Hochschild Regulatory News (HOC)

6 September 2023

Hochschild Mining PLC

Interim Results

Six months ended 30 June 2023

Hochschild Mining PLC ("Hochschild" or the "Company") (LSE: HOC) (OTCQX: HCHDF) is pleased to announce Interim Results for the six months ended 30 June 2023.

Financial Highlights

§ Revenue of $314.0 million (H1 2022: $347.8 million)[1]

§ Adjusted EBITDA of $99.5 million (H1 2022: $130.5 million)[2]

§ Profit before income tax (pre-exceptional) of $0.8 million (H1 2022: $15.3 million)

§ Loss before income tax (post-exceptional) of $66.1 million (H1 2022: profit of $5.4 million)

§ Basic loss per share (pre-exceptional) of $0.004 (H1 2022: earning per share of $0.01)

§ Basic loss per share (post-exceptional) of $0.09 (H1 2022: $0.01)

§ Cash and cash equivalent balance of $93.6 million as at 30 June 2023 (31 December 2022: $143.8 million)

§ Net debt of $227.1 million as at 30 June 2023 (31 December 2022: $175.1 million)

Operational Highlights[3] 

§ Inmaculada's Modified Environmental Impact Assessment approved on 1 August 2023 for an additional 20 years

§ All-in sustaining costs (AISC) from operations of $1,572 per gold equivalent ounce (H1 2022: $1,466) or $18.9 per silver equivalent ounce (H1 2022: $17.7)[4]

§ H1 2023 attributable production of 136,878 gold equivalent ounces or 11.4 million silver equivalent ounces (H1 2022: 157,380 gold equivalent ounces or 13.1 million silver equivalent ounces)

Project & Exploration Highlights

§ Mara Rosa project in Brazil advancing on schedule and on budget - total project progress at 92% with first production on track for H1 2024

§ Brownfield programme commenced in the surrounding areas of all three mines

ESG highlights

§ Continued improvement across all key metrics

§ Lost Time Injury Frequency Rate of 0.84 (FY 2022: 1.37)[5]

§ Accident Severity Index of 32 (FY 2022: 93)[6]

§ Water Consumption of 168lt/person/day (FY 2022: 171lt/person/day)

§ Domestic waste generation of 0.95 kg/person/day (FY 2022: 1.05kg/person/day)

§ ECO score of 5.89 out of 6 (FY 2022: 5.27)[7]

2023 Full year outlook

§ Revised guidance mainly reflects the impact of MEIA delays on Inmaculada and accelerated mine development costs at San Jose

§ Revised production target:

o  289,000-303,0000 gold equivalent ounces (24.0-25.0 million silver equivalent ounces)

§ Revised All-in sustaining costs target:

o  $1,490-$1,580 per gold equivalent ounce ($18.0-$19.0 per silver equivalent ounce)

§ Total sustaining and development capital expenditure expected to be approximately $130-140 million

§ Additional $60 million drawn down in early August 2023 from $200 million debt facility signed in December 2022

Capital Markets Event

§ Capital Markets Event to be held on 22 November 2023 in London where the Company will set out its long-term strategy

_______________________________________________________________________________________

A live conference call and audio webcast will be held at 9.30am (London time) on Wednesday 6 September 2023 for analysts and investors.

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

https://brrmedia.news/HOC_IR23

Conference call dial in details:

UK: +44 (0)330 551 0200

UK Toll Free: 0808 109 0700

US/Canada Toll Free: 866 580 3963

Pin: Hochschild - Interim Results

_______________________________________________________________________________________

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

_______________________________________________________________________________________

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.

About Hochschild Mining PLC:

Hochschild Mining PLC is a leading precious metals company listed on the London Stock Exchange (HOCM.L / HOC LN) and crosstrades on the OTCQX Best Market in the U.S. (HCHDF), with a primary focus on the exploration, mining, processing and sale of silver and gold. Hochschild has over fifty years' experience in the mining of precious metal epithermal vein deposits and currently operates three underground epithermal vein mines, two located in southern Peru and one in southern Argentina. Hochschild also owns the Mara Rosa Advanced Project in Brazil as well as numerous long-term projects throughout the Americas

EDUARDO LANDIN, CHIEF EXECUTIVE OFFICER SAID:

I am honoured to lead Hochschild Mining PLC and believe in a relationship with shareholders based on trust and a thorough appreciation of our key strengths.

We are dedicated to transparency and responsible business practices. Our core competencies drive success, with a proven track record of finding new resources, looking for new value accretive opportunities, delivering projects on time and on budget and operating efficiently. These are underpinned by a focus on consistent ESG performance and the capacity to continually learn from experience.

I look forward to working with colleagues across the business to ensure that we continue improving our strong safety, environmental, operational and financial record, while progressing our growth strategy. Together with the executive team, we are fully committed to unleashing Hochschild's full potential. We believe that safe, efficient operations, a clear strategic direction, great people and capital discipline will enable our Company to generate superior returns for shareholders and make a broader positive contribution to society.

The first half of the year was challenging for the Company as we reached the final stages of the process in securing Inmaculada's Modified Environmental Impact Assessment ("MEIA") which, regrettably, impacted in the short-term our operational and exploration strategy. However, following the recent welcome approval of the MEIA by the Peruvian government, the Company is now in an excellent position to optimise the Inmaculada mine and unlock its impressive geological potential, complete construction of our new Mara Rosa operation in Brazil and advance the new Royropata discovery at Pallancata.

I would like to thank the teams involved in four years of hard work on the permitting project and am delighted that Inmaculada will remain a key part of Hochschild's portfolio for many years to come. The extension reaffirms our commitment to our stakeholders in the Ayacucho region and its communities as well as to Peru overall.

ESG

We continued with our focus on safety and are proud that, in H1 2023, our key performance indicators highlighted our strongest performance to date in this area with both the accident frequency rate and accident severity indices at unprecedented low levels of 0.84 and 32, respectively. We are particularly pleased to report that during the construction phase at Mara Rosa, we performed over three million hours without any lost time accidents and that at both our Pallancata and San Jose operations we have surpassed two million hours without lost time accidents.

Our safety performance is matched by our environmental management during this first half with our ECO Score ending the period at 5.89 (out of 6), its most robust level since the implementation of this internally-designed KPI. This demonstrates not only proactivity and sound operational credentials but also a positive outcome of internal audits and regulatory inspections.

We are always looking for ways to improve our engagement with our local communities and so, to achieve this, during the first half we have reviewed, and are in the process of implementing, a reorganised social relations team with a continued focus on support and collaboration. In addition, in the first half, we held training sessions as part of our focus on promoting economic development through the Impulso Productivo ('Boosting Productivity') and "Orgullo Pecuario ('Pride in our Livestock') programmes for local farmers and livestock keepers. Additionally, we have been supporting local farmers in their sales by partnering with Sodexo.

Finally, in the area of education, we launched courses in our five Digital Centres in Peru in conjunction with local educational institutions under the Conexion Futuro programme ('Future Connection'). Workshops and motivational talks were also conducted for secondary school students in our communities, thanks to the Aprender para Triunfar programme ('Learn to Succeed').

Operations

Hochschild's production in the first half was, as expected, impacted by the delay in securing the approval of the MEIA, which had a knock-on effect on development at the mine. Overall attributable production was 136,878 gold equivalent ounces (11.4 million silver equivalent ounces), which was lower than the first half of 2022 due to the permit delay, as well as the expected lower production at Pallancata. Production in the period was at an all-in sustaining cost ("AISC") of $1,572 per gold equivalent ounce ($18.9 per silver equivalent ounce). Inmaculada otherwise had a solid half with production of 92,856 gold equivalent ounces (H1 2022: 106,584 ounces) and AISC at $1,272 per gold equivalent ounce (H1 2022: $1,074 per ounce).

Pallancata's current mining area is almost depleted, and grades and tonnage, as expected, continued to decline in the first half of the year. Output was 1.2 million silver equivalent ounces (H1 2022: 1.6 million ounces) with the mine's AISC unsurprisingly high at $31.7 per silver equivalent ounce (H1 2022: $32.3 per ounce). The Company's plan is to place Pallancata on care and maintenance in Q4 2023.

In Argentina, mine sequencing and the annual holidays impacted the first quarter but the second quarter was much stronger, leading to production of 4.9 million silver equivalent ounces in the first half (H1 2022: 5.1 million ounces). AISC was $21.5 per silver equivalent ounce (H1 2022: $21.2 per ounce).

Overall, I am proud of our team's fantastic work, which has delivered operational efficiencies and cost savings to mitigate the impact of the MEIA delay.

Projects

At the Mara Rosa project in the state of Goias in Brazil, we have made excellent progress in the first half of the year and are now at 92% total completion with all key equipment in place and all civil works complete and mechanical assembly advanced to 70% completion. We have also made good progress with pre-stripping and preparations for the operational permit. I am pleased to say that we remain on track for first production in the first half of next year and will provide regular progress updates over the final few months of construction.

Exploration

Our brownfield exploration programme for 2023 was also affected by the MEIA delay and has only recently re-started in Peru. Plans are underway to drill 10,000 metres at Inmaculada to identify additional high-grade resources in the Eduardo and San Salvador belts. With respect to our exciting Royropata discovery in Pallancata, where over 50 million ounces of high-grade silver were discovered in 2022 in veins with average widths of 5 metres, we have applied for the requisite permit to drill for additional resources. In Argentina, the team is targeting further potential resource drilling in the area surrounding our operations.

Financial results

Financial results reflect the difficult operating environment experienced in H1 2023, which we expect to improve in H2. Both silver and gold production were lower, as guided, versus H1 2022 and therefore, despite a 4% rise in the average gold price achieved, revenue decreased by 10% to $314.0 million (H1 2022: $347.8 million). AISC was $1,572 per gold equivalent ounce (H2 2022: $1,466 per ounce) with the rise reflecting the impact of the MEIA delay at Inmaculada, expected lower production at Pallancata and lower grades at San Jose. Adjusted EBITDA of $99.5 million (H1 2022: $130.5 million) mostly reflects the decreased production levels and increased costs whilst pre-exceptional loss per share was $0.004 (H1 2022: $0.01 earnings per share). Post-exceptional loss per share was $0.09 (H1 2022: $0.01).

Financial position

Following receipt of the MEIA, the Company is in a good position to fund the remaining capital expenditure at Mara Rosa which we expect to amount to $54 million in H2. Cash and cash equivalents was $93.6 million at the end of June (31 December 2022: $143.8 million) and net debt was $227.1 million (31 December 2022: $175.1 million). In December 2022, Hochschild closed a $200 million committed medium-term loan facility, which will provide funding to complete the construction of Mara Rosa and amortise our existing debt facilities, as well as for other corporate uses. We have also taken additional steps to ensure future cashflow certainty from the low-cost Mara Rosa project and have hedged additional ounces in Brazil for the next few years at highly competitive gold prices. This gives us financial flexibility to repay debt and continue to invest in our growth strategy.

Outlook

The MEIA delay has, as expected, impacted several of our 2023 operational and investment plans. We have therefore modified our production and cost guidance for the year at Inmaculada and at San Jose, where we have taken the decision to accelerate some 2024 mine development plans. The second half will also feature the final stages of investment in Mara Rosa as well as the restarting of our brownfield exploration programme in Peru, which will continue into 2024.

As we enter this new exciting phase for the Company, we look forward to presenting our long-term strategic plans and showcasing our future exploration opportunities at a Capital Markets Event on 22 November 2023.

I would like to express my gratitude to all stakeholders for their ongoing support in what has been a prolonged period of uncertainty for the Company. We are, however, entering a new phase with renewed impetus, and we are looking forward to a busy second half of construction and exploration while maintaining the very highest levels of safety, ethics and community support as we work to deliver on our commitments to all stakeholders.

OPERATING REVIEW

OPERATIONS

Note: All 2023 and 2022 silver/gold equivalent production figures assume a gold/silver ratio of 83:1.

Production

In H1 2023, Hochschild delivered attributable production of 136,878 gold equivalent ounces or 11.4 million silver equivalent ounces (on an attributable basis), with the decrease versus the same period of 2022 resulting from mine development of Inmaculada being temporarily impacted by the delay in the approval of the MEIA, as well as expected planned lower production at Inmaculada and Pallancata.

Total group production

Total production includes 100% of all production, including production attributable to Hochschild's minority shareholder at San Jose.

Attributable group production

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

The delay in the approval of the Inmaculada MEIA has, as expected, temporarily impacted the mine plan for 2023 at the operation and resulted in a modification to the production and cost forecasts for 2023. In addition, the Company has taken the decision to accelerate some 2024 mine development plans at San Jose into the second half of 2023 and therefore this has temporarily increased capital expenditure at the operation. The revised guidance for 2023 is as follows:

Revised attributable 2023 Production forecast split

Costs

AISC from operations in H1 2023 was $1,572 per gold equivalent ounce or $18.9 per silver equivalent ounce (H1 2022: $1,466 per gold equivalent ounce or $17.7 per silver equivalent ounce), higher than H1 2022 mainly due to lower tonnage at Inmaculada and lower grades at San Jose, partially offset by higher grades at Inmaculada.

The all-in sustaining cost from operations for 2023 is revised to between $1,490 and $1,580 per gold equivalent ounce (or $18.0 and $19.0 per silver equivalent ounce). This incorporates an additional provision of $4.1 million for brownfield exploration at Inmaculada and San Jose.

Revised 2023 AISC forecast split

Inmaculada

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

Production

Inmaculada's first half production was 61,852 ounces of gold and 2.6 million ounces of silver, which amounts to a gold equivalent output of 92,856 ounces (H1 2022: 106,584 ounces),with the reduction versus H1 2022, as expected, due to the ongoing delays in the decision on the MEIA impacting mine development although this was partially offset by higher grades.

Costs

AISC was $1,272 per gold equivalent ounce (H1 2022: $1,074 per ounce). The increase versus the same period of 2022 is mainly due to deferred mine development resulting from the MEIA delay, which caused decreased tonnage although this was partially offset by higher grades. The result was better than originally budgeted for the period due to temporary lower capex.

Pallancata

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

Production

In H1 2023, Pallancata's output was 1.2 million silver equivalent ounces (H1 2022: 1.6 million ounces) with reduced tonnage and grades versus H1 2022 in line with the current declining production profile.

Costs

AISC was $31.7 per silver equivalent ounce (H1 2022: $32.3 per ounce). Costs were slightly lower than H1 2022 as lower tonnage and lower grades were offset by substantially lower exploration capex versus the same period of last year.

San Jose

The San Jose silver/gold mine is located in Argentina, in the province of Santa Cruz, 1,750km southwest of Buenos Aires. San Jose commenced production in 2007. Hochschild holds a controlling interest of 51% in the mine and is the mine operator. The remaining 49% interest is owned by McEwen Mining Inc.

Production

The first half at San Jose in Argentina is traditionally a shorter operational period due to the scheduled hourly workers' holiday, which occurs in the first quarter. Mine sequencing also affected production earlier on in the year but the operation delivered a stronger second quarter with improved grades resulting in the H1 total of 4.9 million silver equivalent ounces (H1 2022: 5.1 million ounces).

Costs

AISC was $21.5 per silver equivalent ounce (H1 2022: $21.2 per ounce), in line with the same period of 2022. The effect of lower grades was offset by higher tonnage, lower capex and local currency devaluation.

ADVANCED PROJECT: MARA ROSA

The Mara Rosa project is progressing according to schedule and budget with total project progress now standing at 92% and with the Company continuing to expect first production in H1 2024.

Procurement

Currently purchase orders have been issued for 99% of the project. Deliveries are on schedule with key equipment received including the crusher, belt conveyors, the secondary substation, electrocentres, filters, HDPE piping, aluminium cables for the transmission lines, hydrocyclones, agitators, wastewater treatment station, thickeners and the ball mills. In addition, the drilling service contract was signed during the period and the contractor is already mobilised.

Mine and Pre-Stripping:

The pre-stripping contractor has begun blasting work and 365kt of ore has already moved according to schedule. The target is to guarantee a stockpile for use during the plant ramp-up period. Construction of the waste dumps and ore stockpiles is also underway.

Civil works

Civil works in the processing plant area is completed. Assembly work is advancing on schedule; total advance is 70%.

Infrastructure assembly

The Electromechanical assembly contractor has been mobilised, and the work is advancing in line with schedule at 70% progress. The commissioning of the dry circuit, including crushing, screening and belt conveyor areas is expected towards the end of Q3. Power supply for the mine is being provided by the building of a 67km, 138kv transmission line from the Porangatu substation with work currently 99% advanced and expected to be completed very shortly.

Earthworks

The water reservoir is fully operational and already at 95% of storage capacity with water from the pit area whilst dry stacking construction started during the quarter and is expected to finish in the fourth quarter.

Permitting

Operations licences for the 138kv powerline, main substation, and dry and wet circuits were submmited to local authorities. The company received the operation permit for the Powerline and expects to receive the operaitons license of the dry circuit in the third quarter.

Sustainability

Environmental controls to monitor construction work have been implemented to ensure compliance with applicable permits. ESG programmes are advancing as expected with almost 900 people having visited the "knowledge trail" as of June 2023. On 5 June, the trail received the "Goiás Sustainability Award" in the Innovation, Science and Education category.

During May, the project hosted over 70 stakeholders including local mayors, politicians and community members, who inspected the site progress and gave some very positive feedback. Also in May, the team helped to promote "Traffic Week" involving 2,600 people from schools in Mara Rosa as well as on the main street in Mara Rosa itself. Monthly newsletters covering project progress and sustainability initiatives are continuing to be distributed to local communities.

Health and Safety

Hochschild's health and safety corporate standards have been implemented at the project, including the introduction of the Company's Seguscore safety indicator. The project has recently surpassed three million injury-free working hours and year-to-date Frequency and Severity Indexes are currently at zero.

DEVELOPMENT PROJECT: VOLCAN

On 10 August, Hochschild issued an update on the Volcan Gold Project ("Volcan") which detailed a number of key milestones that have been achieved at the 100%-owned project (the "Project") located in the Maricunga Region of Chile: 

§ Created a new Canadian Company, Tiernan Gold Corp ("Tiernan"), as a subsidiary of Hochschild Mine Holdings UK

§ Restructured the Project to be owned by Tiernan

§ Completed an updated Mineral Resource Estimate to Canadian NI 43-101 standards, which outlined:

o  463.3 Mt of Measured and Indicated Resources at 0.66 g/t gold for 9.8 million ounces of gold contained

o  75.0 Mt of Inferred Resources at 0.516 g/t gold for and additional 1.2 million ounces of gold contained

§ Completed a positive Preliminary Economic Assessment to Canadian NI 43-101 standards, which highlighted:

o  22mtpa open-pit, heap leach operation with a 14 year mine life

o  Average of 332,000 ounces per year of gold production for first 10 years of operations with 3.8 million ounces produced over the estimated mine life

o  Initial capital cost of $900 million, with life of mine sustaining capital an additional $276 million

o  Cash costs of $921/oz and All-in-Sustaining-Costs of $1,002/oz, life of mine

o  NPV (5%) = $826 million and IRR = 21% at $1,800/oz gold price, after-tax

§ Executed an agreement for a $15 million financing with the sale of a new 1.5% NSR royalty on the Project to Franco-Nevada

§ Engaged Canaccord Genuity to evaluate strategic alternatives for Tiernan

Further details can be found in the separate press release on the Company's website at hochschildmining.com

BROWNFIELD EXPLORATION

Following the approval of the Inmaculada's MEIA, the brownfield team is planning to drill 10,000m at the deposit to target high-grade structures in the Eduardo and San Salvador belts. Resources are expected to be added by the end of the first quarter of 2024.

At Pallancata, geological mapping is being completed on the western side west of the new Royropata belt with the team also close to completing a geological model for the Bolsa target in the same area. Permitting for the next drilling campaign is expected in the second quarter of 2024.

Finally, 5,000m of drilling is planned close to operations at San Jose with completion again expected towards the end of the first quarter of 2024.

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 periods.

Revenue

Gross revenue[8]

Gross revenue from continuing operations decreased by 9% to $321.9 million in H1 2023 (H1 2022: $355.0 million) due to lower silver and gold production. Output was mainly impacted by the delay in the approval of the MEIA at Inmaculada and scheduled lower production at Inmaculada and Pallancata. This was partially offset by higher average realised gold prices.

On 10 November 2021, the Group hedged 3.3 million ounces of 2023 silver production at US$25 per ounce, and on 20 April 2023 the Group hedged 29,250 ounces of 2023 gold production at US$2,047 per ounce. As of June 2023, 1.65 million silver ounces (H1 2022: 2.0 million) were priced at US$25 per ounce (H1 2022: US$27), and 9,750 gold ounces (H1 2022: nil) were priced at US$2,047 per ounce, boosting the realised price.

On 12 April 2023, the Group hedged 27,600 ounces of 2024 gold production at US$2,100 per ounce and on 19 June 2023, the Group hedged 150,000 ounces of 2025, 2026 and 2027 gold production at US$2,117, US$2,167 and US$2,206 per ounce, respectively.

Gold

Gross revenue from gold in H1 2023 decreased to $195.3 million (H1 2022: $211.3 million) due to lower gold produced across all operations. This was partially offset by a 4% increase in the average realised gold price.

Silver

Gross revenue decreased in H1 2023 to $126.3 million (H1 2022: $143.4 million) due to lower silver produced across all operations and a 2% decrease in the average realised silver price.

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 2023 and H1 2022:

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 2023, the Group recorded commercial discounts of $7.8 million (H1 2022: $7.2 million). The ratio of commercial discounts to gross revenue in H1 2023 was 2.4% (H1 2022: 2.0%).

Net revenue

Net revenue was $314.0 million (H1 2022: $347.8 million), comprising net gold revenue of $192.1 million (H1 2022: $208.7 million) and net silver revenue of $121.6 million (H1 2022: $138.8 million). In H1 2023, gold accounted for 61% and silver for 39% of the Company's consolidated net revenue (H1 2022: gold 60% and silver 40%).

Reconciliation of gross revenue by mine to Group net revenue

Costs

Total cost of sales before exceptional items was $250.9 million in H1 2023 (H1 2022: $240.5 million). The direct production cost excluding depreciation was lower at $170.1 million (H1 2022: $174.0 million) mainly due to lower production in Inmaculada and Pallancata, partially offset by a scheduled higher proportion of conventional mining methods across all mining units, and inflation. Depreciation in production cost increased to $71.9 million (H1 2022: $68.8 million) mainly due to the impact of the reversal in impairment loss at Pallancata of $15.5 million as at 31 December 2022, partially offset by lower depreciation in Inmaculada due to lower production. Fixed costs incurred during total or partial production stoppages were $3.0 million in H1 2023 (H1 2022: $3.9 million). Decrease in inventories was $4.7 million in H1 2023 (H1 2022: increase in inventories of $8.2 million) due to higher consumption of products in process across all operations.

Fixed costs during operational stoppages and reduced capacity:

Unit cost per tonne

The Company reported unit cost per tonne at its operations of $170.6 per tonne in H1 2023, a 9% increase versus H1 2022 ($156.6 per tonne). This was due to the effect of: higher costs resulting from lower treated tonnage in Inmaculada and Pallancata, a scheduled higher proportion of conventional mining methods across all mining units, and inflation.

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 reconciliation[10]

Six months to 30 June 2023

Six months to 30 June 2022

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[15]

All-in sustaining cash costs per silver equivalent ounce

Six months to 30 June 2023

Six months to 30 June 2022

Administrative expenses

Administrative expenses were down by 16% to $20.9 million (H1 2022: $24.9 million) mainly due to lower bonus provision and professional fees.

Exploration expenses

In H1 2023, exploration expenses decreased to $11.5 million (H1 2022: $23.8 million) mainly due lower exploration expenses at the Snip project of $2.3 million (H1 2022: $6.9 million), lower exploration expenses at Pallancata of $0.6 million (H1 2022: $3.7 million), lower personnel expenses of $2.5 million (H1 2022: $3.7 million), and lower exploration expenses at Inmaculada of $0.4 million (H1 2022: $1.6 million). 

In addition, the Group capitalises part of its brownfield exploration, which mostly relates to costs incurred converting potential resources to the Inferred or Measured and Indicated categories. In H1 2023, the Company capitalized $0.4 million relating to brownfield exploration (H1 2022: $0.2 million), bringing the total investment in exploration for H1 2022 to $11.9 million (H1 2022: $24.0 million).

Selling expenses

Selling expenses slightly increased to $6.9 million (H1 2022: $6.7 million) mainly due to higher gold prices.

Other income/expenses

Other income was $4.9 million (H1 2022: $2.6 million) with the increase mainly due to an insurance reimbursement received in H1 2023 in connection with damage to Inmaculada's machine belt in 2022.

Other expenses before exceptional items were $12.8 million (H1 2022: $22.9 million) with the decrease mainly due to: lower additions to the provision for mine closure of $1.3 million (H1 2022: $10.8 million), a decrease in care and maintenance costs of $3.2 million (H1 2022: $4.2 million), expenses from a voluntary redundancy programme in Argentina incurred in H1 2022 of $0.9 million, and lower labour contingencies in Argentina of $1.0 million (2022: $1.7 million). These were partially offset by a provision for obsolescence of supplies of $1.7 million (H1 2022: $nil).

Adjusted EBITDA

Adjusted EBITDA decreased by 24% to $99.5 million (H1 2022: $130.5 million) mainly due to the fall in revenue resulting from lower silver and gold production.

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

Finance income

Finance income was $2.6 million (H1 2022: $2.2 million), mainly due to higher interest on deposits of $2.3 million (H1 2022: $0.6 million) resulting from the rise in interest rates, partially offset by the gain on the unwinding of discount of the mine closure provision of $1.1 million in H1 2022. 

Finance costs

Finance costs decreased from $13.1 million in H1 2022 to $11.0 million in H1 2023, principally due to foreign exchange transaction costs to acquire dollars in Argentina in H1 2022 of $2.8 million, a loss on the sale of C3 Metals Inc. shares of $0.3 million in H1 2023 (H1 2022: recorded a loss on the fair value of C3 Metals Inc. shares of $2.3 million), partially offset by higher interest expenses, which totalled $8.6 million in H1 2023 (H1 2022: $6.3 million), mainly explained by higher interest rates,

Foreign exchange losses

The Group recognized a foreign exchange loss of $4.3 million (H1 2022: $2.6 million) as a result of exposures in currencies other than the functional currency, mainly in Argentina of $3.8 million (H1 2022: $0.1 million), and Peru of $0.5 million (H1 2022: $3.0 million).

Income tax

The Company's pre-exceptional income tax charge was $5.1 million (H1 2022: $5.8 million) and includes royalties and special mining tax of $2.7 million (H1 2022: $4.0 million), and the foreign exchange effect on deferred income tax of $1.9 million (H1 2022: credit of $5.6 million).

Exceptional items

Exceptional items in H1 2023 totalled a $48.3 million loss after tax (H1 2022: $9.9 million loss after tax) related to impairment losses at: the Azuca and Crespo projects of $42.3 million; the San Jose mining unit of $17.4 million; and the investment in Aclara Resources Inc. of $7.2 million.

The tax effect of the exceptional items was a tax gain of $18.6 million (H1 2022: $nil). The total effective tax rate was 20.3% (2022: 107.8%).

Cash flow and balance sheet review

Cash flow

Net cash generated from operating activities increased from $18.7 million in H1 2022 to $86.4 million in H1 2023 mainly due to higher cash inflows from working capital changes and lower taxes paid; partially offset by lower Adjusted EBITDA.

Net cash used in investing activities decreased to $134.4 million in H1 2023 from $199.2 million in H1 2022 mainly due to the consideration paid for the acquisition of Amarillo Gold on 1 April 2022 of $123.4 million, partially offset by higher construction capex in Mara Rosa of $64.6 million (H1 2022: $10.1 million).

Cash generated (used in)/from financing activities changed to an outflow of $0.2 million from an inflow of $0.3 million in H1 2022 mainly due to the net effect of: (i) repayment of pre-shipment loans of $11.7 million (H1 2022: $nil), (ii) pre-shipment loans raised of $12.6 million (H1 2022: $13.4 million), and (iii) payment of $12.0 million in dividends to shareholders in H1 2022.

Working capital

The Group's working capital position in H1 2023 decreased by $3.7 million from $(12.1) million to $(15.8) million. The key drivers of the decrease were lower inventories of $10.4 million partially offset by lower trade and other payables of $7.7 million.

Net cash/ (debt)

The Group's reported net debt position was $227.1 million as at 30 June 2023 (31 December 2022: net debt position of $175.1 million). The decrease in cash and cash equivalents in H1 2023 is mainly explained by capital expenditure at Mara Rosa of $64.6 million.

Capital expenditure[23]

H1 2023 capital expenditure decreased from $202.5 million in H1 2022 to $128.5 million in H1 2023 mainly to the consideration paid for the acquisition of Amarillo Gold on 1 April 2022 of $123.4 million, partially offset by higher construction capex in Mara Rosa of $64.6 million (H1 2022: $10.1 million).

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. The Company cautions against undue reliance on any forward looking statement or guidance, particularly in light of the current economic climate and the significant volatility, uncertainty and disruption caused by Covid-19. 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 2022 are set out in detail in the Risk Management section of the 2022 Annual Report and in Note 38 to the 2022 Consolidated Financial Statements.

The key risks disclosed in the 2022 Annual Report (available at www.hochschildmining.com) are categorised as:

§ Financial risks comprising commodity price risk, commercial counterparty risk and liquidity risk;

§ Operational risks including the risks associated with operational performance, business interruption/supply chain, information security and cybersecurity, exploration & reserve and resource replacement, personnel and project development;

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

§ Sustainability risks including risks associated with health and safety, environmental, climate change and community relations.

With the exception of liquidity risk, which has been mitigated by the approval of the Inmaculada MEIA, the risks referred to above continue to apply to the Company in respect of the remaining six months of the financial year. 

RELATED PARTY TRANSACTIONS

Related party transactions are disclosed in Note 23 to the interim condensed consolidated financial statements.

GOING CONCERN

After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the duration of the Going Concern Period until 30 September 2024. Accordingly, they continue to adopt the going concern basis in preparing the interim condensed set of financial statements. For further detail, refer to the Going concern disclosure in Note 2 "Significant Accounting Policies" of the interim condensed consolidated 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 UK adopted International Accounting Standard 34 "Interim Financial Reporting" 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

Eduardo LandinChief Executive Officer

5 September 2023

INDEPENDENT REVIEW REPORT TO HOCHSCHILD MINING PLC

Conclusion

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2023, 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 25. 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.

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 2023 is not prepared, in all material respects, in accordance with UK adopted International Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Basis for Conclusion

We conducted our review in accordance with International Standard on Review Engagements 2410 (UK) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" (ISRE) issued by the Financial Reporting Council. 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 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.

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

Conclusions Relating to Going Concern

Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis of Conclusion section of this report, nothing has come to our attention to suggest that management have inappropriately adopted the going concern basis of accounting or that management have identified material uncertainties relating to going concern that are not appropriately disclosed.

This conclusion is based on the review procedures performed in accordance with this ISRE, however future events or conditions may cause the entity to cease to continue as a going concern.

Responsibilities of the directors

The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

In preparing the half-yearly financial report, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Auditor's Responsibilities for the review of the financial information

In reviewing the half-yearly report, we are responsible for expressing to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report. Our conclusion, including our Conclusions Relating to Going Concern, are based on procedures that are less extensive than audit procedures, as described in the Basis for Conclusion paragraph of this report.

Use of our report

This report is made solely to the company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Financial Reporting Council. 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.

Ernst & Young LLP

London

5 September 2023

Interim condensed consolidated income statement

Interim condensed consolidated statement of comprehensive income

1 Foreign exchange effect generated in the Group´s companies when the functional currency is the local currency, mainly generated by the decrease of the US$ exchange rate in Brazil. 

Interim condensed consolidated statement of financial position