------------------+--------+-----------+-------------+-------------+
| | | 285,600 | 279,198 | 95,726 |
+-------------------------------------+--------+-----------+-------------+-------------+
| Current liabilities | | | | |
+-------------------------------------+--------+-----------+-------------+-------------+
| Trade and other payables | | 68,501 | 82,291 | 52,176 |
+-------------------------------------+--------+-----------+-------------+-------------+
| Financial liabilities at fair value | | 2,640 | - | - |
| through profit and loss | | | | |
+-------------------------------------+--------+-----------+-------------+-------------+
| Borrowings | 12 | 112,908 | 98,070 | 33,169 |
+-------------------------------------+--------+-----------+-------------+-------------+
| Provisions | 13 | 11,405 | 4,277 | 13,029 |
+-------------------------------------+--------+-----------+-------------+-------------+
| Income tax payable | | 21,333 | 997 | 10,850 |
+-------------------------------------+--------+-----------+-------------+-------------+
| | | 216,787 | 185,635 | 109,224 |
+-------------------------------------+--------+-----------+-------------+-------------+
| Total liabilities | | 502,387 | 464,833 | 204,950 |
+-------------------------------------+--------+-----------+-------------+-------------+
| Total equity and liabilities | | 1,305,857 | 990,456 | 811,629 |
+-------------------------------------+--------+-----------+-------------+-------------+
1 Certain numbers shown here do not correspond to the 2008 financial statements
and reflect adjustments made as detailed in note 2.
These financial statements were approved by the Board of Directors on 23 March
2010 and signed on its behalf by:
Ignacio Rosado
Chief Financial Officer
23 March 2010
Consolidated statement of cash flows
For the year ended 31 December 2009
+------------------------------------------------+--------+-----------+--------------+
| | | Year ended 31 |
| | | December |
+------------------------------------------------+--------+--------------------------+
| | Notes | 2009 | (Restated)1 |
| | | US$000 | 2008 |
| | | | US$000 |
+------------------------------------------------+--------+-----------+--------------+
| Cash flows from operating activities | | | |
+------------------------------------------------+--------+-----------+--------------+
| Cash generated from operations | | 215,698 | 102,167 |
+------------------------------------------------+--------+-----------+--------------+
| Interest received | | 1,041 | 7,512 |
+------------------------------------------------+--------+-----------+--------------+
| Interest paid | | (12,902) | (4,302) |
+------------------------------------------------+--------+-----------+--------------+
| Payments of mine closure costs | | (2,831) | (1,476) |
+------------------------------------------------+--------+-----------+--------------+
| Tax paid | | (482) | (25,260) |
+------------------------------------------------+--------+-----------+--------------+
| Net cash generated from operating activities | | 200,524 | 78,641 |
+------------------------------------------------+--------+-----------+--------------+
| Cash flows from investing activities | | | |
+------------------------------------------------+--------+-----------+--------------+
| Purchase of property, plant and equipment | | (116,009) | (296,027) |
+------------------------------------------------+--------+-----------+--------------+
| Purchase of evaluation and exploration assets | | (8,636) | - |
+------------------------------------------------+--------+-----------+--------------+
| Acquisition of subsidiary | 4 | (19,246) | - |
+------------------------------------------------+--------+-----------+--------------+
| Investment in an associate | 4 | (216,943) | (164,211) |
+------------------------------------------------+--------+-----------+--------------+
| Purchase of available-for-sale financial | | (1,857) | (19,240) |
| assets | | | |
+------------------------------------------------+--------+-----------+--------------+
| Purchase of intangibles | | (16,330) | (37) |
+------------------------------------------------+--------+-----------+--------------+
| Proceeds from sale of available-for-sale | | 3,861 | 3,321 |
| financial assets | | | |
+------------------------------------------------+--------+-----------+--------------+
| Proceeds from sale of property, plant and | | 2,139 | 392 |
| equipment | | | |
+------------------------------------------------+--------+-----------+--------------+
| Other | | - | 12 |
+------------------------------------------------+--------+-----------+--------------+
| Net cash used in investing activities | | (373,021) | (475,790) |
+------------------------------------------------+--------+-----------+--------------+
| Cash flows from financing activities | | | |
+------------------------------------------------+--------+-----------+--------------+
| Proceeds of borrowings | 12 | 285,461 | 484,041 |
+------------------------------------------------+--------+-----------+--------------+
| Repayment of borrowings | 12 | (277,185) | (257,300) |
+------------------------------------------------+--------+-----------+--------------+
| Transaction costs associated with borrowing | | (3,568) | (2,408) |
+------------------------------------------------+--------+-----------+--------------+
| Acquisition of minority interest | 4 | (1,500) | - |
+------------------------------------------------+--------+-----------+--------------+
| Dividends paid | | (20,048) | (28,531) |
+------------------------------------------------+--------+-----------+--------------+
| Proceeds from issue of ordinary shares under | | 143,621 | - |
| Global offer | | | |
+------------------------------------------------+--------+-----------+--------------+
| Transaction costs associated with issue of | | (3,453) | - |
| shares | | | |
+------------------------------------------------+--------+-----------+--------------+
| Capital contribution from minority | | 11,115 | 16,926 |
| shareholders | | | |
+------------------------------------------------+--------+-----------+--------------+
| Cash flows generated from financing activities | | 134,443 | 212,728 |
| | | | |
+------------------------------------------------+--------+-----------+--------------+
| Net decrease in cash and cash equivalents | | (38,054) | (184,421) |
| during the year | | | |
+------------------------------------------------+--------+-----------+--------------+
| Exchange difference | | (249) | (858) |
+------------------------------------------------+--------+-----------+--------------+
| Cash and cash equivalents at beginning of year | | 116,147 | 301,426 |
| | | | |
+------------------------------------------------+--------+-----------+--------------+
| Cash and cash equivalents at end of year | | 77,844 | 116,147 |
+------------------------------------------------+--------+-----------+--------------+
1 Certain numbers shown here do not correspond to the 2008 financial statements
and reflect adjustments made as detailed in note 2.
Consolidated statement of changes in equity
For the year ended 31 December 2009
+----------------+-------+----------+---------+----------+---------+----------+--------------------+----------+-----------+----------+-------------+----------+-----------+----------+-----------+----------+----------+----------+--------------+----------+----------+----------+----------+
| | | | | | | | Other reserves | | | | | | | | | | |
+----------------+-------+----------+---------+----------+---------+----------+-------------------------------------------------------------------------------------------+----------+-----------+----------+----------+----------+--------------+----------+----------+----------+----------+
| | Notes | | Equity | | Share | | Unrealised | | Bond | | Cumulative | | Merger | | Total | | Retained | | Capital | | Minority | | Total |
| | | | share | | premium | | gain/(loss) | | equity | | translation | | reserve | | Other | | earnings | | and | | interest | | equity |
| | | | capital | | US$000 | | on | | component | | adjustment | | US$000 | | reserves | | US$000 | | reserves | | US$000 | | US$000 |
| | | | US$000 | | | | available-for-sale | | US$000 | | US$000 | | | | US$000 | | | | attributable | | | | |
| | | | | | | | financial assets | | | | | | | | | | | | to | | | | |
| | | | | | | | and initial | | | | | | | | | | | | shareholders | | | | |
| | | | | | | | valuation of | | | | | | | | | | | | of the | | | | |
| | | | | | | | hedging | | | | | | | | | | | | Parent | | | | |
| | | | | | | | US$000 | | | | | | | | | | | | US$000 | | | | |
+----------------+-------+----------+---------+----------+---------+----------+--------------------+----------+-----------+----------+-------------+----------+-----------+----------+-----------+----------+----------+----------+--------------+----------+----------+----------+----------+
| Balance | | | 146,466 | | 395,928 | | 1,862 | | - | | 2,628 | | (210,046) | | (205,556) | | 229,202 | | 566,040 | | 50,008 | | 616,048 |
| at 1 | | | | | | | | | | | | | | | | | | | | | | | |
| January | | | | | | | | | | | | | | | | | | | | | | | |
| 2008 as | | | | | | | | | | | | | | | | | | | | | | | |
| reported | | | | | | | | | | | | | | | | | | | | | | | |
+----------------+-------+----------+---------+----------+---------+----------+--------------------+----------+-----------+----------+-------------+----------+-----------+----------+-----------+----------+----------+----------+--------------+----------+----------+----------+----------+
| Adjustments | | | - | | - | | - | | - | | - | | - | | - | | (9,130) | | (9,130) | | (239) | | (9,369) |
| due to | | | | | | | | | | | | | | | | | | | | | | | |
| restatement | | | | | | | | | | | | | | | | | | | | | | | |
| of | | | | | | | | | | | | | | | | | | | | | | | |
| financial | | | | | | | | | | | | | | | | | | | | | | | |
| statements | | | | | | | | | | | | | | | | | | | | | | | |
+----------------+-------+----------+---------+----------+---------+----------+--------------------+----------+-----------+----------+-------------+----------+-----------+----------+-----------+----------+----------+----------+--------------+----------+----------+----------+----------+
| Balance | | | 146,466 | | 395,928 | | 1,862 | | - | | 2,628 | | (210,046) | | (205,556) | | 220,072 | | 556,910 | | 49,769 | | 606,679 |
| at | | | | | | | | | | | | | | | | | | | | | | | |
| 1 | | | | | | | | | | | | | | | | | | | | | | | |
| January | | | | | | | | | | | | | | | | | | | | | | | |
| 2008, | | | | | | | | | | | | | | | | | | | | | | | |
| restated | | | | | | | | | | | | | | | | | | | | | | | |
+----------------+-------+----------+---------+----------+---------+----------+--------------------+----------+-----------+----------+-------------+----------+-----------+----------+-----------+----------+----------+----------+--------------+----------+----------+----------+----------+
| Other | | | - | | - | | (2,272) | | - | | (43,003) | | - | | (45,275) | | 620 | | (44,655) | | (207) | | (44,862) |
| comprehensive | | | | | | | | | | | | | | | | | | | | | | | |
| loss/income | | | | | | | | | | | | | | | | | | | | | | | |
+----------------+-------+----------+---------+----------+---------+----------+--------------------+----------+-----------+----------+-------------+----------+-----------+----------+-----------+----------+----------+----------+--------------+----------+----------+----------+----------+
| Profit | | | - | | - | | - | | - | | - | | - | | - | | (24,718) | | (24,718) | | 3,178 | | (21,540) |
| for | | | | | | | | | | | | | | | | | | | | | | | |
| the | | | | | | | | | | | | | | | | | | | | | | | |
| year | | | | | | | | | | | | | | | | | | | | | | | |
+----------------+-------+----------+---------+----------+---------+----------+--------------------+----------+-----------+----------+-------------+----------+-----------+----------+-----------+----------+----------+----------+--------------+----------+----------+----------+----------+
| Total | | | - | | - | | (2,272) | | - | | (43,003) | | - | | (45,275) | | (24,098) | | (69,373) | | 2,971 | | (66,402) |
| comprehensive | | | | | | | | | | | | | | | | | | | | | | | |
| loss for 2008 | | | | | | | | | | | | | | | | | | | | | | | |
+----------------+-------+----------+---------+----------+---------+----------+--------------------+----------+-----------+----------+-------------+----------+-----------+----------+-----------+----------+----------+----------+--------------+----------+----------+----------+----------+
| Dividends | | | - | | - | | - | | - | | - | | - | | - | | (28,331) | | (28,331) | | | | (28,331) |
+----------------+-------+----------+---------+----------+---------+----------+--------------------+----------+-----------+----------+-------------+----------+-----------+----------+-----------+----------+----------+----------+--------------+----------+----------+----------+----------+
| Adjustment | | | - | | - | | - | | - | | - | | - | | - | | - | | - | | 1,220 | | 1,220 |
| to | | | | | | | | | | | | | | | | | | | | | | | |
| deferred | | | | | | | | | | | | | | | | | | | | | | | |
| consideration1 | | | | | | | | | | | | | | | | | | | | | | | |
+----------------+-------+----------+---------+----------+---------+----------+--------------------+----------+-----------+----------+-------------+----------+-----------+----------+-----------+----------+----------+----------+--------------+----------+----------+----------+----------+
| Expiration | | | - | | - | | - | | - | | - | | - | | - | | 124 | | 124 | | 4 | | 128 |
| of | | | | | | | | | | | | | | | | | | | | | | | |
| dividends | | | | | | | | | | | | | | | | | | | | | | | |
| payable | | | | | | | | | | | | | | | | | | | | | | | |
+----------------+-------+----------+---------+----------+---------+----------+--------------------+----------+-----------+----------+-------------+----------+-----------+----------+-----------+----------+----------+----------+--------------+----------+----------+----------+----------+
| Capital | | | - | | - | | - | | - | | - | | - | | - | | - | | - | | 12,329 | | 12,329 |
| contribution | | | | | | | | | | | | | | | | | | | | | | | |
| from | | | | | | | | | | | | | | | | | | | | | | | |
| minority | | | | | | | | | | | | | | | | | | | | | | | |
| shareholders | | | | | | | | | | | | | | | | | | | | | | | |
+----------------+-------+----------+---------+----------+---------+----------+--------------------+----------+-----------+----------+-------------+----------+-----------+----------+-----------+----------+----------+----------+--------------+----------+----------+----------+----------+
| Balance | | | 146,466 | | 395,928 | | (410) | | - | | (40,375) | | (210,046) | | (250,831) | | 167,767 | | 459,330 | | 66,293 | | 525,623 |
| at | | | | | | | | | | | | | | | | | | | | | | | |
| 31 | | | | | | | | | | | | | | | | | | | | | | | |
| December | | | | | | | | | | | | | | | | | | | | | | | |
| 2008, | | | | | | | | | | | | | | | | | | | | | | | |
| restated | | | | | | | | | | | | | | | | | | | | | | | |
+----------------+-------+----------+---------+----------+---------+----------+--------------------+----------+-----------+----------+-------------+----------+-----------+----------+-----------+----------+----------+----------+--------------+----------+----------+----------+----------+
| Other | | | - | | - | | 3,736 | | - | | 25,742 | | - | | 29,478 | | - | | 29,478 | | (23) | | 29,455 |
| comprehensive | | | | | | | | | | | | | | | | | | | | | | | |
| loss/income | | | | | | | | | | | | | | | | | | | | | | | |
+----------------+-------+----------+---------+----------+---------+----------+--------------------+----------+-----------+----------+-------------+----------+-----------+----------+-----------+----------+----------+----------+--------------+----------+----------+----------+----------+
| Profit | | | - | | - | | - | | - | | - | | - | | - | | 98,080 | | 98,080 | | 23,260 | | 121,340 |
| for | | | | | | | | | | | | | | | | | | | | | | | |
| the | | | | | | | | | | | | | | | | | | | | | | | |
| year | | | | | | | | | | | | | | | | | | | | | | | |
+----------------+-------+----------+---------+----------+---------+----------+--------------------+----------+-----------+----------+-------------+----------+-----------+----------+-----------+----------+----------+----------+--------------+----------+----------+----------+----------+
| Total | | | - | | - | | 3,736 | | - | | 25,742 | | - | | 29,478 | | 98,080 | | 127,558 | | 23,237 | | 150,795 |
| comprehensive | | | | | | | | | | | | | | | | | | | | | | | |
| loss/income | | | | | | | | | | | | | | | | | | | | | | | |
| for 2009 | | | | | | | | | | | | | | | | | | | | | | | |
+----------------+-------+----------+---------+----------+---------+----------+--------------------+----------+-----------+----------+-------------+----------+-----------+----------+-----------+----------+----------+----------+--------------+----------+----------+----------+----------+
| Issuance | | | 12,171 | | - | | - | | - | | - | | 127,997 | | 127,997 | | - | | 140,168 | | - | | 140,168 |
| of | | | | | | | | | | | | | | | | | | | | | | | |
| shares | | | | | | | | | | | | | | | | | | | | | | | |
+----------------+-------+----------+---------+----------+---------+----------+--------------------+----------+-----------+----------+-------------+----------+-----------+----------+-----------+----------+----------+----------+--------------+----------+----------+----------+----------+
| Transfer | | | - | | - | | - | | - | | - | | (127,997) | | (127,997) | | 127,997 | | - | | - | | - |
| to | | | | | | | | | | | | | | | | | | | | | | | |
| retained | | | | | | | | | | | | | | | | | | | | | | | |
| earnings | | | | | | | | | | | | | | | | | | | | | | | |
+----------------+-------+----------+---------+----------+---------+----------+--------------------+----------+-----------+----------+-------------+----------+-----------+----------+-----------+----------+----------+----------+--------------+----------+----------+----------+----------+
| Issuance | | | - | | - | | - | | 8,432 | | - | | - | | 8,432 | | - | | 8,432 | | - | | 8,432 |
| of | | | | | | | | | | | | | | | | | | | | | | | |
| convertible | | | | | | | | | | | | | | | | | | | | | | | |
| bond | | | | | | | | | | | | | | | | | | | | | | | |
+----------------+-------+----------+---------+----------+---------+----------+--------------------+----------+-----------+----------+-------------+----------+-----------+----------+-----------+----------+----------+----------+--------------+----------+----------+----------+----------+
| Purchase | 4 | | - | | - | | - | | - | | - | | - | | - | | 4,150 | | 4,150 | | (5,650) | | (1,500) |
| of | | | | | | | | | | | | | | | | | | | | | | | |
| shares | | | | | | | | | | | | | | | | | | | | | | | |
| from | | | | | | | | | | | | | | | | | | | | | | | |
| minority | | | | | | | | | | | | | | | | | | | | | | | |
| interest | | | | | | | | | | | | | | | | | | | | | | | |
+----------------+-------+----------+---------+----------+---------+----------+--------------------+----------+-----------+----------+-------------+----------+-----------+----------+-----------+----------+----------+----------+--------------+----------+----------+----------+----------+
| Dividends | | | - | | - | | - | | - | | - | | - | | - | | (12,294) | | (12,294) | | | | (12,294) |
| declared | | | | | | | | | | | | | | | | | | | | | | | |
| during | | | | | | | | | | | | | | | | | | | | | | | |
| the year | | | | | | | | | | | | | | | | | | | | | | | |
+----------------+-------+----------+---------+----------+---------+----------+--------------------+----------+-----------+----------+-------------+----------+-----------+----------+-----------+----------+----------+----------+--------------+----------+----------+----------+----------+
| Dividends | | | - | | - | | - | | - | | - | | - | | - | | - | | - | | (7,754) | | (7,754) |
| paid to | | | | | | | | | | | | | | | | | | | | | | | |
| minority | | | | | | | | | | | | | | | | | | | | | | | |
| interest | | | | | | | | | | | | | | | | | | | | | | | |
+----------------+-------+----------+---------+----------+---------+----------+--------------------+----------+-----------+----------+-------------+----------+-----------+----------+-----------+----------+----------+----------+--------------+----------+----------+----------+----------+
| Balance | | | 158,637 | | 395,928 | | 3,326 | | 8,432 | | (14,633) | | (210,046) | | (212,921) | | 385,700 | | 727,344 | | 76,126 | | 803,470 |
| at | | | | | | | | | | | | | | | | | | | | | | | |
| 31 | | | | | | | | | | | | | | | | | | | | | | | |
| December | | | | | | | | | | | | | | | | | | | | | | | |
| 2009 | | | | | | | | | | | | | | | | | | | | | | | |
+----------------+-------+----------+---------+----------+---------+----------+--------------------+----------+-----------+----------+-------------+----------+-----------+----------+-----------+----------+----------+----------+--------------+----------+----------+----------+----------+
1. This amount represents the increase in the minority interests share of the
assets of Pallancata, following the Group's investment during the year 2008 in
accordance with the agreement signed with Minera Oro Vega S.A.C.
Notes to the consolidated financial statements
For the year ended 31 December 2009
The financial information for the year ended 31 December 2009 and 2008 contained
in this document does not constitute statutory accounts as defined in section
435 of the Companies Act 2006. The financial information for the years ended 31
December 2009 and 2008 have been extracted from the consolidated financial
statements of Hochschild Mining plc for the year ended 31 December 2009 which
have been approved by the directors on 23 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 498 of the Companies Act 2006.
1. Significant accounting policies
The accounting policies adopted in the preparation of the financial information
are consistent with those applied to the year ended 31 December 2008 except for
the adoption of new and amended standards and the retrospective restatement for
change to the depreciation calculation (see note 2).
(a) Adoption of new and amended standards
The accounting policies adopted are consistent with those of the previous
financial year except for the 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.
- IFRS 8 'Operating Segments' applicable for annual periods beginning on or
after 1 January 2009.
The Group concluded that the operating segments determined in accordance with
IFRS 8 were different in comparison with 2008 segments reported.
- IAS 23 Amendment, 'Borrowing Costs', applicable for annual periods beginning
on or after 1 January 2009.
The Group has adopted the standard on a prospective basis. It did not have an
impact on the financial position or performance of the Group.
- IAS 1 'Presentation of Financial Statements', applicable for annual periods
beginning on or after 1 January 2009.
The most important change was the obligation to include the statement of
comprehensive income.
- IFRS 2 'Amendment to IFRS 2 - Vesting Conditions and Cancellations',
applicable for annual periods beginning on or after
1 January 2009.
It did not have an impact on the financial position or performance of the Group.
- IAS 32 and IAS 1 Amendment 'Puttable Financial Instruments and Obligations
Arising on Liquidation', applicable for annual periods beginning on or after 1
January 2009.
It did not have an impact on the financial position or performance of the Group.
- IFRS 1 and IAS 27 Amendment 'Cost of an Investment in a Subsidiary, Jointly
Controlled Entity or Associate', applicable for annual periods beginning on or
after 1 January 2009.
It did not have an impact on the financial position or performance of the Group.
- 2008 Annual Improvements to IFRS, applicable for annual periods beginning on
or after 1 January 2009.
These amendments had no impact on the financial performance of the Group as they
only affected the disclosure of financial information.
- IFRIC 16 'Hedges of a Net Investment in a Foreign Operation', applicable for
annual periods beginning on or after
1 October 2008.
It did not have an impact on the financial position or performance of the Group.
- IFRS 7 'Financial Instruments: Disclosures', applicable for annual periods
beginning on or after 1 January 2009.
The main change was related to the disclosure of hierarchy of financial
instruments at fair value.
- IFRIC 13 'Customer Loyalty Programmes', applicable for periods beginning on
or after 1 July 2008.
It did not have an impact on the financial position or performance of the Group.
- IFRIC 15 'Agreements for the Construction of Real Estate', applicable for
periods beginning on or after 1 January 2009.
It did not have an impact on the financial position or performance of the Group.
- IFRIC 18 'Transfer of Assets from Customers', applicable to assets
transferred on or after 1 July 2009.
It did not have an impact on the financial position or performance of the Group.
- IAS 39 & IFRS 7 Amendments 'Reclassification of Financial Instruments',
applicable for periods beginning on or after 1 July 2008.
It did not have an impact on the financial position or performance of the Group.
- IAS 39 Amendment 'Reclassification of Financial Assets: Effective Date and
Transition', applicable for periods beginning on or after 1 July 2008.
It did not have an impact on the financial position or performance of the Group.
- IFRIC 9 & IAS 39 Amendments 'Embedded Derivatives', applicable for periods
ending on or after 30 June 2009.
It did not have an impact on the financial position or performance of the Group.
2. retrospective restatement for change to DEPRECIATION calculation
The Group applies the unit of production depreciation methodology in the
calculation of depreciation of its mine assets. When this approach was adopted
in connection with the Group's listing during 2006, as the future capital
expenditure associated with developing the undeveloped reserves and resources
was not significant to the calculation, these depreciation calculations included
only the future costs of converting resource to reserve. Since the listing, the
Group has extended both the life, and throughput, of certain mines, and has
opened, and subsequently expanded, two new mines. These actions, which were
completed in 2009, have led to an increase in the amount of undeveloped
resources, and a disproportionate increase to the associated future capital
expenditure required to develop and access these reserves and resources.
As a result of these changed circumstances, during the year management
identified that the existing depreciation calculations were no longer
effectively matching costs to production in the manner in which the unit of
production approach is designed. Consequently the depreciation calculations were
revised to include all the future capital expenditure associated with developing
these reserves and resources. Management believes that this revision will enable
improved matching of costs to production in the relevant period, and thereby
will better reflect the Group's economic performance.
As required by IAS 8 'Accounting Policies, Changes in Accounting Estimates and
Errors', the Group has retrospectively applied this revised depreciation
methodology by adjusting the comparative financial information contained in
these financial statements. The effect of this prior year, non-cash restatement
on each of the primary financial statements is as follows:
+----------------------------------------------------+------------+------------+-------------+
| Pre exceptional consolidated income statement | (Reported) | (Restated) | Effect |
| | Year ended | Year ended | of |
| | 31 | 31 | restatement |
| | December | December | US$000 |
| | 2008 | 2008 | |
| | US$000 | US$000 | |
+----------------------------------------------------+------------+------------+-------------+
| Continuing operations | | | |
+----------------------------------------------------+------------+------------+-------------+
| Cost of sales | (240,441) | (256,608) | (16,167) |
+----------------------------------------------------+------------+------------+-------------+
| Gross profit | 193,338 | 177,171 | (16,167) |
+----------------------------------------------------+------------+------------+-------------+
| Profit from continuing operations before net | 86,268 | 70,101 | (16,167) |
| finance income/(cost), foreign exchange | | | |
| (loss)/gain and income tax | | | |
+----------------------------------------------------+------------+------------+-------------+
| Profit from continuing operations before income | 61,442 | 45,275 | (16,167) |
| tax | | | |
+----------------------------------------------------+------------+------------+-------------+
| Income tax expense | (29,762) | (24,767) | 4,995 |
+----------------------------------------------------+------------+------------+-------------+
| Profit/(Loss) for the year from continuing | 31,680 | 20,508 | (11,172) |
| operations | | | |
+----------------------------------------------------+------------+------------+-------------+
| Attributable to: | | | |
+----------------------------------------------------+------------+------------+-------------+
| Equity shareholders of the Company | 24,643 | 15,782 | (8,861) |
+----------------------------------------------------+------------+------------+-------------+
| Minority shareholders | 7,037 | 4,726 | (2,311) |
+----------------------------------------------------+------------+------------+-------------+
| Basic and diluted earnings per ordinary share from | 0.08 | 0.05 | (0.03) |
| continuing operations and for the year (expressed | | | |
| in US dollars per share) | | | |
+----------------------------------------------------+------------+------------+-------------+
+---------------------------------------------------+------------+------------+-------------+
| Consolidated income statement | (Reported) | (Restated) | Effect |
| | Year ended | Year ended | of |
| | 31 | 31 | restatement |
| | December | December | US$000 |
| | 2008 | 2008 | |
| | US$000 | US$000 | |
+---------------------------------------------------+------------+------------+-------------+
| Continuing operations | | | |
+---------------------------------------------------+------------+------------+-------------+
| Cost of sales | (240,675) | (256,842) | (16,167) |
+---------------------------------------------------+------------+------------+-------------+
| Gross profit | 193,104 | 176,937 | (16,167) |
+---------------------------------------------------+------------+------------+-------------+
| Impairment of property, plant and equipment | (34,706) | (30,212) | 4,494 |
+---------------------------------------------------+------------+------------+-------------+
| Profit from continuing operations before net | 48,400 | 36,727 | (11,673) |
| finance income/(cost), foreign exchange | | | |
| (loss)/gain and income tax | | | |
+---------------------------------------------------+------------+------------+-------------+
| Profit from continuing operations before income | 9,400 | (2,273) | (11,673) |
| tax | | | |
+---------------------------------------------------+------------+------------+-------------+
| Income tax expense | (22,914) | (19,267) | 3,647 |
+---------------------------------------------------+------------+------------+-------------+
| Loss for the year from continuing operations | (13,514) | (21,540) | (8,026) |
+---------------------------------------------------+------------+------------+-------------+
| Attributable to: | | | |
+---------------------------------------------------+------------+------------+-------------+
| Equity shareholders of the Company | (19,003) | (24,718) | (5,715) |
+---------------------------------------------------+------------+------------+-------------+
| Minority shareholders | 5,489 | 3,178 | (2,311) |
+---------------------------------------------------+------------+------------+-------------+
| Basic and diluted earnings per ordinary share | (0.06) | (0.08) | (0.02) |
| from continuing operations and for the year | | | |
| (expressed in US dollars per share) | | | |
+---------------------------------------------------+------------+------------+-------------+
+----------------------------------------------------+------------+------------+-------------+
| Consolidated statement of financial position | (Reported) | (Restated) | Effect |
| | As at | As at | of |
| | 31 | 31 | restatement |
| | December | December | US$000 |
| | 2008 | 2008 | |
| | US$000 | US$000 | |
+----------------------------------------------------+------------+------------+-------------+
| ASSETS | | | |
+----------------------------------------------------+------------+------------+-------------+
| Non-current assets | | | |
+----------------------------------------------------+------------+------------+-------------+
| Property, plant and equipment (including | 488,984 | 461,291 | (27,693) |
| evaluation and exploration assets) | | | |
+----------------------------------------------------+------------+------------+-------------+
| Deferred income tax assets | 20,795 | 21,811 | 1,016 |
+----------------------------------------------------+------------+------------+-------------+
| Total non-current assets | 705,366 | 678,689 | (26,677) |
+----------------------------------------------------+------------+------------+-------------+
| Current assets | | | |
+----------------------------------------------------+------------+------------+-------------+
| Inventories | 49,220 | 51,855 | 2,635 |
+----------------------------------------------------+------------+------------+-------------+
| Total current assets | 309,132 | 311,767 | 2,635 |
+----------------------------------------------------+------------+------------+-------------+
| Total assets | 1,014,498 | 990,456 | (24,042) |
+----------------------------------------------------+------------+------------+-------------+
| EQUITY AND LIABILITIES | | | |
+----------------------------------------------------+------------+------------+-------------+
| Capital and reserves attributable to shareholders | | | |
| of the Parent | | | |
+----------------------------------------------------+------------+------------+-------------+
| Retained earnings | 182,612 | 167,767 | (14,845) |
+----------------------------------------------------+------------+------------+-------------+
| Minority interest | 68,843 | 66,293 | (2,550) |
+----------------------------------------------------+------------+------------+-------------+
| Total equity | 543,018 | 525,623 | (17,395) |
+----------------------------------------------------+------------+------------+-------------+
| Non-current liabilities | | | |
+----------------------------------------------------+------------+------------+-------------+
| Deferred income tax liabilities | 15,839 | 9,192 | (6,647) |
+----------------------------------------------------+------------+------------+-------------+
| Total equity and liabilities | 1,014,498 | 990,456 | (24,042) |
+----------------------------------------------------+------------+------------+-------------+
+----------------------------------------------------+------------+------------+-------------+
| Consolidated statement of financial position | (Reported) | (Restated) | Effect |
| | As at | As at | of |
| | 1 January | 1 January | restatement |
| | 2008 | 2008 | US$000 |
| | US$000 | US$000 | |
+----------------------------------------------------+------------+------------+-------------+
| ASSETS | | | |
+----------------------------------------------------+------------+------------+-------------+
| Non-current assets | | | |
+----------------------------------------------------+------------+------------+-------------+
| Property, plant and equipment (including | 263,062 | 249,061 | (14,001) |
| evaluation and exploration assets) | | | |
+----------------------------------------------------+------------+------------+-------------+
| Deferred income tax assets | 22,400 | 26,162 | 3,762 |
+----------------------------------------------------+------------+------------+-------------+
| Total non-current assets | 329,592 | 319,353 | (10,239) |
+----------------------------------------------------+------------+------------+-------------+
| Current assets | | | |
+----------------------------------------------------+------------+------------+-------------+
| Inventories | 47,012 | 47,628 | 616 |
+----------------------------------------------------+------------+------------+-------------+
| Total current assets | 491,660 | 492,276 | 616 |
+----------------------------------------------------+------------+------------+-------------+
| Total assets | 821,252 | 811,629 | (9,623) |
+----------------------------------------------------+------------+------------+-------------+
| EQUITY AND LIABILITIES | | | |
+----------------------------------------------------+------------+------------+-------------+
| Capital and reserves attributable to shareholders | | | |
| of the Parent | | | |
+----------------------------------------------------+------------+------------+-------------+
| Retained earnings | 229,202 | 220,072 | (9,130) |
+----------------------------------------------------+------------+------------+-------------+
| Minority interest | 50,008 | 49,769 | (239) |
+----------------------------------------------------+------------+------------+-------------+
| Total equity | 616,048 | 606,679 | (9,369) |
+----------------------------------------------------+------------+------------+-------------+
| Non-current liabilities | | | |
+----------------------------------------------------+------------+------------+-------------+
| Deferred income tax liabilities | 9,091 | 8,837 | (254) |
+----------------------------------------------------+------------+------------+-------------+
| Total equity and liabilities | 821,252 | 811,629 | (9,623) |
+----------------------------------------------------+------------+------------+-------------+
+----------------------------------------------------+------------+------------+-------------+
| Consolidated statement of comprehensive income | (Reported) | (Restated) | Effect |
| | Year ended | Year ended | of |
| | 31 | 31 | restatement |
| | December | December | US$000 |
| | 2008 | 2008 | |
| | US$000 | US$000 | |
+----------------------------------------------------+------------+------------+-------------+
| Profit for the year | (13,514) | (21,540) | (8,026) |
+----------------------------------------------------+------------+------------+-------------+
| Total comprehensive income for the year | (58,376) | (66,402) | (8,026) |
+----------------------------------------------------+------------+------------+-------------+
| Total comprehensive income attributable to | | | |
+----------------------------------------------------+------------+------------+-------------+
| Equity shareholders of the Company | (63,658) | (69,373) | (5,715) |
+----------------------------------------------------+------------+------------+-------------+
| Minority interest | 5,282 | 2,971 | (2,311) |
+----------------------------------------------------+------------+------------+-------------+
This restatement was non-cash in nature, and therefore had no impact on the
Consolidated cash flow statement.
The impact on the Consolidated statement of changes in equity is set out in that
statement.
3. 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. Transfer prices
between 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 segments. Those transfers are eliminated on
consolidation.
(a) Reportable segment information
+---------------+----------+----------+---------+------------+----------+---------+-------------+----------+--------------+-----------+
| | Ares | Arcata | Selene | Pallancata | San | Moris | Exploration | Other | Adjustment | Total |
| | US$000 | US$000 | US$000 | US$000 | José | US$000 | US$000 | US$000 | and | US$000 |
| | | | | | US$000 | | | | eliminations | |
| | | | | | | | | | US$000 | |
+---------------+----------+----------+---------+------------+----------+---------+-------------+----------+--------------+-----------+
| Year ended | | | | | | | | | | |
| 31 December | | | | | | | | | | |
| 2009 | | | | | | | | | | |
+---------------+----------+----------+---------+------------+----------+---------+-------------+----------+--------------+-----------+
| Revenue for | 53,312 | 141,574 | 10,757 | 160,416 | 147,102 | 26,440 | - | 140 | - | 539,741 |
| external | | | | | | | | | | |
| costumers | | | | | | | | | | |
+---------------+----------+----------+---------+------------+----------+---------+-------------+----------+--------------+-----------+
| Inter | - | - | - | - | - | - | - | 3,027 | (3,027) | - |
| segment | | | | | | | | | | |
| revenue | | | | | | | | | | |
+---------------+----------+----------+---------+------------+----------+---------+-------------+----------+--------------+-----------+
| Total | 53,312 | 141,574 | 10,757 | 160,416 | 147,102 | 26,440 | - | 3,167 | (3,027) | 539,741 |
| revenue | | | | | | | | | | |
+---------------+----------+----------+---------+------------+----------+---------+-------------+----------+--------------+-----------+
| | | | | | | | | | | |
+---------------+----------+----------+---------+------------+----------+---------+-------------+----------+--------------+-----------+
| Profit/(loss) | 18,907 | 74,922 | (2,874) | 84,810 | 41,767 | 7,674 | (24,558) | (54,560) | 8,722 | 154,810 |
| from | | | | | | | | | | |
| continuing | | | | | | | | | | |
| operations | | | | | | | | | | |
| before | | | | | | | | | | |
| impairment | | | | | | | | | | |
| and income | | | | | | | | | | |
| tax1, 2 | | | | | | | | | | |
+---------------+----------+----------+---------+------------+----------+---------+-------------+----------+--------------+-----------+
| | | | | | | | | | | |
+---------------+----------+----------+---------+------------+----------+---------+-------------+----------+--------------+-----------+
| Other | | | | | | | | | | |
| segment | | | | | | | | | | |
| information | | | | | | | | | | |
+---------------+----------+----------+---------+------------+----------+---------+-------------+----------+--------------+-----------+
| Depreciation3 | (5,362) | (19,292) | (8,235) | (15,324) | (29,510) | (4,868) | (202) | (1,129) | - | (83,922) |
+---------------+----------+----------+---------+------------+----------+---------+-------------+----------+--------------+-----------+
| Non-cash | - | - | - | - | - | - | - | (6,185) | - | (6,185) |
| expenses | | | | | | | | | | |
+---------------+----------+----------+---------+------------+----------+---------+-------------+----------+--------------+-----------+
| Impairment | (15,263) | - | (4,805) | - | - | 3,446 | (10,091) | - | - | (26,713) |
| of assets | | | | | | | | | | |
+---------------+----------+----------+---------+------------+----------+---------+-------------+----------+--------------+-----------+
| | | | | | | | | | | |
+---------------+----------+----------+---------+------------+----------+---------+-------------+----------+--------------+-----------+
| Assets | | | | | | | | | | |
+---------------+----------+----------+---------+------------+----------+---------+-------------+----------+--------------+-----------+
| Current | 5,239 | 21,004 | 2,708 | 51,228 | 33,190 | 8,307 | - | 1,118 | - | 122,794 |
| assets | | | | | | | | | | |
+---------------+----------+----------+---------+------------+----------+---------+-------------+----------+--------------+-----------+
| Capital | 3,484 | 29,688 | 16,579 | 24,117 | 26,113 | 480 | 5,778 | 2,296 | - | 108,535 |
| expenditure | | | | | | | | | | |
+---------------+----------+----------+---------+------------+----------+---------+-------------+----------+--------------+-----------+
| Other | 3,630 | 43,291 | 43,995 | 31,765 | 174,057 | 9,009 | 91,322 | 11,265 | - | 408,334 |
| non-current | | | | | | | | | | |
| assets4 | | | | | | | | | | |
+---------------+----------+----------+---------+------------+----------+---------+-------------+----------+--------------+-----------+
| Total | 12,353 | 93,983 | 63,282 | 107,110 | 233,360 | 17,796 | 97,100 | 14,679 | - | 639,663 |
| segment | | | | | | | | | | |
| assets | | | | | | | | | | |
+---------------+----------+----------+---------+------------+----------+---------+-------------+----------+--------------+-----------+
| Not | | | | | | | | 666,194 | | 666,194 |
| reportable | | | | | | | | | | |
| assets | | | | | | | | | | |
+---------------+----------+----------+---------+------------+----------+---------+-------------+----------+--------------+-----------+
| Total | 12,353 | 93,983 | 63,282 | 107,110 | 233,360 | 17,796 | 97,100 | 680,873 | | 1,305,857 |
| assets | | | | | | | | | | |
+---------------+----------+----------+---------+------------+----------+---------+-------------+----------+--------------+-----------+
1. The profit for each operating segment does not include administrative
expenses of US$51,068,000, other income of US$13,283,000, other expenses of
US$20,577,000, impairment of property, plant and equipment of US$26,713,000,
share of gains of associates and joint ventures of US$47,223,000, finance income
of US$28,684,000, finance cost of US$47,296,000, foreign exchange loss of
US$256,000 and the positive effect of others of US$2,160,000.
2. The profit for the operating segments Ares, Arcata, Selene and Pallancata
includes an exceptional item in cost of sales of US$6,918,000.
3. Includes US$11,000 of depreciation capitalised in Minera Hochschild Mexico
S.A. de C.V. due to the San Felipe project.
4. Includes the goodwill of San José unit amounting to US$2,091,000.
(a) Reportable segment information
+-----------------+---------+----------+---------+------------+----------+---------+-------------+-----------+--------------+----------+
| | Ares | Arcata | Selene | Pallancata | San | Moris | Exploration | Other | Adjustments | Total |
| | US$000 | US$000 | US$000 | US$000 | José | US$000 | US$000 | US$000 | and | US$000 |
| | | | | | US$000 | | | | eliminations | |
| | | | | | | | | | US$000 | |
+-----------------+---------+----------+---------+------------+----------+---------+-------------+-----------+--------------+----------+
| Year ended | | | | | | | | | | |
| 31 December | | | | | | | | | | |
| 2008 | | | | | | | | | | |
+-----------------+---------+----------+---------+------------+----------+---------+-------------+-----------+--------------+----------+
| Revenue for | 105,998 | 119,945 | 37,142 | 56,307 | 88,891 | 25,372 | - | 124 | - | 433,779 |
| external | | | | | | | | | | |
| costumers | | | | | | | | | | |
+-----------------+---------+----------+---------+------------+----------+---------+-------------+-----------+--------------+----------+
| Inter | - | - | 163 | 1,381 | 22,805 | - | - | 5,270 | (29,619) | - |
| segment | | | | | | | | | | |
| revenue | | | | | | | | | | |
+-----------------+---------+----------+---------+------------+----------+---------+-------------+-----------+--------------+----------+
| Total | 105,998 | 119,945 | 37,305 | 57,688 | 111,696 | 25,372 | - | 5,394 | (29,619) | 433,779 |
| revenue | | | | | | | | | | |
+-----------------+---------+----------+---------+------------+----------+---------+-------------+-----------+--------------+----------+
| | | | | | | | | | | |
+-----------------+---------+----------+---------+------------+----------+---------+-------------+-----------+--------------+----------+
| Profit/(loss | 44,936 | 60,045 | 4,358 | 18,544 | 31,751 | 2,314 | (24,077) | (139,308) | (836) | (2,273) |
| from | | | | | | | | | | |
| continuing | | | | | | | | | | |
| operations | | | | | | | | | | |
| before | | | | | | | | | | |
| impairment | | | | | | | | | | |
| and income | | | | | | | | | | |
| tax1, 2,3 | | | | | | | | | | |
+-----------------+---------+----------+---------+------------+----------+---------+-------------+-----------+--------------+----------+
| | | | | | | | | | | |
+-----------------+---------+----------+---------+------------+----------+---------+-------------+-----------+--------------+----------+
| Other | | | | | | | | | | |
| segment | | | | | | | | | | |
| information | | | | | | | | | | |
+-----------------+---------+----------+---------+------------+----------+---------+-------------+-----------+--------------+----------+
| Depreciation3,4 | (5,381) | (16,842) | (6,837) | (9,428) | (15,763) | (5,013) | (111) | (1,154) | - | (60,529) |
+-----------------+---------+----------+---------+------------+----------+---------+-------------+-----------+--------------+----------+
| Non-cash | - | - | - | - | - | - | - | (23,975) | - | (23,975) |
| expenses | | | | | | | | | | |
+-----------------+---------+----------+---------+------------+----------+---------+-------------+-----------+--------------+----------+
| Impairment | - | - | (9,157) | - | - | (5,652) | (15,403) | - | - | (30,212) |
| of assets3 | | | | | | | | | | |
+-----------------+---------+----------+---------+------------+----------+---------+-------------+-----------+--------------+----------+
| | | | | | | | | | | |
+-----------------+---------+----------+---------+------------+----------+---------+-------------+-----------+--------------+----------+
| Assets | | | | | | | | | | |
+-----------------+---------+----------+---------+------------+----------+---------+-------------+-----------+--------------+----------+
| Current | 9,149 | 22,944 | 6,859 | 27,671 | 26,580 | 4,867 | - | 1,133 | - | 99,203 |
| assets | | | | | | | | | | |
+-----------------+---------+----------+---------+------------+----------+---------+-------------+-----------+--------------+----------+
| Capital | 10,438 | 43,977 | 47,226 | 14,619 | 80,398 | 2,234 | 63,386 | 48,993 | - | 311,271 |
| expenditure | | | | | | | | | | |
+-----------------+---------+----------+---------+------------+----------+---------+-------------+-----------+--------------+----------+
| Other | 9,271 | 15,010 | 12,681 | 22,745 | 106,102 | 7,354 | 11,714 | (32,766) | - | 152,111 |
| non-current | | | | | | | | | | |
| assets3,5 | | | | | | | | | | |
+-----------------+---------+----------+---------+------------+----------+---------+-------------+-----------+--------------+----------+
| Total | 28,858 | 81,931 | 66,766 | 65,035 | 213,080 | 14,455 | 75,100 | 17,360 | - | 562,585 |
| segment | | | | | | | | | | |
| assets | | | | | | | | | | |
+-----------------+---------+----------+---------+------------+----------+---------+-------------+-----------+--------------+----------+
| Not | - | - | - | - | - | - | - | 427,871 | - | 427,871 |
| reportable | | | | | | | | | | |
| assets | | | | | | | | | | |
+-----------------+---------+----------+---------+------------+----------+---------+-------------+-----------+--------------+----------+
| Total | 28,858 | 81,931 | 66,766 | 65,035 | 213,080 | 14,455 | 75,100 | 445,231 | - | 990,456 |
| assets | | | | | | | | | | |
+-----------------+---------+----------+---------+------------+----------+---------+-------------+-----------+--------------+----------+
1. The profit for each operating segment does not include administrative
expenses of US$69,878,000, other income of US$5,277,000, other expenses of
US$10,230,000, impairment of assets of US$30,212,000, share of losses of
associates and joint ventures of US$8,214,000, finance income of US$13,296,000,
finance cost of US$36,921,000, foreign exchange loss of US$7,161,000 and the
positive effect of others of US$4,735,000.
2. The profit for the operating segments Ares, Arcata, Selene and Pallancata
includes an exceptional item in cost of sales of US$234,000.
3. The amounts presented have been restated due to the retrospective
restatement for change to depreciation calculation disclosed in note 2.
4. Includes US$111,000 of depreciation capitalised in Minera Hochschild Mexico
S.A. de C.V. due to the San Felipe project.
5. Includes the goodwill of San José unit amounting to US$2,091,000.
(b) Geographical segment reporting
Based on the entity-wide disclosure stated in IFRS 8, the revenue for the period
based on the country in which the customer is located is as follows:
+------------------------------------------------------------+---------+----------+
| | Year ended |
| | 31 December |
+------------------------------------------------------------+--------------------+
| | 2009 | 2008 |
| | US$000 | US$000 |
+------------------------------------------------------------+---------+----------+
| External customer | | |
+------------------------------------------------------------+---------+----------+
| USA | 130,126 | 130,631 |
+------------------------------------------------------------+---------+----------+
| Peru | 159,339 | 125,171 |
+------------------------------------------------------------+---------+----------+
| Mexico | - | 15 |
+------------------------------------------------------------+---------+----------+
| Belgium | - | 6,011 |
+------------------------------------------------------------+---------+----------+
| Canada | 98,960 | 50,465 |
+------------------------------------------------------------+---------+----------+
| Germany | 84,121 | 54,570 |
+------------------------------------------------------------+---------+----------+
| Switzerland | 57,549 | 66,883 |
+------------------------------------------------------------+---------+----------+
| United Kingdom | 1,925 | - |
+------------------------------------------------------------+---------+----------+
| Korea | 7,721 | - |
+------------------------------------------------------------+---------+----------+
| Chile | - | 33 |
+------------------------------------------------------------+---------+----------+
| Total | 539,741 | 433,779 |
+------------------------------------------------------------+---------+----------+
| Inter-segment | | |
+------------------------------------------------------------+---------+----------+
| Peru | 1,161 | 25,164 |
+------------------------------------------------------------+---------+----------+
| Mexico | 1,866 | 4,455 |
+------------------------------------------------------------+---------+----------+
| Total | 542,768 | 463,398 |
+------------------------------------------------------------+---------+----------+
4. Acquisitions
(a) Acquisition of subsidiaries
Southwestern Resources Corporation
On 21 May 2009, the Group acquired a 100% interest of Southwestern Resources
Corp. ("Southwestern), a mineral exploration company with a number of gold,
silver and base metals projects adjacent to the Group's operations in southern
Peru. The acquisition has been accounted for using the purchase method of
accounting.
As at 30 June 2009, net assets were determined on a provisional basis. During
the second semester of 2009 the determination of fair value has been finalised
and adjustments have been made to the balances previously reported.
The net assets acquired in the transaction and the negative goodwill arising
were as follows:
+-------------------------------------------+-------------+-------------+----------+
| | Provisional | Adjustments | Updated |
| | fair value | to fair | fair |
| | US$000 | value | value |
+-------------------------------------------+-------------+-------------+----------+
| Cash and cash equivalents | 5,349 | - | 5,349 |
+-------------------------------------------+-------------+-------------+----------+
| Available-for-sale financial assets | 949 | - | 949 |
+-------------------------------------------+-------------+-------------+----------+
| Investment in associate | 1,669 | (1,308) | 361 |
+-------------------------------------------+-------------+-------------+----------+
| Property, plant and equipment | 24,266 | - | 24,266 |
+-------------------------------------------+-------------+-------------+----------+
| Other assets | 360 | (160) | 200 |
+-------------------------------------------+-------------+-------------+----------+
| Deferred income tax liability | (2,959) | (704) | (3,663) |
+-------------------------------------------+-------------+-------------+----------+
| Other current liabilities | (581) | 59 | (522) |
+-------------------------------------------+-------------+-------------+----------+
| Net assets | 29,053 | (2,113) | 26,940 |
+-------------------------------------------+-------------+-------------+----------+
| Negative goodwill arising on acquisition | (9,807) | 2,113 | (7,694) |
+-------------------------------------------+-------------+-------------+----------+
| Total acquisition cost | 19,246 | - | 19,246 |
+-------------------------------------------+-------------+-------------+----------+
The total acquisition cost of US$19,246,000 comprised a cash payment of
US$19,056,000 and cost of US$190,000 directly attributable to the acquisition.
The revenue of the entity if the acquisition date was the start of the period
was nil.
The loss of the entity if the acquisition date was the start of the period was
US$75,073.5 Acquisitions (continued)
(b) Acquisition of associates
Lake Shore Gold Corp.
During 2008, the Group acquired a 39.99% interest in Lake Shore Gold Corp.
('Lake Shore Gold'), 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.
- 5.00% acquired from a third party on 23 June 2008 for US$21,162,000.
The interest in Lake Shore Gold 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.
On 9 March 2009 the Group acquired 14,900,000 shares of Lake Shore for
US$18,003,000 as part of its commitment to participate in the bought-deal
financing agreement entered into by Lake Shore. After completion of the
transaction, the Group's ownership in Lake Shore was maintained at 39.99%.
On 6 November 2009 Lake Shore Gold acquired all of the outstanding common shares
of West Timmins Mining Inc. ("West Timmins") by issuing 103,951,125 common
shares and 8,550,264 options and warrants. At the date of the transaction the
Group held an interest of 18.40% in West Timmins (acquired between August and
November of 2009 for a total consideration of US$63,782,000). As a consequence
of the transaction the Group's interest in Lake Shore Gold was diluted from
39.99% to 26.10% and a net gain of US$42,279,000 was recognised as an
exceptional item in the profit and loss statement within the caption "Share on
post tax profit/loss of associates", refer to note 11. On the same day, 28.3
million shares held by the Group on West Timmins were converted into 20.7
million shares in Lake Shore Gold, increasing the Group's interest in Lake Shore
Gold to 32.20%.
During December 2009 the Group acquired an additional interest of 3.88% for a
total consideration of US$86,168,000. Also, at 31 December 2009 the accumulated
interest held by the Group of 36.09% was diluted to 35.69% due to the issuance
of a package of shares, options and warrants by Lake Shore Gold. The total loss
recognised in connection with the dilution of US$4,493,000 is recognised as an
exceptional item in the profit and loss statement within the caption "Share on
post tax profit/loss of associates", refer to note 11.
Gold Resource Corporation
In connection with the Strategic Alliance Agreement signed with Gold Resource
Corporation, an underground precious metals mining company with a number of
development projects in Mexico, the Group purchased 1,670,000 common shares
(4.9%) for US$5,010,000 on 5 December 2008. The Group also acquired an option to
purchase a further 4,330,000 common shares for US$12,990,000 (US$3 per share).
On 25 February 2009, the Group exercised its option to purchase a further
4,330,000 common shares. As a result of the acquisition of the second tranche,
the Group held a 13.6% interest in Gold Resource Corporation and appointed one
of the four directors, giving the Group 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 since 25
February 2009.
On 30 June 2009, the Group exercised its option to purchase an additional
5,000,000 common shares for a total cash consideration of US$20,000,000.
The purchase was completed in two tranches: US$5,000,000 which closed on 30 June
2009 and a second tranche of US$15,000,000 which closed on 20 July 2009.
On 16 December 2009, the Group purchased 1,954,795 common shares for a total
cash consideration of US$16,000,000. As at 31 December 2009 the Group owns a
25.0% interest in Gold Resource Corp.
(c) Acquisition of minority interest
Minas Santa Maria de Moris
On 5 June 2009, the Group acquired the remaining 30% interest in Minas Santa
Maria de Moris from its former partner Exmin S.A. de C.V., obtaining full
ownership of its subsidiary for a total cash consideration of US$1,500,000.
In compliance with the Group's accounting policy, the difference between the
consideration paid of US$1,500,000 and the carrying value of the minority
interest at the acquisition date of US$5,650,000 has been recognised as an
increase of retained earnings.
The revenue of the entity in the period, if the acquisition date was the start
of the period was US$26,440,000.
The profit of the entity in the period, if the acquisition date was the start of
the period was US$9,074,000.
5. Other income and other expenses
+---------------------------------+----------+------+-------------+------+----------+-------------+-------------+------+----------+
| | Year ended 31 | Year ended 31 December 2008 | |
| | December 2009 | | |
+--------------------------------------------+---------------------------+---------------------------------------------+----------+
| | Before | Exceptional | Total | Before | Exceptional | Total |
| | exceptional | items | US$000 | exceptional | items | US$000 |
| | items | US$000 | | items | US$000 | |
| | US$000 | | | US$000 | | |
+---------------------------------+-----------------+-------------+-----------------+-------------+-------------+-----------------+
| Other income: | | | | | | |
+---------------------------------+-----------------+-------------+-----------------+-------------+-------------+-----------------+
| Export incentive | 1,921 | - | 1,921 | 2,622 | - | 2,622 |
+---------------------------------+-----------------+-------------+-----------------+-------------+-------------+-----------------+
| Gain on recovery of expenses | 472 | - | 472 | 225 | - | 225 |
+---------------------------------+-----------------+-------------+-----------------+-------------+-------------+-----------------+
| Gain on sale of property, plant | - | 153 | 153 | - | 252 | 252 |
| and equipment | | | | | | |
+---------------------------------+-----------------+-------------+-----------------+-------------+-------------+-----------------+
| Lease rentals | 302 | - | 302 | 217 | - | 217 |
+---------------------------------+-----------------+-------------+-----------------+-------------+-------------+-----------------+
| Recovery of impairment of | - | 584 | 584 | - | - | - |
| deposits in Kaupthing, Singer | | | | | | |
| and Friedlander Bank1 | | | | | | |
+---------------------------------+-----------------+-------------+-----------------+-------------+-------------+-----------------+
| Negative goodwill on | - | 7,694 | 7,694 | - | - | - |
| acquisition of subsidiary | | | | | | |
| (refer to note 4) | | | | | | |
+---------------------------------+-----------------+-------------+-----------------+-------------+-------------+-----------------+
| Reversal of Electroperu | - | 351 | 351 | | | |
| contingency2 | | | | | | |
+---------------------------------+-----------------+-------------+-----------------+-------------+-------------+-----------------+
| Other | 1,806 | - | 1,806 | 1,961 | - | 1,961 |
+---------------------------------+-----------------+-------------+-----------------+-------------+-------------+-----------------+
| Total | 4,501 | 8,782 | 13,3283 | 5,025 | 252 | 5,277 |
+---------------------------------+-----------------+-------------+-----------------+-------------+-------------+-----------------+
| Other expenses: | | | | | | |
+---------------------------------+-----------------+-------------+-----------------+-------------+-------------+-----------------+
| Increase in provision for mine | (11,526) | - | (11,526) | (3,216) | - | (3,216) |
| closure3 | | | | | | |
+---------------------------------+-----------------+-------------+-----------------+-------------+-------------+-----------------+
| Impairment of deposits in | - | - | - | - | (1,292) | (1,292) |
| Kaupthing, Singer and | | | | | | |
| Friedlander Bank1 | | | | | | |
+---------------------------------+-----------------+-------------+-----------------+-------------+-------------+-----------------+
| Electroperu contingency2 | - | - | - | - | (692) | (692) |
+---------------------------------+-----------------+-------------+-----------------+-------------+-------------+-----------------+
| Cost of maintenance of | - | - | - | (1,165) | - | (1,165) |
| equipment | | | | | | |
+---------------------------------+-----------------+-------------+-----------------+-------------+-------------+-----------------+
| Termination benefits4 | - | (662) | (662) | - | - | - |
+---------------------------------+-----------------+-------------+-----------------+-------------+-------------+-----------------+
| Loss on sale of other assets | (1,635) | - | (1,635) | - | - | - |
+---------------------------------+-----------------+-------------+-----------------+-------------+-------------+-----------------+
| Compensation claims provision5 | (1,850) | - | (1,850) | (354) | - | (354) |
+---------------------------------+-----------------+-------------+-----------------+-------------+-------------+-----------------+
| Provision for obsolescence of | (1,128) | (585) | (1,713) | (634) | - | (634) |
| supplies6 | | | | | | |
+---------------------------------+-----------------+-------------+-----------------+-------------+-------------+-----------------+
| Impairment of trade | (1,116) | | (1,116) | (336) | - | (336) |
| receivables7 | | | | | | |
+---------------------------------+-----------------+-------------+-----------------+-------------+-------------+-----------------+
| Other | (2,075) | - | (2,075) | (2,541) | - | (2,541) |
+---------------------------------+-----------------+-------------+-----------------+-------------+-------------+-----------------+
| Total | (19,330) | (1,247) | (20,577) | (8,246) | (1,984) | (10,230) |
+---------------------------------+-----------------+-------------+-----------------+-------------+-------------+-----------------+
| | | | | | | | | | |
+---------------------------------+----------+------+-------------+------+----------+-------------+-------------+------+----------+
1 Most of those funds were recovered during 2009 and therefore an exceptional
gain recognised to reverse part of the impairment recorded during 2008 In 2008,
this amount represents the impairment of cash deposits with Kaupthing, Singer
and Friedlander Bank which went into administration in October 2008.
2 Compañía Minera Ares has a dispute with Electroperú S.A. regarding the
electric power it used during November and December 2002, and January, February
and March 2003 which was simultaneously billed by Electroperú and Sociedad
Eléctrica del Sur Oeste S.A. (SEAL). Compañía Minera Ares has filed a claim with
Osinergim (the Peruvian power regulator) claiming that the billing should be
only for the actual power consumed by the company and that Electroperú and SEAL
should each have half the billing. Electroperú has filed an administrative court
action against the resolution issued by Osinergim and initiated an arbitration
process seeking to additionally collect S/.832,135 (US$264,842) plus interest.
Management, having consulted legal counsel, considered that there was a
reasonable possibility that the outcome of these proceedings would not be
favourable for Compañía Minera Ares, and accordingly had provided in full for
the claim during 2008. At the end of 2009 the calculation was updated,
determining a reversal of US$351,000 to reflect the actual estimation of the
claim amount.
3 In 2009 corresponds to changes in the estimated mine closure costs of closed
operations in Peru of US$11,800,000 (2008: US$2,288,000), net by the gain
generated due to the change in the discount rate of US$274,000 (2008: loss of
US$928,000).
4 Represents the termination benefits paid to the employees due to the closing
of the Selene mine.
5 Corresponds to compensation claims provisions related to the Peruvian
companies.
6 Mainly corresponds to the write-off of supplies at the Sipán mine that could
not be sold or used in the other mine units of Perú and the obsolescence of
supplies at the Selene mine due to the closure of the mine.
7 Mainly corresponds to the impairment of a trade receivable from a customer in
Perú. In 2008 mainly corresponds to the amount accrued for impairment of other
receivables.
6. Finance income and finance costs
+-------------------------+-------------+-------------+----------+-------------+-------------+-----------+
| | Year ended 31 | Year ended 31 |
| | December 2009 | December 2008 |
+-------------------------+--------------------------------------+---------------------------------------+
| | Before | Exceptional | Total | Before | Exceptional | Total |
| | exceptional | items | US$000 | exceptional | items | US$000 |
| | items | US$000 | | items | US$000 | |
| | US$000 | | | US$000 | | |
+-------------------------+-------------+-------------+----------+-------------+-------------+-----------+
| Finance income: | | | | | | |
+-------------------------+-------------+-------------+----------+-------------+-------------+-----------+
| Interest on time | 819 | - | 819 | 5,934 | - | 5,934 |
| deposits1 | | | | | | |
+-------------------------+-------------+-------------+----------+-------------+-------------+-----------+
| Gain from changes in | - | 9,045 | 9,045 | 304 | 2,301 | 2,605 |
| the fair value of | | | | | | |
| financial instruments2 | | | | | | |
+-------------------------+-------------+-------------+----------+-------------+-------------+-----------+
| Gain on sale of | - | 623 | 623 | - | 1,613 | 1,613 |
| available-for-sale | | | | | | |
| financial assets3 | | | | | | |
+-------------------------+-------------+-------------+----------+-------------+-------------+-----------+
| Gain on exchange of | - | 12,632 | 12,632 | - | - | - |
| available-for-sale | | | | | | |
| financial assets4 | | | | | | |
+-------------------------+-------------+-------------+----------+-------------+-------------+-----------+
| Interest on loans to | 2,609 | - | 2,609 | 2,623 | - | 2,623 |
| minority shareholders | | | | | | |
| (note 12) | | | | | | |
+-------------------------+-------------+-------------+----------+-------------+-------------+-----------+
| Change in discount | 2,837 | - | 2,837 | - | - | - |
| rate5 | | | | | | |
+-------------------------+-------------+-------------+----------+-------------+-------------+-----------+
| Interest on loans to | - | - | - | 47 | - | 47 |
| third parties | | | | | | |
+-------------------------+-------------+-------------+----------+-------------+-------------+-----------+
| Other | 119 | - | 119 | 474 | - | 474 |
+-------------------------+-------------+-------------+----------+-------------+-------------+-----------+
| Total | 6,384 | 22,300 | 28,684 | 9,382 | 3,914 | 13,296 |
+-------------------------+-------------+-------------+----------+-------------+-------------+-----------+
| Finance costs: | | | | | | |
+-------------------------+-------------+-------------+----------+-------------+-------------+-----------+
| Interest on bank loans | (13,976) | - | (13,976) | (13,387) | - | (13,387) |
| and long-term debt | | | | | | |
+-------------------------+-------------+-------------+----------+-------------+-------------+-----------+
| Interest on convertible | (1,663) | - | (1,663) | - | - | - |
| bond (note 12) | | | | | | |
+-------------------------+-------------+-------------+----------+-------------+-------------+-----------+
| Unwind of discount | (278) | - | (278) | (4,590) | - | (4,590) |
| rate6 | | | | | | |
+-------------------------+-------------+-------------+----------+-------------+-------------+-----------+
| Loss from changes in | (25,962) | - | (25,962) | - | - | - |
| the fair value of | | | | | | |
| forward contracts7 | | | | | | |
+-------------------------+-------------+-------------+----------+-------------+-------------+-----------+
| Loss from changes in | (2,452) | (1,256) | (3,708) | - | (6,246) | (6,246) |
| the fair value of | | | | | | |
| financial instruments8 | | | | | | |
+-------------------------+-------------+-------------+----------+-------------+-------------+-----------+
| Impairment of | - | - | - | - | (11,421) | (11,421) |
| available-for-sale | | | | | | |
| financial assets9 | | | | | | |
+-------------------------+-------------+-------------+----------+-------------+-------------+-----------+
| Premium paid on | - | - | - | - | (421) | (421) |
| purchase of | | | | | | |
| available-for-sale | | | | | | |
| financial assets10 | | | | | | |
+-------------------------+-------------+-------------+----------+-------------+-------------+-----------+
| Other | (1,709) | | (1,709) | (856) | - | (856) |
+-------------------------+-------------+-------------+----------+-------------+-------------+-----------+
| Total | (46,040) | (1,256) | (47,296) | (18,833) | (18,088) | (36,921) |
+-------------------------+-------------+-------------+----------+-------------+-------------+-----------+
1 Mainly corresponds to interest on liquidity funds.
2 In 2009 the amount mainly corresponds to the gain realised upon the exercise
of an option over shares in Gold Resource Corp. on 25 February 2009 of
US$5,493,000, the gain of the option contract to buy 3,750,000 shares of Gold
Resource Corp. of US$1,912,500 and the change in the fair value of Fortuna
Silver Mine Inc. warrants of US$1,639,000. In 2008 the amount corresponds to the
change in the fair value of the option over 4,330,000 shares of Gold Resource
Corp. of US$2,301,000 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 of removing the risk
of fluctuations in metal prices.
3 In 2009 corresponds to the sale of 3,287,570 shares in Fortuna Silver Mines
Inc. resulting in a realised gain of US$623,000 which has been recycled from
equity into the income statement. In 2008 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.
4 Mainly corresponds to the gain from change in the fair value of West Timmins
Mining Inc. shares. Between August and November of 2009 the Group acquired 18.4%
interest in West Timmins Mining Inc. for a total consideration of US$63,782,000.
These shares were subsequently exchanged for Lake Shore Gold shares on 6
November 2009 realising a gain of US$12,129,000 (includes transaction costs of
US$394,000). In addition includes the gain for receiving shares of Dia Bras
Exploration due to the merger with EXMIN Resources Inc. of US$391,000 and for
receiving shares of Lara Exploration Ltd. due to the merger with Maxy Gold Corp.
of US$112,000.
5 Corresponds to the gain arising on the reduction in the discount rate used to
the calculation of the recoverable amount of VAT of Minera Santa Cruz of
US$2,837,000 (2008:Nil)
6 In 2009 corresponds to the unwind of the discount on the provision for mine
closure of US$278,000. In 2008 corresponds to the unwind of the discount on the
provision for mine closure of US$669,000 (refer to note 13) and the unwind of
discount on VAT of Minera Santa Cruz of US$3,921,000.
7 Corresponds to the realised loss due to changes in the fair value of
derivative instruments, being the future contracts of gold and silver signed
with Citibank, JP Morgan and INTL Commodities Inc. with the intention to remove
the risk of the fluctuations in metal prices.
8 In 2009 corresponds to the loss due to changes in the fair value of the zero
cost collar contracts signed by Cia. Minera Ares during the period. These
contracts are over 5,200,000 ounces of silver, with a cap of US$17/oz for
1,400,000 ounces, US$19.5/oz for 400,000 ounces and US$19.95/oz for 400,000
ounces, and a floor of US$11.00/oz. and contracts with a cap of US$20.92/oz and
floor of US$13.80/oz for 1,500,000 ounces, and a cap of US$21/oz and a floor of
US$14/oz
for 1,500,000 ounces. The contracts expire between January and
December 2010. In addition includes a loss of US$1,256,000 relating to the fair
value of the swap contract signed with BBVA and Citibank to fix the interest
rate of the JP Morgan led syndicated loan in 1.75% (refer to note 12). In 2008
mainly corresponds
to the change in fair value of warrants in Fortuna Silver
Mines Inc. of US$6,245,000.
9 Corresponds to the impairment of the investment in the shares of EXMIN
(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).
10 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.
Interest income and expense from assets and liabilities that are not at fair
value through the profit and loss are as follows:
+------------------------------------------------------------+----------+-----------+
| | As at 31 |
| | December |
+------------------------------------------------------------+----------------------+
| | 2009 | 2008 |
| | US$000 | US$000 |
+------------------------------------------------------------+----------+-----------+
| Interest income from financial assets that are not at fair | 3,428 | 8,604 |
| value through the profit and loss | | |
+------------------------------------------------------------+----------+-----------+
| Interest expense from financial liabilities that are not | (15,639) | (13,387) |
| at fair value through the profit and loss | | |
+------------------------------------------------------------+----------+-----------+
| Total | (12,211) | (4,783) |
+------------------------------------------------------------+----------+-----------+
7. Income tax expense
+---------------------------------+-------------+-------------+------+----------+-------------+-------------+------+----------+
| | Year ended 31 | Year ended 31 December 2008 | |
| | December 2009 | | |
+---------------------------------+----------------------------------+---------------------------------------------+----------+
| | Before | Exceptional | Total | Before | Exceptional | Total |
| | exceptional | items1 | US$000 | exceptional | items | US$000 |
| | items | US$000 | | items | US$000 | |
| | US$000 | | | US$000 | | |
+---------------------------------+-------------+-------------+-----------------+-------------+-------------+-----------------+
| Current tax: | | | | | | |
+---------------------------------+-------------+-------------+-----------------+-------------+-------------+-----------------+
| Current tax charge from | 30,946 | (2,275) | 28,671 | 13,058 | (56) | 13,002 |
| continuing operations | | | | | | |
+---------------------------------+-------------+-------------+-----------------+-------------+-------------+-----------------+
| | 30,946 | (2,275) | 28,671 | 13,058 | (56) | 13,002 |
+---------------------------------+-------------+-------------+-----------------+-------------+-------------+-----------------+
| Deferred taxation: | | | | | | |
+---------------------------------+-------------+-------------+-----------------+-------------+-------------+-----------------+
| Origination and reversal of | 12,486 | (8,943) | 3,543 | 10,814 | (5,444) | 5,370 |
| temporary differences from | | | | | | |
| continuing operations | | | | | | |
+---------------------------------+-------------+-------------+-----------------+-------------+-------------+-----------------+
| | 12,486 | (8,943) | 3,543 | 10,814 | (5,444) | 5,370 |
+---------------------------------+-------------+-------------+-----------------+-------------+-------------+-----------------+
| Withholding taxes | 1,256 | - | 1,256 | 895 | - | 895 |
+---------------------------------+-------------+-------------+-----------------+-------------+-------------+-----------------+
| Total taxation charge in the | 44,688 | (11,218) | 33,470 | 24,767 | (5,500) | 19,267 |
| income statement | | | | | | |
+---------------------------------+-------------+-------------+-----------------+-------------+-------------+-----------------+
| | | | | | | | | |
+---------------------------------+-------------+-------------+------+----------+-------------+-------------+------+----------+
1. This amount corresponds to the related tax impact of exceptional items. This
principally relates to a current tax credit of US$2,076,000 in connection with
the one off bonus paid to the mining workers in Peru (2008: Nil) and
US$9,048,000 deferred tax credit in connection with an impairment loss
recognised in the period (2008: US$3,736,000).
The weighted average statutory income tax rate was 30.1% for 2009 and 7.5% for
2008. 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:
+------------------------------------------------------------+----------+------+----------+
| | As at 31 | |
| | December | |
+------------------------------------------------------------+-----------------+----------+
| | 2009 | (Restated) 2008 |
| | US$000 | US$000 |
+------------------------------------------------------------+----------+-----------------+
| Profit from continuing operations before income tax | 154,810 | (2,273) |
+------------------------------------------------------------+----------+-----------------+
| At average statutory income tax rate of 30.1% (2008: | 46,702 | 171 |
| (7.5)%) | | |
+------------------------------------------------------------+----------+-----------------+
| Expenses not deductible for tax purposes | 2,049 | 5,315 |
+------------------------------------------------------------+----------+-----------------+
| Non-taxable income | (6,662) | (2,055) |
+------------------------------------------------------------+----------+-----------------+
| Non-taxable negative goodwill1 | (2,308) | - |
+------------------------------------------------------------+----------+-----------------+
| Deferred tax recognised on special investment regime2 | (629) | (6,063) |
+------------------------------------------------------------+----------+-----------------+
| Recognition of previously unrecognised deferred tax | (4,222) | (1,102) |
| assets3 | | |
+------------------------------------------------------------+----------+-----------------+
| Non-taxable share of (gains)/losses of associates | (13,276) | 2,534 |
+------------------------------------------------------------+----------+-----------------+
| Net deferred tax assets generated in the year not | 11,204 | 13,871 |
| recognised | | |
+------------------------------------------------------------+----------+-----------------+
| Change in tax regime4 | (2,002) | (1,544) |
+------------------------------------------------------------+----------+-----------------+
| Change in statutory Income Tax Rate5 | (786) | 786 |
+------------------------------------------------------------+----------+-----------------+
| Foreign exchange rate effect6 | 25 | 7,731 |
+------------------------------------------------------------+----------+-----------------+
| Derecognition of deferred tax assets previously | 4,790 | - |
| recognised7 | | |
+------------------------------------------------------------+----------+-----------------+
| Other | (1,415) | (377) |
+------------------------------------------------------------+----------+-----------------+
| At average effective income tax rate of 21.62% (2008: | 33,470 | 19,267 |
| 847.65%) | | |
+------------------------------------------------------------+----------+-----------------+
| Taxation charge attributable to continuing operations | 33,470 | 19,267 |
+------------------------------------------------------------+----------+-----------------+
| Total taxation charge in the income statement | 33,470 | 19,267 |
+------------------------------------------------------------+----------+-----------------+
| | | | |
+------------------------------------------------------------+----------+------+----------+
1. Corresponds to non-taxable negative goodwill on acquisition of Southwestern
Group.
2. 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)).
3. Increase in 2009 mainly corresponds to recognised tax losses upon tax
restructuring in Mexican companies of US$7,392,000 and the use of previously
unrecognised tax losses in 2009 of US$7,687,000. In 2008, mainly corresponds to
the tax effect of certain mine closure expenses which are now expected to be
deductible against taxable income, when incurred.
4. Corresponds to the effect of the change in the Mexican tax regime (refer to
note (ii)).
5. 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. This
increase was reversed during 2009 as the Group opted out of certain clauses of
the stability agreement, including the increase of 2% in income tax.
6 Mainly corresponds to the foreign exchange effect from converting tax bases
and monetary items from local currency to the functional currency.
7 Relates to the reversal of a deferred tax asset previously recognised as the
ability to utilise this potential deferred tax asset against future taxable
profits is now uncertain.
(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 for the feasibility studies for mining
projects. The investment recognised under this regime amounted to US$1,800,000
in 2009 (2008: US$17,300,000). No significant further deduction under this
special investment regime is expected in 2010 and subsequent years.
(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 charge 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 ISR Tax instead of IETU
in each period until the end of the mine's life. Therefore, at 31 December 2009
the Group reversed the deferred tax liability of US$2,002,000 recognised at 31
December 2008 in connection with IETU.
8. Basic and diluted earnings per share
Earnings per share ('EPS') is calculated by dividing profit for the year
attributable to equity shareholders of the Company by the weighted average
number of ordinary shares issued during the year.
The Company has dilutive potential ordinary shares.
As at 31 December 2009 and 2008, EPS has been calculated as follows:
+------------------------------------------------------------+---------+------+----------+
| | As at 31 | |
| | December | |
+------------------------------------------------------------+----------------+----------+
| | 2009 | 2008 |
+------------------------------------------------------------+---------+-----------------+
| Profit/(loss) for the year and from continuing operations | 98,080 | (24,718) |
| attributable | | |
| to equity holders of the Company US$000 | | |
+------------------------------------------------------------+---------+-----------------+
| Weighted average number of ordinary shares in issue | 314,043 | 307,350 |
| (thousands) | | |
+------------------------------------------------------------+---------+-----------------+
| Weighted average number of ordinary shares in issue and | 317,607 | 307,350 |
| dilutive potential ordinary shares (thousands) | | |
+------------------------------------------------------------+---------+-----------------+
| Basic and earning/(loss) per share from: | | |
+------------------------------------------------------------+---------+-----------------+
| Before exceptional items US$ | 0.17 | 0.05 |
+------------------------------------------------------------+---------+-----------------+
| Exceptional items US$ | 0.14 | (0.13) |
+------------------------------------------------------------+---------+-----------------+
| Total for the year and from continuing operations US$ | 0.31 | (0.08) |
+------------------------------------------------------------+---------+-----------------+
| Diluted earning/(loss) per share from: | | |
+------------------------------------------------------------+---------+-----------------+
| Before exceptional items US$ | 0.17 | 0.05 |
+------------------------------------------------------------+---------+-----------------+
| Exceptional items US$ | 0.14 | (0.13) |
+------------------------------------------------------------+---------+-----------------+
| Total for the year and from continuing operations US$ | 0.31 | (0.08) |
+------------------------------------------------------------+---------+-----------------+
| | | | |
+------------------------------------------------------------+---------+------+----------+
9. Property, plant and equipment
+--------------------------+-------------+-----------+------------+----------+---------+--------------+---------+
| | Mining | Land | Plant | Vehicles | Mine | Construction | Total |
| | properties | and | and | US$000 | closure | in progress | US$000 |
| | and | buildings | equipment1 | | asset | and capital | |
| | development | US$000 | US$000 | | US$000 | advances | |
| | costs | | | | | US$000 | |
| | US$000 | | | | | | |
+--------------------------+-------------+-----------+------------+----------+---------+--------------+---------+
| Year ended 31 December | | | | | | | |
| 2008 | | | | | | | |
+--------------------------+-------------+-----------+------------+----------+---------+--------------+---------+
| Cost | | | | | | | |
+--------------------------+-------------+-----------+------------+----------+---------+--------------+---------+
| At 1 January 2008 | 157,711 | 65,435 | 105,946 | 2,824 | 38,288 | 14,021 | 384,225 |
+--------------------------+-------------+-----------+------------+----------+---------+--------------+---------+
| Additions | 79,496 | 4,253 | 9,375 | 77 | - | 149,759 | 242,960 |
+--------------------------+-------------+-----------+------------+----------+---------+--------------+---------+
| Change in discount rate | | - | - | - | 3,113 | - | 3,113 |
+--------------------------+-------------+-----------+------------+----------+---------+--------------+---------+
| Disposals | - | - | (120) | (158) | - | - | (278) |
+--------------------------+-------------+-----------+------------+----------+---------+--------------+---------+
| Write-off | - | - | (24) | - | - | - | (24) |
+--------------------------+-------------+-----------+------------+----------+---------+--------------+---------+
| Change in mine closure | - | - | - | - | 280 | - | 280 |
| estimate | | | | | | | |
+--------------------------+-------------+-----------+------------+----------+---------+--------------+---------+
| Transfers and other | (2,192) | 30,748 | 68,535 | 746 | - | (97,837) | - |
| movements | | | | | | | |
+--------------------------+-------------+-----------+------------+----------+---------+--------------+---------+
| Transfers from | 2,960 | - | - | - | - | - | 2,960 |
| Evaluation and | | | | | | | |
| exploration assets | | | | | | | |
+--------------------------+-------------+-----------+------------+----------+---------+--------------+---------+
| Sales during | (125) | - | - | - | - | - | (125) |
| preoperating stage in | | | | | | | |
| Minera Santa Cruz | | | | | | | |
+--------------------------+-------------+-----------+------------+----------+---------+--------------+---------+
| Foreign exchange | (32) | (43) | (467) | (69) | - | (10) | (621) |
+--------------------------+-------------+-----------+------------+----------+---------+--------------+---------+
| At 31 December 2008 | 237,818 | 100,393 | 183,245 | 3,420 | 41,681 | 65,933 | 632,490 |
+--------------------------+-------------+-----------+------------+----------+---------+--------------+---------+
| Accumulated depreciation | | | | | | | |
| and impairment | | | | | | | |
+--------------------------+-------------+-----------+------------+----------+---------+--------------+---------+
| At 1 January 2008 | 50,027 | 12,858 | 31,749 | 860 | 31,703 | - | 127,197 |
+--------------------------+-------------+-----------+------------+----------+---------+--------------+---------+
| Restatement of | 14,001 | - | - | - | - | - | 14,001 |
| depreciation | | | | | | | |
+--------------------------+-------------+-----------+------------+----------+---------+--------------+---------+
| At 1 January 2008, as | 64,028 | 12,858 | 31,749 | 860 | 31,703 | - | 141,198 |
| restated | | | | | | | |
+--------------------------+-------------+-----------+------------+----------+---------+--------------+---------+
| Depreciation for the | 37,918 | 7,697 | 13,729 | 455 | 730 | - | 60,529 |
| year | | | | | | | |
+--------------------------+-------------+-----------+------------+----------+---------+--------------+---------+
| Impairment2 | 5,582 | 754 | 6,286 | 105 | 943 | 788 | 14,458 |
+--------------------------+-------------+-----------+------------+----------+---------+--------------+---------+
| 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 2008 | 107,516 | 21,311 | 51,628 | 1,306 | 33,376 | 788 | 215,925 |
+--------------------------+-------------+-----------+------------+----------+---------+--------------+---------+
| Net book amount at | 130,302 | 79,082 | 131,617 | 2,114 | 8,305 | 65,145 | 416,565 |
| 31 December 2008, as | | | | | | | |
| restated | | | | | | | |
+--------------------------+-------------+-----------+------------+----------+---------+--------------+---------+
+---------------------------+-------------+-----------+------------+----------+---------+--------------+----------+
| | Mining | Land | Plant | Vehicles | Mine | Construction | Total |
| | properties | and | and | US$000 | closure | in progress | US$000 |
| | and | buildings | equipment1 | | asset | and capital | |
| | development | US$000 | US$000 | | US$000 | advances | |
| | costs | | | | | US$000 | |
| | US$000 | | | | | | |
+---------------------------+-------------+-----------+------------+----------+---------+--------------+----------+
| Year ended 31 December | | | | | | | |
| 2009 | | | | | | | |
+---------------------------+-------------+-----------+------------+----------+---------+--------------+----------+
| Cost | | | | | | | |
+---------------------------+-------------+-----------+------------+----------+---------+--------------+----------+
| At 1 January 2009 | 237,818 | 100,393 | 183,245 | 3,420 | 41,681 | 65,933 | 632,490 |
+---------------------------+-------------+-----------+------------+----------+---------+--------------+----------+
| Additions | 50,969 | 381 | 16,032 | 160 | - | 32,357 | 99,899 |
+---------------------------+-------------+-----------+------------+----------+---------+--------------+----------+
| Acquisition of subsidiary | 23,800 | - | 347 | 119 | - | - | 24,266 |
+---------------------------+-------------+-----------+------------+----------+---------+--------------+----------+
| Change in discount rate | - | - | - | - | (1,770) | - | (1,770) |
+---------------------------+-------------+-----------+------------+----------+---------+--------------+----------+
| Disposals | (1,148) | - | (1,639) | (96) | - | (169) | (3,052) |
+---------------------------+-------------+-----------+------------+----------+---------+--------------+----------+
| Write-off | (27,718) | (1,894) | (5,496) | (162) | - | 62 | (35,208) |
+---------------------------+-------------+-----------+------------+----------+---------+--------------+----------+
| Change in mine closure | - | - | - | - | 15,220 | - | 15,220 |
| estimate | | | | | | | |
+---------------------------+-------------+-----------+------------+----------+---------+--------------+----------+
| Reclassification to | - | - | (5,891) | - | - | - | (5,891) |
| intangibles | | | | | | | |
+---------------------------+-------------+-----------+------------+----------+---------+--------------+----------+
| Transfers and other | - | 10,244 | 28,433 | 255 | - | (38,932) | - |
| movements | | | | | | | |
+---------------------------+-------------+-----------+------------+----------+---------+--------------+----------+
| Transfer to Evaluation | (1,921) | - | - | - | - | - | (1,921) |
| and exploration assets | | | | | | | |
+---------------------------+-------------+-----------+------------+----------+---------+--------------+----------+
| Foreign exchange | 2,087 | 3 | 546 | 12 | - | 33 | 2,681 |
+---------------------------+-------------+-----------+------------+----------+---------+--------------+----------+
| At 31 December 2009 | 283,887 | 109,127 | 215,577 | 3,708 | 55,131 | 59,284 | 726,714 |
+---------------------------+-------------+-----------+------------+----------+---------+--------------+----------+
| Accumulated depreciation | | | | | | | |
| and impairment | | | | | | | |
+---------------------------+-------------+-----------+------------+----------+---------+--------------+----------+
| At 1 January 2009 | 107,516 | 21,311 | 51,628 | 1,306 | 33,376 | 788 | 215,925 |
+---------------------------+-------------+-----------+------------+----------+---------+--------------+----------+
| Depreciation for the year | 45,229 | 13,719 | 23,345 | 375 | 1,254 | - | 83,922 |
| | | | | | | | |
+---------------------------+-------------+-----------+------------+----------+---------+--------------+----------+
| Write-off2 | (26,666) | (1,147) | (2,924) | (80) | 130 | - | (30,687) |
+---------------------------+-------------+-----------+------------+----------+---------+--------------+----------+
| Impairment3 | 9,671 | 4,390 | 5,093 | 50 | 2,172 | 310 | 21,686 |
+---------------------------+-------------+-----------+------------+----------+---------+--------------+----------+
| Disposals | - | - | (956) | (110) | - | - | (1,066) |
+---------------------------+-------------+-----------+------------+----------+---------+--------------+----------+
| Reclassification to | - | (606) | (1,559) | - | - | - | (2,165) |
| intangibles | | | | | | | |
+---------------------------+-------------+-----------+------------+----------+---------+--------------+----------+
| Foreign exchange | - | - | 141 | - | - | - | 141 |
+---------------------------+-------------+-----------+------------+----------+---------+--------------+----------+
| At 31 December 2009 | 135,750 | 37,667 | 74,768 | 1,541 | 36,932 | 1,098 | 287,756 |
+---------------------------+-------------+-----------+------------+----------+---------+--------------+----------+
| Net book amount at | 148,137 | 71,460 | 140,809 | 2,167 | 18,199 | 58,186 | 438,958 |
| 31 December 2009 | | | | | | | |
+---------------------------+-------------+-----------+------------+----------+---------+--------------+----------+
1 The carrying value of plant and equipment held under finance leases at 31
December 2009 was US$11,177,000 (2008: US$7,482,000). Additions during the year
included US$6,058,000 (2008: US$7,872,000) of plant and equipment under finance
leases. Leased assets are pledged as security for the related finance lease.
2 As the result of the planned cessation of mining activities at the Selene mine
unit, the remaining net book value of assets of US$4,523,000 was written off.
3 The amount of impairment losses recognised in profit and loss during the
period was US$21,686,000. As a result of the impairment testing, the Group has
impaired the Ares mine unit by US$15,041,000, the Liam property by US$10,091,00
and reversed the impairment loss of Moris unit of US$3,446,000 . The trigger for
the impairment was the proximity of the closing of Ares and the resulting
revision to the remaining recoverable reserves and resources, In addition the
company reassessed the fair value of the Liam properties, following the
acquisition of Southwestern (refer to note 4). The Group tested for impairment
the following mining units: Ares, San José and Moris. 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. 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. During the year ended 31 December 2008, the Group
recognised impairments totalling US$14,458,000, related to Selene mine unit
(US$8,208,000), Moris mine unit (US$5,652,000) and San Felipe project
(US$598,000). These impairments were triggered primarily by the effect of the
economic environment at that time, and the significantly reduced gold, silver
and zinc prices.
4 There where no borrowing costs capitalised in property, plant and equipment as
no significant qualifying assets were constructed during 2009.
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 $1,015/oz to $837.5/oz (2008:
from $750/oz to $879/oz) and silver prices range from $16.0/oz to $13.22/oz
(2008: from $11.84/oz to $13/oz).
- Estimation of reserves and resources - Reserves and resources are based on
management's estimates using appropriate exploration and evaluation techniques.
- Production volumes and grades - Tonnage produced was estimated at plant
capacity with 19 days of maintenance per year (2008: 12 days).
- 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 mining 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 | 2009 | 2009 |
| | Real | Real |
| | pre-tax | post-tax |
| | discount | % |
| | rate | |
| | % | |
+------------------------------------------------------------+----------+----------+
| Ares | 3.21 | 3.21 |
+------------------------------------------------------------+----------+----------+
| San José | 14.3 | 8.43 |
+------------------------------------------------------------+----------+----------+
| Moris | 5.43 | 3.91 |
+------------------------------------------------------------+----------+----------+
+------------------------------------------------------------+----------+----------+
| Mining unit | 2008 | 2008 |
| | Real | Real |
| | pre-tax | post-tax |
| | discount | % |
| | rate | |
| | % | |
+------------------------------------------------------------+----------+----------+
| Ares | 28.5 | 5.1 |
+------------------------------------------------------------+----------+----------+
| San José | 17.0 | 9.2 |
+------------------------------------------------------------+----------+----------+
| Moris | 5.97 | 4.3 |
+------------------------------------------------------------+----------+----------+
Cash flows used for impairment tests were based on the annual 2010 budget
presented and approved by the board in December 2009. The starting point in all
cases was January 2010. Individual cash flows are based on the annual 2010
budget and an estimated set of reserve and resource as of December 2009 provided
by Explorations and Operations. In addition, for the following years, the Group
includes any conservative adjustment to reflect the nature of each operation in
an accurate manner. In the case of revenue, production figures were estimated
considering reserve grade (after extracted tonnage) and full capacity. In the
case of operating expenses, all figures are based on the 2010 budget and the
main assumption was that any change in the foreign exchange rate would be offset
by a change in the inflation rate. Future capital expenditure is based on 2010
budget, excluding one off expenses and considering operation´s view on
developments and infrastructure, according the estimated set of reserves and
resources.
10. evaluation and exploration ASSETS
+-----------------------------------------------------------+--------+----------+
| | 2009 | 2008 |
| | US$000 | US$000 |
+-----------------------------------------------------------+--------+----------+
| At 1 January | 44,726 | 6,034 |
+-----------------------------------------------------------+--------+----------+
| Additions | 8,636 | 68,311 |
+-----------------------------------------------------------+--------+----------+
| Impairments1 | (222) | (15,754) |
+-----------------------------------------------------------+--------+----------+
| Write-off | (284) | - |
+-----------------------------------------------------------+--------+----------+
| Transfers and other movements | 1,921 | (2,960) |
+-----------------------------------------------------------+--------+----------+
| Foreign exchange | 1,051 | (10,905) |
+-----------------------------------------------------------+--------+----------+
| At 31 December | 55,828 | 44,726 |
+-----------------------------------------------------------+--------+----------+
1 The amount of impairment losses recognised in profit and loss during the
period was US$222,000. As a result of the impairment testing, the Group has
impaired the Ares mine unit by US$222,000. The trigger for the impairment was
the proximity of the closing of Ares and the resulting revision to the remaining
recoverable reserves and resources. The Group tested for impairment the
following mining units: Ares, San José and Moris. 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. The recoverable amount used in assessing the impairment
charges 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. During the year ended 31 December 2008, the Group recognised impairments
totalling US$15,754,000, related to Selene mine unit (US$949,000) and San Felipe
project (US$14,805,000). Refer to note 9 for the assumptions considered in the
impairment calculation.
2 There were no borrowing costs capitalised in evaluation and exploration
assets.
3 From the net book value at 31 December 2009, US$37,825,000 corresponds to the
investment in San Felipe (2008: US$36,552,000) (refer to note 15).
11. Investments accounted under equity method
+------------------------------------------------------------+---------+------+----------+
| | Year end 31 | |
| | December | |
+------------------------------------------------------------+----------------+----------+
| | 2009 | 2008 |
| | US$000 | US$000 |
+------------------------------------------------------------+---------+-----------------+
| Lake Shore Gold Corp(a) | 386,190 | 136,376 |
+------------------------------------------------------------+---------+-----------------+
| Minas Pacapausa S.A.C.(b) | - | (170) |
+------------------------------------------------------------+---------+-----------------+
| Cabo Sur(c) | (57) | (187) |
+------------------------------------------------------------+---------+-----------------+
| Gold Resource Corp.(d) | 62,467 | - |
+------------------------------------------------------------+---------+-----------------+
| Zincore Metals Inc.(e) | 2,065 | - |
+------------------------------------------------------------+---------+-----------------+
| Total | 450,665 | 136,019 |
+------------------------------------------------------------+---------+-----------------+
| | | | |
+------------------------------------------------------------+---------+------+----------+
(a) Lake Shore Gold Corp
The following table summarises the financial information of the Group's
investment in Lake Shore Gold Corp:
+------------------------------------------------------------+----------+------+----------+
| | Year ended | |
| | 31 December | |
+------------------------------------------------------------+-----------------+----------+
| | 2009 | 2008 |
| | US$000 | US$000 |
+------------------------------------------------------------+----------+-----------------+
| Share of the associate's statement of financial position: | | |
+------------------------------------------------------------+----------+-----------------+
| Current assets | 47,520 | 29,217 |
+------------------------------------------------------------+----------+-----------------+
| Non-current assets | 345,948 | 128,913 |
+------------------------------------------------------------+----------+-----------------+
| Current liabilities | (7,663) | (5,839) |
+------------------------------------------------------------+----------+-----------------+
| Non-current liabilities | (50,758) | (28,428) |
+------------------------------------------------------------+----------+-----------------+
| Net assets | 335,047 | 123,863 |
+------------------------------------------------------------+----------+-----------------+
| Goodwill on acquisition | 51,143 | 12,513 |
+------------------------------------------------------------+----------+-----------------+
| Carrying amount of the investment | 386,190 | 136,376 |
+------------------------------------------------------------+----------+-----------------+
| Share of the associate's revenue and losses: | | |
+------------------------------------------------------------+----------+-----------------+
| Revenue | - | - |
+------------------------------------------------------------+----------+-----------------+
| Profit/(Losses) 1 | 46,951 | (3,925) |
+------------------------------------------------------------+----------+-----------------+
| Carrying amount of the investment | 386,190 | 136,376 |
+------------------------------------------------------------+----------+-----------------+
| | | | |
+------------------------------------------------------------+----------+------+----------+
1 Share of the associate's profit in 2009 includes (1) a gain of US$101,503,000
from the Group's share in Lake Shore Gold's acquisition of 100% of West Timmins'
net assets, (2) a gain from the Group's share in the results of the period of
Lake Shore Gold of US$9,165,000, (3) a loss from dilution of the Group's
interest from 39.99% to 26.1% at 6 November 2009 of US$59,224,000, and (4) a
loss from dilution of the Group's interest from 36.09% to 35.69% at 31 December
2009 of US$4,493,000.
(b) Minas Pacapausa S.A.C.
On 21 June 2005, Minera Oro Vega S.A.C. ('Minorva', the partner of the Group's
Minera Suyamarca S.A.C. subsidiary) and Minera del Suroeste ('Misosa') entered
into an option and joint venture agreement ('Framework Agreement') in respect of
the Pacapausa properties located in Peru.
On 16 November 2007, Minera Suyamarca S.A.C. ('Suyamarca') signed an amendment
to the Framework Agreement with Misosa and Minorva, incorporating the terms
under which Suyamarca would acquire Minorva's contractual position. Under the
arrangement, Suyamarca paid US$200,000 to Minorva in exchange for its
contractual position in the Framework Agreement. The new joint venture company,
Minas Pacapausa S.A.C. ('Pacapausa'), was incorporated on 4 March 2008 and
Suyamarca contributed US$1,200,000 (solely funded by the Group) in exchange for
a 50% interest in Pacapausa. Subsequently, Minorva transferred to Pacapausa all
technical reports and other assets obtained as a result of its exploration
activities in the properties in exchange for a cash payment of US$1,200,000.
In compliance with the Group's policy, Pacapausa recognises all expenses related
to the project within exploration expenses as the project has not yet reached
the inferred mineral resource category.
On 21 May 2009 the Group acquired a 100% interest of Southwestern Resources
Corp., the parent company of Misosa and consequently, started to consolidate the
financial results of Pacapausa.
The following table summarises the financial information relating to the Group's
investment in Pacapausa:
+------------------------------------------------------------+--------+------+----------+
| | Year ended | |
| | 31 December | |
+------------------------------------------------------------+---------------+----------+
| | 2009 | 2008 |
| | US$000 | US$000 |
+------------------------------------------------------------+--------+-----------------+
| Share of the joint venture's statement of financial | | |
| position: | | |
+------------------------------------------------------------+--------+-----------------+
| Current assets | - | 10 |
+------------------------------------------------------------+--------+-----------------+
| Non-current assets | - | - |
+------------------------------------------------------------+--------+-----------------+
| Current liabilities | - | (180) |
+------------------------------------------------------------+--------+-----------------+
| Non-current liabilities | - | - |
+------------------------------------------------------------+--------+-----------------+
| Net assets | - | (170) |
+------------------------------------------------------------+--------+-----------------+
| Share of the joint venture's revenue and loss: | | |
+------------------------------------------------------------+--------+-----------------+
| Revenue | - | - |
+------------------------------------------------------------+--------+-----------------+
| Loss | (131) | (2,132) |
+------------------------------------------------------------+--------+-----------------+
| Carrying amount of the investment | - | (170) |
+------------------------------------------------------------+--------+-----------------+
| | | | |
+------------------------------------------------------------+--------+------+----------+
(c) Cabo Sur
On 21 February 2007, the Group signed an option and joint venture agreement with
Mirasol Resources Ltd. ('Mirasol'). Under the terms of the agreement, the Group
has the right to acquire a 51% interest in the Claudia project by investing,
over a period of four years, at least US$6,000,000 and making payments to
Mirasol of US$650,0000 within four years.
On 13 March 2007 Mirasol incorporated Cabo Sur S.A. ('Cabo Sur') and during 2008
transferred all the rights of the Claudia property into Cabo Sur. Until the
exercise of the Claudia's option, Mirasol and the Group will own 99% and 1% of
Cabo Sur, respectively. However, the Group exercises joint control over Cabo Sur
as the strategic financial and operating decisions require the consent of both
parties. Accordingly, in compliance with the Group's policy and IAS 31, the
investment has been treated as a jointly controlled entity accounted for using
the equity method.
In compliance with the Group's policy, Cabo Sur recognises all expenses related
to the project within exploration expenses
as the project has not yet
reached the inferred mineral resource category.
The following table summarises the financial information of the Group's
investment in Cabo Sur:
+------------------------------------------------------------+--------+------+----------+
| | Year ended | |
| | 31 December | |
+------------------------------------------------------------+---------------+----------+
| | 2009 | 2008 |
| | US$000 | US$000 |
+------------------------------------------------------------+--------+-----------------+
| Share of the joint venture's statement of financial | | |
| position: | | |
+------------------------------------------------------------+--------+-----------------+
| Current assets | 6 | 32 |
+------------------------------------------------------------+--------+-----------------+
| Non-current assets | 6 | 2 |
+------------------------------------------------------------+--------+-----------------+
| Current liabilities | (69) | (221) |
+------------------------------------------------------------+--------+-----------------+
| Non-current liabilities | - | - |
+------------------------------------------------------------+--------+-----------------+
| Net assets | (57) | (187) |
+------------------------------------------------------------+--------+-----------------+
| Share of the joint venture's revenue and loss: | | |
+------------------------------------------------------------+--------+-----------------+
| Revenue | - | - |
+------------------------------------------------------------+--------+-----------------+
| Loss | (61) | (2,157) |
+------------------------------------------------------------+--------+-----------------+
| Carrying amount of the investment | (57) | (187) |
+------------------------------------------------------------+--------+-----------------+
| | | | |
+------------------------------------------------------------+--------+------+----------+
(d) Gold Resource Corp.
The following table summarises the financial information of the Group's
investment in Gold Resource Corp:
+------------------------------------------------------------+----------+------+----------+
| | Year ended | |
| | 31 December | |
+------------------------------------------------------------+-----------------+----------+
| | 2009 | 2008 |
| | US$000 | US$000 |
+------------------------------------------------------------+----------+-----------------+
| Share of the joint venture's statement of financial | | |
| position: | | |
+------------------------------------------------------------+----------+-----------------+
| Current assets | 5,671 | - |
+------------------------------------------------------------+----------+-----------------+
| Non-current assets | 46,873 | - |
+------------------------------------------------------------+----------+-----------------+
| Current liabilities | (181) | - |
+------------------------------------------------------------+----------+-----------------+
| Non-current liabilities | (11,609) | - |
+------------------------------------------------------------+----------+-----------------+
| Net assets | 40,754 | - |
+------------------------------------------------------------+----------+-----------------+
| Goodwill on acquisition | 21,713 | |
+------------------------------------------------------------+----------+-----------------+
| Share of the joint venture's revenue and loss: | | - |
+------------------------------------------------------------+----------+-----------------+
| Revenue | - | - |
+------------------------------------------------------------+----------+-----------------+
| Loss | (1,240) | - |
+------------------------------------------------------------+----------+-----------------+
| Carrying amount of the investment | 62,467 | - |
+------------------------------------------------------------+----------+-----------------+
| | | | |
+------------------------------------------------------------+----------+------+----------+
(e) Zincore Metals Inc.
On 21 May 2009 the Group acquired 100% of Southwestern Resources Corporation.
Within the assets of the group was 38,100,000 shares of Zincore Metals Inc.
equivalent to a 48.2% of interest. On September 2009 Zincore Metals Inc. issued
24,060,000 shares resulting in a dilution of the Group´s interests to 36.8%.
Zincore Metals Inc. raised US$5,596,000 that generated a Group´s gain of
US$2,065,000.
The following table summarises the financial information of the Group's
investment in Zincore Metals Inc:
+------------------------------------------------------------+--------+------+----------+
| | Year ended | |
| | 31 December | |
+------------------------------------------------------------+---------------+----------+
| | 2009 | 2008 |
| | US$000 | US$000 |
+------------------------------------------------------------+--------+-----------------+
| Share of the joint venture's statement of financial | | |
| position: | | |
+------------------------------------------------------------+--------+-----------------+
| Current assets | 2,110 | - |
+------------------------------------------------------------+--------+-----------------+
| Non-current assets | 67 | - |
+------------------------------------------------------------+--------+-----------------+
| Current liabilities | (96) | - |
+------------------------------------------------------------+--------+-----------------+
| Non-current liabilities | (16) | - |
+------------------------------------------------------------+--------+-----------------+
| Net assets | 2,065 | - |
+------------------------------------------------------------+--------+-----------------+
| Share of the joint venture's revenue and profit: | | - |
+------------------------------------------------------------+--------+-----------------+
| Revenue | - | - |
+------------------------------------------------------------+--------+-----------------+
| Profit | 1,704 | - |
+------------------------------------------------------------+--------+-----------------+
| Carrying amount of the investment | 2,065 | - |
+------------------------------------------------------------+--------+-----------------+
| | | | |
+------------------------------------------------------------+--------+------+----------+
12. Borrowings
+-----------------------------------------------+---------+---------+---------+---------+----------+
| | As at 31 December |
+-----------------------------------------------+--------------------------------------------------+
| | | 2009 | | 2008 | |
+-----------------------------------------------+---------+---------+---------+---------+----------+
| | Non- | Current | Non- | Current | |
| | current | US$000 | current | US$000 | |
| | US$000 | | US$000 | | |
+-----------------------------------------------+---------+---------+---------+---------+----------+
| Secured bank loans | 115,854 | 34,773 | 202,094 | 56,625 | |
+-----------------------------------------------+---------+---------+---------+---------+----------+
| Amount due to minority shareholders | - | 75,570 | 29,598 | 40,409 | |
+-----------------------------------------------+---------+---------+---------+---------+----------+
| Convertible bond payable | 103,827 | 1,663 | - | - | |
+-----------------------------------------------+---------+---------+---------+---------+----------+
| Amounts due to related parties | - | 902 | - | 1,036 | |
+-----------------------------------------------+---------+---------+---------+---------+----------+
| Total | 219,681 | 112,908 | 231,692 | 98,070 | |
+-----------------------------------------------+---------+---------+---------+---------+----------+
(a) Secured bank loans
As at 31 December 2009, the balance corresponds to:
i. Pre shipment loans for a total amount of US$8,750,000 in Compañía Minera Ares
and US$20,000,000 in Minera Santa Cruz S.A. These obligations accrue an
effective annual interest rate ranging from 1.05% to 4.75% and are guaranteed by
the inventories and the trade receivables of the company. Pre shipments are
credit lines given by the Banks to pay obligations related to the exports of the
Group.
ii. Leasing agreement with Banco de Credito for an amount of US$5,693,000 in
Compañía Minera Ares. This obligation accrues an effective annual interest rate
ranging from 6.80% to 7.60%.
iii. Leasing agreement with BIF for an amount of US$3,016,000 in Compañía Minera
Ares. This obligation accrues an effective annual interest rate ranging from
7.15% to 8.25%.
iv. Leasing agreement with Interbank for an amount of US$296,000 in Compañía
Minera Ares. This obligation accrues an effective annual interest rate of 9.01%.
The following table demonstrates the present value and maturity of future
minimum lease payments as at 31 December 2009:
+------------------------------------------------------------+--------+------+----------+
| | As at 31 | |
| | December | |
+------------------------------------------------------------+---------------+----------+
| | 2009 | 2008 |
| | US$000 | US$000 |
+------------------------------------------------------------+--------+-----------------+
| Not later than one year | 4,406 | 2,705 |
+------------------------------------------------------------+--------+-----------------+
| Between 1 and 2 years | 3,664 | 2,604 |
+------------------------------------------------------------+--------+-----------------+
| Between 2 and 5 years | 935 | 1,898 |
+------------------------------------------------------------+--------+-----------------+
| Total | 9,005 | 7,207 |
+------------------------------------------------------------+--------+-----------------+
| | | | |
+------------------------------------------------------------+--------+------+----------+
The following table demonstrates the reconciliation between the total minimum
lease payments and the present value as at 31 December 2009 and 2008:
+------------------------------------------------------------+--------+------+----------+
| | As at 31 | |
| | December | |
+------------------------------------------------------------+---------------+----------+
| | 2009 | 2008 |
| | US$000 | US$000 |
+------------------------------------------------------------+--------+-----------------+
| Present value of leases | 9,005 | 7,207 |
+------------------------------------------------------------+--------+-----------------+
| Future interest | 718 | 728 |
+------------------------------------------------------------+--------+-----------------+
| Total minimum lease payments | 9,723 | 7,935 |
+------------------------------------------------------------+--------+-----------------+
| | | | |
+------------------------------------------------------------+--------+------+----------+
The carrying amount of net lease liabilities approximate their fair value.
v. Loan facility with a syndicate of lenders with JP Morgan Chase Bank N.A.
acting as the Administrative Agent. Total secured term loan facility of
US$200,000,000 that accrues an effective interest rate of LIBOR + 1% and is
guaranteed by all the equity share capital, free and clear of any liens, of
Compañía Minera Ares S.A.C. The balance as at 31 December 2009 is comprised of
the secured term loan facility of US$114,320,000 plus accrued interest of
$1,787,000 and net of transaction costs of US$3,235,000. During 2009 the Group
signed a swap contract with BBVA and Citibank to fix the interest rate at 1.75%.
The Company has granted the following guarantees on its $114,320,000 bank
syndicated loan:
- Pledge of all shares in Compañía Minera Ares (wholly-owned subsidiary).
- Subsidiary guarantees by certain wholly-owned subsidiaries whereby these
subsidiaries guarantee with their cash flows the repayment of the loan.
The main administrative and financial covenants that the Company and Compañía
Minera Ares must comply with during the term of the syndicated loan are as
follows:
- Quarterly unaudited and annual audited financial statements for Hochschild
Mining plc and Compañía Minera Ares.
- Investments in restricted and unrestricted subsidiaries based on an agreed
upon limit (unlimited within restricted subsidiaries).
- It is intended for every wholly-owned subsidiary to participate in the
subsidiary guarantee.
- Maintain the following ratios (at a consolidated and Compañía Minera Ares
level) beginning on the date of execution of the agreement and during the term
of effect of the loan:
- Interest expense coverage ratio greater than 3:1.
- Debt to EBITDA ratio lower than 2.5:1 from 2009 onwards
Compliance with the restrictive covenants described in the preceding paragraph
is overseen by Compañía Minera Ares management and the Administrative Agent. The
Group and Compañía Minera Ares have complied with the commitments
and
financial covenants mentioned in the syndicated loan agreement.
As at 31 December 2008, the balance corresponded to:
- Pre-shipment loans for a total amount of US$18,380,000 in Compañía Minera
Ares, US$11,280,000 in Compañía Minera Suyamarca S.A.C. and US$20,000,000 in
Minera Santa Cruz S.A. These obligations accrue an effective annual interest
rate ranging from 5.55% to 8.70% and are guaranteed by the inventories of the
company.
ii. Leasing agreement with Banco de Credito for an amount of US$7,207,000 in
Compañia Minera Ares. This obligation accrues an effective annual interest rate
ranging from 6.80% to 7.45%.
iii. Loan facility with a syndicate of lenders with JP Morgan Chase Bank N.A.
acting as the Administrative Agent. Total secured term loan facility of
US$200,000,000 that accrues an effective interest rate of LIBOR + 1% and is
guaranteed by all the equity share capital, free and clear of any liens, of
Compañia Minera Ares S.A.C. The balance as at 31 December 2008 is comprised of
the secured term loan facility of US$200,000,000 plus accrued interests of
US$4,260,000 and net of transaction costs of US$2,408,000.
(b) Amounts due to minority shareholders
As at 31 December 2009 the balance mainly corresponds to a loan from Minera
Andes Inc. to Minera Santa Cruz S.A. for an amount of US$67,124,000 (2008:
US$62,105,000) with interests rates between 7.86% and 12%. There is also a loan
of US$8,446,000 to Minera Santa Cruz S.A. from Minera Andes S.A. (2008:
US$7,902,000) with an interest rate of 12%.
(c) Convertible bond payable
Placement of US$115,000,000 of senior unsecured convertible bonds, due 2014,
which are convertible into ordinary shares
of Hochschild Mining plc. The
bonds have a coupon of 5.75% per annum payable semi-annually on 28 January and
28 July of each year. The issuer have the option to call the Bonds on or after
20 October 2012 and until maturity, in the event the trading price of the
ordinary shares exceed 130% of the conversion price over a certain period. In
addition, the Group has the right to redeem the Bonds if at any time the
aggregate principal amount of the Bonds outstanding is equal to or less than 15%
of the aggregate principal amount of the Bonds initially issued.
The following information has to be considered for the conversion into ordinary
shares:
- Conversion premium: 35% above the Reference Share Price
- Reference Share Price: GBP 2.95
- Initial Conversion Price: GBP 3.9825
- Fixed Exchange Rate: US$ 1.59 / GBP 1.00
The balance as at 31 December 2009 is comprised of the principal of
US$115,000,000 plus accrued interest of $1,663,000 and net of transaction costs
of US$2,741,000 and the bond equity component of US$8,432,000.
The maturity of non-current borrowings is as follows:
+------------------------------------------------------------+---------+------+----------+
| | As at 31 | |
| | December | |
+------------------------------------------------------------+----------------+----------+
| | 2009 | 2008 |
| | US$000 | US$000 |
+------------------------------------------------------------+---------+-----------------+
| Between 1 and 2 years | 31,586 | 81,284 |
+------------------------------------------------------------+---------+-----------------+
| Between 2 and 5 years | 188,095 | 150,408 |
+------------------------------------------------------------+---------+-----------------+
| Total | 219,681 | 231,692 |
+------------------------------------------------------------+---------+-----------------+
| | | | |
+------------------------------------------------------------+---------+------+----------+
The carrying amount of short-term borrowings approximates their fair value. The
carrying amount and fair value of the non-current borrowings are as follows:
+-----------------------------------------------+---------+----------+----------+------+----------+
| | Carrying amount | Fair Values |
| | as at 31 December | as at 31 |
| | | December |
+-----------------------------------------------+-------------------------------+-----------------+
| | 2009 | 2008 | 2009 US$000 | 2008 |
| | US$000 | US$000 | | US$000 |
+-----------------------------------------------+---------+----------+-----------------+----------+
| Bank loans | | | | |
+-----------------------------------------------+---------+----------+-----------------+----------+
| Secured | 115,854 | 202,094 | 116,358 | 213,408 |
+-----------------------------------------------+---------+----------+-----------------+----------+
| Amounts due to minority interest and related | - | 29,598 | - | 33,263 |
| parties (fixed rates) | | | | |
+-----------------------------------------------+---------+----------+-----------------+----------+
| Convertible bond payable | 103,827 | - | 126,331 | - |
+-----------------------------------------------+---------+----------+-----------------+----------+
| Total | 219,681 | 231,692 | 242,689 | 246,671 |
+-----------------------------------------------+---------+----------+-----------------+----------+
| | | | | | |
+-----------------------------------------------+---------+----------+----------+------+----------+
13. Provisions
+--------------------------------+-----------+----------+---------------+-----------+---------+----------+
| | Provision | Workers' | Contributions | Executive | Other | Total |
| | for mine | profit | to Peruvian | long-term | US$000 | US$000 |
| | closure1 | sharing | Government | incentive | | |
| | US$000 | US$000 | US$000 | plan2 | | |
| | | | | US$000 | | |
+--------------------------------+-----------+----------+---------------+-----------+---------+----------+
| At 1 January 2008 | 32,150 | 9,195 | 1,434 | 799 | 272 | 43,850 |
+--------------------------------+-----------+----------+---------------+-----------+---------+----------+
| Increase to existing provision | 2,105 | 4,273 | 944 | 302 | 962 | 8,586 |
+--------------------------------+-----------+----------+---------------+-----------+---------+----------+
| Accretion resulting from | 669 | - | - | - | - | 669 |
| unwinding of discount rate | | | | | | |
+--------------------------------+-----------+----------+---------------+-----------+---------+----------+
| Change in discount rate | 4,042 | - | - | - | - | 4,042 |
+--------------------------------+-----------+----------+---------------+-----------+---------+----------+
| Change in estimate | 1,409 | - | - | - | - | 1,409 |
+--------------------------------+-----------+----------+---------------+-----------+---------+----------+
| Payments | (1,476) | (13,248) | (1,368) | (1,101) | (21) | (17,214) |
+--------------------------------+-----------+----------+---------------+-----------+---------+----------+
| Foreign exchange | - | 641 | (19) | - | - | 622 |
+--------------------------------+-----------+----------+---------------+-----------+---------+----------+
| At 31 December 2008 | 38,899 | 861 | 991 | - | 1,213 | 41,964 |
+--------------------------------+-----------+----------+---------------+-----------+---------+----------+
| Less current portion | (1,379) | (861) | (991) | - | (1,046) | (4,277) |
+--------------------------------+-----------+----------+---------------+-----------+---------+----------+
| Non-current portion | 37,520 | - | - | - | 167 | 37,687 |
+--------------------------------+-----------+----------+---------------+-----------+---------+----------+
| At 1 January 2009 | 38,899 | 861 | 991 | - | 1,213 | 41,964 |
+--------------------------------+-----------+----------+---------------+-----------+---------+----------+
| Increase to existing provision | - | 2,073 | 870 | - | 1,499 | 4,442 |
+--------------------------------+-----------+----------+---------------+-----------+---------+----------+
| Accretion resulting from | 278 | - | - | - | - | 278 |
| unwinding of discount rate | | | | | | |
+--------------------------------+-----------+----------+---------------+-----------+---------+----------+
| Change in discount rate | (2,045) | - | - | - | - | (2,045) |
+--------------------------------+-----------+----------+---------------+-----------+---------+----------+
| Change in estimate | 27,020 | - | - | - | - | 27,020 |
+--------------------------------+-----------+----------+---------------+-----------+---------+----------+
| Payments | (2,831) | (948) | (956) | - | (371) | (5,106) |
+--------------------------------+-----------+----------+---------------+-----------+---------+----------+
| Foreign exchange | - | (78) | (12) | - | 30 | (60) |
+--------------------------------+-----------+----------+---------------+-----------+---------+----------+
| Other | - | 88 | | - | | 88 |
+--------------------------------+-----------+----------+---------------+-----------+---------+----------+
| At 31 December 2009 | 61,321 | 1,996 | 893 | - | 2,371 | 66,581 |
+--------------------------------+-----------+----------+---------------+-----------+---------+----------+
| Less current portion | 6,640 | 1,996 | 893 | - | 1,876 | 11,405 |
+--------------------------------+-----------+----------+---------------+-----------+---------+----------+
| Non-current portion | 54,681 | - | - | - | 495 | 55,176 |
+--------------------------------+-----------+----------+---------------+-----------+---------+----------+
1. The provision represents the discounted values of the estimated cost to
decommission and rehabilitate the mines at the expected date of depletion of
each of the deposits. The present value of the provision has been calculated
using a real pre-tax annual discount rate, based on a US Treasury bond of an
appropriate tenure as at 31 December 2009 and 2008 respectively, and the cash
flows have been adjusted to reflect the risk attached to these cash flows.
Uncertainties in the timing for using this provision includes changes in the
future that could impact the time of closing the mines, as new resources and
reserves are discovered. During 2009 the Group made an internal review of the
provision for mine closure for all its mining units. Consequently, at 31
December 2009 an increase of US$27,020,000 has been recognised in the provision
mainly related to changes in the waste dam and tailing dam closure plans,
increased contractors costs and the construction of a new water treatment plant
in Sipan mining unit. From the total amount, US$15,220,000 has been recognised
as an increase in the mine closure asset (refer to note 9) and the remaining
US$11,800,000 has been recognised within other expenses (refer to note 5). This
increase in estimate relates to Ares unit (US$2,212,000), Selene unit
(US$5,864,000), Sipan unit (US$5,976,000), Arcata unit (US$4,903,000),
Pallancata unit (US$5,038,000), Moris unit (US$990,000), San José unit
(US$2,075,000) and the decrease relates to the San Felipe project (US$38,000).
2 The 2007 Executive Long-Term incentive plan was replaced by a new plan with
different variables. To terminate the first plan, the Group paid to the
employees under the plan an amount of US$1,101,000, during the first semester of
2008, recognising administrative expenses of US$275,000 and exploration expenses
of US$27,000.
3. The new plan reduces the number of variables and only considers Total
Shareholder Return ('TSR'). The plan comprises an amount to be paid in cash to
participants depending on the achievement of the three-year performance measures
during the performance period which ends on 31 December 2010. The cash award
will be held for an additional period and delivered 50% on 31 December 2010 and
the remaining 50% on 31 December 2011, accumulating notional interest at the
prevailing inter-bank interest rate. Only employees who remain with the Company
until this date will have right of the benefit, with some exemptions that have
to be approved by the Remuneration Committee of the Board. The provision
represents the discounted values of the estimated cost of the long-term employee
benefit. There is no provision in 2009 and 2008 because TSR over the period did
not reach the performance level required under the rules of the plan.
14. Related-party balances and transactions
(a) Related-party accounts receivable and payable
The Group had the following related-party balances and transactions during the
years ended 31 December 2009 and 2008. The related parties are companies owned
or controlled by the main shareholder of the parent company, joint ventures or
associates.
+-----------------------------------------------+--------+--------+----------+------+--------+----------+
| | Accounts receivable | Accounts payable |
| | At 31 December | At 31 December |
+-----------------------------------------------+----------------------------+--------------------------+
| | 2009 | 2008 | 2009 | 2008 | |
| | US$000 | US$000 | US$000 | US$000 | |
+-----------------------------------------------+--------+--------+-----------------+--------+----------+
| Other | | | | | |
+-----------------------------------------------+--------+--------+-----------------+--------+----------+
| Fosfatos del Pacífico S.A. | 28 | - | - | - | |
+-----------------------------------------------+--------+--------+-----------------+--------+----------+
| Compañía Minera Corianta S.A. | - | - | - | 1 | |
+-----------------------------------------------+--------+--------+-----------------+--------+----------+
| Cementos Selva S.A. | - | - | - | 43 | |
+-----------------------------------------------+--------+--------+-----------------+--------+----------+
| | 28 | - | - | 44 | |
+-----------------------------------------------+--------+--------+-----------------+--------+----------+
| Joint ventures | | | | | |
+-----------------------------------------------+--------+--------+-----------------+--------+----------+
| Cabo Sur | 968 | 1,005 | 902 | 992 | |
+-----------------------------------------------+--------+--------+-----------------+--------+----------+
| Minas Pacapausa S.A.C. | - | 2 | - | - | |
+-----------------------------------------------+--------+--------+-----------------+--------+----------+
| | 968 | 1,007 | 902 | 992 | |
+-----------------------------------------------+--------+--------+-----------------+--------+----------+
| Loans | | | | | |
+-----------------------------------------------+--------+--------+-----------------+--------+----------+
| Cementos Pacasmayo S.A.A. | - | 41 | - | - | |
+-----------------------------------------------+--------+--------+-----------------+--------+----------+
| | - | 41 | - | - | |
+-----------------------------------------------+--------+--------+-----------------+--------+----------+
| Total | 996 | 1,048 | 902 | 1,036 | |
+-----------------------------------------------+--------+--------+-----------------+--------+----------+
| Current related party balances | 996 | 1,048 | 902 | 1,036 | |
+-----------------------------------------------+--------+--------+-----------------+--------+----------+
| Total | 996 | 1,048 | 902 | 1,036 | |
+-----------------------------------------------+--------+--------+-----------------+--------+----------+
| | | | | | | |
+-----------------------------------------------+--------+--------+----------+------+--------+----------+
As at 31 December 2009 and 2008 all other accounts are, or were, non-interest
bearing.
No security has been granted or guarantees given by the Group in respect of
these related party balances.
Principal transactions between affiliates are as follows:
+------------------------------------------------------------+--------+------+----------+
| | As at 31 | |
| | December | |
+------------------------------------------------------------+---------------+----------+
| | 2009 | 2008 |
| | US$000 | US$000 |
+------------------------------------------------------------+--------+-----------------+
| Income | | |
+------------------------------------------------------------+--------+-----------------+
| Recovery of expenses | - | 34 |
+------------------------------------------------------------+--------+-----------------+
| Expenses | | |
+------------------------------------------------------------+--------+-----------------+
| Purchase of supplies | - | 39 |
+------------------------------------------------------------+--------+-----------------+
| Services received | - | 2 |
+------------------------------------------------------------+--------+-----------------+
| | | | |
+------------------------------------------------------------+--------+------+----------+
During 2008, in addition to the normal arrangements the Group has with its
related parties, the Group purchased a building from Cementos Pacasmayo, a
company under common control to that of the Group, for US$3,622,000 representing
an arm's length purchase price.
Transactions between the Group and these companies are on an arm's length basis.
(b) Compensation of key management personnel of the Group
Key management personnel include the members of the senior management team and
Directors who receive remuneration.
+------------------------------------------------------------+--------+------+----------+
| | As at 31 | |
| | December | |
+------------------------------------------------------------+---------------+----------+
| | 2009 | 2008 |
| | US$000 | US$000 |
+------------------------------------------------------------+--------+-----------------+
| Salaries and bonuses | 8,596 | 8,718 |
+------------------------------------------------------------+--------+-----------------+
| Total compensation paid to key management personnel | 8,596 | 8,718 |
+------------------------------------------------------------+--------+-----------------+
| | | | |
+------------------------------------------------------------+--------+------+----------+
This amount includes the remuneration paid to the Directors of the parent
company of the Group of US$5,870,520 (2008: US$3,847,865), out of which
US$399,117 (2008: US$463,218) relates to pension payments.
The Group made a loan to one of the Directors of US$200,000 with an interest
rate of 7.45% until 30 April 2009, 3.50% from 1 May 2009 to 31 July 2009 and
3.00% from 1 August 2009. The balance as at 31 December was US$227,214, composed
of principal of US$200,000 and interests of US$27,214. The Group did not collect
any amount of this loan.
15 Subsequent events
(a) On 6 May 2006 the Group signed an agreement with Silex Argentina S.A.
("Silex"), a wholly owned subsidiary of Golden Minerals Company ("Golden
Minerals") to explore and develop minerals in a group of properties located in
Argentina, which comprise the project "El Quevar". The initial interest held by
the Group was 35%, which was subsequently reduced to 20% in exchange for Silex
funding the feasibility study.
On 30 December 2009 the Group entered into an agreement with Golden Minerals and
Silex to sell its interest in the project in exchange for 400,000 common shares
and a warrant to purchase 300,000 common shares of Golden Minerals at a price
per share of US$15. The agreement was subject to certain conditions precedent
that did not take place until 7 January 2010.
(b) On 16 February 2010 the Group acquired 1,273,036 shares of its associate
Lake Shore for CAD$5,130,000 (approximately US$4,920,000). After completion of
the transaction, the Group's ownership in Lake Shore increased from 35.69% to
35.92%.
(c) Between 26 January 2010 and 5 February 2010 the Group acquired 440,500
shares of its associate Gold Resource Corp. for US$$4,322,000 in the open
market. In addition, on 8 March 2010 the Group signed a subscription agreement
with Gold Resource Corp. by which the Group acquired 600,000 shares for a total
consideration of US$5,172,000. Following completion of this purchases the
Group's ownership in its associate increased from 25% to 26.7%.
(d) On 9 February 2010 the Group signed an engagement letter with BMO Capital
Markets Limited ("BMO") for the sale of the San Felipe project, the Group's zinc
project located in northern Mexico.
(e) On 5 March 2010, Inversiones Pacasmayo S.A., a related party of the Group,
purchased Hochschild Mining plc's 36.9% stake in Zincore at a price of C$0.27
per share representing a 11.6% premium over the 20 day average closing price.
Inversiones Pacasmayo S.A. paid a a total cash consideration of C$10,287,000.
As a result of the transaction, Hochschild Mining plc has no further interest in
Zincore.
The disposal was approved on behalf of the Hochschild board by a committee
comprising solely independent Non-Executive Directors ("the Independent
Committee"). The Independent Committee has been advised by Canaccord Adams
Limited that the terms of the disposal are fair and reasonable as far as
shareholders are concerned.
(f) On 11 March 2009 the Group has filed suit in the New York State Supreme
Court asking that Minera Andes Inc. ("MAI") and its subsidiary Minera Andes SA
("MASA") be required to execute the formal loan agreement documents in respect
of the US$65 million project finance loan. This facility was provided by the
Group to one of its subsidiaries Minera Santa Cruz S.A. for
the development of the San José operation in Argentina. The law suit lists the
following causes of action: (i) a decree by the court requiring MASA and its
parent company to execute formal loan agreement documents with the Group
consistent with the previous agreements between the two companies, (ii) it asks
that MAI and MASA be enjoined from further interference in the repayment of the
project finance loan, (iii) asks the court to order payment to the Group of
benefits derived by MAI and MASA as a result of the loan, and (iv) requests an
order declaring that other shareholder loans are subordinate to the project
finance loan.
RESERVES AND RESOURCES
Ore reserves and mineral resources estimates
Hochschild Mining plc reports its mineral resources and reserves estimates in
accordance with the Australasian Code for Reporting of Exploration Results,
Mineral Resources and Ore Reserves 2004 edition ('the JORC Code'). This
establishes minimum standards, recommendations and guidelines for the public
reporting of exploration results and mineral resources and reserves estimates.
In doing so it emphasises the importance of principles of transparency,
materiality and confidence. The information on ore reserves and mineral
resources on pages 126 to 128 were prepared by or under the supervision of
Competent Persons (as defined in the JORC Code). Competent Persons are required
to have sufficient relevant experience and understanding of the style of
mineralisation, types of deposits and mining methods in the area of activity for
which they are qualified as a Competent Person under the JORC Code. The
Competent Person must sign off their respective estimates of the original
mineral resource and ore reserve statements for the various operations and
consent to the inclusion of that information in this report, as well as the form
and context in which it appears.
Hochschild Mining plc employs its own Competent Person who has audited all the
estimates set out in this report. Hochschild Mining Group companies are subject
to a comprehensive programme of audits which aim to provide assurance in respect
of ore reserve and mineral resource estimates. These audits are conducted by
Competent Persons provided by independent consultants. The frequency and depth
of an audit depends on the risks and/or uncertainties associated with that
particular ore reserve and mineral resource, the overall value thereof and the
time that has lapsed since the previous independent third party audit.
The JORC Code requires the use of reasonable economic assumptions. These include
long-term commodity price forecasts (which, in the Group's case, are prepared by
ex-house specialists largely using estimates of future supply and demand and
long-term economic outlooks).
Ore reserve estimates are dynamic and are influenced by changing economic
conditions, technical issues, environmental regulations and any other relevant
new information and therefore these can vary from year to year. Mineral resource
estimates can also change and tend to be influenced mostly by new information
pertaining to the understanding of the deposit and secondly the conversion to
ore reserves.
The estimates of ore reserves and mineral resources are shown as at 31 December
2009, unless otherwise stated. Mineral resources that are reported include those
mineral resources that have been modified to produce ore reserves. All tonnage
and grade information has been rounded to reflect the relative uncertainty in
the estimates; there may therefore be small differences. The prices used for the
reserves calculation were: Au Price: US$810 per ounce and Ag Price: US$13.50 per
ounce.
RESERVES AND RESOURCES (AUDITED BY P&E CONSULTING*)
attributable metal reserves AS AT 31 DECEMBER 2009
+--------------------------+-----------+-----------+-----------+-------+-------+-------+-------+-------+
| Reserve category | Proved | Probable | Proved | Ag | Au | Ag | Au | Ag |
| | (t) | (t) | and | (g/t) | (g/t) | (moz) | (koz) | Eq. |
| | | | probable | | | | | (moz) |
| | | | (t) | | | | | |
+--------------------------+-----------+-----------+-----------+-------+-------+-------+-------+-------+
| MAIN OPERATIONS* | | | | | | | | |
+--------------------------+-----------+-----------+-----------+-------+-------+-------+-------+-------+
| Arcata | | | | | | | | |
+--------------------------+-----------+-----------+-----------+-------+-------+-------+-------+-------+
| Proved | 947,644 | | | 441 | 1.39 | 13.4 | 42.5 | 16.0 |
+--------------------------+-----------+-----------+-----------+-------+-------+-------+-------+-------+
| Probable | | 921,244 | | 393 | 1.23 | 11.6 | 36.4 | 13.8 |
+--------------------------+-----------+-----------+-----------+-------+-------+-------+-------+-------+
| Total | | | 1,868,888 | 417 | 1.31 | 25.1 | 78.9 | 29.8 |
+--------------------------+-----------+-----------+-----------+-------+-------+-------+-------+-------+
| Pallancata | | | | | | | | |
+--------------------------+-----------+-----------+-----------+-------+-------+-------+-------+-------+
| Proved | 1,734,541 | | | 370 | 1.62 | 20.7 | 90.1 | 26.0 |
+--------------------------+-----------+-----------+-----------+-------+-------+-------+-------+-------+
| Probable | | 610,964 | | 307 | 1.25 | 6.0 | 24.5 | 7.5 |
+--------------------------+-----------+-----------+-----------+-------+-------+-------+-------+-------+
| Total | | | 2,345,505 | 354 | 1.52 | 26.7 | 114.6 | 33.5 |
+--------------------------+-----------+-----------+-----------+-------+-------+-------+-------+-------+
| San José | | | | | | | | |
+--------------------------+-----------+-----------+-----------+-------+-------+-------+-------+-------+
| Proved | 315,324 | | | 457 | 7.66 | 4.6 | 77.7 | 9.3 |
+--------------------------+-----------+-----------+-----------+-------+-------+-------+-------+-------+
| Probable | | 460,175 | | 452 | 7.09 | 6.7 | 104.8 | 13.0 |
+--------------------------+-----------+-----------+-----------+-------+-------+-------+-------+-------+
| Total | | | 775,499 | 454 | 7.32 | 11.3 | 182.5 | 22.3 |
+--------------------------+-----------+-----------+-----------+-------+-------+-------+-------+-------+
| Total | | | | | | | | |
+--------------------------+-----------+-----------+-----------+-------+-------+-------+-------+-------+
| Proved | 2,997,510 | | | 402 | 2.18 | 38.7 | 210.2 | 51.3 |
+--------------------------+-----------+-----------+-----------+-------+-------+-------+-------+-------+
| Probable | | 1,992,382 | | 380 | 2.59 | 24.3 | 165.8 | 34.3 |
+--------------------------+-----------+-----------+-----------+-------+-------+-------+-------+-------+
| Main operations total | | | 4,989,892 | 393 | 2.34 | 63.1 | 376.0 | 85.6 |
| | | | | | | | | |
+--------------------------+-----------+-----------+-----------+-------+-------+-------+-------+-------+
| Ares | | | | | | | | |
+--------------------------+-----------+-----------+-----------+-------+-------+-------+-------+-------+
| Proved | 239,102 | | | 95 | 5.25 | 0.7 | 40.3 | 3.1 |
+--------------------------+-----------+-----------+-----------+-------+-------+-------+-------+-------+
| Probable | | 56,740 | | 74 | 4.16 | 0.1 | 7.6 | 0.6 |
+--------------------------+-----------+-----------+-----------+-------+-------+-------+-------+-------+
| Total | | | 295,842 | 91 | 5.04 | 0.9 | 47.9 | 3.7 |
+--------------------------+-----------+-----------+-----------+-------+-------+-------+-------+-------+
| Moris | | | | | | | | |
+--------------------------+-----------+-----------+-----------+-------+-------+-------+-------+-------+
| Proved | 857,646 | | | 4 | 1.47 | 0.1 | 40.5 | 2.6 |
+--------------------------+-----------+-----------+-----------+-------+-------+-------+-------+-------+
| Probable | | 84,384 | | 4 | 1.45 | 0.0 | 3.9 | 0.2 |
+--------------------------+-----------+-----------+-----------+-------+-------+-------+-------+-------+
| Total | | | 942,030 | 4 | 1.47 | 0.1 | 44.5 | 2.8 |
+--------------------------+-----------+-----------+-----------+-------+-------+-------+-------+-------+
| Total | | | | | | | | |
+--------------------------+-----------+-----------+-----------+-------+-------+-------+-------+-------+
| Proved | 1,096,748 | | | 24 | 2.29 | 0.9 | 80.9 | 5.7 |
+--------------------------+-----------+-----------+-----------+-------+-------+-------+-------+-------+
| Probable | | 141,124 | | 32 | 2.54 | 0.1 | 11.5 | 0.8 |
+--------------------------+-----------+-----------+-----------+-------+-------+-------+-------+-------+
| Other operations total | | | 1,237,872 | 25 | 2.32 | 1.0 | 92.4 | 6.5 |
+--------------------------+-----------+-----------+-----------+-------+-------+-------+-------+-------+
| Total | | | | | | | | |
+--------------------------+-----------+-----------+-----------+-------+-------+-------+-------+-------+
| Proved | 4,094,258 | | | 301 | 2.21 | 39.6 | 291.1 | 57.0 |
+--------------------------+-----------+-----------+-----------+-------+-------+-------+-------+-------+
| Probable | | 2,133,506 | | 357 | 2.59 | 24.5 | 177.3 | 35.1 |
+--------------------------+-----------+-----------+-----------+-------+-------+-------+-------+-------+
| Total | | | 6,227,764 | 320 | 2.34 | 64.1 | 468.4 | 92.2 |
+--------------------------+-----------+-----------+-----------+-------+-------+-------+-------+-------+
Note: Where reserves are attributable to joint venture partner, reserve figures
reflect the Company's ownership only. Includes discounts for ore loss and
dilution.
Attributable metal resources AS AT 31 DECEMBER 2009 (audited by P&E Consulting*)
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Resource | | Measured | | Indicated | | Measured | | Inferred | | Ag | Au | Zn | | Pb | | Cu (%) | | Ag Eq | | Ag | | Au | | Zn | | Pb | | Cu |
| category | | (t) | | (t) | | and | | (t) | | (g/t) | (g/t) | (%) | | (%) | | | | (g/t) | | (moz) | | (koz) | | (kt) | | (kt) | | (kt) |
| | | | | | | indicated | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | (t) | | | | | | | | | | | | | | | | | | | | | | |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| MAIN | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| OPERATIONS* | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Arcata | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Measured | | 1,310,666 | | | | | | | | 514 | 1.60 | - | | - | | - | | 610 | | 21.7 | | 67.4 | | - | | - | | - |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Indicated | | | | 1,024,287 | | | | | | 464 | 1.42 | - | | - | | - | | 549 | | 15.3 | | 46.8 | | - | | - | | - |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Total | | | | | | 2,334,953 | | | | 492 | 1.52 | - | | - | | - | | 584 | | 37.0 | | 114.2 | | - | | - | | - |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Inferred | | | | | | | | 2,227,956 | | 417 | 1.32 | - | | - | | - | | 496 | | 29.9 | | 94.5 | | - | | - | | - |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Pallancata | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Measured | | 2,017,132 | | | | | | | | 439 | 1.91 | - | | - | | - | | 553 | | 28.5 | | 123.6 | | - | | - | | - |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Indicated | | | | 1,000,005 | | | | | | 379 | 1.57 | - | | - | | - | | 473 | | 12.2 | | 50.6 | | - | | - | | - |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Total | | | | | | 3,017,137 | | | | 419 | 1.80 | - | | - | | - | | 527 | | 40.6 | | 174.2 | | - | | - | | - |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Inferred | | | | | | | | 950,743 | | 376 | 1.51 | - | | - | | - | | 466 | | 11.5 | | 46.3 | | - | | - | | - |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| San | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| José | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Measured | | 378,861 | | | | | | | | 527 | 8.62 | - | | - | | - | | 1,044 | | 6.4 | | 105.0 | | - | | - | | - |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Indicated | | | | 969,658 | | | | | | 445 | 6.58 | - | | - | | - | | 839 | | 13.9 | | 205.0 | | - | | - | | - |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Total | | | | | | 1,348,519 | | | | 468 | 7.15 | - | | - | | - | | 897 | | 20.3 | | 310.0 | | - | | - | | - |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Inferred | | | | | | | | 914,296 | | 314 | 4.51 | - | | - | | - | | 585 | | 9.2 | | 132.6 | | - | | - | | - |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Main | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| operations | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| total | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Measured | | 3,706,659 | | | | | | | | 475 | 2.48 | - | | - | | - | | 624 | | 56.6 | | 296.0 | | - | | - | | - |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Indicated | | | | 2,993,950 | | | | | | 429 | 3.14 | - | | - | | - | | 618 | | 41.3 | | 302.4 | | - | | - | | - |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Total | | | | | | 6,700,609 | | | | 454 | 2.78 | - | | - | | - | | 621 | | 97.9 | | 598.4 | | - | | - | | - |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Inferred | | | | | | | | 4,092,994 | | 385 | 2.08 | - | | - | | - | | 509 | | 50.6 | | 273.4 | | - | | - | | - |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| OTHER | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| OPERATIONS | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Ares | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Measured | | 543,826 | | | | | | | | 144 | 5.45 | - | | - | | - | | 471 | | 2.5 | | 95.2 | | - | | - | | - |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Indicated | | | | 145,638 | | | | | | 124 | 4.19 | - | | - | | - | | 376 | | 0.6 | | 19.6 | | - | | - | | - |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Total | | | | | | 689,464 | | | | 140 | 5.18 | - | | - | | - | | 451 | | 3.1 | | 114.8 | | - | | - | | - |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Inferred | | | | | | | | 362,138 | | 167 | 3.91 | - | | - | | - | | 402 | | 1.9 | | 45.6 | | - | | - | | - |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Moris | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Measured | | 1,205,895 | | | | | | | | 4 | 1.30 | - | | - | | - | | 82 | | 0.2 | | 50.3 | | - | | - | | - |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Indicated | | | | 103,265 | | | | | | 4 | 1.31 | - | | - | | - | | 82 | | 0.0 | | 4.4 | | - | | - | | - |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Total | | | | | | 1,309,160 | | | | 4 | 1.30 | - | | - | | - | | 82 | | 0.2 | | 54.7 | | - | | - | | - |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Inferred | | | | | | | | 415,689 | | 5 | 1.22 | - | | - | | - | | 78 | | 0.1 | | 16.3 | | - | | - | | - |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Other | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| operations | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| total | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Measured | | 1,749,721 | | | | | | | | 48 | 2.59 | - | | - | | - | | 203 | | 2.7 | | 145.5 | | - | | - | | - |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Indicated | | | | 248,903 | | | | | | 74 | 3.00 | - | | - | | - | | 254 | | 0.6 | | 24.0 | | - | | - | | - |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Total | | | | | | 1,998,624 | | | | 51 | 2.64 | - | | - | | - | | 209 | | 3.3 | | 169.5 | | - | | - | | - |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Inferred | | | | | | | | 777,826 | | 80 | 2.47 | - | | - | | - | | 229 | | 2.0 | | 61.9 | | - | | - | | - |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| ADVANCED | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| PROJECTS | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (100%) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Azuca | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Measured | | - | | | | | | | | - | - | - | | - | | - | | - | | - | | - | | - | | - | | - |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Indicated | | | | - | | | | | | - | - | - | | - | | - | | - | | - | | - | | - | | - | | - |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Total | | | | | | - | | | | - | - | - | | - | | - | | - | | - | | - | | - | | - | | - |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Inferred | | | | | | | | 3,745,984 | | 288 | 1.31 | - | | - | | - | | 366 | | 34.6 | | 157.4 | | - | | - | | - |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Crespo | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Measured | | 1,303,461 | | | | | | | | 53 | 0.69 | - | | - | | - | | 94 | | 2.2 | | 28.8 | | - | | - | | - |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Indicated | | | | 8,224,590 | | | | | | 38 | 0.56 | - | | - | | - | | 71 | | 9.9 | | 147.5 | | - | | - | | - |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Total | | | | | | 9,528,050 | | | | 40 | 0.58 | - | | - | | - | | 74 | | 12.1 | | 176.3 | | - | | - | | - |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Inferred | | | | | | | | 8,315,845 | | 38 | 0.74 | - | | - | | - | | 82 | | 10.1 | | 198.4 | | - | | - | | - |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| San | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Felipe | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Measured | | 1,393,716 | | | | | | | | 69 | 0.02 | 7.12 | | 3.10 | | 0.39 | | 315 | | 3.1 | | 0.9 | | 99.26 | | 43.15 | | 5.50 |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Indicated | | | | 1,354,261 | | | | | | 82 | 0.06 | 6.14 | | 2.73 | | 0.31 | | 295 | | 3.6 | | 2.4 | | 83.18 | | 36.97 | | 4.24 |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Total | | | | | | 2,747,977 | | | | 76 | 0.04 | 6.64 | | 2.92 | | 0.35 | | 305 | | 6.7 | | 3.3 | | 182.45 | | 80.12 | | 9.74 |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Inferred | | | | | | | | 1,257,731 | | 84 | 0.05 | 6.18 | | 2.26 | | 0.19 | | 283 | | 3.4 | | 1.9 | | 77.76 | | 28.47 | | 2.34 |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Advanced | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| projects | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| total | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Measured | | 2,697,176 | | | | | | | | 61 | 0.34 | 3.68 | | 1.60 | | 0.20 | | 208 | | 5.3 | | 29.7 | | 99.26 | | 43.15 | | 5.50 |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Indicated | | | | 9,578,851 | | | | | | 44 | 0.49 | 0.87 | | 0.39 | | 0.04 | | 103 | | 13.5 | | 150.0 | | 83.18 | | 36.97 | | 4.24 |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Total | | | | | | 12,276,027 | | | | 48 | 0.46 | 1.49 | | 0.65 | | 0.08 | | 126 | | 18.8 | | 179.7 | | 182.45 | | 80.12 | | 9.74 |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Inferred | | | | | | | | 13,319,559 | | 112 | 0.84 | 0.58 | | 0.21 | | 0.02 | | 181 | | 48.2 | | 357.7 | | 77.76 | | 28.47 | | 2.34 |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| OTHER | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| INVESTMENTS | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Timmins | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (Lake | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Shore)1 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Measured | | 0 | | | | | | | | 0 | 0.00 | - | | - | | - | | 0 | | 0.0 | | 0.0 | | - | | - | | - |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Indicated | | | | 1,158,465 | | | | | | 0 | 8.56 | - | | - | | - | | 513 | | 0.0 | | 318.7 | | - | | - | | - |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Total | | | | | | 1,158,465 | | | | 0 | 8.56 | - | | - | | - | | 513 | | 0.0 | | 318.7 | | - | | - | | - |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Inferred | | | | | | | | 319,158 | | 0 | 5.74 | - | | - | | - | | 344 | | 0.0 | | 58.9 | | - | | - | | - |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Resource | | Measured | | Indicated | | Measured | | Inferred | | Ag | Au | Zn | | Pb | | Cu (%) | | Ag Eq | | Ag | | Au | | Zn | | Pb | | Cu |
| category | | (t) | | (t) | | and | | (t) | | (g/t) | (g/t) | (%) | | (%) | | | | (g/t) | | (moz) | | (koz) | | (kt) | | (kt) | | (kt) |
| | | | | | | indicated | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | (t) | | | | | | | | | | | | | | | | | | | | | | |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Inmaculada | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (IMZ) 2 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Measured | | 0 | | | | | | | | 0 | 0.00 | - | | - | | - | | 0 | | 0.0 | | 0.0 | | - | | - | | - |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Indicated | | | | 606,620 | | | | | | 122 | 3.90 | - | | - | | - | | 354 | | 2.4 | | 75.5 | | - | | - | | - |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Total | | | | | | 606,620 | | | | 122 | 3.90 | - | | - | | - | | 354 | | 2.4 | | 75.5 | | - | | - | | - |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Inferred | | | | | | | | 2,296,140 | | 147 | 3.40 | - | | - | | - | | 350 | | 10.8 | | 250.9 | | - | | - | | - |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Other | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| investments | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| total | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Measured | | 0 | | | | | | | | 0 | 0.00 | - | | - | | - | | 0 | | 0.0 | | 0.0 | | - | | - | | - |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Indicated | | | | 1,765,085 | | | | | | 42 | 6.96 | - | | - | | - | | 459 | | 2.4 | | 394.9 | | - | | - | | - |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Total | | | | | | 1,765,085 | | | | 42 | 6.96 | - | | - | | - | | 459 | | 2.4 | | 394.9 | | - | | - | | - |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Inferred | | | | | | | | 2,615,298 | | 129 | 3.69 | - | | - | | - | | 350 | | 10.9 | | 309.9 | | - | | - | | - |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| TOTAL | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Measured | | 8,153,557 | | | | | | | | 246 | 1.80 | 1.22 | | 0.53 | | 0.07 | | 396 | | 64.5 | | 471.2 | | 99.26 | | 43.15 | | 5.50 |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Indicated | | | | 14,586,789 | | | | | | 123 | 1.86 | 0.57 | | 0.25 | | 0.03 | | 254 | | 57.8 | | 871.2 | | 83.18 | | 36.97 | | 4.24 |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Total | | | | | | 22,740,345 | | | | 167 | 1.84 | 0.80 | | 0.35 | | 0.04 | | 305 | | 122.4 | | 1342.4 | | 182.45 | | 80.12 | | 9.74 |
+-------------+--------+-----------+--------+------------+--------+------------+--------+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| Inferred | | | | | | | | 20,805,678 | | 167 | 1.50 | 0.37 | | 0.14 | | 0.01 | | 269 | | 111.6 | | 1002.9 | | 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.
1 Hochschild owns a 38% interest in Lake Shore Gold
2 Hochschild owns a 49% interest (IMZ owns the remaining 51%). IMZ can earn a
70% interest (diluting Hochschild to 30%) by completing a feasibility study by
September 2013 at its sole cost and issuing to Hochschild 200,000 IMZ shares
CHANGE IN METAL AND RESOURCES FROM DECEMBER 2008 TO DECEMBER 2009
Change in total reserves and resources
+----------------+----------+----------+-------------+------------+----------+------------+--------+
| Ag equivalent | Category | December | Production1 | Movements2 | December | Net | % |
| content | | 2008 | | | 2009 | difference | change |
| (million | | | | | | | |
| ounces) | | | | | | | |
+----------------+----------+----------+-------------+------------+----------+------------+--------+
| Arcata | Resource | 87.2 | | -7.8 | 79.4 | -7.8 | -9.0% |
+----------------+----------+----------+-------------+------------+----------+------------+--------+
| | Reserve | 33.1 | 12.3 | 9.0 | 29.8 | -3.3 | -10.0% |
+----------------+----------+----------+-------------+------------+----------+------------+--------+
| Pallancata | Resource | 90.9 | | 18.0 | 108.9 | 18.0 | 19.8% |
+----------------+----------+----------+-------------+------------+----------+------------+--------+
| | Reserve | 63.1 | 12.3 | 5.1 | 55.9 | -7.2 | -11.4% |
+----------------+----------+----------+-------------+------------+----------+------------+--------+
| San José | Resource | 96.0 | | 14.0 | 110.0 | 14.0 | 14.5% |
+----------------+----------+----------+-------------+------------+----------+------------+--------+
| | Reserve | 52.3 | 11.4 | 2.8 | 43.7 | -8.6 | -16.5% |
+----------------+----------+----------+-------------+------------+----------+------------+--------+
| Main | Resource | 274.2 | | 24.1 | 298.3 | 24.1 | 8.8% |
| operations | | | | | | | |
| total: | | | | | | | |
+----------------+----------+----------+-------------+------------+----------+------------+--------+
| | Reserve | 148.5 | 36.0 | 16.9 | 129.4 | -19.1 | -12.9% |
+----------------+----------+----------+-------------+------------+----------+------------+--------+
| Ares | Resource | 17.5 | | -2.9 | 14.7 | -2.9 | -16.4% |
+----------------+----------+----------+-------------+------------+----------+------------+--------+
| | Reserve | 8.6 | 3.8 | -1.1 | 3.7 | -4.9 | -56.5% |
+----------------+----------+----------+-------------+------------+----------+------------+--------+
| Moris | Resource | 7.8 | | -3.3 | 4.5 | -3.3 | -42.0% |
+----------------+----------+----------+-------------+------------+----------+------------+--------+
| | Reserve | 5.2 | 3.2 | 0.8 | 2.8 | -2.4 | -46.1% |
+----------------+----------+----------+-------------+------------+----------+------------+--------+
| Other | Resource | 25.3 | | -6.1 | 19.2 | -6.1 | -24.2% |
| operations | | | | | | | |
| total: | | | | | | | |
+----------------+----------+----------+-------------+------------+----------+------------+--------+
| | Reserve | 13.8 | 7.0 | -0.3 | 6.5 | -7.3 | -52.6% |
+----------------+----------+----------+-------------+------------+----------+------------+--------+
| Azuca | Resource | 23.3 | | 20.8 | 44.1 | 20.8 | 89.5% |
| | | | | | | | |
+----------------+----------+----------+-------------+------------+----------+------------+--------+
| | Reserve | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | -.- |
+----------------+----------+----------+-------------+------------+----------+------------+--------+
| Crespo | Resource | 0.0 | | 44.7 | 44.7 | 44.7 | -.- |
| | | | | | | | |
+----------------+----------+----------+-------------+------------+----------+------------+--------+
| | Reserve | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | -.- |
+----------------+----------+----------+-------------+------------+----------+------------+--------+
| San Felipe | Resource | 38.5 | | 0.0 | 38.5 | 0.0 | 0.0% |
| | | | | | | | |
+----------------+----------+----------+-------------+------------+----------+------------+--------+
| | Reserve | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | -.- |
+----------------+----------+----------+-------------+------------+----------+------------+--------+
| Advanced | Resource | 61.7 | | 65.5 | 127.3 | 65.5 | 106.2% |
| projects total | | | | | | | |
+----------------+----------+----------+-------------+------------+----------+------------+--------+
| | Reserve | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | -.- |
+----------------+----------+----------+-------------+------------+----------+------------+--------+
| Timmins (Lake | Resource | 64.8 | | -1.3 | 63.5 | -1.3 | -2.0% |
| Shore)3 | | | | | | | |
+----------------+----------+----------+-------------+------------+----------+------------+--------+
| | Reserve | 49.6 | 0.0 | -0.8 | 48.7 | -0.8 | -1.7% |
+----------------+----------+----------+-------------+------------+----------+------------+--------+
| Inmaculada | Resource | 45.6 | | 21.3 | 66.9 | 21.3 | 46.7% |
| (IMZ)4 | | | | | | | |
+----------------+----------+----------+-------------+------------+----------+------------+--------+
| | Reserve | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | -.- |
+----------------+----------+----------+-------------+------------+----------+------------+--------+
| Other | Resource | 110.4 | | 20.0 | 130.4 | 20.0 | 18.1% |
| investments | | | | | | | |
| total | | | | | | | |
+----------------+----------+----------+-------------+------------+----------+------------+--------+
| | Reserve | 49.6 | | -0.8 | 48.7 | -0.8 | -1.7% |
+----------------+----------+----------+-------------+------------+----------+------------+--------+
| Total: | Resource | 471.6 | | 103.5 | 575.0 | 103.5 | 21.9% |
| | | | | | | | |
+----------------+----------+----------+-------------+------------+----------+------------+--------+
| | Reserve | 211.9 | 43.0 | 15.8 | 184.6 | -27.2 | -12.8% |
+----------------+----------+----------+-------------+------------+----------+------------+--------+
1 Depletion: reduction in reserves based on ore delivered to the mine plant.
2 Increase in reserves and resources due mainly to mine site exploration but
also to price increases.
3 Hochschild owns a 38% interest in Lake Shore Gold
4 Hochschild owns a 49% interest (IMZ owns the remaining 51%). IMZ can earn a
70% interest (diluting Hochschild to 30%) by completing a feasibility study by
September 2013 at its sole cost and issuing to Hochschild 200,000 IMZ shares
Change in attributable reserves and resources
+----------------------+----------+--------------+----------+----------+------------+--------+
| Ag equivalent | Category | Percentage | December | December | Net | % |
| content (million | | attributable | 2008 | 2009 | difference | change |
| ounces) | | | Att.1 | Att.1 | | |
+----------------------+----------+--------------+----------+----------+------------+--------+
| Arcata | Resource | 100% | 87.2 | 79.4 | -7.8 | -9.0% |
| | | | | | | |
+----------------------+----------+--------------+----------+----------+------------+--------+
| | Reserve | | 33.1 | 29.8 | -3.3 | -10.0% |
+----------------------+----------+--------------+----------+----------+------------+--------+
| Pallancata | Resource | 60% | 54.6 | 65.3 | 10.8 | 19.8% |
| | | | | | | |
+----------------------+----------+--------------+----------+----------+------------+--------+
| | Reserve | | 37.9 | 33.5 | -4.3 | -11.4% |
+----------------------+----------+--------------+----------+----------+------------+--------+
| San José | Resource | 51% | 49.0 | 56.1 | 7.1 | 14.5% |
+----------------------+----------+--------------+----------+----------+------------+--------+
| | Reserve | | 26.7 | 22.3 | -4.4 | -16.5% |
+----------------------+----------+--------------+----------+----------+------------+--------+
| Main operations | Resource | | 190.7 | 200.8 | 10.1 | 5.3% |
| total | | | | | | |
+----------------------+----------+--------------+----------+----------+------------+--------+
| | Reserve | | 97.6 | 85.6 | -12.0 | -12.3% |
+----------------------+----------+--------------+----------+----------+------------+--------+
| Ares | Resource | 100% | 17.5 | 14.7 | -2.9 | -16.4% |
| | | | | | | |
+----------------------+----------+--------------+----------+----------+------------+--------+
| | Reserve | | 8.6 | 3.7 | -4.9 | -56.5% |
+----------------------+----------+--------------+----------+----------+------------+--------+
| Moris | Resource | 100% | 5.4 | 4.5 | -0.9 | -17.1% |
+----------------------+----------+--------------+----------+----------+------------+--------+
| | Reserve | | 3.6 | 2.8 | -0.8 | -23.0% |
+----------------------+----------+--------------+----------+----------+------------+--------+
| Other operations | Resource | | 23.0 | 19.2 | -3.8 | -16.5% |
| total | | | | | | |
+----------------------+----------+--------------+----------+----------+------------+--------+
| | Reserve | | 12.2 | 6.5 | -5.7 | -46.6% |
+----------------------+----------+--------------+----------+----------+------------+--------+
| Azuca | Resource | 100% | 23.3 | 44.1 | 20.8 | 89.5% |
| | | | | | | |
+----------------------+----------+--------------+----------+----------+------------+--------+
| | Reserve | | 0.0 | 0.0 | 0.0 | -.- |
+----------------------+----------+--------------+----------+----------+------------+--------+
| Crespo | Resource | 100% | 0.0 | 44.7 | 44.7 | -.- |
| | | | | | | |
+----------------------+----------+--------------+----------+----------+------------+--------+
| | Reserve | | 0.0 | 0.0 | 0.0 | -.- |
+----------------------+----------+--------------+----------+----------+------------+--------+
| San Felipe | Resource | 100% | 38.5 | 38.5 | 0.0 | 0.0% |
| | | | | | | |
+----------------------+----------+--------------+----------+----------+------------+--------+
| | Reserve | | 0.0 | 0.0 | 0.0 | -.- |
+----------------------+----------+--------------+----------+----------+------------+--------+
| Advanced projects | Resource | | 61.7 | 127.3 | 65.5 | 106.2% |
| total | | | | | | |
+----------------------+----------+--------------+----------+----------+------------+--------+
| | Reserve | | 0.0 | 0.0 | 0.0 | -.- |
+----------------------+----------+--------------+----------+----------+------------+--------+
| Timmins (Lake Shore | Resource | 35.7% | 25.2 | 22.7 | -2.6 | -10.2% |
| Gold)2 | | | | | | |
+----------------------+----------+--------------+----------+----------+------------+--------+
| | Reserve | | 19.3 | 17.4 | -1.9 | -9.9% |
+----------------------+----------+--------------+----------+----------+------------+--------+
| Inmaculada (IMZ)3 | Resource | 49% | 22.3 | 32.8 | 10.4 | 46.7% |
| | | | | | | |
+----------------------+----------+--------------+----------+----------+------------+--------+
| | Reserve | | 0.0 | 0.0 | 0.0 | -.- |
+----------------------+----------+--------------+----------+----------+------------+--------+
| Other investments | Resource | | 47.6 | 55.4 | 7.9 | 16.5% |
| total | | | | | | |
+----------------------+----------+--------------+----------+----------+------------+--------+
| | Reserve | | 19.3 | 17.4 | -1.9 | -9.9% |
+----------------------+----------+--------------+----------+----------+------------+--------+
| Total: | Resource | | 323.0 | 402.7 | 79.7 | 24.7% |
| | | | | | | |
+----------------------+----------+--------------+----------+----------+------------+--------+
| | Reserve | 100% | 129.2 | 109.6 | -19.6 | -15.2% |
+----------------------+----------+--------------+----------+----------+------------+--------+
1 Attributable reserves and resources based on the Group's percentage ownership
of its joint venture projects.
2 Hochschild owns a 38% interest in Lake Shore Gold
3 Hochschild owns a 49% interest (IMZ owns the remaining 51%). IMZ can earn a
70% interest (diluting Hochschild to 30%) by completing a feasibility study by
September 2013 at its sole cost and issuing to Hochschild 200,000 IMZ shares
PRODUCTION
Total Group production1
+--------------------------------------------+----------+----------+---------+
| | Year | Year | % |
| | ended | ended | change |
| | 31 | 31 | |
| | December | December | |
| | 2009 | 2008 | |
+--------------------------------------------+----------+----------+---------+
| Silver production (koz) | 24,585 | 20,782 | 18 |
+--------------------------------------------+----------+----------+---------+
| Gold production (koz) | 211.64 | 193.97 | 9 |
+--------------------------------------------+----------+----------+---------+
| Total silver equivalent (koz) | 37,283 | 32,421 | 15 |
+--------------------------------------------+----------+----------+---------+
| Total gold equivalent (koz) | 621.38 | 540.34 | 15 |
+--------------------------------------------+----------+----------+---------+
| Silver sold (koz) | 23,563 | 20,593 | 14 |
+--------------------------------------------+----------+----------+---------+
| Gold sold (koz) | 204.09 | 198.32 | 3 |
+--------------------------------------------+----------+----------+---------+
1 Total production includes 100% of all production, including production
attributable to joint venture partners at San José and Pallancata.
Attributable Group production1
+--------------------------------------------+----------+----------+---------+
| | Year | Year | % |
| | ended | ended | change |
| | 31 | 31 | |
| | December | December | |
| | 2009 | 2008 | |
+--------------------------------------------+----------+----------+---------+
| Silver production (koz) | 18,754 | 16,941 | 11 |
+--------------------------------------------+----------+----------+---------+
| Gold production (koz) | 156.77 | 152.86 | 3 |
+--------------------------------------------+----------+----------+---------+
| Attrib. silver equivalent (koz) | 28,160 | 26,113 | 8 |
+--------------------------------------------+----------+----------+---------+
| Attrib. gold equivalent (koz) | 469.34 | 435.22 | 8 |
+--------------------------------------------+----------+----------+---------+
1 Attributable production includes 100% of all production from Arcata, Ares and
Moris, 60% from Pallancata and 51% from San José.
2009 production by mine
Arcata
+--------------------------------------------+----------+----------+---------+
| Product | Year | Year | % |
| | ended | ended | change |
| | 31 | 31 | |
| | December | December | |
| | 2009 | 2008 | |
+--------------------------------------------+----------+----------+---------+
| Ore production (tonnes) | 643,059 | 557,870 | 15 |
+--------------------------------------------+----------+----------+---------+
| Average head grade silver (g/t) | 503 | 571 | -12 |
+--------------------------------------------+----------+----------+---------+
| Average head grade gold (g/t) | 1.56 | 1.53 | 2 |
+--------------------------------------------+----------+----------+---------+
| Concentrate produced (tonnes) | 22,352 | 20,639 | 8 |
+--------------------------------------------+----------+----------+---------+
| Silver grade in concentrate (kg/t) | 13.36 | 13.94 | -4 |
+--------------------------------------------+----------+----------+---------+
| Gold grade in concentrate (kg/t) | 0.04 | 0.04 | - |
+--------------------------------------------+----------+----------+---------+
| Silver produced (koz) | 9,542 | 9,032 | 6 |
+--------------------------------------------+----------+----------+---------+
| Gold produced (koz) | 28.64 | 24.04 | 19 |
+--------------------------------------------+----------+----------+---------+
| Silver sold (koz) | 8,748 | 8,564 | 2 |
+--------------------------------------------+----------+----------+---------+
| Gold sold (koz) | 26.02 | 22.36 | 16 |
+--------------------------------------------+----------+----------+---------+
Ares
+--------------------------------------------+----------+----------+---------+
| Product | Year | Year | % |
| | ended | ended | change |
| | 31 | 31 | |
| | December | December | |
| | 2009 | 2008 | |
+--------------------------------------------+----------+----------+---------+
| Ore production (tonnes) | 341,273 | 347,910 | -2 |
+--------------------------------------------+----------+----------+---------+
| Average head grade silver (g/t) | 96 | 157 | -39 |
+--------------------------------------------+----------+----------+---------+
| Average head grade gold (g/t) | 4.17 | 6.06 | -31 |
+--------------------------------------------+----------+----------+---------+
| Doré total (koz) | 947 | 1,608 | -41 |
+--------------------------------------------+----------+----------+---------+
| Silver produced (koz) | 900 | 1,538 | -41 |
+--------------------------------------------+----------+----------+---------+
| Gold produced (koz) | 42.59 | 64.16 | -34 |
+--------------------------------------------+----------+----------+---------+
| Silver sold (koz)1 | 873 | 2,398 | -64 |
+--------------------------------------------+----------+----------+---------+
| Gold sold (koz)2 | 41.82 | 77.44 | -46 |
+--------------------------------------------+----------+----------+---------+
1 Total sale figures for Ares in 2008 include the sale of 746 koz of silver
precipitates from San José.
2 Total sale figures for Ares in 2008 include the sale of 11.14 koz of gold
precipitates from San José.
Pallancata1
+--------------------------------------------+----------+----------+---------+
| Product | Year | Year | % |
| | ended | ended | change |
| | 31 | 31 | |
| | December | December | |
| | 2009 | 2008 | |
+--------------------------------------------+----------+----------+---------+
| Ore production (tonnes) | 922,521 | 468,125 | 97 |
+--------------------------------------------+----------+----------+---------+
| Average head grade silver (g/t) | 327 | 312 | 5 |
+--------------------------------------------+----------+----------+---------+
| Average head grade gold (g/t) | 1.43 | 1.49 | -4 |
+--------------------------------------------+----------+----------+---------+
| Concentrate produced (tonnes) | 7,684 | 4,265 | 80 |
+--------------------------------------------+----------+----------+---------+
| Silver grade in concentrate (kg/t) | 34.09 | 30.54 | 12 |
+--------------------------------------------+----------+----------+---------+
| Gold grade in concentrate (kg/t) | 0.13 | 0.12 | 8 |
+--------------------------------------------+----------+----------+---------+
| Silver produced (koz) | 8,420 | 4,188 | 101 |
+--------------------------------------------+----------+----------+---------+
| Gold produced (koz) | 31.97 | 16.16 | 98 |
+--------------------------------------------+----------+----------+---------+
| Silver sold (koz) | 8,147 | 3,852 | 112 |
+--------------------------------------------+----------+----------+---------+
| Gold sold (koz) | 29.77 | 14.81 | 101 |
+--------------------------------------------+----------+----------+---------+
1 The Company has a 60% interest in Pallancata.
Selene1
+--------------------------------------------+----------+----------+---------+
| Product | Year | Year | % |
| | ended | ended | change |
| | 31 | 31 | |
| | December | December | |
| | 2009 | 2008 | |
+--------------------------------------------+----------+----------+---------+
| Ore production (tonnes) | 109,893 | 269,150 | -59 |
+--------------------------------------------+----------+----------+---------+
| Average head grade silver (g/t) | 217 | 210 | 3 |
+--------------------------------------------+----------+----------+---------+
| Average head grade gold (g/t) | 1.09 | 1.21 | -10 |
+--------------------------------------------+----------+----------+---------+
| Concentrate produced (tonnes) | 1,057 | 3,201 | -67 |
+--------------------------------------------+----------+----------+---------+
| Silver grade in concentrate (kg/t) | 18.55 | 15.04 | 23 |
+--------------------------------------------+----------+----------+---------+
| Gold grade in concentrate (kg/t) | 0.09 | 0.08 | 13 |
+--------------------------------------------+----------+----------+---------+
| Silver produced (koz) | 628 | 1,579 | -60 |
+--------------------------------------------+----------+----------+---------+
| Gold produced (koz) | 3.02 | 8.50 | -64 |
+--------------------------------------------+----------+----------+---------+
| Silver sold (koz) | 636 | 1,929 | -67 |
+--------------------------------------------+----------+----------+---------+
| Gold sold (koz) | 2.96 | 9.93 | -70 |
+--------------------------------------------+----------+----------+---------+
1 Selene was closed on 28 May 2009
San José1
+--------------------------------------------+----------+----------+---------+
| Product | Year | Year | % |
| | ended | ended | change |
| | 31 | 31 | |
| | December | December | |
| | 2009 | 2008 | |
+--------------------------------------------+----------+----------+---------+
| Ore production (tonnes) | 460,971 | 295,963 | 56 |
+--------------------------------------------+----------+----------+---------+
| Average head grade silver (g/t) | 398 | 559 | -29 |
+--------------------------------------------+----------+----------+---------+
| Average head grade gold (g/t) | 6.19 | 6.69 | -7 |
+--------------------------------------------+----------+----------+---------+
| Silver produced (koz) | 4,998 | 4,381 | 14 |
+--------------------------------------------+----------+----------+---------+
| Gold produced (koz) | 77.08 | 54.26 | 42 |
+--------------------------------------------+----------+----------+---------+
| Silver sold (koz) | 5,072 | 4,588 | 11 |
+--------------------------------------------+----------+----------+---------+
| Gold sold (koz) | 77.22 | 57.70 | 34 |
+--------------------------------------------+----------+----------+---------+
1 The Company has a 51% interest in San José.
Moris
+--------------------------------------------+-----------+----------+---------+
| Product | Year | Year | % |
| | ended | ended | change |
| | 31 | 31 | |
| | December | December | |
| | 2009 | 2008 | |
+--------------------------------------------+-----------+----------+---------+
| Ore production (tonnes) | 1,282,461 | 876,148 | 46 |
+--------------------------------------------+-----------+----------+---------+
| Average head grade silver (g/t) | 5.02 | 5.71 | -12 |
+--------------------------------------------+-----------+----------+---------+
| Average head grade gold (g/t) | 1.38 | 1.57 | -12 |
+--------------------------------------------+-----------+----------+---------+
| Silver produced (koz) | 97 | 65 | 49 |
+--------------------------------------------+-----------+----------+---------+
| Gold produced (koz) | 28.34 | 26.85 | 6 |
+--------------------------------------------+-----------+----------+---------+
| Silver sold (koz) | 87 | 68 | 28 |
+--------------------------------------------+-----------+----------+---------+
| Gold sold (koz) | 26.29 | 28.01 | -6 |
+--------------------------------------------+-----------+----------+---------+
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR EAFDLAENEEEF
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