Hochschild Regulatory News (HOC)

29 March 2011

Hochschild Mining plc

Preliminary Results for the twelve months ended 31 December 2010

Financial highlights1

·; Record revenue of $752.3 million, up 39%

·; Record adjusted EBITDA of $397.7 million, up 59%

·; Record attributable profit after tax of $94.9 million, up 79% 

·; Record EPS of $0.28, up 65%

·; Exceptional gain on the sale of stake in Lake Shore Gold Corp of $63.7 million

·; Strong financial position with a year end cash balance of $525.5 million

·; Proposed final dividend of $0.03 per share, up 50%, bringing total dividend for 2010 to $0.05 per share

·; Repayment in full of syndicated loan facility of $114.3 million in January 2011

·; Investment in Gold Resource Corp valued at $349 million compared to a net acquisition cost of $67 million

Operational highlights

·; Full year production of 26.4 million attributable silver equivalent ounces

·; Exploration programme delivering positive results:

o Resource life of core operations up 23% to 8.7 years

o Advanced projects, Inmaculada, Azuca and Crespo, on track with the potential to add a minimum of 12 million attributable silver equivalent ounces per year starting from the end of 2013

o Number of Company Maker prospects increased from three to eight

·; Acquisition of controlling stakes in Inmaculada (Peru) & Victoria (Chile)

·; Option agreement for the Valeriano property in Chile

·; 2011 production target of 22.5 million silver equivalent ounces

·; $70 million exploration budget for 2011, up 40%

* Adjusted EBITDA is calculated as profit from continuing operations before exceptional items, net finance costs and income tax plus depreciation and exploration expenses other than personnel and other exploration related fixed expenses.

 1 On a pre-exceptional basis

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

"I am pleased to report strong financial and operational results for the full year 2010. Our strategy to focus on organic growth through exploration has been a great success with a 23% increase in the resource life of our core operations to 8.7 years and an expanded project pipeline currently including eight Company Makers. We remain extremely confident about the prospects for our three advanced projects following positive scoping studies, particularly at Inmaculada where we have recently announced an increase in total resources to 128.3 million silver equivalent ounces.

We are reporting record EBITDA of $397.7 million, up 59% and earnings per share up 65%, driven by another strong year for precious metals. The final proposed dividend has increased by 50% bringing the total dividend for the year to $0.05 per share, reflecting our confidence in the sustainable operational performance of the Group and strong cash position, with a year end cash balance of $525.5 million."

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A presentation will be held for analysts & investors at 9.00am (UK time) on Tuesday 29 March 2011 at the offices of JP Morgan Cazenove, 20 Moorgate, London, EC2R 6DA.  

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

http://www.thomson-webcast.net/uk/dispatching/?event_id=7e62729d2d9a65b15e178b52d5966a14&portal_id=b48bca21de6fabf3b2a93c33e33cb205 

Conference call dial in details:

UK: +44 (0)20 7138 0838 (Please quote 'Hochschild Mining webcast' or confirmation code 9905834).

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

UK: +44 (0)20 7111 1244 Access code: 9905834#

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Enquiries:

Hochschild Mining plc

Charles Gordon +44 (0)20 7907 2934

Head of Investor Relations

Finsbury

Faeth Birch +44 (0)20 7251 3801

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 forty years' experience in the mining of precious metal epithermal vein deposits and currently operates four underground epithermal vein mines, three located in southern Peru, one in southern Argentina and one open pit mine in northern Mexico. Hochschild also has numerous long-term projects throughout the Americas.  

Chairman's Statement

I am pleased to report that Hochschild Mining has delivered a strong performance in 2010. What was once again a turbulent year for the global economy was, however, one of the strongest years in history for precious metals, particularly for the silver price which rose 83%. In this environment, the Company met its operational expectations, strengthened its financial position and undertook some key strategic steps which I firmly believe will secure our future growth path and deliver further value for our shareholders.

The Company's consistent operational efficiency coupled with strong gold and silver prices delivered a robust financial performance with EBITDA up 59% at $397.7 million and post exceptional EPS also up strongly by some 48% to $0.46 per share. Consequently, the Board is delighted to announce that we are proposing to increase the final dividend by 50% to $0.03 per share which reflects our strong balance sheet position and the anticipated healthy future cashflows of the Group. We believe the proposed increase is in accordance with capital availability and our desire to provide a yield to shareholders whilst continuing to respect the growth requirements of the business and the availability of capital.

During 2010, the Board appointed a new management team led by Ignacio Bustamante as Chief Executive Officer and Ramón Barúa as Chief Financial Officer. I believe that the realigned Company focus on growth through exploration heralds the beginning of a new era for Hochschild in which our excellent asset base, combined with an immense talent pool, will unlock consistent and profitable precious metal production growth. The 40% increase in our exploration budget to $70 million for 2011 is firm evidence of our commitment to this strategy and our confidence in the potential of our current project pipeline. In addition, we now have over 70 geologists providing us with the technical experience and expertise required to deliver a steady stream of value accretive project opportunities.

Our management team has great confidence in the potential of the Company to develop this aggressive exploration strategy and, allied to this, they have promoted a disciplined approach to the assessment of acquisitions. In this regard, the key announcements in 2010 were the progression of our 100% owned Azuca and Crespo projects and the acquisition of a controlling stake in the Inmaculada project, all of which are located at the core of our Southern Peru cluster.

Also noteworthy was the sale of our stake in Lake Shore Gold Corp which represented a 34% gain on our original average purchase price. The decision was made in light of our stated commitment that acquisitions must not only deliver early stage assets, strong geological potential and high value accretion but also a clear path to control. The sale achieved a very profitable return on our investment and has given us the financial strength to reinvest in our near term project pipeline. In addition, our 25% investment in Gold Resource Corp, in which we have invested a total of $67 million, is currently valued at approximately $349 million.

The silver market rose over 70% in the second half of 2010 boosted by strong fundamentals, unprecedented investment demand and renewed focus on silver's value as an alternative to gold. Whilst the corresponding rise in Hochschild's share price can be explained partly by the buoyant precious metals market, I firmly believe that an increasingly widespread market acceptance of our shift in strategic focus as well as the positive results achieved to date have also been major factors and will continue to be so in the future.

During 2011, we can look forward to further crucial steps in the development of our advanced projects at Inmaculada, Azuca and Crespo which in total have the potential to add a minimum of 12 million profitable ounces per year to our current production base from the end of 2013. Management is also confident that we are in a very strong position to continue the investment in brownfield expansion at our existing mines and to take advantage of any value enhancing acquisitions and opportunities that arise which meet the strict investment criteria I have described above.

We are committed to the safety of all our employees and have made good progress during the past year. In 2010, we reduced our accident frequency rate by 29% compared to 2009and continue to move forward with the implementation of the safety management information system jointly developed with DNV. Nonetheless, it is with deep regret that I report two fatalities in 2010. We have addressed the underlying safety deficiencies that led to the occurrence of these tragic events and we continue to view any fatalities as unacceptable.

On behalf of the Board, I would like to thank our entire team for their continued commitment in 2010 and I am confident that such impressive execution will remain the focus in 2011. 

Eduardo Hochschild

Executive Chairman

28 March 2011

Chief Executive Officer's Statement

Having joined Hochschild Mining over 19 years ago, it gives me great pleasure to present my first set of results as CEO. I am pleased to announce strong full year performance, reflecting the continuing operational and financial strength of our business.

2010 has been a pivotal year for the Group. As a new management team, we agreed, with the full support of the Board, that focusing on an organic growth strategy, utilising our strong exploration and project development skills, would be the optimum strategy to continue generating value for all our shareholders. With our unrivalled knowledge of the Americas, premium land packages in many of the key geological areas and extensive existing infrastructure, we are strongly positioned to consolidate and grow our role as one of the leading mining operators in the Americas.

Organic growth strategy

Our strategy for growth is based on three distinct pillars. Firstly, we continue to optimise production and extend the life of our core producing assets, Arcata, Pallancata and San Jose, which are the bedrock of the Company. Last year, we committed to increasing resources and I am pleased to say that we achieved this, with resource life up 23% to 8.7 years in 2010. Particularly good progress was made at San Jose, where we discovered nine new veins and two extensions in the second half of 2010, thus increasing total resource life at the property by 36% to 11.4 years and at Arcata, where we have increased the resource life by 30% to 9.6 years.

The second pillar is our exploration pipeline which currently contains highly promising targets at various stages of development across four key countries - Peru, Argentina, Mexico and Chile. In 2010, we delivered some excellent results particularly at our three advanced projects in our southern Peru cluster - Inmaculada, Azuca and Crespo, which all moved through scoping to pre-feasibility/feasibility stage. These three projects combined have the potential to add a minimum of 12 million attributable silver equivalent ounces per year to our production profile starting from the end of 2013. Furthermore, we have increased the number of Company Maker prospects which have the potential to deliver 20 - 30 million silver equivalent ounces. To support our 2011 exploration programme, we have once again significantly increased our budget by a further 40% to $70 million, more than double 2009 levels. This will deliver an extensive drill programme covering 335,000 metres at greenfield and brownfield sites in our four target countries.

Finally, our corporate development team has a clear mandate to pursue early stage, value accretive opportunities which display significant geological potential and a clear path to control. We saw this strategy in action in September 2010 with the acquisition of a controlling stake in the Inmaculada project, following the announcement of positive scoping results by our joint venture partner International Minerals Corp ("IMZ"). In Chile, we exercised our option to increase ownership in the Victoria project to a controlling 60% stake and we also signed an option agreement for a 100% stake in the Valeriano property which is located in an extremely prospective location, 27 kilometres north of Barrick Gold Corporation's Pascua Lama project.

We have a proven track record of identifying early stage, value accretive opportunities demonstrated by our investments in Lake Shore Gold and Gold Resource Corp. The divestment of the Lake Shore Gold stake at an attractive price allowed us to secure funding for the development of our advanced projects as well as for our exploration strategy.

2010 overview

Our operations delivered a robust performance in 2010 with production of 26.4 million attributable silver equivalent ounces comprised of 17.8 million ounces of silver and 144.4 thousand ounces of gold. Pallancata and San Jose performed particularly well with silver equivalent production up 19% and 8% year-on-year respectively. The 6% year-on-year reduction in attributable silver equivalent production was mainly driven by a lower contribution from the Arcata operation where we made the firm decision of mining reserve grades in order to achieve a consistent and sustainable level of production.

As a result of the significant increase in precious metals prices in the second half of 2010, our Ares mine in southern Peru continued to operate for the full year, albeit at a declining rate. We are monitoring the grade and cost profile of Ares and Moris, our ageing open pit mine in Mexico, to ensure that they are in line with our policy of producing profitable ounces. We expect both operations to cease producing in 2011.

For 2011, we are targeting production of 22.5 million ounces from current operations. We expect stable production at Pallancata and San Jose and lower production at Arcata as we move towards the reserve grade, as mentioned above. There continues to be enormous potential at Arcata with new high grade veins continuing to be found and resource life now at a very solid 9.6 years.

2010 was not only a year of high prices but also of high cost inflation. The management team has worked hard to contain controllable costs. Unit cost at underground operations increased 16%, mainly due to local price inflation in Argentina, higher royalties and the longer than anticipated mine life at the high cost Ares operation. Looking ahead, we are forecasting overall 2011 unit cost per tonne performance in Peru to be broadly in line with industry cost inflation of around 10%, whilst in Argentina we expect the rate to continue rising as a result of ongoing local price inflation of around 25-30%.

The business is in sound financial health reporting record revenue of $752.3 million in 2010 up 39% year on year, underpinned by higher realised silver and gold prices, which were up 83% and 30% year-on-year respectively. Attributable profit after tax rose 79% to $94.9 million (2009: $52.9 million) with pre-exceptional EPS of $0.28 for the full year, up 65% on 2009.

At San Jose, I am also pleased that during 2010 we resolved the lawsuit with our joint venture partner, Minera Andes Inc ("MAI") and we are fully committed to working together with MAI to deliver the mine's full potential.

We closed the year with an extremely substantial cash balance of $525.5 million which enabled us to repay our entire existing syndicated loan facility of $114.3 million in January 2011 and announce a 50% increase in our final dividend. This strong cash balance, together with healthy operating cashflow which is up 52% to $304.2 million in 2010, gives us the financial flexibility to pursue our ambitious exploration programme in 2011 and beyond. It also supports a full capital expenditure programme (2010: $156.5 million) including investment in our existing producing assets, mine development, advanced exploration projects and equipment. Finally, our strong capital position enables us to make selective, value accretive acquisitions which are consistent with Group strategy.

Outlook

Mining is a long-term investment proposition and we have a clear strategy for delivering long-term growth and value for shareholders. 2011 is already proving to be another promising year in this important phase of Hochschild's evolution: production of 22.5 million attributable silver equivalent ounces, key stage development at all three of our advanced projects and an exploration programme which, with unprecedented investment, will aim to make tangible progress in 2011 and beyond. With Hochschild's highly talented team, solid asset base and extensive project pipeline set to deliver long term production growth, I am confident that we are in a strong position to create further stakeholder value. I look forward to updating you on our progress over the course of the year. 

Ignacio Bustamante

Chief Executive Officer

28 March 2011

OPERATING REVIEW

2010 Highlights

·; Full year production of 26.4 million attributable silver equivalent ounces, in line with market expectations

·; Strong production at Pallancata and San Jose, up 19% and 8% respectively

·; Advanced projects, Inmaculada, Azuca and Crespo on track with the potential to add a minimum of 12 million attributable silver equivalent ounces per year starting from the end of 2013

·; Acquisition of controlling stake in the Inmaculada project

CURRENT OPERATIONS

Production

Hochschild delivered another solid performance in 2010, in line with its stated target, achieving attributable production of 26.4 million silver equivalent ounces comprised of 17.8 million ounces of silver and 144,403 ounces of gold (2009: 28.2 million attributable silver equivalent ounces). Production was particularly strong at the Company's two newest mines, Pallancata and San Jose, which now contribute approximately half of the Company's total attributable production, offset by lower production at Arcata where the Company is moving towards mining reserve grades in order to achieve a consistent and sustainable level of production.

The Company has announced a production target of 22.5 million attributable silver equivalent ounces for 2011, in line with its mid-term forecast of 20-23 million attributable silver equivalent ounces from current operations. Management expects stable production at San José and Pallancata, offset by lower production at Arcata, as the Company moves towards its long term goal of mining close to the average reserve grade at each of its core operations as anticipated in 2009.

Costs

The Company reported an increase in unit cost per tonne at its underground operations of 16% in 2010 to $82.3 (2009: $70.7) primarily due to significant price inflation in Argentina, higher royalties and longer than anticipated mine life at the high cost Ares operation. Please see page 19 of the financial review for further details on costs.

Main operations

Arcata: Peru

Production and sales

Arcata, which commenced production in 1964, is a 100% owned underground operation located in the Department of Arequipa in southern Peru.

During 2010, Arcata's production was impacted by lower silver grades due to changing geotechnical conditions at the accessible mine areas. In order to ensure a consistent and sustainable level of production, Arcata extraction grades were reduced during the year, moving towards reserve grade level as anticipated in 2009. Consequently, 2010 silver production decreased by 15% to 8.1 million ounces (2009: 9.5 million ounces). Gold production was 10% lower at 25,834 ounces (2009: 28,639 ounces).

As at 31 December 2010, the silver equivalent reserve grade at Arcata was 431 g/t and the Company expects to mine around this level in 2011, notwithstanding the 10-15% variability that is typical with these types of deposits. The Company remains positive about the geological potential at the Arcata property and has made excellent progress with the extension of its resource life which increased 30% in 2010 to 9.6 years.

Costs

The Arcata operation reported a 15% increase in unit cost per tonne in 2010, mainly as a result of higher metals prices increasing the royalties paid by the Company and also due to higher infrastructure costs relating to mine tunnels and stopes. This was partly offset by efficiency measures leading to cost reductions in contractors, explosives and maintenance.

A number of initiatives are planned for 2011 including the construction of eight new stopes in order to optimise extraction capacity as well as a programme to reduce energy consumption through the replacement of existing energy pumps.

Resource life  

The resource life of Arcata currently stands at 9.6 years, up from 7.4 years in 2009 following an intensive drill campaign focused on the Socorro, Sorpresa, Luz, Rita and Barbara veins. A total of 76,506 metres of diamond drilling was completed during the year (2009: 59,582 metres) with significant intercepts including:

The 2011 programme will employ geophysical methods in those areas of the property with thick post mineral cover and will also drill for further potential in the Mariana and Socorro veins. In addition, the Company will develop new resources in the Socorro, Luz, and Sorpresa veins.

Pallancata: Peru

Production and sales

The 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 and is a joint venture with International Minerals Corporation ("IMZ").Hochschild controls 60% of the joint venture and is the mine operator. Ore from Pallancata is transported 22 kilometres to the Selene plant for processing.

Pallancata continues to deliver strong results with record silver equivalent production in 2010, up 19% to 12.3 million silver equivalent ounces. Production was positively impacted by increased treated tonnage which rose 16% year-on-year, due to the Selene plant exclusively processing Pallancata's ore. As a result of these effects and a higher extracted silver grade of 344 g/t (2009: 327 g/t) silver production increased 20% to 10.1 million ounces (2009: 8.4 million ounces). Gold production also increased in 2010, up 12% to 35,848 ounces (2009: 31,975 ounces).

Following positive results from the ongoing drill programme at Pallancata, the Company completed mine development in two new areas in November 2010, Ranichico and Virgen del Carmen, both of which have strong future potential. In 2011, the Company will develop two further areas, San Javier and Pallancata East.

Costs

Pallancata's production cost is reported on a consolidated basis with the Selene processing plant. The Pallancata operation reported a 9% increase in unit cost per tonne year-on-year mainly due to higher royalties paid by the Company as a result of higher production and higher prices in 2010. Costs were also impacted by investment in infrastructure including mine tunnels and stopes and also in mine support facility upgrades. These effects were partly offset by cost efficiencies resulting from the wide vein structure of the deposit and higher production volume. 

Cost initiatives undertaken during 2010 include the optimisation of drilling and blasting procedures thus reducing the volume of explosives used and the introduction of a new paste fill plant. Plans for 2011 include the completion of a new tailings dam and the implementation of a new washing circuit stage in the treatment process which will help maintain the plant's target of 3,000 tpd capacity throughout the year.

1 The Company has a 60% interest in Pallancata

Resource life

The resource life of the Pallancata operation currently stands at 6.9 years, up 11% compared to 2009. During 2010, the Company continued to advance underground development at the Mariana and Virgen del Carmen veins. A total of 46,547 metres of diamond drilling was executed over the course of the year (2009: 26,573 metres), mainly focused on the Cimoide, Sofia; Pallancata West and East veins with intercepts including:

The focus for the 2011 brownfield programme will be drilling at the Huararani, Santa Angela, Pacapausa and Bolsa targets and the development of new resources at the Rina, Paralela and Pallancata West and South East Veins.

San José: Argentina

Production and sales

The San Jose silver/gold mine is located in Argentina, in the province of Santa Cruz, 1,750 kilometres southwest of Buenos Aires. San Jose commenced production in 2007 and is a joint venture with Minera Andes Inc ("MAI") in which Hochschild controls 51% and is the mine operator.

San Jose reported strong results in 2010, with silver production up 7% to 5.3 million ounces (2009: 5.0 million ounces) and gold production up 9% to 84,303 ounces (2009: 77,075 ounces). This was mainly due to higher volumes from new mining areas, including the high grade Kospi vein and also due to the successful installation of a Merrill Crowe circuit in the mill to process residual tailings recoveries. This project has exceeded the Company's initial recovery estimate of 500,000 silver equivalent ounces with a one-off 665,280 silver equivalent ounces recovered in 2010.

As expected, the grade profile of San Jose increased over the course of the year following lower production in the first quarter of 2010. As is common in the early stages of operation, grades were lower as a result of the mix of material with lower grade development mineral surrounding the high grade Kospi vein which increased steadily as mining progressed. The Kospi vein contributed over 188,803 tonnes of ore to the mine's production in 2010 and, as expected, has positively impacted results with full year silver equivalent production up 8% to 10.4 million silver equivalent ounces.

Additionally, in September 2010, the Company agreed to settle the lawsuit with MAI, regarding the $65 million project financing loan provided by Hochschild to the San Jose project. The companies committed to a new repayment schedule for both the project finance loan and the 2004 shareholder loan of $50 million, over a maximum period of 8 years with a fixed interest rate of 7% per annum. Future payments on both loans may be accelerated based on mine performance and metal prices.

Argentina continues to be a challenging economic and operating environment although the Company remains positive about the high grade potential of the San Jose mine and surrounding property.

Costs

Local cost inflation in Argentina remains high and consequently San Jose reported an increase in unit cost per tonne of 29% in 2010. This was mainly due to higher personnel expenses relating to an increase in the number of employees at the operation and the associated transportation, catering and maintenance costs, as well as a 25% increase in salaries. The mine's management team continues to introduce initiatives and technology which improve productivity and reduce costs.

1 The Company has a 51% interest in San Jose

Resource life

Following an intensive drill campaign in 2010 which resulted in the discovery of nine new high-grade gold/silver veins and two extensions, the Company materially increased the resource life of the San Jose property by 36% to 11.4 years (2009: 8.4 years). A significant portion of the San Jose property continues to be open at depth and laterally. During 2010, 53,692 metres of diamond drilling was completed focusing on the Ayelen, Micaela, Kospi and Ramal Kospi veins with significant intercepts including:

The 2011 exploration programme at San Jose includes developing resources at the newly discovered Susana vein and the Saavedra West breccia. The Company is planning to expand geophysical coverage (induced polarisation and ground magnetics) to an additional 10,000 hectares south of the mine area.

Other operations

Ares: Peru

Production and sales

The Ares mine, which commenced production in 1998, is a 100% owned operation located approximately 275 kilometres from the city of Arequipa in southern Peru. Following the significant increase in prices in the second half of 2010, the mine continued to operate for the full year, albeit at a lower level, producing 2.7 million silver equivalent ounces (2009: 3.5 million silver equivalent ounces).

As previously announced, Ares is expected to close in the second half of 2011. Management is monitoring the grade and cost profile of the operation to ensure that it is in line with the Company's policy of producing profitable ounces.

Moris: Mexico

Production and sales

The 100% owned Moris mine, is the Group's only open pit mine and is located in the district of Chihuahua, Mexico. Moris provided a key stepping stone into Mexico, which is of key strategic importance to the Group. As previously disclosed, Moris is an ageing deposit with a declining production profile. The operation produced 86,408 ounces (2009: 96,583 ounces) of silver and 21,532 ounces (2009: 28,344 ounces) of gold in 2010 or 1.4 million silver equivalent ounces (2009: 1.8 million silver equivalent ounces).

Moris is scheduled for closure in 2011. Management is monitoring the grade and cost profile of the operation to ensure that it is in line with the Company's policy of producing profitable ounces.

ADVANCED PROJECTS

The Company now has three advanced projects, Inmaculada, Azuca and Crespo, which have the combined potential to add a minimum of 12 million attributable silver equivalent ounces per annum to the Company's profile with production due to commence at the end of 2013. Approximately 15% of the total 2011 exploration budget of $70 million will be focused on resource development at these three projects to ensure a stable mine life prior to commencing production.

Inmaculada

Inmaculada, a 20,000 hectare gold-silver project located in the Company's existing operational cluster in southern Peru, is 60% owned and controlled by Hochschild, following the acquisition of a controlling stake in October 2010. The remaining 40% is held by the Company's joint venture partner at Pallancata, IMZ. Hochschild has progressed the project to feasibility which it aims to complete by the end of 2011 with production planned to commence by December 2013.

The scoping study published by IMZ in September 2010 estimated average annual total silver equivalent production of 11 million ounces from the project's Angela vein and total resources of 115 million silver equivalent ounces (1.9 million gold equivalent ounces). In February 2011, Hochschild published a 12% increase in total resources to 128.3 million silver equivalent ounces and a 29% increase in the silver equivalent grade to 498 g/t, based on the 180 g/t cut-off used by IMZ in the scoping study. When assuming the 98 g/t silver equivalent cut-off grade which reflects the anticipated marginal cost of production, resources increase further to 137.3 million silver equivalent ounces, an increase of 20%. Summary results (on a 100% basis, applying a 180 g/t silver equivalent cut-off grade and a silver to gold ratio of 60:1) are as follows:

·; Measured & Indicated resources: 4.7mt at an average grade of 5.2 g/t gold and 186 g/t silver containing approximately 795,000 ounces of gold and 28.3 million ounces of silver.

·; Inferred resources of 2.7mt at an average grade of 6.1 g/t gold and 247 g/t silver containing approximately 521,000 ounces of gold and 21.0 million ounces of silver.

Hochschild expects the results to significantly improve the economics of the project detailed in the above mentioned 2010 scoping study. Furthermore, after applying the Company's marginal silver equivalent cut-off grade of 98 g/t, the resource figures increase further. Updated project economics will be published with the completion of the feasibility study.

The Company is moving forward with an exploration programme at the property which consists of 40 mining concessions. The main Angela vein remains open with significant additional upside potential in several other structures and the joint venture has committed to undertake a 20,000 metre drilling programme annually for the first three years to further develop resources. In 2011, the Company will undertake geophysical work at the Jimena vein and at the north eastern extension of the Angela vein in preparation for drilling later in the year.

Results from the scoping study indicated that at base case gold and silver prices of $1,000/oz and $17/oz respectively, the project could return a cumulative total pre-tax cash flow (undiscounted) approximately $660 million and a pre-tax internal rate of return ("IRR") of 41%. Using prices for gold and silver of $1,400/oz and $34/oz respectively, the project could return a cumulative total pre-tax cash flow (undiscounted) of approximately $1,417 million and 74% IRR.

Azuca

In September 2010, the Company announced positive results from the scoping study undertaken at its 100% owned Azuca property, estimating initial average annual silver equivalent production of 3.5 million ounces, which represents around 16% of Hochschild's 2011 attributable production. At base case gold and silver prices of $1,000/oz and $17/oz respectively, the scoping study indicates that the project could return a cumulative total pre-tax cash flow (undiscounted) of approximately $107 million and 21% IRR. Using prices for gold and silver of $1,400/oz and $34/oz respectively, the project could return a cumulative total pre-tax cash flow (undiscounted) of approximately $533.7 million and 95% IRR. The study, which was completed by an independent third party, assumes plant throughput of 750 tonnes per day with engineering designed to easily accommodate future capacity increases.

Azuca has reached resources of 70.3 million silver equivalent ounces as at 31 December 2010 and is now at pre-feasibility stage with targeted completion in Q1 2012. The Company is currently undertaking an intensive exploration programme at the property with the aim of expanding the scale and profitability of the project. In 2010, 59,811 metres of drilling was undertaken (2009: 38,600 metres) with positive results at the Karla, Vivian, Prometida and Prometida Ramal Techo veins including:

Crespo

In January 2011, Hochschild reported positive results from a scoping study completed by an independent company, Ausenco, at the Company's 100% owned Crespo project, located in the Company's existing operating cluster in southern Peru. The scoping study is based on resources of 31.3 million silver equivalent ounces (measured and indicated) and estimates annual silver equivalent production of 2.3 million ounces starting from 2014 and a mine life of 7.5 years.

Crespo, which is expected to be an open pit deposit, is one of a number of properties acquired by the Company in 2008 as part of the Liam JV/Southwestern Resources land package and is the first of these to progress to pre-feasibility.

At base case gold and silver price assumptions of $1,000/oz and $17/oz respectively, the project could return a cumulative total pre-tax cash flow (undiscounted) of $53.5 million, with an IRR of 19%. Using prices of $1,400/oz and $34/oz for gold and silver respectively, the project could return a cumulative total pre-tax cash flow (undiscounted) of approximately $230.8 million, with an IRR for the project of approximately 60%.

During 2010, the Company completed 1,740 metres of drilling as well as a 537 metre underground audit to confirm the resource model. The 2011 drill programme is focused on converting inferred resources to the indicated resource category and to explore the Queshca target located a few kilometres away from the main target.

EXPLORATION REVIEW

2010 Highlights

·; $53.5 million invested in exploration in 2010

·; Resource life up 23% to 8.7 years

·; Increase in Company Maker pipeline from three to eight projects

·; Acquisition of controlling stake in the Victoria project in Chile

·; Option agreement for the Valeriano property in Chile

·; 2011 exploration budget up 40% to $70 million

·; 335,000 metres of drilling to be undertaken at greenfield and brownfield projects across 4 countries

Exploration is a key part of Hochschild's growth strategy, demonstrated by the significant increase in budget which has more than doubled since 2009 to $70 million in 2011. A total of 300,086 metres of drilling was undertaken by the Company's local exploration teams in 2010 (2009: 149,99 metres), at both existing sites and at new, greenfield projects in Peru, Argentina, Mexico and Chile. The Company now has over 70 geologists providing the technical experience and expertise required to deliver a steady stream of value accretive opportunities.

The Company has achieved positive results particularly with regards to its key objective of increasing the resource life of its main operations and on expanding its project pipeline which now includes three advanced projects and eight Company Makers (projects with the potential to achieve 20-30 million silver equivalent ounces per year).

The significant investment in 2011 will support the delivery of an extensive and targeted drill programme covering 335,000 metres across the four target countries mentioned above. The budget will be split between exploration work at the Company's existing operations and on identifying and developing high-quality, early stage projects which have the potential to move through the pipeline to production.

Brownfield exploration

Approximately 49% of the 2010 budget was invested in brownfield drilling in the areas immediately surrounding Hochschild's three main operations and resulted in a significant 23% increase in resource life to 8.7 years as at 31 December 2010 (2009: 7.1 years in 2009). For further details on the Company's brownfield exploration programme, please see pages 7-12.

The Company takes a very conservative approach to resource delineation and is one of the few companies that applies the same cut off grades to reserves and resources.

For full reserve and resource tables, please see pages 57-62.

Greenfield exploration

Company Makers

As mentioned above, the Company is also continuing to focus on Company Makers which are projects with the potential to achieve 20-30 million silver equivalent ounces per year. These are typically high sulphidation, disseminated or gold/copper porphyry deposits and are generally open pit operations. In 2010, $11.2 million was invested in finding and developing such deposits and this has increased to $13.1 million in 2011. The Company currently has eight potential Company Makers in the pipeline:

Victoria

In November 2010, the Company exercised its option to increase its holding in the Victoria project in northern Chile to 60% by incurring $6.0 million in exploration expenditure (Iron Creek Capital hold the remaining 40%). Although still at an early stage, exploration work is delivering positive results at the property which covers 37 kilometres of continuous strike length at the highly productive Domeyko Fault Zone. Drilling indicates significant mineralisation with recent results including:

Drilling has extended the overall strike length of the mineralised trend to approximately 1 kilometre. A large area of hydrothermal alteration, including extensive local silicification and alunite at Leña, in the southeast area of the property, was also discovered. The programme included mapping of a quartz-vein stockwork over an area of approximately 800 metres by 400 metres associated with porphyry copper style alteration and supergene turquoise mineralisation at the Picaron prospect on the west side of Victoria.

The Company has also undertaken drilling at the Vida target which appears to display many of the characteristics of a mafic porphyry Au (+/-Cu) system, cross-cut by later, northwest trending structures that are the focus of higher-grade gold mineralisation. Three new RC holes covering a total of 946 metres have been drilled to date and revealed high-grade, cross-cutting, sulphide-rich breccia/fault structures that are oxidised near surface. Results include:

Total drilling of 10,000 metres is planned for the Victoria property in 2011.

Valeriano

In November 2010, Hochschild entered into an option agreement with Sociedad Contractual Minera Valleno for the Valeriano property which is located 27 kilometres north of Barrick Gold Corporation's Pascua Lama project. Valeriano covers an area of 3,750 hectares in close proximity to the Argentinian border and hosts both high-sulphidation as well as porphyry style, disseminated gold mineralisation.

The property has been explored in the past by Phelps Dodge (1989-1991) and Barrick (1995-1997), both of which completed drill campaigns totalling 12,575 metres. No significant exploration has been undertaken at the property since 1997. A number of highly mineralised intercepts have been reported from this drilling including:

·; 100 metres at 1.37 g/t Au in typical shallow high sulphidation style mineralisation starting at 19 metres depth

·; 41 metres at 0.61 g/t Au, 12 g/t Ag and 0.30% Cu, porphyry type mineralisation starting at 70 metres depth

Exploration work commenced in January 2011 with a review of the existing data set and re-interpretation of geophysical data and drilling to test the deep porphyry-style target as well as the near surface high-sulphidation system. Field work is also underway including sampling and mapping surface exposures and acquisition of deep IP and resistivity surveys. A 2,500 metre drill campaign is scheduled to commence in H2 2011 to test targets defined by this exploration campaign.

Mercurio

Mercurio is a 100% owned, 36,388 hectare property in Mexico, located between two high grade mines, approximately 43 kilometres from Sombrerete and 68 kilometres from Fresnillo. During the year, 6,945 metres of drilling was undertaken at the project with results including 86 metres at 20 g/t Ag (0.2% Cu, 0.5% Pb, 1.4% Zn) and 3.5 metres at 300 g/t Ag (4.4% Cu, 1.2% Pb, 7.5% Zn).

Drilling focused on a system of low sulphidation veins which have reported anomalous silver and base metal results. Deeper drilling is planned for the first half of 2011.

Josnitoro

Josnitoro is a 100% owned project located in Peru. The project was acquired as part of the Southwestern Resources acquisition, with visible gold mineralisation starting at surface. The Company is working towards completing the necessary permits and approval process.

Corazon de Tinieblas

The Corazon de Tinieblas property in Mexico was acquired in H1 2010 by the Company and is currently completing the permit process. A number of areas have been defined for drill testing and more detailed mapping is scheduled to better define the controls to mineralisation and the overall lithologic stratigraphy of the area which will reveal the structural setting.

Apacheta

At the 100% owned Apacheta project in Peru, the Company is in the process of completing the permit process and is also undertaking mapping, geochemical sampling and geophysics to define drill targets within this extensive land package.

Parihuana

The Parihuana project is 100% owned by Hochschild and is located in Peru. The project entered the pipeline in 2010 and drill targets have been selected for testing in the first half of 2011. Alteration mineralogical studies indicate typical high-sulphidation affiliation and clay mineralogy also indicates a central zone of higher temperature and acid conditions.

Sabina

At the 100% owned Sabina project in Peru, drilling to date has not reported significant mineralisation. However, a vertical anomalous feeder system has been identified at the Chaquella target with the intensity of the alteration system indicating a powerful hydrothermal system and the Company therefore plans to complete the current drill programme in 2011.

Medium scale projects

The Company's pipeline currently contains various medium scale properties in the prospects and drill target categories which each have the potential to deliver 5-10 million silver equivalent ounces of production per year. These tend to be low sulphidation epithermal gold/silver type deposits with varying base metal content and are typically mined underground.

In 2010, $6.9 million was dedicated to finding and developing medium scale projects and the Company plans to increase this investment to $8.6 million in 2011. Positive results have been reported at a number of these projects, particularly at La Flora which has moved up the pipeline from prospect to drill target. Two new properties also entering the pipeline in 2010 were the Cricket prospect in Argentina as well as the more advanced Pausi project in Peru which is now at 'drill target' stage.

La Flora

At the La Flora project in Argentina, two large vein systems have been identified since drilling commenced in H2 2010. The project has progressed to 'drill targets' and a detailed exploration programme is underway. Logging of the drill holes indicated that the anomalous gold mineralisation is associated with the upper reaches of a hydrothermal system. In 2011, geophysical work and deeper drilling will be undertaken to test the potential of higher grade mineralisation.

Encrucijada

Three drill holes were completed at the Encrucijada property (a joint venture with Andina Minerals) in 2010 focusing on the San Bernardo Dome target with associated advanced argillic alteration and tourmaline breccias. Alteration and mineralisation indicates a possible copper porphyry system with anomalous gold and molybdenum also reported from these intercepts:

Mosquito

The Company is making progress at the Mosquito project in Argentina, where seven new vein targets have been identified. A total of 9,984 metres was drilled in 2010 with results pending. All targets have cut vein structures associated with surface mapping.

Astana Farallon

Astana Farallón is a 100% owned gold/silver epithermal vein project in the Company's southern Peru cluster. A 5,600 metre drill programme is planned for H2 2011 which is designed to test a known productive horizon at depth. Historic drilling at shallow levels reported anomalous results reported in Au, Ag, Pb, and Zn.

Pariguanas

In June 2010, the Company signed an agreement with Compañía de Minas Buenaventura ("Buenaventura") to create the Pariguanas joint venture through the combination of neighbouring properties of similar size owned by the two companies. Hochschild holds 40% of the property which covers 4,437 hectares of land located approximately 18 kilometres from the Company's existing Ares operation. Buenaventura currently holds the remaining 60% of the joint venture with the obligation to achieve production by 2018.

Pariguanas is a low sulphidation, predominantly underground vein system where up to five prospective areas have been outlined. A total of 7,290 metres in 31 holes has been drilled by Buenaventura to date, mainly focused on the San Pedro vein. Positive results include:

·; 2.7 metres at 0.7 g/t Au and 1,194 g/t Ag including 0.9 metres at 1.6 g/t Au and 3,016 g/t Ag

·; 4.4 metres at 3.1 g/t Au and 2,376 g/t Ag including 1.6 metres at 7.4 g/t Au and 6,288 g/t Ag

In the event that Buenaventura does not commence production by 2018, Hochschild will have the option to assume control of the project by committing to certain payments linked to Buenaventura's investment.

Copper projects

Following the acquisition of Southwestern Resources in 2008, the Company currently holds a number of copper projects located in the southern Andes within a highly prospective area for copper deposits. The Company has committed approximately 4% of the total 2011 budget and a dedicated exploration team to drilling at the properties in order to establish potential value.

Generative

The Company holds over 1 million hectares of prime land in key geological regions across four countries and has committed around 6% of the total 2011 budget to further expand its land package in premium areas.

FINANCIAL REVIEW

Key performance indicators:

(before exceptional items, unless otherwise indicated)

1 Revenue presented in the financial statements is disclosed as net revenue (in this Financial Review it is calculated as gross revenue less commercial discounts)

2Includes Hochschild's main operations: Arcata, Pallancata and San Jose. Cash costs are calculated to include cost of sales, treatment charges, and selling expenses before exceptional items less depreciation included in cost of sales.

3 Adjusted EBITDA is calculated as profit from continuing operations before exceptional items, net finance costs and income tax plus depreciation and exploration expenses other than personnel and other exploration related fixed expenses.

4Cash flow from operations is calculated as profit for the year from continuing operations after exceptional items, plus the add-back of non-cash items within profit for the year (such as depreciation and amortisation, impairments and write-off of assets, gains/losses on sale of assets, amongst others) plus/minus changes in liabilities/assets such as trade and other payables, trade and other receivables, inventories, net tax assets, net deferred income tax liabilities, amongst others.

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

Revenue

Gross revenue: Gross revenue from continuing operations increased 36% to $802.7 million in 2010 (2009: $589.9 million) driven by higher metal prices during the year.

Silver: Gross revenue from silver increased 44% in 2010 to $549.7 million (2009: $382.4 million) as a result of higher prices. The total amount of silver ounces sold in 2010 decreased to 24,283 koz (2009: 24,330 koz2) mainly due to lower year-on-year production.

Gold: Gross revenue from gold increased 22% in 2010 to $253.0 million (2009: $207.5 million) also as a result of higher prices. The total amount of gold ounces sold in 2010 decreased to 199.9 koz (2009: 207.8 koz3) mainly due to lower year-on-year production.

Gross average realised sales prices

As of December 2010, the Company discloses average realised prices calculated as gross revenue divided by gross ounces sold. Previously, the Company disclosed average realised prices calculated as net revenue divided by net ounces sold. Net revenue is calculated as gross revenue minus commercial discounts, see paragraph below.

2 Restated

3 Restated

The following table provides restated figures for average realised prices and ounces sold for 2009 and 2010:

Commercial discounts

Commercial discounts refer to refinery treatment charges, refining fees and payable deductions for processing concentrates, and are discounted 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 2010, the Group recorded commercial discounts of $50.5 million (2009: $50.4 million). The ratio of commercial discounts to gross revenue in 2010 decreased to 6% (2009: 9%).

Net revenue

Increased by 39% to $752.3 million, comprising silver revenue of $508.3 million and gold revenue of $243.9 million. In 2010, silver accounted for 68% and gold 32% of the Company's consolidated net revenue compared to 63% and 37% respectively in 2009.

Net revenue by mine

1Other revenue includes revenue from sale of energy in Peru, revenue from administrative services in Mexico and revenue from base metal components in the concentrate sold from the Arcata mine net of commercial discounts in 2009 only.

Costs

Total pre-exceptional cost of sales increased 24% to $345.7 million in 2010 (2009: $279.3 million) mainly as a result of the increase in direct production cost of 21% to $225.2 million (2009: $186.3 million). Direct production cost increased mainly due to inflation in personnel, supplies and energy expenses, particularly in Argentina. In addition, mining royalties increased as a result of higher metal prices. Depreciation and amortisation, which increased 23% to $102.7 million (2009: $83.4 million), also contributed to higher cost of sales.

Unit cost per tonne

The Company reported an overall increase in unit cost per tonne at its underground operations of 16% in 2010 to $82.3 (2009: $70.7). This increase is mainly explained by higher royalties as well as price inflation in Argentina.

In order further to increase transparency, the Company is restating its unit cost per tonne figures to include certain indirect operating expenses including health, safety and environmental accreditations. In addition, Pallancata's 2009 unit cost per tonne has been restated to exclude the depreciation component of the Selene plant processing fee. With these restatements, the unit cost per tonne of the Company's underground operations in 2009 reduces from $71.2 to $70.7.

Unit cost per tonne by operation*:

*Unit cost per tonne is calculated by dividing mine and geology costs by extracted tonnage and plant and other costs by treated tonnage. Dividing total production cost disclosed in the segmental report on page 55 by treated tonnage reported in the production report provides a good approximation for unit cost per tonne.

Cash costs

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

Co-product silver/gold cash costs are total cash costs multiplied by the percentage of revenue from silver/gold, divided by the number of silver/gold ounces sold in the year. Silver and gold cash costs increased from $7.1 to $9.3 per ounce and from $476 to $535 per ounce, respectively. Silver and gold cash costs from main operations (Arcata, Pallancata and San Jose) increased from $7.1 to $8.7 per ounce and from $480 to $504 per ounce, respectively. The increase was mainly explained by higher production costs and the lower average grades, mainly at Arcata and Ares.

By-product silver/gold cash costs are total cash costs less revenue from gold/silver, divided by the number of silver/gold ounces sold in the year. By-product cash costs for the period were $3.0 per silver ounce (2009:$2.4 per silver ounce) and ($1,153) per gold ounce (2009: ($576) per gold ounce).

Administrative expenses

Administrative expenses before exceptional items increased by 30% to $66.2 million (2009: $51.1 million) mainly as a result of: a 35% increase in personnel expenses to $34.3 million (2009: $25.4 million) and a 45% increase in professional fees to $9.6 million (2009: $6.6 million).

Personnel expenses increased primarily due to the provision for a management long-term incentive plan, termination benefits due to changes in management and higher salaries. Professional fees increased mainly due to higher legal fees mainly related to the Minera Andes dispute.

Exploration expenses

As a result of the Group's decision to focus on organic growth through exploration, exploration expenses, which primarily relate to greenfield exploration, increased by 109% to $41.5 million in 2010 (2009: $19.9 million). Further detail on this programme can be found in the exploration section on page 13.

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 2010, the Group capitalised $12.0 million relating to brownfield exploration compared to $8.6 million in 2009 bringing the total investment in exploration for the full year 2010 to $53.5 million. In addition, $10.2 million was invested in the Company's advanced projects.

Selling expenses

Selling expenses increased to $26.9 million (2009: $21.0 million) mainly due to higher export duties at San Jose, driven by the increase in gold and silver prices (export duties in Argentina are levied at 10% of revenue for concentrate and 5% of revenue for doré).

Other income/expenses

Other income before exceptional items was $5.6 million (2009: $4.5 million). Other income post exceptional items was $82.8 million (2009: $13.3 million), mainly as a result of the divestment in the Company's stake in Lake Shore Gold from 35% to 6%, which generated a gain of $63.7 million.

Other expenses before exceptional items reached $11.0 million (2009: $19.3 million). There were no exceptional items related to other expenses in 2010.

Profit from continuing operations

Profit from continuing operations before exceptional items, net finance costs and income tax increased to $266.6 million (2009: $153.6 million) as a result of the effects detailed above.

Adjusted EBITDA

Adjusted EBITDA increased by 59% over the period to $397.7 million (2009: $249.9 million) driven primarily by higher silver and gold prices. Adjusted EBITDA is calculated as profit from continuing operations before exceptional items, net finance costs and income tax plus depreciation and exploration expenses other than personnel and other exploration related fixed expenses.

Impact of the Group's investments in joint ventures and associates

An associate is an entity in which Hochschild has significant influence but not control and is accounted for using the equity method.

Hochschild's pre exceptional share of the profit/(loss) after tax of associates totalled $(4.6) million in 2010 (2009: $7.6 million). In 2010, the Company's share in associates was mainly explained by losses relating to its holdings in Gold Resource Corp and Lake Shore Gold of $3.2 million and $1.4 million, respectively. In 2009, the Company's share in associates was mainly explained by a gain of $9.2 million from Lake Shore Gold; partially offset by a loss of $1.0 million in Gold Resource Corp.

Hochschild reduced its stake in Lake Shore Gold from 35% to 6% in November 2010. The divestment of the remaining 6% stake in Lake Shore Gold, which took place in February 2011, will be recorded in the Company's 2011 accounts.

Hochschild also divested its holdings in Cabo Sur (89%) and Zincore Metals Inc (37%) during the year. The Company continues to hold a 25% stake in Gold Resource Corp.

Finance income

Finance income before exceptional items decreased by 36% to $4.1 million (2009: $6.4 million) mainly driven by accounting non-cash adjustments in Argentina ($2.5 million) in respect of the discounting of San Jose's VAT receivables.

Finance costs

Finance cost decreased 36% to $29.5 million in 2010 (2009: $46.0 million). Interest costs increased to $17.3 million in 2010 (2009: $15.6 million) mainly due to the refinancing of upcoming syndicated bank loan maturities in November 2009 with a longer-dated convertible bond at a higher interest rate. Nonetheless, the reduction in recognised losses from the use of derivatives in 2010 to $(9.1) million (2009: $28.4 million) resulted in a decrease in finance costs.

Hochschild repaid, in full, its syndicated bank loan facility in January 2011. In addition, the Company has no outstanding currency or commodity hedge positions.

Foreign exchange losses

The Group recognised a foreign exchange gain of $0.3 million (2009: $0.3 million loss) as a result of transactions in currencies other than the functional currency.

Income tax

The Company's pre-exceptional effective tax rate decreased to 32.5% in 2010 (2009: 36.8%) mainly as a result of the reversal in 2010 of a provision for tax credits of $4.8 million, which was recognised at the end of 2009.

In addition, the post-exceptional effective tax rate increased to 24.7% (2009: 21.6%) primarily driven by a lower proportion of non-taxable, exceptional gains to profit before income tax in 2010 compared to 2009, which represented a decrease in the effective income tax rate of 8% in 2010 compared to 12% in 2009.

Exceptional items

Exceptional items in 2010 totaled $57.8 million after tax (2009: ($44.7 million). This mainly includes:

Positive exceptional items:

Negative exceptional items:

Cash flow & balance sheet review:

Cash flow:

Total cash generated increased from $(38.1) million in 2009 to $448.2 million in 2010 ($486.3 million difference). Operating cashflow increased 51% to $304.2 million from $200.5 million in 2009 ($103.7 million difference), mainly due to higher metal prices. Net cash from investing activities increased to $199.0 million in 2010 from $(373.0) million in 2009, primarily due to the reduction in the Company's holding in Lake Shore Gold. Finally, cash from financing activities decreased to $(55.0) million from $134.4 million, primarily as a result of the higher dividend paid to International Minerals Inc of $26 million in 2010, compared to an equity issuance of $145 million in 2009.

Working capital:

The Company's working capital position decreased to $(1.1) million in 2010 from $66.0 million in 2009 as a result of higher trade and other payables and provisions. This was primarily explained by; payments to International Minerals Inc relating to the Inmaculada acquisition ($54.8 million), workers profit sharing ($21.3 million), higher commercial payables ($20.4 million) and a provision for the management long term incentive plan ($7.0 million).

Net debt:

*Includes pre-shipment loans which were previously reported under working capital (2009 figures have been restated to reflect this change)

The Company reported net cash of $207.8 million as at 31 December 2010 (2009: $254.7 million). This was primarily driven by the significant increase in cash and cash equivalents from $77.8 million to $525.5 million during the year. In January 2011, the Company paid down its full syndicated loan facility of $114.3 million, which will be recorded in its 2011 accounts.

The Convertible bond currently outstanding has a conversion price of £3.98 and allows the Company to force conversion of the bonds at anytime after 20 October 2012 if, during a 20 day period, the Company's stock price exceeds 130% of the conversion price (£5.17).

Capital expenditure¹

1 Includes additions in property, plant and equipment and evaluation and exploration assets and excludes increases in closure of mine assets.

2 Other capex includes mainly Azuca ($13.8 million), Crespo ($2.7 million) and administrative capex of ($1.5 million)

3 Capex does not include the $90.6 million additions in respect of the acquisition of Inmaculada

2010 capital expenditure of $156.5 million (2009: $108.5 million) includes mine development of $71.5 million, equipment of $53.8 million, capitalized exploration costs of $12.0 million in respect of the Group's operating mines and $16 million capitalized in respect of advanced projects (Azuca and Crespo).

Dividends:

The directors recommend a final dividend of $0.03 per ordinary share which, subject to shareholder approval at the 2011 AGM, will be paid on 7 June 2011 to those shareholders appearing on the register on 13 May 2011. If approved, this will result in a total dividend for the year of $0.05 per share. Dividends are declared in US dollars. Unless a shareholder elects to receive dividends in US dollars, they will be paid in pounds sterling with the US dollar dividend converted into pound sterling at exchange rates prevailing at the time of payment. Our dividend policy takes into account the profitability of the business and the underlying growth in earnings of the Company, as well as its capital requirements and cash flow.

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 2010

Consolidated statement of comprehensive income

For the year ended 31 December 2010

Consolidated statement of financial position

As at 31 December 2010

These financial statements were approved by the Board of Directors on 28 March 2011 and signed on its behalf by:

Ignacio BustamanteChief Executive Officer

28 March 2011

Consolidated statement of cash flows

For the year ended 31 December 2010

Consolidated statement of changes in equity

For the year 31 December 2010

Notes to the consolidated financial statement

For the year ended 31 December 2010

1 Notes To the consolidated financial statements

For the year ended 31 December 2010

The financial information for the year ended 31 December 2010 and 2009 contained in this document does not constitute statutory accounts as defined in section 435 of the Companies Act 2006. The financial information for the years ended 31 December 2010 and 2009 have been extracted from the consolidated financial statements of Hochschild Mining plc for the year ended 31 December 2010 which have been approved by the directors on 28 March 2011 and will be delivered to the Registrar of Companies in due course. The auditor's report on those financial statements was unqualified and did not contain a statement under section 498 of the Companies Act 2006.

2 Significant accounting policies

The accounting policies adopted are consistent with those of the previous financial year except for the adoption of new and amended standards.

The Group has adopted the following new and amended IFRS and IFRIC interpretations during the year. Adoption of these revised standards and interpretations did not have any effect on the financial performance or position of the Group.

·; IFRS 3 "Business Combinations (revised January 2008)", applicable for annual periods beginning on or after 1 July 2009.

The revised standard will have an impact on the profit or loss reported in the period of an acquisition, the amount of goodwill recognised in a business combination and the profit or loss reported in future periods. IFRS 3 applies prospectively to business combinations occurring after 1 July 2009 and had no impact on the financial statements.

·; IAS 27 "Consolidated and Separate Financial Statements (revised January 2008)", applicable for annual periods beginning on or after 1 July 2009.

IAS 27 requires that a change in the ownership interest of a subsidiary (without loss of control) is accounted for as a transaction with owners in their capacity as owners. The Group has changed the reference 'minority interest' to 'non-controlling interest', in accordance with the standard.

·; IFRIC 17 "Distributions of Non-cash Assets to Owners", applicable for annual periods beginning on or after 1 July 2009.

This interpretation provides guidance on accounting for arrangements whereby an entity distributes non-cash assets to shareholders either as a distribution of reserves or as dividends. The interpretation had no effect on the financial position or performance of the Group.

·; IAS 39 "Financial Instruments: Recognition and Measurement - Eligible Hedged Items", applicable for annual periods beginning on or after 1 July 2009.

The amendment addresses the designation of a one-sided risk in a hedged item, and the designation of inflation as a hedged risk or portion in particular situations. The amendment had no effect on the financial position or performance of the Group.

·; IFRS 2 'Group Cash-settled Share-based Payment Arrangements', applicable for annual periods beginning on or after 1 January 2010.

The standard has been amended to clarify the accounting for group cash-settled share-based payment transactions, where a subsidiary receives goods or services from employees or suppliers but the parent or another entity in the group pays for those goods or services. IFRIC 8 and IFRIC 11 have been withdrawn. This amendment had no effect on the financial position or performance of the Group.

·; Improvements to International Financial Reporting Standards (issued 2009).

Includes 15 amendments to 12 standards.

Applicable for annual periods beginning on or after 1 July 2009: IFRS 2 Share-based Payment, IAS 38 Intangible Assets, IFRIC 9 Reassessment of Embedded Derivatives, IFRIC 16 Hedges of a net Investment in a Foreign Operation.

Effective immediately on issue date in April 2009: IAS 18 Revenue.

Applicable for annual periods beginning on or after 1 January 2010: IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, IFRS 8 Operating Segments, IAS 1 Presentation of Financial Statements, IAS 7 Statement of Cash Flows, IAS 17 Leases, IAS 36 Impairment of Assets, IAS 39 Financial Instruments: Recognition and Measurement. These improvements had no impact on the financial position or performance of the Group.

3 SEGMENT REPORTING

The Group's activities are principally related to mining operations which involve the exploration, production and sale of gold and silver. Products are subject to the same risks and returns and are sold through the same distribution channels. The Group undertakes a number of activities solely to support mining operations including power generation and services. Transfer prices between segments are set on an arm's-length basis in a manner similar to that used for third parties. Segment revenue, segment expense and segment results include transfers between segments. Those transfers are eliminated on consolidation.

For internal reporting purposes, management takes decisions and assesses the performance of the Group through consideration of the following reporting segments:

·; Operating unit - Ares, which generates revenue from the sale of gold and silver.

·; Operating unit - Arcata, which generates revenue from the sale of gold, silver and concentrate.

·; Operating unit - Selene, which until June 2009 generated revenue from the sale of gold, silver and concentrate. The operating unit is no longer considered a reporting segment.

·; Operating unit - Pallancata, which generates revenue from the sale of concentrate.

·; Operating unit - San Jose, which generates revenue from the sale of gold, silver and concentrate.

·; Operating unit - Moris, which generates revenue from the sale of gold and silver.

·; Exploration, which explores and evaluates areas of interest in brownfield and greenfield sites with the purpose of extending the life of mine of existing operations and to assess the feasibility of new mines. The exploration segment includes expenses reflected through profit and loss and capitalised as assets.

·; Other - for the year 2010 the amount disclosed includes the profit or loss generated by Empresa de Transmision Callalli S.A.C. (a power generation company), Servicios Corporativos Hochschild Mining Mexico S.A. de C.V. (a service company in Mexico), and Selene mine that closed in 2009 which, as a consequence, was not considered to be a reportable segment. For the year 2009 the amount disclosed includes the profit or loss generated by Empresa de Transmision Callalli S.A.C., Servicios Corporativos Hochschild Mining Mexico S.A. de C.V. and Compañía Minera Arcata S.A.

The Group's administration, financing, other activities (including other income and expense), and income taxes are managed at a corporate level and are not allocated to operating segments.

Segment information is consistent with the accounting policies adopted by the Group. Management evaluates the financial information based on International Financial Reporting Standards (IFRS) as adopted for use in the European Union.

The Group measures the performance of its operating units by the segment profit or loss that comprises gross profit, selling expenses and exploration expenses.

Segment assets include the items that could be allocated directly to the segment.

(a) Reportable segment information

1 "Other" revenue primarily relates to revenues earned by Servicios Corporativos Hochschild Mining Mexico S.A. de C.V. for services provided to the Moris Mine, and the Mexican exploration activities.

2 Segment profit for the operating segments Ares, Arcata, Selene and Pallancata includes an exceptional item in cost of sales of US$8,861,000..

3 Others is comprised of administrative expenses of US$66,221,000, other income of US$82,802,000, other expenses of US$10,956,000, impairment of assets of US$24,018,000, share of loss of associates and joint ventures of US$6,080,000,, finance income of US$13,344,000, finance cost of US$29,542,000, and foreign exchange gain of US$29,000.

4 Includes US$61,000 of depreciation capitalised in Minera Hochschild Mexico S.A. de C.V. due to the San Felipe project.

5 Includes the goodwill of San Jose unit amounting to US$2,091,000.

6 Not reportable assets are comprised of intangibles of US$150,000, investments accounted under the equity method of US$79,068,000, available-for-sale financial assets of US$153,620,000, other receivables of US$93,348,000, income tax receivable of US$3,318,000, deferred income tax assets of US$5,229,000, other financial assets of US$20,662,000 and cash and cash equivalents of US$525,482,000.

1 "Other" revenue primarily relates to revenues earned by Servicios Corporativos Hochschild Mining Mexico S.A. de C.V. for services provided to the Moris mine, and the Mexican exploration activities.

2 Segment profit for the operating segments Ares, Arcata, Selene and Pallancata includes an exceptional item in cost of sales of US$6,918,000.

3 Others is comprised of administrative expenses of US$51,068,000, other income of US$13,283,000, other expenses of US$20,577,000, impairment of property, plant and equipment of US$26,713,000, share of gains of associates and joint ventures of US$47,223,000, finance income of US$28,684,000, finance cost of US$47,296,000, and foreign exchange loss of US$256,000.

4 Includes US$11,000 of depreciation capitalised in Minera Hochschild Mexico S.A. de C.V. due to the San Felipe project.

5 Includes the goodwill of San Jose unit amounting to US$2,091,000.

6 Not reportable assets are comprised of intangibles of US$342,000, investments accounted under the equity method of US$450,665,000, available-for-sale financial assets of US$19,181,000, other receivables of US$91,033,000, income tax receivable of US$10,582,000, deferred income tax assets of US$15,852,000, other financial assets of US$695,000 and cash and cash equivalents of US$77,844,000.

(b) Geographical information

Based on the entity-wide disclosure stated in IFRS 8, the revenue for the period based on the country in which the customer is located is as follows:

In the periods set out below, certain customers accounted for greater than 10% of the Group's total revenues as detailed in the following table:

Based on the entity-wide disclosure requirements set out in IFRS 8, non-current assets, excluding financial instruments and income tax assets, were allocated based on the geographical area where the assets are located as follows:

4 Acquisitions

(a) Acquisition of associates

Lake Shore Gold Corp.

On 9 March 2009 the Group acquired 14,900,000 shares of Lake Shore Gold Corp. ("Lake Shore Gold") for US$18,003,000 as part of its commitment to participate in the bought-deal financing agreement entered into by Lake Shore Gold. After completion of the transaction, the Group's ownership in Lake Shore Gold was maintained at 39.99%.

On 6 November 2009 Lake Shore Gold acquired all of the outstanding common shares of West Timmins Mining Inc. ("West Timmins") by issuing 103,951,125 common shares and 8,550,264 options and warrants. At the date of the transaction the Group held an interest of 18.40% in West Timmins (acquired between August and November of 2009 for a total consideration of US$63,782,000). As a consequence of the transaction the Group's interest in Lake Shore Gold was diluted from 39.99% to 26.10% and a net gain of US$42,279,000 was recognised as an exceptional item in the consolidated income statement within the caption "Share on post tax profit/loss of associates" (refer to note 11). On the same day, 28,300,000 shares held by the Group in West Timmins were converted into 20,700,000 shares in Lake Shore Gold, increasing the Group's interest in Lake Shore Gold to 32.20%.

During December 2009 the Group acquired an additional interest of 3.88% in Lake Shore Gold for a total consideration of US$86,168,000. Also, at 31 December 2009 the accumulated interest held by the Group of 36.09% was diluted to 35.69% due to the issuance of a package of shares, options and warrants by Lake Shore Gold. The total loss recognised in connection with the dilution of US$4,493,000 is recognised as an exceptional item in the consolidated income statement within the caption "Share on post tax profit/loss of associates" (refer to note 11).

On 16 February 2010 the Group acquired 1,273,036 shares of Lake Shore Gold for CAD$5,130,000 (US$4,813,000). After completion of the transaction, the Group's ownership in Lake Shore Gold increased from 35.69% to 35.92%.

At 6 October 2010 the Group diluted its interests in Lake Shore Gold to 32.7%.

On 14 October 2010 the Group entered into an agreement with RBC Dominion Securities Inc., BMO Nesbitt Burns Inc. and CIBC World Markets Inc. to dispose 109,000,000 shares held in Lake Shore Gold (approximately 27.3% interest) pursuant to a bought deal transaction, at a price of CAD$3.60 per share. The sale was completed on 3 November 2010. After this transaction the Group holds approximately a 5.4% interest, no longer has Board representation and no longer exercises significant influence in Lake Shore Gold.

Gold Resource Corporation

In connection with the Strategic Alliance Agreement signed with Gold Resource Corporation, an underground precious metals mining company with a number of development projects in Mexico, the Group purchased 1,670,000 common shares (4.9%) for US$5,010,000 on 5 December 2008. The Group also acquired an option to purchase a further 4,330,000 common shares for US$12,990,000 (US$3 per share).

On 25 February 2009, the Group exercised its option to purchase a further 4,330,000 common shares. As a result of the acquisition of the second tranche, the Group held a 13.6% interest in Gold Resource Corporation and appointed one of the four directors, giving the Group significant influence over that company. In compliance with the Group's policy and IAS 28, the investment has been treated as an associate and accounted for using the equity method since 25 February 2009.

On 30 June 2009, the Group exercised its option to purchase an additional 5,000,000 common shares for a total cash consideration of US$20,000,000.

The purchase was completed in two tranches: US$5,000,000 which closed on 30 June 2009 and a second tranche of US$15,000,000 which closed on 20 July 2009.

On 16 December 2009, the Group purchased 1,954,795 common shares for a total cash consideration of US$16,000,000.

Between 26 January 2010 and 5 February 2010 the Group acquired 440,500 shares of its associate Gold Resource Corp. for US$$4,351,000 in the open market. In addition, on 8 March 2010 the Group signed a subscription agreement with Gold Resource Corp. by which the Group acquired 600,000 shares for a total consideration of US$5,172,000.

In addition on 27 May 2010 the Group acquired 631,579 shares of Gold Resource Corp. for a total consideration of US$6,000,000. Following completion of this purchase the Group's ownership in its associate increased to 25.28% on a fully diluted basis as at 31 December 2010.

(b) Acquisition of assets

Minera Quellopata S.A.C.

On 13 August 2007, the Group and Ventura Gold Corp. ("Ventura") entered into a letter of agreement by which the Group granted the option to Ventura to earn in an initial interest of 51% in the Inmaculada Property (located in Perú). Under the Agreement, Ventura was required to drill a minimum of 15,000m and issue 1,000,000 shares of Ventura throughout three years. Also, to maintain the option Ventura was required to issue 2,000,000 additional shares throughout a period of 5 more years (2011 - 2015).

On 19 December 2008 Ventura exercised its option to acquire an initial 51% interest in the project after completing the initial drilling and the issuance of the first million shares required (which was effectively completed during 2009).

Pursuant to the letter of agreement, the Group and International Minerals - ("IMZ") (which acquired 100% of Ventura and became party to the letter of agreement) formed a Peruvian company called Minera Quellopata S.A.C. ("Quellopata"), owned 51% by IMZ and 49% by the Group and entered into a Shareholders agreement on October 2009 (the "Quellopata Shareholders Agreement"). The Group contributed the Inmaculada Property and IMZ contributed all the exploration studies, in respect of the Inmacualada property, to Quellopata.

Ventura had the option to acquire an additional 19% interest in the project (totalling 70%) in exchange for the funding of the feasibility study within 6 years.

On 12 October 2010, the Group signed a Framework Agreement with IMZ, through which the Group acquired an additional 30% in the Inmaculada project (totalling 60% interest) in exchange for: (i) the purchase of US$20,000,000 of common shares of IMZ in a private placement, (ii) a payment of US$15,000,000, (iii) funding the first US$100,000,000 needed to plan, develop and construct a mining operation within the Inmaculada Property, (iv) the transfer of Minera del Suroeste S.A.C.'s ownership in Minas Pacapausa S.A.C. to Minera Suyamarca S.A.C. Minera Oro Vega which will transfer to Quellopata, together with the Puquiopata project. The Group will be the operator of the new venture pursuant to a separate Management Agreement similar in form and substance to the Pallancata Management Agreement.

On 23 December 2010 ("effective date"), the Group signed the New Joint Venture Agreement Pallancata - Inmaculada ("New JV Agreement") with IMZ, which details the approved structure and plan for the project and terminates the Quellopata Shareholders Agreement and the Pallancata Joint Venture Agreement.

This transaction has been accounted for as an asset acquisition as on the basis that Quellopata has no existing processes.

 As a result of the acquisition, the Group obtained control over Quellopata and has consolidated it as a subsidiary. The net assets received in the asset acquisition were US$91,782,000 and the Non-Controlling Interest generated by the transaction was US$36,940,000. The Group recognised a contingent consideration of US$39,243,000 and an obligation to IMZ of US$15,594,000 disclosed in the notes 26 and 24 of the Annual Report respectively.

(c) Acquisition of subsidiaries

Southwestern Resources Corporation

On 21 May 2009, the Group acquired a 100% interest of Southwestern Resources Corp. ("Southwestern), a mineral exploration company with a number of gold, silver and base metals projects adjacent to the Group's operations in southern Peru. The acquisition has been accounted for using the purchase method of accounting.

The net assets acquired in the transaction and the negative goodwill arising were as follows:

The total acquisition cost of US$19,246,000 comprised a cash payment of US$19,056,000 and cost of US$190,000 directly attributable to the acquisition.

(d) Acquisition of non- controlling interest

Minas Santa Maria de Moris

On 5 June 2009, the Group acquired the remaining 30% interest in Minas Santa Maria de Moris from its former partner Exmin S.A. de C.V., obtaining full ownership of its subsidiary for a total cash consideration of US$1,500,000.

In compliance with the Group's accounting policy, the difference between the consideration paid of US$1,500,000 and the carrying value of the non-controlling interest at the acquisition date of US$5,650,000 has been recognised as an increase of retained earnings.

5 Other income and other expenses