Hochschild Regulatory News (HOC)

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15 August 2018

Hochschild Mining plc

Interim Results for the six months ended 30 June 2018

2018 Interim Results Highlights

§ Revenue of $372.3 million (H1 2017: $340.8 million)[1]

§ Adjusted EBITDA of $161.9 million (H1 2017: $136.0 million)[2]

§ Pre-exceptional profit before income tax of $54.9 million (H1 2017: $28.9 million)

§ Post-exceptional profit before income tax of $38.6 million (H1 2017: $38.9 million)

§ Adjusted basic earnings per share of $0.05 (H1 2017: $0.03)[3]

§ Cash and cash equivalent balance of $141.7 million as at 30 June 2018 (31 December 2017: $257.0 million)

§ Net debt of $67.3 million as at 30 June 2018 (31 December 2017: $102.8 million)

§ Interim dividend up 42% at 1.965 cents per share totalling $10.0 million (H1 2017: 1.38 cents per share totalling $7.0 million)

Exploration programme delivering exciting results

§ Inmaculada drilling programme has added 800,000 gold or 59.2 million silver equivalent ounces of inferred resources year-to-date

o Further update in Q4 2018

§ Encouraging results being delivered at Arcata - mine developments being prioritised over inferred resource additions

§ San Jose drilling set to restart in September after poor seasonal weather conditions

§ Good progress on permitting for 2019 drilling programme at Pallancata

H1 2018 operational delivery in line with guidance

§ All-in sustaining costs from operations of $11.9 per silver or $880 per gold equivalent ounce (H1 2017: $12.0 per silver or $892 per gold equivalent ounce)

§ Production of 19.9 million attributable silver or 268,237 attributable gold equivalent ounces (H1 2017: 17.9 million attributable silver or 242,208 attributable gold equivalent ounces)[4]

§ Inmaculada AISC per gold equivalent ounce of $615 (H1 2017: $651)

§ Record production of 138,427 gold equivalent ounces at Inmaculada (H1 2017: 115,547 ounces)

H2 2018 Outlook

§ On track to deliver attributable production target of 38.0 million silver equivalent ounces for 2018 (514,000 gold equivalent ounces)

§ All-in sustaining costs for 2018 expected to be in line with $13.0-13.4 per silver equivalent ounce ($960-$990 per gold equivalent ounce) target

Ignacio Bustamante, Chief Executive Officer said:

"Hochschild Mining has delivered a strong first half performance with record production at Inmaculada and a very solid performance on the costs front leaving us on track to achieve our 2018 targets. Our brownfield programme has started to generate some exciting results with the key achievement of the addition of 800,000 gold equivalent ounces (59.2 million silver equivalent ounces) of resources at Inmaculada as well as good progress at Arcata. We have also been able to advance our debt repayment programme with the refinancing and repayment of our bond to put the Company in a strong financial position to execute the brownfield plan and growth strategy.

Safety

In my statement that accompanied the 2017 Full Year Results, I discussed the establishment of our Safety Culture Transformation Plan (Plan) which is a tailored, multi-faceted programme that includes a number of initiatives to reinforce our safety-first culture. Amidst this Company-wide effort, I am deeply saddened to report that two accidents occurred during the first half of 2018 which claimed the lives of three workers. In keeping with Company practice, detailed investigations were carried out and resulting recommendations have been incorporated into the Plan. These incidents serve to highlight the importance of our continuous efforts to prioritise safety in order to create a zero-harm working environment and I am therefore encouraged to report that in H1 2018, there have been significant reductions in the Lost Time Injury Frequency Rate and the number of high potential safety events when compared to the same period of 2017.

Operations

Hochschild's mines enjoyed a record half of production with Inmaculada and Pallancata demonstrating particularly strong results as the Company's output rose to 19.9 million silver equivalent ounces (268,237 gold equivalent ounces). Thies represents an 11% improvement on the first half of last year and puts us on track to meet our full year target of 38 million silver equivalent ounces (514,000 gold equivalent ounces). Inmaculada's output of 138,427 gold equivalent ounces was characterised by strong grades and boosted by inventory in process at the beginning of the year leaving the mine well ahead of the run rate to meet its forecasted 235,000 ounces. All-in sustaining costs at $615 per gold equivalent ounce were low reflecting the good operational performance but also some second-half phasing of capital expenditure which we expect will raise the number to the forecast full year levels ($700-$750 per gold equivalent ounce).

At Pallancata, better grades from developments, ancillary veins and from the new Pablo vein (currently in its ramp-up phase) have increased production and lowered costs allowing the operation to deliver 4.2 million silver equivalent ounces at an all-in sustaining cost of 12.0 per silver equivalent ounce. Finally, both San Jose and Arcata's output was in line with expectations in the first half with San Jose's unit costs helped by the significant Argentine peso devaluation (offsetting high local inflation), whilst Arcata remained in a transitional phase emphasising the need for our current brownfield programme to deliver high quality accessible new resources.

Exploration

The key achievement of our 2018 brownfield plan to date has been the successful start of the comprehensive exploration programme at Inmaculada. The Company has begun by drilling an area to the south east of the Angela vein and has confirmed the presence of a considerable number of structures including the Millet, Divina and Lola veins, all in close proximity to the current mine infrastructure. So far, approximately 800,000 gold equivalent ounces (59.2 million silver equivalent ounces) of inferred resources have been added, a highly encouraging result which confirms the strong early potential in this district. The current campaign is continuing with at least 10,000 metres still to be drilled in 2018 and we expect to provide a further update in the fourth quarter. In addition, several targets have been already identified to form the basis of the 2019 programme.

At Arcata, encouraging results have been achieved so far this year with drilling to the north of current mining infrastructure and we have therefore decided to prioritise underground development over inferred resource additions with the aim of rapid incorporation into the mine plan and an improvement in the mine's output and economic results. At San Jose, some positive drilling results were achieved close to the current deposit before severe winter weather disrupted the programme whilst at Pallancata, good progress has been made in permitting to prepare for the 2019 plan, which includes a number of highly promising targets to the south of the current mine.

Financial results

Production and the gold price achieved in the first half both increased versus H1 2017 and were offset only by a lower silver price and therefore revenue rose by 8% to $372 million (H1 2017: $341 million). This together with a small reduction achieved in the operational all-in sustaining cost to $11.9 per silver equivalent ounce (H1 2017: $12.0 per ounce) has led to Adjusted EBITDA rising in the period to $162 million (H1 2017: $136 million). Despite the increased tax charge and foreign exchange loss offsetting the effects of the reduction in interest costs, pre-exceptional earnings per share increased to $0.05 whilst the payment of the premium of $11 million to redeem the senior notes in January along with the payment reversal of capitalised bond issuance costs (both treated as exceptional) led to post-exceptional earnings per share of $0.03.

Financial position

Our balance sheet is now the strongest it has been in over four years with the repayment of our bonds in January and the refinancing of a portion of that debt at much lower rates. The first half cashflow from operations also continued to be strong with our net debt position falling still further. Cash and cash equivalents stood at approximately $142 million at the end of June leading to a net debt position of $67 million (31 December 2017: $102.8 million) and a ratio of net debt to annual Adjusted EBITDA currently at 0.21x.

Outlook

Precious metal prices are currently nearing the bottom of their recent trading range. However, Hochschild's operational performance combined with a strong balance sheet, exciting early results from our brownfield programme, a significant recent devaluation in the Argentine peso and no current hedges in place leave us in a beneficial position. The Board has declared an interim dividend of 1.965 cents per share ($10 million) reflecting the ongoing progress in our long term growth strategy as well as the positive steps 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 15 August 2018 for analysts and investors. For a live webcast of the presentation please click on the link below:

https://edge.media-server.com/m6/p/2kg5v937

Conference call dial in details:

UK: +44 (0)330 336 9125 (Please use the following confirmation code: 2785932).

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

UK: +44 (0)20 7660 0134(Passcode: 2785932)

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, Hochschild delivered a new record half of attributable production with 268,237 gold equivalent ounces or 19.9 million silver equivalent ounces primarily driven by significant increases at Inmaculada and Pallancata, as well as another consistent result from the 51% owned San Jose mine.

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

All-in sustaining costs from operations in H1 2018 was $881 per gold equivalent ounce or $11.9 per silver equivalent ounce (H1 2017: $888 per gold equivalent ounce or $12.0 per silver equivalent ounce), driven by Inmaculada's 6% half-on-half decline in addition to a better than expected result from Pallancata.

The Company is maintaining its guidance of all-in sustaining cost from operations in 2018 at between $960 and $990 per gold equivalent ounce (or $13.0 and $13.4 per silver equivalent ounce). Inmaculada's costs are expected to rise in the second half due to increased development capital expenditure following a successful first half of exploration. At Pallancata, the ramp-up to full production of the Pablo vein will increase tonnage but will process lower grades which will raise all-in sustaining costs slightly to the forecasted levels.

Inmaculada (Peru)

The 100% owned Inmaculada gold/silver underground operation is located in the Department of Ayacucho in southern Peru. It commenced commissioning in June 2015.

Production

Inmaculada produced 138,427 gold equivalent ounces in the first half, a 20% improvement on H1 2017 (115,547 gold equivalent ounces), driven by better than expected grades and a contribution from inventory in process from Q4 2017. 

Costs

All-in sustaining costs were lower than forecast at $615 per gold equivalent ounce (H1 2017: $651 per ounce) mostly due to the impact of higher grades as well as the effect of the inventory in process (mentioned above). However, in the second half, costs are expected to normalise with capital expenditure increasing to access the new veins.

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

Current mining operations at Pallancata saw average grades from the mix of material from the Pablo vein, mine developments and ancillary veins continuing to be better than planned in the first half. This is expected to be only a temporary effect and will not continue once Pablo is fully ramped up. The operation produced 4.2 million silver equivalent ounces (H1 2017: 3.2 million ounces).

The ramp up of tonnage from Pablo continued in the first half although a small delay in the installation of the ventilation systems resulted in tonnage reaching approximately 1,900 tonnes per day by the end of June, slightly lower than the forecast 2,200 tonnes per day. The Company expects to achieve a run-rate of around 2,800 tonnes per day in the fourth quarter.

Costs

All-in sustaining costs at Pallancata in the first half were $12.0 per silver equivalent ounce (H1 2017: $10.9 per ounce). This better-than-expected result was due to higher grades from the mix of material from the Pablo vein, developments and ancillary veins, as mentioned above. All-in sustaining cost for the full year is still expected to be between $13.0 to $13.5 per silver equivalent ounce with the lower grade Pablo vein scheduled to ramp up to full production of 2,800 tonnes per day in the fourth quarter.

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.

Production

San Jose has once again experienced a steady half with tonnage slightly higher than the corresponding period of 2017 but this was partially offset by lower grades resulting in production of 6.5 million silver equivalent ounces, in line with the same period of 2017 (H1 2017: 6.5 million ounces).

Work on the $14 million hydraulic backfill project has progressed steadily in the first half although poor seasonal weather conditions have recently affected deliveries of materials and equipment. Testing of the completed pumping process is scheduled for August with full operation due in October.

Costs

All-in sustaining costs were $15.0 per silver equivalent ounce (H1 2017: $14.4 per ounce) with the increase versus last year due to ongoing high cost inflation in Argentina in addition to seasonally lower grades and the backfill project. These were partially offset by increased tonnage. Overall 2018 all-in sustaining costs are still expected to be between $14.0 to $14.5 per silver equivalent ounce with the full effects of the recent accelerating devaluation of the Argentinian peso already reducing unit costs.

Arcata (Peru)

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

Production

Tonnage and grades at Arcata remained consistent throughout the first half of the year with the focus still on improving the cost position and increasing the quality of resources through the 2018 exploration programme, as well as other efficiency and productivity measures. Total production for the half was 2.2 million silver equivalent ounces, which places the mine on track to meet the 2018 forecast of just over 4 million ounces.

Costs

In H1 2018, Arcata's all-in sustaining costs were $19.3 per silver equivalent ounce (H1 2017: $17.6 per ounce) reflecting the reduced tonnage versus this time last year as well as the higher than expected investment in the mine's exploration in the first half due to the good progress made with the drilling programme.

EXPLORATION

Inmaculada

Hochschild has continued the comprehensive surface drilling programme begun in November 2017 with the campaign focusing on the area to the East of the Angela vein. Almost 28,000 metres of mostly resource drilling has been carried out and initial inferred resources have been achieved. Selected results are listed below:

Resources (unaudited) from the above zones are estimates using metal price assumptions of $1,200 for gold and $16.5 per ounce for silver. So far, approximately 59.2 million silver equivalent ounces (800,000 gold equivalent ounces) of the Inferred category have been added to the Inmaculada resource base (see below table), all of which are close to the existing Inmaculada infrastructure with good widths and therefore represent significant low cost additions to the future Inmaculada mine plan.

Inferred Resources[5]

The programme is continuing in Q3 and 10,000m of drilling is planned for the Millet West, Divina West and Misterio structures with a further update on resources expected in the fourth quarter.

Arcata

At Arcata, an underground drilling programme for the year has been focused on areas close to the existing mine infrastructure with potential to be rapidly incorporated into the short-term Arcata mine plan. Such resources are being prioritised over inferred resource incorporation. Just over 13,000 metres of resource drilling was carried out in the Ruby 2, Ruby 3, Cristina, Rosalia, Pablito East, Veta X and Fryda veins whilst almost 9,000 metres of potential drilling was executed in the Tunel 4, Barbara, Tres Reyes, Silvia and Anomaly North structures. Selected results are listed below:

In the third quarter, the programme will focus on 7,000m of drilling at the Ruby 2, Ruby 3 and Pamela (New) structures.

Pallancata

Approximately 1,000m of potential underground drilling was carried out in Pablo Sur structures with the campaign in this area continuing into the third quarter. Much of the focus for 2018 is currently on securing exploration permits for potential 2019 campaigns for the Pallancata East area, for the Cochaloma structures to the south east and for highly promising areas further to the south with good progress made to date.

San Jose

At San Jose, resources are expected to be added from the ongoing drilling campaign close to the mine infrastructure particularly from the Ayelen S.E., Molle and Odin veins. Almost 7,000 metres of drilling was executed before the winter weather disrupted progress. The targets were the Maia and Guadalupe structures in the south of the deposit. The team was also in the middle of executing a potential drilling campaign to the North West at the Aguas Vivas zone before the weather disruption. Selected results from the first half are provided below:

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 7% to $386.4 million in H1 2018 (H1 2017: $359.5 million) due to an increase in sales of silver and gold in line with the increased production versus the same period of last year as well as a rise in the average gold price received.[6]

Silver

Gross revenue was flat in H1 2018 at $179.5 million (H1 2017: $180.1 million). The increase in the total amount of silver ounces sold to 11,067 koz (H1 2017:10,508 koz), which was driven by increases at Pallancata and Inmaculada, was offset by a decline at Arcata as well as a 5% decline in the average silver price received (see below).

Gold

Gross revenue from gold in H1 2018 increased to $206.9 million (H1 2017: $179.4 million) due to a 5% increase in the gold price received as well as a 10% rise in the total amount of gold ounces sold in H1 2018. The increase was due to higher production but also inventory in process relating to the prior year that was sold in 2018.

Gross average realised sales prices

The following table provides figures for average realised prices (before the deduction of commercial discounts) and ounces sold for H1 2018 and H1 2017:

Commercial discounts

Commercial discounts refer to refinery treatment charges, refining fees and payable deductions for processing concentrate, 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 2018, the Group recorded commercial discounts of $14.2 million (H1 2017: $18.9 million) with the decrease explained by the lower production from the concentrate-only Arcata mine. The ratio of commercial discounts to gross revenue in H1 2018 was 4% (H1 2017: 5%).

Net revenue

Net revenue was $372.3 million (H1 2017 $340.8 million), comprising net gold revenue of $203.4 million (H1 2017: $174.6 million) and net silver revenue of $168.8 million (H1 2017: $166.0 million). In H1 2018, gold accounted for 55% and silver 45% of the Company's consolidated net revenue (H1 2017: gold 51% and silver 49%) with the increase in the gold contribution due to an increase in sales from the Inmaculada mine and the rise in the average gold price received.

Revenue by mine[7]

Costs

Total cost of sales was $267.3 million in H1 2018 (H1 2017: $261.2 million). The direct production cost excluding depreciation was higher at $174.0 million (H1 2017: $157.2 million) in line with higher production volumes mainly due to the ramp up of the Pablo vein at Pallancata. Despite the production increases, the depreciation in production cost slightly decreased to $82.9 million (H1 2017: $83.8 million). Other items, which principally includes stoppage costs and personnel related provisions, declined to $0.9 million in H1 2018 (H1 2017: $2.6 million). Change in inventories was $ 9.4 million in H1 2018 (H1 2017: $17.6 million) due to a decrease in products in process and finished goods.

Unit cost per tonne

The Company reported unit cost per tonne at its operations of $124.5 per tonne in H1 2018, a 3% decrease versus H1 2017 ($127.8 per tonne) due to increased mined tonnage at Pallancata and the depreciation of the Argentine peso offsetting the decline in tonnage at Arcata.

Unit cost per tonne by operation (including royalties)[8]:

Cash costs

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

Cash cost reconciliation[9]:

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 2018

Six months to 30 June 2017

Administrative expenses

Administrative expenses before exceptional items decreased by 17% to $21.7 million (H1 2017: $26.0 million) primarily due to a decrease in personnel expenses.

Exploration expenses

In H1 2018, exploration expenses increased to $13.0 million (H1 2017: $7.1 million) in line with the overall rise in the Company's investment in brownfield and greenfield exploration. 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 2018, the Company capitalised $4.9 million relating to brownfield exploration compared to $1.9 million in H1 2017, bringing the total investment in exploration for H1 2018 to $17.9 million (H1 2017: $9.0 million). 

Selling expenses

Selling expenses decreased by 52% versus H1 2017 to $2.5 million (H1 2017: $5.2 million) due to the reallocation of transportation costs of $2.7 million to pre-exceptional cost of sales (direct production cost excluding depreciation).

Other income/expenses

Other income before exceptional items was lower at $4.9 million (H1 2017: $5.2 million).

Other expenses before exceptional items were higher at $7.9 million (H1 2017: $6.2 million) mainly due to termination benefits of $1.3 million related to Arcata´s restructuring programme.

Adjusted EBITDA

Adjusted EBITDA increased by 19% to $161.9 million (H1 2017: $136.0 million) primarily due to the rise in production and partially offset by an increase in exploration expenses.

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 $1.1 million decreased from H1 2017 ($2.7 million) primarily due to the impact of a one-off gain from the discount of tax credits in Argentina ($1.9 million) in H1 2017.

Finance costs

Finance costs before exceptional items decreased from $13.3 million in H1 2017 to $6.5 million in H1 2018, principally due to the reduction of the interest rate from 7.75% (Senior Notes) to a 2.64% average (short and medium term loan rates) resulting from the repayment of the Company's Senior Notes. In addition, the gross debt was reduced from $353.8 million ($294.8 million of Senior Notes and $59.0 million of short term debt) to $207.5 million (medium-term loan of $100.0 million and short-term debt of $107.5 million).

Foreign exchange (losses)/gains

The Group recognised a foreign exchange loss of $4.3 million (H1 2017: $0.5 million loss) as a result of exposures in currencies other than the functional currency - primarily the Argentinean peso.

Income tax

The Company's pre-exceptional income tax charge was $32.7 million (H1 2017: $10.7 million). The substantial increase in the charge is mainly explained by the Company's increase in profitability in the period. In addition, the increase is also due to the negative income tax impact of $8 million resulting from converting local currency tax basis at a higher FX rate in Argentina thus reducing future tax shields in dollar terms.

Exceptional items

Exceptional items in H1 2018 totalled an $11.5 million loss after tax (H1 2017: $9.3 million gain after tax). Exceptional items principally included the payment of the premium of $11.4 million to redeem early the Senior Notes and the reversal of capitalised bond issuance costs of $4.9 million.

In addition to these items, the exceptional tax effect was a $4.8 million tax gain (H1 2017: $1.7 million tax charge). 

Cash flow and balance sheet review

Cash flow:

Operating cash flow increased from $80.5 million in H1 2017 to $117.2 million in H1 2018 mainly due to higher EBITDA.

Net cash used in investing activities increased to $64.1 million in H1 2018 from $45.4 million in H1 2017 mainly due to the construction of the hydraulic backfill plant in Argentina, the development of the Pablo vein at Pallancata and higher capitalised exploration.

Finally, cash used in financing activities increased to $164.6 million from $30.6 million in H1 2017, primarily due the repayment of the Company's Senior Notes ($294.8 million) and $1.5 million of short term debt in Argentina. This was partially offset by new loans of $150.0 million raised to repurchase the Senior Notes. In addition, $10 million of dividends were paid to Hochschild Mining plc shareholders and $7.2 million to McEwen Mining shareholders.

As a result, total cash flows resulted in a net decrease of $111.5 million from an increase of $4.5 million in H1 2017 ($(116.0) million difference).

Working capital

The Group's working capital position improved by $(5.1) million from $(64.9) million to a $(70.0) million in H1 2018. The key drivers were: lower inventories of ($10.7) million due to a reduction in products in process; and lower trade and other receivables of $(6.8) million resulting from an improvement in commercial terms. Other positive contributions came from: the reduction in Other financial assets/(liability) of $(2.2) million resulting from the embedded derivative associated with provisional pricing; and the reduction in the Income tax receivable of ($2.5) million. These positive changes were partially offset by a temporary decrease in trade and other payables of $(13.6) million and a decrease in provisions ($3.4 million).

Net debt

The Group reported net debt position was $67.3 million as at 30 June 2018 (31 December 2017: $102.8 million). The reduction in H1 2018 includes the operating cash generated during the period and the net effect of: the repayment of the Company's Senior Notes of $294.8 million; the repayment of short term debt of $1.5 million in Argentina and the new loans raised to purchase the Senior Notes (a short-term loan with Nova Scotia Bank of $50.0 million and a medium term loan with Nova Scotia Bank and Citibank of $100.0 million).

Capital expenditure[15]

H1 2018 capital expenditure of $67.3 million (H1 2017: $58.8 million) mainly comprised of operational capex of $64.8 million (H1 2017: $57.5 million) with the small increase versus H1 2017 comprising increases in capital expenditure at Inmaculada (capitalised exploration), Pallancata (development of the Pablo vein) and San Jose (the hydraulic backfill project) partially offset by a decrease at Arcata.

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 2017 are set out in detail in the Risk Management & Viability section of the 2017 Annual Report and in Note 36 to the 2017 Consolidated Financial Statements.

The key risks disclosed in the 2017 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, information security and cybersecurity, 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 PARTY TRANSACTIONS

There were no significant related parties transactions during the six month period ended 30 June 2018.

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 4 to 8. The financial position of the Company, its cash flow and liquidity position are described in the Financial Review on pages 9 to 14.

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

14 August 2018

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 2018 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 LLPLondon14 August 2018

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