Annual Financial Report
April 22 2010 - 1:13PM
UK Regulatory
TIDMHOC
RNS Number : 6639K
Hochschild Mining PLC
22 April 2010
22 April 2010
Hochschild Mining plc ("the Company")
1. Documents lodged with the Financial Services Authority in accordance with
LR 9.6.1
· Annual Report & Accounts for the year ended 31 December 2009 ("2009
Annual Report")
· AGM Circular (incorporating the Notice of AGM)
· Proxy Card (incorporating the Notice of Availability of 2009 Annual
Report and AGM Circular on website)
· Proposed New Articles of Association
Copies of the above documents have been submitted to the UK Listing Authority
and will be available for inspection at the Document Viewing Facility, which is
situated at:
Financial Services Authority
25 The North Colonnade
Canary Wharf
London
E14 5HS
Tel. 020 7066 1000
The 2009 Annual Report and the AGM Circular are also available on the Company's
website at www.hochschildmining.com
2. Information required to be disclosed in accordance with DTR 6.3.5
The following information has been reproduced from the 2009 Annual Report and
should be read in conjunction with the Company's announcement of results for the
year ended 31 December 2009 published on 24 March 2010.
All page references and cross-references in the following extracts are to the
2009 Annual Report.
a. The following has been reproduced from pages 40 and 41 of the 2009 Annual
Report:
"RISK MANAGEMENT
Overview
As with all businesses, management of the Group's operations and execution of
the Group's growth strategies are subject to a number of risks, the occurrence
of any one of which may adversely affect the execution of growth strategies and
hence the performance of the Group. The Group has made significant developments
in the management of the Group's risk environment which seeks to identify and,
where appropriate, implement the controls to mitigate the impact of the Group's
significant risks. This effort is supported by a Risk Committee with the
participation of the CEO, the Vice Presidents, the Country General Managers and
the head of the internal audit function.
The Risk Committee is responsible for implementing the Group's policy on risk
management and internal control in support of the Company's business objectives,
and monitoring the effectiveness of risk management within the organisation. A
review of the most significant risks is carried out by the Audit Committee,
further details of which are given in the Corporate Governance Report on pages
49 to 53.
The key business risks affecting the Group are set out in the table below. The
steps the Group has taken to mitigate these risks, when they are within its
control, are also described.
1. FINANCIAL RISKS
- COMMODITY PRICE RISK
Description of risk
Adverse movements in precious metals' prices could have a material impact on the
Group's results of operations.
Mitigating Steps
Whilst committed to being unhedged, management continuously monitors silver and
gold prices and, where appropriate, shall take the necessary action, within
Board approved parameters.
- CREDIT
Description of risk
Loss of revenue resulting from defaulting customers
Mitigating steps
As a result of the global economic downturn, management has taken a number of
steps to protect the Group against defaulting customers, by amending sales
contracts to provide for advance payment and delaying the transfer of title to
goods sold, by obtaining parent company guarantees and implementing risk
profiling of key and new customers.
- LIQUIDITY
Description of risk
The Group may be unable to raise funds to meet its financial commitments as they
fall due.
Mitigating Steps
The Board and the Executive Committee monitor the Group's requirements for short
and medium-term liquidity and access to credit lines to ensure appropriate level
of financing. In 2009 the Group increased its short-term bank lines by over 30%
in addition to accessing further long-term financing through the issue of equity
and convertible bonds
- FOREIGN CURRENCY
Description of Risk
The combination of US dollar denominated sales and a cost base spread across
local currencies may impact the Group's results in the event of adverse currency
movements against the US dollar.
Mitigating Steps
The relationship between the US dollar and local currencies, and gold and silver
prices provide the company with a natural hedge. Management periodically reviews
this relationship to ensure the company is properly protected.
- INTEREST RATE
Description of Risk
Movements in interest rates could impact the Group's results from financings.
Mitigating Steps
Given the low interest rate environment, management has taken measures to fix
the interest rate exposure of the Group stemming from its debt balance.
Further information on financial risks can be found in note 38 to the
Consolidated Financial Statements
2. OPERATIONAL RISKS
- COSTS
Description of Risk
Increase in production costs will impact on the Group's profitability.
Mitigating Steps
The Group seeks to enter into long-term supply contracts where possible, and at
favourable prices.
- BUSINESS INTERRUPTION
Description of Risk
Assets used in operations may break down and insurance policies may not cover
against all forms of risks due to certain exclusions and limitations.
Mitigating Steps
The Group has combined property damage and business interruption insurance
policies for all operations, and adequacy of coverage is regularly reviewed in
conjunction with consultants to ensure appropriate level of cover for the
industry and for operations in Latin America. Contingency planning has also led
to the Group compiling stock of critical parts and access to back-up power
supplies
- RESERVE AND RESOURCE REPLACEMENT
Description of Risk
The Group's future profitability and operating margins depend upon its ability
to replenish reserves with geological characteristics to enable mining at
competitive costs. Reserves stated in this Annual Report are estimates.
Mitigating Steps
The Group has an annual drilling plan which is revised on a quarterly basis.
Exploration targets are continuously being defined with new targets
incorporated.
- PERSONNEL
Description of Risk
Loss of key senior management and personnel; in particular, highly skilled
engineers and geologists. Lack of availability of individuals with relevant
mining experience situated in the locality of the Group's operations, or the
inability of the Group to obtain all necessary services or expertise locally or
to conduct operations on projects at reasonable rates.
Mitigating Steps
The Group seeks to provide competitive compensation arrangements and
well-defined career plans for positions of strategic importance. In respect of
mining personnel, a dedicated labour relations strategy has been developed to
meet employees' needs and to facilitate open dialogue between key stakeholders.
3. MACRO ECONOMIC RISKS
- POLITICAL, LEGAL AND REGULATORY RISKS
Description of Risk
Costs associated with ensuring compliance with all relevant laws and regulations
are substantial and future changes may require additional expense, restrictions
on or suspensions of, the Group's operations and may result in delays in the
development of its properties.
Mitigating Steps
Regional risk assessments are performed when investment in new countries are
considered. These incorporate reviews of political environments and likelihood
of changes in relevant royalties and taxes. Local teams in each country of
operation monitor and react, as necessary, to policy changes impacting on the
business. Further mitigation is achieved through broadening of the geographic
spread of the Group's assets, ensuring risk is diversified across a number of
countries.
4. CORPORATE SOCIAL RESPONSIBILITY RELATED RISKS
- HEALTH AND SAFETY
Description of risk
Group employees working in the mines may be exposed to health and safety risks.
Failure to manage these risks may result in a work slowdown, stoppage or strike
and/or may damage the reputation of the Group and hence its ability to operate.
Mitigating Steps
Attainment of Level 4 of the DNV safety management information system at all
operating units.
- ENVIRONMENTAL
Description of risk
The Group may be liable for losses arising from environmental hazards associated
with the Group's activities and production methods, or may be required to
undertake extensive remedial clean-up action or pay for governmental remedial
clean-up actions.
Mitigating Steps
As part of the Group's approach to environmental risk management, periodic
audits of the Group's operations are carried out with findings reported to
senior management, and corresponding recommendations implemented under agreed
action plans. Air and water quality is monitored on a weekly and monthly basis.
- SOCIAL
Description of risk
Communities living in the localities of the Group's operations may oppose the
activities carried out by the Group at existing mines or development projects
and prospects which may also impact on the Group's ability to obtain concessions
for current or future projects.
Mitigating Steps
The Group's Community Relations Department maintains continuous dialogue and
cooperation with communities surrounding the Group's operations. New high impact
plans have been developed focusing on health, education and technical
assistance. Tailored risk matrices are monitored on a monthly basis.
b. The following has been reproduced from pages 119 and 120 of the 2009 Annual
Report:
"31 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
S$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 interest of US$27,214. The Group did not collect
any amount of this loan.
(c) Participation in placing by Pelham Investment Corporation ("Pelham")
Pelham, a company controlled by Eduardo Hochschild, participated in a placing of
the Company's Ordinary Shares ("Shares") in October 2009 by subscribing for
1,064,780 Shares at a price of 295p per Share.
c. The following has been reproduced from page 48 of 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."
This information is provided by RNS
The company news service from the London Stock Exchange
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