TIDMHOC

RNS Number : 4487W

Hochschild Mining PLC

19 August 2015

___________________________________________________________________________

19 August 2015

Hochschild Mining plc

Interim Results for the six months ended 30 June 2015

Financial Results highlights[1]

   --    Net revenue of $190.3 million (H1 2014: $282.0 million) 
   --    Adjusted EBITDA of $39.3 million (H1 2014: $94.3 million)[2] 
   --    Earnings per share of $(0.10) (H1 2014: $(0.01)) 
   --    Cash balance of $84.3 million as at 30 June 2015 

Inmaculada Project update

   --    Inmaculada production to date: 

o 21,100 ounces of gold

o 506,200 ounces of silver

   --    Mined tonnage, grades and metallurgical recoveries in line with expectations 
   --    2015 production target of 6-7 million silver equivalent ounces on track[3] 

Operational highlights

   --    Half year production of 9.2 million attributable silver equivalent ounces 
   --    24.0 million silver equivalent ounce full year production target on track 

-- Main operation all-in sustaining costs per silver equivalent ounce fell by 9% to $15.0 ($16.0 per ounce assuming silver-to-gold ratio of 60:1)[4]

-- $13-14 per ounce all-in sustaining cost target for 2015 on track ($15-16 per ounce assuming silver-to-gold ratio of 60:1)

H2 2015 Outlook

   --    Significantly improved production expected in H2 2015 
   --    Inmaculada full production set to drive significant cost and margin improvement in H2 2015 
 
 $000, pre-exceptional unless stated                   Six months to 30 June 2015   Six months to 30 June 2014 
----------------------------------------------------  ---------------------------  --------------------------- 
 Attributable silver production (koz)                                       6,265                        8,526 
 Attributable gold production (koz)                                            41                           55 
 Net revenue[5]                                                           190,259                      282,012 
 Adjusted EBITDA                                                           39,306                       94,282 
 Loss from continuing operations                                         (37,750)                      (1,546) 
 Loss from continuing operations (post-exceptional)                      (43,885)                     (11,749) 
 Earnings per share ($ pre-exceptional)                                    (0.10)                       (0.01) 
 Earnings per share ($ post-exceptional)                                   (0.12)                       (0.04) 
----------------------------------------------------  ---------------------------  --------------------------- 
 

Commenting on the results, Eduardo Hochschild, Chairman, said:

"During this year, we have been completing the investment in Hochschild's new flagship low cost Inmaculada mine. I am delighted that in June we reached a milestone for our Company with the production of our first ounces from this crucial project and I am confident that, as we move through the remainder of 2015, we will start to see the fruits of our long term investment strategy."

_______________________________________________________________________________________

A live conference call & audio webcast will be held at 2pm (London time) on Wednesday 19 August 2015 for analysts and investors. Details as follows:

For a live webcast of the presentation please click on the link below:

http://edge.media-server.com/m/p/h5k94yz3

Conference call dial in details:

UK: +44(0)20 3427 1900 (Please use the following confirmation code: 2270177).

A recording of the conference call will be available for one week following its conclusion, accessible from the following telephone number:

UK: (0)20 3427 0598 (Access code: 2270177)

The On Demand version of the webcast will be available within two hours after the end of the presentation and is accessible using the same webcast link.

_______________________________________________________________________________________

Enquiries:

Hochschild Mining plc

Charles Gordon +44 (0)20 3714 9040

Head of Investor Relations

Hudson Sandler

Charlie Jack +44 (0)207 796 4133

Public Relations

_______________________________________________________________________________________

About Hochschild Mining plc:

Hochschild Mining plc is a leading precious metals company listed on the London Stock Exchange (HOCM.L / HOC LN) with a primary focus on the exploration, mining, processing and sale of silver and gold. Hochschild has over fifty years' experience in the mining of precious metal epithermal vein deposits and currently operates four underground epithermal vein mines, three located in southern Peru and one in southern Argentina. Hochschild also has numerous long-term projects throughout the Americas.

CHIEF EXECUTIVE OFFICER'S STATEMENT

2015 has already proved to be both an exciting and challenging year for Hochschild. We have achieved first production from our flagship Inmaculada project whilst managing the existing business in an ongoing deteriorating commodity price environment. The financial position of the company is expected to improve through the second half as we reach full capacity at Inmaculada and begin to benefit from the new low cost production.

Growth

The Company made excellent progress in the first half on the final stages of construction at Inmaculada with the result that we were able to start the commissioning of the processing plant and deliver first production in early June. The subsequent ramp-up has progressed well with mining operations running smoothly and grades and recoveries in line with or better than expectations and we are now close to being able to declare commercial production. A number of non-essential deliverables, such as the paste backfill plant, remain to be completed but we are confident that, with approximately 1.8 million silver equivalent ounces produced to date, the operation is on track to deliver its six to seven million silver equivalent ounce target for the year. We also remain excited by the geological potential in the district surrounding our Inmaculada and Pallancata land packages and expect to continue exploration work in 2016 alongside similar programmes at Arcata and San Jose.

H1 2015 performance

Our current operations have delivered a solid first half despite the implementation of revised mine plans at both Peruvian operations, producing 9.2 million attributable silver equivalent ounces. So far in 2015, Arcata and San Jose have exceeded our expectations whilst Pallancata's performance has reflected the long-term move to thinner veins in addition to the delay in brownfield drilling at the mine. However, I am happy to report that early results from the recent resumption of drilling are extremely encouraging for the long term future of the operation. We remain on track to meet our annual production forecast of 24 million silver equivalent ounces with production in the second half expected to be boosted by between six to seven million ounces from Inmaculada.

Our financial results for the first half reflected the effects of a further 18% fall in the average silver price received versus the first half of 2014, our mine plan optimisation in Peru, our ongoing efforts to reduce costs and the final phase of our Inmaculada investment programme. Main operation all-in sustaining costs per silver equivalent ounce were in line with expectations at $15.0 and we can look forward to the increasing positive impact of low cost production from Inmaculada in the second half. Pre-exceptional EBITDA was $39.3 million whilst the first half loss per share resulted partly from interest costs arising from our $350 million senior notes issued in January 2014. We fully expect those costs to begin to be absorbed as cashflows from Inmaculada start to be generated. The cash balance at the end of the half was at $84 million which is net of $63 million of scheduled project capital expenditure executed during the period.

Financing

During the first half, Hochschild continued to allocate capital expenditure to complete Inmaculada. Early in the year, we further enhanced our liquidity with the drawdown of $75 million of short term lines of credit in Peru and towards the end of the half we were able to extend the maturity of these facilities as well as improve the interest rate to an average annual rate of approximately 0.9%. Furthermore, we took advantage of short periods of price improvement at the start of the year to hedge six million silver ounces for 2015 at $17.75 per ounce on top of the 38,000 gold ounces hedged at $1,300 per ounce, thereby continuing our policy of protecting cashflows during the Inmaculada construction.

Outlook

Production for the second half of 2015 is scheduled to include the first material contribution from Inmaculada and a stronger contribution from San Jose, with all-in sustaining cost expected to meet guidance of between $13 to $14 per silver equivalent ounce (or between $15 to $16 using the 60:1 gold to silver ratio).

The current market environment for precious metals remains uncertain but I am confident in a more positive outlook for Hochschild in the second half of this year and into 2016. We can look forward to the establishment of Inmaculada as a significant cash generating asset for the Company and thus becoming our new flagship operation.

Ignacio Bustamante

Chief Executive Officer

18 August 2015

OPERATING REVIEW

CURRENT OPERATIONS

Production

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August 19, 2015 02:01 ET (06:01 GMT)

In the first half of 2015, the Company delivered attributable production of 9.2 million silver equivalent ounces, including 6.3 million ounces of silver and 40.6 thousand ounces of gold. With production from the newly commissioned Inmaculada mine ramping up, the Company is on track to meet its full year production target of 24.0 million attributable silver equivalent ounces.[6]

Costs

The Company's all-in sustaining costs at its main operations were reduced by 9% in H1 2015 to $15.0 per ounce driven by operational initiatives resulting from the cashflow optimisation programme, the ongoing local currency devaluation and better than expected grades particularly at Arcata.[7] Unit cost per tonne at the main Peruvian operations was at $106.5 (H1 2014: $74.0) with the key reason for the increase being the significant reduction in capacities at both mines as part of the Company's mine plan optimization announced in November 2014. In Argentina, unit cost per tonne increased by 10% to $219.5 (H1 2014: $200.0).

Main operations: Arcata (Peru)

The 100% owned Arcata underground operation is located in the Department of Arequipa in southern Peru. It commenced production in 1964.

 
 Arcata summary                    Six months    Six months   % change 
                                   to 30 June    to 30 June 
                                         2015          2014 
-------------------------------  ------------  ------------  --------- 
 Ore production (tonnes)              300,924       365,573       (18) 
 Average silver grade (g/t)               340           262         30 
 Average gold grade (g/t)                0.97          0.81         20 
 Silver produced (koz)                  2,726         2,895        (6) 
 Gold produced (koz)                     7.17          8.76       (18) 
 Silver equivalent produced 
  (koz)                                 3,248         3,459        (6) 
 Silver sold (koz)                      2,683         2,947        (9) 
 Gold sold (koz)                         6.92          8.58       (19) 
 Unit cost ($/t)                        113.2          82.2         38 
 Total cash cost ($/oz Ag 
  co-product)([8])                       11.5          12.5        (8) 
 All-in sustaining cost ($/oz)           13.6          17.7       (23) 
-------------------------------  ------------  ------------  --------- 
 

Production

At Arcata, total silver equivalent production in H1 2015 was 3.2 million ounces (H1 2014: 3.5 million ounces). Despite the announced adjusted mine plans for 2015 to ensure the extraction of profitable ounces, Arcata delivered a stronger than expected first half production with higher than expected tonnage and silver grades.

Costs

In the first half, the unit cost at Arcata of $113.2 per tonne (H1 2014: $82.2 per tonne) reflected the reduction in capacity as part of the above-mentioned mine plan adjustment. However, with corresponding grade increases and ongoing reductions in sustaining and development capital expenditure, all-in sustaining costs fell by 23% to $13.6 per silver equivalent ounce (H1 2014: $17.7 per ounce).

Brownfield exploration

In the first half, the Arcata exploration programme has focused on the incorporation of resources from the Stephani, Cristina, Soledad, Macarena and Nicolle as well as further exploration of the Tunel 4 vein system. 5,026 metres of drilling were executed. Significant intercepts included:

 
 Vein          Results 
------------  ------------------------------------- 
 North-South   DDH027-LM11: 2.12m at 0.43 g/t Au & 
                719 g/t Ag 
                DDH768-LM14: 1.27m at 2.46 g/t Au & 
                549 g/t Ag 
                DDH802-GE15: 1.58m at 0.56 g/t Au & 
                659 g/t Ag 
                DDH990-GE11: 0.82m at 0.15 g/t Au & 
                1,667 g/t Ag 
------------  ------------------------------------- 
 Lucero        DDH777-LM15: 1.35m at 1.35 g/t Au & 
                593 g/t Ag 
                DDH792-GE15: 1.01m at 1.85 g/t Au & 
                395 g/t Ag 
                DDH800-LM15: 0.97m at 1.49 g/t Au & 
                533 g/t Ag 
------------  ------------------------------------- 
               DDH800-LM15: 1.00m at 4.05 g/t Au & 
 Soledad        1,015 g/t Ag 
------------  ------------------------------------- 
 

Pallancata: Peru

The 100% owned Pallancata silver/gold property is located in the Department of Ayacucho in southern Peru, approximately 160 kilometres from the Arcata operation. Pallancata commenced production in 2007. Ore from Pallancata is transported 22 kilometres to the Selene plant for processing.

 
 Pallancata summary                Six months    Six months   % change 
                                   to 30 June    to 30 June 
                                         2015          2014 
-------------------------------  ------------  ------------  --------- 
 Ore production (tonnes)              289,551       523,695       (45) 
 Average silver grade (g/t)               248           264        (6) 
 Average gold grade (g/t)                1.19          1.12          6 
 Silver produced (koz)                  1,948         3,588       (46) 
 Gold produced (koz)                     8.44         12.84       (34) 
 Silver equivalent produced 
  (koz)                                 2,563         4,415       (42) 
 Silver sold (koz)                      1,986         3,615       (45) 
 Gold sold (koz)                         8.33         13.11       (36) 
 Unit cost ($/t)                         99.5          68.1         46 
 Total cash cost ($/oz Ag 
  co-product)                            12.3          10.1         22 
 All-in sustaining cost ($/oz)           15.6          15.1          3 
-------------------------------  ------------  ------------  --------- 
 

Production

At Pallancata, total production for the first half was 2.6 million silver equivalent ounces. (H1 2014: 4.4 million ounces) with tonnage significantly lower than the equivalent period in 2014 due to the adjusted mine plan resulting in an approximate halving of capacity although silver and gold grades have risen to compensate and are expected to remain at current levels for the remainder of the year.

Costs

Cost per tonne at Pallancata was $99.5 per tonne in the first half (H1 2014: $68.1 per tonne). As at Arcata, unit costs increased in line with the scheduled capacity reductions and although grade increases and sustaining capital expenditure cuts partially compensated, all-in sustaining cost per silver equivalent ounce increased slightly to $15.6 (H1 2014: $15.1) mostly due to the mine's ongoing transfer to thinner veins in the mix. The Company continues to target further cost reduction programmes at the operation.

Brownfield exploration

The exploration team at Pallancata received permits in May to begin a 19,100 metre exploration and drilling programme with the aim of focusing on inferred resource exploration at surface and also geological mapping of the west and south side of the district for new target definition. Results are expected in the second half of the year.

San Jose: Argentina

The San Jose silver/gold mine is located in Argentina, in the province of Santa Cruz, 1,750 kilometres south-southwest of Buenos Aires. San Jose commenced production in 2007 and is a joint venture with McEwen Mining Inc (formerly Minera Andes Inc.). Hochschild holds a controlling interest of 51% in the mine and is the mine operator.

 
 San Jose summary(*)               Six months    Six months   % change 
                                   to 30 June    to 30 June 
                                         2015          2014 
-------------------------------  ------------  ------------  --------- 
 Ore production (tonnes)              232,995       276,663       (16) 
 Average silver grade (g/t)               448           385         16 
 Average gold grade (g/t)                6.34          5.60         13 
 Silver produced (koz)                  2,932         2,975        (1) 
 Gold produced (koz)                    42.30         43.91        (4) 
 Silver equivalent produced 
  (koz)                                 6,012         5,803        (4) 
 Silver sold (koz)                      3,115         3,004          4 
 Gold sold (koz)                        42.75         43.25        (1) 
 Unit cost ($/t)                        219.5         200.0         10 
 Total cash cost ($/oz Ag 
  co-product)                            11.5          12.9       (11) 
 All-in sustaining cost ($/oz)           15.6          16.7        (7) 
-------------------------------  ------------  ------------  --------- 
 

(*) The Company has a 51% interest in San Jose

Production

The San Jose operation improved, as expected, from its seasonally shorter first quarter to deliver 6.0 million silver equivalent ounces (H1 2014: 5.8 million ounces) with both grades and recoveries particularly strong versus the same period of 2014, offsetting the slightly reduced tonnage in the half. San Jose is expected to deliver a stronger second half with tonnage expected to peak in the fourth quarter.

Costs

At San Jose, unit cost per tonne was $219.5 in the first half (H1 2014:$200.0). Tonnage decreased versus the same period of 2014 and this was only partially offset by the effect of the Company's ongoing optimisation plan and the moderate devaluation of the Argentinian peso. All-in sustaining costs were reduced by 7% versus the same period of 2014 with cash optimisation initiatives helping to reduce sustaining capital expenditure in addition to better grades. The Company continues to target further cost reduction programmes at San Jose.

PROJECT REVIEW

Inmaculada (Peru)

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August 19, 2015 02:01 ET (06:01 GMT)

The 100% owned Inmaculada underground operation is located in the Department of Ayacucho in southern Peru. It commenced production in June 2015.

 
 Inmaculada summary                Six months    Six months   % change 
                                   to 30 June    to 30 June 
                                         2015          2014 
------------------------------  -------------  ------------  --------- 
 Ore production (tonnes)               52,325             -          - 
 Average silver grade (g/t)                89             -          - 
 Average gold grade (g/t)                2.92             -          - 
 Silver produced (koz)                  95.45             -          - 
 Gold produced (koz)                     3.42             -          - 
 Silver equivalent produced               344             -          - 
  (koz) 
 Silver sold (koz)                          -             -          - 
 Gold sold (koz)                            -             -          - 
 Unit cost ($/t)                            -             -          - 
 Total cash cost ($/oz Ag                   -             -          - 
  co-product)([9]) 
 All-in sustaining cost ($/oz)              -             -          - 
------------------------------  -------------  ------------  --------- 
 

During the first half, plant construction continued with first dore production achieved on 3 June 2015. By the end of June, as part of the ramp-up phase to achieve full commercial design capacity, 52,325 tonnes of low grade development material had been treated at the plant producing approximately 3,420 ounces of gold and 95,450 ounces of silver.

Ramp-up in mill throughput has continued throughout July and August with tonnes per day reaching an average of 3,000 tonnes per day and expected to hit the forecast capacity of 3,500 tonnes per day at the end of August whilst gold and silver recoveries have now slightly exceeded expectations with the target of reaching 95% in gold and 90% in silver by the end of the year.

The Hochschild team has continued underground mine development and currently a stockpile of approximately 270,000 tonnes is available for processing whilst stope mining activities have commenced utilising long hole and breasting methods. The Company reiterates that the overall production forecast of 6-7 million silver equivalent ounces for 2015 remains in place and that it is on course to receive its plant operating permit which will allow the Company to begin commercial sales.

Construction of the paste backfill plant has reached 65%, with work on the laboratories, warehouses and workshops now complete.

The Company and the contractor are currently in discussions over a number of contract change orders presented by the contractor relating to the completion of the EPC contract for Inmaculada. Based on Hochschild's own evaluation work and advice received from external advisers, the Company believes that the majority of the change orders are without any merit or will be subject to significant downward adjustment. In addition, the Company believes that GyM has breached a number of terms of the EPC Contract, including failing to meet the Completion Date. Hochschild continues to assess the change orders and discussions with the contractor are ongoing.

The exploration focus near the Inmaculada mine remains on the Palca area to the North East and following a mapping programme in 2014 at the Palca 1 zone, six promising vein structures have been selected amongst others in a corridor of almost five kilometres with work at Palca 2 zone starting later on in the year.

FINANCIAL REVIEW

Key performance indicators

(before exceptional items, unless otherwise indicated)

 
  $000 unless otherwise indicated                      Six months to 30 June 2015   Six months 30 June 2014   % change 
----------------------------------------------------  ---------------------------  ------------------------  --------- 
 Net Revenue[10]                                                          190,259                   282,012       (33) 
 Attributable silver production (koz)                                       6,265                     8,526       (27) 
 Attributable gold production (koz)                                            41                        55       (25) 
 Main operation cash costs ($/oz Ag co-product)[11]                          11.8                      11.8          - 
 Main operation cash costs ($/oz Au co-product)                               872                       803          9 
 Total all-in sustaining costs ($/oz)[12]                                    16.2                      17.1        (5) 
 Main operation all-in sustaining costs ($/oz)                               15.0                      16.4        (9) 
 Adjusted EBITDA[13]                                                       39,306                    94,282       (58) 
 (Loss)/profit from continuing operations 
  (pre-exceptional)                                                      (37,750)                   (1,546)    (2,342) 
 (Loss)/profit from continuing operations (post 
  exceptional)                                                           (43,885)                  (11,749)      (274) 
 Earnings per share (pre exceptional)                                      (0.10)                    (0.01)      (900) 
 Earnings per share (post exceptional)                                     (0.12)                    (0.04)      (200) 
 Cash flow from operating activities[14]                                   18,320                    44,159       (59) 
----------------------------------------------------  ---------------------------  ------------------------  --------- 
 

The reporting currency of Hochschild Mining plc is U.S. dollars. In discussions of financial performance the Group removes the effect of exceptional items, unless otherwise indicated, and in the income statement results are shown 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 periods.

Revenue

Gross revenue

Gross revenue from continuing operations decreased 34% to $202.5 million in H1 2015 (H1 2014: $308.1 million) driven by lower production arising from the Company's optimised mine plans at its Peruvian operations and another substantial fall in precious metal prices.

Silver

Gross revenue from silver decreased 37% in H1 2015 to $131.3 million (H1 2014: $206.8 million) as a result of a 18% fall in the average price received as well as a 23% decrease in the total amount of silver ounces sold to 7,785 koz (H1 2014:10,086 koz).

Gold

Gross revenue from gold decreased 30% in H1 2015 to $71.2 million (H1 2014: $101.3 million) as a result of a 8% fall in the average price received although mostly due to a 24% decline in gold sales - the total amount of gold ounces sold in H1 2015 was 58.0 koz (H1 2014: 76.3 koz).

Gross average realised sales prices

The following table provides figures for average realised prices and ounces sold for H1 2015 and H1 2014:

 
 Average realised prices              Six months to   Six months to 
                                       30 June 2015    30 June 2014 
-----------------------------------  --------------  -------------- 
 Silver ounces sold (koz)                     7,785          10,086 
 Avg. realised silver price ($/oz)             16.9            20.5 
 Gold ounces sold (koz)                       58.01           76.29 
 Avg. realised gold price ($/oz)              1,227           1,328 
-----------------------------------  --------------  -------------- 
 

Commercial discounts

Commercial discounts refer to refinery treatment charges, refining fees and payable deductions for processing concentrates, and are discounted from gross revenue on a per tonne basis (treatment charge), per ounce basis (refining fees) or as a percentage of gross revenue (payable deductions). In H1 2015, the Group recorded commercial discounts of $12.3 million (H1 2014: $26.2 million). This decrease is explained by the reduction in sales of concentrate versus the same period of last year due to lower production and the higher proportion of dore produced at Arcata versus concentrate. The ratio of commercial discounts to gross revenue in 2014 decreased to 6% (H1 2014: 9%).

Net revenue

Net revenue decreased by 33% to $190.3 million (H1 2014: $282.0 million), comprising silver revenue of $122.5 million and gold revenue of $67.7 million. In H1 2015 silver accounted for 64% and gold 36% of the Company's consolidated net revenue compared to 66% and 34% respectively in H1 2014.

Revenue by mine

 
 $000 unless otherwise indicated    Six months to 30 June 2015   Six months to 30 June 2014   % change 
---------------------------------  ---------------------------  ---------------------------  --------- 
 Silver revenue 
 Arcata                                                 45,901                       60,273       (24) 
 Ares                                                        -                       10,420          - 
 Pallancata                                             34,200                       75,154       (54) 
 San Jose                                               51,186                       60,930       (16) 
 Moris                                                       -                           30          - 
 Commercial discounts                                  (8,829)                     (20,634)       (57) 
 Net silver revenue                                    122,458                      186,173       (34) 
 Gold revenue 
 Arcata                                                  9,018                       11,308       (20) 
 Ares                                                        -                       14,391          - 

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August 19, 2015 02:01 ET (06:01 GMT)

 Pallancata                                             10,990                       17,555       (37) 
 San Jose                                               51,177                       57,629       (11) 
 Moris                                                       -                          441          - 
 Commercial discounts                                  (3,509)                      (5,517)         36 
 Net gold revenue                                       67,676                       95,807       (29) 
---------------------------------  ---------------------------  ---------------------------  --------- 
 Other revenue[15]                                         125                           32        291 
---------------------------------  ---------------------------  ---------------------------  --------- 
 Net revenue                                           190,259                      282,012       (33) 
---------------------------------  ---------------------------  ---------------------------  --------- 
 

Costs

Total pre-exceptional cost of sales decreased 17% to $174.5 million in H1 2015 (H1 2014: $209.4 million). The direct production cost decreased by 13% to $114.2 million (H1 2014: $131.3 million) mainly due to lower tonnage treated and the impact of the mine plan revisions. Depreciation was $55.5 million (H1 2014: $58.9 million) with the decrease mainly due to lower tonnage and the lower cost of the conversion of resources into reserves. Other items, which principally includes the costs associated with a ten day work stoppage in Argentina, was $4.9 million (H1 2014: $3.0 million).

 
 $000                                 Six months    Six months   % Change 
                                      to 30 June    to 30 June 
                                            2015          2014 
----------------------------------  ------------  ------------  --------- 
 Direct production cost excluding 
  depreciation                           114,236       131,276       (13) 
 Depreciation in production cost          55,486        58,856        (6) 
 Other items                               4,928         2,978         65 
 Change in inventories                     (157)        16,311      (101) 
----------------------------------  ------------  ------------  --------- 
 Pre-exceptional cost of sales           174,493       209,421       (17) 
----------------------------------  ------------  ------------  --------- 
 

Unit cost per tonne

The Company reported unit cost per tonne at its main operations of $138.3 in H1 2015 versus $102.8 in H1 2014. For further explanation on the increase in unit cost per tonne please refer to the Operating Review.

Unit cost per tonne by operation (including royalties)[16]:

 
 Operating unit ($/tonne)     Six months    Six months   % change 
                              to 30 June    to 30 June 
                                    2015          2014 
--------------------------  ------------  ------------  --------- 
 Main operations                   138.3         102.8         35 
 Peru                              106.5          74.0         44 
 Arcata                            113.2          82.2         38 
 Pallancata                         99.5          68.1         46 
--------------------------  ------------  ------------  --------- 
 Argentina 
 San Jose                          219.5         200.0         10 
--------------------------  ------------  ------------  --------- 
 Others 
 Ares                                  -         117.8          - 
--------------------------  ------------  ------------  --------- 
 Total                             138.3         104.6         32 
--------------------------  ------------  ------------  --------- 
 

Cash costs

Cash cost reconciliation[17]:

 
 $000 unless otherwise indicated       Six months    Six months                      % change 
                                       to 30 June    to 30 June 
                                             2015          2014 
-----------------------------------  ------------  ------------  ---------------------------- 
 Group cash cost                          142,157       187,672                          (24) 
-----------------------------------  ------------  ------------  ---------------------------- 
 (+) Cost of sales                        174,493       209,421                          (17) 
 (-) Depreciation and amortisation 
  in cost of sales                       (56,536)      (62,761)                          (10) 
 (+) Selling expenses                      11,600        14,536                          (20) 
 (+) Commercial deductions                 12,600        26,476                          (52) 
     Gold                                   3,519         5,529                          (36) 
     Silver                                 9,081        20,947                          (57) 
-----------------------------------  ------------  ------------  ---------------------------- 
 Revenue                                  190,259       282,012                          (33) 
-----------------------------------  ------------  ------------  ---------------------------- 
 Gold                                     122,458        95,807                            28 
 Silver                                    67,676       186,173                          (64) 
 Others                                       125            32                           291 
-----------------------------------  ------------  ------------  ---------------------------- 
 Ounces sold 
-----------------------------------  ------------  ------------  ---------------------------- 
 Gold                                        58.0          76.3                          (24) 
 Silver                                     7,785        10,086                          (23) 
-----------------------------------  ------------  ------------  ---------------------------- 
 Group cash cost ($/oz) 
-----------------------------------  ------------  ------------  ---------------------------- 
 Co product Au                                872           836                             8 
 Co product Ag                               11.8          12.3                           (4) 
 By product Au                                181         (255)                           171 
 By product Ag                                9.1           8.6                             6 
-----------------------------------  ------------  ------------  ---------------------------- 
 

Cash costs are calculated based on pre-exceptional figures. Co-product cash cost per ounce is the cash cost allocated to the primary metal (allocation based on proportion of revenue), divided by the ounces sold of the primary metal. By-product cash cost per ounce is the total cash cost minus revenue and commercial discounts of the by-product divided by the ounces sold of the primary metal.

All-in sustaining cost reconciliation

All-in sustaining cash costs per silver equivalent ounce([18])

Six months to 30 June 2015

 
  $000 unless otherwise indicated  Arcata  Pallancata  San José  Main Operations        Other  Corporate    Total 
                                                                                        Operations   & Others 
---------------------------------  ------  ----------  -------------  ---------------  -----------  ---------  ------- 
  (+) Production cost excluding 
   depreciation[19]                33,629      27,186         49,559          110,374            -          -  110,374 
  (+) Other items in cost of 
   sales                            1,058         595          3,275            4,928            -          -    4,928 
  (+) Operating and exploration 
   capex 
   for units                        5,283       5,010         19,968           30,261            -      1,199   31,460 
  (+) Brownfield exploration 
   expenses                            37       1,183            555            1,775            -      1,180    2,955 
  (+) Administrative expenses 
   (excl 
   depreciation and before 
   exceptional 
   items)                           1,616       1,265          3,439            6,320            -     11,642   17,962 
  (+) Royalties                                   373                             373            -                 373 
---------------------------------  ------  ----------  -------------  ---------------  -----------  ---------  ------- 
  Sub-Total                        41,623      35,612         76,796          154,031            -     14,021  168,052 
---------------------------------  ------  ----------  -------------  ---------------  -----------  ---------  ------- 
  Au Ounces produced                7,168       8,443         42,300           57,911                           57,911 
---------------------------------  ------  ----------  -------------  ---------------  -----------  ---------  ------- 
  Ag Ounces produced (000's)        2,726       1,948          2,932            7,606            -          -    7,606 
---------------------------------  ------  ----------  -------------  ---------------  -----------  ---------  ------- 
  Ounces produced (Ag Eq 000's)     3,248       2,563          6,012           11,823            -          -   11,823 
---------------------------------  ------  ----------  -------------  ---------------  -----------  ---------  ------- 
  Sub-total ($/oz)                   12.8        13.9           12.8             13.0            -          -     14.2 
---------------------------------  ------  ----------  -------------  ---------------  -----------  ---------  ------- 
  (+) Commercial deductions         1,974       3,750          6,876           12,600            -          -   12,600 
  (+) Selling expenses                475         544         10,581           11,600            -          -   11,600 
---------------------------------  ------  ----------  -------------  ---------------  -----------  ---------  ------- 

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  Sub-total                         2,449       4,294         17,457           24,200            -          -   24,200 
---------------------------------  ------  ----------  -------------  ---------------  -----------  ---------  ------- 
  Au Ounces sold                    6,921       8,333         42,754           58,008            -          -   58,008 
---------------------------------  ------  ----------  -------------  ---------------  -----------  ---------  ------- 
  Ag Ounces sold (000's)            2,683       1,986          3,115            7,785            -          -    7,785 
---------------------------------  ------  ----------  -------------  ---------------  -----------  ---------  ------- 
  Ounces sold (Ag Eq 000's)         3,187       2,592          6,228           12,008            -          -   12,008 
---------------------------------  ------  ----------  -------------  ---------------  -----------  ---------  ------- 
  Sub-total ($/oz)                    0.8         1.7            2.8              2.0            -          -      2.0 
---------------------------------  ------  ----------  -------------  ---------------  -----------  ---------  ------- 
  All-in sustaining costs ($/oz 
   Ag 
   Eq)                               13.6        15.6           15.6             15.0            -          -     16.2 
---------------------------------  ------  ----------  -------------  ---------------  -----------  ---------  ------- 
 

All-in sustaining costs using the gold to silver ratio of 60:1 gives a total cost of $17.3 per ounce and main operations cost of $16.0 per ounce (Arcata at $14.0 per once, Pallancata at $16.2 per ounce and San Jose at $17.1 per ounce).

Six months to 30 June 2014

 
  $000 unless otherwise indicated  Arcata  Pallancata  San José  Main Operations        Other  Corporate    Total 
                                                                                        Operations   & Others 
---------------------------------  ------  ----------  -------------  ---------------  -----------  ---------  ------- 
  (+) Production cost excluding 
   depreciation                    29,059      34,779         49,838          113,676       17,600          -  131,276 
  (+) Other items in cost of 
   sales                              992         647            656            2,295          683          -    2,978 
  (+) Operating and exploration 
   capex 
   for units                       18,164      17,859         20,926           56,949          (5)        431   57,375 
  (+) Brownfield exploration 
   expenses                           214         629             91              934         (61)        688    1,561 
  (+) Administrative expenses 
   (excl 
   depreciation and before 
   exceptional 
   items)                           2,144       2,947          4,063            9,154          166     10,709   20,029 
  (+) Royalties                                   897                             897          262          -    1,159 
---------------------------------  ------  ----------  -------------  ---------------  -----------  ---------  ------- 
  Sub-Total                        50,573      57,758         75,574          183,905       18,645     11,828  214,379 
---------------------------------  ------  ----------  -------------  ---------------  -----------  ---------  ------- 
  Au Ounces produced                8,755      12,840         43,912           65,507       11,465          -   76,972 
---------------------------------  ------  ----------  -------------  ---------------  -----------  ---------  ------- 
  Ag Ounces produced (000's)        2,895       3,588          2,975            9,458          525          -    9,983 
---------------------------------  ------  ----------  -------------  ---------------  -----------  ---------  ------- 
  Ounces produced (Ag Eq 000's)     3,459       4,415          5,803           13,676        1,264          -   14,940 
---------------------------------  ------  ----------  -------------  ---------------  -----------  ---------  ------- 
  Sub-total ($/oz)                   14.6        13.1           13.0             13.4         14.8          -     14.3 
---------------------------------  ------  ----------  -------------  ---------------  -----------  ---------  ------- 
  (+) Commercial deductions         9,846       7,872          8,758           26,476            -          -   26,476 
  (+) Selling expenses              1,054         977         12,461           14,492           44          -   14,536 
---------------------------------  ------  ----------  -------------  ---------------  -----------  ---------  ------- 
  Sub-total                        10,900       8,849         21,219           40,968           44          -   41,012 
---------------------------------  ------  ----------  -------------  ---------------  -----------  ---------  ------- 
  Au Ounces sold                    8,576      13,112         43,252           64,940       11,354          -   76,294 
---------------------------------  ------  ----------  -------------  ---------------  -----------  ---------  ------- 
  Ag Ounces sold (000's)            2,947       3,615          3,004            9,566          519          -   10,086 
---------------------------------  ------  ----------  -------------  ---------------  -----------  ---------  ------- 
  Ounces sold (Ag Eq 000's)         3,499       4,460          5,789           13,748        1,251          -   14,998 
---------------------------------  ------  ----------  -------------  ---------------  -----------  ---------  ------- 
  Sub-total ($/oz)                    3.1         2.0            3.7              3.0          0.0          -      2.7 
---------------------------------  ------  ----------  -------------  ---------------  -----------  ---------  ------- 
  All-in sustaining costs ($/oz 
   Ag 
   Eq)                               17.7        15.1           16.7             16.4         14.8          -     17.1 
---------------------------------  ------  ----------  -------------  ---------------  -----------  ---------  ------- 
 

Administrative expenses

Administrative expenses before exceptional items decreased by 12% to $18.8 million (H1 2014: $21.4 million) primarily due to the continuing impact of the cashflow optimisation programme.

Exploration expenses

In H1 2015, pre-exceptional exploration expenses, decreased by 50% to $4.1 million (H1 2014: $8.2 million).

In addition, 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. The Company capitalised $0.7 million relating to brownfield exploration compared to $1.2 million in H1 2014, bringing the total investment in exploration for H1 2015 to $4.8 million (H1 2014: $9.4 million). In addition, $0.8 million was invested in the Company's Advanced and Growth Projects.

Selling expenses

Selling expenses fell by 20% in H1 2015 to $11.6 million (H1 2014: $14.5 million) due to lower prices impacting the export tax in Argentina. Selling expenses mainly consist of export duties at San Jose (export duties in Argentina are levied at 10% of revenue for concentrate and 5% of revenue for dore) and logistic costs for the sale of concentrate.

Other income/expenses

Other income before exceptional items was $2.6 million (H1 2014: $2.0 million). Other expenses before exceptional items reached $4.6 million (H1 2014: $4.8 million) mainly due to care and maintenance expenses at Ares.

Adjusted EBITDA

Adjusted EBITDA decreased by 58% over the period to $39.3 million (H1 2014: $94.3 million) driven primarily by significantly precious metal prices as well as the decision to reduce capacity at the Peruvian operations as part of the Company's optimised mine plans for 2015. These effects were partially offset by the continuing impact of the cash optimisation initiatives.

Adjusted EBITDA is calculated as profit from continuing operations before exceptional items, net finance costs and income tax plus non-cash items (depreciation and changes in mine closure provisions) and exploration expenses other than personnel and other exploration related fixed expenses.

 
 $000 unless otherwise indicated                    Six months to 30 June 2015   Six months to 30 June 2014   % change 
-------------------------------------------------  ---------------------------  ---------------------------  --------- 
 Profit from continuing operations before 
  exceptional items, net finance cost, foreign 
  exchange 
  loss and income tax                                                 (20,707)                       25,738      (180) 
 Operating margin                                                        (11)%                           9%          - 
 Depreciation and amortisation in cost of sales                         56,536                       62,761       (10) 
 Depreciation and amortisation in administrative 
  expenses                                                                 817                        1,324       (38) 
 Exploration expenses                                                    4,092                        8,175       (50) 
 Personnel and other exploration related fixed 
  expenses                                                             (1,432)                      (3,716)       (61) 
 Other non cash expenses[20]                                                 -                            -          - 
-------------------------------------------------  ---------------------------  ---------------------------  --------- 
 Adjusted EBITDA                                                        39,306                       94,282       (58) 
-------------------------------------------------  ---------------------------  ---------------------------  --------- 
 Adjusted EBITDA margin                                                    21%                          33% 

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-------------------------------------------------  ---------------------------  ---------------------------  --------- 
 

Finance income

Finance income before exceptional items of $0.6 million reduced from H1 2014 ($1.8 million) mainly due to lower interest received on deposits and liquidity funds ($0.6 million) and the absence of dividends received from the investment in Gold Resource Corporation ($0.5 million).

Finance costs

Finance costs before exceptional items decreased from $18.1 million in H1 2014 to $14.6 million in the first half of 2015, principally due to the repayment of the Company's convertible bond in October 2014 and the resulting reduction in interest paid.

Foreign exchange losses

The Group recognised a foreign exchange loss of $1.2 million (H1 2014: $0.3 million loss) as a result of exposure in currencies other than the functional currency, principally the Peruvian Nuevo Sol and Argentinean Peso, which depreciated 5% and 8% respectively in the period against the US Dollar.

Income tax

The Company's pre-exceptional income tax expense was $1.8 million (H1 2014: $10.7 million). The reduction in the expense is mainly explained by the higher pre-exceptional loss before income tax of $(36.0) million (H1 2014: $9.1 million).

Exceptional items

Exceptional items in H1 2015 totalled $(6.1) million after tax (H1 2014: $10.2 million). The tables below detail the exceptional items excluding the exceptional tax effect that amounted to $1.3 million (H1 2014: $2.3 million).

Exceptional items in H1 2015 comprise the following items:

H1 2015 negative exceptional items:

 
 Main items                                                  $000   Description of main items 
-------------------------------------------------------  --------  ----------------------------------------------- 
 Impairment and write-off of non-financial assets (net)   (5,917)   Impairment of the Crespo unit of $5.9 million. 
 Finance cost                                             (1,486)   Interest on tax contingency 
-------------------------------------------------------  --------  ----------------------------------------------- 
 

Cash flow & balance sheet review

Cash flow:

 
 $000 unless otherwise            Six months to   Six months to     Change 
  indicated                        30 June 2015    30 June 2014 
-------------------------------  --------------  --------------  --------- 
 Net cash generated from 
  operating activities                   18,320          44,159   (25,839) 
 Net cash used in investing 
  activities                          (119,212)       (127,049)      7,837 
 Cash flows generated/(used) 
  in financing activities                70,215          27,374     42,841 
-------------------------------  --------------  --------------  --------- 
 Net (decrease)/increase 
  in cash and cash equivalents 
  during the period                    (30,677)        (55,516)     24,839 
-------------------------------  --------------  --------------  --------- 
 

Operating cash flow decreased from $44.2 million in H1 2014 to $18.3 million in H1 2015, mainly due to lower prices. Net cash used in investing activities decreased to $(119.2) million in H1 2015 from $(127.0) million in H1 2014 due to reduced sustaining capex at all operations, partially offset by higher construction capex at Inmacualda. Finally, cash generated from financing activities increased to $70.2 million from $27.4 million in H1 2014, primarily as a result of the proceeds from the short term debt raised in Peru ($75 million). As a result, total cash generated improved from $(55.5) million in H1 2014 to $(30.7) million in H1 2015 ($24.8 million difference).

Working capital

 
 $000 unless otherwise indicated               As at 30 June 2015                As at 30 June 2014 
--------------------------------------------  -------------------  -------------------------------- 
 Trade and other receivables                              161,903                           194,265 
 Inventories                                               59,570                            54,135 
 Net other financial assets / (liabilities)                 7,511                             5,207 
 Net income tax receivable / (payable)                     21,921                            21,514 
 Trade and other payables and provisions                (217,466)                         (181,641) 
--------------------------------------------  -------------------  -------------------------------- 
 Working Capital                                           33,439                            93,480 
--------------------------------------------  -------------------  -------------------------------- 
 

The Group's working capital position decreased to $33.4 million in H1 2015 from $93.5 million in H1 2014. This was primarily explained by: lower trade and other receivables ($(32.4) million) due to higher dore sales at Arcata and lower prices; and by higher trade and other payables and provisions ($(35.8) million, in line with improved payment terms obtained from vendors.

Net cash

 
 $000 unless otherwise indicated    As at 30 June 2015   As at 30 June 
                                                                  2014 
---------------------------------  -------------------  -------------- 
 Cash and cash equivalents                      84,316         225,550 
 Long term borrowings                        (442,898)       (343,174) 
 Short term borrowings[21]                    (97,053)       (137,678) 
---------------------------------  -------------------  -------------- 
 Net cash/(debt)                             (455,635)       (255,302) 
---------------------------------  -------------------  -------------- 
 

The Group reported net cash position was $(455.6) million as at 30 June 2015 (2014: $(255.3) million). The change was mainly driven by cash used to build the Inmaculada Project including construction capex and working capital allocated to the project.

Capital expenditure([22])

 
 $000 unless otherwise indicated    Six months to 30 June    Six months 
                                                     2015    to 30 June 
                                                                   2014 
---------------------------------  ----------------------  ------------ 
 Arcata                                             5,283        18,164 
 Ares                                                   -           (5) 
 Selene                                               130           156 
 Pallancata                                         4,880        17,703 
 San Jose                                          19,968        20,926 
 Operations                                        30,261        56,944 
---------------------------------  ----------------------  ------------ 
 Inmaculada                                        98,978        75,595 
 Crespo                                             1,012         2,467 
 Volcan                                               565           972 
 Azuca                                                137           578 
 Other                                              1,199           431 
---------------------------------  ----------------------  ------------ 
 Total                                            132,152       136,987 
---------------------------------  ----------------------  ------------ 
 

H1 2015 capital expenditure of $132.2 million (H1 2014: $137.0 million) mainly composed of operational capex of $30.3 million and Inmaculada capital expenditure of $99.0 million.

RISKS

The principal risks and uncertainties facing the Company in respect of the year ended 31 December 2014 are set out in detail in the Risk Management section of the 2014 Annual Report and in Note 38 to the 2014 Consolidated Financial Statements.

The key risks disclosed in the 2014 Annual Report (available at www.hochschildmining.com) are categorised as:

o Financial risks which include commodity price risk and counterparty credit risk;

o Operational risks including the risks associated with operational performance, delivery of projects, business interruption, exploration & reserve and resource replacement and personnel;

o Macro-economic risks which include political, legal and regulatory risks; and

o Sustainability risks including risks associated with health and safety, environmental and community relations.

These risks continue to apply to the Company in respect of the remaining six months of the financial year.

In terms of the changes in the profile of these risks, the Board recognises the heightened level of financial risk that results from the combination of (i) a deteriorating precious metals pricing environment and (ii) the Company's commitments which include the financing of the Group's debt and the capital demands of the Inmaculada project as it ramps up to full capacity. In addition, such a pricing environment reduces the comfort gap between the current level of indebtedness and the limits established in the debt covenants.

The Company's risk management strategy overseen by the Board has prompted a number of actions taken by management to mitigate this risk which primarily include:

o an ongoing focus on managing costs following the implementation of the Cash Optimisation Plan; and

o the renewal of short-term credit lines, which will provide the Company with further financial flexibility.

The Board expects that the Group's financial position will improve significantly as production at Inmaculada increases as it achieves full capacity which, in addition to increasing the Group's total production, will also increase margins given its lower costs of production relative to the Group's other mines.

GOING CONCERN

The Company's business activities, together with the factors likely to affect future development, performance and position are set out in the Operating Review and Project Review on pages 4 to 7. The financial position of the Company, its cash flow and liquidity position are described in the Financial Review on pages 8 to16.

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The Directors believe that the financial resources available at the date of the issue of these condensed interim financial statements are sufficient for the Company to manage its business risks successfully.

The Company's forecasts and projections, taking into account reasonably possible changes in operational performance and in particular the price of gold and silver, and other mitigating actions described in the Risks section above, show that there are reasonable expectations that the Company will be able to operate on funds currently held and those generated internally, for the foreseeable future.

After making enquiries and considering the above, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future and consider the going concern basis of accounting to be appropriate. As a result they continue to adopt the going concern basis of accounting in preparing the condensed interim financial statements.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors confirm that, to the best of their knowledge, the interim condensed consolidated financial statements have been prepared in accordance with IAS 34 "Interim Financial Reporting" as adopted by the European Union and that the interim management report includes a fair review of the information required by Disclosure and Transparency Rules 4.2.7 and 4.2.8.

A list of current Directors and their functions is maintained on the Company's website.

For and on behalf of the Board

Ignacio Bustamante

Chief Executive Officer

18 August 2015

INDEPENDENT REVIEW REPORT TO HOCHSCHILD MINING PLC

Introduction

We have been engaged by Hochschild Mining plc (the 'Company') to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2015 which comprises the Interim condensed consolidated income statement, the Interim condensed consolidated statement of comprehensive income, the Interim condensed consolidated statement of financial position, the Interim condensed consolidated statement of cash flows, the Interim condensed consolidated statement of changes in equity and the related notes 1 to 20. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.

Directors' Responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2015 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Ernst & Young LLP

London

18 August 2015

Interim condensed consolidated income statement

 
                                      Six-months ended                     Six-months ended 
                     Notes        30 June 2015 (Unaudited)              30 June 2014 (Unaudited) 
                     -----  ------------------------------------  ----------------------------------- 
                                          Exceptional                          Exceptional 
                                 Before         items                  Before        items 
                            exceptional         (Note             exceptional        (Note 
                                  items            6)      Total        items           6)      Total 
                                 US$000        US$000     US$000       US$000       US$000     US$000 
                            -----------   -----------  ---------  -----------  -----------  --------- 
Continuing 
operations 
Revenue                4        190,259             -    190,259      282,012            -    282,012 
Cost of sales          5      (174,493)             -  (174,493)    (209,421)      (3,511)  (212,932) 
                            -----------   -----------  ---------  -----------  -----------  --------- 
Gross profit                     15,766             -     15,766       72,591      (3,511)     69,080 
Administrative 
 expenses                      (18,779)             -   (18,779)     (21,355)        (868)   (22,223) 
Exploration 
 expenses                       (4,092)             -    (4,092)      (8,175)        (537)    (8,712) 
Selling expenses               (11,600)             -   (11,600)     (14,536)            -   (14,536) 
Other income                      2,602             -      2,602        2,030            -      2,030 
Other expenses                  (4,604)             -    (4,604)      (4,817)      (2,963)    (7,780) 
Impairment and 
 write-off 
 of non-financial 
 assets 
 (net)                                -       (5,917)    (5,917)            -        (476)      (476) 
(Loss)/profit from 
 continuing 
 operations 
 before net finance 
 income/(cost), 
 foreign 
 exchange loss and 
 income tax                    (20,707)       (5,917)   (26,624)       25,738      (8,355)     17,383 
Finance income         7            581             -        581        1,813            -      1,813 
Finance costs          7       (14,636)       (1,486)   (16,122)     (18,087)      (4,189)   (22,276) 
Foreign exchange 
 loss                           (1,211)             -    (1,211)        (335)            -      (335) 
                            -----------   -----------  ---------  -----------  -----------  --------- 
(Loss)/profit from 
 continuing 
 operations 
 before income tax             (35,973)       (7,403)   (43,376)        9,129     (12,544)    (3,415) 
Income tax 
 (expense)/benefit     8        (1,777)         1,268      (509)     (10,675)        2,341    (8,334) 
                            -----------   -----------  ---------  -----------  -----------  --------- 
Loss for the period 
 from continuing 
 operations                    (37,750)       (6,135)   (43,885)      (1,546)     (10,203)   (11,749) 
Attributable to: 
Equity shareholders 
 of the Company                (38,341)       (6,135)   (44,476)      (2,469)     (10,161)   (12,630) 
Non-controlling 
 interests                          591             -        591          923         (42)        881 
                            -----------   -----------  ---------  -----------  -----------  --------- 
                               (37,750)       (6,135)   (43,885)      (1,546)     (10,203)   (11,749) 
                            ===========   ===========  =========  ===========  ===========  ========= 
Basic and diluted 
 earnings per 
 ordinary 
 share from 
 continuing 
 operations and for 
 the period 
 (expressed 
 in U.S. dollars 
 per 
 share)                          (0.10)        (0.02)     (0.12)       (0.01)       (0.03)     (0.04) 
                            ===========   ===========  =========  ===========  ===========  ========= 
 
 

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Interim condensed consolidated statement of comprehensive income

 
                                                            Six-months ended 
                                                                 30 June 
                                                   ---------------------------------- 
                                                   2015 (Unaudited)  2014 (Unaudited) 
                                                             US$000            US$000 
                                                   ----------------  ---------------- 
 
Loss for the period                                        (43,885)          (11,749) 
Other comprehensive income to be reclassified 
 to profit or loss in subsequent periods: 
Exchange differences on translating foreign 
 operations                                                   (309)              (79) 
Change in fair value of available-for-sale 
 financial assets                                               201             2,538 
Recycling of the loss on available-for-sale 
 financial assets                                               (1)               934 
Change in fair value of cash flow hedges                      9,509             4,294 
Recycling of the gain on cash flow hedges                   (4,991)           (2,189) 
Deferred income tax relating to components 
 of other comprehensive income                              (1,266)             (631) 
                                                   ----------------  ---------------- 
Other comprehensive gain for the period, 
 net of tax                                                   3,143             4,867 
                                                   ----------------  ---------------- 
Total comprehensive expense for the period                 (40,742)           (6,882) 
                                                   ----------------  ---------------- 
Total comprehensive (expense)/income 
 attributable to: 
Equity shareholders of the Company                         (41,333)           (7,763) 
Non-controlling interests                                       591               881 
                                                   ----------------  ---------------- 
                                                           (40,742)           (6,882) 
                                                   ================  ================ 
 

Interim condensed consolidated statement of financial position

 
                                                           As at 30        As at 31 
                                                               June        December 
                                                               2015            2014 
                                                        (Unaudited) 
                                           Notes             US$000          US$000 
                                           -----      -------------      ---------- 
ASSETS 
Non-current assets 
Property, plant and equipment                9            1,136,541       1,076,310 
Evaluation and exploration assets           10              208,286         207,290 
Intangible assets                           10               41,860          42,815 
Available-for-sale financial assets                             653             455 
Trade and other receivables                                   5,897           6,488 
Deferred income tax assets                                      896           1,574 
                                                          1,394,133       1,334,932 
                                                      -------------      ---------- 
Current assets 
Inventories                                                  59,570          58,417 
Trade and other receivables                                 156,006         167,038 
Income tax receivable                                        22,155          25,584 
Other financial assets                      11                9,052           4,342 
Cash and cash equivalents                   13               84,316         115,999 
                                                      -------------      ---------- 
                                                            331,099         371,380 
                                                      -------------      ---------- 
Total assets                                              1,725,232       1,706,312 
                                                      =============      ========== 
 
EQUITY AND LIABILITIES 
Capital and reserves attributable 
 to shareholders of the Parent 
Equity share capital                        15              170,609         170,389 
Share premium                               15              396,021         396,021 
Treasury shares                                               (898)           (898) 
Other reserves                                            (214,073)       (217,335) 
Retained earnings                                           408,227         451,047 
                                                      -------------      ---------- 
                                                            759,886         799,224 
Non-controlling interests                                    95,751          95,160 
Total equity                                                855,637         894,384 
                                                      -------------      ---------- 
 
  Non-current liabilities 
Trade and other payables                                         81              92 
Borrowings                                  14              442,898         440,834 
Provisions                                                  107,163         111,751 
Deferred income                                              25,000          25,000 
Deferred income tax liabilities                              85,403          84,959 
                                                      -------------      ---------- 
                                                            660,545         662,636 
                                                      -------------      ---------- 
Current liabilities 
Trade and other payables                                    102,642         111,890 
Other financial liabilities                 11                1,541           1,533 
Borrowings                                  14               97,053          27,882 
Provisions                                                    7,580           2,870 
Income tax payable                                              234           5,117 
                                                      -------------      ---------- 
                                                            209,050         149,292 
                                                      -------------      ---------- 
Total liabilities                                           869,595         811,928 
                                                      -------------      ---------- 
Total equity and liabilities                              1,725,232       1,706,312 
                                                      =============      ========== 
 

Interim condensed consolidated statement of cash flows

 
                                                             Six-months ended 
                                                                  30 June 
                                                    ---------------------------------- 
                                                    2015 (Unaudited)  2014 (Unaudited) 
                                             Notes            US$000            US$000 
                                             -----  ----------------  ---------------- 
Cash flows from operating activities 
Cash generated from operations                                44,503            56,477 
Interest received                                                346             1,533 
Interest paid                                 14            (18,554)           (6,021) 
Payment of mine closure costs                                  (969)           (2,485) 
Income tax paid                                              (7,006)           (5,345) 
                                                    ----------------  ---------------- 
Net cash generated from operating 
 activities                                                   18,320            44,159 
                                                    ----------------  ---------------- 
Cash flows from investing activities 
Purchase of property, plant and equipment                  (116,012)         (140,456) 
Purchase of evaluation and exploration 
 assets                                                      (2,732)           (2,188) 
Purchase of intangibles                                        (592)             (281) 
Dividends received                                                 -               414 
Deferred income received related 
 to San Felipe property                                            -             1,223 
Proceeds from sale of available-for-sale 
 financial assets                                                  3            14,121 
Proceeds from sale of property, plant 
 and equipment                                 9                 121               118 
Net cash used in investing activities                      (119,212)         (127,049) 
                                                    ----------------  ---------------- 
Cash flows from financing activities 
Proceeds from borrowings                      14             100,784           357,812 
Repayment of borrowings                       14            (29,924)         (322,828) 
Dividends paid                                16               (645)           (7,610) 
Cash flows generated from financing 
 activities                                                   70,215            27,374 
                                                    ----------------  ---------------- 
Net decrease in cash and cash equivalents 

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 during the period                                          (30,677)          (55,516) 
Impact of foreign exchange                                   (1,006)           (5,369) 
Cash and cash equivalents at beginning 
 of period                                                   115,999           286,435 
                                                    ----------------  ---------------- 
Cash and cash equivalents at end 
 of period                                    13              84,316           225,550 
                                                    ================  ================ 
 

Interim condensed consolidated statement of changes in equity

 
                                                                                                            Other reserves 
                                                                                                                                                                                            Capital 
                                                                         Unrealised                                                                                                    and reserves 
                                                                        gain/(loss)                                                                                                    attributable 
                                                                                 on                                                                                                              to 
                       Equity                                    available-for-sale      Unrealised         Bond       Cumulative               Share-based       Total                shareholders 
                        share        Share         Treasury               financial            gain       equity      translation     Merger        payment       other    Retained          of the       Non-controlling         Total 
                      capital      premium           Shares                  assets       on hedges    component       adjustment    reserve        reserve    reserves    earnings          Parent             interests        Equity 
        Note           US$000       US$000           US$000                  US$000          US$000       US$000           US$000     US$000         US$000      US$000      US$000          US$000                US$000        US$000 
 
 
 
 
Balance at 1 
 January 
 2015                   170,389  396,021  (898)     14  3,126      -  (13,005)  (210,046)    2,576  (217,335)   451,047   799,224   95,160   894,384 
                        -------  -------  -----  -----  -----  -----  --------  ---------  -------  ---------  --------  --------  -------  -------- 
Other 
 comprehensive 
 gain/ (loss)                 -        -      -    200  3,252      -     (309)          -        -      3,143         -     3,143        -     3,143 
(Loss)/gain for 
 the 
 period                       -        -      -      -      -      -         -          -        -          -  (44,476)  (44,476)      591  (43,885) 
                                          -----  -----  -----         --------             ------- 
Total 
 comprehensive 
 (loss)/income for 
 the period                   -        -      -    200  3,252      -     (309)          -        -      3,143  (44,476)  (41,333)      591  (40,742) 
Issuance of shares  15      220        -      -      -      -      -         -          -  (1,560)    (1,560)     1,340         -        -         - 
Deferred bonus 
 plan                         -        -      -      -      -      -         -          -      424        424         -       424        -       424 
Restricted share 
 plan                         -        -      -      -      -      -         -          -    1,238      1,238         -     1,238        -     1,238 
CEO LTIP                      -        -      -      -      -      -         -          -       17         17       316       333        -       333 
Balance at 30 June 
 2015 (unaudited)       170,609  396,021  (898)    214  6,378      -  (13,314)  (210,046)    2,695  (214,073)   408,227   759,886   95,751   855,637 
                        =======  =======  =====  =====  =====  =====  ========  =========  =======  =========  ========  ========  =======  ======== 
 
Balance at 1 
 January 
 2014                   170,389  396,021  (898)  1,024      -  8,432  (11,289)  (210,046)      736  (211,143)   511,492   865,861  104,375   970,236 
                                          -----  -----  -----         --------             ------- 
Other 
 comprehensive 
 gain/(loss)                  -        -      -  3,472  1,474      -      (79)          -        -      4,867         -     4,867        -     4,867 
(Loss)/gain for 
 the 
 period                       -        -      -      -      -      -         -          -        -          -  (12,630)  (12,630)      881  (11,749) 
                                          -----  -----  -----         --------             ------- 
Total 
 comprehensive 
 (loss)/income for 
 the period                   -        -      -  3,472  1,474      -      (79)          -        -      4,867  (12,630)   (7,763)      881   (6,882) 
Deferred bonus 
 plan                         -        -      -      -      -      -         -          -      106        106         -       106        -       106 
CEO LTIP                      -        -      -      -      -      -         -          -      260        260         -       260        -       260 
 Dividends 
  declared 
  to 
  non-controlling 
  interests                   -        -      -      -      -      -         -          -        -          -         -         -  (5,511)   (5,511) 
Balance at 30 June 
 2014 (unaudited)       170,389  396,021  (898)  4,496  1,474  8,432  (11,368)  (210,046)    1,102  (205,910)   498,862   858,464   99,745   958,209 
                        =======  =======  =====  =====  =====  =====  ========  =========  =======  =========  ========  ========  =======  ======== 
 

Notes to the interim condensed consolidated financial statement

   1       Corporate Information 

Hochschild Mining plc (hereinafter the "Company" and together with its subsidiaries, the "Group") is a public limited company incorporated on 11 April 2006 under the Companies Act 1985 as a limited company and registered in England and Wales with registered number 05777693. The Company's registered office is located at 23 Hanover Square, London W1S 1JB, United Kingdom. Its ordinary shares are traded on the London Stock Exchange.

The Group's principal business is the mining, processing and sale of silver and gold. The Group has two operating mines (Arcata and Pallancata) and two plants (Selene, currently used to treat ore from the Pallancata mine and the Ares plant (which ceased operations during 2014)) located in Southern Peru, and one operating mine (San Jose) located in Argentina. The Inmaculada advanced project, located in Peru, will enter commercial production later in 2015. The Group also has a portfolio of projects located across Peru, Argentina, Mexico and Chile at various stages of development.

These interim condensed consolidated financial statements were approved for issue on behalf of the Board of Directors on 18 August 2015.

   2       Significant Accounting Policies 
   (a)      Basis of preparation 

These interim condensed consolidated financial statements set out the Group's financial position as at 30 June 2015 and 31 December 2014 and its financial performance and cash flows for the six months periods ended 30 June 2015 and 30 June 2014.

They have been prepared in accordance with IAS 34 Interim Financial Reporting in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union. Accordingly, the interim condensed consolidated financial statements do not include all the information required for full annual financial statements and therefore, should be read in conjunction with the Group's 2014 annual consolidated financial statements as published in the 2014 Annual Report.

The interim condensed consolidated financial statements do not constitute statutory accounts as defined in the Companies Act 2006. The financial information for the full year is based on the statutory accounts for the financial year ended 31 December 2014. A copy of the statutory accounts for that year, which were prepared in accordance with IFRS as adopted by the European Union has been delivered to the Registrar of Companies. The auditor's report under section 495 of the Companies Act 2006 in relation to those accounts was unmodified and did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying the report and did not contain a statement under s498(2) or s498(3) of the Companies Act 2006.

The impact of the seasonality or cyclicality of operations is not regarded as significant on the interim condensed consolidated financial statements.

The interim condensed consolidated financial statements are presented in US dollars ($) and all monetary amounts are rounded to the nearest thousand ($000) except when otherwise indicated.

   (b)      Changes in accounting policies and disclosures 

The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual consolidated financial statements for the year ended 31 December 2014, except for the adoption of new standards and interpretations effective for the Group from 1 January 2015, which has not had a material impact on the annual consolidated financial statements or the interim condensed consolidated financial statements of the Group. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

   (c)      Going concern 

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After making enquiries, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the condensed set of financial statements. For further detail refer to the detailed discussion of the assumptions outlined in the Going Concern section of the announcement.

   3       Segment Reporting 

The following tables present revenue and loss information for the Group's operating segments for the six months ended 30 June 2015 and 2014 and asset information as at 30 June 2015 and 31 December 2014 respectively:

 
                                                                            Exploration 
Six months                                                                          and              Adjustments 
 ended 30                                                San                   Advanced                      and 
 June 2015             Ares    Arcata   Pallancata      Jose   Inmaculada      Projects     Other   eliminations       Total 
 (unaudited)         US$000    US$000       US$000    US$000   (3) US$000        US$000    US$000         US$000      US$000 
--------------       ------   -------   ----------   -------   ----------   -----------   -------   ------------   --------- 
Revenue 
 from external 
 customers                -    52,945       41,440    95,749            -             -       125              -     190,259 
Inter segment 
 revenue                  -         -            -         -            -             -       900          (900)           - 
Total revenue             -    52,945       41,440    95,749            -             -     1,025          (900)     190,259 
                     ------   -------   ----------   -------   ----------   -----------   -------   ------------   --------- 
 
Segment 
 profit/(loss)            -     2,007      (8,332)    10,245            -       (6,297)       336          2,115          74 
Others(1)                                                                                                           (43,450) 
                                                                                                                   --------- 
Loss from 
 continuing 
 operations 
 before 
 income 
 tax                                                                                                                (43,376) 
                                                                                                                   --------- 
 
As at 30 
 June 2015 
 (unaudited) 
Assets 
Capital 
 expenditure              -     5,283        4,880    19,968       98,973         1,714     1,334              -     132,152 
 
Current 
 assets               2,979    13,917       20,978    59,876       12,849            30     2,311              -     112,940 
Other non-current 
 assets                 807   132,172       98,473   222,067      591,146       272,556    69,466              -   1,386,687 
                     ------   -------   ----------   -------   ----------   -----------   -------   ------------   --------- 
Total segment 
 assets               3,786   146,089      119,451   281,943      603,995       272,586    71,777              -   1,499,627 
Not reportable 
 assets(2)                -         -            -         -            -             -   225,605              -     225,605 
                     ------   -------   ----------   -------   ----------   -----------   -------   ------------   --------- 
Total assets          3,786   146,089      119,451   281,943      603,995       272,586   297,382              -   1,725,232 
                     ------   -------   ----------   -------   ----------   -----------   -------   ------------   --------- 
 
 
 

(1) Comprised of administrative expenses of US$18,779,000, other income of US$2,602,000, other expenses of US$4,604,000, impairment of the Crespo unit of US$5,917,000, finance income of US$581,000, finance costs of US$16,122,000, and foreign exchange loss of US$1,211,000.

(2) Not reportable assets are comprised of available-for-sale financial assets of US$653,000, other receivables of US$108,533,000, income tax receivable of US$22,155,000, deferred income tax assets of US$896,000, other financial assets of US$9,052,000, and cash and cash equivalents of US$84,316,000.

(3) Inmaculada achieved first doré production on 3 June 2015; however, as the mine has not yet reached the commercial production phase and has yet to make sales, no revenues have yet been earned, nor has any profit/(loss) been generated.

 
                                                                   Exploration 
Six months                                                                 and            Adjustments 
 ended 30                                         San                 Advanced                    and 
 June 2014         Ares   Arcata  Pallancata     Jose  Inmaculada     Projects    Other  eliminations      Total 
 (unaudited)     US$000   US$000      US$000   US$000      US$000       US$000   US$000        US$000     US$000 
--------------   ------  -------  ----------  -------  ----------  -----------  -------  ------------  --------- 
Revenue 
 from external 
 customers       24,811   61,735      84,837  110,126           -            -      503             -    282,012 
Inter segment 
 revenue              -        -           -        -           -            -    1,952       (1,952)          - 
Total revenue    24,811   61,735      84,837  110,126           -            -    2,455       (1,952)    282,012 
                 ------  -------  ----------  -------  ----------  -----------  -------  ------------  --------- 
 
Segment 
 profit/(loss)    (574)   10,275      22,415   22,687           -      (9,178)      655         (448)     45,832 
Others(1)                                                                                               (49,247) 
                                                                                                       --------- 
Profit 
 from 
 continuing 
 operations 
 before 
 income 
 tax                                                                                                     (3,415) 
                                                                                                       --------- 
 
 
As at 31 
 December 
 2014 
Assets 
Capital 
 expenditure          -   28,867      34,160   51,350     193,445        6,522    6,777             -    321,121 
 
Current 
 assets           6,740   27,993      21,174   66,995       5,877           35    2,421             -    131,235 
Other 
 non-current 
 assets             832  143,524     112,365  223,295     497,771      277,829   70,799             -  1,326,415 
                 ------  -------  ----------  -------  ----------  -----------  -------  ------------  --------- 
Total segment 
 assets           7,572  171,517     133,539  290,290     503,648      277,864   73,220             -  1,457,650 
Not reportable 
 assets(2)            -        -           -        -           -            -  248,662             -    248,662 
                 ------  -------  ----------  -------  ----------  -----------  -------  ------------  --------- 
Total assets      7,572  171,517     133,539  290,290     503,648      277,864  321,882             -  1,706,312 
                 ------  -------  ----------  -------  ----------  -----------  -------  ------------  --------- 
 
 

(1) Comprised of administrative expenses of US$22,223,000, other income of US$2,030,000, other expenses of US$7,780,000, write off of assets of US$476,000, finance income of US$1,813,000, finance costs of US$22,276,000, and foreign exchange loss of US$335,000.

(2) Not reportable assets are comprised of available-for-sale financial assets of US$455,000, other receivables of US$100,708,000, income tax receivable of US$25,584,000, deferred income tax assets of US$1,574,000, other financial assets of US$4,342,000 and cash and cash equivalents of US$115,999,000.

   4       Revenue 
 
                                      Six-months ended 
                                           30 June 
                             ---------------------------------- 
                             2015 (Unaudited)  2014 (Unaudited) 
                                       US$000            US$000 
                             ----------------  ---------------- 
Gold (from dore bars)                  30,664            36,418 
Silver (from dore bars)                58,796            37,303 
Gold (from concentrate)                37,012            59,389 
Silver (from concentrate)              63,662           148,870 
Services                                  125                32 
                                      190,259           282,012 
                             ================  ================ 
 

The realised gain on gold and silver forward sales contracts in the period recognised within revenue was US$4,991,000 (Gold: US$1,793,000, Silver: US$3,198,000) (2014: US$2,189,000 (Gold: US$506,000, Silver: US$1,683,000)).

   5       Cost of sales before exceptional items 

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Included in cost of sales are:

 
                                                       Six-months ended 
                                                            30 June 
                                              ---------------------------------- 
                                              2015 (Unaudited)  2014 (Unaudited) 
                                                        US$000            US$000 
                                              ----------------  ---------------- 
Depreciation and amortisation                           56,962            60,043 
Personnel expenses                                      52,977            55,480 
Mining royalty                                           2,613             3,029 
Change in products in process and finished 
 goods                                                   (157)            16,311 
                                              ----------------  ---------------- 
 
 
   6       Exceptional items 

Exceptional items relate to:

 
                                                          Six-months ended 
                                                               30 June 
                                                ------------------------------------ 
                                                2015 (Unaudited)    2014 (Unaudited) 
                                                          US$000              US$000 
                                                ----------------    ---------------- 
Cost of sales 
Termination benefits Ares mine unit(1)                         -              (3,511) 
                                                ----------------   ----------------- 
Total                                                          -              (3,511) 
Administrative expenses 
Termination benefits(2)                                        -               (868) 
                                                ----------------   ----------------- 
Total                                                          -               (868) 
                                                ----------------   ----------------- 
Exploration expenses 
Termination benefits(2)                                        -               (537) 
                                                ----------------   ----------------- 
Total                                                          -               (537) 
Other expenses 
Loss on sale of subsidiary(3)                                  -             (2,963) 
Total                                                          -             (2,963) 
Impairment and write-off of assets (net) 
Impairment of assets(4)                                  (5,917)                   - 
Write-off of non-current assets(5)                             -               (476) 
Total                                                    (5,917)               (476) 
Finance costs 
Loss from changes in the fair value 
 of financial instruments(6)                                   -                (18) 
Interest on disputed tax charges(7)                      (1,486)                   - 
Amortisation of transaction costs on 
 secure bank loans(8)                                          -             (3,256) 
Loss on sale of available-for-sale financial 
 assets(9)                                                     -               (915) 
Total                                                    (1,486)             (4,189) 
                                                ----------------   ----------------- 
Income tax (expense)/benefit 
Income tax benefit(10)                                     1,268               2,341 
                                                ----------------   ----------------- 
Total                                                      1,268               2,341 
                                                ----------------   ----------------- 
 
 
 
   1.     Termination benefits in connection with the suspension of the Ares mine unit. 

2. Termination benefits paid to employees as part of the restructuring plan implemented by management in 2014.

3. Loss generated by the sale of the Group's subsidiary Minas Santa María de Moris, S.A. de C.V. ("Moris") to Exploraciones y Desarrollos Regiomontanos, S.A. de C.V. and Arturo Préstamo Elizondo.

   4.     Corresponds to the impairment of the Crespo project of US$5,917,000 (note 9). 

5. Write-off of non-current assets in Compañía Minera Ares S.A.C. ("CMA") of US$345,000 and Minera Santa Cruz S.A. ("MSC") of US$131,000.

   6.     Impairment of the Group's available-for-sale investment in Brionor Resources (US$18,000). 

7. Interest on overdue tax charges owed by the Group following a change in circumstances surrounding a tax dispute with the local tax authority, resulting in the exposure now being assessed as 'probable', rather than 'possible'.

8. Corresponds to the attributable issue costs of the syndicated loan granted to CMA, disclosed as an exceptional item as a significant one-off expense and shown net of capitalised borrowing costs of US$1,104,000.

9. Corresponds to the loss on sale of part of the Group's available-for-sale investment in Gold Resource Corp. ("GRC") of US$1,663,000, net of the gain on sale of part of the Group's investments in Chaparral Gold Corp and Mirasol Resources Ltd of US$547,000 and US$201,000 respectively

10. Primarily related to the deferred tax benefit arising from the impairment of the Crespo project of US$1,539,000, net of the associated underlying tax charge of item 7 above, disclosed as exceptional current income tax of US$271,000. As at 30 June 2014, mainly related to the tax benefit over the amortisation of transaction costs on secure bank loans of US$977,000 and termination benefits of US$1,214,000.

   7       Finance income and finance cost before exceptional items 

The Group recognised the following finance income and finance costs before exceptional items:

 
                                                     Six-months ended 
                                                          30 June 
                                            ----------------------------------- 
                                            2015 (Unaudited)   2014 (Unaudited) 
                                                      US$000             US$000 
                                            ----------------   ---------------- 
Finance income: 
Interest on deposits and liquidity funds                 262                910 
Interest on loans                                         31                 73 
Dividends                                                  -                504 
Unwind of discount rate                                  274                  - 
Others                                                    14                326 
                                            ----------------   ---------------- 
Total                                                    581              1,813 
                                            ----------------   ---------------- 
Finance cost: 
Interest on bank loans                                (4,125  )          (2,938) 
Interest on convertible bond                               -             (3,370) 
Interest on bond                                      (9,188  )          (9,143) 
Other interest                                         (781)                  - 
                                            ----------------   ---------------- 
Total interest expense                               (14,094  )         (15,451) 
                                            ----------------   ---------------- 
Unwind of discount rate                                 (11)             (1,837) 
Others                                                  (531  )            (799) 
                                            ----------------   ---------------- 
Total                                                (14,636  )         (18,087) 
                                            ----------------   ---------------- 
 
 

Finance costs above are presented net of borrowing costs capitalised in property, plant and equipment amounting to US$6,165,000 (2014: US$5,912,000) (note 9).

   8       Income tax expense 
 
                                                        Six-months ended 
                                                             30 June 
                                               ---------------------------------- 
                                               2015 (Unaudited)  2014 (Unaudited) 
                                                         US$000            US$000 
                                               ----------------  ---------------- 
Current tax 
Current income tax expense                                  280             5,348 
Current mining royalty charge                               373             1,159 
Current special mining tax charge                             -               392 
Withholding taxes                                             -             (733) 
                                               ----------------  ---------------- 
Total                                                       653             6,166 
                                               ----------------  ---------------- 
Deferred tax 
Deferred income tax relating to origination 
 and reversal of temporary differences                    (144)             2,168 
                                               ----------------  ---------------- 
Total                                                     (144)             2,168 
                                               ----------------  ---------------- 
Total taxation (credit)/charge in the 
 income statement                                           509             8,334 
                                               ================  ================ 
 

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The pre-exceptional tax charge for the period was US$1,777,000 (2014: US$10,675,000). In 2014, the charge primarily originated as result of a decrease in the US dollar value of the Group's Peruvian Nuevo Sol and Argentine Peso-denominated tax bases, due to the devaluation of these currencies relative to the US dollar in the period.

The tax related to items charged or credited to equity is as follows:

 
                                                   Six-months ended 
                                                        30 June 
                                          ---------------------------------- 
                                          2015 (Unaudited)  2014 (Unaudited) 
                                                    US$000            US$000 
                                          ----------------  ---------------- 
 
Deferred income tax relating to fair 
 value gains on cash flow hedges                     1,266               631 
Total taxation charge in the statement 
 of comprehensive income                             1,266               631 
                                          ================  ================ 
 
   9       Property, plant and equipment 

During the six months ended 30 June 2015, the Group acquired assets with a cost of US$128,827,000 (30 June: US$134,518,000). The additions for the six months ended 30 June 2015 relate to:

 
                                 Other property 
              Mining properties       plant and 
                and development       equipment 
                         US$000          US$000 
              -----------------  -------------- 
San Jose                 13,381           5,467 
Pallancata                3,778           1,081 
Inmaculada               33,178          65,142 
Arcata                    4,032             527 
Crespo                      912               - 
Others                        -           1,329 
              -----------------  -------------- 
                         55,281          73,546 
              =================  ============== 
 

Assets with a net book value of US$53,000 were disposed of by the Group during the six month period ended 30 June 2015 (30 June 2014: US$83,000) resulting in a net gain on disposal of US$68,000 (30 June 2014: US$35,000).

For the six months ended 30 June 2015, the depreciation charge on property, plant and equipment was US$63,056,000 (30 June 2014: US$63,936,000).

At 30 June 2015, the Group recorded an impairment charge of US$3,899,000 with respect to property, plant and equipment at the Crespo project (2014: US$nil). The recoverable value of this CGU was determined using a fair value less costs of disposal ('FVLCD') methodology. FVLCD was determined using a combination of level 2 and level 3 inputs to construct a discounted cash flow model to estimate the amount that would be paid by a willing third party in an arm's length transaction. The key assumptions on which management has based its determination of fair value less costs of disposal are substantially consistent with those employed at the time of the impairment assessment carried out at 31 December 2014, and disclosed in the Group's full annual financial statements for that year. The key changes resulting in the impairment charge recorded were changes in macroeconomic conditions leading to a delay for the Crespo property's development.

As a result of the impairment charge, the estimated recoverable amount of the Crespo CGU is equal to its carrying value; consequently, any change in the following key assumptions would, in isolation, cause a further impairment charge or a reversal of all or a portion of the impairment charge to be recognised for this CGU:

 
                                    (Further impairment)/ 
                                              reversal of 
 Sensitivities                          impairment US$000 
--------------------------------   ---------------------- 
 Price (10% decrease)                            (19,204) 
 Discount rate (3% increase)                     (14,731) 
 Production cost (10% increase)                   (9,357) 
---------------------------------  ---------------------- 
 Price (10% increase)                              18,848 
 Discount rate (3% decrease)                       19,360 
 Production cost (10% decrease)                     9,224 
---------------------------------  ---------------------- 
 
 

In addition to the sensitivities above, any further delay in the timing of the expected development of the Crespo property would be likely to result in a further impairment charge.

   10     Evaluation, exploration and intangible assets 

a) Evaluation and exploration assets: During the six months ended 30 June 2015, the Group capitalised evaluation and exploration costs of US$2,732,000 (30 June 2014: US$2,188,000). The additions correspond to the following properties:

 
               US$000 
               ------ 
Azuca             137 
San Jose        1,114 
Pallancata         21 
Inmaculada         71 
Arcata            724 
Crespo            100 
El Dorado         565 
                2,732 
               ====== 
 

There were no transfers from evaluation and exploration assets to property, plant and equipment during the period (2014: US$nil).

At 30 June 2015, the Group recorded an impairment charge of US$1,736,000 with respect to evaluation and exploration assets at the Crespo project (2014: US$nil), refer to note 9.

b) Intangible assets: During the six months ended 30 June 2015, the additions to intangible assets amounted to US$593,000 (30 June 2014: US$281,000).

For the six months ended 30 June 2015, the amortisation charge on intangible assets was US$684,000 (30 June 2014: US$747,000).

There were transfers from intangibles to property, plant and equipment during the period of US$582,000 (30 June 2014: from property, plant and equipment to intangibles of US$496,000).

At 30 June 2015, the Group recorded an impairment charge of US$282,000 with respect to intangible assets at the Crespo project (2014: US$nil), refer to note 9.

   11     Other financial assets and liabilities 
 
                                               As at 30 
                                                   June              As at 
                                                               31 December 
                                                   2015               2014 
                                            (unaudited) 
                                                 US$000             US$000 
                                          -------------      ------------- 
Other financial assets 
Bonds                                               192                  - 
Commodity swaps(1)                                8,860              4,342 
                                          -------------      ------------- 
Other financial assets                            9,052              4,342 
                                          =============      ============= 
 
Other financial liabilities 
Embedded derivatives(2)                           1,541              1,533 
Other financial liabilities                       1,541              1,533 
                                          =============      ============= 
 
   1      Corresponds to the fair value of the following unsettled commodity swap contracts: 

a. signed in August 2014 with JP Morgan to hedge the sale of 38,000 ounces of gold at US$1,300 per ounce, during the period from January to December 2015; and

b. signed in January 2015 with JP Morgan to hedge the sale of 6,000,000 ounces of silver at US$17.75 per ounce, during the period from January to December 2015.

2 Sales of concentrate and certain gold and silver volumes are provisionally priced at the time the sale is recorded (note 12).

   12     Financial instruments 

Fair value hierarchy

The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.

Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly.

Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.

At 30 June 2015 and 31 December 2014, the Group held the following financial instruments measured at fair value:

 
                             As at 30 
                            June 2015 
                          (unaudited)               Level 1           Level 2   Level 3 
                               US$000                US$000            US$000    US$000 
                        -------------          ------------          --------  -------- 
 Assets measured 
  at fair value 
 Equity shares                    653                   653                 -         - 
 Bonds (note 11)                  192                   192                 -         - 
 Commodity swaps 
  (note 11)                     8,860                     -             8,860         - 
                                9,705                   845             8,860         - 
                        -------------          ------------          --------  -------- 
 
 Liabilities measured 
  at fair value 
 Embedded derivatives 
  (note 11)                   (1,541)                     -                 -   (1,541) 
                                               ------------      ------------  -------- 
                              (1,541)                     -                 -   (1,541) 
                        -------------          ------------      ------------  -------- 
 
 
 
                             As at 31 
                             December       Level 1   Level 2   Level 3 
                          2014 US$000        US$000    US$000    US$000 
 Assets measured 
  at fair value 
 Equity shares                    455           455         -         - 

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 Commodity swaps 
  (note 11)                     4,342             -     4,342         - 
                                4,797           455     4,342         - 
 Liabilities measured 
  at fair value 
 Embedded derivatives 
  (note 11)                   (1,533)             -         -   (1,533) 
                                       ------------  --------  -------- 
                              (1,533)             -         -   (1,533) 
                        -------------  ------------  --------  -------- 
 
 
 

During the six months ended 30 June 2015 and the year ended 31 December 2014, there were no transfers between these levels.

The reconciliation of the financial instruments categorised as Level 3 is as follows:

 
                                                         Embedded 
                                                      derivatives    Equity 
                                             (liabilities)/assets    shares 
                                                           US$000    US$000 
                                       --------------------------  -------- 
 Balance at 1 January 2014                                (2,294)     6,000 
 Gain from the period recognised 
  in revenue                                                  761         - 
 Impairment through profit 
  and loss (finance costs)                                      -   (6,000) 
 Balance 31 December 2014                                 (1,533)         - 
 Loss from the period recognised 
  in revenue                                                  (8)         - 
 Balance 30 June 2015 (unaudited)                         (1,541)         - 
                                       --------------------------  -------- 
 
 
 

Valuation techniques:

Level 2: Commodity swap contracts

Commodity swap contracts: Contracts entered into to hedge against the risk of commodity price fluctuations. These swap contracts are valued using a commonly accepted methodology which makes maximum use of market inputs such as quoted market prices and discount rates.

Level 3: Embedded derivatives and equity shares of Pembrook Mining Corp.

Embedded derivatives: Sales of concentrate and certain gold and silver volumes are provisionally priced at the time the sale is recorded. The price is then adjusted after an agreed period of time (usually linked to the length of time it takes for the smelter to refine and sell the concentrate or for the refiner to process the dore into gold and silver), with the Group either paying or receiving the difference between the provisional price and the final price. This price exposure is considered to be an embedded derivative in accordance with IAS 39 'Financial Instruments: Recognition and Measurement'. The gain or loss that arises on the fair value of the embedded derivative is recorded in 'Revenue' (note 4). The selling price of metals can be reliably measured as these are actively traded on international exchanges but the estimated metal content is a non-observable input to this valuation.

Equity shares: The investments in unlisted shares (Pembrook Mining Corp. and ECI Exploration and Mining Inc.) were recognised at cost less any recognised impairment losses given that there is not an active market for these investments. The investments in ECI Exploration and Mining Inc. and Pembrook Mining Corp. are fully impaired as at 30 June 2015 and 31 December 2014, based on available observable market data of similar peers.

   13     Cash and cash equivalents 
 
                                               As at 30 
                                                   June              As at 
                                                               31 December 
                                                   2015               2014 
                                            (unaudited) 
                                                 US$000             US$000 
                                          -------------      ------------- 
 
Cash at bank                                        278                293 
Liquidity funds(1)                                  484                935 
Current demand deposit accounts(2)               62,441             76,850 
Time deposits(3)                                 21,113             37,921 
                                          -------------      ------------- 
Cash and cash equivalents                        84,316            115,999 
                                          =============      ============= 
 

1 The liquidity funds are mainly invested in certificate of deposits, commercial papers and floating rate notes with a weighted average maturity of 10 days as at 30 June 2015 (as at 31 December 2014: 10 days).

   2      Relates to bank accounts which are readily accessible to the Group and bear interest. 
   3      These deposits have an average maturity of 3 days (as at 31 December 2014: 2 days). 
   14     Borrowings 

The movement in borrowings during the six month period to 30 June 2015 is as follows:

 
                           As at 1                                                  As at 30 
                           January   Additions   Repayments   Reclassifications    June 2015 
                       2015 US$000      US$000       US$000              US$000       US$000 
                     -------------  ----------  -----------  ------------------  ----------- 
 Current 
 Bank loans(1)              14,425     105,880     (34,393)               (764)       85,148 
 Bond payable(2)            13,457      14,355     (14,085)             (1,822)       11,905 
                            27,882     120,235     (48,478)             (2,586)       97,053 
 Non-current 
 Bank loan(3)               98,791           -            -                 764       99,555 
 Bond payable(2)           342,043           -            -               1,300      343,343 
                           440,834           -            -               2,064      442,898 
                     -------------  ----------  -----------  ------------------  ----------- 
 
 Accrued interest:        (14,951)    (19,451)       18,554               2,586     (13,262) 
                     -------------  ----------  -----------  ------------------  ----------- 
 Before accrued 
  interest                 453,765     100,784     (29,924)               2,064      526,689 
                     -------------  ----------  -----------  ------------------  ----------- 
 
 

1 Relates to the US$75,377,000 short- term credit lines drew down during January and June 2015 (2014: US$nil), pre-shipment loans for a total amount of US$9,211,000 (2014: US$13,843,000) which are credit lines given by banks to meet payment obligations arising from the exports of the Group, and the current portion of the medium-term loan totalling US$560,000 (2014: US$582,000).

2 Relates to the issuance of US$350,000,000 7.75% Senior Unsecured Notes on 23 January 2014.The carrying value at 30 June 2015 of US$355,248,000 (2014: US$355,500,000) was determined in accordance with the effective interest method.

3 Medium-term loan of US$100,000,000 with Scotiabank Peru S.A.A. acting as Lead Arranger and The Bank of Nova Scotia and Corpbanca as lenders. The carrying value at 30 June 2015 of US$100,115,000 (2014: US$99,373,000) was determined in accordance with the effective interest method.

The carrying amount of current borrowings approximates their fair value. The carrying amount and fair value of the non--current borrowings are as follows:

 
                         Carrying amount                Fair value 
                ------------------------  ------------------------ 
                  As at 30      As at 31    As at 30      As at 31 
                 June 2015      December   June 2015      December 
                    US$000   2014 US$000      US$000   2014 US$000 
                ----------  ------------  ----------  ------------ 
Bank loan           99,555        98,791      98,992        99,083 
Bond payable       343,343       342,043     359,188       348,250 
--------------  ----------  ------------  ----------  ------------ 
Total              442,898       440,834     458,180       447,333 
--------------  ----------  ------------  ----------  ------------ 
 
   15     Equity 

Share capital and share premium

The movement in share capital of the Company from 31 December 2014 to 30 June 2015 is as follows:

 
                                                Number     Share     Share 
                                           of Ordinary   Capital   premium 
                                                shares    US$000    US$000 
---------------------------------------   ------------  --------  -------- 
Shares issued as at 1 January 2015         367,101,352   170,389   396,021 
Shares issued and paid pursuant to the 
 Deferred Bonus Plan on 20 March 2015          587,015       220         - 
----------------------------------------  ------------  --------  -------- 
Shares issued as at 30 June 2015           367,688,367   170,609   396,021 
----------------------------------------  ------------  --------  -------- 
 

At 30 June 2015 and 31 December 2014 all issued shares with a par value of 25 pence each were fully paid (30 June 2015: weighted average of US$0.464 per share, 31 December 2014: weighted average of US$0.464 per share).

On 20 March 2015 the Group issued 587,015 ordinary shares under the Deferred Bonus Plan, a benefit granted to certain employees of the Group.

   16     Dividends paid and declared 

There were dividends paid in the six months ended 30 June 2015 of US$645,000 (30 June 2014: US$7,610,000).

There were no dividends declared in the six months ended 30 June 2014 or 2015. The Directors of the Company have not declared an interim dividend in respect of the six months ended 30 June 2015 (30 June 2014: US$nil).

   17     Related party transactions 

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There were no significant transactions with related parties during the six months ended 30 June 2015.

   18     Commitments 
   a)       Mining rights purchase options 

During the ordinary course of business, the Group enters into agreements to carry out exploration under concessions held by third parties. Generally, under the terms of these agreements, the Group has the option to acquire the concession or invest in the entity holding the concession. In order to exercise the option the Group must satisfy certain financial and other obligations over the agreement term. The option lapses in the event that the Group does not meet the financial requirements. At any point in time, the Group may cancel the agreements without penalty, except in certain specific circumstances.

The Group continually reviews its requirements under the agreements and determines on an annual basis whether to proceed with the financial commitment. Based on management's current intention regarding these projects, the commitments at the balance sheet date are as follows:

 
                                    As at                      As at 
                      30 June 2015 US$000    31 December 2014 US$000 
                     --------------------   ------------------------ 
Less than one year                    550                        350 
More than one year                  6,450                      6,850 
 
 
   b)    Capital commitments 

The future capital commitments of the Group are as follows:

 
                           As at                      As at 
             30 June 2015 US$000    31 December 2014 US$000 
            --------------------   ------------------------ 
Peru                      43,192                     97,826 
Argentina                  8,569                      6,091 
                          51,761                    103,917 
            --------------------   ------------------------ 
 
 
   19     Contingencies 

Inmaculada project:

On 10 August 2012 the Group's principal operating subsidiary in Peru, CMA, entered into a turn-key engineering, procurement and construction contract (the "EPC Contract") with GyM S.A. ("GyM"), under which GyM agreed to complete the engineering, construction and commissioning of the plant and related components of the Inmaculada Advanced Project in order to commence commercial production by 31 December 2014 (the "Completion Date").

Under the terms of the EPC Contract, the Group agreed to pay GyM as consideration a fixed maximum guaranteed price of approximately US$140 million (the "Maximum Fixed Price"). The Maximum Fixed Price may be amended, under limited circumstances, through written change orders signed by the parties. Against this background, the Group has received a number of change orders from GyM requesting, among other things, additional payments under the EPC Contract (the "GyM Change Orders"). As at the date of the approval of these condensed consolidated interim financial statements, the Group has approved certain of these change orders amounting to US$4.4 million.

The Group has engaged Hill International ("Hill"), a construction claims consultant, to advise on the technical merits of the GyM Change Orders and Miranda & Amado Abogados, a law firm in Peru, to advise on the contractual merits and other matters relating to Peruvian law ("M&A" and, together with Hill, the "External Advisers"). Based on their evaluation of the GyM Change Orders and advice received from the External Advisers, the Group believes that almost all of the GyM Change Orders are without any merit or will be subject to significant downward adjustment. In addition, the Group believes that GyM has breached a number of terms of the EPC Contract, including failing to meet the Completion Date.

The Group continues to assess the GyM Change Orders and discussions with GyM are ongoing. On that basis, other than the approved change orders amounting to US$4.4 million, no other provision has been made. Any further disclosure in relation to this matter would be commercially prejudicial to the Group's interests.

   20     Subsequent events 

1 On 9 July 2015 the Group refinanced its short-term loans with Interbank (US$10,000,000) and Citibank (US$25,000,000), with US$35,000,000 drawn on its short-term credit lines in Peru with BBVA. The new facility has an annual interest rate of 0.8% and matures on 4 July 2016.

2 On 7 July 2015, the Group renegotiated the terms of the agreement with Impulsora Minera Santa Cruz ("IMSC") to sell the San Felipe property. Under the new terms the US$5 million payment originally due from IMSC on 1 December 2015 was postponed to 1 December 2016.

Profit by operation(1)

(Segment report reconciliation) as at 30 June 2015

 
                                                                                      Consolidation 
                                                                                         adjustment 
 Company (US$000)                           Arcata  Pallancata  San Jose  Inmaculada     and others  Total/HOC 
 --------------------------------------   --------  ----------  --------  ----------  -------------  --------- 
 Revenue                                    52,945      41,440    95,749           -            125    190,259 
 Cost of sales (pre-consolidation)        (50,463)    (49,228)  (74,923)           -            121  (174,493) 
 ---------------------------------------  --------  ----------  --------  ----------  -------------  --------- 
 Consolidation adjustment                       48          73         -           -          (121)          - 
 Cost of sales (post-consolidation)       (50,415)    (49,155)  (74,923)           -              -  (174,493) 
             Production cost excluding 
              Depreciation                (33,629)    (27,186)  (49,559)     (3,862)              -  (114,236) 
                Depreciation in 
                 production 
                 cost                     (15,955)    (20,380)  (19,023)       (128)              -   (55,486) 
                Other items                (1,058)       (595)   (3,275)           -              -    (4,928) 
                Change in inventories          227       (994)   (3,066)       3,990              -        157 
 ---------------------------------------  --------  ----------  --------  ----------  -------------  --------- 
 Gross profit                                2,482     (7,788)    20,826           -            246     15,766 
 ---------------------------------------  --------  ----------  --------  ----------  -------------  --------- 
 Administrative expenses                         -           -         -           -       (18,779)   (18,779) 
 Exploration expenses                            -           -         -           -        (4,092)    (4,092) 
 Selling expenses                            (475)       (544)  (10,581)           -              -   (11,600) 
 Other income/expenses                           -           -         -           -        (2,002)    (2,002) 
 ---------------------------------------  --------  ----------  --------  ----------  -------------  --------- 
 Operating profit before 
  impairment                                 2,007     (8,332)    10,245           -       (24,627)   (20,707) 
 ---------------------------------------  --------  ----------  --------  ----------  -------------  --------- 
 Impairment and write-off 
  of assets                                      -           -         -           -        (5,917)    (5,917) 
 Finance income                                  -           -         -           -            581        581 
 Finance costs                                   -           -         -           -       (16,122)   (16,122) 
 Foreign exchange                                -           -         -           -        (1,211)    (1,211) 
 ---------------------------------------  --------  ----------  --------  ----------  -------------  --------- 
 Profit/(loss) from continuing 
  operations before income 
  tax                                        2,007     (8,332)    10,245           -       (47,296)   (43,376) 
 ---------------------------------------  --------  ----------  --------  ----------  -------------  --------- 
 Income tax                                      -           -         -           -          (509)      (509) 
 ---------------------------------------  --------  ----------  --------  ----------  -------------  --------- 
 Profit/(loss) for the year 
  from continuing operations                 2,007     (8,332)    10,245           -       (47,805)   (43,885) 
 ---------------------------------------  --------  ----------  --------  ----------  -------------  --------- 
 
 

1 On a post-exceptional basis.

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.

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