Hochschild Regulatory News (HOC)

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18 March 2015

Hochschild Mining plc

Preliminary Results for the twelve months ended 31 December 2014

Inmaculada Advanced Project update

Financial Results highlights1

· Net revenue of $493.0 million (2013: $622.2 million)

· Adjusted EBITDA of $135.6 million (2013: $201.0 million)2

· Earnings per share of $(0.15) (2013: $(0.15))

· Cash balance of $116.0 million as at 31 December 2014

· $75 million of short term lines drawn in 2015

Operational highlights

2015 Outlook

· Attributable production target of 24.0 million silver equivalent ounces

· All-in sustaining costs expected to be $15-16 per silver equivalent ounce

· Operational expenditure of $45 million

· Remaining Inmaculada construction expenditure of $72 million

Commenting on the results, Eduardo Hochschild, Chairman, said:

"In 2014, Hochschild continued to make good progress with our flagship low cost Inmaculada project, delivered further significant savings from our successful cashflow optimisation programme and skilfully managed our balance sheet despite ongoing commodity market weakness. With the Inmaculada commissioning process commencing soon, I am confident that completion and ramp-up of this exciting addition to our operating base will be delivered in the next few months and that we can look forward to a strong improvement in the Company prospects in the second half of 2015."

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A presentation will be held for analysts & investors at 9.30am (UK time) on Wednesday 18 March 2015 at the offices of J.P.Morgan, 60 Victoria Embankment, London, EC4Y 0JP

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:

UK: +44(0)20 3427 1908 (Please quote confirmation code 9667033)

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Enquiries:

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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 three underground epithermal vein mines, two located in southern Peru and one in southern Argentina. Hochschild also has numerous long-term projects throughout the Americas.

CHAIRMAN'S STATEMENT

Throughout another year of weak commodity markets, we have executed a consistent strategy and I am delighted that we are now so close to the completion of Inmaculada, our next mine in Peru. Our management team has skilfully navigated its way through a continuing decline in silver prices whilst keeping the organisation competitive, allocating capital to project construction and maintaining our financial flexibility.

Following our acquisition of the remaining stake in Inmaculada in 2013, I remain confident about not only the plant commissioning and mine ramp-up in just a few weeks from now, but also the considerable potential within the mine's surrounding area. I believe that there is scope over the coming years to transform our Inmaculada land package into a world class mining district and provide Hochschild with low cost growth for many years to come and significantly beyond the originally envisaged mine life. In addition, the Arcata deposit still has strong geological potential and we continue to assess a variety of attractive exploration and partnership opportunities. I believe that the competitive advantages we have from our long regional experience, our strong local business relationships as well as long-standing partnerships with key local suppliers will allow us to develop our assets in a cost effective manner. Across the Americas, Hochschild has accumulated a number of highly prospective early stage projects which will provide a growth platform for years to come.

The speed and success of our cashflow optimisation programme, which has exceeded our initial expectations, has been vital in our drive to ensure our Company operates profitably in underlying commodity markets that unfortunately have not yet recovered after the initial steep declines in mid 2013. Indeed with the silver price once again reaching its lowest level since 2010, some necessary mine plan adjustments were made to our Peruvian assets which will ensure their viability in 2015 and especially during the key final stages of the Inmaculada project construction. We have also recently put in place further hedging for a portion of our Peruvian production for the year, which will provide us with a degree of cashflow stability in 2015.

Despite another highly creditable performance operationally, Hochschild's 2014 earnings remain in negative territory principally due to higher interest costs resulting from the inaugural senior notes issue in January 2014 which we expect to be offset once the Inmaculada project is complete. The Board therefore proposes not to reinstate the full year dividend whilst the cash position is still restricted by project capital expenditure. We remain committed to the long term principle of delivering shareholder returns and the Board intends to again reassess the position once the Company returns to profitability.

Operating Responsibly

Our commitment to safety remains steadfast and one that we are not willing to compromise and I am therefore delighted to report that for the first time since our listing in 2006, we have been able to achieve our on-going objective of Zero Fatalities in the year. This is a true testament to all our teams who have collectively worked to improve the safety culture across the Company and of course, to our workers themselves. Being a 'Responsible Operator' sits at the core of our business strategy and as showcased in the 2014 Sustainability Report, through the diverse range of initiatives we have undertaken during the year. In addition to building upon our successes with the Travelling Doctor programme, where we have extended its reach and the range of services offered, and the award-winning Digital Chalhuanca project, we have worked with the communities close to the Inmaculada project to establish business networks dealing in locally grown produce as a means of promoting sustainable economic development. Looking at our commitment to the environment, I am proud to report that our main operations have been re-certified as compliant with the ISO 14001 international standard, acknowledging the integrity of our environmental management systems.

Board

It is in these challenging times for the industry that the need for strong leadership is of paramount importance and, for this reason, I wish to commend our dedicated management team for their ongoing efforts and my fellow directors for their continued support during the year. Whilst mindful of the benefits of refreshing the composition of the Board, I consider the need for stability in this key transitionary period as being as crucial as ever. I am, therefore, also grateful to our directors for agreeing to delay the implementation of our Non-Executive succession plan.

The continued operating challenges prompted the Board to review its contribution to the Cashflow Optimisation Programme resulting in a further reduction in Board remuneration. This reflects an acknowledgment of the sacrifices made by colleagues across the business and the impact on shareholders from the volatile price environment.

After discussions with the Board, I took the decision to assume a Non-Executive role, as announced at the end of last year. Despite this recent change, I remain resolutely committed to the business as we position ourselves to optimise the delivery of value to all of our stakeholders.

Outlook

It remains challenging to predict the short term direction of precious metal markets although we retain our belief that the strong underlying fundamentals will reassert themselves. However, the Board is reassured that considerable steps have been taken to ensure the Company's resilience in a low price environment but also to capitalise on an upturn when it happens with low cost, value accretive growth.

Eduardo Hochschild

Chairman

17 March 2015

CHIEF EXECUTIVE OFFICER'S STATEMENT

Hochschild's key strategic aims for 2014 have been to advance our flagship Inmaculada project to its final stages, to continue to drive our successful cashflow optimisation programme and finally, to manage the Company's finances through what was always expected to be a challenging transitional phase. These objectives have been achieved despite further silver price weakness during 2014, a trend that has now extended to the majority of commodity markets.

Growth

The importance of the low cost Inmaculada mine for the future competitiveness of the Company was emphasised throughout the year whilst good progress was made at the project. The plant contractor, Graña y Montero, commenced work on the plant in early April and in spite of a few delays, plant completion has now reached 90%. Excellent progress has also been made in other key deliverables including the completion of the camp, connection to the national grid and all procurement and infrastructure targets achieved. We remain confident that the commissioning date in Q2 will be achieved. The key area of underground mine development has progressed well and consequently a substantial ore stockpile will be available for processing on completion of the plant, ensuring our production guidance from the mine in 2015 of six to seven million silver equivalent ounces remains in place.

Cost Savings

Throughout 2014, Hochschild has continued to make substantial progress in improving the cost position of its current mines as well as of the Company as a whole. Initiatives have encompassed all business areas including administration, exploration and most importantly at the operational level where we have achieved further efficiencies in supply chain management and commercial negotiations as well as significant working capital improvements. Both the Peruvian operations have been optimised with the focus now on accessible ore. This has reduced sustaining capital expenditure for 2015 and has resulted in a reduction in plant throughput at both sites with the Company focusing on the production of profitable ounces. Whilst the overall efficiency drive has necessitated further headcount reductions, the Company's all-in sustaining cost target for 2015 of between $15 and $16 per silver equivalent ounce represents a significant reduction and demonstrates the potential upside of our flexible strategy. Beyond 2015, it is essential to the ongoing competitiveness of the current Peruvian mines that further operational efficiencies are achieved and that the brownfield exploration programme continues to find additional high quality resources.

Financing

With the Company allocating significant growth capital expenditure to Inmaculada in a volatile precious metal environment, focused management of our financial position has been crucial. We began the year with our inaugural senior note offering raising approximately $350 million to finance the previous year's International Minerals acquisition and continued to demonstrate sufficient financial flexibility to fund the remaining Inmaculada expenditure as well as repaying the $115 million convertible bond in October. Liquidity has been further enhanced with a $100 million medium term credit facility secured late in the year. We also took advantage of short periods of price improvement to hedge almost 30% of our 2014 production in order to realise a degree of cashflow certainty during the year. We believe that such a strategy will remain appropriate during commissioning and ramp up of the new mine as we transition to lower cost production.

2014 overview

Despite our own ongoing programme of costs savings across the organisation, our current operations responded well, exceeding the forecast production target by almost 6% and delivering 22.2 million attributable silver equivalent ounces. Arcata in Peru and San Jose in Argentina both enjoyed robust years with their combined contribution lifting by 3% versus 2013 whilst the adjustment in production at Pallancata reflected the continuing move to thinner veins. We were also able to deliver a better than expected final production result from the Ares mine which was suspended in June.

Financial results for 2014 reflected the effect of a near 15% fall in the average price achieved of silver despite some relief provided by the hedges taken out during the year. Pre-exceptional EBITDA was $135.5 million as a result of the aggressive plan to reduce costs and expenses designed to offset the lower revenues. The increase in the annual finance costs is primarily related to the bond issued in January 2014 to complete the acquisition of Inmaculada and Pallancata minorities and consequently the Company expects that, once the new mine commences production and starts generating cashflow, this charge will be largely absorbed. Pre-exceptional EPS was (0.15) cents per share. The cash balance at the end of 2014 was $116 million although an additional $75 million of short term lines have been drawn down in early 2015.

Outlook

Production for 2015 is expected to increase to 24 million attributable silver equivalent ounces which takes into account between six and seven million ounces from Inmaculada. Costs are expected to fall substantially although a portion of the capital expenditure savings is non-recurring beyond 2015. The Company has also continued its policy of protecting cashflows during the Inmaculada construction by hedging a further six million silver ounces for 2015 at $17.75 per ounce on top of the 38,000 gold ounces already hedged at $1,300 per ounce.

In 2015, the focus of expenditure will remain firmly on completing and ramping up Inmaculada, brownfield exploration at our current operations and a drilling campaign at the Corina project in Peru. Whilst exploration-led growth remains an important part of Hochschild's long term strategy, the cashflow optimisation programme has led to significant reductions in our exploration initiatives especially at our greenfield projects, which we expect to resume once prices recover.

2014 has proved to be another challenging year for the Company and the management team is, once again, encouraged by the committed attitude shown by all our employees. We look forward to the commissioning of our new mine and expect to see the Company in a stronger position by the end of 2015. We are confident that Inmaculada will not only become our flagship low cost producer but, with the strong upside potential at the deposit, will represent an important engine of growth for the long term.

Ignacio Bustamante

Chief Executive Officer

17 March 2015

OPERATING REVIEW

2014 Highlights

· Full year production of 22.2 million attributable silver equivalent ounces achieved, exceeding guidance

· Main operation all-in sustaining costs reduced by 6% in 2014 to $17.4 per silver equivalent ounce

· Core operation mine plans revised to deliver profitable ounces in lower precious metal price environment

· Strong progress at Inmaculada Advanced Project with plant commissioning set for Q2 2015

CURRENT OPERATIONS

Production

In 2014, Hochschild has once again successfully exceeded its full year production target, delivering attributable production of 22.2 million silver equivalent ounces, including 16.2 million ounces of silver and 101 thousand ounces of gold. Hochschild's production target for 2015 is 24.0 million attributable silver equivalent ounces. The increase is mainly explained by the inclusion of between six to seven million ounces from the Inmaculada project offsetting the reduced contribution from the current operations in Peru following the revision of mine plans.

In order to reduce operating expenditure and ensure that all the Company's mines can deliver profitable ounces in 2015, the mine plans of the Arcata and Pallancata operations have been optimised to maximise cash generation with the operational focus expected to be on accessible ore areas requiring reduced capital expenditure with cut-off grades reflecting the current weaker metal price environment. Plant throughput is expected to be reduced to 1,500 tonnes per day at Arcata and 1,800 tonnes per day at Pallancata, with the San Jose operation in Argentina continuing at its current level.

Costs

The Company's all-in sustaining costs at its main operations were reduced by 6% in 2014 to $17.4 per ounce driven by operational initiatives resulting from the cashflow optimisation programme, an ongoing decrease in industry cost inflation and grade improvements particularly at Arcata.5 Unit cost per tonne at the main Peruvian operations was at $77.3 (2013: $74.2) with key factors being narrower veins at Pallancata and the absence of material from the low cost Macarena waste damn deposit at Arcata. In Argentina, unit cost per tonne was reduced by 6% to $197.8 (2013: $210.0). Please see page 16 of the Financial Review for further details on costs.

The emphasis on profitable ounces at all operations with reduced levels of sustainable capital expenditure for 2015 is expected to have a positive effect on the Company's overall costs with the all-in sustaining cost for the Company now expected to be reduced to between $15 to $16 per ounce in 2015.

Main operations: Arcata (Peru)

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

Production and sales

Full year silver equivalent production at Arcata was 6.8 million ounces, a very creditable 14% improvement on the 2013 result (6.0 million ounces) and was principally driven by a planned move to higher grade areas of the mine. Tonnage fell following the depletion of the Macarena Waste Dam deposit by the end of the first half of the year.

Table Showing Contribution from Macarena Waste Dam Deposit

Costs

In 2014, the unit cost at Arcata of $89.1 per tonne was up 10% versus 2013 with the overall effects of the ongoing cost savings initiatives offset by the planned depletion in the processing of the low cost Macarena material. However, all-in sustaining costs fell by 15% to $17.7 per silver equivalent ounce (2013: $20.9 per ounce) due to a decline in sustaining capex resulting from cashflow optimisation programme initiatives as well as better grades.

Brownfield exploration

In 2014, a total of 20,868 metres of drilling was carried out at Arcata. In the first half of the year, a detailed surface mapping and sampling campaign was completed covering a total of 1,330 ha. In addition, a drilling campaign with the aim of adding new resources was carried out at the property.

In 2015, a 17,440 metre exploration and drilling programme at Arcata will focus on inferred resource exploration at surface over Tunel 3 and Tunel 4 and underground resource exploration at the Lucero and Norte Sur 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 and up until December 2013 was a joint venture, in which Hochschild held a controlling interest of 60% with International Minerals Corporation ("IMZ"). Following the purchase of IMZ, Hochschild now owns 100% of the operation. Ore from Pallancata is transported 22 kilometres to the Selene plant for processing.

Production and sales

At Pallancata, as a result of the Company's adjustment of mine plans to ensure the extraction of profitable ounces, as detailed in the November 2014 Operational Update, tonnage in the fourth quarter was moved downwards with grades increasing. For the full year, Pallancata produced 8.0 million silver equivalent ounces (2013: 9.3 million ounces) with the fall in the second half reflecting the scheduled move to thinner veins in the mix.

Costs

Cost per tonne at Pallancata were $69.3 per tonne in 2014 (2013: $68.3 per tonne). As at Arcata, costs were positively impacted by the cashflow optimisation programme although the impact was offset by a higher proportion of mineral extracted using conventional methods due to narrower veins. All-in sustaining costs however, were flat versus 2013 at $16.7 per silver equivalent ounce.

Brownfield exploration

During the first half of 2014, the exploration programme focused on mapping and sampling a total of 1,200 ha. New surface structures have also been recognised and drilling was carried out at two vein systems. 10,466 metres of drilling was completed on potential areas with further mapping campaigns also carried out over an area of 686ha. 

In 2015, a 19,100 metre exploration and drilling programme at Pallancata will focus on inferred resource exploration at surface and also geological mapping of the west and south side of the district for new target definition.

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 (formerly Minera Andes 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 and sales

In 2014, San Jose again proved to be a very consistent performer with increased tonnage offsetting lower grades and resulting in almost unchanged year-on-year production of 12.1 million silver equivalent ounces (2013: 12.3 million ounces).

Costs

At San Jose, unit cost per tonne decreased by 6% versus 2013 to $197.8. This was mainly due to the impact of the cash optimisation. All-in sustaining costs were reduced by 6% versus the same period of 2013 with cash optimisation initiatives helping to reduce sustaining and development capital expenditure.

Brownfield exploration

In 2014, a 5,263 metre potential drilling campaign was focused on the definition of new veins. The team had already completed detailed surface mapping and sampling over the Los Pinos vein and identified another structure, Los Pinitos. In addition, mapping work identified additional corridors for subsequent drilling campaigns to focus on whilst further structures were identified in the north east and to the west.

In 2015, a drilling program over Los Pinos and Los Pinitos is planned - subject to obtaining environmental permits. A review and interpretation of the ground magnetic and electrical data collected on the property in the last 5 years is scheduled along with surface geology work to identify new drill targets for 2016.

Other operations

Ares: Peru

The Ares mine, which commenced production in 1998, is a 100% owned operation located approximately 25 kilometres from Hochschild's Arcata mine in southern Peru.

Production and sales

The Company's Ares mine in Peru was suspended in the second quarter of 2014 with total production for the first half and for the year as whole being a better-than-expected 1.2 million silver equivalent ounces (2013: 2.2 million ounces)

Brownfield exploration

Following the 2014 programme of geological mapping, a 2,500 metre drilling campaign is scheduled for 2015, subject to receiving the requisite exploration permits.

PROJECT REVIEW

Hochschild's portfolio currently includes one Advanced Project, Inmaculada and three Growth Projects, Crespo, Azuca and Volcan. The continuing weakness of the precious metal markets following the initial price declines in 2013 has led to the current focus on Hochschild's flagship Inmaculada project. The acquisition of IMZ, completed in December 2013, gave the Company 100% of this project which is expected to contribute, after a ramp-up period, approximately 12 million silver equivalent ounces per annum on average with the start of plant commissioning due in the second quarter of 2015.

The strategy with regards to Crespo, Azuca and Volcan was revised in late 2013 with work on these deposits remaining on hold throughout 2014. Despite the 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

Inmaculada is a 20,000 hectare gold-silver project located in the Company's existing operational cluster in southern Peru and is 100% owned and controlled by Hochschild, following the acquisition of the remaining 40% from IMZ stake in December 2013.

The EPC contractor Graña y Montero continued construction of the plant throughout the year. Later in 2014, concrete foundations for the plant's SAG mill were found to not meet contractual technical specifications and were therefore re-built which, along with other delays in the project including slower than expected on-site recruitment, resulted in the commissioning date of the plant being rescheduled for Q2 2015. However, as a result of excellent progress being made by the Hochschild team in the originally envisaged bottleneck area of mine development, it has been possible to ensure that a stockpile of just over 260,000 tonnes will be available for processing on completion of the plant. Consequently, the Company confirms that the overall production forecast of 6-7 million silver equivalent ounces for 2015 remains in place.

Procurement of all main equipment was completed during the first half and by the end of the year, other key deliverables such as connection to the national grid, infrastructural and engineering requirements and relevant permitting were complete. Construction also commenced in the third quarter on the tailings dam, warehouses, laboratories and workshops as well as work on the paste backfill plant. In addition, a total of 15,406 metres of tunnelling and 2,445 metres of raise boring have been carried out to date at the project.

Construction capital expenditure at the project to date is $348 million with the remaining construction capital expenditure for 2015 expected to be $72 million bringing the total to $420 million.

Toward the middle of the year, mapping was carried out at the Puquiopata (to the North East of Inmaculada) and Huarmapata veins as well a re-logging of the Angela vein system in order to optimise the geological model.

In addition to exploration at the Inmaculada land package, a project was started to explore the overall properties available between the Pallancata mine and Inmaculada. Following a mapping programme in the Palca area further to the North East of Inmaculada, in August two anomalous zones were identified, Palca 1 and Palca 2. At Palca 1, six promising vein structures have been selected amongst others in a corridor of almost five kilometres with work at Palca 2 starting later on in the year. In addition, geochemical results have shown gold and silver presence at surface. The exploration team's resulting interpretation has allowed them to define the Palca corridor which continues to the North West into an area called Cochaloma, which is part of the Pallancata concession, where there are similar structures to Palca.

EXPLORATION REVIEW

In 2014, investment in exploration totalled $20.4 million and was split between exploration work at the Company's existing operations, the Inmaculada Advanced Project and greenfield opportunities in Peru and Mexico. As part of Hochschild's ongoing cashflow optimisation programme, the Company reduced its 2014 exploration budget with the main focus continuing to be on brownfield exploration. Exploration work at the core operations was principally focused on identifying new potential and near-mine high grade areas to further improve the resource quality whilst at the Inmaculada Advanced Project, efforts were focused on identifying new potential high grade areas.

Hochschild's greenfield strategy for 2014 was focused on only the most promising prospects, specifically in Peru and Mexico.

In 2015, exploration activity will be primarily focused on brownfield exploration in order to maintain or improve the resource base. As a direct consequence of the continued low price environment, the level of greenfield exploration and appraisal of acquisition/joint venture opportunities has been significantly reduced.

Mexico

Pachuca

In the first half of the year, at the Pachuca project in Mexico, the joint venture with Solitario Exploration & Royalty Corp, focused on the northwestern extension of the historical vein mining district. The 2014 plan included testing the actual extensions of prior intercepts tested by the previous operator. A total 2,454 metres were drilled on 13 holes during the 2013 and 2014 campaigns. However, despite some drill holes showing economic gold and silver grades, continuous mineralisation could not be identified and therefore the project was transferred back to Solitario.

Riverside Joint Venture

In the first half of the year, the exploration team accepted two targets generated by Riverside, the joint venture partners in the western Sonora in Mexico. The projects were Bohemia and Cajon and whereas Bohemia exhibited mineralised veins, orogenic type mineralisation was observed at Cajon with highly frequent small mineralised veins off a detachment fault. However sampling at Bohemia did not show continuity in the mineralisation, displaying poor gold values and consequently work at the target was halted. Trenching at Cajon also concluded and a drilling campaign will be performed in 2015. 

During the fourth quarter, the Company decided to close its exploration office in Chihuahua and focus on financing and supporting Riverside from the head office. The venture continues to explore new opportunities in this prolific, low-cost mineral district.

Peru

During the year, the Company's exploration efforts in Peru focused on optimising the existing portfolio and reviewing any industry opportunities. One of these was the Corina project, located 15-20 km from the Selene plant and owned by Lara Exploration Ltd. The agreement drawn up includes an option giving Hochschild full ownership of the project over four years. Company community relations teams are currently negotiating access agreements that would allow the Company to drill in late 2015, subject to government permit approvals.

In addition, promising geochemical results have been obtained from the Ibel prospect in Peru.

FINANCIAL REVIEW

Key performance indicators

(before exceptional items, unless otherwise indicated)

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 18% to $540.9 million in 2014 (2013: $658.2 million) primarily driven by another substantial fall in precious metal prices.

Silver

Gross revenue from silver decreased 17% in 2014 to $358.2 million (2013: $432.6 million) as a result of lower prices as well as a 3% decrease in the total amount of silver ounces sold to 18,981 koz (2013:19,555 koz).

Gold

Gross revenue from gold decreased 19% in 2014 to $182.7 million (2013: $225.6 million) as a result of a 4% fall in the average price received although mostly due to a 15% decline in gold sales - the total amount of gold ounces sold in 2014 at 142.8 koz (2013: 168.6 koz).

Gross average realised sales prices

The following table provides figures for average realised prices and ounces sold for 2014 and 2013:

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 2014, the Group recorded commercial discounts of $48.1 million (2013: $36.1 million). This increase is explained by the decision to sell the majority of production from Arcata as concentrate due to improved commercial terms. The ratio of commercial discounts to gross revenue in 2014 increased to 9% (2013: 6%).

Net revenue

Net revenue decreased by 21% to $493.0 million (2013: $622.2 million), comprising silver revenue of $320.8 million and gold revenue of $172.0 million. In 2014 silver accounted for 65% and gold 35% of the Company's consolidated net revenue with no change from the 2013 split.

Revenue by mine

Costs

Total pre-exceptional cost of sales decreased 13% to $404.6 million in 2014 (2013: $466.8 million). The direct production cost decreased by 15% in 2014, to $265.6 million (2013: $311.7 million) mainly due to the positive effects on operating costs of the Company's ongoing cash optimisation programme and lower tonnage treated at the Ares mine. Depreciation in 2014 was $126.0 million (2013: $144.1 million) with the decrease mainly due to lower tonnage and the lower cost of the conversion of resources into reserves. Other items, which principally includes the costs associated with stoppages in Argentina, was $4.4 million in 2014 (2013: $7.0 million) with change in inventories at $8.6 million in 2014 (2013: $3.9 million).

Unit cost per tonne

The Company reported unit cost per tonne at its main operations of $106.6 in 2014, slightly up on 2013 (2013: $103.2). For further explanation on the increase in unit cost per tonne please refer to page 7 of the Operating Review.

Unit cost per tonne by operation (including royalties)12:

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 reconciliation13:

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 ounce14

Year ended 31 Dec 2014

Year ended 31 Dec 2013

Administrative expenses

Administrative expenses before exceptional items decreased by 20% to $43.3 million (2013: $54.4 million) primarily due to the continuing impact of the cashflow optimisation programme. Post-exceptional administrative expenses in 2014 totalled $46.1 million (2013: $56.8 million).

Exploration expenses

In 2014, pre-exceptional exploration expenses, decreased by 60% to $17.3 million (2013: $42.9 million). Post-exceptional exploration expenses in 2014 totaled $18.1 million (2013: $46.3 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 2014, the Company capitalised $1.5 million relating to brownfield exploration compared to $1.7 million in 2013, bringing the total investment in exploration for 2014 to $18.8 million (2013: $44.6 million). In addition, $1.6 million was invested in the Company's Advanced and Growth Projects.

Selling expenses

Selling expenses were flat versus 2013at $28.7 million (2013: $28.8 million) due to lower prices impacting the export tax in Argentina, partially offset by higher production of concentrates in Arcata. Selling expenses mainly consist of export duties at San Jose (export duties in Argentina are 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 $4.1 million (2013: $4.0 million). Other expenses before exceptional items reached $17.5 million (2013: $15.6 million) mainly due to an increase in mine closure provisions of $9.1 million (2013: $5.5 million) and the new reserves tax in Argentina of $3.5 million (2013: $2.5 million).

Adjusted EBITDA

Adjusted EBITDA decreased by 33% over the period to $135.6 million (2013 restated: $201.0 million) driven primarily by significantly lower silver 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 $2.2 million reduced from 2013 ($10.7 million) mainly due to substantially lower interest received on deposits and liquidity funds ($5.2 million) as well as lower dividends received from Gold Resource Corporation ($3.0 million).

Finance costs

Finance costs before exceptional items increased from $11.7 million in 2013 to $33.1 million in 2014, principally due to the interest due on $350 million of Senior Notes (issued in January 2014 via the Company's wholly owned subsidiary, Compañía Minera Ares S.A.C) with a coupon rate of 7.75% due for repayment in 2021.

Foreign exchange losses

The Group recognised a foreign exchange loss of $5.0 million (2013: $19.8 million loss) as a result of exposures in currencies other than the functional currency principally 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 was $6.5 million (2013: $45.0 million). The reduction is mainly explained by lower metal prices reflected in a reduced pre-exceptional loss before income tax ($(50.2) million in 2014 compared to $2.9 million pre-exceptional profit before tax in 2013).

Exceptional items

Exceptional items in 2014 totalled $(14.1) million after tax (2013: $(86.6) million). The tables below detail the exceptional items excluding the exceptional tax effect that amounted to $3.8 million (2013: $35.9 million).

Exceptional items in 2014 comprise the following items:

2014 positive exceptional items:

2014 negative exceptional items:

Cash flow & balance sheet review

Cash flow:

Operating cash flow increased from $64.7 million in 2013 to $93.8 million in 2014, mainly due to a significant improvement of working capital and the implementation of the cash optimisation plan, partially offset by lower prices. Net cash used in investing activities increased to $(263.0) million in 2014 from $(218.1) million in 2013 mainly due to higher pre-operating capex incurred at the Inmaculada project in 2014. Finally, cash generated from financing activities decreased to $5.0 million from $99.8 million in 2013, primarily as a result of the proceeds from the issuance of the unsecured notes ($350.0 million) and the Scotiabank Credit Facility ($100.0 million), partially offset by the repayment of the bridge loan facility ($270.0 million), Convertible Bond ($114.9 million) and reduction of short term borrowings ($30.0 million). As a result, total cash generated decreased from $(53.6) million in 2013 to $(164.2) million in 2014 ($110.6 million difference).

Working capital

The Group's working capital position decreased to $28.6 million in 2014 from $59.4 million in 2013. This was primarily explained by higher trade and other payables and provisions ($(18.0) million) and by lower inventories ($(11.1) million). Also, net other financial assets increased to $2.8 million in 2014 from $(2.3) million in 2013 principally due to gains from hedge agreements

Net cash

The Group reported net cash position was $(352.7) million as at 31 December 2014 (2013: $149.5 million). The change was mainly driven by cash used to build the Inmaculada Project ($198 million capex in 2014).

Capital expenditure18

2014 capital expenditure of $321.1 million (2013: $281.6 million) mainly composed of operational capex of $114.9 million and Inmaculada capital expenditure of $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 2014

Consolidated statement of comprehensive income

For the year ended 31 December 2014

Consolidated statement of financial position

As at 31 December 2014

These financial statements were approved by the Board of Directors on 17 March 2015 and signed on its behalf by:

Ignacio Bustamante

Chief Executive Officer

17 March 2015

Consolidated statement of cash flows

For the year ended 31 December 2014

Consolidated statement of changes in equity

For the year 31 December 2014