Hochschild Mining Plc 2011 Full Year Results

RNS Number : 6524Z

Hochschild Mining PLC

20 March 2012

Hochschild Mining plc

Preliminary Results for the twelve months ended 31 December 2011

Financial highlights¹

· Record revenue and profit

o Revenue of $987.7 million, up 31%

o Adjusted EBITDA of $563.4 million, up 42%

o Attributable profit after tax of $165.9 million, up 75%

o EPS of $0.49, up 75%

· Strong financial position with a year end cash balance of $627.5 million

· Minority investments valued at $353 million²

· Proposed final dividend of $0.03 per share, bringing the total dividend for 2011 to $0.06 per share, up 20%

Operational highlights

· Full year production of 22.6 million attributable silver equivalent ounces in line with target

· Exploration strategy delivering positive results:

o Resource life of main operations up 11% to 9.7 years

o Total resources up 17% to 535 million silver equivalent ounces³

o Positive feasibility studies delivered on Inmaculada and Crespo; potential to add production of 10 million attributable silver equivalent ounces per year

o Further expansion of project pipeline: 13 'Company Maker' and 13 'Medium Scale' prospects spread across Peru, Argentina, Chile and Mexico⁴

· 2012 production target of 20.0 million attributable silver equivalent ounces

· Record $90 million exploration budget for 2012

$000, pre-exceptional unless stated	Year ended 31 Dec 2011	Year ended 31 Dec 2010	% change
Attributable silver production (koz)	14,980	17,768	(16)
Attributable gold production (koz)	127	144	(12)
Net Revenue^*	987,662	752,322	31
Adjusted EBITDA^**	563,403	397,731	42
Profit from continuing operations	268,919	158,830	69
Profit from continuing operations (post exceptional)	272,338	216,665	26
Earnings per share ($)	0.49	0.28	75
Earnings per share ($ post-exceptional)	0.50	0.46	9

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

** Adjusted EBITDA is calculated as profit from continuing operations before net finance income/(cost), foreign exchange loss and income tax plus depreciation and exploration expenses other than personnel and other exploration related fixed expenses.

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

"I am pleased to report another year of strong financial and operational results in 2011. Not only did we meet our full year production target, but we also continued to make good progress on our organic growth strategy. Our successful drilling programme in 2011 resulted in an 11% increase in the resource life of our main operations to almost 10 years, as well as a further expansion of our project pipeline which now includes thirteen Company Makers. We also made excellent progress at our Advanced Projects and recently announced the results of the feasibility studies on Inmaculada and Crespo which have the potential to increase our annual production by 50%, with the commissioning of both projects set for the end of 2013. We also reported significant geological upside at both projects and are continuing work to expand their mineable resource base.

We have delivered record financial results with EBITDA at $563.4 million, an increase of 42% compared to 2010, and pre-exceptional earnings per share at $0.49, up 75%. The Board has significantly increased the exploration budget for 2012 and proposed a final dividend of $0.03 per share, bringing the total dividend for the year to $0.06 per share an increase of 20% and reflecting our confidence in the Group's consistent operational performance, comprehensive exploration programme as well as our strong cash position."

1 On a pre-exceptional basis

2 Market value (as at 31 December 2011) of investments accounted under equity method and available for sale financial assets.

3 Total resources here exclude base metal resources

4 For full definition of the terms 'Company Maker' and 'Medium Scale' please refer to the Exploration Review

_______________________________________________________________________

A presentation will be held for analysts & investors at 9.30am (UK time) on Tuesday 20 March 2012 at the offices of JP Morgan Cazenove, 20 Moorgate, London, EC2R 6DA.

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

http://www.media-server.com/m/p/7iqk2349

Conference call dial in details:

UK: +44 (0)20 7784 1036 (Please quote 'Hochschild Mining webcast' or confirmation code 7491117).

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

UK: +44 (0)20 7111 1244 Access code: 7491117#

_________________________________________________________________________

Enquiries:

Hochschild Mining plc

Charles Gordon +44 (0)20 7907 2934

Head of Investor Relations

RLM Finsbury

Charles Chichester +44 (0)20 7251 3801

Public Relations

_________________________________________________________________________

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, one in southern Argentina and one open pit mine in northern Mexico. Hochschild also has numerous long-term projects throughout the Americas.

CHAIRMAN'S STATEMENT

2011 Overview

Hochschild Mining has once again delivered a resilient performance in the wake of continuing global economic crisis. Thanks to the dedication and creativity of our whole team, we have been able to meet expectations on our key 2011 objectives, including the completion of feasibility studies for two of our Advanced Projects, the achievement of our annual operating targets and the ongoing evolution of our exploration based strategy. Importantly, we are also generating further opportunities to add to our already considerable growth plans as well as having the financial firepower to execute on attractive prospects.

A strong precious metals market again played its part in Hochschild's record financial performance in 2011, allowing us to significantly increase profits in the year whilst selectively mining lower ore grades in order to enable us to produce longer term stable future growth in uncertain markets. Despite significant increases in cyclical costs such as royalties, the Company recorded a considerable EBITDA increase of 42% to $563 million on the back of revenue of almost $1 billion. Earnings per share was up by 75% to 49 cents and the Board is therefore pleased to recommend a 20% increase in the total dividend for the year, to 6 cents per share, which confirms the confidence we have in the business going forward and the ongoing strength of our balance sheet.

Our management team has utilised 2011 to firmly embed the exploration strategy within the Company. During the year, Hochschild has completed over 315,000 metres of drilling with this number expected to increase by approximately 5% in 2012, reflecting the increased exploration budget of $90 million, representing another record for the Company. Our team has also appointed key new exploration managers as well as increased the number of geologists to ninety-two. This significant commitment has begun to bear fruit with the Company further optimising the life-of-mine of our core assets in 2011. In addition, we have swiftly brought two Advanced Projects through the pipeline to feasibility and continue to widen the number of drill targets and prospects, which in turn is considerably strengthening the Hochschild project pipeline. I firmly believe that this strategy will deliver profitable long term production growth to our shareholders.

Precious metals markets' volatility became a more prominent feature in 2011 than ever before with silver in particular displaying very large swings in price. The high of almost $50/oz was reached in May with investment demand becoming the main driver, but by December, silver prices had fallen by some 44% to below $30/oz again. With temperamental commodity markets reflecting broader global economic concerns, the mining sector in the UK was also very volatile. However, we believe that long term fundamentals for gold and silver remain strong and are confident that our business is well underpinned for the future.

Outlook

Over the next year, we expect to see the first crucial steps in the construction phase of our two exciting projects at Inmaculada and Crespo which have the potential to increase our silver equivalent production by 50 percent, or 10 million profitable ounces. The Board remains confident that Hochschild has the financial flexibility to continue pursuing high return investment opportunities whether in brownfield expansion at our existing mines, value enhancing acquisitions or adding to our exploration investment.

Corporate Responsibility

I am proud to report that Hochschild Mining has continued to make progress in the key area of Corporate Responsibility. During 2011, the Group's environmental management systems at all active operations were ISO14001 accredited. An enhanced Community Relations strategy was also formulated, underpinning our collective commitment to providing education as well as promoting health, nutrition and sustainable development in our local communities. A number of initiatives were launched during the year, most notably the 'Maestro Lider' (Leading Teacher) and 'Medico de Cabecera' (Mobile Doctor) programmes, further details of which will be provided in the Annual Report.

On the issue of safety, while a year-on-year reduction in the Group's accident frequency rate was achieved, it is with deepest regret that we report three fatalities during 2011. Operations were suspended immediately after each incident while investigations were carried out. We ensured that any resulting recommendations were immediately acted upon and that the affected families were supported. Our ongoing goal of zero fatalities remains our highest operational priority.

Board Composition

During the year, there were a number of changes to the Board. In light of Dionisio Romero's decision to retire as a Non-Executive Director at the AGM this May and Sir Malcolm Field retiring at the end of 2012, we moved swiftly to appoint Dr Graham Birch and Rupert Pennant-Rea to ensure the continued independent presence on the Board. Both of these Directors have brought with them extensive and relevant experience in the natural resource industry. I would also like to express my sincere gratitude to both Malcolm and Dionisio for their counsel and invaluable contributions to the Company since joining the Hochschild Board back in 2006.

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

20 March 2012

CHIEF EXECUTIVE OFFICER'S STATEMENT

I am pleased to announce another strong set of full year results with 2011 proving to be a record year for Hochschild, reflecting a solid operational performance and reinforcing our organic growth strategy and financial position. We firmly believe that the combination of our enviable operational, exploration and project development skills, combined with our premium geological land position spread across the Americas, is the key to maximising long term sustainable shareholder value.

Strategic progress

The first key pillar of our strategy encompasses our current assets and ensuring their long term sustainability. We have already increased the life of these assets extensively since our IPO in 2006, and in 2011 we continued this trend with significant increases at all three main operations. Resource life for the Company grew from 8.7 years in 2010 to 9.7 in 2011 with a 20% increase in resource life at Arcata, a 7% increase at Pallancata in Peru, and a 7% increase at the San Jose mine in Argentina where we continue to find new veins and extensions, thus increasing total resources at this exciting property to 172.2 million silver equivalent ounces.

2011 was also a key year in the development of our project pipeline, the second pillar of our strategy. One of its cornerstones is our aim to ensure the smooth progress of all our projects through their developmental stages. In this regard, the delivery of two feasibility studies on our Inmaculada and Crespo projects early in 2012 provided ample evidence of Hochschild's project management capability. These two exciting opportunities, based in our southern Peru cluster, give us an expected 50% uplift in our production base whilst generating an attractive return even at conservative price and resource assumptions.

Our most exciting asset is the 60% owned Inmaculada project. This is set to start construction with total initial capital expenditure of $315 million for a 3,500 tonne per day underground operation with total average annual production of 12 million silver equivalent ounces and a commissioning date in the fourth quarter of 2013. Total resources have now increased to almost 150 million silver equivalent ounces. We are confident that these resources will grow significantly from this excellent starting point in the same manner as our other mines and see Inmaculada develop into a major contributor for the Company.

In addition, Hochschild is pleased to see a positive result from its 100% owned Crespo project which is set to add another 2.7 million silver equivalent ounces from 2014 at an initial capital cost of $111 million for a 6,850 tonne per day operation. This open pit project is expected to have a low unit cost per tonne, high gold recovery rates and, given its proximity to Hochschild's other operations in southern Peru, will benefit from operational synergies. Current Inferred resources at Crespo are likely to deliver more mineable material for the project and the exploration team remains positive about the geological potential of the surrounding areas.

We remain excited by the potential of the Azuca deposit, especially with respect to the ongoing exploration of the newly discovered higher grade Colombiana and Cimoide Vivian veins. It is our intention to continue exploration work at the project throughout 2012 in order to consolidate resources and provide a more comprehensive picture of the complex vein structures present in the area before moving the project on to the feasibility study stage.

Exploration work continued in 2011, with a total of 315,373 metres of drilling completed. At our greenfield targets, we had positive results from our Company Makers pipeline at Victoria, Valeriano and Encrucijada in Chile, Mercurio in Mexico and Soranpampa in Peru, as well as strong progress at the Medium Scale Mosquito project in Argentina. Overall, Hochschild has again reaffirmed its exploration commitment with a $90 million budget for 2012, the largest in the Company's history, which will be invested in our brownfield, Advanced Projects and greenfield exploration programmes, which are expected to encompass drilling campaigns in 26 different locations across the Americas.

2011 overview

Our operations once again met their annual targets with production in 2011 of 22.6 million attributable silver equivalent ounces, comprised of 15.0 million ounces of silver and 127.3 thousand ounces of gold. San Jose continued to deliver, with silver equivalent production up 3% on the previous year - a highly creditable performance, with a particularly strong second half. At Arcata and Pallancata, we continued with our policy of adjusting the extracted grade to ensure a consistent and sustainable level of long term production as well as taking the opportunity afforded by high precious metal prices to process low grade material at both mines. The high prices have also allowed our Ares mine in southern Peru to continue operations throughout the year and into 2012, whilst our Moris mine in Mexico contributed just over 1 million silver equivalent ounces before its closure late in the fourth quarter.

In 2011 we continued experiencing cyclical cost inflation in line with the industry trend, primarily resulting from the ongoing high commodity prices. In Peru, unit costs were up by some 14% excluding royalties principally due to wage inflation in the industry and a higher proportion of production from narrower veins in the production mix at Pallancata and Arcata. In Argentina, Hochschild continued to face the challenges of ongoing high local inflation rates of some 25-30%, and although unit costs (excluding royalties) at San Jose only increased by 18%, this was principally due to a devaluation of the local currency of 6%, as well as the extraction of low cost superficial material located in new mine areas and also improvements in operational processes.

We expect overall 2012 unit cost inflation in Argentina to continue to be high, at around 25-30% for the same country specific reasons mentioned above, whilst in Peru we have forecasted an increase in unit costs of approximately 15% excluding royalties and the increased refining cost due to the effects of our dore project at Arcata. The main contributory factors to this increase are anticipated to be expected local industry inflation of 10% and the increasing number of stopes at our main operations.

The Group again achieved record results with revenue of just under $1 billion, up some 31% on 2010, driven by continuing strong precious metal prices, with the average silver price for 2011 up 53% and the average gold price up by 25%. EBITDA also rose sharply, by 42%, to $563 million (2010: $398million) with pre-exceptional EPS of $0.49 for the full year, approximately 75% higher than 2010.

We finished 2011 with a continuing strong cash balance of $627 million which together with our healthy operating cashflow, having increased 53% to $464.1 million in 2011, gives us the financial ability to embark on capital expenditure programmes for our Advanced Projects, pursue our ambitious exploration programme in 2012, continue investing in our main operations, and monitor any potential value accretive acquisitions to be assessed against our previously stated criteria. We also have minority investments worth approximately $350 million as at 31 December 2011, principally represented by our 25.2% stake in Gold Resource Corporation.

Outlook

Hochschild's production target for 2012 is 20.0 million attributable silver equivalent ounces, which takes into account the reduction of almost 300,000 silver equivalent ounces that will now not be recovered at Arcata as a result of the implementation of our dore project. The 2012 production target consists of similar levels of production at each of the core operations to those of 2011, with anticipated further declining production at Ares and Moris.

We have had a very busy start to 2012 with the completion of the Inmaculada and Crespo feasibility studies and we are excited that following the Board's approval of these projects and sanction of their capital expenditure requirements, the key stages of project construction can begin in earnest. Our strategy for this year will once again be to deliver on our production target, execute the first stages of the above mentioned project development and demonstrate consistent progress on our ambitious exploration programme, supported by its $90 million budget.

I am confident that Hochschild's talented and experienced team will continue to create opportunities for future value generation and that realising our 2012 targets will provide more evidence that we have the optimum strategy for long term growth.

Ignacio Bustamante

Chief Executive Officer

20 March 2012

OPERATING REVIEW

2011 Highlights

· Full year production of 22.6 million attributable silver equivalent ounces, in line with target

· Feasibility studies delivered on Inmaculada and Crespo projects; expected to add 10 million attributable silver equivalent ounces per year with production expected to commence at both projects at the end of 2013

· First stage of Arcata dore project completed

CURRENT OPERATIONS

Production

Hochschild once again met its full year production target in 2011, producing 22.6 million attributable silver equivalent ounces, comprised of 15.0 million ounces of silver and 127,287 ounces of gold. In 2011, San Jose continued to deliver a strong performance. Lower production was reported at Pallancata and Arcata as the Company took advantage of high precious metals prices to process low grade material and also continued to adjust extracted grades to provide a sustainable level of long-term production and optimise the resource life of its main operations.

The Company has announced a production target of 20.0 million attributable silver equivalent ounces for 2012. Production at each of the Company's main operations is expected to be in line with 2011. 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

In 2011, the Company reported a 14% increase in unit cost per tonne excluding mine royalties at its main Peruvian operations (Arcata and Pallancata), to $60.8 per tonne (2010: $53.2). This increase was primarily due to a rise in labour costs reflecting higher precious metal prices, higher mining costs resulting from an increase in mined areas and a higher proportion of production from narrower veins.

In Argentina, unit cost per tonne excluding royalties increased by 18% to $169.6 per tonne (2010: $144.1) mainly as a result of local inflation impacting labour and materials costs and a higher consumption of plant reagents which in turn provided improved metallurgical recoveries (by approximately 5%). Local inflation was partially offset by local currency devaluation, lower mine development and the extraction of superficial low grade material (Saavedra). Please see page 22 of the Financial Review for further details on costs.

Main operations

Arcata: Peru

Arcata summary	Year ended 31 Dec 2011	Year ended 31 Dec 2010	% change
Ore production (tonnes)	687,966	645,974	7
Average silver grade (g/t)	312	439	(29)
Average gold grade (g/t)	0.88	1.40	(37)
Silver produced (koz)	6,081	8,099	(25)
Gold produced (koz)	17.38	25.83	(33)
Silver equivalent produced (koz)	7,124	9,649	(26)
Silver sold (koz)	5,979	8,095	(26)
Gold sold (koz)	16.7	24.9	(33)
Unit cost ($/t)	77.0	71.1	8
Unit cost excl. royalties ($/t)	70.2	65.0	8
Total cash cost ($/oz Ag co-product)⁵	12.8	8.5	51

Production and sales

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

During 2011, the Company continued to adjust the extraction grades at Arcata towards the average reserve grade level in order to ensure a consistent and sustainable level of production. Full year silver equivalent production of 7.1 million ounces was 26% lower than 2010 (9.6 million ounces).

The Company took advantage of strong metal prices to process waste material from previous campaigns (see table below on Macarena Waste Dam Deposit). This material, whilst increasing overall annual treated tonnage by 7% to 687,966 tonnes (2010: 645,974 tonnes), was processed at a decreased average silver grade of 95g/t. In addition, in 2011 the Company mined in the lower grade border areas with associated narrower veins and increased dilution. This additional material was not part of Arcata's resource base.

Table Showing Contribution from Macarena Waste Dam Deposit

	Year ended 31 Dec 2011
Total
Tonnage	687,966
Average gold grade (g/t)	0.88
Average silver grade (g/t)	312
Macarena
Tonnage	86,859
Average gold grade (g/t)	0.30
Average silver grade (g/t)	95
Stopes and Developments
Tonnage	601,107
Average gold grade (g/t)	0.97
Average silver grade (g/t)	344

In Q4 2011, the first stage of the project to convert 40% of Arcata's concentrate into dore was successfully completed. The second stage of the project will be completed in H2 2012 and subsequently 100% of Arcata's concentrate will be converted into dore. As a result of the metallurgical recoveries involved in the process, there will be an estimated reduction in production in 2012 of 291,000 silver equivalent ounces. Total investment for the project is approximately $14 million and the Company believes that this will be a highly profitable project as the resulting decrease in refining fees, commercial discounts and associated selling expenses will more than offset the treatment costs associated with the process.

Costs

Unit cost per tonne, excluding royalties, increased by 8% to $70.2 (2010: $65.0). Including royalties, the increase in 2011 was also 8% at $77.0 per tonne (2010: $71.1). Key drivers were a rise in the number of contractors employed in the mine due to the increased number of stopes, higher wage costs in line with industry inflation and higher diesel prices. These effects were partly offset by energy cost savings achieved following price renegotiations and by economies of scale resulting from the increase in treated tonnage.

In 2011, the silver/gold concentrate from Arcata was sold to Cormin, Korea Zinc Co. ltd and MRI Trading Ag.

10% of Arcata's production was processed into dore; all of which was sold to Johnson Matthey in 2011.

Resource life

The resource life of Arcata stands at 11.5 years as at 31 December 2011, up 20%, from 9.6 years in 2010, following an intensive drill campaign focused on the Baja, Marion, Blanca, Amparo, Lucrecia and Tunel 4 veins. In total, 94,656 metres of diamond drilling was completed during the year (2010: 76,506 metres) with significant intercepts including⁶:

Vein

Results

Marion

DDH-028

DDH-099

DDH-057

3.03 m at 3.88 g/t Au and 1,008 g/t Ag

1.90 m at 5.18 g/t Au and 1,704 g/t Ag

2.35 m at 4.08 g/t Au and 1,183 g/t Ag

Amparo

DDH-935

DDH-039

2.97 m at 3.29 g/t Au and 1,736 g/t Ag

3.36 m at 2.06 g/t Au and 751 g/t Ag

Blanca

DDH-079

DDH-914

1.17 m at 8.35 g/t Au and 3,171 g/t Ag

0.85 m at 4.28 g/t Au and 2,579 g/t Ag

Baja

DDH-250

1.09 m at 5.19 g/t Au and 706 g/t Ag

In 2012, the exploration drilling campaign of 62,756 metres will focus on the targeting of higher grade structures and increasing the mine resource base.

Pallancata: Peru

Pallancata summary	Year ended 31 Dec 2011	Year ended 31 Dec 2010	% change
Ore production (tonnes)	1,070,466	1,071,617	(0.1)
Average silver grade (g/t)	301	344	(13)
Average gold grade (g/t)	1.33	1.41	(6)
Silver produced (koz)	8,767	10,135	(13)
Gold produced (koz)	33.88	35.85	(5)
Silver equivalent produced (koz)	10,800	12,286	(12)
Silver sold (koz)	9,064	9,998	(9)
Gold sold (koz)	33.9	33.7	0.6
Unit cost ($/t)	60.4	51.8	17
Unit cost excl. royalties ($/t)	54.5	46.2	18
Total cash cost ($/oz Ag co-product)	9.9	7.4	34

^{^[1]}The Company has a 60% interest in Pallancata

Production and sales

The Pallancata silver/gold property is located in the Department of Ayacucho in southern Peru, approximately 160 kilometres from the Arcata operation. Pallancata commenced production in 2007 and is a joint venture with International Minerals Corporation ("IMZ") in which Hochschild controls 60% and is the mine operator. Ore from Pallancata is transported 22 kilometres to the Selene plant for processing.

In 2011, full year production at Pallancata was 10.8 million silver equivalent ounces (2010: 12.3 million), a decrease of 12%. Although treated tonnage remained broadly flat compared to 2010, there was a fall in grades reflecting higher dilution from narrower veins, as well as the Company's decision to take advantage of the prevailing high precious metals price environment to process some lower grade economic material extracted from the borders of the main Pallancata vein. This additional material was not part of Pallancata's resource base.

Costs

Excluding mine royalties, unit cost per tonne increased by 18%, to $54.5 per tonne (2010: $46.2). Including royalties, the increase in 2011 was 17%, to $60.4 per tonne (2010: $51.8). This rise was principally due to increased wage costs resulting from industry inflation. In addition, the Company incurred higher mine service costs (transportation, energy and equipment hire) reflecting increased diesel prices and the development of new mine areas. A number of cost initiatives partially offset these factors, including a change to the mine backfill process leading to lower cement consumption, as well as cost efficiencies in explosives consumption.

In 2011, the silver/gold concentrate from Pallancata was sold to Teck Metals ltd., Aurubis and LS-Nikko Copper.

Resource life

The resource life of the Pallancata operation stands at 7.4 years as at 31 December 2011, up 7% compared to 2010 (6.9 years). During 2011, a total of 50,748 metres of diamond drilling was carried out over the course of the year (2010: 46,547 metres), mainly focused on the San Javier, Virgen del Carmen, Rina, Luisa, Pallancata West and Huararani veins with intercepts including⁷:

Vein	Results
Luisa	DLLU-A08 DLLU-015 DLLU-A01	9.0 m at 1.61 g/t Au and 301 g/t Ag 3.25 m at 4.89 g/t Au and 1,382 g/t Ag 8.4 m at 2.79 g/t Au and 565 g/t Ag 0.99 m at 40.66 g/t Au and 670 g/t Ag
Pallancata West	DLPL-A796	4.16 m at 6.08 g/t Au and 1,484 g/t Ag
Yanina	DLVC-010	0.77 m at 6.10 g/t Au and 1,300 g/t Ag
Rina	DLRI-A21 DLRI-A40	1.72 m at 6.12 g/t Au and 1,614 g/t Ag 10.36 m at 2.76 g/t Au and 812 g/t Ag
Huararani	DLPL-A745	4.4 m at 18.45 g/t Au and 954 g/t Ag

The 2012 exploration programme at Pallancata will target new mineralised structures to the north, west and south of the main operation area, with 59,140 metres of drilling planned.

San Jose: Argentina

San Jose summary^*	Year ended 31 Dec 2011	Year ended 31 Dec 2010	% change
Ore production (tonnes)	462,825	461,134	0.4
Average silver grade (g/t)	444	397	12
Average gold grade (g/t)	5.86	6.14	(5)
Silver produced (koz)	5,870	5,324	10
Gold produced (koz)	80.95	84.30	(4)
Silver equivalent produced (koz)	10,727	10,382	3
Silver sold (koz)	6,087	5,284	15
Gold sold (koz)	82.4	85.0	(3)
Unit cost ($/t)	181.7	152.3	19
Unit cost excl. royalties ($/t)	169.6	144.1	18
Total cash cost ($/oz Ag co-product)	13.7	10.7	28

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

Production and sales

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 controls 51% of the joint venture and is the mine operator.

San Jose delivered a robust performance in 2011, with silver equivalent production up 3% to 10.7 million ounces (2010: 10.4 million ounces). This was mainly a result of an anticipated increase in silver grades, as well as operational efficiencies that led to an increase in recovery rates to 89% for gold and 86% for silver (an increase of approximately 5% for both gold and silver compared to 2010). Silver grades rose by 12% year-on-year and silver production by 10% to 5.9 million ounces (2010: 5.3 million ounces). In line with the mine plan, the average gold head grade decreased by 5% and gold production by 4% to 80.95 thousand ounces (2010: 84.30 thousand ounces).

On 4 May 2011, following a 15 day production stoppage at the operation, the Group successfully concluded negotiations with the AOMA union (Argentine Mining Labour Association).

Costs

Unit cost per tonne, excluding royalties, increased by 18% to $169.6 (2010: $144.1). Including royalties, the increase in 2011 was 19%, at $181.7 per tonne (2010: $152.3). Local inflation in Argentina continues to run at between 25% and 30% and consequently the key driver of the rise in costs was wage cost inflation. A higher consumption of reagents also contributed to the increase in costs although this was offset by a significant improvement in recoveries. The high local inflation also impacted materials and supplies but was partly offset by a 6% devaluation of the Argentinian peso, lower mine development, the extraction of low cost, low grade, superficial material located in new mine areas (Saavedra) as well as efficiencies gained from improving operational processes (maintenance and other support processes). The Company expects cost increases in 2012 to be in the range of 25-30%, in line with the above mentioned local inflation.

In 2011, the dore produced at San Jose was sold to Argor Heraeus S.A. and Johnson Matthey Inc. The concentrate produced at the operation was sold to Teck Metals ltd., Aurubis and LS-Nikko Copper.

Resource life

Following an intensive drill campaign in 2011, the Company increased the resource life of the San Jose property by 7%, to 12.2 years (as at 31 December 2011). A significant portion of the San José property continues to be open at depth and laterally.

After a successful drilling campaign in the first half of 2011, the second half of the year was dedicated to completing geophysical and magnetometry workin order to identify new targets at the property. This work was successfully completed and provided areas of potential that were targeted in the Q4 drilling campaign and continuing into 2012. During the year, 55,678 metres of diamond drilling was conducted (2010: 53,692 metres), focused on the Luli, Susana, Orión and Pilar veins with significant intercepts including⁸:

Vein	Results
Luli	SJM-157 SJD-1015	1.28 m at 20.11 g/t Au and 1,409 g/t Ag 2.00 m at 45.51 g/t Au and 4,257 g/t Ag
Susana	SJD-1020 SJD-1033	2.15 m at 54.84 g/t Au and 4,949 g/t Ag 2.50 m at 11.43 g/t Au and 1,105 g/t Ag
Pilar	SJD-996 SJD-992	17.17 m at 11.33 g/t Au and 436 g/t Ag 17.72 m at 6.28 g/t Au and 356 g/t Ag

In 2012, the exploration programme includes a 93,320 metre drilling campaign (110,583 metres including infill drilling) that will evaluate extensions of already known mineralised structures and also the targeting of new veins.

Other operations

Ares: Peru

Ares summary	Year ended 31 Dec 2011	Year ended 31 Dec 2010	% change
Ore production (tonnes)	344,085	301,726	14
Average silver grade (g/t)	61	92	(33)
Average gold grade (g/t)	2.90	3.58	(19)
Silver produced (koz)	581	786	(26)
Gold produced (koz)	29.03	32.53	(11)
Silver equivalent produced (koz)	2,323	2,738	(15)
Silver sold (koz)	598	810	(26)
Gold sold (koz)	29.7	32.7	(9)

Production and sales

The Ares mine, which commenced production in 1998, is a 100% owned operation located approximately 275 kilometres from the city of Arequipa in southern Peru. The Ares mine continued to operate for the full year, albeit at a lower level, producing 2.3 million silver equivalent ounces (2010: 2.7 million silver equivalent ounces).

Although production at Ares was expected to end in 2011, the Company continues to extract mineral from new veins and production will continue in 2012.Management also continues to monitor the grade and cost profile of the operation to ensure that it is in line with the Company's policy of producing profitable ounces. A new exploration programme for Ares is currently being developed for 2012, with the aim of identifying new resources.

100% of Ares' production is processed into dore, all of which was sold to Johnson Matthey in 2011.

Moris: Mexico

Moris summary	Year ended 31 Dec 2011	Year ended 31 Dec 2010	% change
Ore production (tonnes)	858,028	1,148,826	(25)
Average silver grade (g/t)	5.02	4.44	13
Average gold grade (g/t)	0.96	1.14	(16)
Silver produced (koz)	64	86	(26)
Gold produced (koz)	19.26	21.53	(11)
Silver equivalent produced (koz)	1,220	1,378	(11)
Silver sold (koz)	64	95	(33)
Gold sold (koz)	19.3	23.5	(18)

Production and sales

The 100% owned Moris mine, is an open pit mine and is located in the district of Chihuahua, Mexico. Mine production ceased at Moris in September 2011, although continued leaching of the pads produced further ounces towards the end of the year. Full year production was 1.2 million silver equivalent ounces (2010: 1.4 million ounces).

Moris is currently in the final stage of the pads' cyanidation process although exploration continues in the area and the Company has been able to identify new exploration targets at Moris with the goal of identifying new resources.

In 2011, the gold/silver dore produced at Moris was sold to Johnson Matthey.

ADVANCED PROJECTS

The Company has three Advanced Projects: Inmaculada, Crespo and Azuca. The Company recently announced the results of feasibility studies, conducted by Ausenco, an independent consultant, on Inmaculada and Crespo. These projects are expected to contribute an average attributable annual production of 10 million silver equivalent ounces, increasing current production levels by 50%. Both projects are due to be commissioned in Q4 2013 and have an initial combined capital cost estimated at $426 million ($335 million attributable to Hochschild).

At Azuca, the Company has delayed the feasibility study to continue 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.

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').

The project is now set to start construction, with total initial capital expenditure of $315 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), and is due to be commissioned in Q4 2013. The Company is also progressing with 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.

Changes from the 2010 scoping study resulting from the feasibility study process include: an update of the mineral resource; the use of only Measured & Indicated resources as the basis for the initial reserves; a change in the metallurgical process from flotation to leaching with the resulting change from a concentrate to dore as the final product; and an increase in the plant capacity from 3,000 tpd to 3,500 tpd. In addition, as a result of feasibility level geotechnical studies, the rock quality was determined to be poorer than anticipated which has affected dilution, mine capex and mining costs. All of these factors were incorporated in the new capex, cost and Net Present Value ('NPV') figures presented in the feasibility study results.

The feasibility study was conducted using only measured and indicated resources from the Angela vein. Summary results (on a 100% basis, applying a 1.5 g/t gold equivalent cut-off grade) are as follows:

· Measured & Indicated resources: 7.07mt at an average grade of 4.07 g/t gold and 144 g/t silver containing approximately 925,100 ounces of gold and 32.8 million ounces of silver.

· Inferred resources of 4.94mt at an average grade of 3.91 g/t gold and 152 g/t silver containing approximately 620,000 ounces of gold and 24.2 million ounces of silver.

· Estimated mineral reserves (at a cut-off grade of 2.3 g/t gold equivalent): 7.80 mt at an average grade of 3.37g/t gold and 120 g/t silver containing approximately 845,000 ounces of gold and 30.1 million ounces of silver.

The project has been shown to be profitable even under conservative gold and silver price assumptions. The single, wide vein will also allow for lower mining costs and a metallurgical process with estimated recovery rates of 95.6% for gold and 90.6% for silver. The project's proximity to the Company's existing operations also offers logistical synergies and reduces execution risk. The principal execution risks facing the Inmaculada project are possible disruptions to the project schedule resulting from social or political instability and the project's dependence on third party supplies of electricity.

The feasibility study results confirmed that the project provides strong returns based on the existing reserve base. However, Hochschild is confident that the mineable resource base will be expanded by upgrading the inferred mineral resources in the South West and North East extensions of the Angela vein. Current project economics do not factor in almost five million tonnes of inferred resource containing over 60 million silver equivalent ounces which could almost double the life of mine. In addition, there is further geological potential at the Inmaculada property which hosts over 25 kilometres of gold/silver-bearing quartz veins of the low sulphidation type - veins which remain largely untested.

In 2011, exploration drilling at Inmaculada totalled 25,341 metres and in 2012, the drilling programme of 54,650 metres will focus on further exploration of the Angela vein and other known veins in the district.

Crespo

Crespo is 100% owned by Hochschild and is located in the Company's existing operating cluster in southern Peru. Crespo is also set to begin construction, with total initial capital expenditure of $111 million for a 6,850 tpd operation with an average annual production of 2.7 million silver equivalent ounces from 2014. This will be a relatively simple open pit project with high gold recovery rates, and again, will benefit from operational synergies due to its proximity to the Company's existing operations. The principal execution risks facing the Crespo project are possible disruptions to the project schedule resulting from social or political instability and the project's dependence on third party supplies of electricity.

Changes from the January 2011 scoping study resulting from the feasibility study process include: an update of the mineral resource; an increase in the plant capacity from 5,650 tpd to 6,850 tpd; and a change in the source of power, to a 25 km 60 KV transmission line connecting the Arcata operation to Crespo. Significant metallurgical testing was also carried out in order to review the overall process and optimise recoveries. These updates were all incorporated in the new capex, cost and NPV figures presented in the feasibility study results.

The updated resource estimate for Crespo replaced the previous estimate published in the scoping study and represented an increase in Measured and Indicated gold equivalent resources of 58% (304,000 ounces). Measured & Indicated resources now total 23.4 million tonnes at 0.45 g/t of gold and 39 g/t of silver containing 340,000 ounces of gold and 29.2 million ounces of silver.

Ore reserves, calculated by Ausenco, total 20.48 million tonnes at 0.46 g/t of gold and 39 g/t of silver with a cut-off grade of 0.33 g/t gold equivalent and metals prices of $1,300/ounce gold and $23/ounce silver.

The Crespo feasibility study results do not factor in almost 3.8 million tonnes of in-pit inferred resource, containing 6.6 million silver equivalent ounces with the potential to add almost 18% of mineable material at no further mining cost to the Company. There is also further geological upside at the Queshca gold target, to the north of the current feasibility study resource base. In addition, a drilling gap exists between Crespo and Queshca and encouraging geological evidence would suggest further potential for economic mineralisation.

The 2012 drill programme of 5,500 metres is focused on converting Inferred resources to the Indicated resource category and to increase the resource base and to continue exploring the Queshca target.

Azuca

The 100% owned Azuca project is also located in the Company's southern Peru operating cluster. In January 2012, the Company took the decision to delay the feasibility study at Azuca and continue exploration work at the project throughout 2012 in order to consolidate resources and to provide a more comprehensive picture of the dispersed 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 Hochschild Board has therefore approved an exploration programme for Azuca in 2012.

As of December 2011, 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 is ongoing, with promising higher grade intercepts suggesting the presence of new higher grade veins. The 2012 drilling programme will be focused on identifying further extensions of the Vivian-Yanamayo, Colombiana and Azuca West veins, with a drilling programme of 28,000 metres expected to be carried out in these new areas.

EXPLORATION REVIEW

2011 Highlights

· $71 million invested in exploration in 2011; 33% brownfield,15% Advanced Projects and 36% greenfield⁹

· Resource life up 11% to 9.7 years

· Total resources up 17% to 535 million silver equivalent ounces¹⁰

· Increase in 'Company Maker' pipeline from 8 to 13 projects

· Record 2012 exploration budget of $90 million; 30% brownfield, 19% Advanced Projects, 35% greenfield, others and support 12% and technical support 4%.

· 330,804 metres of drilling to be undertaken at 26 greenfield and brownfield projects across four countries

Hochschild's commitment to its exploration strategy has been reaffirmed with a 29% increase in the exploration budget for 2012 to $90 million, (from $70 million in 2010), the largest exploration budget ever for the Company. In 2011, investment in exploration totalled $71 million and 315,373 metres of drilling was completed at the Company's brownfield, Advanced Projects, greenfield and copper projects. The 2012 budget, representing 330,804 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.

In 2011, the exploration programme delivered positive results, especially in respect to its key aims of increasing the resource life of the Company's core operations and expanding its project pipeline which now includes 13 'Company Makers' and 13 'Medium Scale' projects.

In 2012, exploration work at the Company's core operations will be mainly focused on improving resource quality. The main objective of exploration work at the Advanced Projects will be to incorporate additional resources at Inmaculada and Crespo, and at Azuca, to concentrate on the exploration of high quality resources that better support a significant investment. Exploration at the Company Maker projects will include continued drilling and further analysis. 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 at the Company's copper projects and on the Company's generative programme to conduct further exploration on the Company's extensive land package of premium properties in four key countries. In 2011, the number of geologists employed by the Company was 92.

Brownfield exploration

In 2011, approximately 33% of the exploration budget was invested in brownfield drilling in the areas immediately surrounding Hochschild's three main operations. As a result, there was an 11% increase in resource life to 9.7 years (2010: 8.7 years).

The Company takes a very conservative approach to resource delineation and applies the same cut-off grades to reserves and resources. As a result, the Company has a high rate of conversion from resources to reserves.

For full reserve and resource tables, please see page 57.

Greenfield exploration

Approximately 36% of the 2011 exploration budget in 2011 was invested in the Company's greenfield programme, and in 2012, the proportion will be 35%. In 2011, a total of 41,546 metres were drilled as part of the greenfield exploration programme and in 2012, this is expected to increase to 47,500 metres.

Company Makers

The Company currently has 13 potential "Company Makers" which are projects with the potential to achieve 20-30 million silver equivalent ounces per year. These are typically high sulphidation, disseminated or gold/copper porphyry deposits and are generally open pit operations. In 2011, $12.4 million was invested in finding and developing such deposits and the 2012 budget has increased to $15.8 million.

Victoria

The Victoria project in northern Chile is 60% owned by Hochschild, with the remaining 40% held by Iron Creek Capital. Exploration work is delivering positive results at the property which covers 46,100 hectares of continuous strike length at the highly productive Domeyko Fault Zone. In 2011, 7,359 metres of drilling was completed. Exploration focused on the porphyry potential of the property and work was completed on a number of targets. The Picaron target was drill tested and significant alteration and anomalous copper mineralisation was encountered, proving it to be a true copper porphyry system. The resource is open and may increase in grade and thickness downstream. Selected intercepts from these exploration programmes include¹¹:

Intercept	Results
VPI-DD-11-003	From 224.0-265.0m depth - 41.0m at 1,293 ppm Cu
VPI-DD-11-003	From 316.0-350.0m depth - 34.6m at 869 ppm Cu, 15.6 ppm Mo
VPI-DD-11-003	From 357.0-368.0m depth - 11.0m at 2,102 ppm Cu, 27.8 ppm Mo and 0.1 g/t Au
VPI-RC-11-010	From 18.0-32.0m depth - 14.0m at 0.39% Cu and 0.43% Mn Includes: 6.0m at 0.53% Cu and 0.62% Mn

The drilling campaign of 6,800 metres in 2012 will include offset drilling of the recently reported intercepts in and around the Picaron target as well as continued definition drilling of the exotic copper oxide deposit. A data compilation and surface exploration programme will also be carried out over the entire Victoria property in 2012 and the drilling of defined targets will subsequently take place in the second half of the year.

Valeriano

The 100% owned 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 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), both of which completed drill campaigns totalling 12,575 metres. No significant exploration had been undertaken at the property since 1997.

Hochschild commenced drilling at Valeriano in October 2011 and at the end of the year, 2,302 metres had been drilled, with anomalous gold and molybdenum intercepts reported. Further detailed geological work has identified targets in and adjacent to the primary tested target. Positive intercepts reported included:

Intercept	Results
VALDD11-001	From 245.12-252.8m depth - 7.68m at 0.75% Cu and 0.08 g/t Au
VALDD11-002	From 572.0-606.4m depth - 34.4m at 0.19% Cu and 116.24 ppm Mo. Includes 6m at 0.19 g/t Au

In 2012, the 2,500 metre drilling programme will continue the drill testing of the target at depth during the first half of the year, with follow up drilling and drill testing of the near surface high sulphidation target planned for the second half.

Encrucijada

At the 51% owned Encrucijada property in Chile, 1,397 metres were drilled in 2011. Preliminary results indicated a true porphyry copper - gold system, with individual intercepts of anomalous gold and silver up to 0.26 g/t and 95 g/t respectively. Positive drilling results included the following intercepts¹²:

Intercept

Results

END11-026

From 0 - 603m depth - 603m at 670ppm Cu

Includes: 0 - 68m depth - 68m at 0.12% Cu

54-66m depth - 12m at 0.20% Cu

382-404m depth - 22m at 0.13% Cu

In 2012, the exploration programme and 2,000 metre drilling campaign at Encrucijada will continue the offset drilling of results reported in 2011 and will also include additional geophysical interpretation and targeting of the porphyry style mineralisation below the San Bernardo tourmaline breccias and dome complex, and in the surrounding area.

Mercurio

Mercurio is a 100% owned 36,388 hectare property in Mexico, located between two high grade mines, Sombrerete and Fresnillo. In 2011, 7,735 metres of drilling was completed; results to date indicate strong base metal, as well as moderate silver mineralisation, associated with a large vein system similar to Fresnillo.

Drilling results included ¹¹:

Intercept	Results
Hole 21	From 338.55-341.9m depth - 35m at 128.6 g/t Ag, 1.95% Zn, 0.66% Pb and 0.16% Cu
Hole 24	From 186.56-189.66 depth - 3.1m at 75 g/t Ag, 7.9% Zn, 6.45% Pb and 0.5% Cu
Hole 29	From 368.35-374.25m depth - 5.9m at 115 g/t Ag, 8.5% Zn, 0.67% Pb and 0.6% Cu

In 2012 the Company plans to drill an additional 8,000 metres at Mercurio, around recently reported intercepts and will continue exploration activities, including drilling on adjacent targets.

Apacheta

At the 100% owned Apacheta project in Peru, 3,044 metres of drilling was completed in 2011 and the project moved up the project pipeline from prospect to drill target. The initial drilling programme tested high sulphidation and porphyry targets identified in the 2010 exploration programme. Drilling intercepted strongly altered rock with anomalous trace element geochemistry. In 2012 the 7,700 metre drilling campaign will complete the initial exploration programme at the Apacheta 1 and 2 targets and further targets will be defined

by a surface sampling programme.

Soranpampa

At the 100% owned Soranpampa project in Peru, 2,896 metres of drilling was carried out in 2011. The first phase of exploration was completed, with anomalous gold and molybdenum intercepts reported. Further detailed geophysical work has identified targets in and adjacent to the primary target already tested. Positive intercepts included¹³ :

Intercept	Results
DDHPA1104	From 356.4-374.0m depth - 17.6m at 0.15% Mo
DDHPA1109	From 332.0-362.3m depth - 30.3m at 0.15 g/t Au

In 2012, the 2,500 metres drilling programme will focus on targets defined by the IP geophysical survey.

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. The Company is in the process of completing the relevant permits and approvals process for the project.

Huachoja

This is a 3,000 hectare, high sulphidation epithermal target in southern Peru optioned from Teck Peru SA. A surface mapping and sampling programme will be completed in the first half of 2012 in order to select targets for drilling. An initial 1,500 metres drill programme will then be carried out in the second half of the year to test identified targets.

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. The Company has completed the permits and approvals process and will look to assign the necessary exploration budget for the project in order to commence a drilling campaign.

Medium scale projects

The Company's project pipeline also contains various Medium Scale properties in the prospects and drill target categories. These projects 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 2011, $7.9 million was assigned to finding and developing Medium Scale projects, and in 2012 the Company plans to invest $7.0 million in this category. Positive results were reported at a number of the Company's Medium Scale projects in 2011 and a number of properties entered the pipeline. These include the Pomona project in Argentina, the San Antonio project in Chile, and the Huacullo and Cuello Cuello properties in Peru.

Mosquito

Two rounds of drilling were completed at the 100% owned Mosquito property in Argentina in 2011. A total of 8,495 metres was drilled, testing over twelve different vein targets. The majority of the drilling did not intercept any anomalous vein mineralisation. In 2012 the 2,000 metre drilling programme will include offset drilling in and around the most anomalous intercepts reported to date. These intercepts are along the extension of the Cerro Morro (Extorre) vein deposit and positive results in 2011 included ¹³:

Intercept

Results

MQD11-15

MQD11-16

From 149.8-152.4m depth - 2.6m at 3.07 g/t Au and 64 g/t Ag

From 128.25-128.71m depth - 0.46m at 0.56 g/t Au and 64 g/t Ag

La Flora

At the La Flora project in Argentina, two large vein systems have been identified since drilling commenced in H2 2010. In 2011, a total of 1,812 metres was drilled at La Flora and a number of vein targets were tested. Drilling was successful in intercepting anomalous gold and silver mineralisation. Positive intercepts included¹³:

Intercept

Results

LFD11-019

From 0.0-3.0m depth - 3m at 0.96 g/t Au and 3.2 g/t Ag

From 11.0-19.3m depth - 8.3m at 1.48 g/t Au and 8.6 g/t Ag

In 2012, the exploration programme and 4,000 metre drilling campaign at La Flora will include a detailed mapping and sampling programme around the anomalous surface samples and drill hole intercepts identified in 2011. An IP geophysical survey will also be completed and identified targets will be subsequently drilled.

Argenta

At the 100% owned Argenta project in Argentina, 853 metres were drilled in 2011 to test the known vein system which reports strongly anomalous gold and silver mineralisation at surface and in drill hole. Assay results are being analysed before a drilling programme is put in place for 2012.

Astana/Farallón

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.

Farallón 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.Work conducted in 2011 was focused on attaining the relevant government and community permits and approvals for both projects. The community permit has been received, and in 2012 the exploration programme will include a 1,106 metre drilling campaign. Exploration activity will be carried out at Farallón, as well as the testing of anomalies in the Astana area.

San Martin

In 2011, work at the San Martin project in Peru was focused on obtaining the relevant government and community permits and approvals. The community permit has been received, and in 2012 the 1,800 metre drilling campaign will focus on defining potential mineralisation following previous drilling campaigns that intercepted high quality mineralisation.

Other Medium Scale projects

Huacullo

At the Huacullo project in Peru, the Company is in the process of completing the relevant government and community permits and approvals process. In 2012 the 485 metre drilling campaign and exploration programme will test potential economic mineralisation in low to intermediate sulphidation veins previously drilled by other companies.

Ibel

At the Ibel project in Peru, in 2011 work focused on the completion of the relevant government and community permits and approval process. In 2012 the 445 metre drilling campaign at Ibel will test potential economic mineralisation in low to intermediate sulphidation veins and hydrothermal breccias located in sedimentary rocks.

San Antonio

A mapping and sampling programme to define drill targets is in progress at the San Antonio project in Chile, and drilling should commence in the second quarter of 2012.

Cuello Cuello

At the Cuello Cuello project in Peru, the relevant government and community permits and approvals were received in December 2011. In 2012 the 1,179 metre drilling campaign that will test potential economic silver-gold mineralisation in a high sulphidation epithermal prospect will commence in the second quarter.

Pomona

In 2011, an initial field review was carried out at the Pomona project in Argentina. In 2012 the Company will conduct detailed mapping and sampling and IP geophysical survey programmes in order to define targets for drilling.

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. The Company has committed 6% of the total 2012 budget and a dedicated exploration team to drilling at the properties in order to establish potential value.

Jasperoide

In 2011, the exploration programme at Jasperoide included detailed geological mapping on the Huinihuini Mountain area of interest and in the surrounding area, and a 3,726 metre drilling campaign with 20 drill holes. The results of the drilling campaign indicate Inferred Resources for a cut off with 0.2% Cu: 12.19 mt with 1.32 % Cu, 0.32 g/t Au. Positive intercepts included ¹⁴ :

Intercept	Results
JA-001	From 86.0-160.0m depth - 74.0m at 1.54% Cu and 0.20 g/t Au
JA-003	From 57.9-208.5m depth - 150.6m at 1.19% Cu and 0.46 g/t Au
JA-013	From 0.0-184.0m depth - 184.0m at 0.65% Cu and 0.20 g/t Au Includes: From 141.8-158.0m depth - 16.2m at 2.90% Cu and 0.61 g/t Au

In 2012, a second drilling campaign of 3,500 metres will focus on the already identified mineralised zone and surrounding area to locate new skarn blankets and to test for a potential associated porphyritic system.

Alpacocha

In 2011, 408 metres were drilled at the Alpacocha copper project. Exploration was focused mainly on the Paraiso target, a porphyry-skarn type deposit, where two areas of interest were identified, Paraiso West and Paraiso East. The drilling programme in 2012 will increase significantly, to 3,000 metres and will focus on the Paraiso target (East and West), where geological mapping, sampling and geophysics will also be completed.

Antay

At the 100% owned Antay copper project, the Company is in 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 has committed 3% of the total 2012 budget to conduct further exploration in these premium areas.

FINANCIAL REVIEW

Key performance indicators

(before exceptional items, unless otherwise indicated)

$000 unless otherwise indicated	Year ended 31 Dec 2011	Year ended 31 Dec 2010	% change
Net Revenue¹	987,662	752,322	31
Attributable silver production (koz)	14,980	17,768	(16)
Attributable gold production (koz)	127	144	(12)
Cash costs ($/oz Ag co-product) ²	11.96	8.74	37
Cash costs ($/oz Au co-product) ²	561	504	11
Adjusted EBITDA³	563,403	397,731	42
Profit from continuing operations	268,919	158,830	69
Profit from continuing operations (post exceptional)	272,338	216,665	26
Earnings per share (pre exceptional)	$0.49	$0.28	75
Earnings per share (post exceptional)	$0.50	$0.46	9
Cash flow from operating activities ⁴	464,110	304,232	53
Resource life of mine (years)	9.7	8.7	11

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

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

³Adjusted EBITDA is calculated as profit from continuing operations before net finance income/(cost), foreign exchange loss and income tax plus depreciation and exploration expenses other than personnel and other exploration related fixed expenses.

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

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

Revenue

Gross revenue

Gross revenue from continuing operations increased 30% to $1,043.7 million in 2011 (2010: $802.7 million) driven by higher metal prices during the year which offset lower Group production.

Silver

Gross revenue from silver increased 37% in 2011 to $755.8 million (2010: $549.7 million) as a result of higher prices. The total amount of silver ounces sold in 2011 decreased to 21,792 koz (2010: 24,283 koz) mainly due to lower year-on-year production.

Gold

Gross revenue from gold increased 14% in 2011 to $287.8 million (2010: $253.0 million) also as a result of higher prices. The total amount of gold ounces sold in 2011 decreased to 182.0 koz (2010: 199.9 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 2011 and 2010:

Average realised prices	Year ended 31 Dec 2011	Year ended 31 Dec 2010
Silver ounces sold (koz)	21,792	24,283
Avg. realised silver price ($/oz)	34.7	22.6
Gold ounces sold (koz)	182.0	199.9
Avg. realised gold price ($/oz)	1,582	1,266

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 2011, the Group recorded commercial discounts of $56.0 million (2010: $50.5 million). The ratio of commercial discounts to gross revenue in 2011 decreased to 5% (2010: 6%).

Net revenue

Net revenue increased by 31% to $987.7 million (2010: $752.3 million), comprising silver revenue of $708.3 million and gold revenue of $279.2 million. In 2011 silver accounted for 72% and gold 28% of the Company's consolidated net revenue compared to 68% and 32% respectively in 2010.

Revenue by mine

$000 unless otherwise indicated	Year ended 31 Dec 2011	Year ended 31 Dec 2010	% change
Silver revenue
Arcata	207,429	173,942	19
Ares	21,168	16,586	28
Selene	-	13	(100)
Pallancata	316,344	233,789	35
San Jose	208,579	123,393	69
Moris	2,273	1,946	17
Commercial discounts	(47,465)	(41,392)	15
Net silver revenue	708,328	508,277	39
Gold revenue
Arcata	26,449	31,264	15
Ares	46,929	40,239	17
Selene	-	2	(100)
Pallancata	54,437	43,712	25
San Jose	129,994	108,849	19
Moris	30,025	28,953	4
Commercial discounts	(8,584)	(9,079)	(5)
Net gold revenue	279,250	243,940	14
Other revenue¹	84	105	(20)
Net revenue	987,662	752,322	31

¹Other revenue includes revenue from (i) the sale of energy in Peru and, (ii) administrative services in Mexico.

Costs

Total pre-exceptional cost of sales increased 17% to $404.3 million in 2011 (2010: $345.7 million) mainly as a result of the increase in the direct production cost of 16% to $261.2 million (2010: $225.2 million). The direct production cost increment occurred mainly in mine costs as a result of an increase in the number of stopes mined. Direct costs also increased due to inflation in labour, supplies and oil prices in Peru and Argentina. Depreciation cost was $103.7 million in 2011 (2010: $101.6 million), other items costs which principally includes workers' profit sharing, were $32.4 million in 2011 (2010: $22.6 million) and change in inventories was $6.9 million in 2011 (2010: $(3.7) million).

Unit cost per tonne

The Company reported an overall increase in unit cost per tonne at its main operations of 16% in 2011 to $95.32 (2010: $82.3). 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)*:

Operating unit ($/tonne)	Year ended 31 Dec 2011	Year ended 31 Dec 2010	% change
Main operations	91.4	78.8	16
Peru	67.1	59.0	14
Arcata	77.0	71.1	8
Pallancata	60.4	51.8	17
Argentina	181.7	152.3	19
San Jose	181.7	152.3	19
Others	53.1	35.1	51
Ares	120.6	107.5	12
Moris	17.9	16.3	10
Total Company	79.1	61.3	29

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

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

Operating unit ($/tonne)	Unit cost per tonne 2011	Unit cost per tonne 2010	% change
Main operations	83.8	72.5	16
Peru	60.8	53.2	14
Arcata	70.2	65.0	8
Pallancata	54.5	46.2	18
Argentina	169.6	144.1	18
San Jose	169.6	144.1	18
Others	52.1	34.3	52
Ares	118.0	103.6	14
Moris	17.9	16.3	10
Total Company	73.5	57.2	28

Cash costs

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 $9.3 to $13.0 per ounce and from $535 to $613 per ounce, respectively. Silver and gold cash costs from main operations (Arcata, Pallancata and San Jose) increased from $8.7 to $12.0 per ounce and from $504 to $561 per ounce, respectively. The increase in silver cash costs resulted from higher production costs and grade declines at both main Peruvian operations due to the incorporation of lower grade material. In addition, cash costs also increased due to higher precious metal prices causing rises in workers profit sharing contributions, higher commercial discounts and increased export taxes at San Jose.

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 $4.9 per silver ounce (2010:$ 3.0 per silver ounce) and ($1,987) per gold ounce (2010: ($1,153) per gold ounce).

Cash cost reconciliation*:

$000 unless otherwise indicated	Year ended 31 Dec 2011	Year ended 31 Dec 2010	% change
Group Cash Cost	394,225	323,560	22
(+) Cost of sales	404,291	345,667	17
(-) Depreciation in Cost of Sales	(105,085)	(99,498)	6
(+) Selling expenses	38,970	26,920	45
(+) Commercial deductions	56,049	50,471	11
Gold	8,584	9,079	(5)
Silver	47,465	41,392	15
Revenue	987,662	752,322	31
Gold	279,250	243,940	14
Silver	708,328	508,277	39
Others	84	105	(20)
Ounces Sold	21,974	23,702	(7)
Gold	182	196	(7)
Silver	21,792	23,506	(7)
Group Cash Cost ($/oz)
Co product Au	613	535	15
Co product Ag	13.0	9.30	40
By product Au	(1,987)	(1,153)	72
By product Ag	4.88	3.00	63

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

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.

Administrative expenses

Administrative expenses before exceptional items decreased by 3% to $64.4 million (2010: $66.2 million) mainly due to a lower provision for the Long-term Incentive Plan and the elimination of the Voluntary Contribution to the Peruvian Government following a revision to the tax regime in Peru.

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 14% to $47.3 million in 2011 (2010: $41.5 million). Further detail on the exploration programme can be found in the exploration section on page 15.

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 2011, the Group capitalised $13.2 million relating to brownfield exploration compared to $12.0 million in 2010, bringing the total investment in exploration for 2011 to $60.6 million (2010: $53.5 million). In addition, $10.1 million was invested in the Company's Advanced Projects.

Furthermore, in 2011, in line with the Company's strategy to further develop its production assets, capital expenditure on Advanced Projects and current operations included an additional $14 million to convert Inferred resources into Measured and Indicated resources.

Selling expenses

Selling expenses increased to $39.0 million (2010: $26.9 million) mainly as a result of export duties at San Jose, driven by the increase in gold and silver prices (export duties in Argentina are levied at 10% of revenue for concentrate and 5% of revenue for dore).

Other income/expenses

Other income before exceptional items was $7.1 million (2010: $5.6 million), mainly reflecting a $3.3 million export tax credit in Argentina. Other expenses before exceptional items reached $15.8 million (2010: $11.0 million), the principal component being an increase in mine closure provisions of $8.2 million due to the revision of the mine closure plans in all units.

Profit from continuing operations

Profit from continuing operations before exceptional items, net finance costs and income tax increased to $424.0 million (2010: $266.6 million) as a result of the factors detailed above.

Adjusted EBITDA

Adjusted EBITDA increased by 42% over the period to $563.4 million (2010: $397.7 million) driven primarily by higher silver and gold prices.

Adjusted EBITDA is calculated as profit from continuing operations before net finance income/(cost), foreign exchange loss 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 2011	Year ended 31 Dec 2010	% change
Profit from continuing operations before exceptional items, net finance cost, foreign exchange loss and income tax	423,973	266,626	59
Operating margin	43%	35%
Depreciation and amortisation in cost of sales	105,085	99,498	6
Depreciation and amortisation in administrative expenses	1,903	2,048	(7)
Exploration expenses	47,336	41,537	14
Personnel and other exploration related fixed expenses	(14,894)	(11,978)	(24)
Adjusted EBITDA	563,403	397,731	42
Adjusted EBITDA margin	57%	53%

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

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

Hochschild's pre exceptional share of the profit/(loss) after tax of associates totalled $11.7 million in 2011 (2010: ($4.6) million), a result of the gain in the value of the Group's holding of Gold Resource Corp's common shares.

Finance income

Finance income before exceptional items increased by 15% to $4.7 million (2010: $4.1 million) mainly due to the increase of interest received on time deposits.

Finance costs

Finance costs decreased by 28% to $21.3 million in 2011 (2010: $29.5 million). Interest costs decreased to $15.3 million in 2011 (2010: $17.3 million). In addition, finance costs in 2010 included a $7.6 million loss on Zero Cost Collar derivative contracts.

In January 2011 Hochschild repaid in full its syndicated bank loan facility. The Group has no outstanding positions on currency or commodity hedges.

Foreign exchange losses

The Group recognised a foreign exchange loss of $1.6 million (2010: $0.03 million gain) as a result of transactions in currencies other than the functional currency.

Income tax

The Group's pre-exceptional effective tax rate increased to 35.6% in 2011 (2010: 32.9%). This increase is mainly explained by three new taxes introduced in Peru in Q4 2011, the New Mining Royalty ('NMR'), the Special Mining Tax ('SMT') and the Special Mining Assessment ('SMA'); detailed information on these taxes (collectively referred to as the 'New Taxes') is provided below. In addition, in 2011 Hochschild recognised the impact of a withholding tax related to dividends declared from the operating companies to the UK parent company.

Overview of the New Taxes

The application of the New Taxes is dependent on the presence or otherwise of a tax stability agreement with the Peruvian Government. These taxes replace a royalty, (the "Former Royalty") and a Voluntary Contribution (the 'Voluntary Contribution'). The Voluntary Contribution was calculated using a formula which, in the case of Hochschild, is approximate to 1.25% of Net Income.

NMR

The NMR applies to operating assets without stability agreements. It differs from the Former Royalty by changing the basis of calculation from sales to operating income. The NMR is calculated by applying a progressive scale of rates that range from 1% to 12% depending on the level of operating margin. A minimum amount of NMR is payable equivalent to 1% of Revenue. The Former Royalty was accounted for in the Cost of Sales line but the NMR will be accounted for in the Income Tax line.

SMT

The SMT is a new tax, also payable by mining companies with respect to operating assets without stability agreements, and is calculated on the same basis as the NMR. The rate of the SMT ranges from 2% to 8.4% depending on the level of operating margin. Unlike the NMR however, there is no minimum tax payable. The SMT is accounted for in the Income Tax line.

SMA

The SMA is an assessment raised on mining companies with respect to operating assets with stability agreements, to calculate an amount payable to the State on a voluntary basis. The rate used to calculate the assessment ranges from 4% to 13.12% of operating income, depending on the level of operating margin. The SMA is calculated on operating income after the deduction of payments due under the Former Royalty, which continues to be payable.

Hochschild does not have a stability agreement in place for Ares or Pallancata, and is therefore required to pay the NMR and the SMT in respect of those assets. The same will also apply for mines operated by the Company in Peru in the future (for example Inmaculada and Crespo).

In the case of Arcata, having reported to the Government that it waived its tax stability agreement in June 2009, the Company is required to pay the SMT. However the Peruvian Government is yet to confirm the waiver of the stability agreement. Therefore, Arcata will continue to pay the Former Royalty (which is accounted for in the Cost of Sales line).

The NMR and SMT payments will be deductable for the calculation of workers' profit share and Income Tax.

Exceptional items

Exceptional items in 2011 totaled $3.4 million after tax (2010: ($57.8 million). This mainly comprises:

Positive exceptional items:

Main items	$000	Description of main items
Reversal/(Impairment and write-off of assets) (net)	1,210	Corresponds to the reversal of the write-off recorded in 2010 related to the 100% dore project at the San Jose mine.
Finance income	5,989	Corresponds to the gain of $6,386,000 on the sale of the residual stake in Lake Shore Gold, net of the loss generated by the sale of Golden Minerals Company shares of $397,000.

Negative exceptional items:

Main items	$000	Description of main items
Other expenses	(1,408)	The provision of termination benefits due to workers as a result of the closure of the Moris mine.
Share of post tax losses of associates and joint ventures accounted under equity method	(261)	Loss resulting from dilution of holding in Gold Resource Corp.
Loss from changes in the fair value of financial instruments	(2,111)	Mainly corresponds to the fair value adjustment of the warrants in Golden Minerals Company and Iron Creek Capital Corp of $1,563,000 and $139,000 respectively. In addition, this amount includes the impairment of Brionor Resources and Empire Petroleum Corp of $380,000 and $50,000 respectively.

Cash flow & balance sheet review

Cash flow:

$000	Year ended 31 Dec 2011	Year ended 31 Dec 2010	Change
Net cash generated from operating activities	464,110	304,232	159,878
Net cash used in investing activities	(139,898)	198,963	(338,861)
Cash flows generated/(used) in financing activities	(221,901)	(55,010)	(166,891)
Net (decrease)/increase in cash and cash equivalents during the period	102,311	448,185	(345,874)

Operating cashflow increased 53% to $464.1 million from $304.2 million in 2010, mainly due to higher metal prices. Net cash from investing activities decreased to $(139.9) million in 2011 from $199.0 million in 2010, primarily due to the reduction in the Company's holding in Lake Shore Gold during 2010 and planned increases in capital expenditure commitments during 2011 including the costs associated with progressing the Advanced Projects through to feasibility. Finally, cash from financing activities decreased to $(221.9) million from $(55.0) million in 2010, primarily as a result of the prepayment of the syndicated loan ($114.3 million), and incremental dividend payments to Hochschild Mining plc shareholders ($13.5 million in 2011 compared to $20.3 million in 2010) and to IMZ, the Group's joint venture partner in Pallancata ($26.0 million in 2011 compared to $54.0 million in 2010). As a result, total cash generated decreased from $448.2 million in 2010 to $102.3 million in 2011 ($346 million difference).

Working capital

$000	Year ended 31 Dec 2011	Year ended 31 Dec 2010
Trade and other receivables	175,672	182,752
Inventories	53,032	55,130
Net other financial assets / (liabilities)	(12,803)	18,732
Net Income tax receivable / (payable)	(23,859)	(10,977)
Trade and other payables and provisions	(259,907)	(246,781)
Working capital	(67,865)	(1,144)

The Group's working capital position decreased to $(67.8) million in 2011 from $(1.1) million in 2010 primarily due to a decline of $31.5 million that resulted in a net other financial liability position in 2011, driven by a change in the value of embedded derivatives. The decrease was also a result of a higher net income tax position in 2011 compared to 2010 reflecting higher commodity prices, and higher trade and other payables and provisions in 2011 compared to 2010, due to higher workers profit sharing and mine closure provisions.

Net cash

$000	Year ended Dec 2011	Year ended 31 Dec 2010
Cash and cash equivalents	627,481	525,482
Long term borrowings	(104,866)	(248,380)
Short term borrowings*	(46,334)	(69,272)
Net cash	476,281	207,830

*Includes pre-shipment loans which were previously reported under working capital.

The Group reported net cash of $476.3 million as at 31 December 2011 (2010: $207.8 million). This was primarily driven by the increase in cash and cash equivalents from operating activities (of $102.0 million) and the decrease in long term and short term borrowings. In January 2011, the Group paid down in full its syndicated loan facility of $114.3 million.

In October 2011, the Group's 51% owned Joint Venture entity in Argentina repaid the entire outstanding principal and accrued interest on its shareholder and project finance loans. Hochschild received net proceeds of approximately $96 million from this repayment, consisting of approximately $66 million from the repayment of the project finance loan and approximately $30 million from the shareholder loan. Hochschild's joint venture partner, McEwen Mining Inc (formerly named Minera Andes Inc), received net proceeds of approximately $29 million from this repayment.

The Company's Convertible Bond has a conversion price (before adjustment for the recommended dividend) of £3.94 and allows the Company to force conversion of the bonds at any time after 20 October 2012 if, on each of at least 20 dealing days out of 30 consecutive dealing days, the Company's share price exceeds 130% of the conversion price (currently £5.12).

Capital expenditure¹

$000	Year ended 31 Dec 2011	Year ended 31 Dec 2010²
Arcata	33,040	30,230
Ares	2,673	5,422
Selene	4,570	5,839
Pallancata	50,489	38,116
San Jose	62,994	55,183
Moris	555	2,728
Inmaculada	19,447	-
Crespo	10,232	2,738
Azuca	31,641	13,741
Other	2,306	2,486
Total	217,947	156,483

¹ Includes additions in property, plant and equipment and evaluation and exploration assets (confirmation of resources) and excludes increases in the closure of mine assets.

²Additions of $90.6 million in respect of the acquisition of Inmaculada is not reflected in this table.

2011 capital expenditure of $217.9 million (2010: $156.5 million) includes operating capex of $141.4 million, capitalised exploration costs of $13.2 million in respect of the Group's operating mines, $61.3 million capitalised in respect of Advanced Projects (Inmaculada, Crespo and Azuca) and administrative capex of $2.0 million.

Capital expenditure at Pallancata rose by $12.4 million in 2011 due to higher mine development costs reflecting an increase in mined areas developed, and higher mine contractors' rates. The construction of a new tailings dam and higher equipment costs also contributed to the rise.

Capital expenditure at San Jose increased by $7.8 million in 2011, reflecting local inflation in mine development costs.

Dividends

The directors recommend a final dividend of $0.03 per ordinary share which, subject to shareholder approval at the 2012 AGM, will be paid on 29 May 2012 to those shareholders appearing on the register on 4 May 2012. 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	2012
Ex-dividend date	2 May
Record date	4 May
Deadline for return of currency election forms	9 May
Payment date	29 May

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.

⁵ Cash costs are calculated to include cost of sales, treatment charges, and selling expenses before exceptional items less depreciation included in cost of sales.

⁶ Please note that all mineralised intersections in this release are quoted as down-hole lengths, not true widths.

⁷ Please note that all mineralised intersections in this release are quoted as down-hole lengths, not true widths.

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

⁹ Amount disclosed refers to expenditure from the Group's exploration budget and does not include expenditure from the operational budget.

¹⁰Total resources here exclude base metal resources

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

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

¹³Please 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.

Consolidated income statement

For the year ended 31 December 2011

		Year ended 31 December 2011			Year ended 31 December 2010
	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	987,662	-	987,662	752,322	-	752,322
Cost of sales	6, 11	(404,291)	-	(404,291)	(345,667)	(8,861)	(354,528)
Gross profit		583,371	-	583,371	406,655	(8,861)	397,794
Administrative expenses	7	(64,354)	-	(64,354)	(66,221)	-	(66,221)
Exploration expenses	8	(47,336)	-	(47,336)	(41,537)	-	(41,537)
Selling expenses	9	(38,970)	-	(38,970)	(26,920)	-	(26,920)
Other income	11	7,062	-	7,062	5,605	77,197	82,802
Other expenses	11	(15,800)	(1,408)	(17,208)	(10,956)	-	(10,956)
Impairment and write-off of assets (net)	11	-	1,210	1,210	-	(24,018)	(24,018)
Profit from continuing operations before net finance income/(cost), foreign exchange loss and income tax		423,973	(198)	423,775	266,626	44,318	310,944
Share of post tax profit/(losses) of associates and joint ventures accounted under equity method	11,17	11,707	(261)	11,446	(4,607)	(1,473)	(6,080)
Finance income	11,12	4,689	5,989	10,678	4,140	9,204	13,344
Finance costs	11,12	(21,331)	(2,111)	(23,442)	(29,542)	-	(29,542)
Foreign exchange loss		(1,562)	-	(1,562)	29	-	29
Profit from continuing operations before income tax		417,476	3,419	420,895	236,646	52,049	288,695
Income tax (expense)/benefit	13	(148,557)	-	(148,557)	(77,816)	5,786	(72,030)
Profit for the year from continuing operations		268,919	3,419	272,338	158,830	57,835	216,665
Attributable to:
Equity shareholders of the Company		165,890	2,826	168,716	94,924	61,687	156,611
Non-controlling interests		103,029	593	103,622	63,906	(3,852)	60,054
		268,919	3,419	272,338	158,830	57,835	216,665
Basic earnings per Ordinary Share from continuing operations for the year (expressed in US dollars per share)	14	0.49	0.01	0.50	0.28	0.18	0.46
Diluted earnings per Ordinary Share from continuing operations for the year (expressed in US dollars per share)	14	0.49	0.01	0.50	0.29	0.17	0.46

Consolidated statement of comprehensive income

For the year ended 31 December 2011

		Year ended 31 December
	Notes	2011 US$000	2010 US$000
Profit for the year		272,338	216,665
Other comprehensive income
Recycling of the exchange differences on translating foreign operations due to Lake Shore Gold sale		-	2,143
Exchange differences on translating foreign operations		(1,143)	2,982
Change in fair value of available-for-sale financial assets	18	(33,078)	47,573
Recycling of the gain on available-for-sale financial assets		(6,836)	(5,915)
Change in fair value of cash flow hedges taken to equity		-	(2,346)
Recycling of the change in fair value of cash flow hedges taken to equity		1,930	429
Deferred income tax relating to components of other comprehensive income	13	7,164	(7,189)
Other comprehensive income for the period, net of tax		(31,963)	37,677
Total comprehensive income for the year		240,375	254,342
Total comprehensive income attributable to
Equity shareholders of the Company		136,689	194,288
Non-controlling interests		103,686	60,054
		240,375	254,342

Consolidated statement of financial position

As at 31 December 2011

	Notes	As at 31 December 2011 US$000	As at 31 December 2010 US$000
ASSETS
Non-current assets
Property, plant and equipment¹	15	461,554	406,914
Evaluation and exploration assets¹	16	274,507	212,080
Intangible assets		18,772	20,166
Investments accounted under equity method	17	83,201	79,068
Available-for-sale financial assets	18	40,769	153,620
Trade and other receivables		8,741	36,817
Income tax receivable		-	2,401
Deferred income tax assets		-	5,229
		887,544	916,295
Current assets
Inventories		53,032	55,130
Trade and other receivables		166,931	145,935
Income tax receivable		601	917
Other financial assets		28	20,662
Cash and cash equivalents	19	627,481	525,482
		848,073	748,126
Total assets		1,735,617	1,664,421
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)	-
Other reserves		(207,117)	(175,244)
Retained earnings		677,218	528,788
		1,023,768	908,109
Non-controlling interests		195,299	147,120
Total equity		1,219,067	1,055,229
Non-current liabilities
Trade and other payables		8	2,393
Borrowings	20	104,866	248,380
Provisions	21	68,430	86,443
Deferred income tax liabilities		68,152	28,534
		241,456	365,750
Current liabilities
Trade and other payables		117,037	116,074
Other financial liabilities		12,831	1,930
Borrowings	20	46,334	69,272
Provisions	21	74,432	41,871
Income tax payable		24,460	14,295
		275,094	243,442
Total liabilities		516,550	609,192
Total equity and liabilities		1,735,617	1,664,421

1 31 December 2010 figures are subject to a reclassification as disclosed in note 2(z).

These financial statements were approved by the Board of Directors on 19 March 2012 and signed on its behalf by:

Ignacio Bustamante

Chief Executive Officer

19 March 2012

Consolidated statement of cash flow

For the year ended 31 December 2011

		Year ended 31 December
	Notes	2011 US$000	2010 US$000
Cash flows from operating activities
Cash generated from operations		520,262	351,261
Interest received		13,690	1,749
Interest paid		(29,474)	(20,604)
Payment of mine closure costs	21	(4,113)	(4,634)
Tax paid		(36,255)	(23,540)
Net cash generated from operating activities		464,110	304,232
Cash flows from investing activities
Purchase of property, plant and equipment		(140,004)	(122,836)
Purchase of evaluation and exploration assets		(73,010)	(35,980)
Proceeds from sale of investment in associates		-	383,614
Acquisition of subsidiary	4(a)	(15,594)	-
Dividends received from associates		6,603	2,633
Investment in associates		-	(20,336)
Purchase of available-for-sale financial assets		(491)	(20,785)
Purchase of intangibles		-	(94)
Proceeds from sale of available-for-sale financial assets		82,485	11,915
Proceeds from sale of property, plant and equipment		113	832
Net cash (used in)/generated from investing activities		(139,898)	198,963
Cash flows from financing activities
Proceeds of borrowings		117,670	37,650
Repayment of borrowings		(272,379)	(52,447)
Transaction costs associated with borrowing		-	(690)
Purchase of treasury shares		(898)	-
Dividends paid	22	(74,285)	(39,523)
Capital contribution from non-controlling interests		7,991	-
Cash flows (used in)/generated from financing activities		(221,901)	(55,010)
Net increase/(decrease) in cash and cash equivalents during the year		102,311	448,185
Exchange difference		(312)	(547)
Cash and cash equivalents at beginning of year		525,482	77,844
Cash and cash equivalents at end of year	19	627,481	525,482

Consolidated statement of changes in equity

For the year ended 31 December 2011

					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 2010		158,637	395,928	-	3,339	(13)	8,432	(14,633)	(210,046)	-	(212,921)	385,700	727,344	76,126	803,470
Other comprehensive income/(loss)		-	-	-	34,469	(1,917)	-	5,125	-	-	37,677	-	37,677	-	37,677
Profit for the year		-	-	-	-	-	-	-	-	-	-	156,611	156,611	60,054	216,665
Total comprehensive income for 2010		-	-	-	34,469	(1,917)	-	5,125	-	-	37,677	156,611	194,288	60,054	254,342
Capital contribution from non-controlling interests		-	-	-	-	-	-	-	-	-	-	-	-	36,940	36,940
Dividends declared during the year	22	-	-	-	-	-	-	-	-	-	-	(13,523)	(13,523)	-	(13,523)
Dividends paid to non-controlling interests	22	-	-	-	-	-	-	-	-	-	-	-	-	(26,000)	(26,000)
Balance at 31 December 2010		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 provision		-	-	-	-	-	-	-	-	154	154	-	154	-	154
Treasury shares		-	-	(898)	-	-	-	-	-	-	-	-	(898)	-	(898)
Dividends declared during the year	22	-	-	-	-	-	-	-	-	-	-	(20,286)	(20,286)	-	(20,286)
Dividends declared to non-controlling interests	22	-	-	-	-	-	-	-	-	-	-	-	-	(63,498)	(63,498)
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

1 Notes to the consolidated financial statements

For the year ended 31 December 2011

The financial information for the year ended 31 December 2011 and 2010 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 2011 and 2010 have been extracted from the consolidated financial statements of Hochschild Mining plc for the year ended 31 December 2011 which have been approved by the directors on 19 March 2012 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 24 "Related Party Transactions (Amendment)", applicable for annual periods beginning on or after 1 January 2011.

The IASB has issued an amendment to IAS 24 that clarifies the definitions of a related party. The new definitions emphasise a symmetrical view of related party relationships as well as clarifying in which circumstances persons and key management personnel affect related party relationships of an entity. Secondly, the amendment introduces an exemption from the general related party disclosure requirements for transactions with a government and entities that are controlled, jointly controlled or significantly influenced by the same government as the reporting entity. The adoption of the amendment did not have any impact on the financial position or performance of the Group.

· IAS 32 "Financial Instruments: Presentation - Classification of Rights Issues", applicable for annual periods beginning on or after 1 February 2010.

The amendment changed the definition of a financial liability in order to classify rights issues (and certain options or warrants) as equity instruments in cases where such rights are given pro rata to all of the existing owners of the same class of an entity's non-derivative equity instruments, or to acquire a fixed number of the entity's own equity instruments for a fixed amount in any currency. This amendment did not have any impact on the Group after initial application.

· IFRIC 14 "Prepayments of a minimum funding requirement (Amendment)", applicable for annual periods beginning on or after 1 January 2011.

The amendment provides guidance on assessing the recoverable amount of a net pension asset. The amendment permits an entity to treat the prepayment of a minimum funding requirement as an asset. The amendment did not have any impact on the financial statements of the Group.

· IFRIC 19 "Extinguishing Financial Liabilities with Equity Instruments", applicable for annual periods beginning on or after 1 July 2010.

The interpretation clarifies that equity instruments issued to a creditor to extinguish a financial liability qualify as consideration paid. The equity instruments issued are measured at their fair value. In case this cannot be reliably measured, they are measured at the fair value of the liability extinguished. Any gain or loss is recognised immediately in profit or loss. The adoption of this interpretation did not have any effect on the financial statements of the Group.

· "Improvements to IFRSs (issued in May 2010)", applicable for annual periods beginning on or after 1 July 2010 or 1 January 2011.

The IASB issued Improvements to IFRSs, an omnibus of amendments to its IFRS standards including IFRS 3 Business Combinations, IFRS 7 Financial Instruments - Disclosures, IAS1 Presentation of Financial Statements and IAS 34 Interim Financial Statements.

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 José, which generates revenue from the sale of gold, silver and concentrate.

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

· Exploration, which explores and evaluates areas of interest in brownfield and greenfield sites with the 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 - for the year 2011 the amount disclosed includes the profit or loss generated by Empresa de Transmision 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 which, a consequence, is not considered to be a reportable segment . For the year 2010 the amount disclosed includes the profit or loss generated by Empresa de Transmision Callalli S.A.C. (a power generation company), Servicios Corporativos Hochschild Mining Mexico S.A. de C.V. (a service company in Mexico), and the Selene mine.

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

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

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

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

(a) Reportable segment information

	Ares US$000	Arcata US$000	Pallancata US$000	San José 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/(loss) 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)
Impairment	-	-	-	-	-	-	-	-	-

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 cost 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 José 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.

	Ares US$000	Arcata US$000	Pallancata US$000	San José US$000	Moris US$000	Exploration US$000	Other¹ US$000	Adjustment and eliminations US$000	Total US$000
Year ended 31 December 2010
Revenue for external customers	56,824	181,778	261,877	220,825	30,899	-	119	-	752,322
Inter segment revenue	-	-	-	-	-	-	6,992	(6,992)	-
Total revenue	56,824	181,778	261,877	220,825	30,899	-	7,111	(6,992)	752,322

Segment profit/(loss)²	15,053	104,677	158,528	92,804	766	(49,277)	5,030	1,756	329,337
Others³									(40,642)
Profit/(loss) from continuing operations before income tax									288,695

Other segment information
Depreciation⁴	(2,788)	(18,214)	(33,939)	(34,730)	(10,865)	(218)	(1,692)	-	(102,446)
Amortisation	-	-	-	(2,067)	-	-	(301)	-	(2,368)
Impairment	(42)	(1,328)	(102)	(6,728)	-	(15,464)	(354)	-	(24,018)

Assets
Capital expenditure	5,422	30,230	43,955	55,183	2,728	108,218	2,305	-	248,041

Current assets	4,661	20,934	69,968	39,739	7,295	11	1,926	-	144,534
Other non-current assets⁵	9,670	82,983	127,869	210,010	1,428	194,111	12,939	-	639,010
Total segment assets	14,331	103,917	197,837	249,749	8,723	194,122	14,865	-	783,544
Not reportable assets⁶	-	-	-	-	-	-	880,877	-	880,877
Total assets	14,331	103,917	197,837	249,749	8,723	194,122	895,742	-	1,664,421

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

2 Segment profit for the operating segments Ares, Arcata, Selene and Pallancata includes an exceptional item in cost of sales of US$8,861,000 (refer to note 6(1)).

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

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

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

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

(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
	2011 US$000	2010 US$000
External customer
USA	153,301	147,701
Peru	82,223	158,540
Canada	148,023	137,713
Germany	185,447	128,834
Switzerland	152,612	88,457
United Kingdom	50,540	38,802
Korea	215,516	52,275
Total	987,662	752,322
Inter-segment
Peru	667	882
Mexico	7,299	6,110
Total	995,628	759,314

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 2011			Year ended 31 December 2010
	US$000	% Revenue	Segment	US$000	% Revenue	Segment
Aurubis AG (formerly Nordeutsche Affinerie AG)	185,447	19%	Pallancata and San José	128,834	17%	Selene Pallancata San José
LS Nikko	176,397	18%	Pallancata and San José	52,275	7%	Pallancata and San José
Teck Metals Ltd. (formerly Teck Cominco Metals Ltd)	148,023	15%	Pallancata and San José	137,713	18%	Arcata Pallancata
Johnson Matthey Inc.	96,293	10%	Ares Arcata San José and Moris	79,384	11%	Ares Arcata San José Moris
Consorcio Minero S.A.	82,174	8%	Arcata and San José	158,464	21%	Arcata San José

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
	2011 US$000	2010 US$000
Peru	496,395	399,905
Argentina	231,892	210,265
Mexico	26,224	28,699
Chile	146	68
United Kingdom	83,377	79,291
Total non-current segment assets	838,034	718,228
Available-for-sale financial assets	40,769	153,620
Trade and other receivables	8,741	36,817
Deferred income tax assets	-	5,229
Income tax receivable	-	2,401
Total non-current assets	887,544	916,295

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.

Gold Resource Corporation

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

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

At 31 December 2011 the Group´s ownership in Gold Resource Corp. is 25.2% on a fully diluted basis.

(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 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 holds approximately a 5.4% interest, no longer has Board representation and no longer exercises 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 (approximately 5.4% interest in Lake Shore Gold on a fully diluted basis) 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

	As at 31 December
	2011 US$000	2010 US$000
Gold (from doré bars)	144,812	125,613
Silver (from doré bars)	155,122	98,431
Gold (from concentrate)	134,438	118,327
Silver (from concentrate)	553,206	409,846
Services	84	105
Total	987,662	752,322

Included within revenue is a gain of US$12,395,086 relating to provisional pricing adjustments representing the change in the fair value of embedded derivatives (2010: gain of US$60,473,436) arising on sales of concentrates and doré.

6 Cost of sales

Included in cost of sales are:

	Year ended 31 December
	2011 US$000	2010 US$000
Depreciation and amortisation	105,897	102,705
Personnel expenses¹ (note 10)	109,011	97,055
Mining royalty (note 24)	17,950	15,091
Change in products in process and finished goods	6,893	(3,609)

1 2010 personnel expenses amount includes an exceptional item that corresponds to a one-off bonus paid to the mining workers in Peru, relating to 2009, of US$8,861,000.

7 Administrative expenses

	Year ended 31 December
	2011 US$000	2010 US$000
Personnel expenses	32,376	34,337
Professional fees	6,256	9,557
Social and community welfare expenses¹	7,717	6,686
Lease rentals	1,088	1,176
Travel expenses	1,878	1,756
Communications	823	133
Indirect taxes	3,147	2,008
Depreciation	1,869	1,747
Amortisation of software licences	34	301
Contribution to Peruvian Government	26	1,814
Technology and systems	565	1,354
Security	457	437
Supplies	453	250
Other	7,665	4,665
Total	64,354	66,221

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

8 Exploration expenses

	Year ended 31 December
	2011 US$000	2010 US$000
Mine site exploration¹
Arcata	4,512	2,476
Ares	2	-
Pallancata	2,917	3,742
San José	1,612	2,153
	9,043	8,371
Prospects²
Peru	2,952	5,292
Argentina	3,534	2,767
Mexico	2,419	1,485
Chile	6,558	7,607
	15,463	17,151
Generatives³
Peru	7,093	3,356
Argentina	117	46
Mexico	562	460
Chile	164	175
	7,936	4,037
Personnel	10,882	7,851
Others	4,012	4,127
Total	47,336	41,537

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. Once an inferred resource has been identified, costs incurred converting it to indicated and measured resources are capitalised.

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: detail mapping, detail 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
	2011 US$000	2010 US$000
Liabilities related to exploration activities	1,808	1,117

Cash flows of exploration activities are as follows:

	As at 31 December
	2011 US$000	2010 US$000
Payments	22,708	21,036

9 Selling expenses

	As at 31 December
	2011 US$000	2010 US$000
Transportation of doré, concentrate and maritime freight	5,215	7,559
Sales commissions	3,300	1,466
Personnel expenses	340	296
Warehouse services	27,151	15,146
Other	2,964	2,453
Total	38,970	26,920

10 Personnel expenses¹

	As at 31 December
	2011 US$000	2010 US$000
Salaries and wages	90,061	77,803
Workers' profit sharing	31,444	22,830
Other legal contributions	17,780	15,215
Statutory holiday payments	6,202	5,406
Long-term incentive plan	2,574	6,975
Termination benefits	2,232	2,768
Other	12,170	14,307
Total	162,463	145,304

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$109,011,000 (2010: US$97,055,000), US$32,376,000 (2010: US$34,337,000), US$10,882,000 (2010: US$7,851,000), US$340,000 (2010: US$296,000) and US$9,854,000 (2010: US$5,765,000) respectively.

Average number of employees for 2011 and 2010 were as follows:

	As at 31 December
	2011	2010
Peru	2,402	2,323
Argentina	1,188	1,083
Mexico	148	160
Chile	28	19
United Kingdom	11	9
Total	3,777	3,594

11 Pre-tax exceptional items

	Year ended 31 December 2011 US$000	Year ended 31 December 2010 US$000
Cost of sales:
Personnel expenses (note 6(1))	-	(8,861)
Total	-	(8,861)
Other income:
Gain on sale of investment in El Quevar¹	-	6,010
Gain on sale of investment in Zincore Metals Inc.²	-	7,533
Gain on sale of investment in Lake Shore Gold³	-	63,654
Total	-	77,197
Other expenses:
Termination benefits⁴	(1,408)	-
Total	(1,408)	-
Impairment and write-off of assets (net):
Impairment and write-off of assets⁵	-	(24,018)
Reversal of write-off of assets⁶	1,210	-
Total	1,210	(24,018)
Share of post tax losses of associates and joint ventures accounted under equity method	(261)	(1,473)
Total	(261)	(1,473)
Finance income:
Gain on sale and exchange of available-for-sale financial assets⁷	5,989	5,915
Gain from changes in the fair value of financial instruments⁸	-	3,289
Total	5,989	9,204
Finance expenses:
Loss from changes in the fair value of financial instruments⁹	(2,111)	-
Total	(2,111)	-

1 Corresponds to the gain generated from the sale of the Group´s interest in the El Quevar project in Argentina in exchange for 400,000 common shares and a warrant to purchase 300,000 common shares of Golden Minerals at a price per share of US$15.

2 Corresponds to the gain generated from the sale of the Group´s interest in Zincore Metals Inc. to Inversiones Pacasmayo S.A., a related party of the Group.

3 Corresponds to the gain generated from the sale of 109,000,000 Lake Shore Gold shares on 3 November 2010.

4 Relates to the provision of termination benefits due to workers as a result of the closure of Moris mine.

5 Mainly comprises the effects of the result of the physical verification exercise performed every three years at the Peruvian unit mines which resulted in a write-off in the Ares mine unit of US$1,727,000 and in the Pallancata mine unit of US$102,000. In addition, includes a write off of US$12,000 in México, US$747,000 in Peru related to the Crespo project and US$6,728,000 in Argentina related to the proposed conversion of San José's production to doré only. In 2010, the Group has impaired the San Felipe property by US$14,702,000. The impairment was triggered by the conclusion of the marketing process conducted during the year and reflects the Company's estimate of the recoverable amount.

6 Corresponds to the reversal of the write-off recorded in 2010 related to the 100% doré project in the San José mine.

7 In 2011 the 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. In 2010 the amount corresponds to the gain on sale of Golden Minerals and Fortuna River shares of US$5,833,000 and US$53,000 respectively, net of the loss generated by the sale of Dia Bras Exploration and Lara Explorations Ltd shares of US$152,000 and US$21,000 respectively, and the gain for receiving shares of International Minerals Corporation due to the merger with Ventura Gold Corp of US$202,000.

8 In 2010 the amount corresponds to the gain from change in the fair value of Golden Minerals Company and Iron Creek Capital Corp warrants of US$2,972,000 and US$168,000 respectively. In addition includes US$149,000 related to the fair value adjustment on acquisition of International Minerals shares on November 2010

9 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 2011 Before exceptional items US$000	Year ended 31 December 2010 Before exceptional items US$000
Finance income:
Interest on deposits and liquidity funds¹	2,225	350
Interest on loans to non-controlling interests¹	2,352	2,514
Change in discount rate	-	283
Other	112	993
Total	4,689	4,140
Finance costs:
Interest on bank loans and long-term debt¹ (note 20)	(6,517)	(8,744)
Interest on convertible bond¹ (note 20)	(8,760)	(8,588)
Unwind of discount rate	(1,684)	(538)
Loss from changes in the fair value of financial instruments	(1,810)	(9,094)
Other	(2,560)	(2,578)
Total	(21,331)	(29,542)

1 Interest income and expense from assets and liabilities that are not at fair value through the profit and loss are as follows:

	As at 31 December
	2011 US$000	2010 US$000
Interest income from financial assets that are not at fair value through the profit and loss	4,577	2,864
Interest expense from financial liabilities that are not at fair value through the profit and loss	(15,277)	(17,332)
Total	(10,700)	(14,468)

13 Income tax expense

	Year ended 31 December 2011			Year ended 31 December 2010
	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	86,154	-	86,154	50,138	(2,659)	47,479
Current mining royalty charge (note 24)	2,536	-	2,536	-	-	-
Current special mining tax charge (note 24)	3,002	-	3,002	-	-	-
Withholding taxes	4,963	-	4,963	513	-	513
	96,655	-	96,655	50,651	(2,659)	47,992
Deferred taxation:
Origination and reversal of temporary differences from continuing operations	54,277	-	54,277	41,690	(3,127)	38,563
Recognition of deferred tax not previously recognised following a change in estimate/outlook	(2,375)	-	(2,375)	(14,525)	-	(14,525)
	51,902	-	51,902	27,165	(3,127)	24,038
Total taxation charge in the income statement	148,557	-	148,557	77,816	(5,786)	72,030

The weighted average statutory income tax rate was 31.8% for 2011 and 31.4% for 2010. 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
	2011 US$000	2010 US$000
Deferred taxation:
Deferred income tax relating to fair value gains on available-for-sale financial assets	(7,164)	7,189
Total tax charge in the statement of other comprehensive income	(7,164)	7,189

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
	2011 US$000	2010 US$000
Profit from continuing operations before income tax	420,895	288,695
At average statutory income tax rate of 31.8% (2010: 31.4%)	133,881	90,594
Expenses not deductible for tax purposes	2,742	2,250
Non-taxable income¹	(3,096)	(17,976)
Recognition of previously unrecognised deferred tax assets²	(2,375)	(14,525)
Non-taxable share of losses/(gains) of associates	(3,033)	1,702
Net deferred tax assets generated in the year not recognised	8,636	8,179
Deferred tax recognised on special investment regime	(2,092)	(1,017)
Derecognition of deferred income tax assets	5,981	-
Adjustment of tax base of Minera Quellopata S.A.C	(2,692)	-
Withholding tax	4,963	513
Special mining tax and new royalty³	5,538	-
Foreign exchange rate effect⁴	4,532	(430)
Other	(4,428)	2,740
At average effective income tax rate of 35.3% (2010: 25.0%)	148,557	72,030
Taxation charge attributable to continuing operations	148,557	72,030
Total taxation charge in the income statement	148,557	72,030

1 Mainly corresponds to the non taxable gain on the sale of Lake Shore Gold shares of US$1,692,000 (2010: US$17,743,000).

2 In 2011 mainly corresponds to the recognition of previously unrecognised mine closure provision of US$8,278,000. In 2010, mainly corresponded to the use of previously unrecognised tax losses.

3 Corresponds to the effect generated by the new mining royalty and special mining tax (note 24).

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 2011 and 2010, EPS has been calculated as follows:

	As at 31 December
	2011	2010
Basic and earnings per share from continuing operations:
Before exceptional items (US$)	0.49	0.28
Exceptional items (US$)	0.01	0.18
Total for the year and from continuing operations (US$)	0.50	0.46
Diluted earnings per share from continuing operations:
Before exceptional items (US$)	0.49	0.29
Exceptional items (US$)	0.01	0.17
Total for the year and from continuing operations (US$)	0.50	0.46

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

	As at 31 December
	2011	2010
Profit for the year from continuing operations (US$000)	272,338	216,665
Less non-controlling interests (US$000)	(103,622)	(60,054)
Profit attributable to equity holders of the parent - continuing operations (US$000)	168,716	156,611
Exceptional items after tax - attributable to equity holders of the parent (US$000)	(2,826)	(61,687)
Profit from continuing operations before exceptional items attributable to equity holders of the parent (US$000)	165,890	94,924
Interest on convertible bond (US$000)	8,760	8,588
Diluted profit from continuing operations before exceptional items attributable to equity holders of the parent (US$000)	174,650	103,512

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

	As at 31 December
	2011	2010
Basic weighted average number of ordinary shares in issue (thousands)	338,022	338,085
Dilutive potential ordinary shares related to convertible bond (thousands)	18,161	18,161
Diluted weighted average number of ordinary shares in issue and dilutive potential ordinary shares (thousands)	356,183	356,246

15 Property, plant and equipment

	Mining properties and development costs US$000	Land and buildings US$000	Plant and equipment¹ US$000	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-off	(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-off	(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

1 The carrying value of plant and equipment held under finance leases at 31 December 2011 was US$5,741,000 (2010: US$7,936,000). Additions during the year included US$900,000 (2010: US$1,239,000) 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 2011

	Mining properties and development costs US$000		Land and buildings US$000	Plant and equipment US$000	Vehicles US$000	Mine closure asset US$000	Construction in progress and capital advances US$000	Total US$000
Year ended 31 December 2010
Cost
At 1 January 2010		283,887	109,127	215,577	3,708	55,131	59,284	726,714
Reclassification		(60,173)	-	-	-	-	-	(60,173)
Restated balance at 1 January 2010		223,714	109,127	215,577	3,708	55,131	59,284	666,541
Additions		71,473	80	14,138	14	1,081	39,572	126,358
Acquisition of subsidiary		-	-	5	-	-	-	5
Change in discount rate		-	-	-	-	989	-	989
Disposals		-	-	(1,498)	(448)	-	-	(1,946)
Transfer of leases		-	-	(717)	-	-	-	(717)
Write-off		(934)	(2,705)	(7,624)	(43)	-	(6,803)	(18,109)
Change in mine closure estimate		-	-	-	-	(1,108)	-	(1,108)
Transfers and other movements		273	14,438	15,068	366	-	(30,145)	-
Transfer from evaluation and exploration assets		4,249	-	-	-	-	-	4,249
Foreign exchange		1,096	8	(61)	9	-	17	1,069
At 31 December 2010		299,871	120,948	234,888	3,606	56,093	61,925	777,331
Accumulated depreciation and impairment
At 1 January 2010		135,750	37,667	74,768	1,541	36,932	1,098	287,756
Reclassification		(9,904)	-	-	-	-	-	(9,904)
Restated balance at 1 January 2010		125,846	37,667	74,768	1,541	36,932	1,098	277,852
Depreciation for the year		54,027	17,976	26,201	408	3,834	-	102,446
Write-off		(201)	(2,657)	(5,911)	(24)	-	-	(8,793)
Disposals		-	-	(648)	(373)	-	-	(1,021)
Transfer of leases		-	-	(123)	-	-	-	(123)
Foreign exchange		-	1	45	10	-	-	56
At 31 December 2010		179,672	52,987	94,332	1,562	40,766	1,098	370,417
Net book amount at 31 December 2010		120,199	67,961	140,556	2,044	15,327	60,827	406,914

16 Evaluation and exploration assets

	Azuca US$000	Crespo US$000	Inmaculada US$000	San Felipe US$000	Others US$000	Total US$000
Cost
Balance at 1 January 2010	7,079	1,238	-	53,185	10,857	72,359
Reclassification	8,076	52,097	-	-	-	60,173
Restated balance at 1 January 2010	15,155	53,335	-	53,185	10,857	132,532
Additions	13,162	2,436	91,507	581	15,078	122,764
Foreign exchange	-	-	-	3,058	-	3,058
Transfers to property, plant and equipment	22	-	-	-	(4,271)	(4,249)
Balance at 31 December 2010	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 from/(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
Accumulated impairment
Balance at 1 January 2010	-	-	-	15,360	1,171	16,531
Reclassification	-	9,904	-	-	-	9,904
Restated balance at 1 January 2010	-	9,904	-	15,360	1,171	26,435
Impairment	-	-	-	14,702	-	14,702
Foreign exchange	-	-	-	888	-	888
Balance at 31 December 2010	-	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
Net book value as at 31 December 2010	20,263	53,943	91,507	25,874	20,493	212,080
Net book value as at 31 December 2011	58,331	55,514	108,677	25,000	26,985	274,507

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

17 Investments accounted under equity method
(a) Gold Resource Corp.

The Group has a 25.2% interest 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.

At 31 December 2011, the capital and reserves were US$132,582,000, and US$3,978,000 (loss on currency translation) respectively.

The profit of the period was US$46,464,000.

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

	Year ended 31 December
	2011 US$000	2010 US$000
Share of the associate's statement of financial position:
Current assets	20,258	15,087
Non-current assets	57,919	56,065
Current liabilities	(7,605)	(1,632)
Non-current liabilities	(11,727)	(14,808)
Net assets	58,845	54,712
Goodwill on acquisition	24,356	24,356
Share of the associate's revenue, profit and loss:
Revenue	26,496	3,730
Profit/(losses)¹	11,446	3,711
Carrying amount of the investment	83,201	79,068

1 Share of the associate's profit in 2011 includes (1) a pre-exceptional gain from the Group's share in the results of the period of Gold Resource Corp. of US$11,707,000 (2010: loss of US$3,171,000) and (2) an exceptional loss from dilution of US$261,000 (2010: gain of US$6,882,000).

(b) Lake Shore Gold Corp.

The profit and loss effect in 2010 was a loss of US$9,785,000 which included (1) a pre-exceptional loss from the Group's share in the results of the period of Lake Shore Gold of US$1,430,000, (2) an exceptional loss from dilution of the Group's interest from 35.9% to 35.7% on 30 June 2010 of US$2,021,000, (3) an exceptional gain from dilution of the Group's interest from 35.7% to 33.6% on 10 September 2010 of US$3,817,000 and (4) an exceptional loss from dilution of the Group's interest from 33.6% to 32.7% on 6 October 2010 of US$10,151,000.

18 Available-for-sale financial assets

	Year ended 31 December
	2011 US$000	2010 US$000
Beginning balance	153,620	19,185
Additions¹	2,910	25,786
Impairment	(198)	-
Fair value change recorded in equity	(33,078)	47,573
Disposals²	(82,485)	(11,924)
Reclassification from investments accounted under equity method³	-	73,000
Ending balance	40,769	153,620

1 The 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 Explained by the sale of: (i) 21,540,992 shares of Lake Shore Gold Corp, and (ii) 104,889 shares of Golden Minerals Company. In 2010 corresponds to the sale of: (i) 663,600 shares of Fortuna River, (ii) 3,751,047 shares of Dia Bras Exploration, (iii) 495,200 shares of Lara Explorations Ltd. and (iv) 400,000 shares of Golden Minerals.

3 Corresponds to the reclassification of the Group's Lake Shore Gold shares from investments accounted under equity method to available-for-sale financial assets as at 31 December 2010, as the Group no longer had significant influence over this company.

Available-for-sale financial assets include the following:

	Year ended 31 December
	2011 US$000	2010 US$000
Equity securities - quoted Canadian companies	27,175	131,603
Equity securities - quoted US companies	31	39
Equity securities - quoted British companies	1,722	8,397
Equity securities - unquoted¹	11,841	13,581
Total	40,769	153,620

1 Includes Pembrook Mining Corp and Electrum Capital 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:

	2011 US$000	2010 US$000
Canadian dollars	39,016	145,184
US dollars	31	39
Pounds sterling	1,722	8,397
Total	40,769	153,620

19 Cash and cash equivalents

	As at 31 December
	2011 US$000	2010 US$000
Cash at bank	349	694
Liquidity funds¹	370,021	424,049
Current demand deposit accounts²	45,030	44,346
Time deposits³	212,081	56,393
Cash and cash equivalents considered for the statement of cash flows	627,481	525,482

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 between 5 to 24 days as at 31 December 2011 (2010: between 33 and 56 days). In addition, liquidity funds include US Treasury bonds amounting to US$199,924,000.

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

3 These deposits have an average maturity from 10 to 83 days (2010: 1 to 30 days).

20 Borrowings

					As at 31 December
			2011			2010
	EIR	Non- current US$000	Current US$000	EIR	Non- current US$000	Current US$000
Secured bank loans (a)
· Pre-shipment loans in Minera Santa Cruz	1.3% to 6.0%	-	38,500	1.6% to 2.4%		20,000
· Leasing agreement with Banco de Credito	3.25% to 3.5%	336	760	3.25%	817	2,897
· Leasing agreement with Banco Interamericano de Finanzas	5% to 6%	24	461	5.5%	486	877
· Syndicated loan with JP MorganChase Bank N.A.	-	-	-	1.75%	84,222	29,256
Amount due to non-controlling interests (b)	-	-	-	7%	59,028	11,074
Convertible bond payable (c)	5.75%	104,506	6,613	5.75%	103,827	5,145
Amounts due to related parties (note 23)	-	-	-	0%	-	23
Total		104,866	46,334		248,380	69,272

(a) The following table demonstrates the present value and maturity of future minimum lease payments as at 31 December 2011 and 2010:

	As at 31 December
	2011 US$000	2010 US$000
Not later than one year	1,221	3,774
Between 1 and 2 years	360	1,279
Between 2 and 5 years	-	24
Total	1,581	5,077

The following table reconciles the total minimum lease payments and their present values as at 31 December 2011 and 2010:

	As at 31 December
	2011 US$000	2010 US$000
Present value of leases	1,581	5,077
Future interest	40	155
Total minimum lease payments	1,621	5,232

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

(b) Amounts due to non-controlling interests

The balance as at 31 December 2010 mainly corresponded to a loan from Minera Andes Inc. to Minera Santa Cruz S.A. for an amount of US$64,070,000 with an interest rate of 7%, and a further loan of US$6,032,000 advanced to Minera Santa Cruz S.A. by Minera Andes S.A. with an interest rate of 7%. These loans were repaid in full during 2011.

(c) 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 premium: 35% above the Reference Share Price.

· Reference Share Price: GBP 2.95.

· Initial Conversion Price: GBP 3.9825.

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

The balance as at 31 December 2011 is comprised of the principal of US$115,000,000 (2010: US$115,000.000) plus accrued interest of US$7,292,000 (2010: US$5,145,000), net of transaction costs of US$2,741,000 (2010: US$2,741,000) and the bond equity component of US$8,432,000 (2010: US$8,432,000).

The maturity of non-current borrowings is as follows:

	As at 31 December
	2011 US$000	2010 US$000
Between 1 and 2 years	1,039	59,265
Between 2 and 5 years	103,827	136,951
Over 5 years	-	52,164
Total	104,866	248,380

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
	2011 US$000	2010 US$000	2011 US$000	2010 US$000
Secured bank loans	360	85,525	375	84,728
Amounts due to non-controlling interests and related parties (fixed rates)	-	59,028	-	80,184
Convertible bond payable	104,506	103,827	116,413	121,709
Total	104,866	248,380	116,788	286,621

21 Provisions

	Provision for mine closure¹ US$000	Workers' profit sharing² US$000	Contributions to Peruvian Government US$000	Long-term incentive plan³ US$000	Contingent consideration⁴ US$000	Other US$000	Total US$000
At 1 January 2010	61,321	1,996	893	-	-	2,371	66,581
Additions	1,081	30,199	1,814	1,061	39,243	378	73,776
Accretion	538	-	-	-	-	-	538
Change in discount rate	1,137	-	-	-	-	-	1,137
Change in estimate	2,583	-	-	-	-	-	2,583
Payments	(4,634)	(10,862)	(725)	-	-	-	(16,221)
Foreign exchange	-	(26)	(162)	-	-	108	(80)
At 31 December 2010	62,026	21,307	1,820	1,061	39,243	2,857	128,314
Less current portion	(10,592)	(21,307)	(1,820)	-	(5,859)	(2,293)	(41,871)
Non-current portion	51,434	-	-	1,061	33,384	564	86,443
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

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 as at 31 December 2011 and 2010 respectively, and the cash flows have been adjusted to reflect the risk attached to these cash flows. Uncertainties in the timing for using 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 2011 is: (i) Legal (US$21,584,000), (ii) Voluntary (US$8,247,000).

3 Corresponds to the provision related to the long term incentive plans granted to designated personnel of the Group. Includes the following benefits: (i) Long term incentive plan, granted April 2011, payable April 2014, (ii) Long term incentive plan, granted May 2010, payable May 2013, and (iii) Exploration incentive plan, granted January 2011, payable 50% March 2013 and 50% March 2014. Only employees who remain in the Group's employment until 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 2011 there is a provision of US$2,594,000 that is disclosed under administrative expenses (US$1,467,000), exploration expenses (US$146,000) and capitalised as evaluation and exploration expenses (US$981,000).

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 a mining operations within the Inmaculada property.

5 During 2011 the Group made an external review of the provision for mine closure for all its mining units. Consequently, at 31 December 2011 an increase of US$10,856,000 was recognised.

22 Dividends paid and proposed

	2011 US$000	2010 US$000
Declared and paid during the year:
Equity dividends on ordinary shares:
Final dividend for 2010: US$0.03 (2009: US$0.02)	10,143	6,762
First interim for 2011: US$0.03 (2010: US$0.02)	10,143	6,761
Dividends paid to non-controlling interest: US$0.55 (2010: US$0.40)	53,999	26,000
Dividends declared to non-controlling interest: US$0.06 (2010: Nil)	9,499	-
Dividends declared and paid	83,784	39,523
Proposed for approval by shareholders at the AGM:
Final dividend for 2011: US$0.03 (2010: US$0.03)	10,135	10,143

Dividends per share

The dividends declared in August 2011 were US$10,142,557 (US$0.03 per share). A dividend in respect of the year ending 31 December 2011 of US$0.03 per share, amounting to a total dividend of US$10,134,951 is to be proposed at the Annual General Meeting on 2 June 2012. These financial statements do not reflect this dividend payable.

23 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 2011 and 2010. The related parties are companies owned or controlled by the main shareholder of the parent company, joint ventures or associates.

	Accounts receivable at 31 December		Accounts payable at 31 December
	2011 US$000	2010 US$000	2011 US$000	2010 US$000
Current related party balances
Fosfatos del Pacífico S.A.	-	28	-	-
Cementos Pacasmayo S.A.A.	222	291	32	23
Gold Resource Corp (note 18(a))	710	1,290	-	-
Total	932	1,609	32	23

As at 31 December 2011 and 2010 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
	2011 US$000	2010 US$000
Income
Gain on sale of Zincore Metals Inc. shares to Inversiones Pacasmayo S.A.	-	7,533
Dividend recognised for Gold Resource Corp. investment (note 18(a))	7,313	2,633
Revenue recognised for services performed to Gold Resource Corporation	35	29
Expenses
Expense recognised for the rental paid to Cementos Pacasmayo S.A.A.	(170)	(231)

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)	2011 US$000	2010 US$000
Short term employee benefits	6,504	6,751
Termination benefits	-	1,170
Long term incentive plan	1,200	2,348
Workers profit sharing	184	205
Others	950	647
Total compensation paid to key management personnel	8,838	11,121

This amount includes the remuneration paid to the Directors of the parent company of the Group of US$4,816,370 (2010: US$6,996,557), out of which US$199,660 (2010: US$239,975) relates to pension payments.

(c) Purchase of additional interest in Inmaculada project

During 2010, the Group acquired an additional interest in the Inmaculada project effectively diluting the interest of its joint-venture partners, International Minerals Corporation ("IMZ"). This acquisition qualified as a small related party transaction under the UKLA Listing Rules in light of IMZ's 40% interest in the Pallancata Joint-Venture (note 4(a)).

24 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 calculation was based on the monthly sales value of mineral concentrates.

The SMT and modified mining royalty are accounted for as an income tax in accordance with IAS12.

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 2011, the amount payable as former mining royalty (for mining unit Arcata), the new mining royalty (for mining units Ares and Pallancata), and the SMT amounted to US$709,000 (2010: US$2,946,000), US$1,261,000 (2010: Nil), and US$1,394,000 (2010: Nil) 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$11,921,000 of former mining royalty, disclosed as cost of sales (2010: US$11,223,000), and US$2,536,000 of new mining royalty and US$3,002,000 of SMT, both disclosed as income tax (2010: Nil).

Argentina

In accordance with Argentinean legislation, Provinces (being the legal owners of the mineral resources) are entitled to request royalties from mine operators. For San José, the mining royalty is fixed at 1.85% of the pit-head value of the production where the final product is doré and 2.55% where the final product is mineral concentrate or precipitates. As at 31 December 2011, the amount payable as mining royalties amounted to US$496,000 (2010: US$591,000). The amount recorded in the income statement as cost of sales was US$6,029,000 (2010: US$3,868,000).

Profit by operation¹

(Segment report reconciliation) as at December 2011

Company (US$000)	Ares	Arcata	Pallancata	San Jose	Moris	Consolidation adjustment	Total
Revenue	68,097	209,239	352,642	325,302	32,298	84	987,662
Cost of sales (pre-consolidation)	(47,708)	(80,962)	(118,206)	(133,599)	(23,212)	(604)	(404,291)
Consolidation adjustment	75	567	970	(395)	(613)	(604)	-
Cost of sales (post-consolidation)	(47,783)	(81,529)	(119,176)	(133,204)	(22,599)	-	(404,291)
Production cost w/o depreciation	(42,168)	(52,970)	(63,496)	(86,749)	(15,859)	-	(261,242)
Depreciation in production cost	(1,023)	(23,291)	(34,863)	(42,608)	(1,929)	-	(103,714)
Other items	(4,738)	(6,575)	(17,475)	(3,654)	-	-	(32,442)
Change in inventories	146	1,307	(3,342)	(193)	(4,811)	-	(6,893)
Gross profit	20,389	128,277	234,436	191,703	9,086	(520)	583,371
Administrative expenses	-	-	-	-	-	(64,354)	(64,354)
Exploration expenses	-	-	-	-	-	(47,336)	(47,336)
Selling expenses	(92)	(3,068)	(4,155)	(31,686)	-	31	(38,970)
Other income/expenses	-	-	-	-	-	(10,146)	(10,146)
Operating profit before impairment	20,297	125,209	230,281	160,017	9,086	(122,325)	422,565
Impairment of assets	-	-	-	-	-	1,210	1,210
Investments under equity method	-	-	-	-	-	11,446	11,446
Finance income	-	-	-	-	-	10,678	10,678
Finance costs	-	-	-	-	-	(23,442)	(23,442)
FX gain/(loss)	-	-	-	-	-	(1,562)	(1,562)
Profit/(loss) from continuing operations before income tax²	20,297	125,209	230,281	160,017	9,086	(123,995)	420,895
Income tax	-	-	-	-	-	(148,557)	(148,557)
Profit/(loss) for the year from continuing operations	20,297	125,209	230,281	160,017	9,086	(272,552)	272,338

1 On a post exceptional basis.

2 Hochschild profit before income tax reflected in 2011 annual report

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 • to • 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 2011, 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$1080 per ounce and Ag Price: US$18 per ounce.

Attributable metal reserves as at 31 December 2011

Reserve category	Proved and probable (t)	Ag (g/t)	Au (g/t)	Ag (moz)	Au (koz)	Ag Eq (moz)
MAIN OPERATIONS¹
Arcata
Proved	1,059,998	343	1.0	11.7	34.4	13.7
Probable	1,304,008	313	1.0	13.1	40.7	15.6
Total	2,364,006	327	1.0	24.8	75.1	29.3
Pallancata
Proved	1,643,165	289	1.4	15.3	72.6	19.6
Probable	426,591	278	1.3	3.8	18.4	4.9
Total	2,069,755	287	1.4	19.1	91.1	24.6
San José
Proved	410,654	475	7.0	6.3	92.3	11.8
Probable	446,672	354	5.8	5.1	83.1	10.1
Total	857,326	412	6.4	11.4	175.4	21.9
Main operations total
Proved	3,113,817	332	2.0	33.2	199.3	45.2
Probable	2,177,270	315	2.0	22.0	142.3	30.6
Total	5,291,087	325	2.0	55.3	341.6	75.8
OTHER OPERATIONS
Ares
Proved	159,677	106	4.1	0.5	20.9	1.8
Probable	67,445	138	2.5	0.3	5.4	0.6
Total	227,122	115	3.6	0.8	26.3	2.4
Other operations total
Proved	159,677	106	4.1	0.5	20.9	1.8
Probable	67,445	138	2.5	0.3	5.4	0.6
Total	227,122	115	3.6	0.8	26.3	2.4
Group total
Proved	3,273,494	321	2.1	33.8	220.2	47.0
Probable	2,244,715	310	2.0	22.3	147.7	31.2
TOTAL	5,518,209	316	2.1	56.1	367.8	78.2

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.

Attributable metal resources as at 31 December 2011

Resource category	Tonnes (kt)	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 OPERATIONS¹
Arcata
Measured	1,339,610	492	1.46	-	-	-	579	21.2	62.9	25.0	-	-	-
Indicated	1,335,478	423	1.32	-	-	-	502	18.2	56.7	21.6	-	-	-
Total M & I	2,675,088	457	1.39	-	-	-	541	39.3	119.6	46.5	-	-	-
Inferred	4,424,489	376	1.45	-	-	-	463	53.4	205.9	65.8	-	-	-
Pallancata
Measured	2,517,648	382	1.76	-	-	-	487	30.9	142.6	39.5	-	-	-
Indicated	491,568	323	1.53	-	-	-	414	5.1	24.1	6.6	-	-	-
Total M & I	3,009,216	372	1.72	-	-	-	476	36.0	166.7	46.0	-	-	-
Inferred	1,687,576	347	1.46	-	-	-	434	18.8	79.4	23.6	-	-	-
San José
Measured	589,252	560	8.21	-	-	-	1,053	10.6	155.6	20.0	-	-	-
Indicated	1,791,762	423	6.53	-	-	-	815	24.4	376.2	46.9	-	-	-
Total M & I	2,381,014	457	6.95	-	-	-	874	35.0	531.9	66.9	-	-	-
Inferred	924,843	384	5.30	-	-	-	702	11.4	157.6	20.9	-	-	-
Main operations total
Measured	4,446,510	439	2.53	-	-	-	590	62.7	361.1	84.4	-	-	-
Indicated	3,618,808	409	3.93	-	-	-	645	47.6	457.1	75.1	-	-	-
Total M & I	8,065,319	425	3.16	-	-	-	615	110.3	818.1	159.4	-	-	-
Inferred	7,036,908	370	1.96	-	-	-	487	83.7	442.9	110.2	-	-	-
OTHER OPERATIONS
Ares
Measured	470,660	161	6.18	-	-	-	532	2.4	93.5	8.0	-	-	-
Indicated	151,650	157	3.63	-	-	-	375	0.8	17.7	1.8	-	-	-
Total M & I	622,310	160	5.56	-	-	-	493	3.2	111.2	9.9	-	-	-
Inferred	379,639	167	3.32	-	-	-	367	2.0	40.6	4.5	-	-	-
Other operations total
Measured	470,660	161	6.18	-	-	-	532	2.4	93.5	8.0	-	-	-
Indicated	151,650	157	3.63	-	-	-	375	0.8	17.7	1.8	-	-	-
Total M & I	622,310	160	5.56	-	-	-	493	3.2	111.2	9.9	-	-	-
Inferred	379,639	167	3.32	-	-	-	367	2.0	40.6	4.5	-	-	-

Resource category	Tonnes (kt)	Ag (g/t)	Au (g/t)	Zn (%)	Pb (%)	Cu (%)	Ag Eq (g/t)	Ag (moz)	Au (koz)	Ag Eq (M oz)	Zn (kt)	Pb (kt)	Cu (kt)
ADVANCED PROJECTS
Inmaculada
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 M & I	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	-	-	-
Crespo
Measured	4,582,255	51	0.49	-	-	-	80	7.5	71.6	11.8	-	-	-
Indicated	18,804,956	36	0.44	-	-	-	63	21.7	268.4	37.8	-	-	-
Total M & I	23,387,211	39	0.45	-	-	-	66	29.2	340.0	49.6	-	-	-
Inferred	5,171,188	31	0.35	-	-	-	52	5.2	58.5	8.7	-	-	-
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 M & I	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	-	-	-
Jasperoide
Measured	0	-	0.00	-	-	0.00	0	-	0.00	0.0	-	-	0.0
Indicated	0	-	0.00	-	-	0.00	0	-	0.00	0.0	-	-	0.0
Total M & I	0	-	0.00	-	-	0.00	0	-	0.00	0.0	-	-	0.0
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 M & I	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
Advanced projects total
Measured	8,136,631	77	1.29	1.22	0.53	0.07	196	20.2	336.8	51.4	99.3	43.1	5.5
Indicated	29,287,502	83	0.78	0.28	0.13	0.01	139	78.1	735.1	131.3	83.2	37.0	4.2
Total M & I	37,424,134	82	0.89	0.49	0.21	0.03	152	98.2	1,071.9	182.7	182.4	80.1	9.7
Inferred	28,525,195	67	0.83	0.27	0.10	0.57	179	61.0	758.7	164.4	77.8	28.5	163.6
TOTAL
Measured	13,053,802	203	1.89	0.76	0.33	0.04	343	85.3	791.5	143.8	99.3	43.1	5.5
Indicated	33,057,961	119	1.14	0.25	0.11	0.01	196	126.5	1,209.9	208.2	83.2	37.0	4.2
Total M & I	46,111,762	143	1.35	0.40	0.17	0.02	237	211.8	2,001.3	352.0	182.4	80.1	9.7
Inferred	35,941,742	127	1.07	0.22	0.08	0.46	242	146.7	1,242.2	279.1	77.8	28.5	163.6

1 Main operations and other projects (excluding San Felipe) were audited by P&E Consulting.

Note: Resources include undiscounted reserves, where resources are attributable to a joint venture partner, resources figures reflect the Company's ownership only. No ore loss or dilution has been included, and stockpiled ore excluded.

Change in total reserves and resources

Ag equivalent content (million ounces)	Category	December 2010	Production¹	Movements²	December 2011	Net difference	% change
Arcata	Resource	98.7		13.6	112.3	13.6	13.7%
	Reserve	29.1	7.8	7.9	29.3	0.2	0.8%
Pallancata	Resource	109.0		6.9	116.0	6.9	6.3%
	Reserve	49.4	13.1	4.7	41.0	-8.4	-20.6%
San José	Resource	156.9		15.2	172.1	15.2	9.7%
	Reserve	39.2	11.8	15.6	42.9	3.7	8.6%
Main operations total	Resource	364.7		35.7	400.4	35.7	9.8%
	Reserve	117.8	32.7	28.1	113.2	-4.5	-4.0%
Ares	Resource	12.4		1.9	14.3	1.9	15.5%
	Reserve	1.7	2.3	3.0	2.4	0.7	29.7%
Moris	Resource	1.8		-1.8	0.0	-1.8	-100.0%
	Reserve	1.3	1.7	0.4	0.0	-1.3	0.0%
Other operations total	Resource	14.2		0.1	14.3	0.1	0.8%
	Reserve	3.1	4.0	3.4	2.4	-0.6	-24.0%
Azuca	Resource	70.3		32.7	103.0	32.7	46.6%
	Reserve
Crespo	Resource	47.4		10.9	58.3	10.9	22.9%
	Reserve
Inmaculada	Resource	137.3		12.3	149.7	12.3	9.0%
	Reserve
San Felipe	Resource	38.5		0.0	38.5	0.0	0.0%
	Reserve
Jasperoide	Resources	0.0		57.6	57.6	57.6	-.-
	Reserve
Other projects total	Resource	293.5		113.5	407.0	113.5	38.7%
	Reserve
Total	Resource	672.4		149.3	821.7	149.3	22.2%
	Reserve	120.8	36.7	31.5	115.6	-5.1	-4.4%

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

2 Increase in reserves and resources due mainly to mine site exploration but also to price increases.

Change in attributable reserves and resources

Ag equivalent content (million ounces)	Category	Percentage attributable	December 2010 Att.¹	December 2011 Att.¹	Net difference	% change
Arcata	Resource	100%	98.7	112.3	13.6	13.7%
	Reserve		29.1	29.3	0.2	0.8%
Pallancata	Resource	60%	65.4	69.6	4.1	6.3%
	Reserve		29.7	24.6	-5.1	-20.9%
San José	Resource	51%	80.0	87.8	7.7	9.7%
	Reserve		20.0	21.9	1.9	8.6%
Main operations total	Resource		244.2	269.7	25.5	10.4%
	Reserve		78.8	75.8	-3.0	-4.0%
Ares	Resource	100%	12.4	14.3	1.9	15.5%
	Reserve		1.7	2.4	0.7	29.7%
Moris	Resource	100%	1.8	0.0	-1.8	-100.0%
	Reserve		1.3	0.0	-1.3	-100.0%
Other operations total	Resource		14.2	14.3	0.1	0.8%
	Reserve		3.1	2.4	-0.6	-24.0%
Azuca	Resource	100%	70.3	103.0	32.7	46.6%
	Reserve
Crespo	Resource	100%	47.4	58.3	10.9	22.9%
	Reserve
Inmaculada	Resource	100%	82.4	89.8	7.4	9.0%
	Reserve
San Felipe	Resource	100%	38.5	38.5	0.0	0.0%
	Reserve
Jasperoide	Resource	100%	0.0	57.6	57.6	-.-
	Reserve
Other total	Resource		238.5	347.1	108.6	45.5%
	Reserve
Total	Resource		497.0	631.1	134.1	27.0%
	Reserve		81.8	78.2	-3.6	-4.6%

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

2 The Company increased its holdings in the Inmaculada project to 60% in 2010.

Production

Total Group production¹

	Year ended 31 December 2011	Year ended 31 December 2010	% change
Silver production (koz)	21,363	24,430	(13)
Gold production (koz)	180.51	200.05	(10)
Total silver equivalent (koz)	32,193	36,434	(12)
Total gold equivalent (koz)	536.56	607.23	(12)
Silver sold (koz)	21,792	24,283	(10)
Gold sold (koz)	182.0	199.9	(9)

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 2011	Year ended 31 December 2010	% change
Silver production (koz)	14,980	17,768	(16)
Gold production (koz)	127.29	144.40	(12)
Attrib. silver equivalent (koz)	22,617	26,432	(14)
Attrib. gold equivalent (koz)	377.0	440.5	(14)

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

2011 production by mine

Arcata

Product	Year ended 31 December 2011	Year ended 31 December 2010	% change
Ore production (tonnes)	687,966	645,974	7
Average silver grade (g/t)	312	439	(29)
Average gold grade (g/t)	0.88	1.40	(37)
Silver produced (koz)	6,081	8,099	(25)
Gold produced (koz)	17.38	25.83	(33)
Silver equivalent produced (koz)	7,124	9,649	(26)
Silver sold (koz)	5,979	8,095	(26)
Gold sold (koz)	16.7	24.9	(33)

Ares

Product	Year ended 31 December 2011	Year ended 31 December 2010	% change
Ore production (tonnes)	344,085	301,726	14
Average silver grade (g/t)	61	92	(34)
Average gold grade (g/t)	2.90	3.58	(19)
Silver produced (koz)	581	786	(11)
Gold produced (koz)	29.03	32.53	(15)
Silver equivalent produced (koz)	2,323	2,738	(29)
Silver sold (koz)¹	598	810	(26)
Gold sold (koz)²	29.7	32.7	(9)

Pallancata³

Product	Year ended 31 December 2011	Year ended 31 December 2010	% change
Ore production (tonnes)	1,070,466	1,071,617	(0.1)
Average silver grade (g/t)	301	344	(13)
Average gold grade (g/t)	1.33	1.41	(6)
Silver produced (koz)	8,767	10,135	(13)
Gold produced (koz)	33.88	35.85	(5)
Silver equivalent produced (koz)	10,800	12,286	(12)
Silver sold (koz)	9,064	9,998	(9)
Gold sold (koz)	33.9	33.7	0.6

³The Company has a 60% interest in Pallancata.

San Jose⁴

Product	Year ended 31 December 2011	Year ended 31 December 2010	% change
Ore production (tonnes)	462,825	461,134	0.4
Average silver grade (g/t)	444	397	12
Average gold grade (g/t)	5.86	6.14	(5)
Silver produced (koz)	5,870	5,324	10
Gold produced (koz)	80.95	84.30	(4)
Silver equivalent produced (koz)	10,727	10,382	3
Silver sold (koz)	6,087	5,284	15
Gold sold (koz)	82.4	85.0	(3)

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

Moris

Product	Year ended 31 December 2011	Year ended 31 December 2010	% change
Ore production (tonnes)	858,028	1,148,826	(25)
Average silver grade (g/t)	5.02	4.44	13
Average gold grade (g/t)	0.96	1.14	(16) (17)
Silver produced (koz)	64	86	(26)
Gold produced (koz)	19.26	21.53	(11)
Silver equivalent produced (koz)	1,220	1,378	(11)
Silver sold (koz)	64	95.07	(33)
Gold sold (koz)	19.3	23.5	(18)

Glossary

Ag Silver
Adjusted EBITDA Adjusted EBITDA is calculated as profit from continuing operations before net finance income/(cost), foreign exchange loss 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 10am on 23 May 2012 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: +44 20 8639 3399

- By fax

+44 (0)1484 600 911

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 9 May 2012.

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 9 May 2012. 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 marianna.adams@hocplc.com.

Financial calendar

Dividend payments
Ex-dividend date                                                                  2 May 2012
Record date                                                                          4 May 2012
Deadline for return of currency election form                 9 May 2012
Final dividend payable                                                       29 May 2012

Other dates

Annual General Meeting 23 May 2012
Half-yearly results announced August 2012

London Office and Registered Office address

46 Albemarle Street
London
W1S 4JL
United Kingdom

Company Secretary

R D Bhasin

This information is provided by RNS

The company news service from the London Stock Exchange

END

FR LFFLIVTIALIF

Companies

Hochschild Mining (HOC)

Friday, 20th December 2024

COMPANIES COVERED:

SRP NMT RPI

Serco extends Thursday’s gains as upbeat mood prevails and Raspberry Pi also advances off the back of stake building news, but Neometals under pressure as it plans cancellation of AIM listing to focus on ASX.

Full Archive

UK 100

Latest directors dealings

21 hours ago The Renewables Infrastructure Group Limited
21 hours ago The Renewables Infrastructure Group Limited
21 hours ago Smurfit Westrock (DI)
21 hours ago Menhaden Resource Efficiency
21 hours ago BP

All directors dealings today

Hochschild Mining Plc 2011 Full Year Results

Consolidated income statement

(b) Geographical information

Gold Resource Corporation

(b) Disposal of shares

Lake Shore Gold Corp.

17 Investments accounted under equity method(a) Gold Resource Corp.

(b) Lake Shore Gold Corp.

(b) Amounts due to non-controlling interests

(c) Convertible bond payable

23 Related-party balances and transactions

(a) Related-party accounts receivable and payable

(b) Compensation of key management personnel of the Group

(c) Purchase of additional interest in Inmaculada project

24 Mining royalties

Peru

Argentina

Profit by operation1

Reserves and resources

Ore reserves and mineral resources estimates

Production

Total Group production1

Attributable Group production2

2011 production by mine

Arcata

Pallancata3

San Jose4

Moris

Company website

Registrars

- By post

- By telephone

- By fax

Currency option and dividend mandate

Investor relations

Financial calendar

Other dates

London Office and Registered Office address

Company Secretary

Companies

UK 100

Latest directors dealings

17 Investments accounted under equity method
(a) Gold Resource Corp.

Profit by operation¹

Total Group production¹

Attributable Group production²

Pallancata³

San Jose⁴