2012 Full Year Results

RNS Number : 8616Z

Hochschild Mining PLC

13 March 2013

 



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13 March 2013

Hochschild Mining plc

Preliminary Results for the twelve months ended 31 December 2012

Financial highlights[1]

· Revenue of $818.0 million (2011: $987.7 million)

· Adjusted EBITDA of $384.8 million (2011: $563.4 million)

· EPS of $0.19 (2011: $0.49)

· Strong financial position with a year-end cash balance of $359 million[2]

· Minority investments valued at $256 million[3]

· Proposed final dividend of $0.03 per share, bringing the total dividend for 2012 to $0.06 per share

Operational highlights

· Full year production of 20.3 million attributable silver equivalent ounces in line with guidance

· Overall unit cost performance in 2012 in line with guidance

· Good progress at Inmaculada and Crespo; set to increase production levels by 50% from H2 2014 

o Key steps achieved in both projects' permitting processes including granting of Inmaculada EIS

o Project engineering, procurement and construction progressing according to schedule

o Positive exploration results at Inmaculada

· Acquisition of Andina Minerals boosts long-term project pipeline with Volcan gold deposit in Chile

· Exploration programme continues to deliver positive results:

o Excellent results from brownfield exploration programmes

o Core asset resource base optimised

· 2013 production target maintained at 20.0 million attributable silver equivalent ounces

· $77 million exploration budget for 2013

$000, pre-exceptional unless stated	Year ended 31 Dec 2012	Year ended 31 Dec 2011	% change
Attributable silver production (koz)	13,550	14,980	(10)
Attributable gold production (koz)	112	127	(12)
Net Revenue[4]	817,952	987,662	(17)
Adjusted EBITDA[5]	384,791	563,403	(32)
Profit from continuing operations	128,581	268,919	(52)
Profit from continuing operations (post exceptional)	126,866	272,338	(53)
Earnings per share ($)	0.19	0.49	(61)
Earnings per share ($ post-exceptional)	0.19	0.50	(62)

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

"I am pleased to report that in the face of a very challenging environment for mining companies we have been able to deliver a very solid performance, meeting our full year production target and delivering a solid set of financial results. We have also received some very promising results from our brownfield and greenfield exploration programmes and have made good progress at our Inmaculada and Crespo Advanced Projects, which will increase our annual production levels by 50%, with the commissioning date for both projects set for the second half of 2014. Finally, the acquisition of Andina Minerals bolstered our project pipeline with its principal asset, the Volcan gold deposit, located in Chile, which is one of our favoured mining jurisdictions. We remain enthusiastic about the significant potential of our current operations and our extensive project pipeline to deliver substantial optionality and shareholder value in the long term."

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A presentation will be held for analysts & investors at 9.30am (UK time) on Wednesday 13 March 2013 at Holborn Bars, 138-142 Holborn, London, EC1N 2NQ.  

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

www.hochschildmining.com

Conference call dial in details:

UK: [phone] (Please quote 'Hochschild Mining webcast' or confirmation code 6842507).

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Enquiries:

Hochschild Mining plc

Charles Gordon                                                                          [phone]

Head of Investor Relations

RLM Finsbury

Charles Chichester                                                                     [phone]

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

CHAIRMAN'S STATEMENT

2012 Overview

2012 has provided the mining industry with a number of challenges to which I believe our team has responded with energy and confidence. The outperformance of the Company's share price over the course of the year was evidence that a growing number of stakeholders agreed that our organic growth pipeline represents the best opportunity to generate long-term sustainable shareholder value. This resilience in the face of continuing global economic uncertainty is testament to our achievements in meeting our production targets once again, making considerable progress with our Advanced Projects despite the delays caused by changes in the Peruvian permitting process and identifying and executing acquisitions such as Andina Minerals with long-term potential for significant value enhancement.

In 2012, we generated revenue of just over $800 million leading to EBITDA in the region of $400 million with earnings per share of $0.19. The Board has decided to maintain the total dividend at 6 cents per share. This balances Hochschild's strong financial position and outstanding near-term potential for significant earnings growth with the Company's short-term capital expenditure commitments as well as current industry-wide pressures.

In November, we announced the purchase of Andina Minerals, our first sizeable acquisition since 2009. I am confident that we have secured an attractive opportunity at a purchase price significantly below recent comparable transactions. The move into large scale gold assets is entirely consistent with our longstanding "Company Maker" exploration strategy. Our Board has already visited the site and whilst there are undeniable potential challenges in bringing the deposit into production, the Volcan project represents a viable option to diversify our asset base by building a strong presence in a very prospective area of Northern Chile in the long term.

Our organic growth strategy continued to unfold during 2012 and during the year we approved two feasibility studies and subsequently made excellent progress at our two Advanced Projects with significant targets met in procurement, engineering and construction and also in both project's social development programmes.  We did experience delays in the process of obtaining the final construction permits but I remain excited by the potential of these projects to increase our current production levels by 50% and also the significant exploration upside opportunity at Inmaculada.

Our exploration-led strategy and the current capital constrained industry environment requires that disciplined resource allocation and effective risk management be inherent in all our initiatives across the four countries that we explore. We have ensured that we are not only focusing our exploration capital on the most promising prospects, but also that we retain the discipline to exit or farm-out deposits or prospects that do not clear a defined set of hurdles. The year saw meaningful progress at many of our projects both in the Company Maker and Medium Scale categories, and I am confident that we will begin to witness the benefits of our greenfield investment as well as further success in brownfield exploration. I firmly believe this is the key to creating long-term shareholder value.

Operating Responsibly

Underpinning our strategy is our commitment to operate responsibly. During 2012, Hochschild Mining was granted the 'Socially Responsible Company' accreditation by Peru 2021, an organisation that reviews companies' efforts in this crucial area. As a mining company, we are conscious of the impact our activities have on the environment.  To assist us, we seek to rely on leading environmental reporting systems and so I am delighted that an external audit has confirmed that systems at our active operations remain compliant with ISO14001.

We also advanced during the year with the implementation of our Community Relations strategy acknowledging our social commitment to operate in long-term harmony with our communities. A notable initiative for the year was "Digital City" where we dedicated significant financial and human resources to create a digital hub at the town of Chalhuanca located close to our operations at Pallancata. This project sought to improve access to education and to encourage economic sustainability through the installation of free internet access for the whole town. Further details of all of these initiatives will be provided in the Annual Report.

On the issue of safety, we continue to make progress with an 8% reduction in the Group's accident frequency rate. However, there is still a lot more work to be done as most regrettably, there were four fatalities at our operations during 2012. In keeping with Group's practice, all mining activity was suspended immediately after each incident while investigations were carried out. We consider each accident to be avoidable and we therefore took the active decision to re-emphasise management's zero tolerance policy on accidents by designating 14^th November 2012 as the Hochschild Safety Day when production across all sites was suspended and we conducted Group-wide safety training sessions.

Outlook

Despite ongoing price volatility, long-term precious metal fundamentals remain robust as inflation fears continue to drive demand and resource scarcity restricts supply. Looking ahead, our consistent performance and our growth opportunities clearly show that we are on the right track and in 2013 we can expect further progress on the development of our Advanced Projects. In addition, there is significant potential and indeed the financial strength to continue to add optionality to our extensive project pipeline through organic development or further value enhancing acquisitions.

Board Composition

I am delighted that we were able to announce during the year the appointment of Enrico Bombieri as an Independent Non-Executive Director. Enrico brings a wealth of global capital markets' experience from his previous roles as a senior member of management at JP Morgan.  I would also like to take this opportunity to express my gratitude to Sir Malcolm Field for agreeing to postpone his retirement from the Board until the end of 2013 allowing us to further benefit from his invaluable contribution.

On behalf of the Board, I would like to thank the entire talented Hochschild team for another year of strong performance, and our shareholders for your continued support.

Eduardo Hochschild

Executive Chairman

13 March 2013

CHIEF EXECUTIVE OFFICER'S STATEMENT

I am pleased to report that Hochschild has delivered a robust set of results in 2012 reflecting the successful achievement of our annual production target, considerable progress with regards to our organic growth pipeline and towards the end of the year, the announcement of the exciting purchase of Andina Minerals.  Despite further economic, financial and political difficulties continuing to affect many markets in 2013, Hochschild remains in a strong position to enter a critical delivery phase. We remain committed to the safe and sustainable delivery of optimised production, complementing our value enhancing growth potential.

Strategic progress

The geological conditions at our main operations continue to be extremely promising and during 2012 our brownfield exploration results have been significant with high grade discoveries at all three operations. Having previously exceeded all our original life-of-mine targets, in 2012 we shifted the focus of our brownfield exploration programme to improving the quality of our resource base and the results received have confirmed the potential for continued high quality resource additions in the future. As part of this work, we have also completed a full review of our resource base and have been able to optimise the geological models of our main operations. Furthermore, in an effort to improve our resource to reserve conversion ratios, we have optimised our mine plans by removing resources that although economic at our stringent cut-off threshold, are unlikely to be mined at present. These include: resources that necessitate high capex; inaccessible resources from previous mining campaigns; or those that still require further evaluation before inclusion in the mine plan. As a result we have been able to maintain a life-of-mine that is now supported by a more robust resource base. I remain positive about the exploration potential of these outstanding mines and their ability to continue producing high value resources into the future.

The development of our project pipeline remains a key pillar of our strategy and during the year, our Advanced Projects, which will increase our production levels by 50%, made good progress. Following the Board's approval of both feasibility studies in January, several key procurement, engineering and construction targets were achieved throughout the year with the expected start-up date for both projects now set for the second half of 2014. We have also made significant advances with regards to the projects' social development programmes and environmental aspects, as demonstrated by the approval of Inmaculada's Environmental Impact Study in October.

Our ambitious greenfield programme also continued in 2012 and I am pleased that we have received further positive results from our Company Maker pipeline, in particular at Valeriano in Northern Chile where initial drilling testing encountered evidence of a mineralised porphyry copper system at depth with significant copper and gold mineralisation, capped by a mineralised lithocap. Drilling continues at the property to evaluate grades and the size of a potential resource. We have again reaffirmed our continuing commitment to our exploration strategy with a $77 million budget set for 2013 with almost half assigned to the greenfield programme.  

We have always stated that we will look for opportunities to create value not only from our project pipeline but also from acquisitions that meet our disciplined acquisition criteria. In this regard, the announcement in November of the purchase of Andina Minerals was consistent with our strategic model, providing Hochschild with further long-term optionality as well as increased geographical balance within our extensive project pipeline. Its principal asset, the Volcan project, is located in Chile, one of the most attractive, mining-friendly jurisdictions in the Americas. The impressive size of the deposit necessitates careful planning before committing any development capital and therefore we intend to conduct substantial geological and technical evaluation work on the deposit throughout 2013 and are confident that our experienced professionals will develop its strong potential in the long term.  

2012 overview

Hochschild has established a reputation for consistently meeting its annual production targets and in 2012 our operations once again delivered, producing 20.3 million silver equivalent ounces. The San Jose mine in Argentina enjoyed another robust year, with full year production up by 3% and can look forward to an even stronger 2013 following a cost effective 10% plant capacity expansion. Our Peruvian operations continued their policy of mining close to their average reserve grades whilst pursuing opportunities to optimise their performance. For example, the Arcata mine further capitalised on high silver prices to process low grade previously mined material, as well as completing the value enhancing Dore project.

In 2012, Hochschild experienced ongoing cost increases in Peru that were consistent with industry-wide inflation. This trend is set to continue in 2013 with further labour cost increases and currency appreciation currently forecast. In Argentina, we were encouraged by the Company's ability to mitigate the ongoing effects of high local inflation with increased year-on-year tonnages, further helped by a degree of local currency devaluation. We expect local cost inflation in Argentina to continue to be high in 2013, but are confident that the combination of increased tonnage from the capacity increase with further currency devaluation will provide a significant offset. 

Hochschild reported revenue of $818 million in 2012. This reflected a fall of almost 10% in the average silver price received that more than offset the 6% rise in year-on-year gold prices, as well as the scheduled fall in production versus 2011. EBITDA reached $385 million, in line with the fall in revenue, as well as the above mentioned cost inflation, and pre-exceptional EPS was $0.19 for the full year. We continue to have a strong cash balance of approximately $359 million even after the payment for 86.7% of Andina Minerals, as well as just over $250 million in minority investments. Together with our healthy operating cashflow, Hochschild retains the flexibility to begin full construction at the Inmaculada and Crespo projects in the second half of 2013, execute our $77 million exploration programme and, subject to satisfying the Company's strict criteria, further capitalise on the significant range of acquisition opportunities in the current environment.

Outlook

The Company's production target for 2013 is 20.0 million attributable silver equivalent ounces driven by stable production from our core Peruvian operations and a continued decline in contribution from our two ageing mines, Ares in Peru and Moris in Mexico, offset by the increased output from San Jose following the capacity increase.

2013 promises to be an important year in Hochschild's development, as the expected receipt of construction permits for our two Advanced Projects in the second half will signal the start of a key phase of capital expenditure aiming to take the Company smoothly to the next level of production. Our core strategy is unchanged. We will once again be focused on delivering on our stated operational targets, begin the detailed process of assessment at the exciting Volcan project and continue to develop our comprehensive project pipeline supported by its $77 million budget and further selective acquisitions. 

We retain great confidence in our experienced workforce to deliver operational improvements and efficiencies, while balancing increased investment in the drivers of long-term profitable growth with opportunities to enhance returns. I am confident we can continue to deliver significant value for all our stakeholders.

Ignacio Bustamante

Chief Executive Officer

13 March 2013

OPERATING REVIEW

2012 Highlights

·   Full year production of 20.3 million attributable silver equivalent ounces achieved, in line with guidance

·   Good progress at Advanced Projects - Inmaculada plant construction contract awarded and EIS granted by Peruvian government; detailed engineering and construction continued at Inmaculada and Crespo

·   Excellent results from brownfield exploration programmes at core assets

CURRENT OPERATIONS

Production

In 2012, Hochschild once again met its full year production target, producing 20.3 million attributable silver equivalent ounces, comprised of 13.6 million ounces of silver and 111.8 thousand ounces of gold. The Company has announced a production target of 20.0 million attributable silver equivalent ounces for 2013. Production at each of the Company's main operations is expected to be in line with 2012. As anticipated, production at the ageing Ares mine will continue to decline, reflecting lower tonnages and grades. Production at the Moris mine in Mexico is not expected to be material.

Costs[6] 

In 2012, excluding mine royalties and the cost impact of the increased dore production at Arcata, (which is more than compensated for by a reduction in commercial discounts and selling expenses), the Company reported a 17% increase in unit cost per tonne at its main Peruvian operations, to $70.9 per tonne (2011: $60.8). The increase in unit cost per tonne excluding royalties, including the cost impact of the dore project, was 21% (from $60.8 per tonne in 2011, to $73.3 in 2012). In Argentina, unit cost per tonne excluding royalties increased by 12% to $190.4 per tonne (2011: $169.6). The Company expects the increase in overall 2013 unit cost per tonne in Peru to be approximately 15-20% excluding royalties and the increased refining cost due to the effects of the dore project at Arcata. In Argentina, expected continuing local inflation, partially offset by local currency devaluation, is anticipated to result in a unit cost per tonne increase of 10-15%. Please see page 24 of the Financial Review for further details on costs.

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.

Arcata summary	Year ended 31 Dec 2012	Year ended 31 Dec 2011	% change
Ore production (tonnes)	773,498	687,966	12
Average silver grade (g/t)	271	312	(13)
Average gold grade (g/t)	0.83	0.88	(6)
Silver produced (koz)	5,526	6,081	(9)
Gold produced (koz)	17.27	17.38	(1)
Silver equivalent produced (koz)	6,562	7,124	(8)
Silver sold (koz)	5,236	5,979	(12)
Gold sold (koz)	15.9	16.7	(5)
Unit cost ($/t)	86.3	77.0	12
Unit  cost excl. royalties ($/t)	82.0	70.2	17
Total cash cost ($/oz Ag co-product)[7]	14.5	12.8	13

Production and sales

In 2012, full year silver equivalent production at Arcata was 6.6 million ounces (2011: 7.1 million ounces). There was an increase in tonnage compared to 2011 mainly reflecting a planned fourth quarter increase in volumes processed from the low grade Macarena Waste Dam Deposit. This was achieved following a 500 tonne per day capacity expansion at the Arcata plant, completed in Q3 2012. The decrease in production was also a result of lower grades, in line with the Company's policy of mining close to the average reserve grade at its core assets.

Table Showing Contribution from Macarena Waste Dam Deposit

	12 mths 2012	12 mths 2011
Total
Tonnage	773,498	687,966
Average head grade gold (g/t)	0.83	0.88
Average head grade silver (g/t)	271	312
Macarena
Tonnage	133,825	86,859
Average head grade gold (g/t)	0.30	0.30
Average head grade silver (g/t)	105	95
Stopes and Developments
Tonnage	639,673	601,107
Average head grade gold (g/t)	0.94	0.97
Average head grade silver (g/t)	306	344

In addition, production at Arcata included the decrease in ounces recovered as a result of the ramping up of the dore project. This initiative was completed in the fourth quarter with 100% of Arcata's concentrate now being converted into dore, resulting in significant commercial savings which more than offset the decrease in ounces recovered from the process. Excluding the effect of this project, Arcata would have produced an additional 234 thousand silver equivalent ounces in the full year.

In 2012, the silver/gold concentrate from Arcata was sold to Consorcio Minero S.A, Korea Zinc Co and MRI Trading AG. 47% of Arcata's production was processed into dore; all of which was sold to Johnson Matthey in 2012.

Costs

Unit cost per tonne, excluding royalties and the additional cost of increased dore production increased by 9%. Including the additional cost of increased dore production, the unit cost increased by 17% to $82.0 (2011: $70.2). The main drivers were higher mining costs resulting from a higher proportion of production from narrower veins, a 4% appreciation in the Peruvian Sol and higher wage costs, in line with industry inflation. These effects were partly offset by economies of scale resulting from an increase in treated tonnage.

Resource life and Brownfield exploration

The resource life of Arcata stands at 11.7 years as at 31 December 2012. During the year, exploration work at Arcata focused on the definition of new high grade structures and the incorporation of high quality resources from known vein systems, as well as to provide further geological interpretation of the area. Positive results included the discovery of high grade resources in the Tunel 4 area, the discovery of the new Katty vein, and the extension of the Alexia vein with the potential to increase the life of mine and to improve the average grade quality of the resource. In total, 56,269 metres of diamond drilling was completed during 2012 (2011: 94,656 metres) with significant intercepts including^[8]:

Vein	Results
Alexia	DDH380  2.00m at 4.56 g/t Au & 814 g/t Ag DDH400  9.34m at 3.34 g/t Au & 984 g/t Ag
Katty	DDH354  1.45m at 13.69 g/t Au & 1,965 g/t Ag DDH397  1.50m at 47.01 g/t Au & 3,642 g/t Ag
Tunel 4	DDH355  2.24m at 4.68 g/t Au & 1,162 g/t Ag DDH306  1.15m at 6.87 g/t Au & 2,387 g/t Ag DDH304  1.33m at 3.48 g/t Au & 2,815 g/t Ag
Sandra	DDH301 1.18m at 2.06 g/t Au & 1,059 g/t Ag

In 2013, the exploration and drilling programme of 34,000 metres at Arcata will continue in the potential and near mine exploration areas in the northern part of the district surrounding the Socorro, Alexia and Katty vein systems.

Pallancata: Peru

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, in which Hochschild holds a controlling interest of 60% and is the mine operator, with International Minerals Corporation ("IMZ"). Ore from Pallancata is transported 22 kilometres to the Selene plant for processing.

Pallancata summary*	Year ended 31 Dec 2012	Year ended  31 Dec 2011	% change
Ore production (tonnes)	1,094,250	1,070,466	2
Average silver grade (g/t)	256	301	(15)
Average gold grade (g/t)	1.09	1.33	(18)
Silver produced (koz)	7,441	8,767	(15)
Gold produced (koz)	26.23	33.88	(23)
Silver equivalent produced (koz)	9,014	10,800	(17)
Silver sold (koz)	7,280	9,064	(20)
Gold sold (koz)	25.1	33.9	(26)
Unit cost ($/t)	67.2	60.4	11
Unit  cost excl. royalties ($/t)[9]	67.2	54.5	23
Total cash cost ($/oz Ag co-product)	11.4	9.9	15

^*The Company has a 60% interest in Pallancata 

Production and sales

Full year production at Pallancata in 2012 was 9.0 million silver equivalent ounces (2011: 10.8 million). The decrease in production compared to 2011 was mainly due to lower grades reflecting the Company's policy of mining close to the average reserve grade at its core assets, as well as the processing of a higher proportion of mineral from narrower structures with higher mine dilution and lower metallurgic recovery. In addition, temporary delays in the mine execution plan in the first half of the year that led to the treatment of a greater proportion of lower grade material from the mine also contributed to the decrease in production.

In 2012, the silver/gold concentrate from Pallancata was sold to Teck Metals ltd., Aurubis AG, LS-Nikko Copper Inc and Consorcio Minero S.A.

Costs

Excluding mine royalties, unit cost per tonne increased by 23%, to $67.2 per tonne (2011: $54.5)⁹. Including royalties, the increase in 2012 was 11%, to $67.2 per tonne (2011: $60.4). This rise was principally due to an increase in mine costs reflecting the higher proportion of production from narrower veins as well as an increase in mined areas and higher cement consumption following the temporary delays in the mine execution plan in the first half of the year, as mentioned above. In addition, an increase in wage costs resulting from industry inflation and a 4% appreciation of the Peruvian Sol also contributed to the rise.

Resource life and Brownfield exploration

The resource life of the Pallancata operation stands at 7.4 years as at 31 December 2012. During 2012, a total of 50,326 metres of diamond drilling was carried out over the course of the year (2011: 50,748 metres), focused on the identification of wider structures and the incorporation of new resources. Drilling in 2012 mainly focused on the Paola, Luisa, Pallancata West, Huararani, Rina, Yurika and Teresa veins with intercepts including[10]:

Vein	Results
Luisa	DLLU-A26   3.79m at 4.44 g/t Au & 1,061 g/t Ag DLLU-A88   3.03m at 1.76 g/t Au & 523 g/t Ag DLLU-A99   1.20m at 12.17 g/t Au & 1,670 g/t Ag
Huararani	DLHU-A14   3.01m at 3.61 g/t Au & 1,236 g/t Ag
Paola	DLLU-A28  7.13m at 2.52 g/t Au & 279 g/t Ag
Pallancata East	DLPE-A87   1.70m at 3.87 g/t Au & 473 g/t Ag
Yurika	DLTE-A11   1.65m at 2.93 g/t Au & 451 g/t Ag

In 2013, the exploration programme at Pallancata will focus on the definition of structures with high quality resources from known veins systems. The drilling campaign will also concentrate on identifying new high grade veins, with 39,050 metres of drilling planned in total.

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% of the joint venture and is the mine operator.

San Jose summary*	Year ended 31 Dec 2012	Year ended 31 Dec 2011	% change
Ore production (tonnes)	509,851	462,825	10
Average silver grade (g/t)	417	444	(6)
Average gold grade (g/t)	5.79	5.86	(1)
Silver produced (koz)	5,953	5,870	1
Gold produced (koz)	85.77	80.95	6
Silver equivalent produced (koz)	11,099	10,727	3
Silver sold (koz)	5,897	6,087	(3)
Gold sold (koz)	84.3	82.4	2
Unit cost ($/t)	202.2	181.7	11
Unit  cost excl. royalties ($/t)	190.4	169.6	12
Total cash cost ($/oz Ag co-product)	14.4	13.7	5

^*The Company has a 51% interest in San Jose

Production and sales

San Jose delivered another strong performance in 2012, with silver equivalent production of 11.1 million ounces (2011: 10.7 million ounces). The 3% rise in production versus 2011 resulted from an increase in overall tonnage due to a greater availability of lower grade economic development material as well as operational efficiencies that allowed for an increase in mill throughput. The decrease in silver grades reflected this higher proportion of development material as well as the Company's policy of mining close to the average reserve grade at each of its core operations.

San Jose experienced a temporary accumulation of concentrate inventory during Q2 2012 due to the impact of industry-wide regulatory changes in Argentina. However, exports resumed at the end of Q2 and sales of this inventory were completed in Q3 2012.

In 2012, the dore produced at San Jose was sold to Argor Heraeus S.A. The concentrate produced at the operation was sold to Teck Metals ltd., Aurubis AG, LS-Nikko Copper Inc and Consorcio Minero S.A.

Costs

Unit cost per tonne at San Jose, excluding royalties, increased by 12% to $190.4 (2011: $169.6). Including royalties, the increase in 2012 was 11%, at $202.2 per tonne (2011: $181.7). The key driver was wage cost increases driven by local inflation in Argentina continuing to run at between 25% and 30% in 2012. In addition, this also impacted energy costs. These effects were partially offset by a 10% devaluation of the Argentinian peso, and economies of scale achieved through an increase in tonnages extracted and treated.

Resource life and Brownfield exploration

The resource life of San Jose stands at 12.2 years as at 31 December 2012. The Company received some excellent results from the exploration programme at San Jose in 2012, including the discovery of the Emilia vein located within the San Jose area, followed by the discovery of two further high grade structures: the Rosario and Kospi extension veins.  During the year, a total of 81,099 metres (2011: 55,678 metres) of drilling was carried out to incorporate further resources and new economic areas. Drilling focused on a number of veins and significant intercepts included[11]:

Vein	Results
Kospi SE	SJM-217    9.50m at 21.25 g/t Au & 3,404 g/t Ag
Emilia	SJD-496    1.00m at 46.37 g/t Au & 6,951 g/t Ag SJD-1246: 1.00m at 71.31g/t Au & 3,579g/t Ag SJD-1264: 0.90m at 147.04g/t Au & 1,276g/t Ag
Chenque	SJD-1121  1.70m at 11.05 g/t Au & 1,186 g/t Ag
Frea	SJD-1319  1.00m at 35.54 g/t Au & 267 g/t Ag
Huevos Verdes	SJD-1322  1.00m at 5.99 g/t Au & 1,632 g/t Ag
Pilar	SJD-1052  0.84m at 13.00 g/t Au & 2,275 g/t Ag

In 2013, the exploration programme at San Jose will include geological mapping and a 32,000 metres drilling campaign to continue exploration in and around the San Jose mine and the Saavedra areas.

Other operations

Ares: Peru

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.

Ares summary	Year ended 31 Dec 2012	Year ended 31 Dec 2011	% change
Ore production (tonnes)	336,423	344,085	(2)
Average silver grade (g/t)	54	61	(11)
Average gold grade (g/t)	2.65	2.90	(9)
Silver produced (koz)	481	581	(17)
Gold produced (koz)	26.28	29.03	(9)
Silver equivalent produced (koz)	2,058	2,323	(11)
Silver sold (koz)	473	598	(21)
Gold sold (koz)	25.8	29.7	(13)

Production and sales

Although production at Ares was expected to end in 2011, the Company continues to extract mineral from new veins and production continued in 2012.Full year production at Ares was 2.1 million ounces (compared to 2.3 million ounces in 2011). The Company continues to monitor production closely at Ares to ensure the extraction of profitable ounces during the last stage of its life cycle, with production expected to continue into 2013. The exploration programme is continuing at the property and positive results have already been received.

100% of Ares' production is processed into dore, all of which was sold to Johnson Matthey in 2012.

Brownfield exploration

In 2012, a full geophysical survey was conducted at Ares and as a result new intersections at the Isabel vein were discovered and new structural corridors were detected. During the second half of the year, near mine exploration continued on the Apolo vein in the NW corridor. In addition, several new anomalies were detected and drilling was carried out in the Rosario and Isabel veins to define new resources. During the year, a total of 17,534 metres of drilling was carried out at Ares. Positive intercepts included¹²:  

Vein	Results
Isabel	AM-1515  1.70m at 3.36 g/t Au & 578 g/t Ag AM-1493: 1.35m at 9.83 g/t Au & 68 g/t Ag AM-1482: 6.05m at 0.44 g/t Au & 155 g/t Ag
Olga	AM-1482: 2.65m at 0.13 g/t Au & 448 g/t Ag
Apolo	AM-1497  0.70m at 0.10 g/t Au & 243 g/t Ag

In 2013, the exploration programme and 2,800 metres drilling campaign at Ares will focus on exploring the potential extensions of known veins systems and in new structures.

Moris: Mexico

The 100% owned Moris mine, is an open pit mine and is located in the district of Chihuahua, Mexico.

Moris summary	Year ended 31 Dec 2012	Year ended 31 Dec 2011	% change
Ore production (tonnes)	-	858,028	-
Average silver grade (g/t)	-	5.02	-
Average gold grade (g/t)	-	0.96	-
Silver produced (koz)	42	64	(34)
Gold produced (koz)	8.79	19.26	(54)
Silver equivalent produced (koz)	570	1,220	(53)
Silver sold (koz)	42	64	(34)
Gold sold (koz)	8.7	19.3	(55)

Production and sales

Despite mine production at Moris having ceased in September 2011, in 2012, continued leaching of the pads produced a further 570,000 silver equivalent ounces (2011: 1.2 million ounces). The Company expects to continue recovering mineral from the pads in 2013, although this is not expected to be material. Exploration continues at the property.

In 2012, the gold/silver dore produced at Moris was sold to Johnson Matthey.

Brownfield exploration

Exploration work at Moris during 2012 focused on identifying new economic structures. During the year, 13,994 metres of drilling was carried out in the La Nopalera, Creston, Eureka, La Mexicana, Los Alamos and San Luis areas. Positive intercepts included[12]:

Area	Results
La Mexicana	DM-34  1.72m at 4.97 g/t Au & 7 g/t Ag DM-37  4.91m at 2.56 g/t Au & 3 g/t Ag DM-36  5.85m at 1.74 g/t Au & 3 g/t Ag

During 2013, further mapping and sampling will be carried out in order to better define the new resource areas.

ADVANCED PROJECTS

The Company has four Advanced Projects: Inmaculada, Crespo and Azuca in Peru and the Volcan Gold project in Chile. In January 2012, Hochschild announced the successful completion of the Inmaculada and Crespo feasibility studies which are forecast to contribute 10 million silver equivalent ounces of attributable production on average per annum. In November 2012, the Company announced that following industry-wide delays in the permitting process in Peru, it now expects to receive the final mill construction permits for the Inmaculada and Crespo projects in the second half of 2013 with commissioning for both projects' mills scheduled for the second half of 2014. At Azuca, the Company continued exploration work at the project throughout 2012 in order to consolidate resources and provide a more comprehensive picture of the complex vein structures in the area. The Volcan Gold deposit was acquired following the acquisition of Andina Minerals Inc in November 2012. 

Inmaculada

Inmaculada is a 20,000 hectare gold-silver project located in the Company's existing operational cluster in southern Peru and 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, International Minerals Corporation ('IMZ').

Following the substantial progress made by the Company during 2012 with regards to detailed engineering and also procurement and construction contracts for the Inmaculada project, the revised total capital expenditure estimate for the project is now expected to be approximately $370 million for a 3,500 tonne per day ('tpd') underground operation with average annual production of 12 million silver equivalent ounces (7 million attributable ounces). The project is due to be commissioned in the second half of 2014. During the year, the Company also continued to receive positive results from the exploration programme at the property which consists of 40 mining concessions with resources which are currently estimated at a total of 150 million silver equivalent ounces.

In August 2012 the Company awarded the contract for the construction of the plant at Inmaculada, within budget, for $142 million and in September, the Environmental Impact Study ('EIS') for the project was awarded, representing a key step in the project's permitting process. Also during the year, the purchase of the main plant equipment was completed and the Company progressed with the detailed plant engineering, as well as the detailed engineering for the mine. In addition, engineering for the camp facilities and for the workshops, warehouses and offices was completed. Construction of the water treatment plant was also underway and construction of the exploration tunnels continued, with 2,920 metres completed during the year. Finally, the contract for the construction of the main access road to the site was granted, with completion due in H1 2013, and work also continued on the construction of the electricity transmission line during the year.

Exploration at Inmaculada in 2012 focused on the definition and incorporation of potential systems outside of the current resource area. During the year, five drill rigs were in operation and a total of 45,942 metres of drilling was carried out, focused on the Tensional Lourdes, Tensional Lourdes II, Martha and Angela and Juliana veins, as well as the newly discovered Susana and Mirella veins where assay results showed excellent mineralisation. Positive results included[13]:

Vein	Results
Martha	MAR12-006  0.85m at 51.77 g/t Au & 175 g/t Ag
Susana	MAR12-004  1.03m at 17.15 g/t Au & 1,851 g/t Ag MAR12-006  2.52m at 4.97 g/t Au & 531 g/t Ag
Lourdes	LOU12-013  1.13m at 18.23 g/t Au & 155 g/t Ag LOU12-001  3.50m at 7.12 g/t Au & 369 g/t Ag
Angela SW Cimoide	ASW12-016  10.75m at 4.03 g/t Au & 188 g/t Ag includes:        ASW12-016  5.70m at 1.41 g/t Au & 312 g/t Ag
Mirella	LOU12-023  1.60m at 8.54 g/t Au & 81 g/t Ag LOU12-024  1.23m at 8.26 g/t Au & 81 g/t Ag

In 2013, the 13,450 metres drilling campaign will continue with near mine and potential drilling to expand the current resources at Inmaculada.

Crespo

Crespo is 100% owned by Hochschild and is located in the Company's existing operating cluster in southern Peru. This will be a relatively simple open pit project with high gold recovery rates, and as with the Inmaculada project, will benefit from operational synergies due to its proximity to the Company's existing operations. The project has an estimated total capital expenditure of approximately $110 million for a 6,850 tpd operation with an average annual production of 2.7 million silver equivalent ounces from the second half of 2014.

In 2012 the Company made good progress at Crespo, the detailed engineering for the mine and the plant was in progress during the fourth quarter and is expected to be completed in the first half of 2013. In addition, the final engineering for the camp design and construction was completed and work on the access road to the project commenced.

In April 2012, the Company held a successful public hearing in relation to the project's EIS permit, and during the year, the Company continued the process of responding to the relevant observations with regards to the EIS permit, whilst community relations support programmes also continued. Furthermore, on 28 December 2012, the surface water study for the Crespo project was approved and subsequently on 11 January 2013, the surface land agreement for the project was approved by the local community. Both of these are key steps in the project's approval process and the Company is now in a position to submit the project's construction permit application. 

The exploration programme at Crespo continued to deliver positive results in 2012. During the year, lithological and alteration models were completed and a surface sampling campaign was concluded. Exploration and infill drilling at the Crespo and Queshca areas started in September with three drill rigs in operation. A total of 2,311 metres of exploration drilling was completed during the year as exploration focused on the transition of inferred resources into measured and indicated resources and to test the extension of gold mineralisation below the current pit. Positive results were received from superficial levels and in addition assay results from the Queshca area confirmed a structural domain mineralisation. Positive intercepts included[14]:

Vein	Results
Queshca area	DDHQS-1207     22.50m at 2.86 g/t Au & 29 g/t Ag DDHQS-1205     1.60m at 1.93 g/t Au & 10 g/t Ag DDHQS-1208     24.00m at 8.93 g/t Au & 45 g/t Ag

In 2013, a surface exploration programme will be carried out at Crespo.

Azuca

The 100% owned Azuca project is also located in the Company's southern Peru cluster. In January 2012, the Company took the decision to delay the feasibility study at Azuca and continue exploration work throughout 2012 in order to consolidate resources and to provide a more comprehensive picture of the vein structures present in the area.

Moreover, the Company believes that the geological potential of the Azuca property may produce richer structures that could further support the investment required to develop the asset but could alter the design and location of future mine and plant infrastructure, tailings ponds and other key equipment.   

The focus of the exploration programme at Azuca in 2012 was on the exploration of new areas at the property with the potential for high grade mineral structures, as opposed to the addition of resources. As of December 2012, the Azuca project has Measured & Indicated resources totalling 7.05 million tonnes at 0.77 g/t of gold and 188 g/t of silver containing 173,500 ounces of gold and 42.7 million ounces of silver.

Exploration at the site continued in 2012 with promising intercepts indicating the presence of new higher grade veins. Surface geology and detailed mapping was conducted at Azuca and drilling continued during the year with four drill rigs in operation.  A total of 29,488 metres of drilling was carried out focused on the Azuca West, Paralela, Colombiana, Yanamayo, Esperanza and Prometida veins. Assay results from the Azuca West vein confirmed the continuity of a high grade mineral structure to the southwest. Furthermore, the North-West Colombiana vein intercepts also yielded excellent results that indicate a new possible orientation or new structures towards the north. Positive results included[15]:    

Vein	Results
Yanamayo NE	DAYA-A1204   1.20m at 3.65g/t Au & 764 g/t Ag DAYA-A1205   0.90m at 4.11g/t Au & 513 g/t Ag
Azuca West	DAAW-A1205   2.80m at 1.90g/t Au & 854 g/t Ag DAAW-A1205   4.10m at 2.37g/t Au & 769 g/t Ag
Paralela	DAYA-A1209   1.50m at 1.57g/t Au & 439 g/t Ag

The 2013 drilling programme at Azuca will focus on identifying new high grade potential mineral structures, with a programme of 17,100 metres planned.

Volcan gold deposit

On 8 November 2012, the Company announced that it had made a recommended cash offer of C$0.80 per share for all of the issued and outstanding common shares of Andina Minerals Inc. ("Andina"). Andina owns the Volcan gold project located in the prolific Maricunga gold belt in Chile. Full details can be found in the announcement. 

On 20 February 2013, the Company announced that it had completed the acquisition of all of the outstanding Andina Minerals Inc shares and therefore indirectly owned 100% of the issued and outstanding Andina Minerals Inc shares.  Andina Minerals Inc was delisted from the TSX Venture Exchange on 22 February 2013. 

This acquisition adds to the Company's extensive project pipeline, doubling the current resource base and is located in Chile, one of the Company's key targeted mining jurisdictions. In addition, it is in line with the Company's long standing criteria of acquiring highly value accretive, early stage opportunities with strong geological conditions and with full control. During 2013, the Company will commence an extensive technical and geological evaluation of the Volcan deposit and continue with the relevant permitting processes and applications.

In February 2011, Andina published details of a Pre-Feasibility Study carried out on the Volcan deposit disclosing initial Proven and Probable mineral reserves of 6.6 million ounces of gold. During the process of evaluation mentioned above Hochschild will re-classify the reported reserves as resources.

The exploration programme at the Volcan gold deposit in 2013 will focus on a re-logging campaign to characterise resource data and improve the geological model of the property.

According to Andina's February 2011 Pre-Feasibility Study, the project has the following mineral resources:

Classification	Total In-Pit Resource
	Tonnes	Gold grade (g/t Au)	Contained Gold Ounces
Measured	105,918,000	0.738	2,511,000
Indicated	283,763,000	0.698	6,367,000
Measured & Indicated	389,681,000	0.709	8,878,000
Inferred	41,553,000	0.502	671,000

^a.  All quantities are rounded to the appropriate number of significant figures, consequently sums may not add due to rounding.

^b.  The estimate of mineral resources may be materially affected by environmental, permitting, legal, title, taxation, socio-political, marketing or other relevant issues.

^c.  The quantity and grade of reported Inferred Resources in this estimation are conceptual in nature and there has been insufficient exploration to define these Inferred Resources as an Indicated or Measured Mineral Resource. It is uncertain if further exploration will result in the upgrading of the Inferred Resources into an Indicated or Measured Mineral Resource category.

^d.  The Volcan mineral resource estimate is effective as of 16 September 2010.

EXPLORATION REVIEW

2012 Highlights

·   $97.5 million invested in exploration in 2012; 33% brownfield,17% Advanced Projects and 38% greenfield[16]

·   Resource life of 9.8 years

·   Total resources of 527 million silver equivalent ounces[17]

·   Increase in 'Company Maker' pipeline from 13 to 16 projects 

·   2013 exploration budget of $77 million; 26% brownfield at current operations, 14% Advanced Projects, 44% greenfield, others and support 16%

In 2012, investment in exploration totalled $97.5 million and 350,150 metres of drilling was completed at the Company's brownfield, Advanced Projects, greenfield and copper projects. The 2013 budget, representing 154,700 metres, will be split between exploration work at the Company's existing operations, the Advanced Projects and greenfield opportunities in Peru, Argentina, Mexico and Chile.

The Company's exploration programme in 2012 delivered some excellent results, especially in the brownfield exploration at its current operations. The Company's greenfield exploration programme also produced positive results and its project pipeline was further expanded, to include 16 'Company Makers' and 20 'Medium Scale' projects.

In 2013, exploration work at the Company's core operations will be mainly focused on identifying new potential and near mine high grade areas to further improve the resource quality. At the Inmaculada and Crespo Advanced Projects, exploration efforts will be focused on identifying new potential high grade areas whilst at Azuca, Hochschild will concentrate on the exploration of high quality resources that better support a significant investment. At the Volcan gold deposit in Chile, the Company will commence an extensive technical and geological evaluation of the deposit.

Exploration at the Company Maker projects will include continued drilling and further analysis and at the Company's Medium Scale projects, work will continue to develop those high-quality, early stage projects that have the potential to move through the pipeline to production. Work will also continue on the Company's generative programme to conduct further exploration on the Company's extensive land package of premium properties. In 2012, the number of geologists employed by the Company was 120.

Brownfield exploration

Approximately 33% of the exploration budget was invested in brownfield exploration in 2012.

The geological conditions at the Company's main operations continue to be extremely promising and during 2012, brownfield exploration results have been significant, with high grade discoveries at all three operations. Having previously exceeded all of Hochschild's original life-of-mine targets, in 2012 the focus was shifted to improving the quality of the Company's resource base and the results received have confirmed the potential for continued high quality resource additions in the future. As part of this work, a full review of the resource base was also completed and the Company has been able to optimise the geological models of the main operations. Furthermore, in an effort to improve the resource to reserve conversion ratios, the Company's mine plans have been optimised by removing resources that although economic at Hochschild's stringent cut-off threshold, are unlikely to be mined. These include: resources that necessitate high capex; inaccessible resources from previous mining campaigns; or those that still require further evaluation before inclusion in the mine plan. As a result, life-of-mine has been maintained and is now supported by a more robust resource base.

For full reserve and resource tables, please see page 64.

Greenfield exploration

In 2012 approximately 38% of the 2012 exploration budget was invested in the Company's greenfield programme, and in 2013, the proportion will increase to 44%. In 2012, a total of 53,188 metres was drilled at the Company's greenfield projects.

The Company conducted minimum exploration work at its greenfield projects in Argentina in 2012.  Although exploration and business development teams did remain active in the country throughout the year, a decision has been made to suspend all exploration activities in Argentina for the foreseeable future.  

Company Makers

The Company currently has 16 potential "Company Makers". These are projects with the potential to achieve production of 20-30 million silver equivalent ounces per year. They are typically high sulphidation, disseminated or gold/copper porphyry deposits. In 2012, $20.0 million was invested in finding and developing such deposits and the 2013 budget is $17.9 million.

Valeriano

The Valeriano property in Chile is located 27 kilometres north of Barrick Gold Corporation's Pascua Lama project, in close proximity to the border with Argentina, and covers an area of 3,750 hectares. The property hosts both high-sulphidation as well as porphyry style disseminated copper and gold mineralisation. The property has been explored by a number of mining companies in the past, including Phelps Dodge (1989-1991) and Barrick (1995-1997), which completed drill campaigns totalling 12,575 metres. Hochschild's initial programme in 2012 was the first significant exploration programme since 1997 and the Company has an option to earn in 100% of the Valeriano property through a mix of cash payments and work commitments.  

In 2012 a total of 5,294 metres of drilling was carried out at Valeriano. Initial drill testing at the property in early   2012 encountered evidence of a mineralised porphyry copper system at depth with significant copper and gold mineralisation, capped by a mineralised lithocap. During 2012, drilling was conducted to test the upper epithermal and lower porphyry levels. Near surface epithermal mineralisation was encountered at the property and positive intercepts reported included[18]:

Intercept	Results*
VALDDH-12009	94.10m at 0.59% Cu Eq. includes:        28.00m at 1.02% Cu Eq.        20.00m at 0.86% Cu Eq. 599.90m at 0.54% Cu Eq. includes:        284.00m at 0.66% Cu Eq.

*results contain Au, Ag, Cu and Mo at current rates.

The current exploration programme at Valeriano has been extended into the first half of 2013 to further test the porphyry copper and gold mineralisation at depth.

Victoria

The Victoria project is located in northern Chile and is 66% owned by Hochschild, with the remaining 34% held by Iron Creek Capital. The exploration programme is delivering positive results at the property which covers 46,100 hectares of continuous strike length at the highly productive Domeyko Fault Zone. A total of 7,586 metres of drilling was completed at the deposit in 2012 in the Picaron Exotic, Victoria II and Incahuasi areas. During the year, a surface exploration programme was carried out over the entire property and geological interpretation of historical exploration data was also completed, with new drill targets being identified in the Victoria II and Incahuasi areas. In addition, a detailed mapping programme commenced, in order to define targets for the 2013 exploration season.

In 2013, additional compilation of geophysical studies will be carried out at Victoria and further mapping of the northern area of the property will be conducted to define drill targets for the year's exploration programme.

Encrucijada 

Following the acquisition of Andina Minerals the Encrucijada property in Chile is now 100% owned by Hochschild. As a result of positive exploration results, Encrucijada was re-categorised as a Company Maker project in Q1 2012. During the year, historical geological data was compiled and integrated and a total of 1,674 metres was drilled at Encrucijada. In addition, further geophysical interpretation and targeting of the porphyry style mineralisation below the San Bernardo tourmaline breccias and dome complex, and in the surrounding area, was carried out. At the end of the year, mapping of target areas to the east and north east of the project commenced and initial results identified similar vein mineralisation to the San Bernardo dome, with strongly anomalous copper porphyry style mineralisation.  Results indicate that this controlling structure is part of a major caldera ring structure. Positive drilling results included the following intercepts[19]:

Intercept	Results*
ENCDD11-026	68.00m at 0.20% Cu Eq. 113.90m at 0.15% Cu Eq.includes:           21.90m at 0.18% Cu Eq.
ENCDD12-030	241.20m at 0.13% Cu Eq. includes:        82.95m at 0.17% Cu Eq.

*results contain Au, Ag and Cu at current rates.

In 2013, a mapping programme will be completed at Encrucijada to define further drill targets in the east and north east, as well as throughout the south east extension of the property.

Mercurio

Mercurio is a 100% owned 36,388 hectare property in Mexico, located between two high grade mines, Sombrerete and Fresnillo. In 2012, a total of 12,292 metres of drilling was completed at the property with results to date indicating strong base metal, as well as moderate silver mineralisation, associated with a large vein system similar to Fresnillo.

The exploration programme at Mercurio in 2012 focused on expanding the known mineralisation and identifying new mineralised structures. Geochemical sampling continued at the property and drilling was carried out on the Santa Rosa and Virginia vein systems and along the large north east structural zone which hosts a barite vein, to define the extension and continuity of mineralisation in these silver-based vein corridors. Positive intercepts included¹⁹:

Intercept	Results*
DDHME 12-35	1.00m at  520.34 g/t Ag Eq.
DDHME 12-36	2.45m at 315.78 g/t Ag Eq.
DDHME 12-40	1.65m at 208.85 g/t Ag Eq.
DDHME 12-44	1.21m at 144.65 g/t Ag Eq.
DDHME 12-46	1.68m at 147.67 g/t Ag Eq.

*results contain Ag, Zn and Cu at current rates.

In 2013, drilling will continue at Mercurio and will concentrate on the barite structure zone.  

Apacheta

At the 100% owned Apacheta project in Peru, a total of 2,524 thousand metres of drilling was completed 2012. The initial exploration programme at Apacheta 1 was completed with no positive results. Work continued on the process to obtain the necessary social permits for Apacheta 2 in order to initiate the planned drilling programme there.

Soranpampa  

At the 100% owned Soranpampa project in Peru, a total of 3,040 metres of drilling was carried out in 2012. Drilling was carried out on a geophysical anomaly area in order to identify economic near-surface gold mineralisation. In addition, further detailed geophysical work carried out during the year identified targets in and adjacent to the primary target and exploration work was carried out on these targets. No further exploration work is planned for the Soranpampa project in 2013.

La Falda

The La Falda property in northern Chile is located close to the Company's other projects in the area and was acquired in December 2011 as an earn-in project. The target is a porphyry gold-copper system, similar to other deposits in the Maricunga belt. The drilling programme at La Falda commenced in Q4 2012 and totaled 3,009 metres, testing both lithocap high sulphidation type mineralisation as well as porphyry style gold mineralisation.  Drilling results indicated that gold mineralisation does exist and is related to the porphyry gold setting. Additional targets were identified following continued mapping and sampling programmes and will be developed for drill testing in the north west of the property. The target is characterized by porphyry with banded quartz veins. Positive intercepts from the drilling programme at La Falda included[20]:

Intercept	Results*
FLDRC-12002	4.00m at 10.38 g/t Au Eq.
FLDRC-12004	8.00m at 0.43 g/t Au Eq. 3.00m at 1.13 g/t Au Eq. 3.00m at 0.55 g/t Au Eq.
FLDRC-12007	6.00m at 0.51 g/t Au Eq.

*results contain Au, Ag and Cu at current rates.

Potrero

The Potrero property is located in northern Chile, close to the La Falda property. Potrero was added to the Company's exploration pipeline in Q1 2012. Following the completion of geochemical, geological and geophysical mapping programmes early in the year, a NE-SW trend to mineralisation was confirmed. In addition, results of a geochemical sampling programme returned anomalies associated with the central anomaly and related to NE trending structures and an increase in sheeted veining. The magnetic survey also completed at the property defined lineaments trending NE and NW, with the intersection of these lineaments defining the central area of the property where the porphyry crops out. In conjunction with this programme, a surface mapping programme was completed and identified mineralised porphyries extending to the NE. In 2013, a drill programme has been designed, to test the porphyry target along the NE trend. 

Baborigame

The 51% owned Baborigame project is located in Mexico, in the Chihuahua district. The project was added to the project pipeline in Q3 2012 and is a series of low sulphidation veins with disseminated mineralisation. A detailed mapping and sampling programme was completed on the Cebollas target which is considered to be the most prospective area within the property, a mining district with more than 20 kilometres of quartz veins.  Two gold anomalies were identified during the initial exploration works, and in 2013, a drilling programme will be carried out to test the Cebolla target as well as classic epithermal veins located elsewhere on the property.  

Other Company Maker projects

Coriwasi

This is a 9,800 hectare high sulphidation epithermal and porphyry copper-gold type target in northern Peru optioned from a private party. During 2012, the Company continued the process of completing the relevant permits and approvals process for the project and conducted an airborne magnetic survey of the property which identified a number of magnetic lineaments that correspond with surface gold anomalies. 

Corazon de Tinieblas

The Corazon de Tinieblas property is located in Southern Mexico. The Company is in the process of completing the relevant permits and approvals process for the property.

Huachoja

This is a 3,000 hectare, high sulphidation epithermal target in southern Peru optioned from Teck Peru SA. In 2012, a total of 2,278 metres of drilling was carried out at Huachoja to test four targets. No significant mineralisation was reported in 2012.

Josnitoro

The Josnitoro project is located in Southern Peru. The Company continued the process of obtaining the relevant permit and approvals for the project during 2012.

Julieta

The Julieta property is located in Northern Peru. During 2012, the Company conducted a geological survey of the property and subsequent target definition and commenced the relevant permit and approval processes for the drilling campaign.

Medium Scale projects

The Company's project pipeline also contains various Medium Scale properties in the target delineation and drill testing categories. These are projects that each have the potential to contribute 5-10 million silver equivalent ounces of production per year and tend to be low sulphidation epithermal gold/silver type deposits with varying base metal content and are typically mined underground.

In 2012, the Company assigned $7.8 million to finding and developing Medium Scale projects, and in 2013 plans to invest $5.4 million in this category. The Company continued to receive positive results from the exploration programmes at its Medium Scale projects in 2012 and in addition, added the El Tanque property in Mexico to the pipeline.

Cuello Cuello

At the Cuello Cuello project in Peru, the relevant government and community permits were received in December 2011 and at the end of H1 2012 the drilling programme commenced with a total of 2,407 metres drilled during the year. Four silica structures with high sulphide content were identified, and near surface gold and silver structures were intersected in the drilling campaign. The Company plans to continue drilling at the property in 2013. Positive intercepts from the 2012 drilling campaign included[21]:

Intercept	Results
DDH-CC-12003	0.8m at 0.39 g/t Au & 1,159 g/t Ag 1.1m at 0.16 g/t Au & 596 g/t Ag
DDH-CC-12001	1.5m at 7.00 g/t Au & 56 g/t Ag
DDH-CC-0712	2.3m at 1.4 g/t Au & 375 g/t Ag
DDH-CC-0912	2.2m at 0.1 g/t Au & 861 g/t Ag

Astana/Farallon

Astana is a 100% owned project located in the Company's southern Peru cluster, with high sulphidation of disseminated gold/silver mineralisation. Historical drilling at superficial levels reported anomalous results in gold and silver associated to pyrite with values of 200 to 390 g/t Ag eq. Farallon is a 100% owned low sulphidation silver veins system, located 1.5 km to the east of Astana.  Previous drilling at superficial levels reported anomalous results in gold, silver, lead and zinc.

In 2012 the Company continued the process of attaining the relevant permits and approvals for both projects and received the necessary social permits. At the Astana property, the testing of anomalies was carried out whilst at Farallon a drilling campaign commenced during the year and a total of 518 metres of drilling were carried out to test the economic potential of the property. Historical drilling has already identified moderate silver and gold mineralisation with the current drilling programme expected to continue in the first half of 2013.

San Martin

Work at the San Martin project in Peru in 2012 was focused on obtaining the relevant government and community permits and approvals. In 2013, the Company will finalise the social permit application process and allow for the exploration work to commence, with the focus on defining potential mineralization. Previous drilling campaigns that intercepted high quality mineralisation. 

Huacullo

At the Huacullo project in Peru, in 2012, a surface mapping programme commenced to define the extension of the principal structures at the property where potential economic mineralisation in low to intermediate sulphidation veins were identified in previous drilling campaigns conducted by other companies. In 2013, the Company will finalise the relevant permits application process and continue exploration work at the property.

Other Medium Scale projects

El Tanque

At the El Tanque project in Mexico following a drilling campaign totalling 2,734 metres in 2012, no significant intercepts were reported to support a relevant mineralised body. The Company will not conduct further exploration work at the property in 2013.

Ibel

At the Ibel project in Peru, work in 2012 continued on the completion of the relevant government and community permits and approval process. Geological work and target definition was also carried out in order to test potential economic mineralisation in low to intermediate sulphidation veins and hydrothermal breccias located in sedimentary rocks.

Copper projects

Following the acquisition of Southwestern Resources in 2008, the Company currently holds a number of copper projects located in the southern Andes in Peru, within a highly prospective area for copper deposits.

Jasperoide

In 2012 a total of 1,906 metres of drilling was carried out at Jasperoide, focused on the already identified mineralised zone and surrounding area to locate new skarn blankets and to test for a potential associated porphyritic system. The Company is not planning to conduct further exploration work at the property in 2013.

Alpacocha

At the Alpacocha project an airborne geophysical magnetometer survey was completed and new targets were generated. A total of 3,012 metres of drilling was carried out during the year, concentrated in the Paraiso target, next to a known copper skarn porphyry target. Results have indicated a weak to moderately copper mineralised skarn and porphyry system with the potential for mineralisation to increase at depth. Positive intercepts from the drilling programme at Alpacocha in 2012 included[22]:

Intercept	Results*
PADDH12-01	18.20m at 0.99% Cu. Eq.
PADDH12-05	18.00m at 0.60% Cu. Eq.
PADDH12-03	3.60m at 0.70% Cu. Eq. 3.20m at 0.84% Cu. Eq.
PADDH12-06	2.00m at 0.66% Cu. Eq.

*results contain Au, Ag, Cu and Mo at 19.01.2013 rates.

Antay

At the 100% owned Antay copper project, in 2012 the Company continued the process of obtaining the necessary access permits for the project.   

Generative

The Company holds over one million hectares of prime land in key geological regions across four countries and continues to commit resources to conduct further exploration in these premium areas.

FINANCIAL REVIEW

Key performance indicators   

(before exceptional items, unless otherwise indicated)

$000 unless otherwise indicated	Year ended 31 Dec 2012	Year ended 31 Dec 2011	% change
Net Revenue[23]	817,952	987,662	(17)
Attributable silver production (koz)	13,550	14,980	(10)
Attributable gold production (koz)	112	127	(12)
Cash costs ($/oz Ag co-product)[24]	13.41	11.96	12
Cash costs ($/oz Au co-product) 24	735	561	31
Adjusted EBITDA[25]	384,791	563,403	(32)
Profit from continuing operations	128,581	268,919	(52)
Profit from continuing operations (post exceptional)	126,866	272,338	(53)
Earnings per share (pre exceptional)	$0.19	$0.49	(61)
Earnings per share (post exceptional)	$0.19	$0.50	(62)
Cash flow from operating activities [26]	254,879	464,110	(45)
Resource life of mine (years)	9.8	9.7	1

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. 

Following the revision of the mining royalty regime in Peru in 2011 (as detailed in the Company's 2011 Full Year Results announcement), the mine royalties incurred by the Pallancata and Ares units are now accounted for as Income Tax, whereas previously, royalties for both units were treated as production costs. The effect of this change should be taken into account when comparing the units' production cost per tonne, cash costs and Adjusted EBITDA metrics in 2012 with those of 2011.   

Revenue

Gross revenue

Gross revenue from continuing operations decreased 17% to $869.1 million in 2012 (2011: $1,043.7 million) driven by a decrease in production and a fall in the silver price, partially offset by a rise in the gold price.

Silver

Gross revenue from silver decreased 21% in 2012 to $599.4 million (2011: $755.8 million) as a result of lower prices. The total amount of silver ounces sold in 2012 decreased to 18,928 koz (2011: 21,792 koz) mainly due to lower year-on-year production.

Gold

Gross revenue from gold decreased 6% in 2012 to $269.2 million (2011: $287.8 million) also as a result of lower ounces produced although offset to some extent by an increase in the received gold price. The total amount of gold ounces sold in 2012 decreased to 159.8 koz (2011: 182.0 koz) mainly due to lower year-on-year production.

Gross average realised sales prices

The following table provides figures for average realised prices and ounces sold for 2012 and 2011:

Average realised prices	Year ended 31 Dec 2012	Year ended 31 Dec 2011
Silver ounces sold (koz)	18,928	21,792
Avg. realised silver price ($/oz)	31.6	34.7
Gold ounces sold (koz)	159.8	182.0
Avg. realised gold price ($/oz)	1,684	1,582

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 2012, the Group recorded commercial discounts of $51.2 million (2011: $56.0 million). This decrease resulted from a lower volume of concentrate sold in 2012, mainly due to the Arcata dore project. The ratio of commercial discounts to gross revenue in 2012 increased to 6% (2011: 5%).

Net revenue

Net revenue decreased by 17% to $818.0 million (2011: $987.7 million), comprising silver revenue of $557.8 million and gold revenue of $259.6 million. In 2012 silver accounted for 68% and gold 32% of the Company's consolidated net revenue compared to 72% and 28% respectively in 2011.

Revenue by mine

$000 unless otherwise indicated	Year ended 31 Dec 2012	Year ended 31 Dec 2011	% change
Silver revenue
Arcata	165,464	207,429	(20)
Ares	14,653	21,168	(31)
Selene	-	-	-
Pallancata	232,503	316,344	(27)
San Jose	184,635	208,579	(11)
Moris	1,315	2,273	(42)
Commercial discounts	(40,784)	(47,465)	(14)
Net silver revenue	557,786	708,328	(21)
Gold revenue
Arcata	26,850	26,449	2
Ares	42,927	46,929	(9)
Selene	-	-	-
Pallancata	42,620	54,437	(22)
San Jose	142,151	129,994	9
Moris	14,616	30,025	(51)
Commercial discounts	(9,528)	(8,584)	11
Net gold revenue	259,636	279,250	(7)
Other revenue[27]	530	84	531
Net revenue	817,952	987,662	(17)

Costs

Total pre-exceptional cost of sales increased 4% to $420.3 million in 2012 (2011: $404.3 million) resulting from an increase in the direct production cost, an increase in depreciation and from changes in inventory.  These factors were partially offset by lower workers' profit sharing reflecting the decrease in production in Peru and a lower silver price in 2012. The direct production cost increased by 15% in 2012, to $301.5 million (2011: $261.2 million) mainly as a result of an increase in the number of stopes, inflation in labour and supplies and rising oil prices in Peru and Argentina. Depreciation in 2012 was $121.2 million (2011: $103.7 million), with the increase mainly due to full depreciation of the Ares operation, depreciation of new tailings dams at Pallancata as well as a higher future capex depreciation resulting from the increasing cost to convert resources into reserves in all operating units and higher depreciation ratios. Other items, which principally includes workers' profit sharing, was $15.4 million in 2012 (2011: $32.4 million) and change in inventories which was $(17.7) million in 2012 (2011: $6.9 million).

Unit cost per tonne

The Company reported an overall increase in unit cost per tonne at its main operations of 13% in 2012 to $103.2 (2011: $91.4). The higher unit cost per tonne reported in 2012 includes the effect of the Arcata dore project which in turn, provides significant savings on commercial expenses. 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)[28]:

Operating unit ($/tonne)	Year ended 31 Dec 2012	Year ended 31 Dec 2011	% change
Main operations	103.2	91.4	13
Peru	75.1	67.1	12
Arcata	86.3	77.0	12
Pallancata[29]	67.2	60.4	11
Argentina	202.2	181.7	11
San Jose	202.2	181.7	11
Others	138.4	120.6	15
Ares28	138.4	120.6	15
Total underground	107.8	95.3	13
Moris	-	17.9	-

Unit cost per tonne by operation (excluding royalties)²⁷:

Operating unit ($/tonne)	Unit cost per tonne 2012	Unit cost per tonne 2011	% change
Main operations	99.1	83.8	18
Peru	73.3	60.8	21
Arcata	82.0	70.2	17
Pallancata28	67.2	54.5	23
Argentina	190.4	169.6	12
San Jose	190.4	169.6	12
Others	138.4	118.0	17
Ares28	138.4	118.0	17
Total underground	104.2	88.4	18
Moris	-	17.9	-

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 $13.0 to $14.2 per ounce and from $613 to $781 per ounce, respectively. Silver and gold cash costs from the Company's main operations (Arcata, Pallancata and San Jose) increased from $12.0 to $13.4 per ounce and from $561 to $735 per ounce, respectively. The increase in silver cash costs resulted from higher production costs and lower average grades, partially offset by lower workers' profit sharing, lower commercial discounts and a lower proportion of costs allocated to silver as a result of lower silver prices. 

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 $6.5 per silver ounce (2011:$ 4.9 per silver ounce) and ($1,293) per gold ounce (2011: ($1,987) per gold ounce).

Cash cost reconciliation[30]:

$000 unless otherwise indicated	Year ended 31 Dec 2012	Year ended 31 Dec 2011	% change
Group Cash Cost	392,825	394,225	(0.4)
(+) Cost of sales	420,325	404,291	4
(-) Depreciation in Cost of Sales	(117,627)	(105,085)	12
(+) Selling expenses	39,460	38,970	1
(+) Commercial deductions	51,197	56,049	(9)
Gold	9,552	8,584	11
Silver	41,645	47,465	(12)
Revenue	817,952	987,662	(17)
Gold	259,636	279,250	(7)
Silver	557,786	708,328	(21)
Others	530	84	531
Ounces Sold	19,088	21,974	(13)
Gold	159.8	182.0	(12)
Silver	18,928	21,792	(13)
Group Cash Cost ($/oz)
Co product Au	781	613	27
Co product Ag	14.2	13.0	9
By product Au	(1,293)	(1,987)	(35)
By product Ag	6.53	4.88	34

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.

As detailed in the introduction to the Financial Review, in calculating 2012 cash costs royalties at Pallancata and Ares are now excluded from the cost of sales figure used. Consequently, for comparison purposes, please see below 2011 Group cash costs adjusting the royalties effect.

Group Cash Cost ($/oz)	Year ended 31 Dec 2012	Restated Year ended 31 Dec 2011	% change
Co-product Au	781	602	30
Co-product Ag	14.2	12.7	12
By-product Au	(1,293)	(2,026)	36
By-product Ag	6.53	4.56	43

Administrative expenses

Administrative expenses before exceptional items increased by 13% to $73.0 million (2011: $64.4 million) primarily due to rises in personnel expenses mainly resulting from local inflation and the appreciation of local currencies. An increase in the Company's Long-term Incentive Plan ('LTIP') provision, reflecting the Company's share price performance in 2012, also contributed to the increase. These increases were partially offset by the absence of voluntary contributions in 2012.

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 36% to $64.6 million in 2012 (2011: $47.3 million). Further detail on the exploration programme can be found in the exploration section on page 16.

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 2012, the Group capitalised $15.9 million relating to brownfield exploration compared to $13.2 million in 2011, bringing the total investment in exploration for 2012 to $80.5 million (2011: $60.6 million). In addition, $17.0 million was invested in the Company's Advanced Projects.

Selling expenses

Selling expenses were in line with 2011at $39.5 million (2011: $39.0 million) principally consisting of export duties at San Jose (export duties in Argentina are levied at 10% of revenue for concentrate and 5% of revenue for dore).

Other income/expenses

Other income before exceptional items was $8.7 million (2011: $7.1 million), mainly reflecting a $2.4 million export tax credit in Argentina. Other expenses before exceptional items reached $9.5 million (2011: $15.8 million), which included a provision for obsolescence of supplies of $2.5 million.

Profit from continuing operations before exceptional items, net finance costs, foreign exchange loss and income tax

Profit from continuing operations before exceptional items, net finance costs and income tax decreased to $219.8 million (2011: $424.0 million) as a result of the factors detailed above.

Adjusted EBITDA

Adjusted EBITDA decreased by 32% over the period to $384.8 million (2011: $563.4 million) driven primarily by lower silver prices, lower production and higher costs.

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.

$000 unless otherwise indicated	Year ended 31 Dec 2012	Year ended 31 Dec 2011	% change
Profit from continuing operations before exceptional items, net finance cost, foreign exchange loss and income tax	219,768	423,973	(48)
Operating margin	27%	43%
Depreciation and amortisation in cost of sales	117,627	105,085	12
Depreciation and amortisation in administrative expenses	2,285	1,903	20
Exploration expenses	64,612	47,336	36
Personnel and other exploration related fixed expenses	(19,501)	(14,894)	31
Adjusted EBITDA	384,791	563,403	(32)
Adjusted EBITDA margin	47%	57%

Impact of investment in associate

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 $6.5 million in 2012 (2011: $11.7 million), a result of the Group's share of the results of Gold Resource Corporation. After exceptional items, the share of the profit/(loss) after tax of associates totalled $5.1 million.

Finance income

Finance income before exceptional items of $2.0 million was lower than that of 2011 (2011: $4.7 million) mainly due to the absence in 2012 of interest income received from McEwen Mining following the settlement of loans (2011: $1.7 million).

Finance costs

Finance costs before exceptional items decreased by 40% to $12.9 million in 2012 (2011: $21.3 million) reflecting interest costs associated with the prepayment of a shareholder loan at San Jose during 2011 ($3.4 million), total prepayment of short-term debt in Peru during 2011 ($2.1 million) and the prepayment of a Syndicated loan in 2011 ($1.3 million).

The Group has no outstanding positions on currency or commodity hedges.

Foreign exchange losses

The Group recognised a foreign exchange loss of $1.2 million (2011: $1.6 million loss) as a result of exposures in currencies other than the functional currency.

Income tax

The Group's pre-exceptional effective tax rate increased to 40.0% in 2012 (2011: 35.6%). This increase is partly due to the introduction of three new taxes in Peru in Q4 2011 - the New Mining Royalty, the Special Mining Tax and the Special Mining Assessment. Detailed information on these taxes (collectively referred to as the 'New Taxes') is provided in the Company's 2011 Preliminary Results announcement released on 20 March 2012.

In 2012, income tax included $8.1 million from the New Mining Royalty and Special Mining Tax.  Excluding these impacts, the effective tax rate was 36.2% compared to 34.3% in 2011. The increase in the tax rate mainly reflects lower profit before income tax in the operating companies (due to lower sales) and higher non-deductible expenses, mainly related to increases in the exploration budget.

Exceptional items

Exceptional items in 2012 totaled ($1.7) million after tax (2011: $3.4 million). This mainly comprises: 

Positive exceptional items:

Main items	$000	Description of main items
Other income	1,099	Relates to the provision of termination benefits due to workers as a result of the closure of the Moris mine accrued in 2011 and partially reversed in 2012.
Income tax	141	Deferred taxation

Negative exceptional items:

Main items	$000	Description of main items
Impairment and write-off on assets Share of post tax losses of associates and joint ventures accounted under equity method	(245) (1,376)	Corresponds to assets write-off in Ares and MH Mexico. Partially offset by the reversal of the write-off recorded in 2010 related to the 100% dore project at the San Jose mine. Loss resulting from dilution of holding in Gold Resource Corp.
Finance cost	(1,334)	Mainly corresponds to the impairment of Iron Creek Capital Corp, Brionor Resources and Empire Petroleum Corp of US$1,043,671, US$105,000 and US$8,000 respectively.

Cash flow & balance sheet review     

Cash flow:

$000 unless otherwise indicated	Year ended 31 Dec 2012	Year ended 31 Dec 2011	Change
Net cash generated from operating activities	254,879	464,110	(209,231)
Net cash used in investing activities	(427,869)	(139,898)	(287,971)
Cash flows generated/(used) in financing activities	(94,842)	(221,901)	127,059
Net (decrease)/increase in cash and cash equivalents during the period	(267,832)	102,311	(370,143)

Operating cashflow decreased by 44% to $254.9 million from $464.1 million in 2011, mainly due to lower silver prices and lower production. Net cash from investing activities increased to $(427.9) million in 2012 from $(139.9) million in 2011, primarily due to the acquisition of Andina Minerals Inc ($90.1 million) in 2012, the sale of Lake Shore Gold shares ($80.5 million) in 2011 and higher capex during 2012. Finally, cash used in financing activities decreased to $(94.8) million from $(221.9) million in 2011, primarily as a result of the prepayment of the syndicated loan ($114.3 million), and lower dividend payments to IMZ ($22.0 million in 2012 compared to $54.0 million in 2011), partially offset by higher dividends to McEwen Mining ($19.8 million in 2012 compared to $0.0 million in 2011). As a result, total cash generated decreased from $102.3 million in 2011 to $(267.8) million in 2012 ($(370) million difference).

Working capital

$000 unless otherwise indicated	Year ended 31 Dec 2012	Year ended 31 Dec 2011
Trade and other receivables	174,786	175,672
Inventories	76,413	53,032
Net other financial assets / (liabilities)	(6,741)	(12,803)
Net Income tax receivable / (payable)	(4,459)	(23,859)
Trade and other payables and provisions	(252,823)	(259,907)
Working Capital	(12,824)	(67,865)

The Company's working capital position increased to $(12.8) million in 2012 from $(67.9) million in 2011.  This was primarily explained by higher inventories ($23.4 million), from stockpiles at San Jose and from dore in Peru (due to timing differences), as well as lower income tax payable ($19.4 million) as a result of a lower current tax provision in 2012.

Net cash

$000 unless otherwise indicated	Year ended 31 Dec 2012	Year ended 31 Dec 2011
Cash and cash equivalents	358,944	627,481
Long term borrowings	(106,850)	(104,866)
Short term borrowings[31]	(6,973)	(46,334)
Net cash	245,121	476,281

The Group reported net cash of $245.1 million as at 31 December 2012 (2011: $476.3 million). This was primarily driven by the net decrease in cash generated in 2012 as well as the acquisition of Andina Minerals Inc, partially offset by the repayment of short-term borrowings, mainly at San Jose.

The Company's long-term borrowings are only its convertible bond that has a current conversion price of £3.90. Under its terms, the Company is entitled to force conversion of the bonds at any time after 20 October 2012 if, for a period of 20 out of 30 consecutive days, the average share price, calculated under the terms of the bonds, exceeds 130% of the conversion price (£5.07). 

Capital expenditure[32] 

$000 unless otherwise indicated	Year ended 31 Dec 2012	Year ended 31 Dec 2011
Arcata	52,791	33,040
Ares	7,476	2,673
Selene	1,152	4,570
Pallancata	55,719	50,489
San Jose	71,188	62,994
Moris	846	555
Inmaculada	96,060	19,447
Crespo	17,984	10,232
Azuca	12,476	31,641
Other	18,062	2,306
Sub-Total	333,754	217,947
Andina Minerals	86,631	-
Total	420,385	217,947

2012 capital expenditure of $420.4 million (2011: $217.9 million) includes operating capex of $182.5 million, capitalised exploration costs of $15.9 million in respect of the Group's operating mines, $134.4 million capitalised in respect of the Advanced Projects (Inmaculada, Crespo and Azuca) and administrative capex of $1.0 million. Capital expenditure in 2012 also included $86.6 million relating to the acquisition of Andina Minerals Inc.

Capital expenditure at Arcata rose by $19.8 million in 2012 due to the construction of the Dore project and the plant capacity increase.

Capital expenditure at San Jose increased by $8.2 million in 2012, reflecting local inflation in mine development costs.

Other capex increased by $15.8 million, mainly due to the acquisition of the Conenhua energy transmission line to improve the energy supply to our operations in Peru, and the construction of the energy transmission line for Inmaculada.

Dividends

The directors recommend a final dividend of $0.03 per ordinary share which, subject to shareholder approval at the 2013 AGM, will be paid on 4 June 2013 to those shareholders appearing on the register on 10 May 2013. If approved, this will result in a total dividend for the year of $0.06 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.

Dividend dates	2013
Ex-dividend date	8 May
Record date	10 May
Deadline for return of currency election forms	15 May
Payment date	4 June

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 2012

				Year ended 31 December 2012						Year ended 31 December 2011
		Notes		Before exceptional items US$000		Exceptional items US$000		Total  US$000		Before exceptional items  US$000		Exceptional items  US$000		Total  US$000
Continuing operations
Revenue		3,5		817,952		-		817,952		987,662		-		987,662
Cost of sales		6		(420,325)		-		(420,325)		(404,291)		-		(404,291)
Gross profit				397,627		-		397,627		583,371		-		583,371
Administrative expenses		7		(72,995)		-		(72,995)		(64,354)		-		(64,354)
Exploration expenses		8		(64,612)		-		(64,612)		(47,336)		-		(47,336)
Selling expenses		9		(39,460)		-		(39,460)		(38,970)		-		(38,970)
Other income		11		8,733		1,099		9,832		7,062		-		7,062
Other expenses		11		(9,525)		-		(9,525)		(15,800)		(1,408)		(17,208)
Impairment and write-off of assets (net)/(reversal)		11		-		(245)		(245)		-		1,210		1,210
Profit from continuing operations before net finance income/(cost), foreign exchange loss and income tax				219,768		854		220,622		423,973		(198)		423,775
Share of post-tax profit/(losses) of associates and joint ventures accounted under equity method		11,18		6,456		(1,376)		5,080		11,707		(261)		11,446
Finance income		11,12		1,988		-		1,988		4,689		5,989		10,678
Finance costs		11,12		(12,870)		(1,334)		(14,204)		(21,331)		(2,111)		(23,442)
Foreign exchange loss				(1,212)		-		(1,212)		(1,562)		-		(1,562)
Profit from continuing operations before income tax				214,130		(1,856)		212,274		417,476		3,419		420,895
Income tax (expense)/benefit		13		(85,549)		141		(85,408)		(148,557)		-		(148,557)
Profit for the year from continuing operations				128,581		(1,715)		126,866		268,919		3,419		272,338
Attributable to:
Equity shareholders of the Company				64,830		(1,759)		63,071		165,890		2,826		168,716
Non-controlling interests				63,751		44		63,795		103,029		593		103,622
				128,581		(1,715)		126,866		268,919		3,419		272,338
Basic earnings per ordinary share from continuing operations for the year (expressed in US dollars per share)		14		0.19		-		0.19		0.49		0.01		0.50
Diluted earnings per ordinary share from continuing operations for the year (expressed in US dollars per share)		14		0.19		-		0.19		0.49		0.01		0.50

Consolidated statement of comprehensive income

For the year ended 31 December 2012

				Year ended 31 December
		Notes		2012 US$000		2011 US$000
Profit for the year				126,866		272,338
Other comprehensive income
Exchange differences on translating foreign operations				268		(1,143)
Change in fair value of available-for-sale financial assets		19		(9,269)		(33,078)
Recycling of the loss/(gain) on available-for-sale financial assets				266		(6,836)
Recycling of the change in fair value of cash flow hedges taken to equity				-		1,930
Deferred income tax relating to components of other comprehensive income		13		615		7,164
Other comprehensive income for the period, net of tax				(8,120)		(31,963)
Total comprehensive income for the year				118,746		240,375
Total comprehensive income attributable to
Equity shareholders of the Company				54,951		136,689
Non-controlling interests				63,795		103,686
				118,746		240,375

Consolidated statement of financial position

As at 31 December 2012

		Notes		As at 31 December 2012 US$000		As at 31 December 2011  US$000
ASSETS
Non-current assets
Property, plant and equipment		15		636,555		461,554
Evaluation and exploration assets		16		396,557		274,507
Intangible assets		17		43,903		18,772
Investments accounted under equity method		18		78,188		83,201
Available-for-sale financial assets		19		30,609		40,769
Trade and other receivables		20		8,613		8,741
Deferred income tax assets				856		-
				1,195,281		887,544
Current assets
Inventories		21		76,413		53,032
Trade and other receivables		20		166,173		166,931
Income tax receivable				23,023		601
Other financial assets		22		150		28
Cash and cash equivalents		23		358,944		627,481
				624,703		848,073
Total assets				1,819,984		1,735,617
EQUITY AND LIABILITIES
Capital and reserves attributable to shareholders of the Parent
Equity share capital				158,637		158,637
Share premium				395,928		395,928
Treasury shares				(898)		(898)
Other reserves				(214,946)		(207,117)
Retained earnings				720,011		677,218
				1,058,732		1,023,768
Non-controlling interests				264,518		195,299
Total equity				1,323,250		1,219,067
Non-current liabilities
Trade and other payables		24		-		8
Borrowings		25		106,850		104,866
Provisions		26		76,550		68,430
Deferred income tax liabilities				95,715		68,152
				279,115		241,456
Current liabilities
Trade and other payables		24		149,585		117,037
Other financial liabilities		22		6,891		12,831
Borrowings		25		6,973		46,334
Provisions		26		26,688		74,432
Income tax payable				27,482		24,460
				217,619		275,094
Total liabilities				496,734		516,550
Total equity and liabilities				1,819,984		1,735,617

These financial statements were approved by the Board of Directors on 12 March 2013 and signed on its behalf by:

Ignacio Bustamante

Chief Executive Officer

12 March 2013

Consolidated statement of cash flows

For the year ended 31 December 2012

				Year ended 31 December
		Notes		2012 US$000		2011 US$000
Cash flows from operating activities
Cash generated from operations				344,119		520,262
Interest received				2,614		13,690
Interest paid				(9,987)		(29,474)
Payment of mine closure costs		26		(3,667)		(4,113)
Tax paid				(78,200)		(36,255)
Net cash generated from operating activities				254,879		464,110
Cash flows from investing activities
Purchase of property, plant and equipment				(297,537)		(140,004)
Purchase of evaluation and exploration assets				(46,903)		(73,010)
Acquisition of subsidiary		4(a)		(96,332)		(15,594)
Dividends received from associates				8,454		6,603
Purchase of available-for-sale financial assets				-		(491)
Proceeds from deferred income		24(3)		4,000		-
Proceeds from sale of available-for-sale financial assets				-		82,485
Proceeds from sale of property, plant and equipment				449		113
Net cash used in investing activities				(427,869)		(139,898)
Cash flows from financing activities
Proceeds from borrowings				53,500		117,670
Repayment of borrowings				(93,221)		(272,379)
Purchase of treasury shares				-		(898)
Dividends paid		27		(62,467)		(74,285)
Capital contribution from non-controlling interests				7,346		7,991
Cash flows used in financing activities				(94,842)		(221,901)
Net (decrease)/increase in cash and cash equivalents during the year				(267,832)		102,311
Exchange difference				(705)		(312)
Cash and cash equivalents at beginning of year				627,481		525,482
Cash and cash equivalents at end of year		23		358,944		627,481

Consolidated statement of changes in equity

For the year 31 December 2012

										Other reserves
		Notes		Equity share capital US$000		Share premium US$000		Treasury shares US$000		Unrealised gain/(loss) on available-for-sale financial assets US$000		Unrealised gain/(loss) on cash flow hedges US$000		Bond equity component US$000		Cumulative translation adjustment US$000		Merger reserve US$000		Share- based payment reserve US$000		Total Other reserves US$000		Retained earnings US$000		Capital and reserves attributable to shareholders of the Parent US$000		Non-controlling interests US$000		Total equity US$000
Balance at 1 January 2011				158,637		395,928		-		37,808		(1,930)		8,432		(9,508)		(210,046)		-		(175,244)		528,788		908,109		147,120		1,055,229
Other comprehensive income/(loss)				-		-		-		(32,750)		1,930		-		(1,207)		-		-		(32,027)		-		(32,027)		64		(31,963)
Profit for the year				-		-		-		-		-		-		-		-		-		-		168,716		168,716		103,622		272,338
Total comprehensive income for 2011				-		-		-		(32,750)		1,930		-		(1,207)		-		-		(32,027)		168,716		136,689		103,686		240,375
Capital contribution from non-controlling interest				-		-		-		-		-		-		-		-		-		-		-		-		7,991		7,991
CEO LTIP				-		-		-		-		-		-		-		-		154		154		-		154		-		154
Treasury shares				-		-		(898)		-		-		-		-		-		-		-		-		(898)		-		(898)
Dividends declared during the year		29		-		-		-		-		-		-		-		-		-		-		(20,286)		(20,286)		(63,498)		(83,784)
Balance at 31 December 2011				158,637		395,928		(898)		5,058		-		8,432		(10,715)		(210,046)		154		(207,117)		677,218		1,023,768		195,299		1,219,067
Other comprehensive (loss)/income				-		-		-		(8,388)		-		-		268		-		-		(8,120)		-		(8,120)		-		(8,120)
Profit for the year				-		-		-		-		-		-		-		-		-		-		63,071		63,071		63,795		126,866
Total comprehensive income for 2012				-		-		-		(8,388)		-		-		268		-		-		(8,120)		63,071		54,951		63,795		118,746
Capital contribution from non-controlling interest				-		-		-		-		-		-		-		-		-		-		-		-		39,568		39,568
CEO LTIP				-		-		-		-		-		-		-		-		291		291		-		291		-		291
Expiration of dividends				-		-		-		-		-		-		-		-		-		-		-		-		733		733
Dividends declared during the year		27		-		-		-		-		-		-		-		-		-		-		(20,278)		(20,278)		(34,877)		(55,155)
Balance at 31 December 2012				158,637		395,928		(898)		(3,330)		-		8,432		(10,447)		(210,046)		445		(214,946)		720,011		1,058,732		264,518		1,323,250

1 Notes to the consolidated financial statements

For the year ended 31 December 2012

The financial information for the year ended 31 December 2012 and 2011 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 2012 and 2011 have been extracted from the consolidated financial statements of Hochschild Mining plc for the year ended 31 December 2012 which have been approved by the directors on 12 March 2013 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:

·  IAS 12 "Income Taxes", applicable for annual periods beginning on or after 1 January 2012

Under IAS 12, an entity is to measure the deferred tax relating to an asset depending on whether the entity expects to recover the carrying amount of the asset through use or sale. The amendment introduces a presumption that recovery of the carrying amount will normally be through sale. The amendment is deemed to have no impact on the financial statements of the Group.

·  IFRS 7 "Financial Instruments: Disclosures - Enhanced derecognition disclosure requirements",  applicable for annual periods beginning on or after 1 July 2011

The amendment requires additional disclosure about financial assets that have been transferred but not derecognised to enable the user of the Group´s financial statements to understand the relationship with those assets that have not been derecognised and their associated liabilities. In addition, the amendment requires disclosures about the entity´s continuing involvement in derecognised assets to enable the users to evaluate the nature of, and risks associated with, such involvement. The amendment affects disclosure only and has no impact on the Group´s financial position or performance.

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 - Pallancata, which generates revenue from the sale of concentrate

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

·  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 aim 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 - includes the profit or loss generated by Empresa de Transmisión Callalli S.A.C. (a power generation company), HMX, S.A. de C.V. (a service company in Mexico), and the Selene mine, that closed in 2009 and which, as a consequence, is not considered to be a reportable segment .

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 items that could be allocated directly to the segment.

(a) Reportable segment information

		Ares US$000		Arcata US$000		Pallancata US$000		San Jose US$000		Moris US$000		Exploration¹ US$000		Other2 US$000		Adjustment and eliminations US$000		Total US$000
Year ended 31 December 2012
Revenue for external customers		57,580		175,802		257,725		310,384		15,931		-		530		-		817,952
Inter segment revenue		-		-		-		-		-		-		6,501		(6,501)		-
Total revenue		57,580		175,802		257,725		310,384		15,931		-		7,031		(6,501)		817,952
Segment profit/(loss)		8,635		82,020		132,305		127,015		7,697		(72,024)		3,565		4,342		293,555
Others3																		(81,281)
Profit from continuing operations before income tax																		212,274
Other segment information
Depreciation4		(4,073)		(23,124)		(40,327)		(53,801)		(7)		(860)		(2,969)		-		(125,161)
Amortisation		-		-		-		(1,452)		-		-		(77)		-		(1,529)
Assets
Capital expenditure		7,476		52,791		56,871		71,188		846		213,380		17,833		-		420,385
Current assets		12,569		14,374		54,078		72,605		7,459		3,239		524		-		164,848
Other non-current assets5		11,035		127,091		156,199		251,813		839		500,599		29,439		-		1,077,015
Total segment assets		23,604		141,465		210,277		324,418		8,298		503,838		29,963		-		1,241,863
Not reportable assets6		-		-		-		-		-		-		578,121		-		578,121
Total assets		23,604		141,465		210,277		324,418		8,298		503,838		608,084		-		1,819,984

1  Includes the asset acquisition of Andina Minerals Group (refer to note 4(a)).  

2  "Other" revenue primarily relates to revenues earned by HMX S.A. de C.V. for services provided to the Moris mine, and the Mexican exploration activities.

3  Comprised of administrative expenses of US$72,995,000, other income of US$9,832,000, other expenses of US$9,525,000, impairment of assets of US$245,000, share of gains of associates and joint ventures of US$5,080,000, finance income of US$1,988,000, finance expense of US$14,204,000, and foreign exchange loss of US$1,212,000.

4  Includes US$18,000 of depreciation capitalised in Minera Santa Cruz S.A.

5  Includes goodwill in respect of San Jose amounting to US$2,091,000.

6  Not reportable assets are comprised of investments accounted under the equity method of US$78,188,000, available-for-sale financial assets of US$30,609,000, other receivables of US$86,351,000, income tax receivable of US$23,023,000, deferred income tax assets of US$856,000, other financial assets of US$150,000 and cash and cash equivalents of US$358,944,000.

 

		Ares US$000		Arcata US$000		Pallancata US$000		San Jose US$000		Moris US$000		Exploration US$000		Other¹ US$000		Adjustment and eliminations US$000		Total US$000
Year ended 31 December 2011
Revenue for external customers		68,097		209,239		352,642		325,302		32,298		-		84				987,662
Inter segment revenue		-		-		-		-		-		-		7,966		(7,966)		-
Total revenue		68,097		209,239		352,642		325,302		32,298		-		8,050		(7,966)		987,662
Segment profit/(loss)		20,297		125,209		230,281		160,017		9,086		(50,048)		6,864		(4,641)		497,065
Others2																		(76,170)
Profit from continuing operations before income tax																		420,895
Other segment information
Depreciation3		(1,291)		(22,502)		(34,923)		(43,343)		(1,929)		(383)		(1,903)		-		(106,274)
Amortisation		-		-		-		(1,454)		-		-		(100)		-		(1,554)
Assets
Capital expenditure		2,673		33,040		55,059		62,994		555		61,629		1,997		-		217,947
Current assets		4,798		31,826		62,348		59,064		7,338		276		2,761		-		168,411
Other non-current assets4		10,971		94,583		141,635		231,757		-		255,473		20,414		-		754,833
Total segment assets		15,769		126,409		203,983		290,821		7,338		255,749		23,175		-		923,244
Not reportable assets5		-		-		-		-		-		-		812,373		-		812,373
Total assets		15,769		126,409		203,983		290,821		7,338		255,749		835,548		-		1,735,617

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

2  Comprised of administrative expenses of US$64,354,000, other income of US$7,062,000, other expenses of US$17,208,000, reversal of impairment of assets of US$ 1,210,000, share of gains of associates and joint ventures of US$11,446,000, finance income of US$10,678,000, finance expense of US$23,442,000, and foreign exchange loss of US$1,562,000.

3  Includes US$28,000 of depreciation capitalised in Minera Hochschild Mexico S.A. de C.V. due to the San Felipe project.

4  Includes goodwill in respect of San Jose amounting to US$2,091,000.

5  Not reportable assets are comprised of investments accounted under the equity method of US$83,201,000, available-for-sale financial assets of US$40,769,000, other receivables of US$60,293,000, income tax receivable of US$601,000, deferred income tax assets of US$Nil, other financial assets of US$28,000 and cash and cash equivalents of US$627,481,000.

(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:

		Year ended 31 December
		2012 US$000		2011 US$000
External customer
USA		118,409		153,301
Peru		63,769		82,223
Canada		104,509		148,023
Germany		75,202		185,447
Switzerland		154,200		152,612
United Kingdom		40,664		50,540
Korea		260,719		215,516
Mexico		480		-
Total		817,952		987,662
Inter-segment
Peru		1,324		667
Mexico		5,177		7,299
Total		824,453		995,628

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:

		Year ended 31 December 2012						Year ended 31 December 2011
		US$000		% Revenue		Segment		US$000		% Revenue		Segment
LS Nikko		234,066		29%		Pallancata and San Jose		176,397		18%		Pallancata and San Jose
Teck Metals Ltd. (formerly Teck Cominco Metals Ltd)		104,509		13%		Pallancata and San Jose		148,023		15%		Pallancata and San Jose
Argor Heraus		121,122		15%		San Jose		96,060		10%		San Jose
Aurubis AG (formerly Nordeutsche Affinerie AG)		75,202		9%		Pallancata and San Jose		185,447		19%		Pallancata and San Jose

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:

		As at 31 December
		2012 US$000		2011 US$000
Peru		684,471		496,395
Argentina		251,935		231,892
Mexico		27,075		26,224
Chile		113,387		146
United Kingdom		78,335		83,377
Total non-current segment assets		1,155,203		838,034
Available-for-sale financial assets		30,609		40,769
Trade and other receivables		8,613		8,741
Deferred income tax assets		856		-
Total non-current assets		1,195,281		887,544

4 Acquisitions and disposals

(a) Acquisition of assets

Minera Quellopata S.A.C.

On 12 October 2010, the Group signed a Framework Agreement with International Minerals Corporation ("IMZ"), through which the Group acquired an additional 30% interest in the Inmaculada project (totalling 60%) in exchange for: (i) the purchase of US$20,000,000 of common shares in IMZ by way of a private placement, (ii) a payment of US$15,000,000, (iii) a commitment to fund the first US$100,000,000 needed to plan, develop and construct a mining operation within the Inmaculada property, and (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 transferred to Minera Quellopata S.A.C. ("Quellopata"), together with the Puquiopata project. The Group is the operator of the new venture pursuant to a separate management agreement similar in form and substance to the Pallancata management agreement.

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

As a result of the acquisition, the Group obtained control over Quellopata and consolidated it as a subsidiary. The net assets received in the asset acquisition were US$91,782,000 and the IMZ interest generated by the transaction was US$36,940,000. At 31 December 2010, the Group recognised a contingent consideration of US$39,243,000 and an obligation to IMZ of US$15,594,000.

During 2011 the Group paid to IMZ its obligation of US$15,594,000.

Andina Minerals Inc

On 8 November 2012, the Group made a C$0.80 per share all-cash offer for all of the issued and outstanding common shares of Andina Minerals Inc ("Andina"), a TSX-V listed gold exploration company with projects in Chile, for a total consideration of C$103,416,870. The Board of Directors of Andina unanimously recommended that their shareholders vote in favour of the transaction.

Andina's major asset, the 100% owned Volcan project, includes the Dorado area.  Andina also has a 49% share in the Group's Encrucijada project, and this acquisition would bring the Group´s interest to 100%.  

Andina is based in Alberta, Canada and is 100% owner of Quitovac Mining Company Limited and Andina Holdings Inc
both based in Canada. Andina Holdings Inc owns 99.99% of Andina Minerals Chile Limitada, based in Santiago, Chile. The Chilean company owns two properties: Encrucijada and Volcan and 50% of Sociedad Contractual Minera Pampa Buenos Aires.

At 31 December 2012, the Group had paid US$90,156,869, for 112,124,252 common shares of Andina, reaching 81.4% interest on a fully diluted basis (basic 86.7%). As a result of the acquisition the Group incurred directly attributable transaction costs of US$11,441,742. The Group recognised a liability of US$13,787,427 in respect of the Group´s commitment to acquire 17,146,835 remaining shares as at 31 December 2012.

The fair value total cost of assets acquired and liabilities assumed comprise the following:

		US$000
Cash and cash equivalents		3,190
Trade and other receivables		543
Evaluation and exploration assets		86,301
Property, plant and equipment		330
Water permits		26,583
Total assets		116,947
Accounts payable and other liabilities		1,559
Total liabilities		1,559
Net assets acquired		115,388
Cash consideration		90,157
Liability to acquire non-controlling interests		13,788
Transaction costs		11,443
Total		115,388
Cash paid to acquire controlling interest		90,157
Transaction cost paid		9,365
Less cash acquired		(3,190)
Net cash flow on acquisition		96,332

Based on the Group´s ownership interest as at 31 December 2012, the Group was deemed to have control over Andina and has therefore consolidated it as a subsidiary undertaking. The transaction has been recognised as an asset acquisition. The fair value of the net assets received was US$115,388,000.

The balance of US$13,787,427 was paid between January (US$4,268,605) and February 2013 (US$9,518,822). The Group completed the total acquisition on 20 February 2013. The total consideration was settled in cash.

(b) Disposal of shares

Lake Shore Gold Corp.

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 of 109,000,000 common shares held in Lake Shore Gold (approximately 27.3%) 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 held an interest of approximately 5.4%, no longer had the right to Board representation and no longer exercised significant influence over Lake Shore Gold. On 2 December 2010 the Group entered into a Block Trade Letter Agreement ("the Agreement") with RBC Capital Markets to dispose of the Group's remaining 21,540,992 common shares in Lake Shore Gold at a price of CAD$3.70 per share raising total net proceeds of CAD$79,701,670. Due to the size of the combined sales (the initial disposal of 27.3% of Lake Shore Gold in November 2010 and the subsequent disposal of the remaining 5.4%), the second transaction was subject to shareholder approval which was granted on 8 February 2011. The transaction closed on the same date and a gain of US$6,385,878 was recognised in 2011 in respect of the disposal.

5 Revenue

		Year ended 31 December
		2012 US$000		2011 US$000
Gold (from dore bars)		124,581		144,812
Silver (from dore bars)		153,509		155,122
Gold (from concentrate)		135,055		134,438
Silver (from concentrate)		404,277		553,206
Services		530		84
Total		817,952		987,662

Included within revenue is a loss of US$4,015,265 relating to provisional pricing adjustments representing the change in the fair value of embedded derivatives (2011: gain of US$12,395,086) arising on sales of concentrates and dore (refer to note 2(r) of the Annual Report and footnote 1 of note 22).

6 Cost of sales

Included in cost of sales are:

		Year ended 31 December
		2012 US$000		2011 US$000
Depreciation and amortisation		124,387		105,897
Personnel expenses (note 10)		121,775		109,011
Mining royalty (note 29)		9,672		17,950
Change in products in process and finished goods		(17,708)		6,893

7 Administrative expenses

		Year ended 31 December
		2012 US$000		2011 US$000
Personnel expenses		40,006		32,376
Professional fees		6,180		6,256
Social and community welfare expenses1		6,459		7,717
Lease rentals		1,510		1,088
Travel expenses		2,443		1,878
Communications		990		823
Indirect taxes		3,723		3,147
Depreciation and amortisation		2,285		1,903
Technology and systems		828		565
Security		991		457
Supplies		238		453
Other		7,342		7,691
Total		72,995		64,354

1    Represents amounts expended by the Group on social and community welfare activities surrounding its mining units.

8 Exploration expenses

		Year ended 31 December
		2012 US$000		2011 US$000
Mine site exploration1
Arcata		4,467		4,512
Ares		1,507		2
Sipan		1,415		-
Pallancata		4,062		2,917
San Jose		5,788		1,612
Moris		313		-
		17,552		9,043
Prospects2
Peru		4,795		2,952
Argentina		1,028		3,534
Mexico		6,605		2,419
Chile		9,580		6,558
		22,008		15,463
Generative3
Peru		4,798		7,093
Argentina		141		117
Mexico		497		562
Chile		115		164
		5,551		7,936
Personnel		13,865		10,882
Others		5,636		4,012
Total		64,612		47,336

1  Mine-site exploration is performed with the purpose of identifying potential minerals within an existing mine-site, with the goal of maintaining or extending the mine's life.

2  Prospects expenditure relates to detailed geological evaluations in order to determine zones which have mineralisation potential that is economically viable for exploration. Exploration expenses are generally incurred in the following areas: mapping, sampling, geophysics, identification of local targets and reconnaissance drilling.

3  Generative expenditure is very early stage exploration expenditure related to the basic evaluation of the region to identify prospects areas that have the geological conditions necessary to contain mineral deposits. Related activities include regional and field reconnaissance, satellite images, compilation of public information and identification of exploration targets.

The following table lists the liabilities (generally payables) outstanding at the year-end, which relate to the exploration activities of Group companies engaged only in exploration. Liabilities related to exploration activities incurred by Group operating companies are not included since it is not possible to separate the liabilities related to the exploration activities of these companies from their operating liabilities.

		As at 31 December
		2012 US$000		2011 US$000
Liabilities related to exploration activities		2,082		1,808

Cash flows of exploration activities are as follows:

		As at 31 December
		2012 US$000		2011 US$000
Payments		27,285		22,708

9 Selling expenses

		Year ended 31 December
		2012 US$000		2011 US$000
Transportation of dore, concentrate and maritime freight		5,745		5,215
Sales commissions		2,264		3,300
Personnel expenses		374		340
Warehouse services		3,918		2,526
Taxes		23,323		24,625
Other		3,836		2,964
Total		39,460		38,970

10 Personnel expenses¹

		Year ended 31 December
		2012 US$000		2011 US$000
Salaries and wages		129,208		90,061
Workers' profit sharing		18,487		31,444
Other legal contributions		21,084		17,780
Statutory holiday payments		7,600		6,202
Long Term Incentive Plan		7,891		2,574
Termination benefits		975		2,232
Other		13,079		12,170
Total		198,324		162,463

1  Personnel expenses are distributed in cost of sales, administrative expenses, exploration expenses, selling expenses and capitalised as property plant and equipment amounting to US$121,775,000 (2011: US$109,011,000), US$40,006,000 (2011: US$32,376,000), US$13,865,000 (2011: US$10,882,000), US$374,000 (2011: US$340,000) and US$22,304,000 (2011: US$9,854,000) respectively.

Average number of employees for 2012 and 2011 were as follows:

		As at 31 December
		2012		2011
Peru		3,011		2,402
Argentina		1,226		1,188
Mexico		135		148
Chile		40		28
United Kingdom		12		11
Total		4,424		3,777

11 Pre-tax exceptional items

		Year ended 31 December 2012 US$000		Year ended 31 December 2011 US$000
Other income
Termination benefits1		1,099		-
Total		1,099		-
Other expenses
Termination benefits1		-		(1,408)
Total		-		(1,408)
Impairment and write-off of assets (net)
Impairment and write-off of assets		(484)		-
Reversal of write-off of assets2		239		1,210
Total		(245)		1,210
Share of post-tax losses of associates and joint ventures accounted under equity method3		(1,376)		(261)
Total		(1,376)		(261)
Finance income
Gain on sale and exchange of available-for-sale financial assets4		-		5,989
Total		-		5,989
Finance costs
Loss from changes in the fair value of financial instruments5		(1,334)		(2,111)
Total		(1,334)		(2,111)

1  Relates to the provision of termination benefits due to workers as a result of the closure of Moris mine accrued in 2011 and reversed in 2012. As at 31 December 2012 the restructuring plan agreed at 31 December 2011 was not in effect, as Moris is still in operation.

2  Corresponds to the reversal of the write-off recorded in 2010 related to the 100% dore project at the San Jose mine.

3  Corresponds to the loss from dilution related to Gold Resource Corp. investment (note 18).

4  The 2011 amount corresponds to the gain on sale of the remaining Lake Shore Gold shares held of US$6,386,000, net of the loss generated by the sale of Golden Minerals Company shares of US$397,000.

5  Mainly corresponds to the impairment of Iron Creek Capital Corp, Brionor Resources and Empire Petroleum Corp of US$1,043,671, US$105,000 and US$8,000 respectively. In 2011, mainly corresponds to the fair value adjustment of the Golden Minerals Company and Iron Creek Capital Corp warrants of US$1,563,000 and US$139,000 respectively. In addition the amount includes the impairment of Brionor Resources and Empire Petroleum Corp of US$380,000 and US$50,000 respectively.

12 Finance income and finance costs before exceptional items

		Year ended 31 December 2012 Before exceptional items US$000		Year ended 31 December 2011 Before exceptional items US$000
Finance income
Interest on deposits and liquidity funds		1,429		2,225
Interest on loans to non-controlling interests (note 20)		123		2,352
Interest income		1,552		4,577
Other		436		112
Total		1,988		4,689
Finance costs
Interest on secured bank loans and long-term debt (note 25)		(1,924)		(6,517)
Interest on convertible bond (note 25)		(8,956)		(8,760)
Interest expense		(10,880)		(15,277)
Unwind of discount rate		(731)		(1,684)
Loss from changes in the fair value of financial instruments		-		(1,810)
Other		(1,259)		(2,560)
Total		(12,870)		(21,331)

13 Income tax expense

		Year ended 31 December 2012						Year ended 31 December 2011
		Before exceptional items US$000		Exceptional items US$000		Total US$000		Before exceptional items US$000		Exceptional items US$000		Total US$000
Current corporate income tax from continuing operations
Current corporate income tax charge		48,285		-		48,285		86,154		-		86,154
Current mining royalty charge (note 29)		3,834		-		3,834		2,536		-		2,536
Current special mining tax charge (note 29)		4,256		-		4,256		3,002		-		3,002
Withholding taxes		1,571		-		1,571		4,963		-		4,963
		57,946		-		57,946		96,655		-		96,655
Deferred taxation
Origination and reversal of temporary differences from continuing operations		28,627		(141)		28,486		54,277		-		54,277
Recognition of deferred tax not previously recognised following a change in estimate/outlook		(1,024)		-		(1,024)		(2,375)		-		(2,375)
		27,603		(141)		27,462		51,902		-		51,902
Total taxation charge in the income statement		85,549		(141)		85,408		148,557		-		148,557

The weighted average statutory income tax rate was 32.4% for 2012 and 31.8% for 2011. This is calculated as the average of the statutory tax rates applicable in the countries in which the Group operates, weighted by the profit/(loss) before tax of the Group companies in their respective countries as included in the consolidated financial statements.

The change in the weighted average statutory income tax rate is due to a change in the weighting of profit/(loss) before tax in the various jurisdictions in which the Group operates.

The tax related to items charged or credited to equity is as follows:

		As at 31 December
		2012 US$000		2011 US$000
Deferred taxation:
Deferred income tax relating to fair value gains on available-for-sale financial assets		(615)		(7,164)
Total tax charge in the statement of other comprehensive income		(615)		(7,164)

The total taxation charge on the Group's profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to the consolidated profits of the Group companies as follows:

		As at 31 December
		2012 US$000		2011 US$000
Profit from continuing operations before income tax		212,274		420,895
At average statutory income tax rate of 32.4% (2011: 31.8%)		68,814		133,881
Expenses not deductible for tax purposes		4,163		2,742
Non-taxable income1		(275)		(3,096)
Utilisation of losses in respect of deferred tax not previously recognised2		(1,024)		(2,375)
Non-taxable share of gains of associates		(1,181)		(3,033)
Net deferred tax assets generated in the year not recognised		6,795		8,636
Deferred tax recognised on special investment regime		(2,481)		(2,092)
Derecognition of deferred income tax assets		615		5,981
Adjustment of tax base of Minera Quellopata S.A.C.		-		(2,692)
Withholding tax		1,571		4,963
Special mining tax and mining royalty3		8,090		5,538
Foreign exchange rate effect4		(1,303)		4,532
Other		1,624		(4,428)
At average effective income tax rate of 40.2% (2011: 35.3%)		85,408		148,557
Taxation charge attributable to continuing operations		85,408		148,557
Total taxation charge in the income statement		85,408		148,557

1  Mainly corresponds to the reversal of accrued non deductible personnel expenses recorded in 2011 (2011: Mainly corresponds to the non-taxable gain on the sale of Lake Shore Gold shares of US$1,692,000).

2  The amount for 2012 mainly corresponds to the utilisation of losses in Minas Santa Maria de Moris (2011: mainly corresponds to the recognition of a previously unrecognised mine closure provision of US$8,278,000).

3  Corresponds to the impact of the new mining royalty and special mining tax (note 35).

4  Mainly corresponds to the foreign exchange effect from converting tax bases and monetary items from local currency to the functional currency.

14 Basic and diluted earnings per share

Earnings per share ("EPS") is calculated by dividing profit for the year attributable to equity shareholders of the Company by the weighted average number of ordinary shares issued during the year.

The Company has dilutive potential ordinary shares.

As at 31 December 2012 and 2011, EPS has been calculated as follows:

		As at 31 December
		2012		2011
Basic and earnings per share from continuing operations
Before exceptional items (US$)		0.19		0.49
Exceptional items (US$)		-		0.01
Total for the year and from continuing operations (US$)		0.19		0.50
Diluted earnings per share from continuing operations
Before exceptional items (US$)		0.19		0.49
Exceptional items (US$)		-		0.01
Total for the year and from continuing operations (US$)		0.19		0.50

Net profit from continuing operations before exceptional items and attributable to equity holders of the parent is derived
as follows:

		As at 31 December
		2012		2011
Profit for the year from continuing operations (US$000)		126,866		272,338
Less non-controlling interests (US$000)		(63,795)		(103,622)
Profit attributable to equity holders of the parent - continuing operations (US$000)		63,071		168,716
Exceptional items after tax - attributable to equity holders of the parent (US$000)		1,759		(2,826)
Profit from continuing operations before exceptional items attributable to equity holders of the parent (US$000)		64,830		165,890
Interest on convertible bond (US$000)1		-		8,760
Diluted profit from continuing operations before exceptional items attributable to equity holders of the parent (US$000)		64,830		174,650

The following reflects the share data used in the basic and diluted earnings per share computations:

		As at 31 December
		2012		2011
Basic weighted average number of ordinary shares in issue (thousands)		338,022		338,022
Dilutive potential ordinary shares related to convertible bond (thousands)1		-		18,161
Diluted weighted average number of ordinary shares in issue and dilutive potential ordinary shares (thousands)		338,022		356,183

1 The potential ordinary shares related to the convertible bond have not been included in the calculation of diluted EPS for 2012 as they have an anti dilutive effect.

15 Property, plant and equipment

		Mining properties and development costs  US$000		Land and buildings US$000		Plant and Equipment US$0001		Vehicles US$000		Mine  closure  asset US$000		Construction in progress and capital advances US$000		Total US$000
Year ended 31 December 2012
Cost
At 1 January 2012		382,556		143,764		264,948		4,614		63,185		70,836		929,903
Additions		148,148		4,337		34,469		98				103,319		290,371
Change in discount rate		-		-		-		-		688		-		688
Disposals		-		(62)		(5,135)		(314)		-		-		(5,511)
Write-offs		-		-		(1,289)		(31)		-		-		(1,320)
Change in mine closure estimate		-		-		-		-		3,483		-		3,483
Transfers and other movements		455		31,901		20,429		991		-		(54,774)		(998)
Transfers from evaluation and exploration assets		9,165		-		-		-		-		-		9,165
Foreign exchange		-		-		35		2		-		-		37
At 31 December 2012		540,324		179,940		313,457		5,360		67,356		119,381		1,225,818
Accumulated depreciation and impairment
At 1 January 2012		233,103		70,750		118,832		2,091		42,637		936		468,349
Depreciation for the year		73,340		16,975		31,974		701		2,171		-		125,161
Write-offs		-		-		(811)		(18)		-		-		(829)
Disposals		-		(46)		(3,190)		(200)		-		-		(3,436)
Foreign exchange		-		-		18		-		-		-		18
At 31 December 2012		306,443		87,679		146,823		2,574		44,808		936		589,263
Net book amount at 31 December 2012		233,881		92,261		166,634		2,786		22,548		118,445		636,555

1  The carrying value of plant and equipment held under finance leases at 31 December 2012 was US$991,230 (2011: US$5,741,000 ). Additions during
the year included US$Nil (2011: US$900,000) of plant and equipment under finance leases. Leased assets are pledged as security for the related finance lease.

    There were no borrowing costs capitalised in property, plant and equipment as no significant qualifying assets were constructed during 2012 and 2011.

		Mining properties and development costs  US$000		Land and buildings US$000		Plant and Equipment US$0001		Vehicles US$000		Mine closure  asset US$000		Construction in progress and capital advances US$000		Total US$000
Year ended 31 December 2011
Cost
At 1 January 2011		299,871		120,948		234,888		3,606		56,093		61,925		777,331
Additions		79,284		5,806		16,345		9		782		43,654		145,880
Change in discount rate		-		-		-		-		2,884		-		2,884
Disposals		-		-		(1,867)		(155)		-		-		(2,022)
Write-offs		(6,379)		-		(321)		(21)		-		-		(6,721)
Change in mine closure estimate		-		-		-		-		3,318		-		3,318
Transfers and other movements		509		17,040		16,028		1,192		-		(34,769)		-
Transfers from evaluation and exploration assets		9,269		-		-		-		-		-		9,269
Foreign exchange		2		(30)		(125)		(17)		108		26		(36)
At 31 December 2011		382,556		143,764		264,948		4,614		63,185		70,836		929,903
Accumulated depreciation and impairment
At 1 January 2011		179,672		52,987		94,332		1,562		40,766		1,098		370,417
Depreciation for the year		59,830		17,763		26,329		664		1,871		(183)		106,274
Write-offs		(6,379)		-		(261)		(15)		-		-		(6,655)
Disposals		-		-		(1,500)		(104)		-		-		(1,604)
Transfers to evaluation and exploration assets		(22)		-		-		-		-		-		(22)
Foreign exchange		2		-		(68)		(16)		-		21		(61)
At 31 December 2011		233,103		70,750		118,832		2,091		42,637		936		468,349
Net book amount at 31 December 2011		149,453		73,014		146,116		2,523		20,548		69,900		461,554

16 Evaluation and exploration assets

		Azuca US$000		Crespo US$000		Inmaculada US$000		San Felipe US$000		Dorado US$000		Others US$000		Total US$000
Cost
Balance at 1 January 2011		28,339		55,771		91,507		56,824		-		21,664		254,105
Additions		30,014		9,927		16,920		39		-		15,949		72,849
Foreign exchange		-		(280)		62		(913)		-		-		(1,131)
Transfers to property, plant and equipment		-		-		188		-		-		(9,457)		(9,269)
Balance at 31 December 2011		58,353		65,418		108,677		55,950		-		28,156		316,554
Additions		12,326		1,777		8,085		-		86,301		21,525		130,014
Foreign exchange		-		276		-		-		-		-		276
Transfers from/(to) property plant and equipment		125		144		-		-		-		(8,509)		(8,240)
Balance at 31 December 2012		70,804		67,615		116,762		55,950		86,301		41,172		438,604
Accumulated impairment
Balance at 1 January 2011		-		9,904		-		30,950		-		1,171		42,025
Transfers from property, plant and equipment		22		-		-		-		-		-		22
Balance at 31 December 2011		22		9,904		-		30,950		-		1,171		42,047
Balance at 31 December 2012		22		9,904		-		30,950		-		1,171		42,047
Net book value as at 31 December 2011		58,331		55,514		108,677		25,000		-		26,985		274,507
Net book value as at 31 December 2012		70,782		57,711		116,762		25,000		86,301		40,001		396,557

There were no borrowing costs capitalised in evaluation and exploration assets.

17 Intangible assets

		Goodwill US$000		Transmission line1 US$000		Water permits2 US$000		Software licences US$000		Total US$000
Cost
Balance at 1 January 2011		2,091		22,157		-		1,100		25,348
Additions		-		-		-		161		161
Foreign exchange difference		-		-		-		(1)		(1)
Balance at 31 December 2011		2,091		22,157		-		1,260		25,508
Additions		-		-		26,583		5		26,588
Transfer		-		-		-		72		72
Balance at 31 December 2012		2,091		22,157		26,583		1,337		52,168
Accumulated amortisation
Balance at 1 January 2011		-		4,232		-		950		5,182
Amortisation for the year3		-		1,454		-		100		1,554
Balance at 31 December 2011		-		5,686		-		1,050		6,736
Amortisation for the year3		-		1,452		-		77		1,529
Balance at 31 December 2012		-		7,138		-		1,127		8,265
Net book value as at 31 December 2011		2,091		16,471		-		210		18,772
Net book value as at 31 December 2012		2,091		15,019		26,583		210		43,903

1  The transmission line is amortised using the units of production method. At 31 December 2012, the remaining amortisation period is 12 years.

2  Corresponds to the acquisition of water permits of Andina Minerals Group (refer to note 4(a)).

3  The amortisation for the period is included in cost of sales and administrative expenses in the income statement.

The carrying amount of goodwill is reviewed annually to determine whether it is in excess of its recoverable amount. The value-in-use is determined at the cash-generating unit level, in this case being the San Jose mine, by discounting the expected cash flows estimated by management over the life of the mine.

The calculation of value-in-use is most sensitive to the following assumptions:

·  Commodity prices - Commodity prices of gold and silver are based on prices considered in the Group's 2013 budget (2011: 2012 budget) and external market consensus forecasts. The prices considered in the 2012 (2011) impairment tests were:

Year		2012		2013		2014		2015		2016		2017		2018		2019-2023
2012 - Gold - US$/oz				1823.0		1723.0		1550.0		1411.0		1411.0		1411.0		1411.0
2012 - Silver - US$/oz				35.0		31.0		29.0		26.0		26.0		26.0		26.0
2011 - Gold - US$/oz		1,825.0		1,750.0		1,500.0		1,400.0		1,324.6		1,323.1		1,300.0		1,300.0
2011 - Silver - US$/oz		40.0		35.0		29.6		30.0		25.5		25.4		25.0		25.0

·  Estimation of reserves and resources - Reserves and resources are based on management's estimates using appropriate exploration and evaluation techniques;

·  Production volumes and grades - Tonnage produced was estimated at plant capacity with 12 days of maintenance per year (2011: 12 days);

·  Capital expenditure - The cash flows for each mining unit include capital expenditures to maintain the mine and to convert resources to reserves;

·  Operating costs - Costs are based on historical information from previous years and current mining conditions;

·  Discount rates - The cash flows are discounted at real pre-tax rates that reflect the current market assessments of the time value of money and the risks specific to the cash-generating unit. These rates are based on the weighted average cost of capital specific to each cash-generating unit. The pre-tax discount rate used in the 2012 impairment test was 25.59% (2011: 24.18%).

Management believes that the following changes to the main assumptions would cause the carrying value of the cash‑generating unit (including the goodwill) to equal its recoverable amount. Therefore, any higher deviation would
cause the carrying value of goodwill to exceed its recoverable amount and an impairment provision would be required.

Assumption		2012 Variation		2011 Variation
Gold price		(19.3)%		(37.1)%
Silver price		(15.5)%		(27.1)%
Reserves and resources		(109.6)%		(67.9)%
Costs		17.7%		35.3%
Discount rates		99.4%		292.3%

Headroom for the 2012 and 2011 impairment tests were US$92,349,000 and US$193,591,000 respectively.

Cash flows used for impairment tests were based on the annual 2013 budget presented and approved by the Board, subject to a number of conditions, in November 2012. The starting point in all cases was January 2013. Individual cash flows are based on the annual 2013 budget and an estimated set of reserves and resources as of December 2012 provided by the Exploration and Operations teams. In addition, in respect of subsequent years, the Group makes the necessary conservative adjustments to accurately reflect the nature of each operation. In the case of revenue, production figures were estimated assuming reserve grade (after extracted tonnage) and full capacity. In the case of operating expenses, all figures are based on the 2013 budget. Future capital expenditure is based on the 2013 budget, excluding one-off expenses and considering the Operations team's view on developments and infrastructure, according to the estimated set of reserves and resources.

18 Investments accounted under equity method

Gold Resource Corp.

The Group has a 24.8% interest on a fully diluted basis in Gold Resource Corp., which is involved in the exploration for and production of gold and silver in Mexico. The company was organised under the laws of the State of Colorado, USA, where the principal executive offices are located. The operations are conducted through two wholly-owned subsidiaries, located in Mexico, Don David Gold S.A. de C.V. and Golden Trump Resources S.A. de C.V.

Based on publically available information, at 31 December 2012, the capital and reserves were US$112,254,000 (31.12.2011: US$132,582,000), and US$2,035,000 (31.12.2011: US$3,978,000) (loss on currency translation) respectively.

The profit for the period was US$26,056,000 (2011: US$46,464,000).

The following table summarises the financial information of the Group's investment in Gold Resource Corp:

		Year ended 31 December
		2012 US$000		2011 US$000
Share of the associate's statement of financial position:
Current assets		17,872		20,258
Non-current assets		51,002		57,919
Current liabilities		(3,742)		(7,605)
Non-current liabilities		(11,300)		(11,727)
Net assets		53,832		58,845
Goodwill on acquisition		24,356		24,356
Share of the associate's revenue, profit and loss:
Revenue		33,737		26,496
Profit1		5,080		11,446
Carrying amount of the investment		78,188		83,201

1  Share of the associate's profit in 2012 includes (1) a pre-exceptional gain from the Group's share in the results of the period of Gold Resource Corp. of US$6,456,000 (2011: US$11,707,000) and (2) an exceptional loss from dilution of US$1,376,000 (2011: US$261,000).

19 Available-for-sale financial assets

		Year ended 31 December
		2012 US$000		2011 US$000
Beginning balance		40,769		153,620
Additions1		-		2,910
Impairment		(891)		(198)
Fair value change recorded in equity		(9,269)		(33,078)
Disposals2		-		(82,485)
Ending balance		30,609		40,769

1  The 2011 amount represents the fair value of shares at the date of acquisition and mainly includes: (i) the conversion of Golden Minerals Company warrants into shares of U$2,419,000, (ii) the conversion of Iron Creek Capital Corp warrants into shares of US$83,000 and the purchase of shares of Iron Creek Capital Corp. for US$408,000.

2  Sale of: (i) 21,540,992 shares of Lake Shore Gold Corp, and (ii) 104,889 shares of Golden Minerals Company.

Available-for-sale financial assets include the following:

		Year ended 31 December
		2012 US$000		2011 US$000
Equity securities - quoted Canadian companies1		17,800		27,175
Equity securities - quoted US companies		23		31
Equity securities - quoted British companies		777		1,722
Equity securities - unquoted2		12,009		11,841
Total		30,609		40,769

1  Mainly includes International Minerals Corporation  shares of US$15,169,000 (2011: US$21,414,000).

2  Includes Pembrook Mining Corp and ECI Exploration and Mining Inc. shares.

During the period there were no reclassifications between quoted and unquoted investments.

The fair value of the listed shares is determined by reference to published price quotations in an active market.

The investments in unlisted shares (Pembrook Mining Corp. and ECI Exploration and Mining Inc.) were recognised at
cost given that there is not an active market for these investments. The investment in ECI Exploration and Mining Inc. is fully impaired.

Available-for-sale financial assets are denominated in the following currencies:

		2012 US$000		2011 US$000
Canadian dollars		29,809		39,016
US dollars		23		31
Pound sterling		777		1,722
Total		30,609		40,769

20 Trade and other receivables

		As at 31 December
		2012				2011
		Non-current US$000		Current US$000		Non-current US$000		Current US$000
Trade receivables		-		88,435		-		115,379
Advances to suppliers		-		17,916		-		13,008
Credit due from exports of Minera Santa Cruz		5,609		2,578		5,413		964
Due from non-controlling interests1		-		2,224		-		1,025
Receivables from related parties (note 28)		-		1,017		-		932
Loans to employees		2,276		1,608		2,051		1,350
Interest receivable		-		85		-		711
Receivable from Kaupthing, Singer and Friedlander Bank		-		361		-		515
Other		102		6,575		23		1,986
Provision for impairment2		-		(3,819)		-		(2,406)
Financial assets classified as receivables		7,987		116,980		7,487		133,464
Prepaid expenses		626		10,237		526		6,305
Value Added Tax (VAT)3		-		38,956		728		27,162
Total		8,613		166,173		8,741		166,931

The fair values of trade and other receivables approximate their book value.

1  Corresponds to an amount receivable from Iron Creek Capital Corp. (2011: loan to International Minerals Corporation).

2 Includes the provision for impairment of trade receivable from a customer in Peru of US$1,108,000 (2011: US$1,108,000), the impairment of deposits in Kaupthing, Singer and Friedlander of US$361,000 (2011: US$515,000) and other receivables of US$2,350,000 (2011: US$783,000).

3  This includes an amount of US$18,736,000 (2011: US$16,315,000) VAT paid related to the San Jose project that will be recovered through future sales of gold and silver by Minera Santa Cruz S.A. It also includes the VAT of Minera Suyamarca of US$6,388,000 (2011: US$3,040,000), Compañía Minera Ares S.A.C. of US$8,574,000 (2011: US$6,503,000) and Minas Santa María de Moris of US$2,445,000 (2011: US$1,256,000). The VAT is valued at its recoverable amount.

Movements in the provision for impairment of receivables:

		Individually impaired US$000		Total US$000
At 1 January 2011		2,533		2,533
Provided for during the year		76		76
Released during the year		(203)		(203)
At 31 December 2011		2,406		2,406
Provided for during the year		1,567		1,567
Released during the year		(154)		(154)
At 31 December 2012		3,819		3,819

at 31 December, the ageing analysis of financial assets classified as receivables net of impairment is as follows:

						Past due but not impaired
Year		Total US$000		Neither past due nor impaired US$000		Less than 30 days US$000		30 to 60 days US$000		61 to 90 days US$000		91 to 120 days US$000		Over 120 days US$000
2012		124,967		124,967		-		-		-		-		-
2011		140,951		140,951		-		-		-		-		-

21 Inventories

		As at 31 December 2012 US$000		As at 31 December 2011 US$000
Finished goods		4,874		1,791
Products in process		28,162		13,537
Raw materials		1		5
Supplies and spare parts		49,021		40,240
		82,058		55,573
Provision for obsolescence of supplies		(5,645)		(2,541)
Total		76,413		53,032

Finished goods include ounces of gold and silver, dore and concentrate. Dore is an alloy containing a variable mixture of silver, gold and minor impurities delivered in bar form to refiners and is considered a product in process. The refined products are then sold to the customers and/or refiners. Concentrate is a product containing sulphides with a variable content of base and precious metals and is sold to smelters.

The amount of dore on hand at 31 December 2012 included in products in process is US$9,370,000 (2011: US$1,379,000).

As part of the Group's short-term financing policies, it acquires pre-shipment loans which are guaranteed by the sales contracts.

The amount of expense recognised in profit and loss related to the consumption of inventory of supplies, spare parts and raw materials is US$85,651,000 (2011: US$72,105,000).

Movements in the provision for obsolescence comprise the amount of the expense related to the increase of the provision of US$3,608,000 and the reversal of US$504,000 relating to the sale of supplies and spare parts, that had been provided for (2011: US$695,000).

The amount of income relating to the reversal of the inventory provision is US$nil (2011: US$21,000).

22 Other financial assets and liabilities

		As at 31 December
		2012 US$000		2011 US$000
Other financial assets
Warrants in Iron Creek Capital Corp.		1		28
Bonds		149		-
Total financial assets at fair value through profit or loss		150		28
Other financial liabilities
Embedded derivatives1		6,891		12,831
Total financial liabilities at fair value through profit or loss		6,891		12,831

1  Sales of concentrate and certain gold and silver volumes are provisionally priced at the time the sale is recorded. The price is then adjusted after an agreed period of time (usually linked to the length of time it takes for the smelter to refine and sell the concentrate or for the refiner to process the dore into gold and silver), with the Group either paying or receiving the difference between the provisional price and the final price. This price exposure is considered to be an embedded derivative in accordance with IAS 39 "Financial Instruments: Recognition and Measurement". The gain or loss that arises on the fair value of the embedded derivative is recorded in "Revenue" (refer to note 5).

23 Cash and cash equivalents

		As at 31 December
		2012 US$000		2011 US$000
Cash at bank		322		349
Liquidity funds1		72,803		370,021
Current demand deposit accounts2		61,654		45,030
Time deposits3		224,165		212,081
Cash and cash equivalents considered for the statement of cash flows4		358,944		627,481

The fair value of cash and cash equivalents approximates their book value. The Group does not have undrawn borrowing facilities available in the future for operating activities or capital commitments.

1  The liquidity funds are mainly invested in certificates of deposit, commercial papers and floating rate notes with a weighted average maturity of 5 days as at 31 December 2012 (2011: average of 18 days). In addition, liquidity funds include US Treasury bonds amounting to US$49,967,000 (2011: US$199,924,000).

2  Relates to bank accounts which are freely available and bear interest.

3  These deposits have an average maturity of 36 days (2011: Average of 32 days).

4  Funds deposited in Argentinean institutions are effectively restricted for transfer to other countries, and they are invested locally. Included within cash and cash equivalents at 31 December 2012 is US$25,452,000 (2011: US$nil), which is not readily available for use in subsidiaries outside of Argentina.  

24 Trade and other payables

						As at 31 December
		2012				2011
		Non- current US$000		Current US$000		Non- current US$000		Current US$000
Trade payables1		-		76,012		-		57,720
Salaries and wages payable2		-		31,935		-		24,748
Dividends payable		-		2,242		-		9,797
Taxes and contributions		-		9,077		-		6,302
Accrued expenses		-		383		8		7,004
Guarantee deposits		-		6,325		-		4,197
Mining royalty (note 35)		-		1,630		-		1,205
Deferred income3		-		4,000		-		-
Amount payable to non-controlling interest4		-		13,787		-		-
Accounts payable to related parties (note 30)		-		-		-		32
Other		-		4,194		-		6,032
Total		-		149,585		8		117,037

The fair value of trade and other payables approximate their book values.

1  Trade payables relate mainly to the acquisition of materials, supplies and contractors' services. These payables do not accrue interest and no guarantees have been granted.

2  Salaries and wages payable were as follows:

		2012 US$000		2011 US$000
Remuneration payable		26,404		21,039
Board members' remuneration		581		652
Executive Long Term Incentive Plan		4,950		3,057
Total		31,935		24,748

3    The deferred income represents an advance receipt in respect of an option granted to a third party to acquire the Group´s San Felipe project in Mexico.

4    Amount payable to complete the purchase of Andina Minerals Inc non-controlling shareholders' interests (note 4(a)).

25 Borrowings

		As at 31 December
		2012						2011
		Effective interest rate		Non- current US$000		Current US$000		Effective interest rate		Non- current US$000		Current US$000
Secured bank loans (a)
·  Pre-shipment loans in Minera Santa Cruz (note 21)		-		-		-		1.3% to 6.0%		-		38,500
·  Leasing agreement with Banco de Credito del Peru		3.5%		-		336		3.25% to 3.5%		336		760
·  Leasing agreement with Banco Interamericano de Finanzas		6%		-		24		5% to 6%		24		461
Convertible bond payable (b)		5.75%		106,850		6,613		5.75%		104,506		6,613
Total				106,850		6,973				104,866		46,334

(a) The following table demonstrates the present value and maturity of future minimum lease payments as at 31 December 2012 and 2011:

		As at 31 December
		2012 US$000		2011 US$000
Not later than one year		360		1,221
Between 1 and 2 years		-		360
Between 2 and 5 years		-		-
Total		360		1,581

The following table reconciles the total minimum lease payments and their present values as at 31 December 2012 and 2011:

		As at 31 December
		2012 US$000		2011 US$000
Present value of leases		360		1,581
Future interest		4		40
Total minimum lease payments		364		1,621

The carrying amount of net lease liabilities approximate their fair value.

(b) Convertible bond payable

Relates to the placement of US$115,000,000 of senior unsecured convertible bonds, due 2014, which are convertible into ordinary shares of Hochschild Mining plc. The bonds have a coupon of 5.75% per annum payable semi-annually on 28 January and 28 July of each year. The issuer has the option to call the bonds on or after 20 October 2012 until maturity in the event the trading price of the ordinary shares exceeds 130% of the conversion price over a certain period. In addition, the Group has the right to redeem the bonds if, at any time, the aggregate principal amount of the bonds outstanding is equal to or less than 15% of the aggregate principal amount of the bonds initially issued.

The following information has to be considered for conversion of the bonds into ordinary shares:

·  Conversion Price (before adjustment for the recommended 2011 final dividend): GBP 3.94;

·  Fixed Exchange Rate: US$1.59/GBP 1.00.

The balance as at 31 December 2012 is comprised of the principal of US$115,000,000 (2011: US$115,000.000) plus accrued interest of US$9,636,000 (2011: US$7,292,000), net of transaction costs of US$2,741,000 (2011: US$2,741,000) and the bond equity component of US$8,432,000 (2011: US$8,432,000).

The maturity of non-current borrowings is as follows:

		As at 31 December
		2012 US$000		2011 US$000
Between 1 and 2 years		106,850		1,039
Between 2 and 5 years		-		103,827
Over 5 years		-		-
Total		106,850		104,866

The carrying amount of current borrowings approximates their fair value. The carrying amount and fair value of the non‑current borrowings are as follows:

		Carrying amount as at 31 December				Fair value as at 31 December
		2012 US$000		2011 US$000		2012 US$000		2011 US$000
Secured bank loans		-		360		-		375
Convertible bond payable		106,850		104,506		112,867		116,413
Total		106,850		104,866		112,867		116,788

26 Provisions

		Provision for mine Closure US$0001		Workers' profit Sharing US$0002		Contributions to Peruvian Government US$000		Long term incentive Plan US$0003		Contingent Consideration US$0004		Other US$000		Total US$000
At 1 January 2011		62,026		21,307		1,820		1,061		39,243		2,857		128,314
Additions		782		31,444		38		2,594		-		1,000		35,858
Accretion		533		-		-		-		204		-		737
Change in discount rate		3,541		-		-		-		313		-		3,854
Change in estimate5		10,856		-		-		-		7		-		10,863
Payments		(4,113)		(23,398)		(1,776)		-		(7,389)		(484)		(37,160)
Foreign exchange		-		478		(82)		-		-		-		396
At 31 December 2011		73,625		29,831		-		3,655		32,378		3,373		142,862
Less current portion		(9,791)		(29,831)		-		-		(32,378)		(2,432)		(74,432)
Non-current portion		63,834		-		-		3,655		-		941		68,430
At 1 January 2012		73,625		29,831		-		3,655		32,378		3,373		142,862
Additions		-		18,487		-		7,322		-		1,041		26,850
Accretion		123		-		-		-		-		-		123
Change in discount rate		769		-		-		-		-		-		769
Change in estimate5		3,362		-		-		-		-		-		3,362
Payments		(3,667)		(30,893)		-		-		(32,222)		-		(66,782)
Amounts transferred to payables		-		-		-		(4,950)		-		-		(4,950)
Foreign exchange		2		1,124		-		-		(156)		34		1,004
At 31 December 2012		74,214		18,549		-		6,027		-		4,448		103,238
Less current portion		(4,105)		(18,549)		-		(1,211)		-		(2,823)		(26,688)
Non-current portion		70,109		-		-		4,816		-		1,625		76,550

1  The provision represents the discounted values of the estimated cost to decommission and rehabilitate the mines at the expected date of closure of each of the mines. The present value of the provision has been calculated using a real pre-tax annual discount rate, based on a US Treasury bond of an appropriate tenure adjusted for the impact of quantitative easing as at 31 December 2012 and 2011 respectively, and the cash flows have been adjusted to reflect the risk attached to these cash flows. Uncertainties on the timing for use of this provision include changes in the future that could impact the time of closing the mines, as new resources and reserves are discovered.

2  Corresponds to the legal and voluntary workers' profit sharing of the Group. Legal workers' profit sharing represents 8% of taxable income of Peruvian companies. Voluntary workers' profit sharing is determined by the Group taking into account the market conditions of employment. The balance of the provision as at 31 December 2012 is: (i) Legal US$5,788,000 (2011: US$21,584,000), (ii) Voluntary US$12,761,000 (2011: US$8,247,000).

3  Corresponds to the provision related to awards granted under the Long Term Incentive Plan to designated personnel of the Group. Includes the following benefits: (i) 2012 awards, granted in March 2012, payable in March 2015, (ii) 2011 awards, granted in April 2011, payable in April 2014, and (iii) Exploration incentive plan awards, granted in January 2011, payable 50% in March 2013 and 50% in March 2014. Only employees who remain in the Group's employment on the vesting date will be entitled to a cash payment, subject to exceptions approved by the Remuneration Committee of the Board. The provision represents the discounted values of the estimated cost of the long-term employee benefit. In 2012 there is a provision of US$7,322,000 (2011: US$2,594,000) that is disclosed under administrative expenses US$5,420,000 (2011: US$1,467,000), exploration expenses US$843,000 (2011: US$146,000) and capitalised as evaluation and exploration expenses US$1,059,000 (2011: US$981,000). The amount of US$4,950,000 corresponds to the 2010 award and was transferred to salary and wages payable as the performance period ended at 31 December 2012 (note 24(2)).

4 This contingent consideration provision relates to International Minerals Corporation's discounted share of Hochschild's commitment to fund the first $100,000,000 needed to plan, develop and construct mining operations within the Inmaculada property. The amount of US$32,222,000 was settled as a capital contribution from non-controlling interest (refer to consolidated statement of changes in equity).

5  Based on the 2012 internal review of mine rehabilitation budgets, an increase of US$3,362,000 was recognised. During 2011 the Group conducted an external review of the provision for mine closure costs for all its mining units. Consequently, at 31 December 2011 an increase of US$10,856,000 in this provision was recognised.

27 Dividends paid and proposed

		2012 US$000		2011 US$000
Declared and paid during the year
Equity dividends on ordinary shares:
Final dividend for 2011: US$0.03 (2010: US$0.03)		10,139		10,143
Interim dividend for 2012: US$0.03 (2011: US$0.03)		10,139		10,143
Dividends declared to non-controlling interests: US$0.18 and US$0.08 (2011: US$0.55)		32,690		53,999
Dividends declared and paid		52,968		74,285
Dividends declared to non-controlling interests: US$0.08 (2011: US$0.06)		2,187		9,499
Dividends declared and not paid		2,187		9,499
Total dividends declared		55,155		83,784
Proposed for approval by shareholders at the AGM
Final dividend for 2012: US$0.03 (2011: US$0.03)		10,139		10,139

Dividends per share

The dividends declared in August 2012 were US$10,138,718 (US$0.03 per share). A dividend in respect of the year ending 31 December 2012 of US$0.03 per share, amounting to a total dividend of US$10,138,754 is to be proposed at the Annual General Meeting on 30 May 2013. These financial statements do not reflect this dividend payable.

28 Related-party balances and transactions

(a) Related-party accounts receivable and payable

The Group had the following related-party balances and transactions during the years ended 31 December 2012 and 2011. The related parties are companies owned or controlled by the main shareholder of the parent company, joint ventures or associates.

		Accounts receivable as at 31 December				Accounts payable as at 31 December
		2012 US$000		2011 US$000		2012 US$000		2011 US$000
Current related party balances
Cementos Pacasmayo S.A.A.		139		222		-		32
Gold Resource Corp (note 18)		878		710		-		-
Total		1,017		932		-		32

As at 31 December 2012 and 2011 all other accounts are, or were, non-interest bearing.

No security has been granted or guarantees given by the Group in respect of these related party balances.

Principal transactions between affiliates are as follows:

		Year ended
		2012 US$000		2011 US$000
Income
Dividend recognised for Gold Resource Corp. investment (note 18)		10,093		7,313
Revenue recognised for services provided to Gold Resource Corp		-		35
Expenses
Expense recognised for the rental paid to Cementos Pacasmayo S.A.A.		(164)		(170)

Transactions between the Group and these companies are on an arm's length basis.

(b) Compensation of key management personnel of the Group

		As at 31 December
Compensation of key management personnel (including Directors)		2012 US$000		2011 US$000
Short-term employee benefits		6,742		6,504
Termination benefits		-		-
Long Term Incentive Plan		2,789		1,200
Workers' profit sharing		44		184
Others		556		950
Total compensation paid to key management personnel		10,131		8,838

This amount includes the remuneration paid to the Directors of the parent company of the Group of US$5,467,700 (2011: US$4,816,370), out of which US$199,606 (2011: US$199,660) relates to pension payments.

29 Mining royalties

Peru

In accordance with Peruvian legislation, owners of mining concessions must pay a mining royalty for the exploitation of metallic and non-metallic resources. Mining royalties have been calculated with rates ranging from 1% to 3% of the value of mineral concentrate or equivalent, based on quoted market prices.

In October 2011 changes came into effect for mining companies, with the following features:

a) Introduction of a Special Mining Tax ("SMT"), levied on mining companies at the stage of exploiting mineral resources. The new tax is calculated by applying a progressive scale of rates ranging from 2% to 8.4%, of the quarterly operating profit. This new tax is in addition to existing mining royalties.

b) Modification of the mining royalty calculation, which consists of applying a progressive scale of rates ranging from 1% to 12%, of the quarterly operating profit. The former royalty was calculated on the basis of monthly sales value of mineral concentrates.

The SMT and modified mining royalty are accounted for as an income tax in accordance with IAS 12.

c) For companies that have mining projects benefiting from tax stability regimes, mining royalties are calculated and recorded as they were previously, applying an additional new special charge on mining that is calculated using progressive scale rates, ranging from 4% to 13.12% of quarterly operating profit. This was the case for the Arcata mine unit.

As at 31 December 2012, the amount payable as under the former mining royalty (for the Arcata mining unit), the new mining royalty (for the Ares and Pallancata mining units), and the SMT amounted to US$835,000 (2011: US$709,000), US$1,089,000 (2011: US$1,261,000), and US$1,051,000 (2011: US$1,394,000) respectively. The former mining royalty is recorded as "Trade and other payables", and the new mining royalty and SMT as "Income tax payable" in the Statement of Financial Position. The amount recorded in the income statement was US$3,224,000 comprising the former mining royalty, disclosed as cost of sales (2011: US$11,921,000), and US$3,834,000 (2011: US$2,536,000) of new mining royalty and US$4,256,000 (2011: US$3,002,000) of SMT, both disclosed as income tax.

Argentina

In accordance with Argentinian legislation, Provinces (being the legal owners of the mineral resources) are entitled to request royalties from mine operators. For San Jose, the mining royalty was originally fixed at 1.85% of the pit-head value of the production where the final product is dore and 2.55% where the final product is mineral concentrate or precipitates. In October 2012 a new provincial law was passed, which increased the mining royalty applicable to dore and concentrate to 3% of the pit-head value. As of November 2012 Minera Santa Cruz S.A. is paying the increased 3% royalty although it has filed an administrative claim against the new law. As at 31 December 2012, the amount payable as mining royalties amounted to US$ 795,000. The amount recorded in the income statement as cost of sales was US$ 6,448,000.

Profit by operation¹

(Segment report reconciliation) as at 31 December 2012

	Company (US$ 000)	Ares	Arcata	Pallancata	San Jose	Moris	Consolidation adjustment and  others	Total/HOC
	Revenue	57,580	175,802	257,725	310,384	15,931	530	817,952
	Cost of sales (Pre consolidation)	(48,846)	(91,401)	(121,863)	(149,912)	(8,234)	(69)	(420,325)
	Consolidation adjustment	674	2,459	(2,878)	(186)	-	(69)	-
	Cost of sales (Post consolidation)	(49,520)	(93,860)	(118,985)	(149,726)	(8,234)	-	(420,325)
	Production cost excluding depreciation	(47,191)	(65,522)	(72,101)	(106,621)	(7,811)	(2,230)	(301,476)
	Depreciation in production cost	(3,744)	(25,129)	(40,298)	(51,978)	(7)	-	(121,156)
	Other items	(4,024)	(6,691)	(4,686)	-	-	-	(15,401)
	Change in inventories	5,439	3,482	(1,900)	8,873	(416)	2,230	17,708
	Gross profit	8,734	84,401	135,862	160,472	7,697	461	397,627
	Administrative expenses	-	-	-	-	-	(72,995)	(72,995)
	Exploration expenses	-	-	-	-	-	(64,612)	(64,612)
	Selling expenses	(99)	(2,381)	(3,557)	(33,457)	-	34	(39,460)
	Other income/expenses	-	-	-	-	-	307	307
	Operating profit before impairment	8,635	82,020	132,305	127,015	7,697	(136,805)	220,867
	Impairment of assets	-	-	-	-	-	(245)	(245)
	Investments under equity method	-	-	-	-	-	5,080	5,080
	Finance income	-	-	-	-	-	1,988	1,988
	Finance costs	-	-	-	-	-	(14,204)	(14,204)
	FX loss	-	-	-	-	-	(1,212)	(1,212)
	Profit/(loss) from continuing operations before income tax	8,635	82,020	132,305	127,015	7,697	(145,398)	212,274
	Income tax						(85,408)	(85,408)
	Profit/(loss) for the year from continuing operations	8,635	82,020	132,305	127,015	7,697	(230,806)	126,866

1  On a post exceptional basis.

Reserves and resources

Ore reserves and mineral resources estimates

Hochschild Mining plc reports its mineral resources and reserves estimates in accordance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves 2004 edition ("the JORC Code"). This establishes minimum standards, recommendations and guidelines for the public reporting of exploration results and mineral resources and reserves estimates. In doing so it emphasises the importance of principles of transparency, materiality and confidence. The information on ore reserves and mineral resources on pages 64 to 68 were prepared by or under the supervision of Competent Persons (as defined in the JORC Code). Competent Persons are required to have sufficient relevant experience and understanding of the style of mineralisation, types of deposits and mining methods in the area of activity for which they are qualified as a Competent Person under the JORC Code. The Competent Person must sign off their respective estimates of the original mineral resource and ore reserve statements for the various operations and consent to the inclusion of that information in this report, as well as the form and context in which it appears.

Hochschild Mining plc employs its own Competent Person who has audited all the estimates set out in this report. Hochschild Mining Group companies are subject to a comprehensive programme of audits which aim to provide assurance in respect of ore reserve and mineral resource estimates. These audits are conducted by Competent Persons provided by independent consultants. The frequency and depth of an audit depends on the risks and/or uncertainties associated with that particular ore reserve and mineral resource, the overall value thereof and the time that has lapsed since the previous independent third-party audit.

The JORC Code requires the use of reasonable economic assumptions. These include long-term commodity price forecasts (which, in the Group's case, are prepared by ex-house specialists largely using estimates of future supply and demand and long-term economic outlooks).

Ore reserve estimates are dynamic and are influenced by changing economic conditions, technical issues, environmental regulations and any other relevant new information and therefore these can vary from year-to-year. Mineral resource estimates can also change and tend to be influenced mostly by new information pertaining to the understanding of the deposit and secondly the conversion to ore reserves.

The estimates of ore reserves and mineral resources are shown as at 31 December 2012, unless otherwise stated. Mineral resources that are reported include those mineral resources that have been modified to produce ore reserves. All tonnage and grade information has been rounded to reflect the relative uncertainty in the estimates; there may therefore be small differences. The prices used for the reserves calculation were: Au Price: US$1,200 per ounce and Ag Price: US$20 per ounce.

Attributable metal reserves as at 31 December 2012

Reserve category		Proved and probable (t)		Ag (g/t)		Au (g/t)		Ag (moz)		Au (koz)		Ag Eq (moz)
MAIN OPERATIONS¹
Arcata
Proved		885,968		304		1.0		8.7		27.5		10.3
Probable		1,368,615		294		0.9		12.9		39.7		15.3
Total		2,254,583		298		0.9		21.6		67.2		25.6
Pallancata
Proved		1,332,846		276		1.3		11.8		56.3		15.2
Probable		631,282		269		1.3		5.5		25.6		7.0
Total		1,964,128		273		1.3		17.3		81.9		22.2
San Jose
Proved		423,482		470		6.7		6.4		91.6		11.9
Probable		480,408		471		6.2		7.3		95.5		13.0
Total		903,890		470		6.4		13.7		187.2		24.9
Main operations total
Proved		2,642,296		316		2.1		26.9		175.5		37.4
Probable		2,480,305		322		2.0		25.6		160.9		35.3
Total		5,122,601		319		2.0		52.5		336.4		72.7
OTHER OPERATIONS
Ares
Proved		200,844		127		3.1		0.8		20.0		2.0
Probable		70,992		175		1.6		0.4		3.7		0.6
Total		271,836		140		2.7		1.2		23.8		2.6
ADVANCED PROJECTS
Inmaculada2
Proved		2,304,000		106		3.4		7.9		254.8		23.2
Probable		2,376,000		134		3.3		10.2		254.7		25.5
Total		4,680,000		120		3.4		18.1		509.5		48.7
Group total
Proved		5,147,140		215		2.7		35.6		450.3		62.6
Probable		4,927,297		229		2.6		36.3		419.3		61.4
TOTAL		10,074,437		222		2.7		71.8		869.6		124.0

Note: Where reserves are attributable to a joint venture partner, reserve figures reflect the Company's ownership only. Includes discounts for ore loss and dilution.

1 Main operations were audited by P&E Consulting. 

2 Inmaculada reserves as published in the Feasibility Study released on 11 January 2012.  Prices used for reserves calculation: Au: $1,100/oz and Ag: $18/oz.

Attributable metal resources as at 31 December 2012

Resource category		Tonnes (t)		Ag (g/t)		Au (g/t)		Zn (%)		Pb (%)		Cu (%)		Ag Eq (g/t)		Ag (moz)		Au (koz)		Ag Eq (moz)		Zn (kt)		Pb (kt)		Cu (kt)
MAIN OPERATIONS
Arcata
Measured		1,299,637		464		1.45		-		-		-		551		19.4		60.7		23.0		-		-		-
Indicated		1,658,155		407		1.25		-		-		-		483		21.7		66.8		25.8		-		-		-
Total		2,957,792		432		1.34		-		-		-		513		41.1		127.6		48.8		-		-		-
Inferred		4,239,373		342		1.35		-		-		-		423		46.6		183.8		57.6		-		-		-
Pallancata
Measured		1,984,973		358		1.69		-		-		-		459		22.8		107.6		29.3		-		-		-
Indicated		715,484		338		1.58		-		-		-		433		7.8		36.4		10.0		-		-		-
Total		2,700,457		352		1.66		-		-		-		452		30.6		144.0		39.2		-		-		-
Inferred		2,000,762		338		1.41		-		-		-		422		21.7		90.7		27.2		-		-		-
San Jose
Measured		657,578		559		8.15		-		-		-		1,049		11.8		172.4		22.2		-		-		-
Indicated		1,579,868		453		6.56		-		-		-		847		23.0		333.3		43.0		-		-		-
Total		2,237,446		484		7.03		-		-		-		906		34.8		505.8		65.2		-		-		-
Inferred		1,070,352		476		7.37		-		-		-		918		16.4		253.5		31.6		-		-		-
Main operations total
Measured		3,942,188		426		2.69		-		-		-		588		54.0		340.7		74.5		-		-		-
Indicated		3,953,507		413		3.44		-		-		-		619		52.5		436.6		78.7		-		-		-
Total		7,895,695		420		3.06		-		-		-		603		106.5		777.3		153.2		-		-		-
Inferred		7,310,487		360		2.25		-		-		-		495		84.7		528.0		116.4		-		-		-
OTHER OPERATIONS
Ares
Measured		522,495		173		5.85		-		-		-		524		2.9		98.3		8.8		-		-		-
Indicated		174,308		191		2.92		-		-		-		367		1.1		16.4		2.1		-		-		-
Total		696,803		177		5.12		-		-		-		484		4.0		114.6		10.8		-		-		-
Inferred		381,185		170		3.93		-		-		-		405		2.1		48.1		5.0		-		-		-
Other operations total
Measured		522,495		173		5.85		-		-		-		524		2.9		98.3		8.8		-		-		-
Indicated		174,308		191		2.92		-		-		-		367		1.1		16.4		2.1		-		-		-
Total		696,803		177		5.12		-		-		-		484		4.0		114.6		10.8		-		-		-
Inferred		381,185		170		3.93		-		-		-		405		2.1		48.1		5.0		-		-		-
ADVANCED PROJECTS
Inmaculada1
Measured		1,970,058		128		4.10		-		-		-		374		8.1		259.7		23.7		-		-		-
Indicated		2,269,691		159		4.05		-		-		-		402		11.6		295.4		29.3		-		-		-
Total		4,239,749		144		4.07		-		-		-		389		19.7		555.0		53.0		-		-		-
Inferred		2,962,666		152		3.91		-		-		-		387		14.5		372.0		36.8		-		-		-

1  Inmaculada resources as published in the Feasibility Study released on 11 January 2012.  Prices used for resources calculation: Au: $1,100/oz and Ag: $18/oz.

Attributable metal resources as at 31 December 2012 (continued)

Resource category		Tonnes (t)		Ag (g/t)		Au (g/t)		Zn (%)		Pb (%)		Cu (%)		Ag Eq (g/t)		Ag (moz)		Au (koz)		Ag Eq (moz)		Zn (kt)		Pb (kt)		Cu (kt)
ADVANCED PROJECTS CONTINUED
Crespo2
Measured		5,211,058		47		0.47		-		-		-		75		7.9		78.6		12.6		-		-		-
Indicated		17,298,228		38		0.40		-		-		-		62		21.0		222.5		34.3		-		-		-
Total		22,509,286		40		0.42		-		-		-		65		28.8		301.0		46.9		-		-		-
Inferred		775,429		46		0.57		-		-		-		80		1.1		14.2		2.0		-		-		-
Azuca
Measured		190,602		244		0.77		-		-		-		290		1.5		4.7		1.8		-		-		-
Indicated		6,858,594		187		0.77		-		-		-		233		41.2		168.8		51.3		-		-		-
Total		7,049,197		188		0.77		-		-		-		234		42.7		173.5		53.1		-		-		-
Inferred		6,946,341		170		0.89		-		-		-		223		37.9		199.5		49.9		-		-		-
Volcan3
Measured		105,918,000		-		0.738		-		-		-		44		-		2,511.0		150.7		-		-		-
Indicated		283,763,000		-		0.698		-		-		-		42		-		6,367.0		382.0		-		-		-
Total		389,681,000		-		0.709		-		-		-		43		-		8,878.0		532.7		-		-		-
Inferred		41,553,000		-		0.502		-		-		-		30		-		671.0		40.3		-		-		-
Advanced Projects total
Measured		113,289,719		5		0.78		-		-		-		52		17.5		2,853.9		188.7		-		-		-
Indicated		310,189,513		7		0.71		-		-		-		50		73.7		7,053.7		496.9		-		-		-
Total		423,479,232		7		0.73		-		-		-		50		91.2		9,907.6		685.7		-		-		-
Inferred		52,237,436		32		0.75		-		-		-		77		53.6		1,256.7		129.0		-		-		-
OTHER PROJECTS
Jasperoide4
Measured		-		-		-		-		-		-		-		-		-		-		-		-		-
Indicated		-		-		-		-		-		-		-		-		-		-		-		-		-
Total		-		-		-		-		-		-		-		-		-		-		-		-		-
Inferred		12,187,270		-		0.32		-		-		1.32		147		-		126.8		57.6		-		-		161.2
San Felipe
Measured		1,393,716		69		0.02		7.12		3.10		0.39		315		3.1		0.9		14.1		99.3		43.1		5.5
Indicated		1,354,261		82		0.06		6.14		2.73		0.31		295		3.6		2.4		12.9		83.2		37.0		4.2
Total		2,747,977		76		0.04		6.64		2.92		0.35		305		6.7		3.3		27.0		182.4		80.1		9.7
Inferred		1,257,731		84		0.05		6.18		2.26		0.19		283		3.4		1.9		11.5		77.8		28.5		2.3
Other projects total
Measured		1,393,716		69		0.02		7.12		3.10		0.39		315		3.1		0.9		14.1		99.3		43.1		5.5
Indicated		1,354,261		82		0.06		6.14		2.73		0.31		295		3.6		2.4		12.9		83.2		37.0		4.2
Total		2,747,977		76		0.04		6.64		2.92		0.35		305		6.7		3.3		27.0		182.4		80.1		9.7
Inferred		13,445,001		8		0.30		0.58		0.21		1.22		160		3.4		128.6		69.0		77.8		28.5		163.6
GRAND TOTAL
Measured		119,148,118		20		0.86		0.08		0.04		-		75		77.5		3,293.8		286.1		99.3		43.1		5.5
Indicated		315,671,590		13		0.74		0.03		0.01		-		58		130.9		7,509.1		590.6		83.2		37.0		4.2
Total		434,819,708		15		0.77		0.04		0.02		-		63		208.4		10,802.9		876.7		182.4		80.1		9.7
Inferred		73,374,109		61		0.83		0.11		0.04		0.22		135		143.8		1,961.4		319.3		77.8		28.5		163.6

2    Prices used for resources calculation: Au: $1,300/oz and Ag: $23/oz.

3    Resources reported in the NI 43-101 Technical Report published by Andina Minerals, January 2011.  Price used for resources calculation: Au: $950/oz.

4    The silver equivalent grade (147 g/t Ag Eq) has being calculated applying the following ratios, Cu/Ag=96.38 and Au/Ag=60

Change in total reserves and resources

Ag equivalent content (million ounces)		Category		December 2011		Production¹		Movements²		December 2012		Net difference		% change
Arcata		Resource		112.3		-		(5.9)		106.4		(5.9)		(5.3)
		Reserve		29.3		8.0		4.3		25.6		(3.7)		(12.6)
Pallancata		Resource		116.0		-		(5.3)		110.7		(5.3)		(4.6)
		Reserve		41.0		11.3		7.3		37.0		(4.0)		(9.8)
San Jose		Resource		172.1		-		17.6		189.7		17.6		10.2
		Reserve		42.9		13.2		19.1		48.8		5.9		13.8
Main operations total		Resource		400.4		-		6.4		406.8		6.4		1.6
		Reserve		113.2		32.4		30.6		111.4		(1.8)		(1.6)
Ares		Resource		14.3		-		1.5		15.8		1.5		10.2
		Reserve		2.4		2.4		2.7		2.6		0.2		10.4
Other operations total		Resource		14.3		-		1.5		15.8		1.5		10.2
		Reserve		2.4		2.4		2.7		2.6		0.2		10.4
Inmaculada		Resource		149.7		-		-		149.7		-		-
		Reserve		-		-		81.1		81.1		81.1		-
Crespo		Resource		58.3		-		(9.4)		48.9		(9.4)		(16.1)
		Reserve		-		-		-		-		-		-
Azuca		Resource		103.0		-		-		103.0		-		-
		Reserve		-		-		-		-		-		-
Volcan		Resource		-		-		572.9		572.9		572.9		-
		Reserve		-		-		-		-		-		-
Advanced Projects total		Resource		310.9		-		563.5		874.5		563.5		181.2
		Reserve		-		-		81.1		81.1		81.1		-
Jasperoide		Resource		57.6		-		-		57.6		-		-
		Reserve		-		-		-		-		-		-
San Felipe		Resource		38.5		-		-		38.5		-		-
		Reserve		-		-		-		-		-		-
Other projects total		Resource		96.0		-		-		96.0		-		-
		Reserve		-		-		-		-		-		-
Total		Resource		821.7		-		571.4		1,393.1		571.4		69.5
		Reserve		115.6		34.9		114.4		195.1		79.5		68.8

1  Depletion: reduction in reserves based on ore delivered to the mine plant.

2  Variation in reserves and resources due mainly to mine site exploration but also to price changes.

Change in attributable reserves and resources

Ag equivalent content (million ounces)		Category		Percentage attributable December 2012		December 2011 Att.¹		December  2012  Att.¹		Net difference		% change
Arcata		Resource		100%		112.3		106.4		(5.9)		(5.3)
		Reserve				29.3		25.6		(3.7)		(12.6)
Pallancata		Resource		60%		69.6		66.4		(3.2)		(4.6)
		Reserve				24.6		22.2		(2.4)		(9.8)
San Jose		Resource		51%		87.8		96.8		9.0		10.2
		Reserve				21.9		24.9		3.0		13.8
Main operations total		Resource				269.7		269.5		(0.1)		(0.0)
		Reserve				75.8		72.7		(3.1)		(4.1)
Ares		Resource		100%		14.3		15.8		1.5		10.2
		Reserve				2.4		2.6		0.2		10.4
Other operations total		Resource				14.3		15.8		1.5		10.2
		Reserve				2.4		2.6		0.2		10.4
Inmaculada		Resource		60%		89.8		89.8		-		-
		Reserve				-		48.7		48.7		-
Crespo		Resource		100%		58.3		48.9		(9.4)		(16.1)
		Reserve				-		-		-		-
Azuca		Resource		100%		103.0		103.0		-		-
		Reserve				-		-		-		-
Volcan		Resource		100%		-		572.9		572.9		-
		Reserve				-		-		-		-
Advanced Projects total		Resource				251.1		814.6		563.5		224.4
		Reserve				-		48.7		48.7		-
Jasperoide		Resource		100%		57.6		57.6		-		-
		Reserve				-		-		-		-
San Felipe		Resource		100%		38.5		38.5		-		-
		Reserve				-
Other projects total		Resource				96.0		96.0		-		-
		Reserve				-		-		-		-
Total		Resource				631.1		1,196.0		564.9		89.5
		Reserve				78.2		124.0		45.8		6.3

1  Attributable reserves and resources based on the Group's percentage ownership of its joint venture projects.

Production

Total Group production¹

	Year ended 31 December 2012	Year ended 31 December 2011	% change
Silver production (koz)	19,443	21,363	(9)
Gold production (koz)	164.34	180.51	(9)
Total silver equivalent (koz)	29,304	32,193	(9)
Total gold equivalent (koz)	488.40	536.56	(9)
Silver sold (koz)	18,928	21,792	(13)
Gold sold (koz)	159.8	182.0	(12)

¹Total production includes 100% of all production, including production attributable to joint venture partners at San Jose and Pallancata.

Attributable Group production²

	Year ended 31 December 2012	Year ended 31 December 2011	% change
Silver production (koz)	13,550	14,980	(10)
Gold production (koz)	111.82	127.29	(12)
Attrib. silver equivalent (koz)	20,260	22,617	(10)
Attrib. gold equivalent (koz)	337.7	377.0	(10)

²Attributable production includes 100% of all production from Arcata, Ares and Moris, 60% from Pallancata and 51% from San Jose.

2012 production by mine

Arcata

Product	Year ended 31 December 2012	Year ended 31 December 2011	% change
Ore production (tonnes)	773,498	687,966	12
Average silver grade (g/t)	271	312	(13)
Average gold grade (g/t)	0.83	0.88	(6)
Silver produced (koz)	5,526	6,081	(9)
Gold produced (koz)	17.27	17.38	(1)
Silver equivalent produced (koz)	6,562	7,124	(8)
Silver sold (koz)	5,236	5,979	(12)
Gold sold (koz)	15.9	16.7	(5)

Ares

Product	Year ended 31 December 2012	Year ended 31 December 2011	% change
Ore production (tonnes)	336,423	344,085	(2)
Average silver grade (g/t)	54	61	(11)
Average gold grade (g/t)	2.65	2.90	(9)
Silver produced (koz)	481	581	(17)
Gold produced (koz)	26.28	29.03	(9)
Silver equivalent produced (koz)	2,058	2,323	(11)
Silver sold (koz)1	473	598	(21)
Gold sold (koz)2	25.8	29.7	(13)

 

Pallancata³

Product	Year ended 31 December 2012	Year ended 31 December 2011	% change
Ore production (tonnes)	1,094,250	1,070,466	2
Average silver grade (g/t)	256	301	(15)
Average gold grade (g/t)	1.09	1.33	(18)
Silver produced (koz)	7,441	8,767	(15)
Gold produced (koz)	26.23	33.88	(23)
Silver equivalent produced (koz)	9,014	10,800	(17)
Silver sold (koz)	7,280	9,064	(20)
Gold sold (koz)	25.1	33.9	(26)

³The Company has a 60% interest in Pallancata.

San Jose⁴

Product	Year ended 31 December 2012	Year ended 31 December 2011	% change
Ore production (tonnes)	509,851	462,825	10
Average silver grade (g/t)	417	444	(6)
Average gold grade (g/t)	5.79	5.86	(1)
Silver produced (koz)	5,953	5,870	1
Gold produced (koz)	85.77	80.95	6
Silver equivalent produced (koz)	11,099	10,727	3
Silver sold (koz)	5,897	6,087	(3)
Gold sold (koz)	84.3	82.4	2

⁴The Company has a 51% interest in San Jose.

Moris

Product	Year ended 31 December 2012	Year ended 31 December 2011	% change
Ore production (tonnes)	-	858,028	-
Average silver grade (g/t)	-	5.02	-
Average gold grade (g/t)	-	0.96	-
Silver produced (koz)	42	64	(34)
Gold produced (koz)	8.79	19.26	(54)
Silver equivalent produced (koz)	570	1,220	(53)
Silver sold (koz)	42	64	(34)
Gold sold (koz)	8.7	19.3	(55)

Glossary

Ag Silver
Adjusted EBITDA 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.
Au Gold
Attributable after tax profit Profit for the year before dividends attributable to the equity shareholders of Hochschild Mining plc from continuing operations before exceptional items and after minority interest
Average head grade Average ore grade fed into the mill
Board The Board of Directors of the Company
Company Hochschild Mining plc
CSR Corporate social responsibility
Cu Copper
Directors The Directors of the Company
DNV Det Norske Veritas is an independent foundation with the purpose of safeguarding life, property, and the environment
Dore Dore bullion is an impure alloy of gold and silver and is generally the final product of mining and processing; the dore bullion will be transported to be refined to high purity metal
Dollar or $ United States dollars
Effective Tax Rate Income tax expense as a percentage of profit from continuing operations before income tax
EPS The per-share (using the weighted average number of shares outstanding for the period) profit available to equity shareholders of the Company from continuing operations after exceptional items
eq equivalent
Exceptional item Events that are significant and which, due to their nature or the expected infrequency of the events giving rise to them, need to be disclosed separately
g/t Grammes per tonne
GAAP Generally Accepted Accounting Principles
Group Hochschild Mining plc and subsidiary undertakings
IAS International Accounting Standards
IASB International Accounting Standards Board
IFRS International Financial Reporting Standards
JV Joint venture
koz Thousand ounces
kt Thousand tonnes
ktpa Thousand tonnes per annum
Listing or IPO (Initial Public Offering) or Global Offer The listing of the Company's Ordinary Shares on the London Stock Exchange on 8 November 2006
LTI Lost Time Injury, meaning an occupational injury or illness that results in days away from work
LTIFR Lost Time Injury Frequency Rate = LTI x 1,000,000/hours worked
moz Million ounces
Ordinary Shares Ordinary Shares of 25p each in the Company
Pb Lead
Spot or spot price The purchase price of a commodity at the current price, normally this is at a discount to the long-term contract price
t tonne
tpa tonnes per annum
tpd tonnes per day
Zn Zinc

Shareholder information

Annual General Meeting ('AGM')

The AGM will be held at 9:30am on 30 May 2013 at the offices of Linklaters LLP, One Silk Street, London, EC2Y 8HQ.

Company website

Hochschild Mining plc Interim and Annual Reports and results announcements are available via the internet on our website at www.hochschildmining.com. Shareholders can also access the latest information about the Company and press announcements as they are released, together with details of future events and how to obtain further information.

Registrars

The Registrars can be contacted as follows for information about the AGM, shareholdings, dividends and to report changes in personal details:

- By post

Capita Registrars, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU

- By telephone

If calling from the UK: 0871 664 0300 (Calls cost 10p per minute plus network extras, lines are open 8.30am - 5.30pm Mon to Fri) If calling from overseas: [phone]

- By fax

[phone]

Currency option and dividend mandate

Shareholders wishing to receive their dividend in US dollars should contact the Company's registrars to request a currency election form. This form should be completed and returned to the registrars by 15 May 2013.

The Company's registrars can also arrange for the dividend to be paid directly into a shareholder's UK bank account. To take advantage of this facility, a dividend mandate form, also available from the Company's registrars, should be completed and returned to the registrars by 15 May 2013. This arrangement is only available in respect of dividends paid in UK pounds sterling. Shareholders who have already completed one or both of these forms need take no further action.

Investor relations

For investor enquiries please contact: Marianna Adams, by writing to the London Office address (see below), by phone on 020 7907 2933 or by email at [e-mail].

Financial calendar

Dividend payments
Ex-dividend date                                                                    8 May 2013
Record date                                                                          10 May 2013
Deadline for return of currency election form                 15 May 2013
Final dividend payable                                                       4 June 2013

Other dates

Annual General Meeting                                                    30 May 2013
Half-yearly results announced                                          August 2013

London Office and Registered Office address

46 Albemarle Street
London
W1S 4JL
United Kingdom

Company Secretary

R D Bhasin

---

[1]On a pre-exceptional basis

[2]Including payment for 86.7% of Andina Minerals Inc.

[3]Market value (as at 31 December 2012) of investments accounted under equity method and available for sale financial assets.

[4]Revenue presented in the financial statements is disclosed as net revenue (in the Financial Review it is calculated as gross revenue less commercial discounts). 

[5]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.

[6]Following the revision of the mining royalty regime in Peru in 2011, the mine royalties levied on the output of the Pallancata and Ares units are now accounted for as Income Tax, whereas previously, royalties for both units were treated as production costs. The effect of this change should be taken into account when comparing the units' production cost per tonne, cash costs and Adjusted EBITDA metrics in 2012 with those of 2011.   

[7]Cash costs are calculated to include cost of sales, treatment charges, and selling expenses before exceptional items less depreciation included in cost of sales.

[8]Please note that all mineralised intersections in this release are quoted as down-hole lengths, not true widths.

[9]Following the revision of the mining royalty regime in Peru in 2011, the mine royalties levied on the output of the Pallancata and Ares units are now accounted for as Income Tax, whereas previously, royalties for both units were treated as production costs. The effect of this change should be taken into account when comparing the units' production cost per tonne, cash costs and Adjusted EBITDA metrics in 2012 with those of 2011.     

[10]Please note that all mineralised intersections in this release are quoted as down-hole lengths, not true widths.

[11]Please note that all mineralised intersections in this release are quoted as down-hole lengths, not true widths.

[12]Please note that all mineralised intersections in this release are quoted as down-hole lengths, not true widths.

[13]Please note that all mineralised intersections in this release are quoted as down-hole lengths, not true widths.

[14]Please note that all mineralised intersections in this release are quoted as down-hole lengths, not true widths.

[15]Please note that all mineralised intersections in this release are quoted as down-hole lengths, not true widths. 

[16]Amount disclosed refers to expenditure from the Group's exploration budget and does not include expenditure from the operational budget.

[17]Total resources here exclude base metal resources, excluding Jasperoide, San Felipe and Volcan.

[18]Please note that all mineralised intersections in this release are quoted as down-hole lengths, not true widths.

[19]Please note that all mineralised intersections in this release are quoted as down-hole lengths, not true widths.

[20]Please note that all mineralised intersections in this release are quoted as down-hole lengths, not true widths. 

[21]Please note that all mineralised intersections in this release are quoted as down-hole lengths, not true widths.

[22]Please note that all mineralised intersections in this release are quoted as down-hole lengths, not true widths.

[23]Revenue presented in the financial statements is disclosed as net revenue (in this Financial Review it is calculated as gross revenue less commercial discounts.   

[24]Includes 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. Please refer to paragraph below on the changes of accounting treatment.

[25]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.

[26]Cash 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.

[27]Other revenue includes revenue from (i) the sale of energy in Peru and, (ii) administrative services in Mexico.

[28]Unit cost per tonne is calculated by dividing mine and geology costs by extracted tonnage and plant and other costs by treated tonnage.

[29]Please refer to footnote 6 on page 7 relating to the treatment in the Company's accounts of mining royalties at the Pallancata and Ares units in 2012.

[30]Cash costs are calculated to include cost of sales, treatment charges, and selling expenses before exceptional items less depreciation included in cost of sales.  

[31]Includes pre-shipment loans which were previously reported under working capital.

[32]Includes additions in property, plant and equipment and evaluation and exploration assets (confirmation of resources) and excludes increases in the expected closure 

costs of mine assets.

 

END

 

 

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