Hochschild Regulatory News (HOC)

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9 March 2016

Hochschild Mining plc

Preliminary Results for the twelve months ended 31 December 2015

Financial Results highlights1

§ Net revenue of $469.1 million (2014: $493.0 million)

§ Adjusted EBITDA of $138.8 million (2014: $135.6 million)2

§ Earnings per share of $(0.14) (2014: $(0.13))

§ Cash balance of $84.0 million as at 31 December 2015 (31 December 2014: $116.0 million)

§ Net debt of $350.5 million as at 31 December 2015 (30 June 2015: $455.6 million)

§ Net debt/EBITDA of 2.5x as at 31 December 2015 (30 June 2015: 5.8x)

§ Non-cash post tax impairment charges of $170.6 million

Strong 2015 operational delivery

§ 2015 All per silver equivalent ounce from operations reduced by 26% to $12.9 exceeding guidance3

§ Inmaculada AISC per silver equivalent ounce significantly below guidance at $7.3

§ Full year production of 27.0 million attributable silver equivalent ounces exceeding guidance4

§ Inmaculada mine produced 8.3 million silver equivalent ounces exceeding guidance

Improved financial position

§ $100 million equity rights issue completed

§ $105 million of debt repaid in Q4

§ Argentina macroeconomic and tax reforms already significantly improving San Jose cash flows

o Removal of export tax on dore and concentrate confirmed

o Ongoing devaluation of Argentine peso reducing operating costs

§ Cashflow further protected by additional 2016 precious metal hedges:

o 15,000 ounces of gold at $1,244 per ounce

o Zero cost collar for 3.0 million ounces of silver with a floor of $14.0 per ounce and a cap of $17.6 per ounce

o 55% of total 2016 attributable production target now hedged

2016 Outlook

§ Record attributable production target of 32.0 million silver equivalent ounces

§ AISC now expected to be $12.0-12.5 per silver equivalent ounce (previous guidance of $12-13 per ounce)

§ Inmaculada AISC expected to be $9-10 per silver equivalent ounce

§ Total sustaining and development capital expenditure expected to be approximately $100 million including $10 million to develop Pablo vein

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

"Now that the Company's key investment in the low cost Inmaculada project is complete and with strong operational performance at the mine, the outlook for the Company is much brighter. Together with the encouraging geological results achieved at our existing mines, further substantial cost and debt reductions and a much more positive environment in Argentina, the improvement to profitability is now a reality."

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A presentation will be held for analysts & investors at 9.30am (UK time) on Wednesday 9 March 2016 at the offices of Hudson Sandler, 29 Cloth Fair, London, EC1A 7NN

For a live webcast of the presentation please visit our website:

www.hochschildmining.com

To join the event via conference call, please see dial in details below:

+44(0)20 3427 1915 (Please quote confirmation code 5064692)

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Enquiries:

Hochschild Mining plc

Charles Gordon +44 (0)20 3714 9044

Head of Investor Relations

Hudson Sandler

Charlie Jack +44 (0)207 796 4133

Public Relations

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About Hochschild Mining plc:

Hochschild Mining plc is a leading precious metals company listed on the London Stock Exchange (HOCM.L / HOC LN) with a primary focus on the exploration, mining, processing and sale of silver and gold. Hochschild has over fifty years' experience in the mining of precious metal epithermal vein deposits and currently operates four underground epithermal vein mines, three located in southern Peru and one in southern Argentina. Hochschild also has numerous long-term projects throughout the Americas.

CHAIRMAN'S STATEMENT

Hochschild Mining has ended 2015 in a significantly enhanced operational and financial position compared to twelve months ago. The Company's key investment in the low cost Inmaculada project is now complete and I am delighted by the first six months of strong operational performance. Together with the encouraging geological results achieved at our existing mines and further cost reductions, the expected improved profitability is now a reality. In addition, the Company has taken decisive steps to reduce the debt position via the equity capital raise in the autumn and has taken a conservative approach to protect cashflows through a series of precious metal hedges. With these measures, the leverage ratios have materially improved and are reflecting the enhanced financial health of the business.

We were able to achieve first dore production at Inmaculada in early June 2015, marking the final stage for a project that has taken approximately six years from discovery to commissioning, a notable accomplishment in these turbulent times for the industry. The subsequent ramp-up process was smoothly executed with key operational metrics running according to or above design capacity. During the last quarter, our long-held confidence in the world class characteristics of this deposit was supported by production, costs and ultimately cashflows that surpassed our expectations. The Board believes that the entire process has been to the great credit of our management and operational and project teams who have efficiently dealt with the geological, operational and financial challenges of a new mining operation while ensuring the safety of our workforce and with due respect to the surrounding environment.

Precious metals once again experienced a volatile period with both silver and gold reaching new five year lows whilst other commodities such as oil, copper and iron ore also experienced sharp declines. Despite this difficult environment, our existing operations generated positive cashflows under revised operational plans and I was particularly encouraged by the success of our brownfield exploration programme which not only yielded the discovery of the Pablo vein thus reinvigorating Pallancata but also allowed Arcata to continue to prove its resilience. Later on in the year, there were positive macroeconomic and political developments in Argentina which have led us to believe that we are entering a new era of stronger cashflow generation at our high grade San Jose mine. In short, lower prices have once again been compensated by lower costs, rising production and new higher grade resources at key operations.

The careful management of our financial position was of paramount importance during the year so the success of several Company initiatives has been crucial. Firstly, the Company ensured the full financing of the Inmaculada project via a combination of short and long term debt. Secondly, a target of positive cashflow generation was set at all of our operations (before the effect of hedging) resulting in a high level of cost discipline at each operating asset. Finally, with the new mine having commenced production smoothly, we were able to raise $100 million via a rights issue with the proceeds used to pre-pay and renegotiate debt. We now have a comfortable debt amortisation profile and a solid cash position. However, despite these positive results, the Board remains alert to price volatility and is maintaining its focus on continuing to repay debt and consequently is not recommending reinstating a dividend payment. We remain committed to delivering shareholder returns and the Board intends to review the position again once the Company can sustainably achieve strong margins and the debt position is further reduced.

Operating Responsibly

I am delighted to report that 2015 was unprecedented in that it represented the second consecutive year in which we achieved our long-term aim of zero fatalities. In addition, the Group succeeded in reducing the year-on-year frequency of accidents as well as their severity by approximately 40% and 25% respectively. This is to the great credit of the many teams who, despite the limitation of resources, have worked relentlessly to ensure that we provide a safe workplace for all and to convey the non-negotiable message that safety comes first. As to our efforts to minimise our impact on the environment, I am pleased to report that we maintained our ISO 14001 certification, adopted a new and more robust Corporate Environmental Policy and KPI dashboard to strengthen the Group's environmental culture and made significant strides in water management. In relation to our interaction with local communities, we have continued to run the many programmes designed around our core themes of education, health and socio-economic development. Further details on the individual projects we have supported during the year can be found in our Sustainability Report and online.

Board

I wish to thank my fellow Board members for their valuable insight during the year. As reported last year, we suspended our Non-Executive succession plan to provide continuity at Board level given the difficult trading climate. The status of the plan was kept under review during 2015 and, in recognition of the benefits of a refreshed Board, resulted in the appointment of Michael Rawlinson as a Non-Executive Director with effect from 1 January 2016. I am very pleased that we have been able to secure someone with Michael's experience and knowledge of the mining sector which will undoubtedly prove invaluable during our Board deliberations. In line with our succession plan, Sir Malcolm Field will be retiring from the Board at the conclusion of the forthcoming AGM. Sir Malcolm has served on the Board since the Company's IPO in 2006 with tireless dedication and on behalf of my fellow Directors, I wish to express my profound gratitude for his support and wise counsel.

Outlook

We enter 2016 with renewed optimism. Inmaculada is a flagship producing asset operating at highly competitive costs and is expected to provide the financial stability necessary for targeting future growth plans. The operating environment in Argentina is rapidly improving and we believe that our high grade resource at San Jose will soon generate stronger cashflows. And finally, the optionality that the Arcata and Pallancata assets offer us in terms of geological potential as well as leverage to prices is a key feature that we expect to develop in this coming year.

Eduardo Hochschild, Chairman

8 March 2016

CHIEF EXECUTIVE OFFICER'S STATEMENT

At the start of last year, I noted that the Company's key objectives for 2015 were the commissioning of our new flagship mine, success from our brownfield exploration programme and achieving a stronger overall financial position by the year end. We are pleased to report that we have largely succeeded in our priorities and that we enter 2016 with confidence that, whilst the outlook for natural resources remains volatile, the prospects for the Company have substantially improved. 

Inmaculada

Construction at the Inmaculada site continued into its final stages in the first half of the year with the result that commercial production was declared in August following a near faultless ramp-up period. All key metrics including tonnage, grades and recoveries proved to be in line with or above expectations and although there was a disagreement with our plant contractor over construction delays and a number of submitted change orders, the dispute was resolved amicably and in the final few months of the year, the mine delivered on its world class promise. Production for the year beat the higher end of our forecast range and Inmaculada's all-in sustaining cost per silver equivalent ounce for 2015 was at a very competitive $7.3 per ounce. We can now look forward to a full year of production at costs of between $9 to $10 per silver equivalent ounce which we believe will place the operation in the first quartile of the global cost curve and will ensure strong cashflow for the Company for the foreseeable future. We remain positive about the mine's expansion potential in the medium term and will begin a drill programme in the surrounding district in 2016.

Cost reduction

With commodity prices experiencing a third year of declines, Hochschild continued its cashflow optimisation programme in order to ensure that all our operations were mining profitable ounces and are cashflow positive. The mine plans at Arcata and Pallancata were revised with the focus placed on accessible ore areas requiring reduced capital expenditure and assuming stringent cut off grades. The effect of these measures was somewhat mitigated during the year as both operations delivered successful brownfield exploration programmes allowing additional higher grade tonnage to be processed at Arcata in particular. At Pallancata, the discovery of the Pablo vein in August delivered the prospect of a transition to significantly lower cost feed for the Selene plant with our team expecting to have initial production from the vein towards the end of 2016. Overall, we were able to reduce all-in sustaining costs by 26% versus 2014, which is strong evidence of the Company's ability to operate flexibly in a difficult industry environment. Furthermore, the positive developments in Argentina towards the end of the year indicate the potential to continue to move our operations down the cost curve.

Financial position

In a year when careful management of the balance sheet was crucial, in particular with respect to the completion of our Inmaculada project, we believe we have taken substantial steps in our aim of de-risking the Company. Forming the first part of our three pronged financial strategy, the smooth progress of the new mine's ramp-up to full production started to bear fruit in the final two quarters with the generation of strong cashflow from this low cost operation. Secondly, in October, we announced a $100 million rights issue, the success of which allowed us to begin the process of strengthening our balance sheet and by the end of the year we had already paid down just over $100 million of mid to long term debt. And thirdly, we supplemented this initiative throughout the year by taking advantage of short periods of price strength to hedge around 40% of our production to ensure a degree of cashflow stability. This prudent policy has continued with approximately half of our 2016 production also protected at around the current spot prices. With net debt significantly reduced versus our peak position at the half year and with the maturities of the remaining debt adequately profiled, the Company is in a substantially healthier financial position than at the end of 2014.

2015 overview

One of the most pleasing aspects of the Company's ongoing response to the industry downturn has been the strength of our operations. Once again we exceeded the production target for the year, delivering 27.0 million silver equivalent ounces with both San Jose and Arcata especially, recording better than expected production. Pallancata's performance reflects an operation in a transitional period until new low cost material from the Pablo vein is introduced towards the end of the year. However, when also considering Inmaculada's maiden contribution, we believe the flexibility of the Hochschild portfolio has been amply demonstrated.

The average price achieved once again fell in 2015, by 12% for silver and by almost 10% for gold and consequently our revenue was lower despite total production increasing by almost 12%. However, pleasingly pre-exceptional EBITDA rose by 2% to $139m reflecting the higher margin contribution from Inmaculada and solid cost control across our operations. The cashflow from the new mine is beginning to offset the finance costs arising from our bond issue in January 2014 to fund its construction but this still affected the underlying earnings. Pre-exceptional EPS was $(0.14) per share. The cash balance at the end of the year was $84 million with the fourth quarter debt repayment programme resulting in net debt of approximately $351 million.

Outlook

We expect that 2016 will mark the fourth year of increasing production and reducing costs. Attributable production for the Company is expected to rise to 32.0 million silver equivalent ounces (assuming the average silver to gold ratio for 2015 of 74:1), boosted by the first full year of output from Inmaculada. The all-in sustaining cost per silver equivalent ounce is expected to once again be reduced to between $12.0 to $12.5 which includes almost 14 million ounces of production from Inmaculada at between $9 to $10 per silver equivalent ounce. The focus of our capital expenditure budget of approximately $100 million will be on sustaining and development expenditure for our current mines but included is also an allocation of approximately $10 million for the development of the Pablo vein - a project which initial Company economics estimate has a net asset value of approximately $40 million.

The recent regulatory and economic policy changes in Argentina also offer a promising future for our high grade San Jose mine. Changes including the significant devaluation of the Argentine peso and the new government's cancellation of the export taxes along with management's solid operational track record now place the mine in a good position to improve its cashflow contribution.

2015 has been a year of transformation for the Company. Whilst the industry downturn has necessitated a continued strong focus on cost efficiency, we are extremely encouraged by the positive attitude displayed by all our employees. We have entered 2016 with a renewed sense of confidence: a fourth consecutive year of production increases and reduced costs; a new mine; renewed resources at Arcata and Pallancata; a stronger balance sheet; and several brownfield exploration targets with the potential to continue improving the quality and quantity of our existing resources.

Ignacio Bustamante, Chief Executive Officer

8 March 2016

OPERATING REVIEW

OPERATIONS

Note: silver/gold equivalent production figures assume the average gold/silver ratio for 2015 of 74:1.

Production

In 2015, Hochschild once again exceeded its full year production target, delivering attributable production of 27.0 million silver equivalent ounces (24.7 million ounces using the Company's previous gold/silver ratio of 60:1), including 14.8 million ounces of silver and 166 thousand ounces of gold. The overall production target for 2016 is 32.0 million silver equivalent ounces, assuming the average silver-to-gold ratio for 2015, which consists of just over 14 million ounces from Inmaculada, approximately 7 million attributable ounces from the 51% owned San Jose and the balance from the remaining two Peruvian operations. 2016 production is expected to be equally weighted between gold and silver.

Costs

The Company's all-in sustaining cost was reduced by 26% in 2015 to $12.9 per silver equivalent ounce driven by Inmaculada with a very competitive $7.3 per silver equivalent ounce6. Operational initiatives (cashflow optimisation programme), devaluation of local currencies and grade improvements at all operating units also contributed to the reduction. Please see page 12 of the Financial Review for further details on costs.

The all-in sustaining cost per silver equivalent ounce in 2016 is now expected to be between $12.0 and $12.5 with Inmaculada costs forecast to be between $9 and $10 per ounce, the remaining Peruvian mines at approximately $14.5 per ounce and San Jose at approximately $13 per ounce although ongoing Argentinean peso devaluation and a series of tax cancellations may reduce the target further.

Inmaculada (Peru)

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

Production

Commercial production was declared at the new flagship mine in August 2015 and the Company subsequently announced on 22 September that it had received the final mill operating permit from the Peruvian government with sales of dore commencing soon afterwards. Overall production in 2015 improved on the targeted range, coming in at 8.3 million silver equivalent ounces consisting of 84.6 thousand ounces of gold and 2.1 million ounces of silver. This was primarily driven by solid gold and silver grades and increased tonnage as the processing plant operated at closer to 3,850 tonnes per day during the last quarter of the year compared to its design capacity of 3,500 tonnes per day.

Costs

The all-in sustaining costs were low at $7.3 per silver equivalent ounce. This was driven by better than expected extraction costs, operational efficiencies versus the plan and by the processing of the significant ore stockpile which incurred a low cost in the plant's ramp-up phase and increased tonnage overall when mining operations commenced. The original cost of mining this stockpile was capitalised over the previous few periods. Overall all-in sustaining costs are expected to increase to the normalised forecast level of between $9 to $10 in 2016.

Brownfield exploration

In 2016, a geological mapping programme is planned for the Inmacualda and Hualhua areas along with a 7,000 metre drilling programme in the Palca zone.

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, total silver equivalent production for 2015 was 6.8 million ounces (2014: 7.1 million ounces). Despite introducing an adjusted mine plan at the start of 2015 to ensure the extraction of profitable ounces, Arcata has delivered a much stronger year than expected. A successful brownfield exploration programme has ensured considerable tonnage at higher silver grades than expected.

Costs

In 2015, all-in sustaining costs fell by 19% to $14.3 per silver equivalent ounce (2014: $17.7 per ounce) due to a substantial decline in capital expenditure resulting from the announced adjusted mine plan as well as improved grades.

Brownfield exploration

During 2015, the Arcata exploration programme has focused on the incorporation of resources from the Stephani, Cristina, Soledad, Macarena and Nicole veins as well as further exploration of the Tunels 3 and 4 vein systems. Just over 10,000 metres of drilling were executed. Significant intercepts included:

The focus of 2016 will be a 7,000 metre drilling programme to incorporate additional resources from the Tunel 4, Marion and Alexia veins.

Pallancata (Peru)

The 100% owned Pallancata silver/gold property is located in the Department of Ayacucho in southern Peru, approximately 160 kilometres from the Arcata operation. Pallancata commenced production in 2007. Ore from Pallancata is transported 22 kilometres to the Selene plant for processing.

Production

At Pallancata, total production for the year was 4.9 million silver equivalent ounces (2014: 8.3 million ounces). Tonnage throughout the year was significantly lower than 2014 due to the adjusted mine plan's approximate halving of capacity although silver and gold grades rose gradually throughout the year to partially compensate. The operation remains in a transitional phase with the Selene plant expected to transition to the new Pablo vein later in 2016. See further details of the Pablo vein below.

Costs

All-in sustaining costs fell by 6% to $15.7 per silver equivalent ounce (2014: $16.7 per ounce) due to the scheduled decline in capex as well as better grades. These improvements were partially offset by incremental capex approved to develop the newly discovered Pablo vein. See details below of the Pablo vein's preliminary economics.

Brownfield exploration

The exploration team at Pallancata began a 19,100 metre exploration and drilling programme in May 2015 with the aim of focusing on inferred resource exploration at surface. In mid August, whilst pursuing the west extension of the Yurika vein to the north west of the main Pallancata vein, a new blind structure at a depth of 200 metres below surface was discovered. The Pablo vein has been recognised along an east-west strike for 700 metres and dips 50-75° south. The structure's significant thickness (greater than 10m wide) is associated with dilation zones in flexures and fault jogs. The Pablo vein is a fine-to-medium grain white quartz vein and shows a banded texture and multiple brecciation events filled with adularia and quartz crystals. It is part of a major regional structure, currently extending to about 2 km, which will be explored over the medium term.

Following the initial discovery of the Pablo vein, drilling continued and an initial inferred resource was achieved. The Company's preliminary economics for a two year mine life for the Pablo vein are detailed below. Resources (unaudited) are estimates based on a cut-off grade of 103g/t silver equivalent.

Spot metal prices: $15.5/oz Ag; $1,230/oz Au

Work has started on mine development to access the vein and the Company currently expects to have initial production from Pablo towards the end of 2016.

Drilling has continued at the deposit and 7,242 metres were drilled at Pablo and Yurika veins during the last quarter of the year. Preliminary results are below:

The focus of the brownfield exploration programme for 2016 will be a 5,500 metre drilling programme to add resources in from the Pablo and Yurica veins. Geological mapping of the Pallancata-Selene area will also be carried out.

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 operation once again delivered another consistent year with operation producing a record 13.9 million silver equivalent ounces (2014: 13.4 million ounces) driven by better than projected silver and gold grades.

On 17 December 2015, the Argentinean peso fell by approximately 40% against the dollar following the decision by the government to lift capital controls. With approximately 70% of operating costs at San Jose incurred in pesos, the effect of this significant devaluation is already having a material impact on the mine's cost position.

The Argentinean government published a decree on 2 November 2015 restoring the right to receive a rebate from goods exported through Patagonian ports (previously cancelled in 2009). This benefit is applicable to Hochschild at a rate of approximately 9% of the FOB value of its exports which amounts to approximately $15 million per annum. The current estimate for collection is approximately two years.

In late December 2015, following an announcement by the new government that they would remove export taxes on agricultural and industrial products, it was subsequently confirmed that the decree included removal of the 5% export tax on finished mining products such as dore (approximately 50% of the mine's output). Subsequently in 2016 it was confirmed that the additional 10% export tax on concentrate would also be removed from February 2016.

Finally it was also confirmed recently that the 1% tax on the market value of reserves that was imposed by the Province of Santa Cruz in 2013 has been removed with the resulting positive effect amounting to approximately $3 million per annum.

The effect of all the above-mentioned changes in Argentina is that the Company expects overall economic and operating environment in Argentina to improve significantly.

Costs

At San Jose, unit cost per tonne increased by 6% versus 2014 to $210.4. However, all-in sustaining costs were reduced by 21% to $14.1 per silver equivalent ounce (2014: $17.8 per ounce) driven by cost reduction initiatives, lower capex and better grades.

Brownfield exploration

Whilst no drilling was carried out in 2015, a 3,500 metre programme is planned for 2016 in the Los Pinos and Colorado Grande areas as well as a comprehensive mapping programme of other areas such as Agua Vivas to the South of the mine.

PROJECT REVIEW

Hochschild's portfolio currently includes three Growth Projects, Crespo, Azuca and Volcan. The continuing weakness of the precious metal markets during 2015, following the initial price declines in 2013, led to the focus on completing construction of Hochschild's flagship Inmaculada project.

The strategy with regards to Crespo, Azuca and Volcan was revised in late 2013 with work on these deposits remaining on hold throughout 2014 and 2015. Despite the above-mentioned prioritisation of Inmaculada, all three projects remain an important component of the company's portfolio of development assets. It is management's intention that in the event that precious metals markets show sustained improvement, this would allow the Company to assess capital re-allocation to these assets and potentially re-initiate development.

Inmaculada

During the first half of 2015, construction of the plant continued with first dore production achieved on 3 June 2015. The ramp-up phase was ongoing throughout the third quarter with tonnes per day reaching the forecast capacity of 3,500 in mid August and operating at just above that level for the remainder of the year. Gold and silver recoveries trended to close to their target of 93.7% in gold and 87.9% in silver.

The Hochschild team also continued underground mine development throughout the first half and a stockpile of approximately 270,000 tonnes began to be processed following commissioning of the plant whilst stope mining activities (utilising long hole and breasting methods) were being initiated. Following the declaration of commercial production at the mine in August, the Company subsequently announced on 22 September that it had received the final mill operating permit from the Peruvian government and consequently sales of dore were able to commence.

Construction of the paste backfill plant also continued throughout the year with the mine's laboratories, warehouses and workshops also completed.

During the year, the contractor Graña y Montero (GyM), made a number of requests for additional costs from the Company under the Engineering, Procurement and Construction Contract ("EPC"). In addition, Hochschild made certain claims against GyM as a result of delays in the construction of the plant and related components of the project. In September, following discussions, the Company and GyM settled their mutual claims and agreed that the total amount payable by the Company to GyM for all works under the EPC Contract (including pending work) would be fixed at approximately $159.1 million, of which $20 million represented additional amounts payable in settlement of all claims made by GyM for additional costs under the EPC Contract. In addition, it was agreed that GyM would bear all risks and costs resulting from the completion of all pending work under the EPC Contract and, therefore, subject to certain limited exceptions, GyM would not be entitled to request further adjustments to the amounts agreed to be paid.

To date Hochschild has paid to GyM approximately $136 million under the EPC Contract. It was agreed that the above mentioned amount of $20 million would be paid in four instalments every six months starting in September 2017, with interest accruing at an annual rate of 5% of the outstanding balance. The remaining approximately $4 million will be paid following completion of the outstanding work.

Total construction capital expenditure for the Inmaculada mine was $455 million, of which $449 million has already been incurred by the end of the year with the remaining construction capital expenditure of $6 million expected to be spent during 2016 (to be funded from existing cash resources).

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 decreased by 5% to $469.2 million in 2015 (2014: $493.0 million) primarily driven by another substantial fall in precious metal prices.

Silver

Gross revenue from silver decreased 23% in 2015 to $275.3 million (2014: $358.2 million) as a result of lower prices as well as a 9% decrease in the total amount of silver ounces sold to 17,263 koz (2014:18,981 koz) driven by the fall in ounces produced from Pallancata due to the imposition of the adjusted mine plan.

Gold

Gross revenue from gold increased 19% in 2015 to $217.2 million (2014: $182.7 million) as a result of a 31% rise in the total amount of gold ounces sold in 2015 (187.4 koz) offsetting the 9% fall in the average price received. The increase in gold sales came from the first output from the new Inmaculada operation.

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 existing hedging agreements) and ounces sold for 2015 and 2014:

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 2015, the Group recorded commercial discounts of $23.6 million (2014: $48.1 million). This decrease is explained by the decision to switch the majority of production from Arcata back to dore in 2015 as opposed to the previous year when most was sold as concentrate due to favourable commercial terms. The ratio of commercial discounts to gross revenue in 2015 decreased to 5% (2014: 9%).

Net revenue

Net revenue decreased by 5% to $469.1 million (2014: $493.0 million), comprising silver revenue of $258.4 million and gold revenue of $210.5 million. In 2015 silver accounted for 55% and gold 45% of the Company's consolidated net revenue with a 10 percentage point change from 2014 due to commencement of contributions from the Inmaculada mine.

Revenue by mine

Costs

Total pre-exceptional cost of sales was steady at $403.7 million in 2015 (2014: $404.6 million). The direct production cost was flat at $265.1 million (2014: $265.6 million) with the positive effects of Inmaculada's lower costs offsetting the additional production delivered. Depreciation in 2015 was $139.5 million (2014: $126.0 million) with the increase mainly due to Inmaculada capex depreciation. Other items, which principally include the costs associated with stoppages in Argentina, was $9.3 million in 2015 (2014: $4.4 million). Change in inventories was $10.3 million in 2015 (2014: $8.6 million).

Unit cost per tonne

The Company reported unit cost per tonne at its main operations of $118.4 in 2015, slightly up on 2014 (2014: $106.6). For further explanation on the increase in unit cost per tonne please refer to page 6 of the Operating Review.

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 ounce11

Year ended 31 Dec 2015

Year ended 31 Dec 2014

Administrative expenses

Administrative expenses before exceptional items decreased by 12% to $38.1 million (2014: $43.3 million) primarily due to the continuing impact of the cashflow optimisation programme.

Exploration expenses

In 2015, pre-exceptional exploration expenses, decreased by 46% to $9.3 million (2014: $17.3 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 2015, the Company capitalised $2.6 million relating to brownfield exploration compared to $1.5 million in 2014, bringing the total investment in exploration for 2015 to $11.8 million (2014: $18.8 million). 

Selling expenses

Selling expenses decreased by 24% versus 2014 at $21.7 million (2014: $28.7 million) mainly due to lower prices impacting the export taxes in Argentina and the decision to switch the majority of production from Arcata back to dore. Selling expenses in 2015 consisted of export duties at San Jose (export duties in Argentina were previously levied at 10% of revenue for concentrate and 5% of revenue for dore) and logistic costs for the sale of concentrate.

Other income/expenses

Other income before exceptional items was $8.0 million (2014: $4.1 million) mainly due to incremental revenue from logistic services provided to third parties and an export credit from dore bars in Argentina. Other expenses before exceptional items reached $15.3 million (2014: $17.5 million) mainly due to an increase in mine closure provisions of $7.6 million ($2014: $9.1 million).

Adjusted EBITDA

Adjusted EBITDA increased by 2% over the period to $138.8 million (2014: $135.6 million) driven primarily by the positive effects of the new low cost Inmaculada contribution but largely offset by significantly lower precious metal prices.

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 $1.9 million reduced slightly from 2014 ($2.2 million) mainly due to lower interest received on deposits, partially offset by income generated from the repurchase of bonds below par value.

Finance costs

Finance costs before exceptional items decreased from $33.1 million in 2014 to $31.4 million in 2015, principally due to the repurchase of $55.2 million of Senior Notes with a coupon rate of 7.75% and the $50.0 million prepayment of the medium term loan, both in the fourth quarter.

Foreign exchange losses

The Group recognised a foreign exchange loss of $5.6 million (2014: $5.0 million loss) as a result of exposures in currencies other than the functional currency specifically the Peruvian Nuevo Sol and Argentinean Peso, both of which depreciated in the year against the US Dollar.

Income tax

The Company's pre-exceptional income tax charge was $20.4 million (2014: $6.5 million). The increase is mainly explained by the impact of local currency devaluation in Peru and Argentina which significantly reduced the tax basis of PP&E and therefore generating a deferred tax liability.

Exceptional items

Exceptional items in 2015 totalled $(173.3) million losses after tax (2014: $(14.1) million). The tables below detail the exceptional items excluding the exceptional tax effect that amounted to $36.9 million (2014: $3.8 million).

2015 negative exceptional items:

Cash flow & balance sheet review

Cash flow:

Operating cash flow increased from $93.8 million in 2014 to $133.3 million in 2015, mainly due to the maiden cash contribution from the new Inmaculada mine, partially offset by lower prices. Net cash used in investing activities decreased to $(223.3) million in 2015 from $(263.0) million in 2014 mainly due to moderately lower pre-operating capex incurred at the Inmaculada project in 2015 as well as reduced sustaining capex at the other operations. Finally, cash generated from financing activities increased to $61.0 million from $5.0 million in 2014, primarily as a result of the proceeds from the equity rights issue and short term debt raised in Peru ($75 million) offset by the significant repayment of $105 million of debt in the second half of the year. As a result, total cash outflow decreased from $(164.2) million in 2014 to $(29.0) million in 2015 ($135.2 million difference).

Working capital

The Group's working capital position improved by $35.4 million to $(6.7) million in 2015 from $28.6 million in 2014. This was primarily explained by: lower trade and other receivables ($(38.5) million) due to higher proportion of dore sales (lower collection period) at Arcata and lower prices; and higher trade and other payables and provisions ($(23.2) million), in line with improved payment terms obtained from vendors. These effects were partially offset by higher net financial assets ($17.4 million) and by higher inventories ($11.9 million), mainly resulting from accumulation of concentrate in Argentina in December 2015.

Net debt

The Group reported net debt position was $350.5 million as at 31 December 2015 (2014: ($352.7) million). The reduction includes the net effect of the equity rights issue ($95 million), the prepayment of the Scotiabank medium term loan (($50) million), the repurchase of senior notes (($55) million), the withdrawal of short term pre-shipment loans in Peru ($75 million) and the cash outflow required to complete the construction of Inmaculada.

Capital expenditure14

2015 capital expenditure of $238.2 million (2014: $321.1 million) mainly comprised of operational capex of $63.9 million (2014: $114.9 million) and Inmaculada capital expenditure of $166.3 million (2014: $198.1 million).

Forward looking Statements

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

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

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

Statement of Directors' responsibilities

The Directors confirm that to the best of their knowledge:

- the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

- the Management report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

CONSOLIDATED INCOME STATEMENT

For the year ended 31 December 2015

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2015

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 December 2015

These financial statements were approved by the Board of Directors on 8 March 2016 and signed on its behalf by:

Ignacio Bustamante

Chief Executive Officer

8 March 2016

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 December 2015

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year 31 December 2015