Hochschild Regulatory News (HOC)

18 Sep 2007 07:02

Hochschild Mining PLC18 September 2007 18 September 2007 Hochschild Mining plc Interim Results for the Six Months Ended 30 June 2007 Highlights: • Completed capacity expansions at Ares, Arcata and Selene • Commenced production at San Jose (Argentina), and subsequently at Moris (Mexico) and Pallancata (Peru) • Unit operating costs contained despite continued cost pressure in the industry • Corporate structure expanded in preparation for continued aggressive growth • Attributable after tax profit up 14% to $30 million based on our three operations in Peru • Attributable stated reserves increased by 15% in the first half of 2007 • Interim dividend of 2.0c per share payable on 19 October 2007 • On track to produce 26 million silver equivalent attributable ounces in 2007 with production from the three new operations in the second half of this year Highlights for the six months ended 30 June 2007(presented before exceptional items unless stated) Six months ended Six months ended ($ thousands, unless stated) 30 June 2007 30 June 2006 % change-------------------------------------------------------------------------------Silver production (koz) 5,633 5,468 3%Gold production (koz) 90.70 102.88 (12)%Revenue 121,021 100,813 20%Adjusted EBITDA(1) 56,076 56,316 0%Attributable after tax profit(2) 30,040 26,398 14%Earnings per share (pro forma)(3) 0.10 0.09 14%After exceptional items:Attributable profit after tax 32,856 24,150 36%Earnings per share (statutory) 0.11 0.11 -------------------------------------------------------------------------------- (1) Adjusted EBITDA is calculated as profit from continuing operations beforeexceptional items, net finance costs and income tax plus depreciation,amortization and exploration costs other than personnel and other expenses (seereconciliation on page 9) (2) Attributable after tax profit is calculated as the profit for the periodattributable to the equity shareholders of the company from continuingoperations before exceptional items (3) The pro forma earnings per share calculation assumes that the number ofOrdinary Shares in issue immediately after Listing (being 307.35 million) hadbeen in issue from 1 January 2006 Chairman's comments "I am delighted to be able to report a strong set of financial results forHochschild Mining, backed by an excellent operational performance and deliveryon all the projects that we set out for 2007. With three new operating mines inour portfolio, we will begin to benefit from our significant investment ingrowth in the second half of this year. Our outlook for gold and silver remainspositive and we are confident in our ability to achieve our target of producing26 million silver equivalent ounces this year and 50 million by 2011." Chairman's statement The first six months of 2007 have been a period of significant progress for theHochschild Mining Group in which we have continued to deliver on the commitmentswe made at the time of the IPO, with excellence and responsibility towards ourenvironment, employees and the surrounding communities. In the first half of this year, we operated with three mines, Ares, Arcata andSelene, and successfully completed capacity expansions at all of them. We alsocommenced production at the San Jose mine in Argentina at the end of the secondquarter. More recently, we began production at the Moris mine in Mexico and thePallancata mine in Peru. Thus we have expanded from three operating mines in onecountry to six operating mines in three countries. With these developments, we remain firmly on track to meet our production targetof 26 million silver equivalent ounces in 2007. Our results Revenue from our three operations in Peru, Arcata, Ares and Selene, was up 20%in the first half of 2007 to $121 million. We continued to feel the effects ofthe legacy forward sale contracts; however, these have all since expired andgoing forward our corporate policy is to remain 100% hedge free. In the first half of this year, we successfully contained unit operating costsin an environment where most of our industry is facing substantial costpressures. We continue to achieve low cash costs and high margins due to ourrelatively high-grade deposits and our rigorous system of cost controls at allour operations and projects. We have made a series of investments in our corporate structure as part of ourtransition from a privately owned company operating in one country to a publiclylisted entity with operations in multiple countries. We believe this increase inadministrative costs represents a step change, which will enable use to pursueour strategy of aggressive growth. Whilst this growth in administrative expenses has temporarily affected ouroverall profitability, with adjusted EBITDA of $56 million being unchanged fromthe same period despite a 19% increase in gross profit, we remain confident inour ability to leverage this investment to grow the business and deliverenhanced levels of profitability. Our half year results and our ability to deliver on our growth strategy driveour confidence for the business going forward and support our declaration of aninterim dividend of 2.0 cents per share. Our exploration We increased our attributable reserves by 15% in the first half of this year.This has allowed us to increase our average reserve life to 4.1 years up from3.7 at December 2006. While proving up reserves remains a costly endeavour inunderground mining, we are committed to achieving a 4.0 year minimum reservelife at each of our operations. Our Growth Growth based on high-margin, cash generative, precious metals production in theAmericas remains at the core of our corporate strategy. We continue to emphasizethe importance of exploration as a means to increase our reserve and resourcebase at a low cost per ounce and have committed substantial resources to ourexploration and geology program. We are active in our joint venture approach, having entered into two new jointventures which we believe enhance the scale and diversity of our assetportfolio. We are committed to remaining the partner of choice in Latin Americafor junior exploration companies and believe our strategic alliance with EXMINResources in Mexico exemplifies the way in which we can creatively combineefforts with junior mining companies to achieve mutually beneficial results. In addition, we plan to grow through mid-sized, bolt on acquisitions that fitour niche strategy. Our objective is to strengthen our interest in specificgeological regions in the Americas by making anchor investments in strategicmining districts and executing a cluster consolidation strategy. We remain steadfast in our belief that an acquisition in today's market mustmeet these objectives and add fundamental shareholder value in the long-term. Wehave worked diligently in evaluating acquisition targets and have consideredseveral, regrettably, none of which meet our criteria for long-term valuecreation. We continue to actively seek out and evaluate a number of otheracquisition opportunities and believe that in a short period of time one willcome into fruition. Our outlook Our outlook for gold and silver remains positive on the back of sustained globaldemand for commodities, continued U.S. dollar weakness, growing financialinstability and a rise in international political tensions. In addition, webelieve that increasing investment demand coupled with positive demand-supplyfundamentals support our favouring these metals. We continue to enjoy the benefits of our listing on the London Stock Exchangewith increasing visibility among the investor community and within the miningindustry. Since Listing, seven leading investment houses have initiated coverageof Hochschild Mining. We are delivering on our IPO commitments while building a strong projectpipeline of world class assets within the region. Our existing assets togetherwith the additional production from our three new mines during the second halfof this year give us confidence in our 2007 production target of 26 millionsilver equivalent attributable ounces and provide a strong platform for futuregrowth. Eduardo HochschildExecutive Chairman Enquiries:Hochschild Mining plcWray Barber +44 (0)20 7152 6014Head of Investor Relations FinsburyRobin Walker +44 (0)20 7251 3801Public Relations About Hochschild Mining plc: Hochschild Mining plc (HOC.L for Reuters / HOC LN for Bloomberg) is a publiclyheld company listed on the London Stock Exchange. Hochschild is a leadingprecious metals company with a primary focus on the exploration, mining,processing and sale of silver and gold. Hochschild currently operates fiveunderground epithermal vein mines, four located in southern Peru and one insouthern Argentina and one open pit mine in northern Mexico. Hochschild also hasone early stage development project in Mexico and fifteen long-term prospectsthroughout Latin America. Hochschild has over forty years experience in themining of precious metal epithermal vein deposits. For further information please visit www.hochschildmining.com Operational review: Production: Ounces produced:--------------------------------------------------------------------------------Thousand ounces Six months ended Six months ended % change 30 June 2007 30 June 2006--------------------------------------------------------------------------------SilverArcata 2,631 2,094 26%Ares 1,179 1,406 (16)%Selene 1,822 1,967 (7)%--------------------------------------------------------------------------------Total silver 5,633 5,468 3%--------------------------------------------------------------------------------GoldArcata 6.75 4.96 36%Ares 71.60 83.35 (14)%Selene 12.35 14.57 (15)%--------------------------------------------------------------------------------Total gold 90.70 102.88 (12)%-------------------------------------------------------------------------------- Total production for the first half of 2007 was 5.6 million ounces of silver and91 thousand ounces of gold or 11 million silver equivalent ounces. Thisproduction resulted from our three operating mines in Peru, Arcata, Ares andSelene, and does not include our three new mines, San Jose, Moris andPallancata, all of which have already commenced production. Expansions We successfully completed the plant expansions at Ares, Arcata and Selene. TheAres expansion, which took the plant from 280 ktpa to 325 ktpa, was finished inthe early part of this year. At Arcata, we expanded the plant from 350 ktpa to420 ktpa in the second quarter and it is currently operating at full capacity.At Selene, we recently completed the plant expansion taking capacity from 350ktpa to 700 ktpa to accommodate the ore from our Pallancata project. Silver production Silver production increased 3% in the first half of 2007 compared to the sameperiod last year. This increase resulted from a 26% increase in silverproduction at Arcata following the successful capacity expansion and a slightincrease in the head grade. Ares and Selene saw average head grades decline by22% and 11%, respectively, resulting in lower overall silver production despitethe capacity expansion at both. Gold production Gold production decreased 12% in the first half of 2007 compared to the sameperiod in 2006. This decrease was the result of a decline in gold productionfrom both Ares and Selene attributable to the anticipated decline in headgrades, which was offset by a significant increase in gold production fromArcata resulting from the increased capacity and a 2% increase in the head gradeof gold. Costs: Our relatively high-grade deposits, our corporate focus on operationalefficiency and our ability to mechanise our older operations have enabled us tooffset some of the global cost pressures faced by the industry. Going forward wewill strive to maintain a low cost profile although we expect a temporaryincrease in units costs, while we ramp up our new operations and move intoadditional countries. Cash costs ($ per ounce)-------------------------------------------------------------------------------- Six months ended Six months ended % change 30 June 2007 30 June 2006--------------------------------------------------------------------------------Co-product cash costsSilver ($/oz) 3.92 3.27 20%Gold ($/oz) 159 149 7%-------------------------------------------------------------------------------- Our cash costs on a co-product basis, which are calculated by pro-rating thetotal cash costs between the commodities based on sales revenue, increased 20%and 7% for silver and gold, respectively. This increase was the result of lowergrades mined at both Ares and Selene and relatively flat consistent grades minedat Arcata. The cash cost for silver was up more than that for gold as a resultof a greater percentage of revenue coming from silver sales. Unit costs ($ per tonne) In the first six months of 2007, our unit cost from our three mines, Arcata,Ares and Selene, was $61.2 per tonne, which was up marginally compared to thesame period in 2006 (H1 2006: $58.5/tonne). The unit cost at Arcata decreased 4% primarily due to lower mine costs and to alesser degree by lower plant and administration costs. The mine costs decreasedas a result of additional mechanisation of the operation, which enables us tohave fewer stoppes. Plant and administration unit costs decreased because of theplant expansion. The unit cost at Ares increased 7% due to increased plant costs associated withthe processing of dore. The cost of processing dore increased mainly because ofhigher cost for reagents and greater cyanide consumption. At Selene the unit costs increased 10% due to higher plant costs associated withconverting the Selene concentrate into dore at the Ares facility. Selling ourproduct as dore, as opposed to concentrate, generates benefits from both a cashmanagement standpoint and because of lower commercial deductions and sellingcosts associated with selling dore. These benefits are already being appreciatedby the Group. Exploration: In the first six months of 2007 we increased our total exploration expenditure118% to $10.8 million (H1 2006: $5.0 million). Total exploration expenditureincludes the costs in exploration expense as well as the exploration costs whichare capitalized on the balance sheet. Exploration underpins our growth strategy and our significant budget confirmsour commitment to this area. Our exploration philosophy continues to focus onmaintaining a highly motivated, technically proficient, and well fundedexploration team while continuing to position ourselves as the partner of choicefor many junior mining companies throughout the region. Our strategic alliancewith EXMIN further exemplifies our commitment to expanding our explorationefforts in the region. We believe this alliance favourably positions us inMexico and allows us to leverage EXMIN's expertise in the Sierra Madre gold beltof north western Mexico. Total exploration expenditure-------------------------------------------------------------------------------- Six months ended Six months ended % change($ thousands) 30 June 2007 30 June 2006--------------------------------------------------------------------------------Mine site exploration Arcata 1,627 1,100 48%Ares 223 1,118 (80)%Selene 943 77 1125%San Jose 745 - ---------------------------------------------------------------------------------Total mine site exploration 3,538 2,295 54%-------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Six months ended Six months ended % change($ thousands) 30 June 2007 30 June 2006--------------------------------------------------------------------------------Prospective exploration Peru 752 566 33%Argentina 1,607 833 93%Mexico 4,221 930 354%Chile 638 341 87%USA 25 - -Other 18 - ---------------------------------------------------------------------------------Total prospective exploration 7,261 2,670 172%--------------------------------------------------------------------------------Total exploration expenditure 10,799 4,965 118%-------------------------------------------------------------------------------- Mine site exploration: In the first half of 2007, total mine site exploration expenditure amounted to$3.5 million, which was a 54% increase over the same period of 2006 (H1 2006:$2.3 million). At Arcata, we successfully increased the reserves and resources by 56% and 17%,respectively through continued exploration around the Mariana Vein system. Thisvein system, which is located at the northern margin of the mineralized area,includes the majority of reserves and supports the greater part of production.The current reserve life at Arcata is 4.3 years based on production of 400 ktpa. At Ares, we were able to replace the tonnes processed although at a slightlylower grade. For this reason, the number of reserve and resource silverequivalent ounces decreased by 13% and 12%, respectively in the first half of2007. We believe we will continue to replace tonnes processed at Ares albeit atvarying grades for the foreseeable future. The current reserve life at Ares is2.8 years based on 325 ktpa. At Selene, our exploration expenditure was used to develop a 500 metre cross-cutto the new Tumiri vein. The current reserve life at Selene is temporarilyunderstated at 2.0 years because it is based on current throughput of 440 ktpa,which is the capacity designed to process the ore from both Selene andPallancata. Once Pallancata is producing at 350 ktpa, it will occupy additionalcapacity at the Selene plant and, as a result, the reserve life will increase atSelene. At San Jose, we increased the reserves and resources by 29% and 16%,respectively, which equates to a 9.5 year reserve life based on 286 ktpa. Thecurrent exploration program is focused on expanding resources in the Frea, Kospiand Odin veins, as well as testing mineralization of other targets. This levelof reserves and resources at San Jose provides a sufficient platform, which willenable us to double capacity at the plant in the latter part of 2008. Prospective exploration: We increased the total expenditure on prospective exploration by 172% in thefirst half of 2007 to $7.3 million (H1 2006: $2.7 million). Prospectiveexploration is exploration on non-operational properties. This increase, webelieve, demonstrates our commitment to organic growth, which remains at thecore of our strategy. At Pallancata, we modestly increased attributable reserves and resources 1% and6%, respectively. The significant increase of reserves and resources atPallancata during the second half of 2006 (up 111% and 36% respectively) allowedus to concentrate on other prospects and generative projects within Peru duringthe first half of 2007. At Moris, we have confirmed and validated the data obtained from the vendor whenwe purchased the property last year. In addition, we have drilled 15 holes todate in the old leach pads 8 of which have revealed positive results ofapproximately 1.5 g/t gold. Metallurgical testing of the old leach pad materialis in process. The current reserve life at Moris based on a capacity of 1,060ktpa is 2.8 years. At San Felipe (70%), a joint venture with Grupo Serrana, we have undertaken anaccelerated exploration campaign in order to generate sufficient resources totake the project into feasibility stage later this year. Also in Mexico, we continue to explore the El Gachi property package (70%),which is part of the San Felipe joint venture contract. El Gachi, which is only60 kilometres from San Felipe, was explored by Anaconda and Penoles in the 1960sand 1970s and unverified historic resources indicate resources of approximately100 thousand tonnes at 400 to 500 grams silver and 15% to 20% lead and zinc.During the first half of 2007, we advanced surface exploration in preparationfor drilling with initial samples returning expected results. In Argentina, we signed a joint venture agreement with Mirasol Resources Ltdwhich provides us the option to earn a 51% interest in the Santa Rita andClaudia properties in the southern Patagonia. We have received all assays forthe Santa Rita project following our initial sampling. Following the receipt of the drilling results, on 30 August 2007, we gave our formal notice of terminationand withdrawal from the joint venture agreement in respect of Santa Rita. The Claudia property is adjacent to the Cerro Vanguardia mine and is hosted in a similar regional setting (see our 2006 Annual Report for more information). Geophysical data processing at Claudia is underway and we have several drill ready targets which will be tested as soon as weather permits. Also in Argentina, we signed a letter of intent with Cardero Resources andsubsequently exercised the option to earn up to a 70% interest in the LosManantiales gold property in Argentina. Mineralization at Los Manantialesconsists of low sulphidation epithermal vein systems hosted by Jurassicandesitic volcanics. We are proceeding with mapping and permitting in our Los Manantiales projectwhere we have assembled an 119,873 hectare land package around the pastproducing Angela mine. We expect to drill test this exciting project early nextyear. Financial review:Key financial performance indicators:(presented before exceptional items unless stated)--------------------------------------------------------------------------------($ thousands, unless stated) Six months ended Six months ended % change 30 June 2007 30 June 2006--------------------------------------------------------------------------------Revenue 121,021 100,813 20%Adjusted EBITDA(1) 56,076 56,316 0%Attributable after tax profit(2) 30,040 26,398 14%Earnings per share (pro forma)(3) 0.10 0.09 14%Net cash generated from operating 21,421 34,358 (38)%activitiesNet debt / (net cash) (300,472) (405,541)Working capital 24,864 (24,775)After exceptional items:Attributable profit after tax 32,856 24,150 36%Earnings per share (statutory) 0.11 0.11 --------------------------------------------------------------------------------- (1) Adjusted EBITDA is calculated as profit from continuing operations beforeexceptional items, net finance costs and income tax plus depreciation,amortization and exploration costs other than personnel and other expenses (seereconciliation on page 9) (2) Attributable after tax profit is calculated as the profit for the periodattributable to the equity shareholders of the company from continuingoperations before exceptional items (3) The pro forma earnings per share calculation assumes that the number ofOrdinary Shares in issue immediately after Listing (being 307.35 million) hadbeen in issue from 1 January 2006 Summary of financial performance Financial information is presented in accordance with International FinancialReporting Standards (IFRS) as adopted for use in the European Union. Thereporting currency of Hochschild Mining plc is US dollars. In our discussion offinancial performance we remove the effect of exceptional items, unless stated,and in our income statement we show the results both pre and post suchexceptional items. Exceptional items are those items, which due to their natureor the expected infrequency of the events giving rise to them, need to bedisclosed separately on the face of the income statement to enable a betterunderstanding of the financial performance of the Group and facilitatecomparison with prior years. For the six months ended 30 June 2007, revenue, which was attributable to thesame three operations as in 2006, amounted to $121.0 million, a 20% increaseover the same period in 2006 (H1 2006: $100.8 million). Revenue--------------------------------------------------------------------------------($ thousands) Six months ended Six months ended % change 30 June 2007 30 June 2006--------------------------------------------------------------------------------Silver revenueArcata 31,557 16,059 97%Ares 16,550 11,887 39%Selene 23,726 21,587 10%--------------------------------------------------------------------------------Total silver revenue 71,833 49,533 45%--------------------------------------------------------------------------------Gold revenueArcata 3,974 2,012 98%Ares 37,695 40,996 (8)%Selene 6,939 8,109 (14)%Sipan - 4 ---------------------------------------------------------------------------------Total gold revenue 48,608 51,121 (5)%--------------------------------------------------------------------------------Other(1) 580 159 265%--------------------------------------------------------------------------------Total revenue 121,021 100,813 20%-------------------------------------------------------------------------------- (1) Other revenue includes revenue from a base metal component in the concentratesold from the Arcata mine and services Ounces sold--------------------------------------------------------------------------------Thousand ounces Six months ended Six months ended % change 30 June 2007 30 June 2006--------------------------------------------------------------------------------Silver ounces soldArcata 2,487 1,395 78%Ares 1,317 1,473 (11)%Selene 1,897 1,675 13%--------------------------------------------------------------------------------Total silver ounces sold 5,701 4,543 25%--------------------------------------------------------------------------------Gold ounces soldArcata 6.19 3.19 94%Ares 77.02 88.23 (13)%Selene 11.66 11.95 (2)%--------------------------------------------------------------------------------Total gold ounces sold 94.87 103.36 (8)%-------------------------------------------------------------------------------- We had legacy forward sale contracts in place during the first half of 2007;however, these have all since expired and going forward our corporate policy isto remain one hundred percent hedge free. Forward sale fixed price contracts-------------------------------------------------------------------------------- Six months to Six months to 30 June 2007 30 June 2006--------------------------------------------------------------------------------Silver ounces delivered into fixed price contracts (koz) 772 1,279Gold ounces delivered into fixed price contracts (koz) 56.7 48.8Silver average sale price ($/oz) 12.6 10.9Gold average sale price ($/oz) 512 495Silver average spot price ($/oz) 13.3 11.0Gold average spot price ($/oz) 659 591-------------------------------------------------------------------------------- Our three operations, Arcata, Ares and Selene, were the only operations whichcontributed to gross profit in the first half of 2006 and 2007. Gross profitincreased 19% to $79.0 million in the first half of 2007 (H1 2006: $66.2million) driven by higher revenue and stable operating costs at theseoperations. In the first six months of 2007, our weighted average cost per tonne from ourthree mines was $61.2 per tonne, which was up marginally compared to the sameperiod in 2006 (H1 2006: $58.5/tonne). Administrative expenses totalled $30.1 million, up 91%, in the first six monthsof 2007 compared to the same period of 2006 (H1 2006: $15.8 million). During thefirst half of 2007, we incurred incremental expenses associated with the Londonoffice which we did not have during the first half of last year and since theListing, we have made a series of investments related to hiring additionalpersonnel at all levels to build a strong platform from which to execute ourcorporate strategy. We believe this increase represents a step change inoverhead expenses and is a reflection of the incremental costs associated withbeing a public company with an aggressive growth strategy. Profit from continuing operations before exceptional items, net finance costsand income tax decreased 11% during the first six months of 2007 to $38.0million (H1 2006: $42.7 million) impacted by the increase in administrativeexpenses mentioned above. In the first six months of 2007, adjusted EBITDA, which is calculated as profitfrom continuing operations before exceptional items, net finance costs andincome tax plus depreciation, amortization and exploration costs other thanpersonnel and other expenses, was similar to last year at $56.1 million (H12006: $56.3 million). Adjusted EBITDA reconciliation--------------------------------------------------------------------------------$ thousands Six months ended Six months ended 30 June 2006 30 June 2007 (restated) % change--------------------------------------------------------------------------------Profit from continuing operations beforeexceptionalitems, net finance costsand income tax 38,133 42,712 (11)%Operating margin 32% 42%Plus:Depreciation in Cost ofGoods Sold 8,983 7,462 20%Depreciation inAdministrative Expenses 233 1,190 (80)%Exploration Expense 11,005 6,857 60%Minus:Personnel and other inExploration Expense (2,278) (1,905) 20%--------------------------------------------------------------------------------Adjusted EBITDA 56,076 56,316 ---------------------------------------------------------------------------------Adjusted EBITDA margin 46% 56%-------------------------------------------------------------------------------- Finance income increased significantly in the first half of 2007 to $10.4million (H1 2006: $1.9 million) principally due to additional interest earned onthe net proceeds from the Listing. We currently earn an average return of 5.2%on cash and cash equivalents. The weighted average statutory income tax rate was 30.2% and 29.4% for the firsthalf of 2007 and 2006, respectively. This change is due to a change in theweighting of profit and loss before tax in the various jurisdictions in whichthe Group operates. The effective tax rate for the first half of 2007 was 38% (H1 2006: 37%). Theeffective tax rate was higher than the weighted average statutory tax rate as aresult of certain expenses which are not deductible for tax purposes anddeferred tax assets generated in the period but not recognized. The significant exceptional item in the first half of 2007 of $4.2 million(before a related tax charge of $1.2 million) corresponds to the change in fairvalue of 2,475,355 warrants in Fortuna Silver Mine Inc. In the prior period theexceptional items reduced reported profits by $2.2 million. Attributable after tax profit from continuing operations of $32.9 millionincreased by 36% in the first half of 2007 compared to the same period of 2006(H1 2006: $24.2 million). This increase is the result of a combination of anincrease in gross profit offset by higher administrative costs, coupled with anincrease in finance income earned on the proceeds raised from the IPO, and thegain on the Fortuna Silver Mine warrants. For the purpose of the calculation of pro forma earnings per share for theperiod ended 30 June 2006 it has been assumed that the number of Ordinary Sharesin issue immediately after the listing had been in issue from 1 January 2006.The Directors believe that this pro forma EPS provides a more meaningfulcomparison of the Group's ongoing business than using the statutory EPS whichwould only reflect shares issued at the date of the Listing. Dividends The Directors recommend an interim dividend of US$0.02 per share amounting to$7.3 million which will be paid on 19 October 2007. The final 2006 dividend ofUS$0.0074 per share was paid on 6 July 2007. ------------------------------------------------------------------------------Dividend dates 2007------------------------------------------------------------------------------Ex-dividend date 26 SeptemberDeadline for return of currency election forms 5 OctoberRecord date 28 SeptemberPayment date 19 October------------------------------------------------------------------------------ As stated at the time of the Listing, the Company's dividend policy takes intoaccount the profitability of the business and underlying growth in earnings ofthe Company, as well as its capital requirements and cash flows, whilemaintaining an appropriate level of dividend cover. Interim and final dividendswill be paid in the approximate proportions of one-third and two-thirds of thetotal annual dividend, respectively. Dividends will be declared in US dollars. Unless a shareholder elects to receivedividends in US dollars, they will be paid in pounds sterling with the US dollardividend being converted into pound sterling at exchange rates prevailing at thetime of payment. Cash flow & balance sheet review Working capital$ thousands As at 30 June 2007 As at 31 December 2006------------------------------------------------------------------------------Current assetsInventories 20,148 16,533Trade and other receivables 67,303 49,726Current liabilitiesTrade and other payables (46,487) (64,140)Pre-shipment loans (16,100) (26,894)------------------------------------------------------------------------------Working capital 24,864 (24,775)------------------------------------------------------------------------------ Our working capital position went from negative $25 million at 31 December 2006to positive $25 million at 30 June 2007 primarily because of a decrease in cashfrom trade and other receivables and from trade and other payables. Trade and other receivables increased due to a higher tax credit at the San Joseoperation and an increase in the current portion of the project finance loan toMinera Andes, our partner at San Jose. The decrease in trade and other payablesoccurred as a result of repayment of payables used to finance the San Joseproject in Argentina. In addition, there was a decrease in pre-shipment loans,which we use as a source of working capital. This decrease arose as we did notrequire incremental working capital resource. Net debt------------------------------------------------------------------------------$ thousands As at 30 June 2007 As at 31 December 2006------------------------------------------------------------------------------Cash and cash equivalents 355,760 435,543Long term borrowings 54,981 27,114Short term borrowings less 307 2,888pre-shipment loans------------------------------------------------------------------------------Net debt / (net cash) (300,472) (405,541)------------------------------------------------------------------------------ We continue to maintain a net cash position, although we believe our ability toraise debt at the corporate level remains strong particularly following oursuccessful listing on the London Stock Exchange. The San Jose project is financed by loans made by the joint venture partnersbased on their pro-rata ownership. The loan made to Minera Santa Cruz by MineraAndes, our joint venture partner, is not eliminated upon consolidation, therebyincreasing our long term borrowings. Cash flow------------------------------------------------------------------------------$ thousands Six months ended Six months ended 30 June 2007 30 June 2006------------------------------------------------------------------------------Net cash generated from operating activities 21,421 34,358Net cash used in investing activities 88,125 13,441Cash flows used in financing activities 13,055 17,313------------------------------------------------------------------------------ Net cash generated from operating activities decreased during the first half of2007 primarily as a result of an increase in trade and other receivables. Duringthe same period, net cash used in investing activities increased due toincremental capital expenditure and a loan to Minera Andes. Cash flows used infinancing activities decreased in the first half of 2007 because of an increasein proceeds from borrowings although offset by in increase in dividends paid andtransaction costs associated with the IPO. Interim Consolidated Income Statement (Unaudited) (Unaudited - Restated)1 (Restated)(1) 6 months to 30 June 6 months to 30 June Year ended 31 December 2007 2006 2006---------------------------------------------------------------------------------------------------------------------- Notes Before Excep- Total Before Excep- Total Before Excep- Total excep- tional excep- tional excep- tional tional items tional items tional items items items items ---------------------------------------------------------------------------------------------------------------------- (in thousand of US dollars) (in thousand of US dollars) (in thousand of US dollars) ContinuingoperationsRevenue 4 121,021 - 121,021 100,813 - 100,813 211,246 - 211,246Cost of sales (42,042) - (42,042) (34,571) - (34,571) (77,129) - (77,129)----------------------------------------------------------------------------------------------------------------------Gross profit 78,979 - 78,97 66,242 - 66,242 134,117 - 134,117Administrative (30,127) - (30,127) (15,814) - (15,814) (38,738) - (38,738)expensesExploration (11,005) - (11,005) (6,857) - (6,857) (17,621) - (17,621)expensesSelling (1,107) - (1,107) (1,366) - (1,366) (3,187) - (3,187)expensesOther income 5 2,322 - 2,322 1,796 172 1,968 5,022 346 5,368Other expenses 5 (929) (174) (1,103) (1,289) (3,347) (4,636) (3,870) (6,495) (10,365)----------------------------------------------------------------------------------------------------------------------Profit from continuing 38,133 (174) 37,959 42,712 (3,175) 39,537 75,723 (6,149) 69,574operations before netfinance costs andincome tax Finance income 6 10,398 4,198 14,596 1,864 979 2,843 5,988 918 6,906Finance costs 6 (3,663) - (3,663) (5,121) - (5,121) (12,037) - (12,037)Foreign (729) - (729) (27) - (27) 353 - 353exchange gain/(loss)----------------------------------------------------------------------------------------------------------------------Profit from continuing 44,139 4,024 48,163 39,428 (2,196) 37,232 70,027 (5,231) 64,796operations beforeincome taxIncome tax 7 (16,736) (1,208) (17,944) (14,660) (52) (14,712) (29,440) 547 (28,893)expense----------------------------------------------------------------------------------------------------------------------Profit for the 27,403 2,816 30,219 24,768 (2,248) 22,520 40,587 (4,684) 35,903period----------------------------------------------------------------------------------------------------------------------Attributable to:Equity shareholders 30,040 2,816 32,856 26,398 (2,248) 24,150 46,396 (4,684) 41,712of the CompanyMinority (2,637) - (2,637) (1,630) - (1,630) (5,809) - (5,809)shareholders---------------------------------------------------------------------------------------------------------------------- 27,403 2,816 30,219 24,768 (2,248) 22,520 40,587 (4,684) 35,903----------------------------------------------------------------------------------------------------------------------Basic and 8 0.10 0.01 0.11 0.12 (0.01) 0.11 0.19 (0.02) 0.17diluted earningsper ordinaryshare fromcontinuingoperations(expressed inU.S. dollars pershare)----------------------------------------------------------------------------------------------------------------------(1) For restatement of comparative figures, refer to note 2(c) Interim Consolidated Balance Sheet Notes (Unaudited) (Restated)(1) As of 30 As of 31 June December 2007 2006-------------------------------------------------------------------------------- (in thousand of US dollars)ASSETSNon-current assetsProperty, plant and equipment 9 207,580 141,387Goodwill 2,091 2,091Available-for-sale financial assets 9,785 6,285Trade and other receivables 30,486 17,427Deferred income tax assets 12,069 7,920-------------------------------------------------------------------------------- 262,011 175,110--------------------------------------------------------------------------------Current assetsInventories 20,148 16,533Trade and other receivables 67,303 49,726Derivative financial instruments 6,858 6,022Cash and cash equivalents 10 355,760 435,543-------------------------------------------------------------------------------- 450,069 507,824--------------------------------------------------------------------------------Assets classified as held for sale - 345--------------------------------------------------------------------------------Total assets 712,080 683,279-------------------------------------------------------------------------------- EQUITY AND LIABILITIESCapital and reserves attributable toshareholders of the ParentEquity share capital (including 146,466 146,466additional capital)Share premium 395,928 396,156Other reserves (202,548) (205,039)Retained earnings 185,433 152,577-------------------------------------------------------------------------------- 525,279 490,160--------------------------------------------------------------------------------Minority interest 15,865 14,489--------------------------------------------------------------------------------Total equity 541,144 504,649--------------------------------------------------------------------------------Non-current liabilitiesTrade and other payables 924 1,064Borrowings 54,981 27,114Provisions 29,738 28,690Deferred income tax liabilities 6,394 4,026-------------------------------------------------------------------------------- 92,037 60,894--------------------------------------------------------------------------------Current liabilitiesTrade and other payables 46,487 64,140Derivative financial instruments 136 -Borrowings 16,407 29,782Provisions 7,005 11,385Income tax payable 8,864 12,429-------------------------------------------------------------------------------- 78,899 117,736--------------------------------------------------------------------------------Total liabilities 170,936 178,630--------------------------------------------------------------------------------Total equity and liabilities 712,080 683,279-------------------------------------------------------------------------------- (1) For restatement of comparative figures, refer to note 2(c) Interim Consolidated Cash Flow Statement Notes (Unaudited) (Unaudited - Restated) (Restated) 6 months to 6 months to Year ended 30 June 30 June 31 December 2007 2006 2006-------------------------------------------------------------------------------- (in thousands of US dollars) Cash flows from operatingactivitiesCash generated from 12 26,347 51,195 128,071operationsInterest received 9,982 4,067 2,576Interest paid (974) (3,210) (9,163)Payments of mine (1,071) (2,518) (5,426)closure costsTax paid (12,863) (15,176) (26,010)--------------------------------------------------------------------------------Net cash generated 21,421 34,358 90,048from operating activities--------------------------------------------------------------------------------Cash flows from investingactivitiesPurchase of (66,862) (17,077) (65,704)property, plant andequipmentPurchase of (486) (1,300) (2,770)available-for-salefinancial assetsPurchase of shares - (14) (240)of Minera ColoradaS.A.CPurchase of other - (5,867) (5,867)financial assets atfair value throughprofit or lossPurchase of assets - - (4,983)and liabilities ofMina MorisLoan to Exmin S.A. (746) - (754)de C.V.Loan to Minera (20,076) - (9,800)Andes IncProceeds from other - 6,081 5,591financial assets atfair value throughprofit or lossProceeds from sale - - 6,550ofavailable-for-salefinancial assetsProceeds from sale - - 3,801of MauricioHochschild & Cia.Ltda. S.A.C.(subsidiary)Proceeds from sale - 4,500 4,500of Caylloma miningunitProceeds from sale 18 236 991of property, plantand equipment andassets classifiedas held for saleProceeds from sale - - 3,975of suppliesDividends received - - 147--------------------------------------------------------------------------------Net cash used in (88,152) (13,441) (64,563)investingactivities--------------------------------------------------------------------------------Cash flows fromfinancingactivitiesProceeds of 86,156 61,997 77,014borrowingsRepayment of (73,590) (77,266) (95,977)borrowingsDividends paid (16,281) (1,353) (58,375)Capital - - 93contributionProceeds from issue - - 515,245of ordinary shareunder Global offerTransaction costs (11,722) - (33,989)associated withissue of sharesPurchase of shares - (20) (2)from minorityshareholdersCapital 2,382 - 4,215contribution fromminorityshareholdersRepayment of - (671) (671)capital to minorityshareholders--------------------------------------------------------------------------------Cash flows (used (13,055) (17,313) 407,553in) generated fromfinancingactivities--------------------------------------------------------------------------------Net (decrease)/ (79,786) 3,604 433,038increase in cashand cashequivalents duringthe periodExchange difference 3 (28) 38Cash and cash 435,543 2,467 2,467equivalents atbeginning of period--------------------------------------------------------------------------------Cash and cash 10 355,760 6,043 435,543equivalents at endof period-------------------------------------------------------------------------------- Interim Consolidated Statement of Changes in Equity Other Reserves -------------------- Equity Unrealised share gain/(loss)on Capital and capital available-for- reserves (including sale Cumulative Total attributable to additional Share financial translation Merger other Retained shareholders Minority Total Notes capital) premium assets adjustment reserve reserves earnings of the Parent interest Equity---------------------------------------------------------------------------------------------------------------------- (in thousands of US dollars) Balance at 31 219,233 - 11,265 726 (210,046) (198,055) 28,198 49,376 (2,533) 46,843December 2005 as reportedAdjustments due to change inaccounting policy 2 - - - 73 - 73 9,343 9,416 5,440 14,856----------------------------------------------------------------------------------------------------------------------Balance at 31 December 2005,restated 219,233 - 11,265 799 (210,046) (197,982) 37,541 58,792 2,907 61,699December 2005,restatedFair value gains on available-for-salefinancial assets - - 13,351 - - 13,351 - 13,351 20 13,371Deferred income tax onavailable-for-salefinancial assets - - (398) - - (398) - (398) - (398)Fair value changes transferred toincome statementon disposal - - (22,844) - - (22,844) - (22,844) -(22,844) Translation adjustment for the year - - - 2,834 - 2,834 - 2,834 142 2,976----------------------------------------------------------------------------------------------------------------------Net income recogniseddirectly in equity - - (9,891) 2,834 - (7,057) - (7,057) 162 (6,895)Profit for the year - - - - - - 41,712 41,712 (5,809) 35,903----------------------------------------------------------------------------------------------------------------------Total recognised income for 2006 - - (9,891) 2,834 - (7,057) 41,712 34,655 (5,647) 29,008Shares issued 93 - - - - - - 93 - 93Shares issued under Global offer 73,606 441,639 - - - - - 515,245 - 515,245Transaction costs associated withissue of shares - (45,483) - - - - - (45,483) -(45,483)Capital reduction (146,466) - - - - - 146,466 - - -Dividends 11 - - - - - - (73,142) (73,142) (298)(73,440)Capital contribution from minorityshareholders - - - - - - - - 18,200 18,200Purchase of sharesfrom minorityshareholders - - - - - - - - (2) (2)Repayment of capital tominorityshareholders - - - - - - - - (671) (671)----------------------------------------------------------------------------------------------------------------------Balance at 31 December 2006,restated 146,466 396,156 1,374 3,633 (210,046) (205,039) 152,577 490,160 14,489 504,649----------------------------------------------------------------------------------------------------------------------Fair value gains onavailable-for-salefinancial assets - - 2,935 - - 2,935 - 2,935 79 3,014Deferred income tax onavailable-for-salefinancial assets - - (1,032) - - (1,032) - (1,032) - (1,032)Translationadjustment for the period - - - 588 - 588 - 588 359 947----------------------------------------------------------------------------------------------------------------------Net income recogniseddirectly in equity - - 1,903 588 - 2,491 - 2,491 438 2,929Profit for the period - - - - - - 32,856 32,856 (2,637) 30,219----------------------------------------------------------------------------------------------------------------------Total recognised income for June2007 - - 1,903 588 - 2,491 32,856 35,347 (2,199) 33,148 Transaction costsassociated withissue of shares - (228) - - - - - (228) - (228)Capital contribution fromminorityshareholders - - - - - - - - 3,575 3,575----------------------------------------------------------------------------------------------------------------------Balance at 30 June 2007 146,466 395,928 3,277 4,221 (210,046) (202,548) 185,433 525,279 15,865 541,144----------------------------------------------------------------------------------------------------------------------Balance at 31 December 2005 asreported 219,233 - 11,265 726 (210,046) (198,055) 28,198 49,376 (2,533) 46,843Adjustments dueto change in accounting policy 2 - - - 73 - 73 9,343 9,416 5,440 14,856----------------------------------------------------------------------------------------------------------------------Balance at 31 December 2005,restated 219,233 - 11,265 799 (210,046) (197,982) 37,541 58,792 2,907 61,699----------------------------------------------------------------------------------------------------------------------Fair value gains onavailable-for-salefinancial assets - - 13,023 - - 13,023 - 13,023 - 13,023Sale of available-for-salefinancial assets - - (22,844) - - (22,844) - (22,844) -(22,844)Translation adjustment for theperiod - - - (289) - (289) - (289) 376 87----------------------------------------------------------------------------------------------------------------------Net income recogniseddirectly in equity - - (9,821) (289) - (10,110) - (10,110) 376 (9,734)Profit for the period - - - - - - 24,150 24,150 (1,630) 22,520----------------------------------------------------------------------------------------------------------------------Total recognisedincome for June 2006 - - (9,821) (289) - (10,110) 24,150 14,040 (1,254) 12,786Dividends paid - - - - - - (53,142) (53,142) (298)(53,440)Capital contribution fromminorityshareholders - - - - - - - - 915 915Repayment of capital tominorityshareholders - - - - - - - - (671) (671)----------------------------------------------------------------------------------------------------------------------Balance at 30 June2006, restated 219,233 - 1,444 510 (210,046) (208,092) 8,549 19,690 1,599 21,289---------------------------------------------------------------------------------------------------------------------- Notes to the Interim Consolidated Financial Statements 1 Corporate Information Hochschild Mining plc (hereinafter the "Company") is a public limited companyincorporated on 11 April 2006 under the Companies Act 1985 as a limited companyand registered in England and Wales with registered number 05777693. TheCompany's registered address is 18 Hanover Square, London, W1S 1HX, UnitedKingdom. Its ordinary shares are traded on the London Stock Exchange. The Group's principal business is the mining, processing and sale of silver andgold. The Group has three fully developed operating mines (Ares, Arcata andSelene) located in Southern Peru. The Group also has a portfolio of projectslocated across Peru, Mexico, Chile and Argentina at various stages ofdevelopment. These group interim consolidated financial statements were approved for issue bythe Board of Directors on 5 September 2007. 2 Significant Accounting Policies (a) Basis of preparation The interim consolidated financial statements of the Group for the six monthsended 30 June 2007 have been prepared in accordance with IAS 34 InterimFinancial Reporting. Accordingly, the interim consolidated financial statementsdo not include all the information required for full annual financial statementsand therefore, should be read in conjunction with the Group's annualconsolidated financial statements for the year 2006 as published in the 2006Report to Shareholders. The interim consolidated financial statements do not constitute statutoryaccounts as defined in section 240 of the Companies Act 1985. The financialinformation for the full year is based on the statutory accounts for thefinancial year ended 31 December 2006. A copy of the statutory accounts for thatyear, which were prepared in accordance with International Financial ReportingStandards ('IFRS') issued by the International Accounting Standards Board('IASB'), as adopted by the European Union up to 31 December 2006, has beendelivered to the Registrar of Companies. The auditors' report under section 235of the Companies Act 1985 in relation to those accounts was unqualified. The impact of the seasonality or cyclicality on operations is not regarded assignificant on the interim consolidated financial statements. (b) Changes in accounting policies and presentation rules The accounting policies adopted in the preparation of the interim consolidatedfinancial statements are consistent with those applied in the preparation of theconsolidated financial statement for the year ended 31 December 2006, except forthe effects of the change in the policy for accounting of exploration expenses(see note 2(c) below). The interim consolidated financial statements have been prepared on a historicalcost basis, except for certain classes of property, plant and equipment whichhave been re-valued at 1 January 2003 to determine deemed cost, derivatives,available-for-sale financial instruments and other financial assets at fairvalue through profit and loss which have been measured at fair value. Thefinancial statements are presented in US dollars ($) and all monetary amountsare rounded to the nearest thousand ($000) except when otherwise indicated. (c) Change in accounting policy of capitalisation of exploration expense During the period, management changed its accounting policy relating toexploration and evaluation expenditure as outlined below: • Projects in the development phase - Exploration and evaluation costs are capitalised as tangible assets from the date that the Board authorises the management to conduct a feasibility study. Previously, the Group would commence capitalisation of these costs only from the date, the project's feasibility study is approved and completed. • Identification of resources - Costs incurred in converting inferred resources to indicated and measured resources (of which reserves are a component) are capitalised as incurred. Previously, these costs were expensed. Costs incurred in identifying inferred resources continue to be expensed as incurred. Management believes that this change in accounting policy will enable improvedmatching of revenues and costs in the relevant period and thereby better reflectthe Group's economic performance. In addition, management believes that thischange will ensure consistency with its main peers, thereby enabling morerelevant comparisons to be made. The Group has retrospectively applied this new policy from 1 January 2002, theearliest date at which objective and reliable information existed in relation tothe nature of the exploration expenditure incurred, to enable them calculatethis adjustment. The comparative amounts presented in this report have been restated inaccordance with the new accounting policy as follows: (Unaudited - (Restated) (Unaudited) Restated) Year ended 6 months to 6 months to Year ended 31 31 December Income Statement 30 June 2006 30 June 2006 December 2006 2006------------------------------------------------------------------------------ (in thousands of US dollars)Continuing operationsCost of sales (34,077) (34,571) (75,949) (77,129)Gross profit 66,736 66,242 135,297 134,117Exploration expenses (7,282) (6,857) (19,461) (17,621)Profit from continuing 39,606 39,537 68,914 69,574operations before netfinance costs andincome taxProfit from continuing 37,301 37,232 64,136 64,796operations beforeincome taxIncome tax expense (14,733) (14,712) (28,695) (28,893)Profit for the period 22,568 22,520 35,441 35,903from continuingoperationsProfit for the period 22,568 22,520 35,441 35,903Attributable to:Equity shareholders of 24,198 24,150 41,288 41,712the CompanyMinority shareholders (1,630) (1,630) (5,847) (5,809)Basic and diluted 0.11 0.11 0.17 0.17earnings per ordinaryshare from continuingoperations (expressedin US dollars pershare)------------------------------------------------------------------------------ (Restated) As of As of 31 December 31 December 2006 2006--------------------------------------------------------------------------- (in thousand of US dollars)ASSETSNon-current assetsProperty, plant and equipment 118,413 141,387Deferred income tax assets 15,704 7,920Total non-current assets 159,920 175,110Current assetsInventories 16,405 16,533Total current assets 507,696 507,824Total assets 667,961 683,279 EQUITY AND LIABILITIESCapital and reserves attributable toshareholders of the ParentOther reserves (205,112) (205,039)Retained earnings 142,810 152,577Minority interest 9,011 14,489Total equity 489,331 504,649Total equity and liabilities 667,961 683,279--------------------------------------------------------------------------- (d) Basis of consolidation The consolidated financial statements set out the Group's financial position asof 30 June 2007 and 31 December 2006 and its financial operations and cash flowfor the periods ended 30 June 2007, 31 December 2006 and 30 June 2006. Consolidation rules adopted in the preparation of the interim consolidatedfinancial statements are consistent with those applied in the preparation of theconsolidated financial statements for the year ended 31 December 2006. (e) Exceptional items Exceptional items are those items, which due to their nature or the expectedinfrequency of the events giving rise to them, need to be disclosed separatelyon the face of the income statement to enable a better understanding of thefinancial performance of the Group and facilitate comparison with prior years.Exceptional items include goodwill impairments, assets held for saleimpairments, gain/(loss) from sale of property, plant and equipment, gain/(loss)from sale of investments, gain/(loss) from sale of subsidiaries, gain/(loss)from changes in the fair value of financial instruments, and the related taximpact of these items. (f) Comparatives Where applicable, comparatives have been adjusted on the same basis as currentperiod figures. For the restatement of comparative figures in relation to the change inaccounting policy for exploration expenditure refer to note 2 (c). 3 Segment Reporting The Group's activities are principally related to mining operations whichinvolve exploration, production and sale of gold and silver. Products aresubject to the same risks and returns and are sold through the same distributionchannels. The Group has a number of activities that exist solely to supportmining operations including power generation and services. As such, the Grouphas only one business segment as its primary reporting segment. 4 Revenue (Unaudited) (Unaudited) 6 months to 6 months to Year ended 30 June 30 June 31 December 2007 2006 2006--------------------------------------------------------------------------- (in thousands of US dollars) Gold (from dore bars) 40,591 41,000 70,498Silver (from dore bars) 26,951 11,887 23,929Concentrate 53,423 47,885 116,751Services 56 41 68--------------------------------------------------------------------------- 121,021 100,813 211,246--------------------------------------------------------------------------- Concentrate is made up of: (Unaudited) (Unaudited) 6 months to 6 months to Year ended 30 June 30 June 31 December 2007 2006 2006--------------------------------------------------------------------------- (in thousands of US dollars) Gold 8,017 10,121 21,953Silver 44,882 37,646 94,208Other minerals 524 118 590---------------------------------------------------------------------------Total concentrate 53,423 47,885 116,751--------------------------------------------------------------------------- The total volumes of gold and silver sold are as follows: (Unaudited) (Unaudited) 6 months to 6 months to Year ended 30 June 30 June 31 December 2007 2006 2006--------------------------------------------------------------------------- (in thousands of ounces) Gold 95 103 190Silver 5,701 4,543 10,403--------------------------------------------------------------------------- 5 Other Income and Other Expenses (Unaudited) (Unaudited) Year ended 31 6 months to 6 months to December 30 June 30 June 2006 2007 2006 -------------------------------------------------------------------- (in thousands of US dollars) Other income before exceptional items: Decrease in provision for mine closure(1) 740 1,024 2,812Recovery of expenses 226 - 791Income from mine concession 30 - 151Lease rentals 73 36 90Reversal of impairment of supplies 350 - -Other 903 778 1,178-------------------------------------------------------------------- 2,322 1,796 5,022--------------------------------------------------------------------Exceptional items: Gain on sale of supplies - - 252Gain on sale of property, plant - 172 94and equipment -------------------------------------------------------------------- - 172 346-------------------------------------------------------------------- 2,322 1,968 5,368-------------------------------------------------------------------- Other expenses before exceptional: Penalty on cancellation of contract (13) - (971)Loss on maintenance of equipment (274) (14) (369)Provision for obsolescence of - - (377)supplies Impairment of Colorada assets - - (113)Provision for claims (27) - (292)Allowance SEAL/Electroperu - (58) (113)Other (615) (1,217) (1,635)-------------------------------------------------------------------- (929) (1,289) (3,870)--------------------------------------------------------------------Exceptional items: Loss on sale of property, plant (47) - -and equipment Loss on sale of investments - (2,249) (2,249)Loss on sale of MHC (subsidiary) - (991) (991)Impairment of Sipan assets held - - (2,983)for sale Impairment of Colorada assets - - (230)Loss on sale of Inmobiliaria CNP - (42) (42)Loss on sale of supplies (127) (65) --------------------------------------------------------------------- (174) (3,347) (6,495)-------------------------------------------------------------------- (1,103) (4,636) (10,365)-------------------------------------------------------------------- (1) Decreases in provision for mine closure costs are recorded in "Other income"where the mine to which it relates has fully depreciated the mine rehabilitationasset but the closure and rehabilitation costs are yet to be incurred, and thereis a reduction in the estimate of the total mine closure cost. 6 Finance Income and Finance Cost (Unaudited) (Unaudited) Year ended 6 months to 6 months to 31 30 June 30 June December 2007 2006 2006--------------------------------------------------------------------- (in thousands of US dollars) Finance income before exceptional: Interest on time deposits(1) 9,241 125 4,053Interest on loans to related - 1,250 1,226parties Interest on loans to minority 1,006 - -shareholders(2) Interest on loans to third parties 65 117 205Interest received on bonds and - 217 217equity securities Dividends received - 147 147---------------------------------------------------------------------Other 86 8 140--------------------------------------------------------------------- 10,398 1,864 5,988---------------------------------------------------------------------Exceptional items: Gain from changes in the fair value of financial instruments(3) 4,198 979 918--------------------------------------------------------------------- 4,198 979 918--------------------------------------------------------------------- 14,596 2,843 6,906--------------------------------------------------------------------- Finance costs: Interest on bank loans and (2,557) (3,867) (8,832)long-term debt Unwind of discount rate (565) (499) (1,441)Bank commissions (18) - (854)Loss from changes in the fair value - (297) (345)of financial instruments Interest on loans from related - (9) (5)parties Other (523) (449) (560)--------------------------------------------------------------------- (3,663) (5,121) (12,037)--------------------------------------------------------------------- (1) Mainly generated for interest on liquidity funds, refer to note 10 (2) Corresponds to the interests related to the loans given by Hochschild MiningHoldings Limited to Minera Andes Inc. for US$9,800,000 and US$20,090,000 with aneffective annual interest rate of LIBOR + 2.5 percent and LIBOR + 2.85 per cent,respectively (3) Mainly corresponds to the change in fair value of 2,475,355 warrants over thesame number of shares in Fortuna Silver Mine Inc. At 31 December 2006, expirydates of the warrants were 27 June 2007 and 17 November 2007 (for 862,117 and1,613,238 warrants, respectively). In January 2007, the expiry dates werechanged to 27 June 2010 and 17 November 2010, respectively. 7 Income Tax Expense-------------------------------------------------------------------- (Unaudited) (Unaudited) (Restated) 6 months to 6 months to Year ended 30 June 30 June 31 December 2007(1) 2006(1) 2006(1)-------------------------------------------------------------------- (in thousands of US dollars)Current tax from continuing 20,643 17,976 31,940operations Deferred income tax relating to (2,813) (5,210) (5,022)origination and reversal of timing differences from continuing operations Withholding taxes 114 1,946 1,975-------------------------------------------------------------------- 17,944 14,712 28,893-------------------------------------------------------------------- (1) Amounts relating to items classified as exceptional items for the six-monthending 30 June 2007, 30 June 2006 and for the year ended 31 December 2006 werean expense of US$1,208,000, an expense of US$52,000 and an income of US$547,000,respectively. The weighted average statutory income is calculated as the average of thestatutory tax rates applicable in the countries in which the Group operates,weighted by the profit/(loss) before tax of the subsidiaries in the respectivecountries as included in the consolidated financial statements. The changes in the weighted average statutory income tax rate is due to a changein the weighting of profit/(loss) before tax in the various jurisdictions inwhich the Group operates. The tax on the Group's profit before tax differs from the theoretical amountthat would arise using the weighted average tax rate applicable to profits ofthe consolidated companies as follows: (Unaudited- (Unaudited) Restated) (Restated) 6 months to 6 months to Year ended 30 June 30 June 31 December 2007 2006 2006--------------------------------------------------------------------------- (in thousands of US dollars) Income before tax from continuing 48,163 37,232 64,796operations At average statutory income tax 14,521 10,937 19,553rate of 30.15% (29.38% and 30.18%as of 30 June and 31 December 2006,respectively)Expenses not deductible for tax 1,559 1,726 4,124purposesNon-taxable income (319) (75) (170)Recognition of previously - (312) -unrecognised deferred tax assetsDeferred tax assets generated in 1,638 804 2,552the period not recognisedDeferred tax on unremitted earnings 1,377 (508) 397Withholding tax 114 1,946 1,975Other (946) 194 462---------------------------------------------------------------------------Tax charge 17,944 14,712 28,893--------------------------------------------------------------------------- 8 Basic and diluted earnings per share Earnings per share ("EPS") is calculated dividing profit for the yearattributable to equity shareholders of the Company by the weighted averagenumber of ordinary shares in issue during the period. The Company has no dilutive potential ordinary shares. As of 30 June 2007, 30 June 2006 and 31 December 2006, earnings per share havebeen calculated as follows: (Unaudited- (Unaudited) Restated) (Restated) 6 months to 6 months to Year ended 30 June 30 June 31 December 2007 2006 2006-----------------------------------------------------------------------------Profit from continuing operations 32,856 24,150 41,712attributable to equity holders ofthe Company (US$000)Weighted average number of ordinary 307,350 229,950 242,867shares in issue ('000)Basic and diluted earnings/(loss)per share from:Before exceptional items (US$) 0.10 0.12 0.19Exceptional items (US$) 0.01 (0.01) (0.02)Continuing operations (US$) 0.11 0.11 0.17----------------------------------------------------------------------------- 9 Property, Plant and Equipment During the six months ended 30 June 2007, the Group acquired assets with a costof US$76,384,000 (31 December 2006: US$78,779,000) In addition, during the six months ended 30 June 2007 property, plant andequipment has: • increased by US$1,056,000 as a result of additions in mine closure assets; • increased by US$119,000 as a result of foreign exchange movements on translation; • decreased by US$1,212,000 as a result of the adjustment to the deferred consideration in Suyamarca; • decreased by US$304,000 as a result of change in mine closure estimate; • decreased by US$65,000 as a result of net disposal of assets; • decreased by US$9,785,000 as a result of depreciation expense. 10 Cash and Cash Equivalents (Unaudited) Year ended As of 30 June 2007 31 December 2006------------------------------------------------------------------------- (in thousands of US dollars) Cash in hand 214 997Liquidity funds(1) 342,777 414,527Current demand deposit 10,391 16,477accounts(2)Time deposits(3) 2,378 3,542-------------------------------------------------------------------------Cash and cash equivalents 355,760 435,543considered for the cash flowstatement------------------------------------------------------------------------- (1) The liquidity funds are mainly invested in certificate of deposits, commercialpapers and floating rate notes with weighted average annual effective interestrate of 5.16 percent and a weighted average maturity of 44 days as of 30 June2007 (5.16 percent and 43 days as of December 31, 2006, respectively) (2) Relates to bank accounts which are freely available and do not bear interest (3) The effective interest rates as of 30 June 2007 and 31 December 2006 were 5.00and 4.45 percent, respectively. These deposits have an average maturity of fiveand three days, respectively 11 Dividends Paid and Proposed Amount-------------------------------------------------------------------------------- (in thousands of US dollars)Year ended 31 December 2006Total dividends paid or provided for during the year 73,440(1)Total dividends declared after year-end and not provided for 2,275(2) Six months ended 30 June 2007Total dividends paid or provided for during the period -Total dividends declared after period-end and not provided for 7,333-------------------------------------------------------------------------------- (1) Corresponds to dividends paid or provided to former shareholder Dona Limited (2) Corresponds to dividends declared after year-end and not provided to PelhamInvestment Corporation, Navajo Overseas Corporation and public shareholders Dividends per share The dividends declared in 2006 were US$73,142,000 (US$0.32 per share). Adividend in respect of year ended 31 December 2006 of US$0.0074 per share,amounting to a total dividend of US$2,274,821 was approved at the Company'sAnnual General Meeting on 4 July 2007. These financial statements do not reflectthe dividend payable. 12 Notes to the Cash Flow Statement (Unaudited- (Unaudited) Restated) (Restated) 6 months to 6 months to Year ended 30 June 30 June 31 December 2007 2006 2006----------------------------------------------------------------------------- (in thousands of US dollars)Reconciliation of profit for the periodto net cash generated from operatingactivities Profit for the period 30,219 22,520 35,903Adjustments to reconcile groupoperating profit to net cashinflows from operating activities:Depreciation 9,216 8,652 18,690Loss / (gain) on disposal of property,plant and equipment and assets classifiedas held for sale 47 (172) (94)Impairment of Sipan assets held for sale - - 2,983Impairment of Colorada assets - - 343Loss on sale of available-for-salefinancial assets - 2,291 2,291Loss (gain) on sale of supplies 127 - (252)Loss on sale of MHC (subsidiary) - 991 991Decrease in provision for mine closure (740) (1,024) (2,812)Finance income (14,596) 2,843 (6,906)Finance costs 3,663 5,121 12,037Income tax expense 17,944 14,712 28,893Provision for contingencies - - 292Other 947 391 2,938Increase (decrease) of cash flows fromoperations due to changes in assets andliabilities:Trade and other receivables (20,497) (3,192) 24,615Derivative financial instruments 3,498 (2,575) 3,845Inventories (3,615) (3,596) (5,629)Trade and other payables 2,972 3,377 5,135Provisions (2,838) 856 4,808-----------------------------------------------------------------------------Cash generated from operations 26,347 51,195 128,071----------------------------------------------------------------------------- 13 Commitments (a) Gold and silver future contracts Type of Organisation Quantity contract Quotation Period As of 30 As of 31 June December 2007 (ounces) 2006 (ounces) (US$/oz) From to------------------------------------------------------------------------------------------------------------------GoldCitibank - 23,450 Flat Forward 415.93 August 2006 June 2007Citibank - 36,600 Flat Forward 419.20 January 2007 June 2007--------------------------------------------------------------- - 60,050---------------------------------------------------------------SilverStandard Bank - 772,000 Min/Max 8.40/10.65 October 2006 March 2007---------------------------------------------------------------Total - 832,050--------------------------------------------------------------- The contracts and commitments mentioned above are not fair valued in the booksas they were entered into for the purpose of the delivery of a non-financialitem in accordance with the Group's expected sales requirements. Management had previously entered into fixed price sale contracts in accordancewith the terms and conditions of the loan agreements with the banks. Managementhas now decided that the Group will not enter into any further commitments tooptimise and align average realisations with market prices in future. (b) Mining rights purchase options During the ordinary course of business, the Group enters into agreements tocarry out exploration under concessions held by third parties. Under the termsof some of the agreements, the Group has the option to acquire the concession orinvest in the entity holding the concession. In order to exercise the option theGroup must satisfy certain financial and other obligations over the agreementterm. The options lapse in the event the Group does not meet the financialrequirements. At any point in time, the Group may cancel the agreements withoutpenalty. The Group continually reviews its requirements under the agreements anddetermines on an annual basis whether to proceed with the financial commitment.The commitments at the balance sheet date are as follows: As of As of 30 June 31 December 2007 2006-------------------------------------------------------------------------- (in thousands of US dollars) Commitment for the subsequent twelve months 1,849 1,210Later than one year 30,153 22,539-------------------------------------------------------------------------- (c) Ventura Gold Corp. On 8 January 2007, the Group entered into a letter of intent with Ventura GoldCorp ("Ventura") for Ventura to acquire an interest in the Inmaculada property,located in Peru. Under the agreement, in order for Ventura to acquire an initial51% controlling interest, Ventura shall complete a total of 15,000 metres ofdrilling on the property and issue a total of one million of its common sharesto the Group within a three-year period. Once Ventura acquires its 51% controlling interest, Ventura shall issue anadditional two million of its common shares to the Group within the next fiveyears. Additionally, the Group has the option to become the operator of theproject and buy back an 11% controlling interest in consideration for a paymentto Ventura of three times the total investment made in drilling and relatedexploration work completed. If the Group does not exercise the aforementionedoption, Ventura may elect to increase its controlling interest by 19% upon thecompletion of a feasibility study on the project. As at 30 June 2007, the option joint venture agreement had not been signed butthe Group has already received 100,000 shares included in the 'Available-for-sale financial assets' caption. The option joint venture agreement was subsequently signed on 13 August 2007. (d) Mirasol Resources Ltd. On 21 February 2007, the Group signed the option and joint venture agreementwith Mirasol Resources Ltd. ("Mirasol") under the arrangements set forth in theletter of intent signed on 18 September 2006. The Group will have the right toacquire 51 percent interest in Santa Rita and Claudia projects by investing overfour years at least US$3.5 million, and US$6 million, respectively.Additionally, the Group paid US$150,000 on the signing of the letter of intentand has to make four annual payments of US$200,000 to Mirasol. On 13 March 2007, Mirasol constituted, under the laws of Argentina, twocompanies named "Cabo Sur" and "Punta Verde", which will hold the rights ofClaudia and Santa Rita properties, respectively. Until the exercise of Claudiaand Santa Rita options, Mirasol and the Group will own 99% and 1% of each of thenew companies, respectively. (e) Cardero Resource Corp. On 12 March 2007, the Group entered into a letter of intent with CarderoResource Corp. ("Cardero") in respect of an option and joint venture agreementto explore and develop minerals at Los Manantiales property in Argentina. Underthe arrangements, the Group will have the right to acquire 60 percent interestby incurring expenditures on exploration activities of US$3,500,000 in fouryears. At 30 June 2007, the Group has paid US$294,000 in order to permit Cardero toacquire the properties from its former owner. This payment will be considered aspart of the required commitment. The option and joint venture agreement has not been signed as of 30 June 2007. (f) Geologix Explorations Inc. On 26 April 2007, the Group entered into a letter of intent with GeologixExploration Inc. in respect of a joint venture for the exploration anddevelopment of Silver Cloud property located in north-central Nevada, USA. The Group has the option to acquire 70 percent interest in the venture byinvesting in exploration and development an amount of US$4,100,000 during fiveyears, and making a mandatory payment of US$50,000 upon signing of the finaljoint venture agreement. As of 30 June 2007, the option and joint venture agreement has not been signed. (g) Silver Standard Resources Inc. On 31 May 2007, the Group entered into a letter of intent with Silver StandardResources Inc. in respect of an option and joint venture agreement to exploreand develop minerals in properties located in Chubut province, Argentina. Under the arrangements, the Group will have the right to acquire 51 percentinterest by investing in exploration activities an amount of US$1,000,000 inthree years. At 30 June 2006, the option and joint venture agreement has notbeen signed. 14 Subsequent events (a) On 6 July 2007, the Group signed an Agreement with EXMIN Resources Inc.("EXMIN"), pursuant to which the Group will provide certain funding arrangementsto EXMIN to allow it to comply with its obligations under the joint ventureagreement with the Group. In compliance with the agreement, on 9 July 2007, the Group acquired 7,875,000common shares of EXMIN for a total amount of US$3 million. In addition, on thesame date the Group converted an outstanding loan receivable from EXMIN ofUS$1.5 million into 4,127,231 common shares. (b) On 3 July 2007, the Group approved the executive long-term incentiveplan to recognise the performance of key employees and to ensure that thelong-term interest of these employees are aligned with the interest ofshareholders. The plan comprises an amount to be paid to participants dependingon the achievement of the three-year performance measures being: "expected","improved" or "excellent". Half of the award will be paid on 31 December 2010,with the remaining half paid on 31 December 2011. The independent performancemeasures included in the plan are • Cumulative earnings per share • Volume of production at the end of 2009 • Co-production cash cost • Life of mine as of 31 December 2009 • Resources and reserves grade • Share price (c) As described in Note13 (c) on 13 August 2007, the Group signed the option and jointventure agreement with Ventura. (d) On 30 August 2007, the Group gave its formal notice of termination and withdrawalfrom option and joint venture agreement with Mirasol in respect of Santa Rita. Reserves & ResourcesAttributable metal reservesAs at 30 June 2007 Reserve category Proved Probable Proved And Probable Ag Au Ag Au Ag Eq.--------------------------------------------------------------------------------------------------- (t) (t) (t) (g/t) (g/t) (moz) (koz) (moz)ArcataProved 1,207,398 478 1.29 18.6 50.0 21.6Probable 498,740 559 1.29 9.0 20.6 10.2Total 1,706,138 502 1.29 27.5 70.7 31.8---------------------------------------------------------------------------------------------------AresProved 627,708 230 8.58 4.6 173.2 15.0Probable 269,744 168 5.54 1.5 48.0 4.3Total 897,452 211 7.67 6.1 221.2 19.4---------------------------------------------------------------------------------------------------SeleneProved 780,495 289 2.00 7.3 50.1 10.3Probable 89,865 233 1.03 0.7 3.0 0.9Total 870,360 284 1.90 7.9 53.1 11.1---------------------------------------------------------------------------------------------------PallancataProved 641,002 263 1.06 5.4 21.9 6.7Probable 688,455 280 1.10 6.2 24.3 7.7Total 1,329,457 272 1.08 11.6 46.2 14.4---------------------------------------------------------------------------------------------------San JoseProved 339,391 451 6.20 4.9 67.7 9.0Probable 1,052,155 405 6.80 13.7 229.9 27.5Total 1,391,546 416 6.65 18.6 297.6 36.5---------------------------------------------------------------------------------------------------MorisProved 1,273,582 4.5 1.72 0.2 70.3 4.4Probable 767,974 4.3 1.16 0.1 28.7 1.8Total 2,041,556 4.4 1.51 0.3 99.0 6.2---------------------------------------------------------------------------------------------------TotalProved 4,869,576 262 2.77 41.0 433.3 67.0Probable 3,366,933 287 3.28 31.1 354.6 52.4Total 8,236,510 272 2.98 72.1 787.8 119.3--------------------------------------------------------------------------------------------------- Attributable metal resourcesAs at 30 June 2007 Resource Measured category Measured Indicated & Indicated Inferred Ag Au Zn Pb Cu Ag Eq Ag Au Zn Pb Cu-------------------------------------------------------------------------------------------------------------------- (t) (t) (t) (t) (g/t) (g/t) (%) (%) (%) (g/t) (moz) (koz) (kt) (kt) (kt)ArcataMeasured 1,151,358 545 1.48 -.- -.- -.- 633 20.2 54.8 -.- -.- -.-Indicated 464,648 647 1.49 -.- -.- -.- 737 9.7 22.3 -.- -.- -.-Total 1,616,005 574 1.48 -.- -.- -.- 663 29.8 77.1 -.- -.- -.-Inferred 1,655,637 598 1.52 -.- -.- -.- 689 31.8 81.2 -.- -.- -.-----------------------------------------------------------------------------------------------------------------------AresMeasured 614,694 249 9.31 -.- -.- -.- 808 4.9 184.1 -.- -.- -.-Indicated 277,410 177 5.82 -.- -.- -.- 526 1.6 51.9 -.- -.- -.-Total 892,104 227 8.23 -.- -.- -.- 720 6.5 236.0 -.- -.- -.-Inferred 86,251 198 4.11 -.- -.- -.- 445 0.5 11.4 -.- -.- -.-----------------------------------------------------------------------------------------------------------------------SeleneMeasured 770,576 312 2.15 -.- -.- -.- 441 7.7 53.3 -.- -.- -.-Indicated 87,354 255 1.12 -.- -.- -.- 322 0.7 3.2 -.- -.- -.-Total 857,930 306 2.05 -.- -.- -.- 429 8.4 56.5 -.- -.- -.-Inferred 1,078,996 322 1.59 -.- -.- -.- 417 11.2 55.1 -.- -.- -.-----------------------------------------------------------------------------------------------------------------------PallancataMeasured 583,181 318 1.26 -.- -.- -.- 394 6.0 23.7 -.- -.- -.-Indicated 730,297 325 1.38 -.- -.- -.- 408 7.6 32.3 -.- -.- -.-Total 1,313,478 322 1.33 -.- -.- -.- 401 13.6 56.0 -.- -.- -.-Inferred 749,770 488 1.84 -.- -.- -.- 598 11.8 44.4 -.- -.- -.-----------------------------------------------------------------------------------------------------------------------San JoseMeasured 333,559 526 7.16 -.- -.- -.- 955 5.6 76.8 -.- -.- -.-Indicated 894,539 484 8.10 -.- -.- -.- 970 13.9 232.8 -.- -.- -.-Total 1,228,098 495 7.84 -.- -.- -.- 966 19.6 309.6 -.- -.- -.-Inferred 119,791 442 7.69 -.- -.- -.- 903 1.7 29.6 -.- -.- -.-----------------------------------------------------------------------------------------------------------------------MorisMeasured 3,015,654 4.2 1.31 -.- -.- -.- 83 0.4 127.1 -.- -.- -.-Indicated 218,661 4.5 1.15 -.- -.- -.- 73 0.0 8.1 -.- -.- -.-Total 3,234,315 4.3 1.30 -.- -.- -.- 82 0.4 135.2 -.- -.- -.-Inferred 37,476 4.1 0.88 -.- -.- -.- 57 0.0 1.1 -.- -.- -.-----------------------------------------------------------------------------------------------------------------------San FelipeMeasured 1,143,681 72 0.02 7.43 3.15 0.42 315 2.6 0.7 84.9 36.1 4.8Indicated 482,527 68 0.02 7.15 3.34 0.42 305 1.1 0.3 34.5 16.1 2.0Total 1,626,207 71 0.02 7.34 3.21 0.42 312 3.7 1.0 119.4 52.2 6.8Inferred 234,259 56 0.01 7.30 3.52 0.30 289 0.4 0.1 17.1 8.2 0.7----------------------------------------------------------------------------------------------------------------------TOTALMeasured 7,612,702 194 2.13 1.12 0.47 0.06 358 47.5 520.4 84.9 36.1 4.8Indicated 3,155,435 341 3.46 1.09 0.51 0.06 585 34.6 350.9 34.5 16.1 2.0Total 10,768,137 237 2.52 1.11 0.48 0.06 424 82.1 871.3 119.4 52.2 6.8Inferred 3,962,179 451 1.75 0.43 0.21 0.02 569 57.4 222.9 17.1 8.2 0.7---------------------------------------------------------------------------------------------------------------------- Note: Resources include undiscounted reserves, where reserves are attributable to JV partner, reserve figures reflect the Company's ownership only no ore loss or dilution has been included, and stockpiled ore excluded. Change in metal reserves and resources in silver equivalent ounces Ag Equivalent Content (Million Ounces) Operation Category December 2006 Depletion(1)Addition(2)June2007 Net Difference % change------------------------------------------------------------------------------------------------------Peru------------------------------------------------------------------------------------------------------Arcata Resource 60.6 10.6 71.1 10.6 17% Reserve 20.4 (3.5) 14.9 31.8 11.4 56%------------------------------------------------------------------------------------------------------Ares Resource 24.9 (3.0) 21.9 (3.0) (12)% Reserve 22.3 (5.8) 2.8 19.4 (3.0) (13)%------------------------------------------------------------------------------------------------------Selene Resource 25.2 1.1 26.3 1.1 4% Reserve 12.3 (3.0) 1.8 11.1 (1.2) (10)%------------------------------------------------------------------------------------------------------Pallancata Resource 49.2 3.1 52.3 3.1 6% Reserve 23.8 0.0 0.2 24.0 0.2 1%------------------------------------------------------------------------------------------------------Peru Totals: Resource 159.8 11.8 171.6 11.8 7% Reserve 78.8 (12.2) 19.7 86.2 7.4 9%------------------------------------------------------------------------------------------------------ArgentinaSan Jose Resource 70.4 11.2 81.6 11.2 16% Reserve 55.6 0.0 15.9 71.5 15.9 29%------------------------------------------------------------------------------------------------------Argentina Totals: Resource 70.4 11.2 81.6 11.2 16% Reserve 55.6 0.0 15.9 71.5 15.9 29%------------------------------------------------------------------------------------------------------MexicoMoris Resource 12.3 0.0 12.3 0.0 0% Reserve 8.9 0.0 0.0 8.9 0.0 0%------------------------------------------------------------------------------------------------------San Felipe Resource 25.0 1.4 26.4 1.4 6% Reserve 0.0 0.0 0.0 0.0 0.0 0%------------------------------------------------------------------------------------------------------Mexico Totals: Resource 37.3 1.4 38.7 1.4 4% Reserve 8.9 0.0 0.0 8.9 0.0 0%------------------------------------------------------------------------------------------------------Totals: Resource 267.5 24.4 292.0 24.4 9% Reserve 143.3 (12.2) 35.6 166.6 23.4 16%------------------------------------------------------------------------------------------------------ (1) Depletion: reduction in reserves based on ore delivered to the mine plant(2) Increase in reserves and resources due mainly to mine site exploration but also to price increases Change in attributable metal reserves and resources in silver equivalent ounces Ag Equivalent Content (Million Ounces)Operation Category Percentage Attributable December 2006 Att.1 June2007 Att. 1 Net Difference % change---------------------------------------------------------------------------------------------------------------------Peru---------------------------------------------------------------------------------------------------------------------Arcata Resource 100% 60.6 71.1 10.6 17% Reserve 20.4 31.8 11.4 56%---------------------------------------------------------------------------------------------------------------------Ares Resource 100% 24.9 21.9 (3.0) (12)% Reserve 22.3 19.4 (3.0) (13)%---------------------------------------------------------------------------------------------------------------------Selene Resource 100% 25.2 26.3 1.1 4% Reserve 12.3 11.1 (1.2) (10)%---------------------------------------------------------------------------------------------------------------------Pallancata Resource 60% 29.5 31.4 1.8 6% Reserve 14.3 14.4 0.1 1%---------------------------------------------------------------------------------------------------------------------Peru Totals: Resource 140.2 150.7 10.6 8% Reserve 69.3 76.6 7.4 11%Argentina---------------------------------------------------------------------------------------------------------------------San Jose Resource 51% 35.9 41.6 5.7 16% Reserve 28.3 36.5 8.1 29%---------------------------------------------------------------------------------------------------------------------Argentina Totals: Resource 35.9 41.6 5.7 16% Reserve 28.3 36.5 8.1 29%Mexico---------------------------------------------------------------------------------------------------------------------Moris Resource 70% 8.6 8.6 0.0 0% Reserve 6.2 6.2 0.0 0%---------------------------------------------------------------------------------------------------------------------San Felipe Resource 70% 17.5 18.5 1.0 6% Reserve 0.0 0.0 0.0 0%---------------------------------------------------------------------------------------------------------------------Mexico Totals: Resource 26.1 27.1 1.0 4% Reserve 6.2 6.2 0.0 0.0---------------------------------------------------------------------------------------------------------------------Totals: Resource 202.2 219.4 17 9% Reserve 103.9 119.3 15 15%--------------------------------------------------------------------------------------------------------------------- (1) Attributable reserves and resources based on the Group's percentage ownership of its joint venture projects Production Information Arcata Six months ended Six months ended 30 June 2007 30 June 2006 % change-----------------------------------------------------------------------------------Ore production (tonnes) 176,513 135,526 30%Average head grade silver (g/t) 532.86 542.02 (2)%Average head grade gold (g/t) 1.38 1.35 2%Concentrate produced (tonnes) 7,447 5,214 43%Silver grade in concentrate (kg/t) 10.99 12.49 (12)%Silver produced (koz) 2,631 2,094 26%Gold produced (koz) 6.75 4.96 36%Net silver sold (koz) 2,487 1,395 78%Net gold sold (koz) 6.19 3.19 94%----------------------------------------------------------------------------------- Ares Six months ended Six months ended 30 June 2007 30 June 2006 % change-----------------------------------------------------------------------------------Ore production(tonnes) 156,404 141,529 11%Average head grade silver (g/t) 257.64 332.14 (22)%Average head grade gold (g/t) 14.84 19.01 (22)%Dore total (koz) 1,254.24 1,493.19 (16)%Silver produced (koz) 1,179 1,406 (16)%Gold produced (koz) 71.60 83.35 (14)%Net silver sold (koz) 1,317 1,473 (11)%Net gold sold (koz) 77.02 88.23 (13)%----------------------------------------------------------------------------------- Selene Six months ended Six months ended 30 June 2007 30 June 2006 % change-----------------------------------------------------------------------------------Ore production (tonnes) 190,581 178,044 7%Average head grade silver (g/t) 338.37 378.68 (11)%Average head grade gold (g/t) 2.43 2.93 (17)%Concentrate produced (tonnes) 1,808 1,977 (9)%Silver grade in concentrate (kg/t) 31.75 30.95 3%Silver produced (koz) 1,822 1,967 (7)%Gold produced (koz) 12.35 14.57 (15)%Net silver sold (koz) 1,897 1,675 13%Net gold sold (koz) 11.66 11.95 (2)% Glossary AgSilver Adjusted EBITDAAdjusted EBITDA is calculated as profit from continuing operations beforeexceptional items, net finance costs and income tax plus depreciation,amortization and exploration costs other than personnel and other expenses AuGold Attributable after tax profitProfit for the year before dividends attributable to the equity shareholders ofHochschild Mining plc from continuing operations before exceptional items andafter minority interest Average head gradeAverage ore grade fed into the mill BoardThe board of directors of the Company Company, Group or HochschildHochschild Mining plc and its subsidiary undertakings CSR Committee or Corporate Social Responsibility CommitteeThe corporate social responsibility committee of the Board CSRCorporate social responsibility CuCopper DirectorsThe directors of the Company DoreDore bullion is an impure alloy of gold and silver and is generally the finalproduct of mining and processing; the dore bullion will be transported to berefined to high purity metal Dollar or $United States dollars Effective Tax RateIncome tax expense as a percentage of profit from continuing operations beforeincome tax EPS The per-share (using the weighted average number of shares outstanding for theperiod) profit available to equity shareholders of the Group from continuingoperations before exceptional items and after minority interest eqequivalent Exceptional itemEvents that are significant and which, due to their nature or the expectedinfrequency of the events giving rise to them, need to be disclosed separately GAAPGenerally Accepted Accounting Principles g/tGrams per metric tonne IASInternational Accounting Standards IASBInternational Accounting Standards Board IFRSInternational Financial Reporting Standards kozThousand ounces ktThousand metric tonnes ktpaThousand metric tonnes per annum Listing or IPO (Initial Public Offering) or Global OfferThe listing of the Company's ordinary shares on the London Stock Exchange on 8November 2006 LSELondon Stock Exchange mozMillion ounces Ordinary SharesOrdinary shares of £0.25 each in the Company PbLead Spot or spot priceThe purchase price of a commodity at the current price, normally this is at adiscount to the long term contract price ttonne ZnZinc - ends - This information is provided by RNS The company news service from the London Stock Exchange