Hochschild Regulatory News (HOC)

21 August 2013

Hochschild Mining plc

Interim Results for the six months ended 30 June 2013

H1 2013 Financial highlights1

· Revenue of $308.6 million (H1 2012: $354.5 million)

· Adjusted EBITDA of $90.4 million (H1 2012: $168.4 million)

· Pre-exceptional EPS of $(0.10) (H1 2012: $0.08) which includes $15.4 million ($0.05 per share) foreign exchange loss on cash deposits in Peru - more than offset by positive effects on unit costs and capital expenditure

· Exceptional items of $(13.2) million include:

o $45.9 million net gain resulting from reclassification of Gold Resource Corp holding from investment in associate to available-for-sale financial asset

o $59.1 million of impairment charges and severance payments net of taxes2

· Interim dividend suspended

· Strong balance sheet with total cash of approximately $275 million as at 31 July 2013

· Minority investments valued at $103.8 million as at 31 July 2013

· Undrawn $140 million loan facility to finance Inmaculada project

Cashflow optimisation programme 

· Implemented in H1 2013 - approximately $200 million of initiatives identified

o Unit cost increases in Peru revised down to 0-5% for 2013

o Unit cost increase in Argentina revised down to 5-10% for 2013

o 2013 sustaining capex further lowered to $150 million from original 2013 guidance of $180 million

o 2013 exploration budget further reduced to $50 million from original $77 million

o 2013 administration expenses reduced by $20 million

o Reduction in Board size, Directors' fees and senior management remuneration

o Full impact expected in H2 2013 and H1 2014

o Inmaculada and Crespo project schedules maintained

Crespo Environmental Impact Study approved by Peruvian government - key milestone in project's progress

· Inmaculada and Crespo permitting process on schedule for H2 2013

H1 2013 Operational highlights

· H1 2013 attributable production of 9.7 million silver equivalent ounces

· 2013 production target of 20.0 million attributable silver equivalent ounces on track

· H1 2013 unit cost performance in Peru materially lower as a result of cashflow optimisation programme and local currency depreciation in line with revised guidance

* Revenue presented in the financial statements is disclosed as net revenue (in the Financial Review it is calculated as gross revenue less commercial discounts).

** Adjusted EBITDA is calculated as profit from continuing operations before exceptional items, net finance costs and income tax plus depreciation and exploration expenses other than personnel and other exploration related fixed expenses.

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

"Hochschild Mining has operated in cyclical markets for over a century and the first half of 2013 has provided ample evidence of that characteristic. However, I am optimistic that the entire organisation has moved swiftly in initiating a cost cutting programme that is already delivering tangible results. In the second half and into 2014, the Board is confident we will see the full effects of the measures taken as well as a further slowdown in operating cost inflation. Regrettably it has also necessitated a considerable number of job losses but I firmly believe the initiatives taken combined with our ongoing investment in our Advanced Projects will result in the Company being in a significantly stronger position to capitalise on a long term precious metal price recovery and deliver value accretive growth.

In light of the very difficult financial results caused by the precious metals price falls, the Board has decided not to pay an interim dividend. The Company remains committed to the long term principle of shareholder returns and the Board intends to reassess the position subject to the overall full year financial results."

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A live conference call & audio webcast will be held at 2pm (London time) on Wednesday 21 August 2013 for analysts and investors. Details as follows:

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

http://www.media-server.com/m/p/9exkasok

Conference call dial in details:

UK: +44 (0)20 3427 1901 (Please use the following confirmation code: 5056126).

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

UK: +44 (0)20 3427 0598 (Access code: 5056126)

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.

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Enquiries:

Hochschild Mining plc

Charles Gordon +44 (0)20 7907 2934

Head of Investor Relations

RLM Finsbury

Charles Chichester +44 (0)20 7251 3801

Public Relations

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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 almost 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

The first half of 2013 was undoubtedly a challenging period. The steep fall in precious metal prices has impacted the entire industry and it is to the credit of the entire team at Hochschild that we have confronted the ongoing volatility by reacting quickly to the deteriorating market conditions. The average selling price that we have received for our sales has fallen by approximately 40% versus the same period two years ago, with a significant portion of the fall occurring over a period of weeks in the first half of this year. This has contributed to a difficult environment for both our operating assets and exploration strategy and consequently, our underlying cashflow generation. The combination of strong falls in the silver price and cost increases in the first quarter of the year has led the Company to report an EBITDA of $90 million for H1 2013. An overall pre-exceptional loss of $25.2 million reflects a $15.4 million foreign exchange loss on cash deposits held in Peru resulting from the 11% depreciation in the Peruvian Sol that will be more than offset by positive effects on unit costs and capital expenditure. Despite the half year results, our balance sheet is very robust, allowing us to sustain our long term goals of profitably growing the Company. However, Hochschild remains in a strong position with $275 million of cash3, significant unused credit lines and a cash optimisation programme that is already delivering benefits early in the second half.

Following the initial major decline in precious metal prices in April, we commenced the first stage of a pre-planned programme in order to conserve capital and optimise the cashflow of the Company in a volatile price environment. We have since then expanded the scope of this initiative to systematically cover all areas of the business encapsulating operating costs, sustaining capital expenditure and administrative costs as well as re-focusing our exploration programme going forward. We are already starting to see the impact of this programme throughout the Company and anticipate that the full effects will be realised in the second half of 2013 and into 2014 with expected overall savings of approximately $200 million. This total consists of a combination of cost reductions, operating efficiencies and cuts to discretionary expenditure and includes, regrettably, a significant number of redundancies from a wide range of the Company's operating, financial, exploration and support teams.

Hochschild's current operations delivered a solid first half of production at 9.7 million silver equivalent ounces and we remain on track to deliver our stated 2013 target of 20 million attributable silver equivalent ounces. Several Company cost savings initiatives and the depreciation of the Peruvian Sol have significantly reduced cost inflation in Peru and this has allowed Arcata and Pallancata to achieve lower than expected single-digit cost increases. As the effect of the cashflow optimisation programme takes hold, Hochschild is forecasting unit cost increases for the full year in Peru of 0-5%. In Argentina, whilst production remained strong, the local operating and political environment has continued to deteriorate with a number of brief stoppages and high local inflation contributing to double-digit unit cost increases as expected. However, we have seen some offset from the continuing devaluation in the Argentinean Peso and combined with Company cost savings initiatives, we have been able to revise our forecast for unit cost increases down to 5-10% for 2013.

In the first half we saw continued excellent progress made at our two Advanced Projects, Inmaculada and Crespo both of which are set to receive their final mill construction permits during the second half of this year. At Inmaculada, significant milestones were achieved in tunnelling, construction, engineering and procurement, whilst the team continued to cooperate closely with the relevant ministry authorities to ensure a smooth passage for the construction permit application. Inmaculada, which remains Hochschild's flagship growth project, is on track for first production in the second half of 2014 and is set to benefit in terms of capex and operating costs from any continuing weakness in the Peruvian Sol as well as a less inflationary industry cost environmen. At Crespo, good progress has also been made in terms of project construction and we are also pleased in recent weeks, to have received approval for its Environmental Impact Study, a key milestone in the project's development.

Although Hochschild has reduced the exploration budget from $77 million to $50 million as part of our cashflow optimisation programme, we have still made good progress at a number of our projects in the first half. Brownfield exploration continued at the operations and projects with the target shifting to exploration drilling to delineate high grade resources as opposed to the previous emphasis on life-of-mine increases. New high grade structures were defined at all our main assets demonstrating their continuing significant potential. The Greenfield programme also continued with good progress made, particularly at the Valeriano project in Chile and the Cuello Cuello project close to the Selene plant in our Southern Peru cluster. A total of just over 23,000 metres was drilled in the half year across Chile, Mexico and Peru. Whilst the quantum of exploration spend has been reduced with a more focused budget, exploration remains a cornerstone of the Hochschild strategy in the long term.

Despite current uncertainty of the short term outlook for precious metals, Hochschild continues to believe that the long term fundamentals for its markets remain healthy and underpin the value potential of its current assets, Advanced Projects and exploration pipeline. The Company remains in a strong financial position to finance future growth and expects to be able to demonstrate further substantial savings from its cashflow optimisation programme at the Full Year results.

Ignacio Bustamante

Chief Executive Officer

20 August 2013

OPERATING REVIEW

CURRENT OPERATIONS

Production

In H1 2013 the Company delivered attributable production of 9.7 million silver equivalent ounces, which comprised 6.3 million ounces of silver and 57.9 thousand ounces of gold. The Company remains on track to meet its full year production target of 20.0 million attributable silver equivalent ounces.

Costs

In H1 2013, the Company reported an increase in unit cost per tonne excluding royalties at its main operations in Peru (Arcata and Pallancata) of 4.7% to $75.0 (H1 2012: $71.6). The Company anticipates a 0-5% increase in costs in Peru for the full year. At San Jose in Argentina, unit costs excluding royalties increased by 16.7% in H1 2013, to $216.3 (H1 2012: $185.3). The Company has revised its guidance to a cost increase of around 5-10% in Argentina for the full year. Further details on costs are provided in the Financial Review on page 16.

Main operations

Arcata: Peru

Production and sales

At Arcata, total silver equivalent production in H1 2013 was 2.8 million ounces (H1 2012: 3.6 million ounces). Tonnages were higher than those in 2012 due to the planned increase in volumes processed from the low-grade Macarena waste dam deposit, facilitated by the 500 tonne per day capacity expansion at the Arcata plant (completed in H2 2012). The increased volumes of low-grade Macarena material, as well as the Company's policy of mining close to the average reserve grade at its core assets led to lower grades and production in the first half of 2013 compared to 2012.

The Company continues to plan for grades at Arcata to increase in the second half of 2013 when Macarena tonnage will be gradually replaced by tonnage from stopes and mine development.

Table Showing Contribution From Macarena Waste Dam Deposit

Costs

In H1 2013, the unit cost per tonne excluding royalties at Arcata was materially better than expectations, increasing by 2.1% versus the same period last year, to $82.2 per tonne. This was mainly due to the processing of higher volumes of low cost Macarena material, operational efficiencies resulting in a lower consumption of reagents and materials as well as a significant local currency weakening versus expectations, in addition to the initial effects of recently implemented cost savings initiatives.

Exploration

In H1 2013, a total of 5,265 metres of drilling were carried out at Arcata. The exploration programme focused on the definition of new high-grade structures from known vein systems (potential drilling), and a new geological interpretation of the Amparo-Blanca corridor that identified high-grade structures. In addition, diamond drilling was conducted at the Alexia, Katty, Ramal Marion, Pamela, Ramal Leslie, Baja and Blanca Techo veins. Significant intercepts include5:

In the second half the near-mine exploration programme will continue, with potential drilling focused on the definition of new high-grade structures.

Pallancata*: Peru

* The Company holds a 60% interest in Pallancata.

Production and sales

Pallancata, the Company's other main Peruvian operation, delivered a solid half of production with total silver equivalent production of 4.4 million silver equivalent ounces which is broadly flat on H1 2012 production (4.3 million ounces).

Costs

Unit cost per tonne excluding royalties at Pallancata increased also by a lower than expected 5% in H1 2013, to $69.0 reflecting lower personnel and supply costs as a higher proportion of mineral was extracted using mechanised methods. As at Arcata, costs were also positively impacted by the higher than expected depreciation of the local currency and the cashflow optimisation programme.

Exploration

Both resource and potential drilling were carried out at Pallancata during the period, to further delineate inferred resources and to test new possible vein extensions. A total of 9,969 metres of diamond drilling were carried out. The Yurika West vein mapping programme continued, and identified major structural lineaments trending NE-EW associated with silicified hydrothermal breccias, and new gold-rich high-grade structures were identified in the northern part of the district. In addition, drilling continued at the Luisa, Yurika, Yanely and Ramal San Javier veins. Significant intercepts include6:

In H2 2013 the exploration programme at Pallancata will continue to focus on completing the delineation of new potential structures, incorporating new resources, and mapping the geological extension of the Pallancata NW vein.

San Jose*: Argentina

* The Company holds a 51% interest in San Jose.

Production and sales

San Jose delivered a strong production performance in the first half of 2013. Silver equivalent production rose 6% versus the first half of 2012, to 5.7 million ounces, reflecting increased tonnages and grades.

Costs

At San Jose, unit cost per tonne excluding royalties rose by 17% versus H1 2012 to $216.2 due to the continuing high local inflation in Argentina. The increase was slightly above the 2013 guidance of 10-15% due to a number of brief stoppages at the mine during the period as well as a slightly lower than expected devaluation of the local currency during the period.

Exploration

In H1 2013 the exploration programme at San Jose focused on the geological mapping of the district area and identifying new structures, with new high-grade structures identified in the northern part of the district. A total of 5,743 metres of diamond drilling were completed during H1 2013. In addition, new structures were identified in the Juanita vein system located at the south of the property. Drilling was conducted on the Huevos Verdes, Emilia and Juanita veins, with significant intercepts including7:

In H2 2013, exploration will focus on the delineation of the Juanita vein system to study its vein and disseminated potential.

Other operations

Ares: Peru

Production and sales

The Company's ageing Ares mine in Peru continued to operate during H1 2013 and produced 1.04 million silver equivalent ounces compared to 0.99 million ounces in H1 2012. The Company anticipates that production at Ares will continue until the end of 2013.

Exploration

The exploration programme at Ares in H1 2013 focused on the exploration of potential mineralisation in the extensions of known veins and the definition of new high-grade structures. In addition, exploration continued at the Isabel vein, where new intersections were discovered in the second half of 2012, and additional resources were incorporated. A total of 847 metres of drilling were carried out during H1 2013. In H2 2013 the exploration and drilling programme at Ares will focus on continuing to expand resources and extending the resource life-of-mine.

Moris: Mexico

Production

At Moris, the Company's open pit operation in Mexico, leaching of the pads continued during H1 2013, producing a further 372 thousand silver equivalent ounces, a slight increase compared to H1 2012. Moris remains in the final stages of the pads' cyanidation process with exploration continuing at the property.

Exploration

Exploration work at Moris during the period continued to focus on identifying new economic structures and the completion of the potential geological model of the property to identify new drill targets. Two new structures were discovered to the north of the original mine location, and preliminary data suggests significant mineralisation in the surrounding extensions of the veins. In H2 2013, the exploration of the new structures will be extended to identify possible extensions of mineralised structures.

ADVANCED PROJECTS

In November 2012 the Company announced that it expects to receive the final mill construction permits for both the Inmaculada and Crespo projects in the second half of 2013 with commissioning of both projects' mills scheduled for the second half of 2014.

In March 2013, the Company announced that its 60% owned joint venture Minera Suyamarca S.A.C had negotiated a $140 million secured loan facility with BBVA Continental and Banco Credito del Peru to partially finance the initial capital expenditure for the Inmaculada project.

Inmaculada

In H1 2013, the Company made further progress in the project development, construction and permitting processes at Inmaculada. The detailed civil and underground engineering continued and are on schedule for completion this quarter. Procurement of the main equipment also progressed according to schedule and the plant design requirements were submitted to the EPC contractor. In addition, construction of the three exploration tunnels continued, with 1,926 metres carried out in the first half. Finally, the detailed engineering for the paste backfill commenced, as well as construction of the camp which is expected to be completed during the second half.

The detailed engineering for the energy transmission line was also completed during the first half, and procurement commenced and is expected to be completed in Q3 2013. Tests were also successfully carried out on the main equipment and electrical substations.

In the project's permit application process, the underground water study was approved during the first half, and a specialist task team submitted the Company's technical response to the relevant ministry authorities following their review of the construction permit application. The Company continues to expect that the construction permit will be approved in H2 2013.

The exploration drilling programme in and around the Inmaculada project continued in H1 2013. Surface exploration drilling was completed, with one drill rig in operation to test geophysical anomalies and alteration lineaments parallel to the Mirella vein, and to test the NE extension of the Martha vein. In addition, a new potential high-grade vein, Mayte, was intercepted with 0.40 to 7.70 metres of true widths. During the half, a total of 1,482 metres of diamond drilling were completed, with significant results including8:

In H2 2013, exploration will focus on the completion of a new geological interpretation of the district to target high-grade structures to improve project economics.

Crespo

At the Company's 100% owned Crespo project, in H1 2013 the detailed integration engineering continued and is on schedule for completion in Q3 2013. In addition, orders were placed for the Merrill Crowe plant and mobile crushers. The basic and detailed engineering for the mine was also in progress during H1 2013, and the construction of the new access road to the mine site progressed and is also anticipated to be completed in Q3 2013.

With regards to the permit application process for the Crespo project, the surface land agreement for the project was approved by the local community on 11 January 2013 and the underground water study was approved in Q2 2013. In addition, in July, the Company received the Environmental Impact Study ('EIS') permit for Crespo. The Company submitted the project's construction permit application at the end of February and received positive feedback from the Peruvian government, to move to the next stage in the process.

District surface exploration continued at Crespo in H1 2013 and a new high sulphidation target, Jackelin, was identified. Furthermore, surface geochemistry sampling programmes were completed, with gold and silver anomalies reported. In H2 2013 the Company will continue surface exploration work at Crespo, with full geological mapping of the property to identify new drill targets.

AzucaIn H1 2013, a total of 13,108 metres of diamond drilling were completed at Azuca. The exploration drilling campaigns at Azuca were subsequently put on hold in late April until market conditions improve.

VolcanExploration was not scheduled at Volcan for 2013. Future plans include the process of building a complete geological and geometallurgical model of the El Dorado resource, the re-logging of historical drilling data and the image scanning of a selection of existing diamond drill holes, to define mineralised domains and improve mine planning.

EXPLORATION REVIEWRevised Exploration budget

As part of the Company's cashflow optimisation programme implemented as a response to the volatility in precious metal prices in H1 2013, the Company conducted a detailed review of discretionary elements of its exploration budget. Consequently, the Company has reduced its 2013 exploration budget to $50 million with the key reductions in the brownfield and Advanced Projects exploration programmes. Exploration at the Company's main operations will focus on the development of potential resources as opposed to increasing further, resource life-of-mine, reflecting the Company's confidence in their long term sustainability. In addition, the Company's greenfield exploration programme will concentrate on the Company's most promising prospects.

Greenfield Exploration

In H1 2013, a total of 23,524 metres were drilled as part of the greenfield exploration programme. Drilling was carried out at eight projects, at five 'Company Maker' projects, and at three 'Medium Scale' projects.

Company Makers

The Company currently has 11 potential "Company Makers" which are projects with the potential to achieve 20-30 million silver equivalent ounces per year. These are typically high sulphidation, disseminated or gold/copper porphyry deposits and are generally open pit operations. In H1 2013, the Company made an addition to its Company Makers' portfolio with the Pachuca property in Mexico. Also during the half, the Company stopped the exploration programmes at the La Falda and Potrero Company Maker projects in Chile and the Baborigame Company Maker project in Mexico. No further exploration work is planned for these projects. Highlights from the H1 2013 exploration programme for a number of our Company Maker projects include the following:

Valeriano

At the Valeriano Company Maker project in Chile, in H1 2013 a total of 2,421 metres were drilled to further test at depth the high-grade copper gold porphyry system encountered in the 2012 drilling campaign. Further tests of the mineralised body at a depth of 1.5 km yielded positive results. The drilling campaign at Valeriano was concluded in Q2 2013 and the Company plans to recommence drilling at the end of the winter season at the end of Q3 2013 to continue testing the porphyry system at depth and to define the extension and continuity of the mineralised system.

Mercurio

In H1 2013, a total of 2,898 metres of drilling were carried out at the Mercurio Company Maker project in Mexico, focused on the Barite zone. In H2 2013, the Company plans to continue surface exploration in the North West area of the property.

Pachuca

The Pachuca project is located in Mexico and was added to the Company's project pipeline as a Company Maker project in Q2 2013. The Pachuca property encompasses approximately 19,000 hectares of mineral rights in and around the Pachuca silver-gold mining district. Historic production from the Pachuca district totals approximately 1.4 billion ounces of silver and over 7.0 million ounces of gold, making it one of the largest silver-gold districts in the world. The Company's property does not include the central Pachuca property where historical production has taken place, but rather focuses on the northern area of the property.

Exploration work at Pachuca is currently focused on the reinterpretation and re-logging of the San Juan Gallo and Raquel areas of the property for further drill testing. In addition, 36 veins have been identified within the Pachuca Norte concessions to date, of which only a small number have been explored in previous exploration campaigns.

Julieta

At the Julieta Company Maker project in Peru, in H1 2013 a surface mapping programme was completed and a new area with breccias was discovered, showing robust mineralised surface geochemistry. The Company plans to commence a drilling campaign at the Julieta property in H2 2013.

Medium Scale projects

The Company's project pipeline also contains various Medium Scale properties in the prospects and drill target categories. These projects each have the potential to contribute 5-10 million silver equivalent ounces of production per year and tend to be low sulphidation epithermal gold/silver type deposits with varying base metal content and are typically mined underground. Highlights from the H1 2013 exploration programme for a number of our Medium Scale projects include the following:

Fresia

At the Fresia Medium Scale project in Peru, geological mapping and geochemistry campaigns were completed in H1 2013.

Cuello Cuello

At the Cuello Cuello Medium Scale project in Peru, during H1 2013, a total of 310 metres were drilled. This was the second drilling programme carried out at the property and near surface mineralised structures were again intersected, and two structural trends were identified. Metallurgical tests on ore from these structures show that some areas of the deposit are amenable to cyanide leaching with good recoveries. The Company is currently evaluating the economics of the project before defining the next phase of the exploration programme.

San Martin

Drilling commenced in Q2 2013 at the San Martin Medium Scale project in Peru. A total of 3,003 metres of exploration drilling were carried out to explore the continuity of quartz veins outside of the Rioacite dome. Holes intercepted structures with good mineralisation including sphalerite, galena and red silver, and high- grade gold and silver mineralisation is expected. In H2 2013 further drilling will be carried out along the favourable trend to test the extension and continuity of mineralisation. In addition, a comprehensive geological surface exploration programme will be carried out over the entire property to target similar structures and generate further drilling targets. Significant intercepts included9:

FINANCIAL REVIEW

Key performance indicators:

(before exceptional items, unless otherwise indicated)

1 Revenue presented in the financial statements is disclosed as net revenue (in this Financial Review it is calculated as gross revenue

 less commercial discounts).

2 Includes Hochschild's operations: Arcata, Pallancata and San Jose. Cash costs are calculated to include cost of sales, treatment charges, and selling expenses before exceptional items less depreciation included in cost of sales.

3 Adjusted EBITDA is calculated as profit from continuing operations before exceptional items, net finance costs and income tax plus depreciation and exploration expenses other than personnel and other exploration related fixed expenses.

4Cash flow from operations is calculated as profit for the year from continuing operations after exceptional items, plus the add-back of non-cash items within profit for the year (such as depreciation and amortisation, impairments and write-off of assets, gains/losses on sale of assets, amongst others) plus/minus changes in liabilities/assets such as trade and other payables, trade and other receivables, inventories, net tax assets, net deferred income tax liabilities, amongst others.

The reporting currency of Hochschild Mining plc is U.S. dollars. In discussions of financial performance, the Company 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 Company and to facilitate comparison with prior years. 

Revenue

Gross revenue: Gross revenue from continuing operations decreased by 14% to $325.2 million in H1 2013 (H1 2012: $378.0 million) driven by lower silver and gold prices. This effect was partially offset by higher ounces sold, mainly due to the temporary accumulation of inventory at San Jose in H1 2012.  

Silver: Gross revenue from silver decreased by 21% in H1 2012 to $210.9 million (H1 2012: $268.0 million) as a result of lower prices. The total amount of silver ounces sold in H1 2013 rose to 9,153 koz (H1 2012: 8,596 koz) mainly due to the temporary accumulation of inventory at San Jose in H1 2012.

Gold: Gross revenue from gold increased by 4% in H1 2013 to $114.3 million (H1 2012: $110.0 million) as a result of higher sales volumes; this effect was partially offset by lower gold prices. The total amount of gold ounces sold in H1 2013 increased to 83.6 koz (H1 2012: 65.9 koz) mainly due to the temporary accumulation of inventory at San Jose in H1 2012.

Gross average realised sales prices

The following table provides figures for average realised prices and ounces sold for H1 2013 and H1 2012:

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 2013, the Company recorded commercial discounts of $16.6 million (H1 2012: $23.7 million). Lower commercial discounts in H1 2013 resulted mainly from the completion of the Arcata dore project in Q4 2012, as well as the impact of lower prices.

Net revenue

Net revenue decreased by 13% to $308.6 million (H1 2012: $354.5 million), comprising silver revenue of $198.6 million and gold revenue of $110.0 million. In H1 2013, silver accounted for 64% and gold 36% of the Company's consolidated net revenue compared to 70% and 30% respectively in H1 2012.

Net revenue by mine

1Other revenue includes revenue from sale of energy in Peru and revenue from administrative services in Mexico.

Costs

Total pre-exceptional cost of sales in the first half increased 34% to $233.4 million (H1 2012: $174.4 million) as a result of higher sales volumes (following the accumulation of inventory in San Jose in H1 2012) and higher costs. Direct production costs increased by 14% to $153.0 million (H1 2012: $134.4 million) mainly due to increased tonnages and higher costs per tonne. Further details can be found in the Operating Review. Depreciation and amortisation was higher than H1 2012, at $65.0 million (H1 2012: $55.7 million). Other costs, which principally include workers' profit sharing, fell significantly, to $3.9 million (H1 2012: $8.8 million). The cost resulting from change in inventories was $(11.6) million in H1 2013 as opposed to a positive $24.5 million in H1 2012 reflecting the accumulation of inventory at San Jose in H1 2012. Finally, post-exceptional cost of sales in H1 2013 totaled $233.6 million due to $0.2 million of termination benefits paid to workers between April and May 2013 following the restructuring as part of the Company's cashflow optimisation programme.

Unit cost per tonne

The Company reported an overall increase in unit cost per tonne excluding royalties at its main operations of 7% in H1 2013 to $104.4 (H1 2012: $97.6) principally driven by inflation in Argentina. Further detail on unit costs per tonne can be found in the Operating Review on page 6.

Unit cost per tonne by operation (including royalties)*:

 *Unit cost per tonne is calculated by dividing mine and geology costs by extracted tonnage and plant and other costs by treated tonnage.

Unit cost per tonne by operation (excluding royalties)*:

*Unit cost per tonne is calculated by dividing mine and geology costs by extracted tonnage and plant and other costs by treated tonnage.

Cash costs

Cash costs include cost of sales, commercial deductions and selling expenses before exceptional items, less depreciation included in cost of sales.

Co-product silver/gold cash costs are total cash costs multiplied by the percentage of revenue from silver/gold, divided by the number of silver/gold ounces sold in the first half. Silver cash costs increased from $13.5 to $14.0 per ounce and gold cash costs increased from $751 to $851 per ounce. Silver and gold cash costs at the Company's main operations (Arcata, Pallancata and San Jose) increased from $12.8 to $13.4 per ounce and from $708 to $785 per ounce, respectively. The increase in silver cash costs resulted from higher production costs at all mines and lower average grades in line with the Company's policy of mining close to the average reserve grade.

By-product silver/gold cash costs are total cash costs less revenue from gold/silver, divided by the number of silver/gold ounces sold in the first half. By-product cash costs for the period were $9.3 per silver ounce (H1 2012: $6.4 per silver ounce) and ($143) per gold ounce (H1 2012: ($1,564) per gold ounce).

Cash cost reconciliation*:

* Cash costs are calculated to include cost of sales, treatment charges, and selling expenses before exceptional items less depreciation

included in cost of sales.

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.

Administrative expenses

Administrative expenses before exceptional items decreased by 17% to $29.0 million (H1 2012: $34.1 million) primarily due to the impact of the cashflow optimisation programme. Post-exceptional administrative expenses in H1 2013 totaled $30.0 million and include an expense of $1.0 million due to termination benefits paid to workers between April and May 2013 following the restructuring as part of the above mentioned cashflow optimisation programme.

Exploration expenses

In H1 2013, pre-exceptional exploration expenses, decreased by 13% to $27.8 million (H1 2012: $30.3 million). Post-exceptional exploration expenses in H1 2013 totaled $29.7 million and include an expense of $1.9 million due to termination benefits paid to workers between April and May 2013 following the restructuring as part of the Company's cashflow optimisation programme.

In addition, in H1 2013, the Company capitalised $0.3 million relating to brownfield exploration compared to $8.0 million in H1 2012, bringing the total investment in exploration for the six month period to 30 June 2013 to $28.1 million (H1 2012: $38.4 million). As part of the Company's cashflow optimisation programme, the 2013 exploration budget has been reduced to $50 million, with the majority of the exploration spend to be expensed through the Company's income statement.

Selling expenses

Selling expenses increased to $16.4 million (H1 2012: $15.9 million), reflecting higher sales in H1 2013 following the accumulation of inventory at San Jose in H1 2012.

Other income/expenses

Other income before exceptional items was $3.5 million (H1 2012: $2.6 million). There were no exceptional items related to other income in H1 2013.

Other expenses before exceptional items reached $4.3 million (H1 2012: $4.5 million). There were no exceptional items related to other expenses in H1 2013.

Profit from continuing operations before exceptional items, net finance costs, foreign exchange loss and income tax

Profit from continuing operations before exceptional items, net finance costs, foreign exchange loss and income tax decreased to $1.2 million (H1 2012: $97.9 million) as a result of the effects detailed above.

Adjusted EBITDA

Adjusted EBITDA before exceptional items decreased by 46% over the period to $90.4 million (H1 2012: $168.3 million) driven primarily by lower prices. Adjusted EBITDA is calculated as profit from continuing operations before exceptional items, net finance costs and income tax plus depreciation and exploration expenses other than personnel and other exploration related fixed expenses.

Impact of the Group's investments in joint ventures and associates

The Company's pre-exceptional share of the profit/(loss) after tax of associates totaled $5.9 million in H1 2013 (H1 2012: $3.8 million). In both H1 2013 and H1 2012, the Company's share in associates reflects profits related to its holdings in Gold Resource Corporation ('GRC'). After exceptional items, the share of the profit/(loss) after tax of associates totaled $5.9 million.

The Company recognised an exceptional gain in H1 2013 of $107.9 million due to the loss of significant influence with regards to its investment in GRC, and its resulting reclassification from an associate to an available-for-sale asset. Equity accounting of the investment was discontinued as a result of developments during the period that led the Company to conclude that it no longer had the ability to influence significantly that company's strategic, operational and financial direction. Consequently, the asset is now recognised as an available-for-sale asset at fair value. The difference in the asset value that arises on reclassification is recognised in the income statement. The subsequent decrease of 33% in GRC's share price between the reclassification as at the end of March and the end of H1 2013, has resulted in an impairment in the value of the available-for-sale asset and a charge of $62.0 million in H1 2013.

Finance income and finance costs

Finance income before exceptional items at $5.3 million was significantly higher than that of last year (H1 2012: $0.7 million) due to interest on deposits on the cash balance in Peruvian Soles as well as dividend payments of US$1.3 million from Gold Resource Corporation.

Finance costs before exceptional items was $7.3 million (H1 2012: $7.1 million), in line with H1 2012.

Foreign exchange losses

The Company recognised a foreign exchange loss of $15.4 million in H1 2013 (H1 2012: $1.2 million loss). This loss is principally the result of the impact of an 11% devaluation of the Peruvian Sol versus the US Dollar on cash deposits in Peru. This impact will be more than offset by the positive effects of the local currency weakening on the Company's unit costs and capital expenditure programme.

Income tax

The Company's pre-exceptional income tax was $14.9 million in H1 2013 (H1 2012: $39.5 million). Despite having losses from continuing operations, income tax charges are mainly explained by foreign exchange adjustments and non-deductible expenses, mainly exploration expenses. The Company's post-exceptional income tax was $(10.3) million in H1 2013 (H1 2012: $39.5 million).

Exceptional items

Exceptional items in H1 2013 totaled $(13.2) million after tax (H1 2012: $(1.8) million). The tables below detail the exceptional items excluding the exceptional tax effect that amounted to $25.2 million, comprising $0.7 million of tax related to termination benefits and $24.5 million related to the impairment of assets and projects.

Positive exceptional items:

Negative exceptional items:

Cash flow & balance sheet review:

Cash flow:

Total cash generated decreased from $(83.3) million in H1 2012 to $(105.4) million in H1 2013 ($22.1 million difference). Operating cashflow decreased by $59.8 million mainly due to lower commodity prices. Net cash used in investing activities increased by $15.0 million primarily due to capital expenditure on the Inmaculada and Crespo Advanced Projects during H1 2013 of $51.1 million (H1 2012: $26.9 million). Finally, cash flows generated from financing activities increased by $52.7 million primarily as a result of pre-shipment borrowings raised in Peru and Argentina.

Working capital:

The Company's working capital position increased to $57.9 million in H1 2013 from $10.8 million in H1 2012. This was primarily explained by cash optimisation measures taken in Q2 2013 that reduced trade and other payables (these include reductions relating to cost and capital expenditure reductions, negotiations with suppliers and personnel expenses).

Net cash:

The Company reported net cash of $91.6 million as at 30 June 2013 (FY 2012: $245.1 million) reflecting the impact of capital expenditure on the Company's Advanced Projects of $51.1 million as well as the final payment for the acquisition of Andina Minerals Inc amounting to $14 million, and 2012 related expenses paid in H1 2013 (mainly taxes in Argentina). Finally, a foreign exchange loss on cash deposits in Peru of $15.4 million in H1 2013 will be more than offset by the positive effects of weakening local currency on unit costs and capital expenditure.

The convertible bond has a current conversion price of £3.85 and, under its terms, the Company is entitled to force conversion of the bonds at any time if, for a period of 20 out of 30 consecutive days, the average share price, calculated under the terms of the bonds, exceeds 130% of the conversion price (£5.01).

In March 2013, the Company announced that its 60% owned joint venture Minera Suyamarca S.A.C had negotiated a $140 million secured loan facility with BBVA Continental and Banco Credito del Peru to partially finance the initial capital expenditure for the Inmaculada project. The loan facility has a term of seven years with no principal payable for the first two years. The interest rate is based on the 3-month LIBOR rate plus 3.0%, with customary closing fees and charges. The loan will be non-recoursable to Hochschild as well as to International Minerals Corporation who owns the remaining 40% of Suyamarca.

Capital expenditure¹

1 Includes additions in property, plant and equipment and evaluation and exploration assets (confirmation of resources) and excludes increases in closure of mine assets. 

H1 2013 capital expenditure of $138.2 million (H1 2012: $116.2 million) includes operations capital expenditure of $79.0 million, capitalised exploration costs of $0.3 million in respect of the Company's operating mines, $51.1 million capitalised in respect of the Advanced Projects (Inmaculada and Crespo), US$6.4 million in Azuca and Volcan, and administrative capital expenditure of $1.3 million.

Interim Dividend

The Board has taken the decision not to pay an interim dividend in light of the impact of precious metals price falls on the Company's financial results in H1 2013. The Company remains committed to the long term principle of shareholder returns and the Board intends to review dividend payouts subject to the overall full year financial position.

RISKSThe principal risks and uncertainties facing the Company in respect of the year ended 31 December 2012 were set out in detail in the Risk Management section of the 2012 Annual Report and in Note 36 to the 2012 Consolidated Financial Statements.

The key risks disclosed in the 2012 Annual Report (available at www.hochschildmining.com) are categorised as:

- Financial risks which include commodity price risk, counterparty credit risk and liquidity risk;

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

- Macroeconomic risks which include political, legal and regulatory risks; and

- Sustainability risks including health and safety, environmental and community relations risks.

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

Given the challenging price environment during H1 2013, the Board has considered in more detail the issues resulting from the heightened level of commodity price risk and, in addition, those specific to the implementation of the Company's cashflow optimisation programme. These issues relate to personnel, community relations, feasibility of projects and operations, and exploration.

GOING CONCERN

After considering budgets and cash flow forecasts, the Directors confirm that, having assessed the impact of the cashflow optimisation programme and medium-term cashflow projections under a number of possible scenarios, they are satisfied that the Company has sufficient resources to continue in operation for the foreseeable future. Accordingly, adoption of the going concern basis in the preparation of the financial statements contained herein is considered to be appropriate.

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 BustamanteChief Executive Officer

20 August 2013

INDEPENDENT REVIEW REPORT TO HOCHSCHILD MINING PLC

Introduction

We have been engaged by Hochschild Mining plc (the Company) to review the interim condensed consolidated set of financial statements in the half-yearly financial report for the six months ended 30 June 2013 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 19. 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 interim condensed consolidated 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 IFRSs as adopted by the European Union. The interim condensed consolidated 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 ResponsibilityOur responsibility is to express to the Company a conclusion on the interim condensed consolidated 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.

ConclusionBased on our review, nothing has come to our attention that causes us to believe that the interim condensed consolidated set of financial statements in the half-yearly financial report for the six months ended 30 June 2013 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 LLPLondon20 August 2013

Interim condensed consolidated income statement

Interim condensed consolidated statement of comprehensive income

Interim condensed consolidated statement of financial position

Interim condensed consolidated statement of cash flows

Interim condensed consolidated statement of changes in equity