Hochschild Regulatory News (HOC)

12 March 2014

Hochschild Mining plc

Preliminary Results for the twelve months ended 31 December 2013

Financial highlights[1]

· Revenue of $622.2 million (2012: $818.0 million)

· Adjusted EBITDA of $195.5 million (2012: $384.8 million)

· EPS of $(0.15) (2012: $0.19)

· Cash balance of $291.0 million & short term borrowings reduced to $17.8 million[2]

· Full year dividend suspended

· Minority investments valued at $52.4 million[3]

· Cashflow optimisation programme already delivered $145 million of savings[4]:

o Production costs reduced by $48 million versus initial guidance

o Administration costs reduced by $19 million versus 2012

o Sustaining capital expenditure reduced by $33 million versus initial guidance

o Exploration costs reduced by $25 million versus initial guidance

Acquisition & Refinancing highlights

· Key acquisition of Pallancata and Inmaculada minorities completed

o Consolidates minority shareholding in assets already controlled and operated by Hochschild

o Inmaculada set to reduce average unit cost

· Corporate refinancing completed in January 2014

o 7.75% $350 million Senior Notes issued due 2021

Operational highlights

· Full year production of 20.5 million attrib. silver equivalent ounces achieved, exceeding 20.0 million target

· Main operation all-in sustaining costs lowered by 14% to $18.6 per ounce[5];

· Inmaculada project set to begin commissioning in Q4 2014

o Plant construction on track with all key equipment delivered

o Mine development, infrastructure, energy and engineering targets significantly developed

· Resource life-of-mine increased to 10.0 years

2014 Outlook

· 2014 production target set at 21.0 million attributable silver equivalent ounces

· 2.0 million silver ounces sold forward for 2014 at $22 per ounce; 33,000 gold ounces sold forward for 2014 at $1,338 per ounce

· 0-5% reduction in all-in sustaining costs expected for 2014

· Sustaining capital expenditure expected to be $130 million

· Exploration and geology budget set at approximately $30 million

Commenting on the results, Ignacio Bustamante, CEO, said:

"In 2013, Hochschild reacted quickly to a very negative market environment by initiating a wide-ranging cost savings programme to preserve the Company's operating profitability and, whilst maintaining production levels, capitalised on a weak market environment to consolidate our ownership in our most valuable assets. We were also able to reorganise the Company's financial position, leaving us in an advantageous position to deliver value enhancing growth. We can now look forward to a key year of construction at the Inmaculada project which, when commissioned at the end of 2014, will signal the start of four years of production growth."

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A presentation will be held for analysts & investors at 9.30am (UK time) on Wednesday 12 March 2014 at Holborn Bars, 138-142 Holborn, London, EC1N 2NQ.  

For a live webcast of the presentation please visit our website:

www.hochschildmining.com

Conference call dial in details:

UK: +44(0)20 3427 1900 (Please quote confirmation code 7501261) _________________________________________________________________________

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

_________________________________________________________________________

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.

CHAIRMAN'S STATEMENT

2013 Overview

2013 proved to be a challenging year due to the considerable drop in gold and silver prices but also presented significant opportunities that we were able to capitalise on through the acquisition of International Minerals ("IMZ"). We believe that the fundamental case for stronger precious metal prices remains in place due to the financial difficulties in the world´s biggest economies continuing to threaten the confidence in currencies, and our observation of a growing scarcity of new world class assets in the precious metals universe. However, the markets have been ruthless in imposing a short term lower price environment.

In the first half of the year, the industry was confronted with extreme falls in precious metals prices that far exceeded existing market forecasts. In response and within a very short space of time, our management team initiated a comprehensive cashflow optimisation programme and we have already seen some very positive results with improvements in margins ensuring a better second half of the year and better prospects for 2014. However, notwithstanding another year of very solid operational performance, given the prevailing market conditions and ahead of sizeable capital expenditure on our flagship Inmaculada project, the Board proposes to not reinstate the dividend until the Company´s cash position improves.

The price fall provided Hochschild with a value enhancing opportunity that will allow us, not only to improve our cost position in the short term, but also to grow the Company in a precious metals market in which we truly believe. In September, we announced the acquisition of IMZ, a company that owned the 40% minority stakes in our Pallancata mine and Inmaculada project. It is my firm belief that our management have chosen an opportune stage in the cycle to execute the acquisition of assets we know extremely well and already control.

In line with the IMZ transaction, Hochschild also undertook a broad corporate refinancing initiative in order to meet the cost of the acquisition, fully support the Company's anticipated remaining capital expenditure at Inmaculada and to provide capacity to satisfy the upcoming convertible bond maturity towards the end of this year. It is a great credit to our whole team that at a time of unprecedented industry volatility, we retained the focus to deliver a complex re-financing package that places the Company in an excellent position to capitalise on a period of opportunistic growth.

In addition, one of the key consequences of the dramatic price falls was the necessity to reduce discretionary expenditure and refocus the exploration programme for the year, reducing the budget and prioritising the most promising prospects. The Board remains convinced by the importance of the ongoing exploration strategy to the future growth potential of the Company but recognises the need to adjust the financial commitment depending on the stage in the cycle.

Outlook

The short term outlook for the precious metals markets remains uncertain. However, the Company continues to believe that the long term fundamentals for both silver and gold will eventually reassert themselves. I am confident that, despite a difficult 2013, we have the proven operational and geological expertise, an improving cost position, solid balance sheet and an experienced management team to navigate volatile markets and deliver profitable production into the future.

Operating Responsibly

Our commitment to our people, the communities and the environment remains at the core of our business model. During 2013, the Company produced its first standalone Sustainability Report demonstrating our commitment to informing our stakeholders of our progress in this area. Our ability to operate in a way that respects the environment is supported by our reporting systems which continue to be certified compliant with the international standard, ISO14001. We have also made further progress with our key Travelling Doctor and Teacher Leader initiatives and I am proud that our flagship Digital Chalhuanca project has been recognised externally for its innovation and as an example of successful public/private collaboration. Further details of all of these initiatives will be provided in the Annual Report.

In 2013, we made an unprecedented level of improvement in our safety record with a 37% reduction in the Group's accident frequency rate and a 43% reduction in the accident severity rate. However, as impressive as these figures are, we must continue with our efforts as there were two fatalities at our operations during 2013. We consider each accident to be avoidable and for this reason the management team are in the process of implementing a behaviour-based safety programme that will encourage our people to value safety above all else and continue improving the safety culture.

Board Changes

In acknowledgement of the Board's own contribution to the cashflow optimisation programme, we announced in July reductions in Directors' remuneration and the size of the Board. I would like to convey my gratitude to both Fred Vinton and Rupert Pennant-Rea for their longstanding support and commitment.

These changes to the composition of the Board necessitated a review of our non-executive succession plans and I wish to record my appreciation to Sir Malcolm Field for delaying his retirement from the Board and for his ongoing support as Enrico Bombieri succeeds to the role of Senior Independent Director

On a final note, I wish to thank the entire Hochschild team for their contributions and our shareholders for their continued support in what will be remembered as a tough year but one from which I believe we have emerged in a stronger position.

Eduardo Hochschild

Executive Chairman

11 March 2014

CHIEF EXECUTIVE OFFICER'S STATEMENT

2013 presented Hochschild Mining with an unprecedented level of gold and silver price declines prompting the management team to implement a series of measures throughout the Company. The actions taken were aimed at conserving capital and to position the Company to operate profitably at all stages of the precious metals cycle while delivering our key growth project in 2014. The strategy remains focused on creating value for shareholders by optimising current operations, focusing on exploration and pursuing opportunistic, early-stage acquisitions and is underpinned by our commitment to operate responsibly.

Strategic progress

We announced in September a strategic milestone for Hochschild by consolidating ownership in Pallancata, currently our biggest cash flow generator and in Inmaculada, our most exciting growth project. The transaction represented an important low risk opportunity to increase our exposure to our attractive Southern Peru Cluster, reduce our overall operating cost position and to potentially enhance our cash flow generating potential at no additional ongoing administrative cost. At the same time, we announced the launch of a re-financing process which we successfully completed in January 2014 with our inaugural senior note offering raising approximately $350 million at a highly competitive rate against a backdrop of extremely difficult markets for the mining industry. We remain in a solid financial position with capacity to fund the remaining Inmaculada project capital expenditure as well as the convertible bond maturity later in 2014 whilst retaining flexibility to continue to pursue our strategic priorities.

The construction of the Inmaculada project is clearly the strategic focus for 2014 with the Company commencing significant production increases with the aim of reaching a target of almost 35 million ounces by 2017. In September, we received, as expected, the mill construction permit from the Peruvian government, signalling the start of the crucial final phase of this key project's development. In this regard, we have made excellent progress in 2013 with significant steps made in procurement, infrastructure, engineering and, importantly, mine development and commissioning is set to begin at the end of the year. After a ramp-up period, the average annual production for the life of mine is set at approximately 12 million silver equivalent ounces per annum. Initial production is scheduled to be sourced from one single wide vein (Angela) with reduced dilution and overall operating costs and sustaining capital expenditure expected to be the lowest of all of Hochschild's operating assets.

As previously announced, the strategy with regard to the Crespo Advanced Project was revised in the light of the acquisition of IMZ, resulting in the decision to delay the project in order to better sequence capital allocation with this move postponing approximately $80 million of remaining project expenditure.

The key area of operational focus during the last nine months has been our organisational reaction to the precious metal price falls that occurred during H1. With a plan initially prepared during the budgeting process towards the end of 2012, we were able to rapidly implement our cashflow optimisation programme. This resulted in the identification of almost $200 million of cash savings within the business, encompassing operating costs, sustaining capital expenditure, administrative costs and a refocused exploration programme. The overall exploration budget was reduced from $77 million to approximately $50 million and the greenfield programme, in particular, was significantly reduced with the focus narrowed to the most promising prospects.

The brownfield exploration programme, which has been so successful over the last few years, also continued with the focus on improvements in our resource base. Attributable resources increased by 8% to almost 1.3 billion silver equivalent ounces with the overall resource life-of-mine now at a comfortable 10 years. In line with the reduction in discretionary expenditure, we have also scaled back exploration work at the Volcan gold project in Chile although we can look forward to a new geological model of the porphyry system early this year and remain excited by the long term potential of this project which already has almost 10 million ounces of gold resources.

Other key individual initiatives included significant cuts to administrative and exploration headcount, renegotiation with suppliers and contractors, the temporary suspension of work at the Azuca project and $33 million of reductions to sustaining capital expenditure in 2013. As a team, we are confident that, although the full annualised effects of the programme will only be evident through 2014, the strong improvements already achieved in the Company's underlying profitability allied with the concurrent fall in industry cost inflation, leave the Company in a much more robust position to withstand any further price volatility.

2013 overview

It is particularly pleasing that, despite all the volatility in the industry and the cashflow optimisation measures in place within the Company, Hochschild met the annual production target for the seventh year in a row producing 20.5 million silver equivalent ounces and therefore exceeding the 20.0 million ounce target. Both Pallancata in Peru and San Jose in Argentina enjoyed a very solid operational performance and at Arcata, the team have skilfully handled the complicated flow of reserve grade material from an increasing number of stopes and the low grade, low cost material from the Macarena waste dam which is now almost exhausted. Hochschild will continue to adhere to its policy of mining close to the average reserve grade at its core operations throughout the cycle. The two ageing operations, Ares in Peru and Moris in Mexico have now finally reached the end of their lives with Moris already closed and Ares scheduled to cease operations towards the middle of the year.

A number of the cost savings initiatives from our cashflow optimisation programme started to have a positive effect on the overall cost performance of the Company during the second half of the year. In addition, although 2013 began with continuing industry cost inflation, this began to subside as the year went on and allied to unanticipated devaluation in both the Peruvian Sol and the Argentinean Peso, Hochschild was able to achieve year-on-year reductions in 'all-in sustaining costs' ("AISC") at our main operations of around 14%. This is expected to continue into 2014 with further reductions forecast although the quantum is expected to be lower at between 0-5% on an AISC basis, notwithstanding any further major local currency devaluation.

Hochschild has achieved a resilient set of financial results, in particular in the second half, with the 30% fall in the average silver price received in 2013 leading to a decline in Revenue to $622.2m. Pre-exceptional EBITDA was at $195.5 million but with the second half much improved by the Company's cost savings initiatives and representing 54% of the total under a significantly lower average price received. Pre-exceptional EPS was $(15) cents per share but, again, the second half saw Hochschild reduce the loss to only 5 cents per share. The cash balance is currently $291.0 million with minority investments valued at just over $52 million which takes into account two sales from our non-core investment in Gold Resource Corporation.

Outlook

Hochschild's production target for 2014 is 21.0 million attributable silver equivalent ounces. This increase is explained by the inclusion of the remaining 40% of Pallancata following the completion of the IMZ acquisition, offsetting the effect of the closure of Moris and the significant fall in the contribution from Ares. Management will continue to be focused on implementing measures to further optimise costs, expenses and capex. 2014 also promises to be a year of peak project capital expenditure as we focus our efforts on beginning commissioning the now 100% owned Inmaculada project by the year end marking a new chapter of growth for the Company. However, in order to provide the Company with a degree of cashflow certainty in a crucial year of investment and with precious metal prices remaining volatile, Hochschild has forward sold four million ounces of silver equivalent production. This does not reflect our view of the long term direction of precious metal prices but increases our short term confidence as we invest in the future extraction of sustainable low cost ounces from Inmaculada.

We remain committed to an exploration-led long term growth strategy and the budget of almost $30 million for 2014 reflects a belief that our extensive pipeline of both brownfield, greenfield projects and current operations offer not only optionality but further scope for creating value at all stages of the investment cycle.

The entire Hochschild organisation has had to endure a very difficult 2013 with a significant number of job losses throughout the Company and therefore the management team is grateful for the resilience and commitment shown by all our teams in making an important contribution to an exciting future for Hochschild Mining. Although 2014 is expected to be a transitional year for us, I am confident that we are in a stronger position with a key acquisition completed, a clean financial structure, strong growth prospects and a focus on project delivery.

Ignacio Bustamante

Chief Executive Officer

11 March 2014

OPERATING REVIEW

2013 Highlights

· Full year production of 20.5 million attributable silver equivalent ounces achieved, exceeding guidance

· Main operation all-in sustaining costs reduced by 14% in 2013

· Excellent progress at Inmaculada Advanced Project with mill permit received from Peruvian government and on track to begin commissioning at the end of 2014

CURRENT OPERATIONS

Production

In 2013, Hochschild has once again successfully exceeded its full year production target, delivering attributable production of 20.5 million silver equivalent ounces, including 13.6 million ounces of silver and 116 thousand ounces of gold. Hochschild's production target for 2014 is 21.0 million attributable silver equivalent ounces. The increase is explained by the inclusion of the remaining 40% of Pallancata following the completion of the IMZ acquisition offsetting the effect of the closure of Moris and a significant reduction in the contribution from the ageing Ares operation which is also set to close in H1 2014.

Costs

Although significant industry inflation persisted in the first few months of the year, the Company's all-in sustaining costs at its main operations were reduced by 14% in 2013 to $18.6 per ounce driven by operational initiatives resulting from the cashflow optimisation programme, devaluation of local operating currencies and a subsequent fall in industry cost inflation. Unit cost per tonne at its main Peruvian operations was reduced to $74.2 (2012: $75.1). In Argentina, unit cost per tonne increased by 4% to $210.0 (2012: $202.2). Please see page 19 of the Financial Review for further details on costs.

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.

Production and sales

Full year silver equivalent production at Arcata in 2013 was 6.0 million ounces (2012: 6.6 million ounces), slightly lower than 2012 as a result of lower grades from stopes and developments in line with the Company's policy of mining close to average reserve grade. Tonnage was higher than that of 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). Macarena tonnage continued in the second half and after the expected processing of a small volume in Q1 2014 is now considered to be exhausted and will be replaced by tonnage from stopes and developments in 2014. In addition, production at Arcata included the decrease in ounces recovered as a result of processing 100% of Arcata's concentrate into Doré.

Table Showing Contribution from Macarena Waste Dam Deposit

In 2013, the silver/gold doré from Arcata was sold to Johnson Matthey, Standard Bank, HSBC Bank, Argor Heraeus INTL Commodities and Auramet Trading.

Costs

In 2013, the unit cost per tonne at Arcata was materially better than expectations, decreasing by 6% versus the same period last year to $81.3 per tonne, despite continuing industry inflation at the start of the year. This was mainly due to the overall effects of the cost savings initiatives initiated towards the end of the first half of the year as well as the processing of higher volumes of low cost Macarena material and a significant local currency weakening versus expectations.

Resource life and Brownfield exploration

The resource life of Arcata stands at 11.6 years as at 31 December 2013. In 2013, a total of 10,899 metres of drilling was carried out at Arcata. The exploration programme in the first half of the year focused on the definition of new high-grade structures from known vein systems (potential drilling), and a new geological interpretation of the Ares-Arcata corridor that identified high-grade structures. In addition, diamond drilling was conducted at the Pamela, Blanca 2, Baja 2, Tunel 3, Ramal Leslie, Tunel 4, Irma and Blanca veins. Significant intercepts included:

In 2014, the 25,000 metre exploration and drilling programme at Arcata will focus on the potential, near mine and inferred resource exploration, focusing on the definition of new high grade structures from known vein systems.

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 and up until December 2013 was a joint venture, in which Hochschild held a controlling interest of 60% with International Minerals Corporation ("IMZ"). Following the purchase of IMZ, Hochschild now owns 100% of the operation. Ore from Pallancata is transported 22 kilometres to the Selene plant for processing.

Production and sales

Overall in 2013, Pallancata enjoyed a very solid year of production, delivering silver equivalent production of 9.3 million ounces (2012: 9.0 million) with higher average grades the result of a higher proportion of material from stopes.

In 2013, the silver/gold concentrate from Pallancata was sold to Teck Metals Ltd., LS-Nikko Copper Inc and Glencore.

Costs

Unit cost per tonne at Pallancata also enjoyed a better 2013 than expected increasing by only 2% in 2013, to $68.3 despite continuing industry inflation at the start of the year. As at Arcata, costs were positively impacted by the cashflow optimisation programme as well as the higher than expected depreciation of the local currency. Further positive pressure resulted from lower personnel and supply costs as a higher proportion of mineral was extracted using mechanised methods.

Resource life and Brownfield exploration

The resource life of the Pallancata operation has been increased substantially in 2013 to 8.2 years as at 31 December 2013. During 2013, a total of 20,972 metres of diamond drilling was carried out over the course of the year (2012: 50,326 metres). Both infill and potential drilling were carried out at Pallancata during the year, to further delineate inferred resources and to test new possible vein extensions.

The Yurika West vein mapping programme continued, and identified major structural lineaments trending NE-EW associated with silicified hydrothermal breccias. New gold-rich high-grade structures were identified in the northern part of the district with resource development drilling continuing at the Yurika and Charo veins. Step-out drilling was conducted in the Teresa vein with strong silicification results and towards the end of the year, mapping campaigns focused on the south side of Pallancata (at the Sonia, San Angela, Virgen del Carmen, Lilina and Debora veins) with total coverage for the whole year of 1,164 ha.

Significant intercepts included:

In 2014, the 25,000 metre exploration programme at Pallancata will focus on increasing life-of-mine through drilling in the Yurika, Charo, Mercedes and Sonia veins with potential drilling set to be targeting the Mercedes, Jacqueline, San Cayetano, Charo, Paola and Rina veins.

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% of the joint venture and is the mine operator.

*The Company has a 51% interest in San Jose

Production and sales

2013 has been a strong year for the San Jose operation with silver equivalent production up 11% to 12.3 million ounces (2012: 11.1 million) driven by increased tonnages and increased grades, in particular gold. Higher tonnage was explained by the 10% plant capacity increase completed in December 2012 with higher grades resulting from incorporation of new high grade reserves into the mine plan.

In 2013, the dore produced at San Jose was sold to Argor Heraeus and Republic Metals whilst the concentrate produced at the operation was sold to Teck Metals ltd., Aurubis AG, LS-Nikko Copper Inc, Consorcio Minero and Glencore.

Costs

At San Jose, unit cost per tonne rose by only 4% versus 2012 to $210.0. The increase was slightly below the 2013 revised guidance of 5-10% due to the impact of the cashflow optimisation initiatives and a stronger than expected devaluation of the Argentine peso offsetting the effects of continuing high local inflation and a number of brief stoppages at the mine during the first half.

Resource life and Brownfield exploration

The resource life of San Jose stands at 11.8 years as at 31 December 2013. The key event in exploration at the mine was the incorporation of various surrounding properties, from both Hochschild and McEwen Mining, into the Minera Santa Cruz JV.

For much of 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 10,529 metres of diamond drilling was completed during 2013. In addition, new structures were identified in the Juanita vein system located in the south of the property. Drilling was conducted on the Huevos Verdes, Emilia and Juanita veins with detailed surface mapping and sampling being completed over the Colorado Grande, Juanita, Saavedra and Tres Colores areas. Significant intercepts included:

In 2014, the 2,000 metre potential drilling campaign will focus on the definition of the new Ayelen, Nuevo 1 and Karina veins as well as drilling in the Los Pinos area.

Other operations

Ares: Peru

The Ares mine, which commenced production in 1998, is a 100% owned operation located approximately 25 kilometres from Hochschild's Arcata mine in southern Peru.

Production and sales

The Company's ageing Ares mine in Peru continued to operate in 2013, delivering total silver equivalent production of 2.2 million silver equivalent ounces a 5% improvement on the 2012 figure of 2.1 million ounces. Ares is currently expected to cease production in H1 2014. The Company continues to monitor production closely at Ares to ensure the extraction of profitable ounces during the last few months of its mine life.

100% of Ares' production is processed into dore, all of which was sold to Johnson Matthey in 2013.

Brownfield exploration

The exploration programme at Ares in 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, Paola, Karina and Victoria veins. In the Paola, Falla Marion and Ares West veins, surface mapping and sampling was conducted over an area of 3,567 ha. A new geophysical survey was also completed.

In 2014, geological work will continue to generate targets within the Ares-Arcata corridor and a 2000 metre drilling campaign is planned.

Moris: Mexico

The 100% owned Moris mine, is an open pit mine and is located in the district of Chihuahua, Mexico.

Production and sales

Despite mine production at Moris having ceased in September 2011, in 2013 continued leaching of the pads produced a further 527 thousand silver equivalent ounces (2012: 570 thousand ounces). However, towards the end of the year the Moris operation was finally closed and subsequently transferred to a local third party.

In 2013, the gold/silver dore produced at Moris was sold to Johnson Matthey, INTL Commodities and Auramet Trading.

Brownfield exploration

Exploration work at Moris during 2013 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 including the Los Alamos area, and preliminary data suggested significant mineralisation in the surrounding extensions of the veins. However, the final conclusion was that no further work was needed in the area.

PROJECT REVIEW

Hochschild started 2013 with one Advanced Project, Inmaculada and three Growth Projects, Crespo, Azuca and Volcan. Following the significant price declines towards the middle of the year, the Company renewed its commitment to the flagship Inmaculada project. The acquisition of the IMZ minorities, completed in December 2013, gave the Company 100% of this project which is expected to contribute, after a ramp-up period, almost 12 million silver equivalent ounces on average per annum with the start of commissioning due towards the end 2014.

The strategy with regards to Crespo has been revised and in early October 2013, the Company announced plans to delay the project in order to better sequence overall Company capital allocation, with the focus now firmly on the construction of the Inmaculada project and the acquisition of the IMZ minorities. This is expected to postpone approximately $80 million of remaining Crespo project expenditure. Despite the prioritisation of Inmaculada, Crespo remains an important component of the company's portfolio of development assets. It is management's intention that in the event that precious metals markets show sustained improvement, this would allow the Company to re-allocate capital to the Crespo project and potentially re-initiate development sooner than would be otherwise anticipated.

The Volcan gold project in Chile, acquired following the acquisition of Andina Minerals Inc in November 2012, also had its budgeted exploration capital expenditure reduced as part of the Company's cashflow optimisation programme. However, Hochschild remains excited by the potential for this long term project, which has almost 10 million ounces of gold resources and will continue with desktop geological work in the first part of 2014.

Although a portion of drilling was completed at Azuca during the first half, work has since ceased and the project is now on hold. The Company remains excited by the potential of this large mineralised district but capital allocation is now refocused on more advanced projects.

Inmaculada

Inmaculada is a 20,000 hectare gold-silver project located in the Company's existing operational cluster in southern Peru and is 100% owned and controlled by Hochschild, following the acquisition of the remaining 40% from IMZ stake in December 2013.

Following the announcement on 20 September 2013 that the Peruvian government had approved the mill construction permit for the Inmaculada project, work began in Q4 on the construction of the plant with major site clearance and earthworks ongoing throughout the quarter. Procurement of the main plant equipment is also almost complete with only lime slakers still to be delivered. These are expected in March.

The detailed civil and underground engineering continued throughout the year and is close to completion with mine development plans updated in line with a recently completed and approved mine schedule. In addition, the detailed engineering for the electricity transmission line was also completed during the first half, and procurement commenced and was completed in the third quarter. Tests were also successfully carried out on the main equipment and electrical substations.

Underground mine development progressed well during 2013 with almost 5.7km of tunneling and 1.8km of raised boring carried out during the year bringing the total to over 10.4km achieved since the project's commencement. In addition, the project's infrastructure requirements also made good progress with construction of the camp now complete, and the main access road expected to be finished in the first quarter of 2014.

The exploration drilling programme in and around the Inmaculada project continued in 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. In the second half of the year surface mapping and sampling campaigns started over the Huarmapata 3 area identifying a high sulphidation system with advanced argillic alteration.

During the year, a total of 4,796 metres were drilled in Shakira, Mirella, Susana, Angela, Roxana and Mayte veins, with significant results including:

In 2014, the exploration programme will involve a 5,000 metre programme consisting of potential drilling in the Mayte vein corridor as well as near mine exploration at selected targets , in order to expand the number of current resources.

Crespo

Crespo is 100% owned by Hochschild and is located in the Company's existing operating cluster in southern Peru. This has the potential to be a relatively simple open pit project with high gold recovery rates, and as with the Inmaculada project, will benefit from operational synergies due to its proximity to the Company's existing operations. The project has an estimated total capital expenditure of approximately $110 million for a 6,850 tonne per day operation with an average annual production of 2.7 million silver equivalent ounces.

Work continued on the Crespo project up until the decision to delay the development in the third quarter. In the first half of the year, the detailed integration engineering continued and was completed in Q3 2013. Basic and detailed engineering for the mine also progressed as did construction of the new access road to the mine site which was completed in December.

With regards to the permit application process, 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. Hochschild also submitted the project's construction permit application at the end of February and received positive feedback from the Peruvian government and currently remains under evaluation.

Although exploration work ceased altogether in the third quarter, in the first half of the year district surface exploration was carried out and a new high sulphidation target, Jackelin, was identified. Furthermore, surface geochemistry sampling programmes were completed, with gold and silver anomalies reported.

Volcan

Exploration was not scheduled at the long term Volcan project for 2013. However, work continued throughout the second half in line with the refocused exploration budget and comprised systematic relogging of 56,331 metres of the Andina Minerals drill core in order to construct a more robust geological model of the porphyry system which is expected to be completed in the first half of this year.

Azuca

In H1 2013, a total of 13,108 metres of diamond drilling were completed at Azuca although these campaigns at Azuca were subsequently halted in late April following the decision to place the project on hold.

EXPLORATION REVIEW

In 2013, investment in exploration totalled $51.9 million and 91,429 metres of drilling was completed at the Company's brownfield, Advanced and Growth Projects and greenfield projects. As part of Hochschild's cashflow optimisation programme, initiated as a response to the volatility in precious metal prices towards the middle of the year, the Company conducted a detailed review of discretionary elements of its exploration budget with the result that the Company reduced its 2013 exploration budget from the original $77 million forecast. Exploration at the Company's main operations focused on the development of potential resources as opposed to increasing resource life-of-mine, reflecting the Company's confidence in their long term sustainability. In addition, the Company's greenfield exploration programme was significantly curtailed to concentrate only on the Company's most promising prospects.

The 2014 budget, representing 63,500 metres, will be split between exploration work at the Company's existing operations, Advanced Projects and greenfield opportunities in Peru and Mexico. The main focus will continue to be brownfield exploration.

In 2014, exploration work at the core operations will be mainly focused on identifying new potential and near mine high grade areas to further improve the resource quality whilst at the Inmaculada Advanced Project, efforts will be focused on identifying new potential high grade areas.

Exploration at Company Maker projects will include continued drilling and further analysis and at the Company's Medium Scale projects work will continue to develop those high-quality, early stage projects that have the potential to move through the pipeline to production. Hochschild also aims to continue its generative programme to conduct further exploration on the Company's extensive land package of premium geological properties.

Mines and Advanced Projects exploration

Approximately 33% of the exploration budget was invested in mines and Advanced and Growth Project exploration in 2013.

Greenfield exploration

In 2013, approximately 41% of the 2013 exploration budget was invested in the Company's greenfield programme, with the proportion set to be 17% in 2014. In 2013, a total of 27,958 metres was drilled at the Company's greenfield projects.

Company Makers

Valeriano

At the Valeriano Company Maker project, a total of 6,669 metres were drilled during 2013 to further test at depth, the porphyry copper and gold mineralisation encountered in the 2012 drilling campaign. The exploration confirmed the discovery of a potentially significant porphyry Cu - Au deposit at depth. However, there are no plans for further drilling in 2014 until market conditions improve.

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 JV with Solitario Exploration & Royalty Corp (TSX: SLR) has been focusing on the northwestern extension of the historical vein mining district. Following extensive geological mapping and geochemical sampling along the vein systems, almost half of the 5,000 metre programme has already been drilled during November and December. The assay results from the Escondida vein have shown some significant intersections and a new reinterpretation of the data has led to further drilling focus on the Sorpresa vein, a splay off the Escondida vein, with a potential extension of 2km. In light of this progress, a further 3,000 metres of drilling is scheduled for 2014.

La Falda

At the La Falda Company Maker project in Chile, four holes were completed in the drilling campaign, totaling 2,605 metres. Surface exploration was held to identify new drill targets but no further work has been scheduled for 2014, or until market conditions improve.

Potrero

At the Potrero Company Maker project in Chile, drilling commenced in January 2013 and centred around known mineralised structures as well as to the North East along the projected strike of the mineralisation. During the first quarter, a total of 2,763 metres of diamond drilling were completed and significant gold anomalies were reported. No further drilling campaign has been scheduled for 2014.

Mercurio

In 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. As a result of the cashflow optimisation programme, the project area was significantly refocused to the more prospective north-western Barite area. Soil sampling has delineated a zone of Au mineralisation, which will be followed up by a geochemistry grid over the relevant area. No further drilling has been scheduled for 2014.

Baborigame

At the Baborigame Company Maker project in Mexico, exploration drilling commenced in March 2013. Drilling was carried out on the Cebolla target to test for mineralisation following the indication of gold mineralisation from surface geochemistry. A total of 4,018 metres of diamond drilling were completed in the quarter. No further work has been scheduled for 2014, or until market conditions improve.

Julieta

At the Julieta project, Hochschild completed a 2,000 metres diamond drill programme during Q4 2013. The programme was aimed at testing the hydrothermal breccias found during the surface reconnaissance of the area. Seven drill holes were completed in December 2013 employing two rigs. Favorable alteration was encountered throughout the volcanic sequence in six of the holes, some of which show lengthy anomalous gold intercepts. The seventh hole cut a wide mineralised hydrothermal breccia with locally significant gold mineralization although the extent of this breccia body has not been determined. Significant results from the drill programme are summarised below:

Riverside Joint Venture

Hochschild has supplied Riverside with additional funding to carry out further target generation on the Clemente project in the northern part of the state of Sonora, Mexico. The funding will be used for further mapping, geochemistry and trenching work in order to better delineate drill targets within the highly prospective mega shear. This JV agreement continues into 2014.

Medium Scale projects

Farallón

At the Farallon Medium Scale project in Peru, the first stage of exploration drilling was completed in Q1 2013 with three drill holes and a total of 1,257 metres of drilling completed. Results have indentified multiple intercepts of quartz veins and veinlets with sphalerite, galena and chalcopyrite up to one metre in width, associated with tensional structures. No further work has been scheduled for 2014, or until market conditions improve.

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 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 although no further work has been scheduled for 2014.

Fresia

At the Fresia Medium Scale project, a town hall meeting was held in the project area, whereby the Company´s plans for the upcoming drill programme in the area were presented to the local communities and authorities. The successful completion of this process allows the Company to proceed with filing an application for an exploration drill permit for the project. A 1,500 metre programme is scheduled to begin in Q2 2014.

San Martin

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 Rhyodacite dome. Drilling holes intercepted structures with good mineralisation including sphalerite, galena, ruby silver and high grade gold and silver mineralisation. No further work has been scheduled for 2014, or until market conditions improve.

Ibel

At the Ibel Medium Scale project in Peru, surface mapping and sampling has identified at least five distinct exploration targets, including a large gold-bearing hydrothermal breccia with consistent anomalous gold values over an area measuring 1.5km x 300 metres. No further work has been scheduled for 2014, or until market conditions improve.

FINANCIAL REVIEW

Key performance indicators

(before exceptional items, unless otherwise indicated)

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 years.

Revenue

Gross revenue

Gross revenue from continuing operations decreased 24% to $658.2 million in 2013 (2012: $869.1 million) driven by the significant fall in precious metal prices.

Silver

Gross revenue from silver decreased 28% in 2013 to $432.5 million (2012: $599.4 million) as a result of lower prices offsetting the increase in the total amount of silver ounces sold which rose by 3% to 19,555 koz (2012:18,928 koz).

Gold

Gross revenue from gold decreased 16% in 2013 to $225.6 million (2011: $269.2 million) also as a result of lower prices although offset to some extent by a 5% increase in gold sales - the total amount of gold ounces sold in 2013 at 168.6 koz (2012: 160.0 koz).

Gross average realised sales prices

The following table provides figures for average realised prices and ounces sold for 2013 and 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 2013, the Group recorded commercial discounts of $36.1 million (2012: $51.2 million). This decrease is explained by lower prices and a lower volume of concentrate sold in 2013, mainly as a result of the Arcata dore project. The ratio of commercial discounts to gross revenue in 2013 remained at 6% (2012: 6%).

Net revenue

Net revenue decreased by 24% to $622.2 million (2012: $818.0 million), comprising silver revenue of $405.5 million and gold revenue of $216.6 million. In 2013 silver accounted for 65% and gold 35% of the Company's consolidated net revenue compared to 68% and 32% respectively in 2012.

Revenue by mine

Costs

Total pre-exceptional cost of sales increased 11% to $466.8 million in 2013 (2012: $420.3 million). The direct production cost increased by 3% in 2013, to $311.7 million (2012: $301.5 million) mainly as a result of an increase in tonnage treated mainly in Arcata and San José as a result of plant expansions. Depreciation in 2013 was $144.1 million (2012: $121.2 million), with the increase mainly due to full depreciation of the Ares operation, depreciation of new tailings dams at Arcata as well as a higher future capex depreciation resulting from the increasing cost to convert resources into reserves in all operating units. Other items, which principally includes workers' profit sharing, was $7.0 million in 2013 (2012: $15.4 million) and change in inventories which was $3.9 million in 2013 (2012: $(17.7) million).

Unit cost per tonne

The Company reported unit cost per tonne at its main operations of $103.2 in 2013, flat compared to 2012 (2012: $103.2). For further explanation on the increase in unit cost per tonne please refer to page 7 of the Operating Review.

Unit cost per tonne by operation (including royalties)[14]:

Cash costs

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

Cash cost reconciliation[16]:

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[17]

Year ended 31 Dec 2013

Year ended 31 Dec 2012

Administrative expenses

Administrative expenses before exceptional items decreased by 25% to $54.4 million (2012: $73.0 million) primarily due to the impact of the cashflow optimisation programme. Post-exceptional administrative expenses in 2013 totaled $56.8 million and include an expense of $2.4 million due to termination benefits paid to employees following the restructuring as part of the above mentioned cashflow optimisation programme.

Exploration expenses

In 2013, pre-exceptional exploration expenses, decreased by 34% to $42.9 million (2012: $64.6 million). Post-exceptional exploration expenses in 2013 totaled $46.3 million and include an expense of $3.5 million due to termination benefits paid to employees following the restructuring as part of the Company's cashflow optimisation programme.

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. In 2013, the Company capitalised $1.7 million relating to brownfield exploration compared to $15.9 million in 2012, bringing the total investment in exploration for 2013 to $44.6 million (2012: $80.5 million). In addition, $7.4 million was invested in the Company's Advanced and Growth Projects.

Selling expenses

Selling expenses were lower than 2012at $28.8 million (2012: $39.5 million) as a result of lower prices. 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).

Other income/expenses

Other income before exceptional items was $4.0 million (2012: $8.7 million), mainly reflecting a $1.7 million export tax credit in Argentina. Other expenses before exceptional items reached $15.6 million (2012: $9.5 million) mainly due to an increase in mine closure provisions of $5.5m and the new reserves tax in Argentina of $2.5 million.

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 and income tax decreased to $17.7 million (2012: $219.8 million) as a result of the factors detailed above.

Adjusted EBITDA

Adjusted EBITDA decreased by 49% over the period to $195.5 million (2012: $384.8 million) driven primarily by significantly lower silver 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 investment in associate

The Company's pre-exceptional share of the profit/(loss) after tax of associates totaled $5.9 million in 2013

(2012: $6.5 million). In both 2013 and 2012, the Company's share of post tax profits/(losses) in associates reflects profits related to its holdings in Gold Resource Corporation ('GRC').

Since March 2013, the Company no longer recognised this profit 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.

Finance income

Finance income before exceptional items of $10.7 million was higher than that of 2012 (2012: $2.0 million) mainly due to interest received on deposits and liquidity funds ($6.8 million) and dividends received from Gold Resource Corporation (considered as available-for-sale financial asset since 27 March 2013 ($3.6 million).

Finance costs

Finance costs before exceptional items decreased by 9% to $11.7 million in 2013 (2012: $12.9 million).

At 31 Dec 2013, the Group had no outstanding positions on currency or commodity hedges.

Foreign exchange losses

The Group recognised a foreign exchange loss of $19.8 million (2012: $1.2 million loss). This loss is principally the result of the impact of a devaluation of the Peruvian Sol versus the US Dollar on cash deposits held 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 $45.0 million (2012: $85.5 million). The reduction is mainly explained by lower metal prices reflected in a reduced pre-exceptional profit before income tax ($2.9 million in 2013 vs. $214.1 million in 2012). This effect was partially offset by the devaluation of the Peru and Argentina local currencies which generated a negative impact of $(30.4) million in income tax.

Exceptional items

Exceptional items in 2013 totalled $(86.6) million after tax (2012: $(1.7) million). The tables below detail the exceptional items excluding the exceptional tax effect that amounted to $35.9 million.

Exceptional items in 2013 totalled ($122.5) million before tax (2012: $1.9 million). This mainly comprises the following items:

Positive exceptional items:

Negative exceptional items:

Cash flow & balance sheet review

Cash flow:

Operating cash flow decreased from $254.9 million in 2012 to $64.7 million in 2013, mainly due to significantly lower silver prices. Net cash used in investing activities decreased to $(218.1) million in 2013 from $(427.9) million in 2012 mainly due to (i) lower capital expenditures in line with the implementation of the cashflow optimisation programme during 2013 ($(246.6) million vs. $(297.5) million in 2012), (ii) Andina Minerals Inc acquisition ($90.1 million) in 2012, (iii) proceeds from deferred income related to the sale of San Felipe ($16.0 million) in 2013 and (iv) proceeds from the sale of Gold Resource Corporation shares ($33.5 million) in 2013. Finally, cash used in financing activities increased to $99.8 million from $(94.8) million in 2012, primarily as a result of the bridge loan facility disbursed in 2013 ($270.0 million), proceeds from equity placing ($71.9 million) and lower dividends paid in 2013 ($18.5 million vs. $62.5 million paid in 2012). This effects were partially offset by the acquisition of IMZ minority interest in 2013 ($271 million) As a result, total cash generated increased from $(267.8) million in 2012 to $(53.6) million in 2013 ($214.2 million difference).

Working capital

The Company's working capital position increased to $59.4 million in 2013 from $(12.8) million in 2012. This was primarily explained by higher income tax receivables ($25.3 million) due to lower tax provision in line with lower prices; and by lower provisions ($(44.2) million) resulted from lower personnel bonus provisions and workers profit sharing provisions in 2013.

Net cash

The Group reported net cash of $(149.5) million as at 31 December 2013 (2012: $245.1 million). This was primarily driven by the acquisition of International Minerals Corporation in 2013 and lower cash generated as a result of the drop of metal prices.

The Company's short-term borrowings are its convertible bond that has a current conversion price of £3.80 due in October 2014, the bridge loan facility ($270.0 million) refinanced in January 2014 with a $350 million 7-year Senior Unsecured bond, and short term debt raised in Peru and Argentina. 

Capital expenditure[19] 

2013 capital expenditure of $281.6 million (2012: $420.4 million) includes operating capex of $147.3 million, capitalised exploration costs of $1.7 million in respect of the Group's operating mines, $98.6 million capitalised in Inmaculada, $21.5 capitalised in Crespo, $9.0 million in Azuca and Volcan, and administrative capital expenditure of $3.6 million.

Capital expenditure at Arcata was lower in 2013 without the effect of two important projects completed in 2012: the plant capacity increase and the Doré project. In addition, the implementation of the cashflow optimisation programme also reduced capex. In Pallancata and San Jose, lower capital expenditure is mainly due to reduced mine development as well as the above-mentioned cashflow optimisation programme.

Forward looking Statements

This announcement contains certain forward looking statements, including such statements within the meaning of Section 27A of the US Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In particular, such forward looking statements may relate to matters such as the business, strategy, investments, production, major projects and their contribution to expected production and other plans of Hochschild Mining plc and its current goals, assumptions and expectations relating to its future financial condition, performance and results.

Forward-looking statements include, without limitation, statements typically containing words such as "intends", "expects", "anticipates", "targets", "plans", "estimates" and words of similar import. By their nature, forward looking statements involve risks and uncertainties because they relate to events and depend on circumstances that will or may occur in the future. Actual results, performance or achievements of Hochschild Mining plc may be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. Factors that could cause or contribute to differences between the actual results, performance or achievements of Hochschild Mining plc and current expectations include, but are not limited to, legislative, fiscal and regulatory developments, competitive conditions, technological developments, exchange rate fluctuations and general economic conditions. Past performance is no guide to future performance and persons needing advice should consult an independent financial adviser.

The forward looking statements reflect knowledge and information available at the date of preparation of this announcement. Except as required by the Listing Rules and applicable law, Hochschild Mining plc does not undertake any obligation to update or change any forward looking statements to reflect events occurring after the date of this announcement. Nothing in this announcement should be construed as a profit forecast.

Statement of Directors' responsibilities

The Directors confirm that to the best of their knowledge:

- the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

- the Management report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

Consolidated income statement

For the year ended 31 December 2013

Consolidated statement of comprehensive income

For the year ended 31 December 2013

Consolidated statement of financial position

As at 31 December 2013

These financial statements were approved by the Board of Directors on 11 March 2014 and signed on its behalf by:

Ignacio Bustamante

Chief Executive Officer

11 March 2014

Consolidated statement of cash flows

For the year ended 31 December 2013

Consolidated statement of changes in equity

For the year 31 December 2013