Hochschild Regulatory News (HOC)

20 March 2012

Hochschild Mining plc

Preliminary Results for the twelve months ended 31 December 2011

Financial highlights1

·; Record revenue and profit

o Revenue of $987.7 million, up 31%

o Adjusted EBITDA of $563.4 million, up 42%

o Attributable profit after tax of $165.9 million, up 75%

o EPS of $0.49, up 75%

·; Strong financial position with a year end cash balance of $627.5 million

·; Minority investments valued at $353 million2

·; Proposed final dividend of $0.03 per share, bringing the total dividend for 2011 to $0.06 per share, up 20%

Operational highlights

·; Full year production of 22.6 million attributable silver equivalent ounces in line with target

·; Exploration strategy delivering positive results:

o Resource life of main operations up 11% to 9.7 years

o Total resources up 17% to 535 million silver equivalent ounces3

o Positive feasibility studies delivered on Inmaculada and Crespo; potential to add production of 10 million attributable silver equivalent ounces per year

o Further expansion of project pipeline: 13 'Company Maker' and 13 'Medium Scale' prospects spread across Peru, Argentina, Chile and Mexico4

·; 2012 production target of 20.0 million attributable silver equivalent ounces

·; Record $90 million exploration budget for 2012

* 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 net finance income/(cost), foreign exchange loss and income tax plus depreciation and exploration expenses other than personnel and other exploration related fixed expenses.

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

"I am pleased to report another year of strong financial and operational results in 2011. Not only did we meet our full year production target, but we also continued to make good progress on our organic growth strategy. Our successful drilling programme in 2011 resulted in an 11% increase in the resource life of our main operations to almost 10 years, as well as a further expansion of our project pipeline which now includes thirteen Company Makers. We also made excellent progress at our Advanced Projects and recently announced the results of the feasibility studies on Inmaculada and Crespo which have the potential to increase our annual production by 50%, with the commissioning of both projects set for the end of 2013. We also reported significant geological upside at both projects and are continuing work to expand their mineable resource base.

We have delivered record financial results with EBITDA at $563.4 million, an increase of 42% compared to 2010, and pre-exceptional earnings per share at $0.49, up 75%. The Board has significantly increased the exploration budget for 2012 and proposed a final dividend of $0.03 per share, bringing the total dividend for the year to $0.06 per share an increase of 20% and reflecting our confidence in the Group's consistent operational performance, comprehensive exploration programme as well as our strong cash position."

1 On a pre-exceptional basis

2 Market value (as at 31 December 2011) of investments accounted under equity method and available for sale financial assets.

3 Total resources here exclude base metal resources

4 For full definition of the terms 'Company Maker' and 'Medium Scale' please refer to the Exploration Review

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A presentation will be held for analysts & investors at 9.30am (UK time) on Tuesday 20 March 2012 at the offices of JP Morgan Cazenove, 20 Moorgate, London, EC2R 6DA.  

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

http://www.media-server.com/m/p/7iqk2349

Conference call dial in details:

UK: +44 (0)20 7784 1036 (Please quote 'Hochschild Mining webcast' or confirmation code 7491117).

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 7111 1244 Access code: 7491117#

_________________________________________________________________________

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, one in southern Argentina and one open pit mine in northern Mexico. Hochschild also has numerous long-term projects throughout the Americas.

CHAIRMAN'S STATEMENT

2011 Overview

Hochschild Mining has once again delivered a resilient performance in the wake of continuing global economic crisis. Thanks to the dedication and creativity of our whole team, we have been able to meet expectations on our key 2011 objectives, including the completion of feasibility studies for two of our Advanced Projects, the achievement of our annual operating targets and the ongoing evolution of our exploration based strategy. Importantly, we are also generating further opportunities to add to our already considerable growth plans as well as having the financial firepower to execute on attractive prospects.

A strong precious metals market again played its part in Hochschild's record financial performance in 2011, allowing us to significantly increase profits in the year whilst selectively mining lower ore grades in order to enable us to produce longer term stable future growth in uncertain markets. Despite significant increases in cyclical costs such as royalties, the Company recorded a considerable EBITDA increase of 42% to $563 million on the back of revenue of almost $1 billion. Earnings per share was up by 75% to 49 cents and the Board is therefore pleased to recommend a 20% increase in the total dividend for the year, to 6 cents per share, which confirms the confidence we have in the business going forward and the ongoing strength of our balance sheet.

Our management team has utilised 2011 to firmly embed the exploration strategy within the Company. During the year, Hochschild has completed over 315,000 metres of drilling with this number expected to increase by approximately 5% in 2012, reflecting the increased exploration budget of $90 million, representing another record for the Company. Our team has also appointed key new exploration managers as well as increased the number of geologists to ninety-two. This significant commitment has begun to bear fruit with the Company further optimising the life-of-mine of our core assets in 2011. In addition, we have swiftly brought two Advanced Projects through the pipeline to feasibility and continue to widen the number of drill targets and prospects, which in turn is considerably strengthening the Hochschild project pipeline. I firmly believe that this strategy will deliver profitable long term production growth to our shareholders.

Precious metals markets' volatility became a more prominent feature in 2011 than ever before with silver in particular displaying very large swings in price. The high of almost $50/oz was reached in May with investment demand becoming the main driver, but by December, silver prices had fallen by some 44% to below $30/oz again. With temperamental commodity markets reflecting broader global economic concerns, the mining sector in the UK was also very volatile. However, we believe that long term fundamentals for gold and silver remain strong and are confident that our business is well underpinned for the future.

Outlook

Over the next year, we expect to see the first crucial steps in the construction phase of our two exciting projects at Inmaculada and Crespo which have the potential to increase our silver equivalent production by 50 percent, or 10 million profitable ounces. The Board remains confident that Hochschild has the financial flexibility to continue pursuing high return investment opportunities whether in brownfield expansion at our existing mines, value enhancing acquisitions or adding to our exploration investment.

Corporate Responsibility

I am proud to report that Hochschild Mining has continued to make progress in the key area of Corporate Responsibility. During 2011, the Group's environmental management systems at all active operations were ISO14001 accredited. An enhanced Community Relations strategy was also formulated, underpinning our collective commitment to providing education as well as promoting health, nutrition and sustainable development in our local communities. A number of initiatives were launched during the year, most notably the 'Maestro Lider' (Leading Teacher) and 'Medico de Cabecera' (Mobile Doctor) programmes, further details of which will be provided in the Annual Report.

On the issue of safety, while a year-on-year reduction in the Group's accident frequency rate was achieved, it is with deepest regret that we report three fatalities during 2011. Operations were suspended immediately after each incident while investigations were carried out. We ensured that any resulting recommendations were immediately acted upon and that the affected families were supported. Our ongoing goal of zero fatalities remains our highest operational priority.

Board Composition

During the year, there were a number of changes to the Board. In light of Dionisio Romero's decision to retire as a Non-Executive Director at the AGM this May and Sir Malcolm Field retiring at the end of 2012, we moved swiftly to appoint Dr Graham Birch and Rupert Pennant-Rea to ensure the continued independent presence on the Board. Both of these Directors have brought with them extensive and relevant experience in the natural resource industry. I would also like to express my sincere gratitude to both Malcolm and Dionisio for their counsel and invaluable contributions to the Company since joining the Hochschild Board back in 2006.

On behalf of the Board, I would like to thank the entire talented Hochschild team for another year of strong performance, and our shareholders for your continued support.

Eduardo Hochschild

Executive Chairman

20 March 2012

CHIEF EXECUTIVE OFFICER'S STATEMENT

I am pleased to announce another strong set of full year results with 2011 proving to be a record year for Hochschild, reflecting a solid operational performance and reinforcing our organic growth strategy and financial position. We firmly believe that the combination of our enviable operational, exploration and project development skills, combined with our premium geological land position spread across the Americas, is the key to maximising long term sustainable shareholder value.

Strategic progress

The first key pillar of our strategy encompasses our current assets and ensuring their long term sustainability. We have already increased the life of these assets extensively since our IPO in 2006, and in 2011 we continued this trend with significant increases at all three main operations. Resource life for the Company grew from 8.7 years in 2010 to 9.7 in 2011 with a 20% increase in resource life at Arcata, a 7% increase at Pallancata in Peru, and a 7% increase at the San Jose mine in Argentina where we continue to find new veins and extensions, thus increasing total resources at this exciting property to 172.2 million silver equivalent ounces.

2011 was also a key year in the development of our project pipeline, the second pillar of our strategy. One of its cornerstones is our aim to ensure the smooth progress of all our projects through their developmental stages. In this regard, the delivery of two feasibility studies on our Inmaculada and Crespo projects early in 2012 provided ample evidence of Hochschild's project management capability. These two exciting opportunities, based in our southern Peru cluster, give us an expected 50% uplift in our production base whilst generating an attractive return even at conservative price and resource assumptions.

Our most exciting asset is the 60% owned Inmaculada project. This is set to start construction with total initial capital expenditure of $315 million for a 3,500 tonne per day underground operation with total average annual production of 12 million silver equivalent ounces and a commissioning date in the fourth quarter of 2013. Total resources have now increased to almost 150 million silver equivalent ounces. We are confident that these resources will grow significantly from this excellent starting point in the same manner as our other mines and see Inmaculada develop into a major contributor for the Company.

In addition, Hochschild is pleased to see a positive result from its 100% owned Crespo project which is set to add another 2.7 million silver equivalent ounces from 2014 at an initial capital cost of $111 million for a 6,850 tonne per day operation. This open pit project is expected to have a low unit cost per tonne, high gold recovery rates and, given its proximity to Hochschild's other operations in southern Peru, will benefit from operational synergies. Current Inferred resources at Crespo are likely to deliver more mineable material for the project and the exploration team remains positive about the geological potential of the surrounding areas.

We remain excited by the potential of the Azuca deposit, especially with respect to the ongoing exploration of the newly discovered higher grade Colombiana and Cimoide Vivian veins. It is our intention to continue exploration work at the project throughout 2012 in order to consolidate resources and provide a more comprehensive picture of the complex vein structures present in the area before moving the project on to the feasibility study stage.

Exploration work continued in 2011, with a total of 315,373 metres of drilling completed. At our greenfield targets, we had positive results from our Company Makers pipeline at Victoria, Valeriano and Encrucijada in Chile, Mercurio in Mexico and Soranpampa in Peru, as well as strong progress at the Medium Scale Mosquito project in Argentina. Overall, Hochschild has again reaffirmed its exploration commitment with a $90 million budget for 2012, the largest in the Company's history, which will be invested in our brownfield, Advanced Projects and greenfield exploration programmes, which are expected to encompass drilling campaigns in 26 different locations across the Americas.

2011 overview

Our operations once again met their annual targets with production in 2011 of 22.6 million attributable silver equivalent ounces, comprised of 15.0 million ounces of silver and 127.3 thousand ounces of gold. San Jose continued to deliver, with silver equivalent production up 3% on the previous year - a highly creditable performance, with a particularly strong second half. At Arcata and Pallancata, we continued with our policy of adjusting the extracted grade to ensure a consistent and sustainable level of long term production as well as taking the opportunity afforded by high precious metal prices to process low grade material at both mines. The high prices have also allowed our Ares mine in southern Peru to continue operations throughout the year and into 2012, whilst our Moris mine in Mexico contributed just over 1 million silver equivalent ounces before its closure late in the fourth quarter.

In 2011 we continued experiencing cyclical cost inflation in line with the industry trend, primarily resulting from the ongoing high commodity prices. In Peru, unit costs were up by some 14% excluding royalties principally due to wage inflation in the industry and a higher proportion of production from narrower veins in the production mix at Pallancata and Arcata. In Argentina, Hochschild continued to face the challenges of ongoing high local inflation rates of some 25-30%, and although unit costs (excluding royalties) at San Jose only increased by 18%, this was principally due to a devaluation of the local currency of 6%, as well as the extraction of low cost superficial material located in new mine areas and also improvements in operational processes.

We expect overall 2012 unit cost inflation in Argentina to continue to be high, at around 25-30% for the same country specific reasons mentioned above, whilst in Peru we have forecasted an increase in unit costs of approximately 15% excluding royalties and the increased refining cost due to the effects of our dore project at Arcata. The main contributory factors to this increase are anticipated to be expected local industry inflation of 10% and the increasing number of stopes at our main operations.

The Group again achieved record results with revenue of just under $1 billion, up some 31% on 2010, driven by continuing strong precious metal prices, with the average silver price for 2011 up 53% and the average gold price up by 25%. EBITDA also rose sharply, by 42%, to $563 million (2010: $398million) with pre-exceptional EPS of $0.49 for the full year, approximately 75% higher than 2010.

We finished 2011 with a continuing strong cash balance of $627 million which together with our healthy operating cashflow, having increased 53% to $464.1 million in 2011, gives us the financial ability to embark on capital expenditure programmes for our Advanced Projects, pursue our ambitious exploration programme in 2012, continue investing in our main operations, and monitor any potential value accretive acquisitions to be assessed against our previously stated criteria. We also have minority investments worth approximately $350 million as at 31 December 2011, principally represented by our 25.2% stake in Gold Resource Corporation.

Outlook

Hochschild's production target for 2012 is 20.0 million attributable silver equivalent ounces, which takes into account the reduction of almost 300,000 silver equivalent ounces that will now not be recovered at Arcata as a result of the implementation of our dore project. The 2012 production target consists of similar levels of production at each of the core operations to those of 2011, with anticipated further declining production at Ares and Moris.

We have had a very busy start to 2012 with the completion of the Inmaculada and Crespo feasibility studies and we are excited that following the Board's approval of these projects and sanction of their capital expenditure requirements, the key stages of project construction can begin in earnest. Our strategy for this year will once again be to deliver on our production target, execute the first stages of the above mentioned project development and demonstrate consistent progress on our ambitious exploration programme, supported by its $90 million budget.

I am confident that Hochschild's talented and experienced team will continue to create opportunities for future value generation and that realising our 2012 targets will provide more evidence that we have the optimum strategy for long term growth.

Ignacio Bustamante

Chief Executive Officer

20 March 2012

OPERATING REVIEW

2011 Highlights

·; Full year production of 22.6 million attributable silver equivalent ounces, in line with target

·; Feasibility studies delivered on Inmaculada and Crespo projects; expected to add 10 million attributable silver equivalent ounces per year with production expected to commence at both projects at the end of 2013

·; First stage of Arcata dore project completed

CURRENT OPERATIONS

Production

Hochschild once again met its full year production target in 2011, producing 22.6 million attributable silver equivalent ounces, comprised of 15.0 million ounces of silver and 127,287 ounces of gold. In 2011, San Jose continued to deliver a strong performance. Lower production was reported at Pallancata and Arcata as the Company took advantage of high precious metals prices to process low grade material and also continued to adjust extracted grades to provide a sustainable level of long-term production and optimise the resource life of its main operations.

The Company has announced a production target of 20.0 million attributable silver equivalent ounces for 2012. Production at each of the Company's main operations is expected to be in line with 2011. As anticipated, production at the ageing Ares mine will continue to decline, reflecting lower tonnages and grades. Production at the Moris mine in Mexico is not expected to be material.

Costs

In 2011, the Company reported a 14% increase in unit cost per tonne excluding mine royalties at its main Peruvian operations (Arcata and Pallancata), to $60.8 per tonne (2010: $53.2). This increase was primarily due to a rise in labour costs reflecting higher precious metal prices, higher mining costs resulting from an increase in mined areas and a higher proportion of production from narrower veins.

In Argentina, unit cost per tonne excluding royalties increased by 18% to $169.6 per tonne (2010: $144.1) mainly as a result of local inflation impacting labour and materials costs and a higher consumption of plant reagents which in turn provided improved metallurgical recoveries (by approximately 5%). Local inflation was partially offset by local currency devaluation, lower mine development and the extraction of superficial low grade material (Saavedra). Please see page 22 of the Financial Review for further details on costs.

Main operations

Arcata: Peru

Production and sales

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

During 2011, the Company continued to adjust the extraction grades at Arcata towards the average reserve grade level in order to ensure a consistent and sustainable level of production. Full year silver equivalent production of 7.1 million ounces was 26% lower than 2010 (9.6 million ounces).

The Company took advantage of strong metal prices to process waste material from previous campaigns (see table below on Macarena Waste Dam Deposit). This material, whilst increasing overall annual treated tonnage by 7% to 687,966 tonnes (2010: 645,974 tonnes), was processed at a decreased average silver grade of 95g/t. In addition, in 2011 the Company mined in the lower grade border areas with associated narrower veins and increased dilution. This additional material was not part of Arcata's resource base.

Table Showing Contribution from Macarena Waste Dam Deposit

In Q4 2011, the first stage of the project to convert 40% of Arcata's concentrate into dore was successfully completed. The second stage of the project will be completed in H2 2012 and subsequently 100% of Arcata's concentrate will be converted into dore. As a result of the metallurgical recoveries involved in the process, there will be an estimated reduction in production in 2012 of 291,000 silver equivalent ounces. Total investment for the project is approximately $14 million and the Company believes that this will be a highly profitable project as the resulting decrease in refining fees, commercial discounts and associated selling expenses will more than offset the treatment costs associated with the process.

Costs

Unit cost per tonne, excluding royalties, increased by 8% to $70.2 (2010: $65.0). Including royalties, the increase in 2011 was also 8% at $77.0 per tonne (2010: $71.1). Key drivers were a rise in the number of contractors employed in the mine due to the increased number of stopes, higher wage costs in line with industry inflation and higher diesel prices. These effects were partly offset by energy cost savings achieved following price renegotiations and by economies of scale resulting from the increase in treated tonnage.

In 2011, the silver/gold concentrate from Arcata was sold to Cormin, Korea Zinc Co. ltd and MRI Trading Ag.

10% of Arcata's production was processed into dore; all of which was sold to Johnson Matthey in 2011.

Resource life

The resource life of Arcata stands at 11.5 years as at 31 December 2011, up 20%, from 9.6 years in 2010, following an intensive drill campaign focused on the Baja, Marion, Blanca, Amparo, Lucrecia and Tunel 4 veins. In total, 94,656 metres of diamond drilling was completed during the year (2010: 76,506 metres) with significant intercepts including6:

In 2012, the exploration drilling campaign of 62,756 metres will focus on the targeting of higher grade structures and increasing the mine resource base.

Pallancata: Peru

[1] The Company has a 60% interest in Pallancata 

Production and sales

The 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 is a joint venture with International Minerals Corporation ("IMZ") in which Hochschild controls 60% and is the mine operator. Ore from Pallancata is transported 22 kilometres to the Selene plant for processing.

In 2011, full year production at Pallancata was 10.8 million silver equivalent ounces (2010: 12.3 million), a decrease of 12%. Although treated tonnage remained broadly flat compared to 2010, there was a fall in grades reflecting higher dilution from narrower veins, as well as the Company's decision to take advantage of the prevailing high precious metals price environment to process some lower grade economic material extracted from the borders of the main Pallancata vein. This additional material was not part of Pallancata's resource base.

Costs

Excluding mine royalties, unit cost per tonne increased by 18%, to $54.5 per tonne (2010: $46.2). Including royalties, the increase in 2011 was 17%, to $60.4 per tonne (2010: $51.8). This rise was principally due to increased wage costs resulting from industry inflation. In addition, the Company incurred higher mine service costs (transportation, energy and equipment hire) reflecting increased diesel prices and the development of new mine areas. A number of cost initiatives partially offset these factors, including a change to the mine backfill process leading to lower cement consumption, as well as cost efficiencies in explosives consumption.

In 2011, the silver/gold concentrate from Pallancata was sold to Teck Metals ltd., Aurubis and LS-Nikko Copper.

Resource life

The resource life of the Pallancata operation stands at 7.4 years as at 31 December 2011, up 7% compared to 2010 (6.9 years). During 2011, a total of 50,748 metres of diamond drilling was carried out over the course of the year (2010: 46,547 metres), mainly focused on the San Javier, Virgen del Carmen, Rina, Luisa, Pallancata West and Huararani veins with intercepts including7:

The 2012 exploration programme at Pallancata will target new mineralised structures to the north, west and south of the main operation area, with 59,140 metres of drilling planned.

San Jose: Argentina

*The Company has a 51% interest in San José

Production and sales

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 controls 51% of the joint venture and is the mine operator.

San Jose delivered a robust performance in 2011, with silver equivalent production up 3% to 10.7 million ounces (2010: 10.4 million ounces). This was mainly a result of an anticipated increase in silver grades, as well as operational efficiencies that led to an increase in recovery rates to 89% for gold and 86% for silver (an increase of approximately 5% for both gold and silver compared to 2010). Silver grades rose by 12% year-on-year and silver production by 10% to 5.9 million ounces (2010: 5.3 million ounces). In line with the mine plan, the average gold head grade decreased by 5% and gold production by 4% to 80.95 thousand ounces (2010: 84.30 thousand ounces).

On 4 May 2011, following a 15 day production stoppage at the operation, the Group successfully concluded negotiations with the AOMA union (Argentine Mining Labour Association).

Costs

Unit cost per tonne, excluding royalties, increased by 18% to $169.6 (2010: $144.1). Including royalties, the increase in 2011 was 19%, at $181.7 per tonne (2010: $152.3). Local inflation in Argentina continues to run at between 25% and 30% and consequently the key driver of the rise in costs was wage cost inflation. A higher consumption of reagents also contributed to the increase in costs although this was offset by a significant improvement in recoveries. The high local inflation also impacted materials and supplies but was partly offset by a 6% devaluation of the Argentinian peso, lower mine development, the extraction of low cost, low grade, superficial material located in new mine areas (Saavedra) as well as efficiencies gained from improving operational processes (maintenance and other support processes). The Company expects cost increases in 2012 to be in the range of 25-30%, in line with the above mentioned local inflation.

In 2011, the dore produced at San Jose was sold to Argor Heraeus S.A. and Johnson Matthey Inc. The concentrate produced at the operation was sold to Teck Metals ltd., Aurubis and LS-Nikko Copper.

Resource life

Following an intensive drill campaign in 2011, the Company increased the resource life of the San Jose property by 7%, to 12.2 years (as at 31 December 2011). A significant portion of the San José property continues to be open at depth and laterally.

After a successful drilling campaign in the first half of 2011, the second half of the year was dedicated to completing geophysical and magnetometry workin order to identify new targets at the property. This work was successfully completed and provided areas of potential that were targeted in the Q4 drilling campaign and continuing into 2012. During the year, 55,678 metres of diamond drilling was conducted (2010: 53,692 metres), focused on the Luli, Susana, Orión and Pilar veins with significant intercepts including8:

In 2012, the exploration programme includes a 93,320 metre drilling campaign (110,583 metres including infill drilling) that will evaluate extensions of already known mineralised structures and also the targeting of new veins.

Other operations

Ares: Peru

Production and sales

The Ares mine, which commenced production in 1998, is a 100% owned operation located approximately 275 kilometres from the city of Arequipa in southern Peru. The Ares mine continued to operate for the full year, albeit at a lower level, producing 2.3 million silver equivalent ounces (2010: 2.7 million silver equivalent ounces).

Although production at Ares was expected to end in 2011, the Company continues to extract mineral from new veins and production will continue in 2012.Management also continues to monitor the grade and cost profile of the operation to ensure that it is in line with the Company's policy of producing profitable ounces. A new exploration programme for Ares is currently being developed for 2012, with the aim of identifying new resources.

100% of Ares' production is processed into dore, all of which was sold to Johnson Matthey in 2011.

Moris: Mexico

Production and sales

The 100% owned Moris mine, is an open pit mine and is located in the district of Chihuahua, Mexico. Mine production ceased at Moris in September 2011, although continued leaching of the pads produced further ounces towards the end of the year. Full year production was 1.2 million silver equivalent ounces (2010: 1.4 million ounces).

Moris is currently in the final stage of the pads' cyanidation process although exploration continues in the area and the Company has been able to identify new exploration targets at Moris with the goal of identifying new resources.

In 2011, the gold/silver dore produced at Moris was sold to Johnson Matthey.

ADVANCED PROJECTS

The Company has three Advanced Projects: Inmaculada, Crespo and Azuca. The Company recently announced the results of feasibility studies, conducted by Ausenco, an independent consultant, on Inmaculada and Crespo. These projects are expected to contribute an average attributable annual production of 10 million silver equivalent ounces, increasing current production levels by 50%. Both projects are due to be commissioned in Q4 2013 and have an initial combined capital cost estimated at $426 million ($335 million attributable to Hochschild).

At Azuca, the Company has delayed the feasibility study to continue exploration work at the project throughout 2012 in order to consolidate resources and provide a more comprehensive picture of the complex vein structures in the area.

Inmaculada

Inmaculada is a 20,000 hectare gold-silver project located in the Company's existing operational cluster in southern Peru and is 60% owned and controlled by Hochschild, following the acquisition of a controlling stake in October 2010. The remaining 40% is held by the Company's joint venture partner at Pallancata, International Minerals Corporation ('IMZ').

The project is now set to start construction, with total initial capital expenditure of $315 million for a 3,500 tonne per day ('tpd') underground operation with average annual production of 12 million silver equivalent ounces (7 million attributable ounces), and is due to be commissioned in Q4 2013. The Company is also progressing with the exploration programme at the property which consists of 40 mining concessions with resources which are currently estimated at a total of 150 million silver equivalent ounces.

Changes from the 2010 scoping study resulting from the feasibility study process include: an update of the mineral resource; the use of only Measured & Indicated resources as the basis for the initial reserves; a change in the metallurgical process from flotation to leaching with the resulting change from a concentrate to dore as the final product; and an increase in the plant capacity from 3,000 tpd to 3,500 tpd. In addition, as a result of feasibility level geotechnical studies, the rock quality was determined to be poorer than anticipated which has affected dilution, mine capex and mining costs. All of these factors were incorporated in the new capex, cost and Net Present Value ('NPV') figures presented in the feasibility study results.

The feasibility study was conducted using only measured and indicated resources from the Angela vein. Summary results (on a 100% basis, applying a 1.5 g/t gold equivalent cut-off grade) are as follows:

·; Measured & Indicated resources: 7.07mt at an average grade of 4.07 g/t gold and 144 g/t silver containing approximately 925,100 ounces of gold and 32.8 million ounces of silver.

·; Inferred resources of 4.94mt at an average grade of 3.91 g/t gold and 152 g/t silver containing approximately 620,000 ounces of gold and 24.2 million ounces of silver.

·; Estimated mineral reserves (at a cut-off grade of 2.3 g/t gold equivalent): 7.80 mt at an average grade of 3.37g/t gold and 120 g/t silver containing approximately 845,000 ounces of gold and 30.1 million ounces of silver.

The project has been shown to be profitable even under conservative gold and silver price assumptions. The single, wide vein will also allow for lower mining costs and a metallurgical process with estimated recovery rates of 95.6% for gold and 90.6% for silver. The project's proximity to the Company's existing operations also offers logistical synergies and reduces execution risk. The principal execution risks facing the Inmaculada project are possible disruptions to the project schedule resulting from social or political instability and the project's dependence on third party supplies of electricity.

The feasibility study results confirmed that the project provides strong returns based on the existing reserve base. However, Hochschild is confident that the mineable resource base will be expanded by upgrading the inferred mineral resources in the South West and North East extensions of the Angela vein. Current project economics do not factor in almost five million tonnes of inferred resource containing over 60 million silver equivalent ounces which could almost double the life of mine. In addition, there is further geological potential at the Inmaculada property which hosts over 25 kilometres of gold/silver-bearing quartz veins of the low sulphidation type - veins which remain largely untested.

In 2011, exploration drilling at Inmaculada totalled 25,341 metres and in 2012, the drilling programme of 54,650 metres will focus on further exploration of the Angela vein and other known veins in the district.

Crespo

Crespo is 100% owned by Hochschild and is located in the Company's existing operating cluster in southern Peru. Crespo is also set to begin construction, with total initial capital expenditure of $111 million for a 6,850 tpd operation with an average annual production of 2.7 million silver equivalent ounces from 2014. This will be a relatively simple open pit project with high gold recovery rates, and again, will benefit from operational synergies due to its proximity to the Company's existing operations. The principal execution risks facing the Crespo project are possible disruptions to the project schedule resulting from social or political instability and the project's dependence on third party supplies of electricity.

Changes from the January 2011 scoping study resulting from the feasibility study process include: an update of the mineral resource; an increase in the plant capacity from 5,650 tpd to 6,850 tpd; and a change in the source of power, to a 25 km 60 KV transmission line connecting the Arcata operation to Crespo. Significant metallurgical testing was also carried out in order to review the overall process and optimise recoveries. These updates were all incorporated in the new capex, cost and NPV figures presented in the feasibility study results.

The updated resource estimate for Crespo replaced the previous estimate published in the scoping study and represented an increase in Measured and Indicated gold equivalent resources of 58% (304,000 ounces). Measured & Indicated resources now total 23.4 million tonnes at 0.45 g/t of gold and 39 g/t of silver containing 340,000 ounces of gold and 29.2 million ounces of silver.

Ore reserves, calculated by Ausenco, total 20.48 million tonnes at 0.46 g/t of gold and 39 g/t of silver with a cut-off grade of 0.33 g/t gold equivalent and metals prices of $1,300/ounce gold and $23/ounce silver.

The Crespo feasibility study results do not factor in almost 3.8 million tonnes of in-pit inferred resource, containing 6.6 million silver equivalent ounces with the potential to add almost 18% of mineable material at no further mining cost to the Company. There is also further geological upside at the Queshca gold target, to the north of the current feasibility study resource base. In addition, a drilling gap exists between Crespo and Queshca and encouraging geological evidence would suggest further potential for economic mineralisation.

The 2012 drill programme of 5,500 metres is focused on converting Inferred resources to the Indicated resource category and to increase the resource base and to continue exploring the Queshca target.

Azuca

The 100% owned Azuca project is also located in the Company's southern Peru operating cluster. In January 2012, the Company took the decision to delay the feasibility study at Azuca and continue exploration work at the project throughout 2012 in order to consolidate resources and to provide a more comprehensive picture of the dispersed vein structures present in the area.

Moreover, the Company believes that the geological potential of the Azuca property may produce richer structures that could further support the investment required to develop the asset but could alter the design and location of future mine and plant infrastructure, tailings ponds and other key equipment. The Hochschild Board has therefore approved an exploration programme for Azuca in 2012.

As of December 2011, the Azuca project has Measured & Indicated resources totalling 7.05 million tonnes at 0.77 g/t of gold and 188 g/t of silver containing 173,500 ounces of gold and 42.7 million ounces of silver.

Exploration at the site is ongoing, with promising higher grade intercepts suggesting the presence of new higher grade veins. The 2012 drilling programme will be focused on identifying further extensions of the Vivian-Yanamayo, Colombiana and Azuca West veins, with a drilling programme of 28,000 metres expected to be carried out in these new areas.

EXPLORATION REVIEW

2011 Highlights

·; $71 million invested in exploration in 2011; 33% brownfield,15% Advanced Projects and 36% greenfield9

·; Resource life up 11% to 9.7 years

·; Total resources up 17% to 535 million silver equivalent ounces10

·; Increase in 'Company Maker' pipeline from 8 to 13 projects

·; Record 2012 exploration budget of $90 million; 30% brownfield, 19% Advanced Projects, 35% greenfield, others and support 12% and technical support 4%.

·; 330,804 metres of drilling to be undertaken at 26 greenfield and brownfield projects across four countries

Hochschild's commitment to its exploration strategy has been reaffirmed with a 29% increase in the exploration budget for 2012 to $90 million, (from $70 million in 2010), the largest exploration budget ever for the Company. In 2011, investment in exploration totalled $71 million and 315,373 metres of drilling was completed at the Company's brownfield, Advanced Projects, greenfield and copper projects. The 2012 budget, representing 330,804 metres, will be split between exploration work at the Company's existing operations, the Advanced Projects and greenfield opportunities in Peru, Argentina, Mexico and Chile.

In 2011, the exploration programme delivered positive results, especially in respect to its key aims of increasing the resource life of the Company's core operations and expanding its project pipeline which now includes 13 'Company Makers' and 13 'Medium Scale' projects.

In 2012, exploration work at the Company's core operations will be mainly focused on improving resource quality. The main objective of exploration work at the Advanced Projects will be to incorporate additional resources at Inmaculada and Crespo, and at Azuca, to concentrate on the exploration of high quality resources that better support a significant investment. Exploration at the Company Maker projects will include continued drilling and further analysis. 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. Work will also continue at the Company's copper projects and on the Company's generative programme to conduct further exploration on the Company's extensive land package of premium properties in four key countries. In 2011, the number of geologists employed by the Company was 92.

Brownfield exploration

In 2011, approximately 33% of the exploration budget was invested in brownfield drilling in the areas immediately surrounding Hochschild's three main operations. As a result, there was an 11% increase in resource life to 9.7 years (2010: 8.7 years).

The Company takes a very conservative approach to resource delineation and applies the same cut-off grades to reserves and resources. As a result, the Company has a high rate of conversion from resources to reserves.

For full reserve and resource tables, please see page 57.

Greenfield exploration

Approximately 36% of the 2011 exploration budget in 2011 was invested in the Company's greenfield programme, and in 2012, the proportion will be 35%. In 2011, a total of 41,546 metres were drilled as part of the greenfield exploration programme and in 2012, this is expected to increase to 47,500 metres.

Company Makers

The Company currently has 13 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 2011, $12.4 million was invested in finding and developing such deposits and the 2012 budget has increased to $15.8 million.

Victoria

The Victoria project in northern Chile is 60% owned by Hochschild, with the remaining 40% held by Iron Creek Capital. Exploration work is delivering positive results at the property which covers 46,100 hectares of continuous strike length at the highly productive Domeyko Fault Zone. In 2011, 7,359 metres of drilling was completed. Exploration focused on the porphyry potential of the property and work was completed on a number of targets. The Picaron target was drill tested and significant alteration and anomalous copper mineralisation was encountered, proving it to be a true copper porphyry system. The resource is open and may increase in grade and thickness downstream. Selected intercepts from these exploration programmes include11:

The drilling campaign of 6,800 metres in 2012 will include offset drilling of the recently reported intercepts in and around the Picaron target as well as continued definition drilling of the exotic copper oxide deposit. A data compilation and surface exploration programme will also be carried out over the entire Victoria property in 2012 and the drilling of defined targets will subsequently take place in the second half of the year.

Valeriano

The 100% owned Valeriano property in Chile is located 27 kilometres north of Barrick Gold Corporation's Pascua Lama project, in close proximity to the border with Argentina, and covers an area of 3,750 hectares. The property hosts both high-sulphidation as well as porphyry style disseminated gold mineralisation. The property has been explored by a number of mining companies in the past, including Phelps Dodge (1989-1991) and Barrick (1995-1997), both of which completed drill campaigns totalling 12,575 metres. No significant exploration had been undertaken at the property since 1997.

Hochschild commenced drilling at Valeriano in October 2011 and at the end of the year, 2,302 metres had been drilled, with anomalous gold and molybdenum intercepts reported. Further detailed geological work has identified targets in and adjacent to the primary tested target. Positive intercepts reported included:

In 2012, the 2,500 metre drilling programme will continue the drill testing of the target at depth during the first half of the year, with follow up drilling and drill testing of the near surface high sulphidation target planned for the second half.

Encrucijada 

At the 51% owned Encrucijada property in Chile, 1,397 metres were drilled in 2011. Preliminary results indicated a true porphyry copper - gold system, with individual intercepts of anomalous gold and silver up to 0.26 g/t and 95 g/t respectively. Positive drilling results included the following intercepts12:

In 2012, the exploration programme and 2,000 metre drilling campaign at Encrucijada will continue the offset drilling of results reported in 2011 and will also include additional geophysical interpretation and targeting of the porphyry style mineralisation below the San Bernardo tourmaline breccias and dome complex, and in the surrounding area.

Mercurio

Mercurio is a 100% owned 36,388 hectare property in Mexico, located between two high grade mines, Sombrerete and Fresnillo. In 2011, 7,735 metres of drilling was completed; results to date indicate strong base metal, as well as moderate silver mineralisation, associated with a large vein system similar to Fresnillo.

Drilling results included 11:

In 2012 the Company plans to drill an additional 8,000 metres at Mercurio, around recently reported intercepts and will continue exploration activities, including drilling on adjacent targets.

Apacheta

At the 100% owned Apacheta project in Peru, 3,044 metres of drilling was completed in 2011 and the project moved up the project pipeline from prospect to drill target. The initial drilling programme tested high sulphidation and porphyry targets identified in the 2010 exploration programme. Drilling intercepted strongly altered rock with anomalous trace element geochemistry. In 2012 the 7,700 metre drilling campaign will complete the initial exploration programme at the Apacheta 1 and 2 targets and further targets will be defined

by a surface sampling programme.

Soranpampa

At the 100% owned Soranpampa project in Peru, 2,896 metres of drilling was carried out in 2011. The first phase of exploration was completed, with anomalous gold and molybdenum intercepts reported. Further detailed geophysical work has identified targets in and adjacent to the primary target already tested. Positive intercepts included13 :

In 2012, the 2,500 metres drilling programme will focus on targets defined by the IP geophysical survey.

Other Company Maker projects

Coriwasi

This is a 9,800 hectare high sulphidation epithermal and porphyry copper-gold type target in northern Peru optioned from a private party. The Company is in the process of completing the relevant permits and approvals process for the project.

Huachoja

This is a 3,000 hectare, high sulphidation epithermal target in southern Peru optioned from Teck Peru SA. A surface mapping and sampling programme will be completed in the first half of 2012 in order to select targets for drilling. An initial 1,500 metres drill programme will then be carried out in the second half of the year to test identified targets.

La Falda

The La Falda property in northern Chile, is located close to the Company's other projects in the area and was acquired in December 2011 as an earn-in project. The target is a porphyry gold-copper system. The Company has completed the permits and approvals process and will look to assign the necessary exploration budget for the project in order to commence a drilling campaign.

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.

In 2011, $7.9 million was assigned to finding and developing Medium Scale projects, and in 2012 the Company plans to invest $7.0 million in this category. Positive results were reported at a number of the Company's Medium Scale projects in 2011 and a number of properties entered the pipeline. These include the Pomona project in Argentina, the San Antonio project in Chile, and the Huacullo and Cuello Cuello properties in Peru.

Mosquito 

Two rounds of drilling were completed at the 100% owned Mosquito property in Argentina in 2011. A total of 8,495 metres was drilled, testing over twelve different vein targets. The majority of the drilling did not intercept any anomalous vein mineralisation. In 2012 the 2,000 metre drilling programme will include offset drilling in and around the most anomalous intercepts reported to date. These intercepts are along the extension of the Cerro Morro (Extorre) vein deposit and positive results in 2011 included 13:

La Flora

At the La Flora project in Argentina, two large vein systems have been identified since drilling commenced in H2 2010. In 2011, a total of 1,812 metres was drilled at La Flora and a number of vein targets were tested. Drilling was successful in intercepting anomalous gold and silver mineralisation. Positive intercepts included13:

In 2012, the exploration programme and 4,000 metre drilling campaign at La Flora will include a detailed mapping and sampling programme around the anomalous surface samples and drill hole intercepts identified in 2011. An IP geophysical survey will also be completed and identified targets will be subsequently drilled.

Argenta

At the 100% owned Argenta project in Argentina, 853 metres were drilled in 2011 to test the known vein system which reports strongly anomalous gold and silver mineralisation at surface and in drill hole. Assay results are being analysed before a drilling programme is put in place for 2012.

Astana/Farallón

Astana is a 100% owned project located in the Company's southern Peru cluster, with high sulphidation of disseminated gold/silver mineralisation. Historical drilling at superficial levels reported anomalous results in gold and silver associated to pyrite with values of 200 to 390 g/t Ag eq.

Farallón is a 100% owned low sulphidation silver veins system, located 1.5 km to the east of Astana. Previous drilling at superficial levels reported anomalous results in gold, silver, lead and zinc.Work conducted in 2011 was focused on attaining the relevant government and community permits and approvals for both projects. The community permit has been received, and in 2012 the exploration programme will include a 1,106 metre drilling campaign. Exploration activity will be carried out at Farallón, as well as the testing of anomalies in the Astana area.

San Martin

In 2011, work at the San Martin project in Peru was focused on obtaining the relevant government and community permits and approvals. The community permit has been received, and in 2012 the 1,800 metre drilling campaign will focus on defining potential mineralisation following previous drilling campaigns that intercepted high quality mineralisation.

Other Medium Scale projects

Huacullo

At the Huacullo project in Peru, the Company is in the process of completing the relevant government and community permits and approvals process. In 2012 the 485 metre drilling campaign and exploration programme will test potential economic mineralisation in low to intermediate sulphidation veins previously drilled by other companies.

Ibel

At the Ibel project in Peru, in 2011 work focused on the completion of the relevant government and community permits and approval process. In 2012 the 445 metre drilling campaign at Ibel will test potential economic mineralisation in low to intermediate sulphidation veins and hydrothermal breccias located in sedimentary rocks.

San Antonio

A mapping and sampling programme to define drill targets is in progress at the San Antonio project in Chile, and drilling should commence in the second quarter of 2012.

Cuello Cuello

At the Cuello Cuello project in Peru, the relevant government and community permits and approvals were received in December 2011. In 2012 the 1,179 metre drilling campaign that will test potential economic silver-gold mineralisation in a high sulphidation epithermal prospect will commence in the second quarter.

Pomona

In 2011, an initial field review was carried out at the Pomona project in Argentina. In 2012 the Company will conduct detailed mapping and sampling and IP geophysical survey programmes in order to define targets for drilling.

Copper projects

Following the acquisition of Southwestern Resources in 2008, the Company currently holds a number of copper projects located in the southern Andes in Peru, within a highly prospective area for copper deposits. The Company has committed 6% of the total 2012 budget and a dedicated exploration team to drilling at the properties in order to establish potential value.

Jasperoide

In 2011, the exploration programme at Jasperoide included detailed geological mapping on the Huinihuini Mountain area of interest and in the surrounding area, and a 3,726 metre drilling campaign with 20 drill holes. The results of the drilling campaign indicate Inferred Resources for a cut off with 0.2% Cu: 12.19 mt with 1.32 % Cu, 0.32 g/t Au. Positive intercepts included 14 :

In 2012, a second drilling campaign of 3,500 metres will focus on the already identified mineralised zone and surrounding area to locate new skarn blankets and to test for a potential associated porphyritic system.

Alpacocha

In 2011, 408 metres were drilled at the Alpacocha copper project. Exploration was focused mainly on the Paraiso target, a porphyry-skarn type deposit, where two areas of interest were identified, Paraiso West and Paraiso East. The drilling programme in 2012 will increase significantly, to 3,000 metres and will focus on the Paraiso target (East and West), where geological mapping, sampling and geophysics will also be completed.

Antay

At the 100% owned Antay copper project, the Company is in the process of obtaining the necessary access permits for the project.

Generative

The Company holds over one million hectares of prime land in key geological regions across four countries and has committed 3% of the total 2012 budget to conduct further exploration in these premium areas.

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).

2Includes Hochschild's main 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 net finance income/(cost), foreign exchange loss 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 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 increased 30% to $1,043.7 million in 2011 (2010: $802.7 million) driven by higher metal prices during the year which offset lower Group production.

Silver

Gross revenue from silver increased 37% in 2011 to $755.8 million (2010: $549.7 million) as a result of higher prices. The total amount of silver ounces sold in 2011 decreased to 21,792 koz (2010: 24,283 koz) mainly due to lower year-on-year production.

Gold

Gross revenue from gold increased 14% in 2011 to $287.8 million (2010: $253.0 million) also as a result of higher prices. The total amount of gold ounces sold in 2011 decreased to 182.0 koz (2010: 199.9 koz) mainly due to lower year-on-year production.

Gross average realised sales prices

The following table provides figures for average realised prices and ounces sold for 2011 and 2010:

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 2011, the Group recorded commercial discounts of $56.0 million (2010: $50.5 million). The ratio of commercial discounts to gross revenue in 2011 decreased to 5% (2010: 6%).

Net revenue

Net revenue increased by 31% to $987.7 million (2010: $752.3 million), comprising silver revenue of $708.3 million and gold revenue of $279.2 million. In 2011 silver accounted for 72% and gold 28% of the Company's consolidated net revenue compared to 68% and 32% respectively in 2010.

Revenue by mine

1Other revenue includes revenue from (i) the sale of energy in Peru and, (ii) administrative services in Mexico.

Costs

Total pre-exceptional cost of sales increased 17% to $404.3 million in 2011 (2010: $345.7 million) mainly as a result of the increase in the direct production cost of 16% to $261.2 million (2010: $225.2 million). The direct production cost increment occurred mainly in mine costs as a result of an increase in the number of stopes mined. Direct costs also increased due to inflation in labour, supplies and oil prices in Peru and Argentina. Depreciation cost was $103.7 million in 2011 (2010: $101.6 million), other items costs which principally includes workers' profit sharing, were $32.4 million in 2011 (2010: $22.6 million) and change in inventories was $6.9 million in 2011 (2010: $(3.7) million).

Unit cost per tonne

The Company reported an overall increase in unit cost per tonne at its main operations of 16% in 2011 to $95.32 (2010: $82.3). 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)*:

 *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)*:

Cash costs

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 year. Silver and gold cash costs increased from $9.3 to $13.0 per ounce and from $535 to $613 per ounce, respectively. Silver and gold cash costs from main operations (Arcata, Pallancata and San Jose) increased from $8.7 to $12.0 per ounce and from $504 to $561 per ounce, respectively. The increase in silver cash costs resulted from higher production costs and grade declines at both main Peruvian operations due to the incorporation of lower grade material. In addition, cash costs also increased due to higher precious metal prices causing rises in workers profit sharing contributions, higher commercial discounts and increased export taxes at San Jose.

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 year. By-product cash costs for the period were $4.9 per silver ounce (2010:$ 3.0 per silver ounce) and ($1,987) per gold ounce (2010: ($1,153) 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 3% to $64.4 million (2010: $66.2 million) mainly due to a lower provision for the Long-term Incentive Plan and the elimination of the Voluntary Contribution to the Peruvian Government following a revision to the tax regime in Peru.

Exploration expenses

As a result of the Group's decision to focus on organic growth through exploration, exploration expenses, which primarily relate to greenfield exploration, increased by 14% to $47.3 million in 2011 (2010: $41.5 million). Further detail on the exploration programme can be found in the exploration section on page 15.

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 2011, the Group capitalised $13.2 million relating to brownfield exploration compared to $12.0 million in 2010, bringing the total investment in exploration for 2011 to $60.6 million (2010: $53.5 million). In addition, $10.1 million was invested in the Company's Advanced Projects.

Furthermore, in 2011, in line with the Company's strategy to further develop its production assets, capital expenditure on Advanced Projects and current operations included an additional $14 million to convert Inferred resources into Measured and Indicated resources.

Selling expenses

Selling expenses increased to $39.0 million (2010: $26.9 million) mainly as a result of export duties at San Jose, driven by the increase in gold and silver prices (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 $7.1 million (2010: $5.6 million), mainly reflecting a $3.3 million export tax credit in Argentina. Other expenses before exceptional items reached $15.8 million (2010: $11.0 million), the principal component being an increase in mine closure provisions of $8.2 million due to the revision of the mine closure plans in all units.

Profit from continuing operations

Profit from continuing operations before exceptional items, net finance costs and income tax increased to $424.0 million (2010: $266.6 million) as a result of the factors detailed above.

Adjusted EBITDA

Adjusted EBITDA increased by 42% over the period to $563.4 million (2010: $397.7 million) driven primarily by higher silver and gold prices.

Adjusted EBITDA is calculated as profit from continuing operations before net finance income/(cost), foreign exchange loss 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

An associate is an entity in which Hochschild has significant influence but not control and is accounted for using the equity method.

Hochschild's pre exceptional share of the profit/(loss) after tax of associates totalled $11.7 million in 2011 (2010: ($4.6) million), a result of the gain in the value of the Group's holding of Gold Resource Corp's common shares.

Finance income

Finance income before exceptional items increased by 15% to $4.7 million (2010: $4.1 million) mainly due to the increase of interest received on time deposits.

Finance costs

Finance costs decreased by 28% to $21.3 million in 2011 (2010: $29.5 million). Interest costs decreased to $15.3 million in 2011 (2010: $17.3 million). In addition, finance costs in 2010 included a $7.6 million loss on Zero Cost Collar derivative contracts.

In January 2011 Hochschild repaid in full its syndicated bank loan facility. The Group has no outstanding positions on currency or commodity hedges.

Foreign exchange losses

The Group recognised a foreign exchange loss of $1.6 million (2010: $0.03 million gain) as a result of transactions in currencies other than the functional currency.

Income tax

The Group's pre-exceptional effective tax rate increased to 35.6% in 2011 (2010: 32.9%). This increase is mainly explained by three new taxes introduced in Peru in Q4 2011, the New Mining Royalty ('NMR'), the Special Mining Tax ('SMT') and the Special Mining Assessment ('SMA'); detailed information on these taxes (collectively referred to as the 'New Taxes') is provided below. In addition, in 2011 Hochschild recognised the impact of a withholding tax related to dividends declared from the operating companies to the UK parent company.

Overview of the New Taxes

The application of the New Taxes is dependent on the presence or otherwise of a tax stability agreement with the Peruvian Government. These taxes replace a royalty, (the "Former Royalty") and a Voluntary Contribution (the 'Voluntary Contribution'). The Voluntary Contribution was calculated using a formula which, in the case of Hochschild, is approximate to 1.25% of Net Income.

NMR

The NMR applies to operating assets without stability agreements. It differs from the Former Royalty by changing the basis of calculation from sales to operating income. The NMR is calculated by applying a progressive scale of rates that range from 1% to 12% depending on the level of operating margin. A minimum amount of NMR is payable equivalent to 1% of Revenue. The Former Royalty was accounted for in the Cost of Sales line but the NMR will be accounted for in the Income Tax line.

SMT

The SMT is a new tax, also payable by mining companies with respect to operating assets without stability agreements, and is calculated on the same basis as the NMR. The rate of the SMT ranges from 2% to 8.4% depending on the level of operating margin. Unlike the NMR however, there is no minimum tax payable. The SMT is accounted for in the Income Tax line.

SMA

The SMA is an assessment raised on mining companies with respect to operating assets with stability agreements, to calculate an amount payable to the State on a voluntary basis. The rate used to calculate the assessment ranges from 4% to 13.12% of operating income, depending on the level of operating margin. The SMA is calculated on operating income after the deduction of payments due under the Former Royalty, which continues to be payable.

Hochschild does not have a stability agreement in place for Ares or Pallancata, and is therefore required to pay the NMR and the SMT in respect of those assets. The same will also apply for mines operated by the Company in Peru in the future (for example Inmaculada and Crespo).

In the case of Arcata, having reported to the Government that it waived its tax stability agreement in June 2009, the Company is required to pay the SMT. However the Peruvian Government is yet to confirm the waiver of the stability agreement. Therefore, Arcata will continue to pay the Former Royalty (which is accounted for in the Cost of Sales line).

The NMR and SMT payments will be deductable for the calculation of workers' profit share and Income Tax.

Exceptional items

Exceptional items in 2011 totaled $3.4 million after tax (2010: ($57.8 million). This mainly comprises:

Positive exceptional items:

Negative exceptional items:

Cash flow & balance sheet review

Cash flow:

Operating cashflow increased 53% to $464.1 million from $304.2 million in 2010, mainly due to higher metal prices. Net cash from investing activities decreased to $(139.9) million in 2011 from $199.0 million in 2010, primarily due to the reduction in the Company's holding in Lake Shore Gold during 2010 and planned increases in capital expenditure commitments during 2011 including the costs associated with progressing the Advanced Projects through to feasibility. Finally, cash from financing activities decreased to $(221.9) million from $(55.0) million in 2010, primarily as a result of the prepayment of the syndicated loan ($114.3 million), and incremental dividend payments to Hochschild Mining plc shareholders ($13.5 million in 2011 compared to $20.3 million in 2010) and to IMZ, the Group's joint venture partner in Pallancata ($26.0 million in 2011 compared to $54.0 million in 2010). As a result, total cash generated decreased from $448.2 million in 2010 to $102.3 million in 2011 ($346 million difference).

Working capital

The Group's working capital position decreased to $(67.8) million in 2011 from $(1.1) million in 2010 primarily due to a decline of $31.5 million that resulted in a net other financial liability position in 2011, driven by a change in the value of embedded derivatives. The decrease was also a result of a higher net income tax position in 2011 compared to 2010 reflecting higher commodity prices, and higher trade and other payables and provisions in 2011 compared to 2010, due to higher workers profit sharing and mine closure provisions.

Net cash

*Includes pre-shipment loans which were previously reported under working capital.

The Group reported net cash of $476.3 million as at 31 December 2011 (2010: $207.8 million). This was primarily driven by the increase in cash and cash equivalents from operating activities (of $102.0 million) and the decrease in long term and short term borrowings. In January 2011, the Group paid down in full its syndicated loan facility of $114.3 million.

In October 2011, the Group's 51% owned Joint Venture entity in Argentina repaid the entire outstanding principal and accrued interest on its shareholder and project finance loans. Hochschild received net proceeds of approximately $96 million from this repayment, consisting of approximately $66 million from the repayment of the project finance loan and approximately $30 million from the shareholder loan. Hochschild's joint venture partner, McEwen Mining Inc (formerly named Minera Andes Inc), received net proceeds of approximately $29 million from this repayment.

The Company's Convertible Bond has a conversion price (before adjustment for the recommended dividend) of £3.94 and allows the Company to force conversion of the bonds at any time after 20 October 2012 if, on each of at least 20 dealing days out of 30 consecutive dealing days, the Company's share price exceeds 130% of the conversion price (currently £5.12).

Capital expenditure¹

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

2 Additions of $90.6 million in respect of the acquisition of Inmaculada is not reflected in this table.

2011 capital expenditure of $217.9 million (2010: $156.5 million) includes operating capex of $141.4 million, capitalised exploration costs of $13.2 million in respect of the Group's operating mines, $61.3 million capitalised in respect of Advanced Projects (Inmaculada, Crespo and Azuca) and administrative capex of $2.0 million.

Capital expenditure at Pallancata rose by $12.4 million in 2011 due to higher mine development costs reflecting an increase in mined areas developed, and higher mine contractors' rates. The construction of a new tailings dam and higher equipment costs also contributed to the rise.

Capital expenditure at San Jose increased by $7.8 million in 2011, reflecting local inflation in mine development costs.

Dividends

The directors recommend a final dividend of $0.03 per ordinary share which, subject to shareholder approval at the 2012 AGM, will be paid on 29 May 2012 to those shareholders appearing on the register on 4 May 2012. If approved, this will result in a total dividend for the year of $0.06 per share. Dividends are declared in US dollars. Unless a shareholder elects to receive dividends in US dollars, they will be paid in pounds sterling with the US dollar dividend converted into pound sterling at exchange rates prevailing at the time of payment. Our dividend policy takes into account the profitability of the business and the underlying growth in earnings of the Company, as well as its capital requirements and cash flow.

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.

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

6 Please note that all mineralised intersections in this release are quoted as down-hole lengths, not true widths.

7 Please note that all mineralised intersections in this release are quoted as down-hole lengths, not true widths.

8 Please note that all mineralised intersections in this release are quoted as down-hole lengths, not true widths.

9 Amount disclosed refers to expenditure from the Group's exploration budget and does not include expenditure from the operational budget.

10Total resources here exclude base metal resources

11 Please note that all mineralised intersections in this release are quoted as down-hole lengths, not true widths.

12 Please note that all mineralised intersections in this release are quoted as down-hole lengths, not true widths.

13 Please note that all mineralised intersections in this release are quoted as down-hole lengths, not true widths

14 Please note that all mineralised intersections in this release are quoted as down-hole lengths, not true widths.

Consolidated income statement

For the year ended 31 December 2011

Consolidated statement of comprehensive income

For the year ended 31 December 2011

Consolidated statement of financial position

As at 31 December 2011

1 31 December 2010 figures are subject to a reclassification as disclosed in note 2(z).

These financial statements were approved by the Board of Directors on 19 March 2012 and signed on its behalf by:

Ignacio Bustamante

Chief Executive Officer

19 March 2012

Consolidated statement of cash flow

For the year ended 31 December 2011

Consolidated statement of changes in equity

For the year ended 31 December 2011