Hochschild Regulatory News (HOC)

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16 August 2017

Hochschild Mining plc

Interim Results for the six months ended 30 June 2017

2017 Interim Results Highlights

§ Revenue of $340.8 million (H1 2016: $339.3 million)1

§ Adjusted EBITDA of $136.0 million (H1 2016: $170.3 million)2

§ Profit before income tax of $39.9 million (H1 2016: $60.3 million)

§ Adjusted basic earnings per share of $0.03 (H1 2016: $0.05)3

§ Cash and cash equivalent balance of $144.5 million as at 30 June 2017 (31 December 2016: $140.0 million)

§ Net debt of $164.7 million as at 30 June 2017 (31 December 2016: $187.4 million)

§ $18.5 million of debt repaid in H1 20174

§ Net debt/annual Adjusted EBITDA of 0.56x as at 30 June 2017 (31 December 2016: 0.57x)

§ Interim dividend of 1.38 cents per share ($7.0 million)

§ Brownfield drilling programme ramping up in H2 - starting to deliver positive results

H1 2017 operational delivery in line with guidance

§ H1 2017 AISC per silver equivalent ounce from operations of $12.0 (H1 2016: $10.9) ahead of guidance of $12.2-12.75

§ Half year production of 17.9 million attributable silver equivalent ounces (H1 2016: 17.0 million ounces)6

H2 2017 Outlook

§ On track to deliver record attributable production target of 37.0 million silver equivalent ounces for 2017

§ AISC expected to be in line with $12.2-12.7 per silver equivalent ounce guidance

Ignacio Bustamante, Chief Executive Officer said:

"Hochschild Mining continues to deliver a robust operational performance with both production and cost targets for 2017 on track. Towards the end of the year, once permits are in place, we can expect further progress with the development of the Pablo vein at the Pallancata deposit as well as several brownfield drilling campaigns across the Company's portfolio. I am confident that our Company has the financial and operational flexibility to meet our upcoming debt commitment, fund an extensive brownfield programme and assess value accretive opportunities as they arise.

Operations

In the first half of the year, Hochschild's mines proved to be strong despite the effects of stoppages at two operations. Solid production from Inmaculada and San Jose and a better than expected result from Pallancata contributed to overall output of 17.9 million silver equivalent ounces (242,208 gold equivalent ounces), a 6% improvement on the first half of last year and on track to meet our overall annual target of 37 million silver equivalent ounces. At Inmaculada, tonnage lost in the first half was supplemented by the deposit's high grade stockpile and consequently production reached 8.6 million silver equivalent ounces, just over half the target for the year with the all-in sustaining cost figure at a very competitive $8.8 per silver equivalent ounce. The Pallancata mine enjoyed a strong period with better than expected silver grades and consequently all-in sustaining costs were reduced by over 30% versus the first half of 2016 to $10.9 per silver equivalent ounce. San Jose was once again a consistent contributor although costs rose due lower-than-expected local currency devaluation not fully offsetting ongoing high inflation in Argentina. Finally, Arcata has been mining narrower veins with a reduced number of stopes and consequently the operational focus has been on controlling costs and driving further efficiencies. Accordingly results in the first half reflecting this transitional phase as well as emphasising the need for our brownfield programme to continue to deliver higher quality resources.

Exploration

Over the last two years, the key discovery by our brownfield exploration team has been the Pablo vein at the Pallancata deposit in mid-2015 and since then, the quality and quantity of this resource has increased significantly whilst providing the team with the possibility for an ongoing reinterpretation of the surrounding district. Throughput at Pallancata is expected to rise towards the end of the year once the necessary permits are received from the Peruvian government in the fourth quarter. In addition, the Company's annual brownfield programme, which has already started to deliver positive results, is due to ramp up in the second half with drilling campaigns to be carried out at Inmaculada, San Jose and Arcata as well further initiatives at other prospects, again subject to permitting.

Financial results

Production and prices achieved in the first half were broadly similar to H1 2016 and therefore revenue was also in line at $341 million (H1 2016: $339 million). The Company's increased investment in exploration-led growth as well as the cancellation of the Patagonian port benefit in late 2016 and a fully-implemented backfill process at Inmaculada led to an increase in overall costs with Adjusted EBITDA at the half year of $136 million (H1 2016: $170 million). Pre-exceptional earnings per share was $0.03 whilst an impairment of $26 million at Arcata was offset by a reversal of $32 million at Pallancata and therefore post-exceptional earnings per share was $0.05.

Financial position

Financial discipline and an efficient use of capital remain cornerstones of our Company's strategy and in the first half continued strong cashflow from operations has ensured further progress in reducing our short term debt by almost $19 million. The Company is in a strong position to address the upcoming option to redeem early our remaining Senior Notes in January of next year thus substantially reducing our finance costs going forward. Cash and cash equivalents were approximately $145 million at the end of June (31 December 2016: $140.0 million) leading to a net debt position of $165 million (31 December 2016: $187.4 million) and a ratio of net debt to annual Adjusted EBITDA currently standing at a comfortable 0.56x.

Safety

Hochschild deeply regrets to report that four fatalities have occurred in the first seven months of the year: two previously reported at Inmaculada and another two most recently at the Arcata mine. Safety continues to be the Company's highest priority and therefore the incidents represent a significant setback for our safety programmes. The management recognises that despite the significant progress made over the last decade in our practices and systems, we still must endeavour to strengthen the culture of safety throughout our Company.

Outlook

Although precious metal prices have once again proved to be volatile so far this year, Hochschild's operational strength combined with a stringent cost discipline leads us to reiterate our 2017 production target of 37 million silver equivalent ounces at an all-in sustaining cost of between $12.2 and $12.7 per ounce. The Board is today declaring an interim dividend of 1.38 cents per share reflecting the success of our long term growth strategy as well as the progress made in the year-to-date."

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A live conference call & audio webcast will be held at 2.30pm (London time) on Wednesday 16 August 2017 for analysts and investors. For a live webcast of the presentation please click on the link below:

https://edge.media-server.com/m6/p/3tntxcih 

Conference call dial in details:

UK: +44(0)20 3427 1906 (Please use the following confirmation code: 3657973).

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

UK: (0)20 3427 0598 (Passcode: 3657973)

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

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Enquiries:

Hochschild Mining plc

Charles Gordon +44 (0)20 3709 3264

Head of Investor Relations

Hudson Sandler

Charlie Jack +44 (0)207 796 4133

Public Relations

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OPERATING REVIEW

OPERATIONS

Note: silver/gold equivalent production figures assume a gold/silver ratio of 74:1.

Production

In H1 2017, the Company delivered attributable production of 242,208 gold equivalent ounces or 17.9 million silver equivalent ounces. Pallancata is delivering grades above expectations and was significantly ahead of the H1 2016 result despite a community-related stoppage in the first quarter. At Inmaculada, mining operations were boosted by a contribution from existing high grade stockpiles whilst there was also another solid performance from the 51% owned San Jose operation.

TOTAL GROUP PRODUCTION

Total production includes 100% of all production, including production attributable to Hochschild's joint venture partner at San Jose.

ATTRIBUTABLE GROUP PRODUCTION

Attributable production includes 100% of all production from Arcata, Inmaculada, Pallancata and 51% from San Jose.

Costs

The Company's all-in sustaining cost increased in H1 2017 to $12.0 per silver equivalent ounce (H1 2016: $10.9 per ounce), slightly better than the Company's 2017 guidance of between $12.2 and $12.7 per silver equivalent ounce. This result versus H1 2016 reflects the elimination of the Patagonian port rebate in Argentina, higher backfill and detoxification costs at Inmaculada, net inflation in Argentina and reduced tonnage and grades at Arcata. These effects were partially offset by stronger grades and tonnage at Pallancata. Please see page 9 of the Financial Review for further details on costs.

Inmaculada (Peru)

The 100% owned Inmaculada gold/silver underground operation is located in the Department of Ayacucho in southern Peru. It started operations in September 2015.

Production

Inmaculada recovered well following the stoppage at the operation in Q1 2017 with mining operations steadily ramped up back to full production in the second quarter and throughput and grades reverting to the forecasted level. In the first half, the operation was ahead of the same period of 2016, with gold equivalent production of 115,547 ounces (H1 2016: 111,233 ounces), consisting of 79,820 ounces of gold and 2.6 million ounces of silver. Inmaculada remains on track to meet its full year forecast of approximately 230,000 gold equivalent ounces (17 million silver equivalent ounces).

Costs

All-in sustaining costs were better than expected at $8.8 per silver equivalent ounce (H1 2016: $8.2 per ounce). Reduced mined tonnage resulting from the stoppage in the first quarter and budgeted lower mined gold grades were largely offset by the processing of the high grade stockpile as well as operational efficiencies versus plan. AISC for 2017 is still expected to be between $9.5 and $10.0 per silver equivalent ounce reflecting the above-mentioned lower gold grades and the previously disclosed investment in the expansion of the tailings dam and other infrastructure.

Arcata (Peru)

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

Production

At Arcata, first half, production was 2.9 million silver equivalent ounces (H1 2016: 3.7 million ounces) with tonnage and silver grades adjusted following a revision of the mine plan to accommodate a reduced number of stopes and narrower veins. The focus at Arcata is to improve its cost position by increasing the quality of resources through the brownfield exploration programme as well as other efficiency and productivity measures in order to ensure the long term sustainability of the mine. The forecasts for Arcata's output for the year have been revised to 5.5 million silver equivalent ounces in 2017.

Costs

In H1 2017, as expected, Arcata's all-in sustaining cost rose substantially versus H1 2016 to $17.6 per silver equivalent ounce (H1 2016: $13.0 per ounce) reflecting the reduced tonnage and grades resulting from the revised mine plan as well as the previously-announced increased investment in the mine's brownfield exploration programme. In line with the lower production levels, the Company now expects Arcata's all-in sustaining cost for 2017 to be approximately $17.0 per silver equivalent ounce.

Pallancata (Peru)

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

Production

The first half of the year's performance was a better-than-expected 3.2 million silver equivalent ounces (H1 2016: 1.7 million ounces) consisting of 2.4 million ounces of silver and 9,790 ounces of gold, a significant improvement versus the same period of 2016. The forecast for the full year has now been upgraded to approximately 7.5 million silver equivalent ounces.

Costs

All-in sustaining costs at Pallancata in the first half fell by 31% versus the same period of 2016 to $10.9 per silver equivalent ounce (H1 2016: $15.9 per ounce). The reduction was due to better than expected tonnage and silver grades which offset the loss of January's production due to the stoppage. AISC for full year 2017 is now expected to be approximately $12.0 per silver equivalent ounce.

San Jose (Argentina)

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

*The Company has a 51% interest in San Jose

Production

The San Jose mine in Argentina has continued to be a solid performer in the first half with production of 3.0 million ounces of silver and 46,618 ounces of gold which is 6.5 million silver equivalent ounces, a 2% improvement compared to the same period of 2016 (H1 2016 6.4 million ounces) and principally driven by better gold grades.

Costs

At San Jose, all-in sustaining costs increased to $14.4 per silver equivalent ounce (H1 2016: $11.7 per ounce) mainly due to the elimination of the Patagonian port rebate in the fourth quarter of 2016. In addition, lower than expected currency devaluation in Argentina only partially offset ongoing unit cost inflation. Overall 2017 all-in sustaining costs are now expected to be between $13.5 to $14.0 per silver equivalent ounce.

EXPLORATION

Brownfield exploration

At Arcata, over 15,000m of resource drilling has been carried out at the Tunel 4, Paralela 3, Ramal Marion and Paralela Sur veins although there were a few delays in surface drilling due to the heavy rain in Peru in the first quarter. The outcome of drilling year-to-date is promising with selected results below:

In addition, long horizontal drilling for potential resources also started in the Pamela and Paralelas vein systems in the second quarter with results pending.

At Pallancata, during the quarter, 1,000m of resource drilling was carried out in the Marco vein, a structure identified close to the Pablo vein with just over 1 million ounces of silver equivalent resources already expected to have been identified year-to-date. Selected results are below:

At Inmaculada, although the main drilling programmes have not begun yet, mine development during the period has allowed a reinterpretation of the geological model at the deposit and has so far identified a further 9.7 million silver equivalent ounces of resources.

At San Jose, 4,837m of drilling for potential resources was carried out in the first quarter at the Aguas Vivas zone as well as the Juanita structure with preliminary results from Aguas Vivas below.

During the second half of 2017, approximately 40,000 metres of drilling will be executed with targets including: 3,100 metres of long horizontal drilling for potential resources at Arcata as well as a further 10,000 metres of resource drilling; 1,000 metres of potential resource drilling to test the Millet structure at Inmaculada; 2,500 metres of potential resource drilling to the north east of Inmaculada at the Puquiopata area; and 5,500 metres at the Aguas Vivas zone to the north west of San Jose. Further drilling campaigns are subject to the receipt of the requisite permits.

FINANCIAL REVIEW

The reporting currency of Hochschild Mining plc is U.S. dollars. In discussions of financial performance the Group removes the effect of exceptional items, unless otherwise indicated, and in the income statement results are shown both pre and post such exceptional items. Exceptional items are those items, which due to their nature or the expected infrequency of the events giving rise to them, need to be disclosed separately on the face of the income statement to enable a better understanding of the financial performance of the Group and to facilitate comparison with prior years. 

Revenue

Gross revenue

Gross revenue from continuing operations increased by 2% to $359.5 million in H1 2017 (H1 2016: $353.3 million) due to a slight increase in sales of silver as well as a small rise in the average gold price received.7

Silver

Gross revenue from silver increased by 4% in H1 2017 to $180.1 million (H1 2016: $172.7 million) as a result of the above-mentioned increase in the total amount of silver ounces sold to 10,508 koz (H1 2016:10,085 koz), which was driven by increases at Pallancata and Inmaculada offsetting a decline at Arcata.

Gold

Gross revenue from gold in H1 2017 was similar to the same period of 2016 at $179.4 million (H1 2016: $180.5 million) the total amount of gold ounces sold falling slightly in H1 2017 (143.4 koz) but offset by a 1% increase in the average gold price received.

Gross average realised sales prices

The following table provides figures for average realised prices (which are reported before the deduction of commercial discounts and include the effects of the hedging agreements in place during 2016) and ounces sold for H1 2017 and H1 2016:

Commercial discounts

Commercial discounts refer to refinery treatment charges, refining fees and payable deductions for processing concentrates, and are deducted from gross revenue on a per tonne basis (treatment charge), per ounce basis (refining fees) or as a percentage of gross revenue (payable deductions). In H1 2017, the Group recorded commercial discounts of $18.9 million (H1 2016: $14.1 million) with the increase explained by the higher production from the concentrate-only Pallancata mine. The ratio of commercial discounts to gross revenue in H1 2017 was 5% (H1 2016: 4%).

Net revenue

Net revenue was $340.8 million (H1 2016 $339.3 million), comprising net gold revenue of $174.6 million (H1 2016: $176.0 million) and net silver revenue of $166.0 million (H1 2016: $163.1 million). In H1 2017, gold accounted for 51% and silver 49% of the Company's consolidated net revenue (H1 2016: gold 52% and silver 48%) with the minor increase in the silver contribution due to an increase in sales from the predominantly-silver Pallancata mine.

Revenue by mine8

Costs

Total cost of sales was $261.2 million in H1 2017 (H1 2016: $238.7 million). The direct production cost excluding depreciation was higher at $157.2 million (H1 2016: $139.0 million) due to an increase in costs of Inmaculada mine resulting from two new processes (the paste backfill plant and the tailings detoxification). Costs were also negatively impacted by lower than expected currency devaluation in Argentina only partially offsetting high ongoing unit cost inflation. Depreciation was lower at $83.8 million (H1 2016: $88.6 million) driven by lower extracted tonnage in Pallancata as a result of the community-related stoppage and in Inmaculada as a result of the fatalities in January. Other items, which principally includes stoppage costs and personnel related provisions, was $2.6 million in H1 2017 (H1 2016: ($0.1 million)). Change in inventories was higher at $17.6 million in H1 2017 (H1 2016: $11.3 million) due an important decrease in products in process and finished goods.

Unit cost per tonne

The Company reported unit cost per tonne at its operations of $127.8 per tonne in H1 2017, a 18% increase versus H1 2016 ($108.7 per tonne) mostly due to reduced mined tonnage at Inmaculada and significant cost inflation in Argentina.

Unit cost per tonne by operation (including royalties)9:

Cash costs

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

Cash cost reconciliation10:

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

All-in sustaining cost reconciliation

All-in sustaining cash costs per silver equivalent ounce

Six months to 30 June 2017

Six months to 30 June 2016

Administrative expenses

Administrative expenses before exceptional items increased by 17% to $26.0 million (H1 2016: $22.2 million) primarily due to increased personnel expenses.

Exploration expenses

In H1 2017, exploration expenses increased to $7.1 million (H1 2016: $4.0 million). In addition, the Group capitalises part of its brownfield exploration, which mostly relates to costs incurred converting potential resource to the Inferred or Measured and Indicated category. In H1 2017, the Company capitalised $1.9 million relating to brownfield exploration compared to $0.3 million in H1 2016, bringing the total investment in exploration for H1 2017 to $9.0 million (H1 2016: $4.3 million). 

Selling expenses

Selling expenses decreased by 27% versus H1 2016 to $5.2 million (H1 2016: $7.1 million) mainly due to the elimination of export duties at San Jose. Selling expenses consisted mainly of logistic costs for the sale of concentrate whilst H1 2016 expenses also included approximately 1.5 months of export duties on concentrate until their elimination on 12 February 2016. Previously, export duties in Argentina were levied at 10% of revenue for concentrate.

Other income/expenses

Other income before exceptional items was $5.2 million (H1 2016: $12.9 million). The reduction is mainly due to the elimination of the Patagonian port rebate in the fourth quarter of 2016, partially offset by the sale of land concessions and properties in Peru.

Other expenses before exceptional items were $6.2 million (H1 2016: $6.2 million).

Adjusted EBITDA

Adjusted EBITDA decreased by 19% versus the same period of 2016 to $136.0 million (H1 2016: $170.3 million) primarily due the cancellation of the Patagonian port benefit in Q4 2016 in addition to increases in costs at Inmaculada and San Jose.

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

Finance income

Finance income before exceptional items of $2.7 million increased from H1 2016 ($0.5 million) primarily due the impact of a higher net present value of the Patagonian port rebate ($1.8 million). Collection dates have been updated and are shorter than the originally expected 2 year period. The remainder consists of interest received on deposits.

Finance costs

Finance costs before exceptional items decreased from $17.4 million in H1 2016 to $13.3 million in H1 2017, principally due to the reduction of interest resulting from the repayment of Scotiabank medium term loan in H1 2016 and the short-term borrowings.

Foreign exchange (losses)/gains

The Group recognised a foreign exchange loss of $0.5 million (H1 2016: $0.4 million gain) as a result of exposures in currencies other than the functional currency specifically the Peruvian Nuevo Sol and Argentinean Peso.

Income tax

The Company's pre-exceptional income tax charge was $10.7 million (H1 2016: $21.4 million). The substantial decrease in the charge is explained by the Company's decrease in profitability in the period. The effective tax rate for the period was 23.6% (H1 2016: 32.4%), compared to the weighted average statutory tax rate of 32.1%, and 30.9% if the mining royalty and the special mining tax are included (H1 2016: 37.4%) with the primary reason for the reduction being the impairment reversal at San Felipe.

Exceptional items

Exceptional items in H1 2017 totalled a $9.3 million gain after tax (H1 2016: $1.8 million). Exceptional items principally included impairment reversals of $31.9 million for Pallancata and $5.3 million at San Felipe partially offset by a $26.3 million impairment of Arcata.

These items excluded the exceptional tax effect that amounted to a $1.7 million tax charge (H1 2016: $1.1 million tax charge). 

Cash flow and balance sheet review

Cash flow:

Operating cash flow reduced from $144.6 million in H1 2016 to $80.5 million in H1 2017, mainly due to higher backfill and detoxification costs at Inmaculada, the impact of the net inflation in Argentina and reduced tonnage and grades at Arcata. This was partially offset by lower costs at Pallancata due to stronger grades and tonnage. Net cash used in investing activities decreased to $47.4 million in H1 2017 from $54.8 million in H1 2016 mainly due to lower capex at Inmaculada and at the Company's projects. Finally, cash used in financing activities reduced to $30.6 million from $70.8 million in H1 2016, primarily due to the lower amount of debt repaid. As a result, total cash flows resulted in a net increase of $4.5 million from $19.0 million in H1 2016 ($(14.5) million difference).

Working capital

The Group's working capital position moved by $14.7 million from $(71.1) million reduction to a $(56.4) million reduction in H1 2017. Key drivers were: lower inventories ($14.1 million), higher income tax receivable resulting from $21.2 million of tax payments in Argentina; and higher trade and other payables and provisions $(4.7) million in line with higher costs. These were partially offset by: an increase in trade and other receivables $(12.9) million mainly due to Pallancata's trade receivables in line with its higher production.

Net debt

The Group reported net debt position was $164.7 million as at 30 June 2017 (2016: $187.4 million). The reduction in H1 2017 includes the net effect of: the repayment of short-term loans ($18.5 million) and; the operating cash generated during the period.

Capital expenditure15

H1 2017 capital expenditure of $58.8 million (H1 2016: $59.2 million) mainly comprised of operational capex of $57.5 million (H1 2016: $55.3 million) with the small decrease versus H1 2016 comprising decreases at Inmaculada and projects partially offset by increases in capital expenditure at Pallancata.

Non-IFRS Financial Performance Measures

The Company has included certain non-IFRS measures in this news release. The Company believes that these measures, in addition to conventional measures prepared in accordance with IFRS, provide investors an improved ability to evaluate the underlying performance of the Company. The non-IFRS measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. These measures do not have any standardised meaning prescribed under IFRS, and therefore may not be comparable to other issuers.

Forward looking Statements

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

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

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

RISKS

The principal risks and uncertainties facing the Company in respect of the year ended 31 December 2016 are set out in detail in the Risk Management & Viability section of the 2016 Annual Report and in Note 36 to the 2016 Consolidated Financial Statements.

The key risks disclosed in the 2016 Annual Report (available at www.hochschildmining.com) are categorised as:

o Financial risks comprising commodity price risk;

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

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

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

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

RELATED PARTIES TRANSACTION

Related parties transactions are disclosed in note 19 to the condensed set of financial statements.

GOING CONCERN

The Company's business activities, together with the factors likely to affect future development, performance and position are set out in the Operating Review on pages 3 to 7. The financial position of the Company, its cash flow and liquidity position are described in the Financial Review on pages 8 to 12.

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

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

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

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors confirm that, to the best of their knowledge, the interim condensed consolidated financial statements have been prepared in accordance with IAS 34 "Interim Financial Reporting" as adopted by the European Union and that the interim management report includes a fair review of the information required by Disclosure Guidance and Transparency Rules 4.2.7R and 4.2.8R.A list of current Directors and their functions is maintained on the Company's website.For and on behalf of the Board 

Ignacio BustamanteChief Executive Officer

15 August 2017

INDEPENDENT REVIEW REPORT TO HOCHSCHILD MINING PLC

Introduction

We have been engaged by Hochschild Mining plc (the 'Company') to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2017 which comprises the Interim condensed consolidated income statement, the Interim condensed consolidated statement of comprehensive income, the Interim condensed consolidated statement of financial position, the Interim condensed consolidated statement of cash flows, the Interim condensed consolidated statement of changes in equity and the related notes 1 to 20. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

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

Directors' Responsibilities

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

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

Our Responsibility

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

Scope of Review

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

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2017 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Ernst & Young LLPLondon15 August 2017

Interim condensed consolidated income statement

Interim condensed consolidated statement of comprehensive income

Interim condensed consolidated statement of financial position

Interim condensed consolidated statement of cash flows

Interim condensed consolidated statement of changes in equity

Notes to the interim condensed consolidated financial statement

1 Corporate Information

Hochschild Mining plc (hereinafter the "Company" and together with its subsidiaries, the "Group") is a public limited company incorporated on 11 April 2006 under the Companies Act 1985 as a limited company and registered in England and Wales with registered number 05777693. The Company's registered office is located at 17 Cavendish Square, London W1G 0PH, United Kingdom. Its ordinary shares are traded on the London Stock Exchange.

The Group's principal business is the mining, processing and sale of silver and gold. The Group has three operating mines (Arcata, Pallancata and Inmaculada) located in Southern Peru, and one operating mine (San Jose) located in Argentina. The Group also has a portfolio of projects located across Peru, Argentina, Mexico and Chile at various stages of development.

These interim condensed consolidated financial statements were approved for issue on behalf of the Board of Directors on 15 August 2017.

2 Significant Accounting Policies

(a) Basis of preparation

These interim condensed consolidated financial statements set out the Group's financial position as at 30 June 2017 and 31 December 2016 and its financial performance and cash flows for the six months ended 30 June 2017 and 30 June 2016.

They have been prepared in accordance with IAS 34 Interim Financial Reporting in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union. Accordingly, the interim condensed consolidated financial statements do not include all the information required for full annual financial statements and therefore, should be read in conjunction with the Group's 2016 annual consolidated financial statements as published in the 2016 Annual Report.

The interim condensed consolidated financial statements do not constitute statutory accounts as defined in the Companies Act 2006. The financial information for the full year is based on the statutory accounts for the financial year ended 31 December 2016. A copy of the statutory accounts for that year, which were prepared in accordance with IFRS as adopted by the European Union has been delivered to the Registrar of Companies. The auditor's report under section 495 of the Companies Act 2006 in relation to those accounts was unmodified and did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying the report and did not contain a statement under s498(2) or s498(3) of the Companies Act 2006.

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

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

(b) Changes in accounting policies and disclosures

The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual consolidated financial statements for the year ended 31 December 2016, except for the adoption of new standards and interpretations effective for the Group from 1 January 2017, which has not had a material impact on the annual consolidated financial statements or the interim condensed consolidated financial statements of the Group. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

Except as set out below, the Group's assessment of new standards issued but not yet effective is consistent with that disclosed in the Annual Report 2016.

The Group is continuing to evaluate in detail the potential impact of IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers but does not currently expect these to have a material impact on the financial statements. In respect of IFRS 16 Leases, the Group is yet to estimate the impact of the new rules on the Group's financial statements.

(c) Going concern

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

3 Segment reporting

The following tables present revenue and profit/(loss) information for the Group's operating segments for the six months ended 30 June 2017 and 2016 and asset information as at 30 June 2017 and 31 December 2016 respectively: