Preliminary Results 2016

RNS Number : 8048Y

Hochschild Mining PLC

08 March 2017

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8 March 2017

Hochschild Mining plc

Preliminary Results for the twelve months ended 31 December 2016

Strong financial performance and cash generation

§ Revenue of $688.2 million (2015: $469.1 million)¹

§ Adjusted EBITDA of $329.0 million (2015: $138.8 million)²

§ Profit before income tax of $108.3 million (2015: $256.2 million loss)

§ Adjusted basic earnings per share of $0.11 (2015: $0.14 loss)

§ Cash and cash equivalent balance of $140.0 million as at 31 December 2016 (2015: $84.0 million)

§ Net debt of $187.4 million as at 31 December 2016 (2015: $350.5 million)

§ $127.4 million of debt repaid in 2016³

§ Net debt/Adjusted EBITDA of 0.57x as at 31 December 2016 (2015: 2.5x)

§ Further $25 million of short term debt repaid in February 2017

§ Final proposed dividend of 1.38 cents per share ($7.0 million)

2016 operational delivery exceeding guidance

§ 2016 AISC per silver equivalent ounce from operations reduced by 13% to $11.2 (2015: $12.9) beating original guidance of $12.0-13.0⁴

§ Inmaculada AISC per silver equivalent ounce at $8.7

§ Full year production of 35.5 million attributable silver equivalent ounces, exceeding guidance⁵

§ Inmaculada mine produced 16.9 million silver equivalent ounces

§ Brownfield exploration plan ongoing - potential to extend life of mine ("LOM") and deliver additional low cost growth

§ Pablo resources at Pallancata now increased to 40.4 million silver equivalent ounces (2015: 22.7 million)

o Resource grade up 44% to 529 silver equivalent grams per tonne (2015: 368 grams per tonne)

§ Promising drill targets identified at all operations

2017 Outlook

§ Record attributable production target of 37.0 million silver equivalent ounces

§ AISC expected to be $12.2-12.7 per silver equivalent ounce

§ Inmaculada AISC expected to be $9.0-9.5 per silver equivalent ounce

§ Total sustaining and development capital expenditure expected to be approximately $120-130 million including $20 million to develop the Pablo vein and its surrounding infrastructure

$000 unless stated	Year ended 31 Dec 2016	Year ended 31 Dec 2015	% change
Attributable silver production (koz)	17,284	14,752	17
Attributable gold production (koz)	246	166	48
Revenue	688,242	469,146	47
Adjusted EBITDA	329,014	138,837	137
Profit/(loss) from continuing operations (pre-exceptional)	69,306	(66,399)	204
Profit/(loss) from continuing operations (post-exceptional)	62,862	(239,657)	126
Basic earnings per share (pre-exceptional) $	0.11	(0.14)	179
Basic earnings per share (post-exceptional) $	0.09	(0.52)	117

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

"We have delivered an impressive improvement in our annual results driven by a first full year from our flagship Inmaculada mine, a strong overall cost performance and a more favourable pricing environment. Our financial performance has allowed us to significantly reduce leverage and at the same time reward shareholders for their support with a return to dividends during the year. In 2017, a further increase in output is expected with the new Pablo vein starting production and continued investment in our brownfield exploration strategy."

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A presentation will be held for analysts and investors at 9.30am (UK time) on Wednesday 8 March 2017 at the offices of Hudson Sandler, 29 Cloth Fair, London, EC1A 7NN

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

www.hochschildmining.com

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

+44(0)20 3427 1908 (Please quote confirmation code 1901017)

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Enquiries:

Hochschild Mining plc

Charles Gordon +44 (0)20 3709 3264

Head of Investor Relations

Hudson Sandler

Charlie Jack +44 (0)207 796 4133

Public Relations

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Non-IFRS Financial Performance Measures

The Company has included certain non-IFRS measures in this news release. The Company believes that these measures, in addition to conventional measures prepared in accordance with IFRS, provide investors an improved ability to evaluate the underlying performance of the Company. The non-IFRS measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. These measures do not have any standardised meaning prescribed under IFRS, and therefore may not be comparable to other issuers.

About Hochschild Mining plc:

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

CHAIRMAN'S STATEMENT

Hochschild Mining has come a long way in the decade since our listing on the London Stock Exchange. We have successfully navigated a volatile industry environment with several phases of international expansion, internal restructuring, mine construction and delivered consistently on annual production targets and low cost organic growth while maintaining a constant focus on our duties as a responsible operator. This has placed the Company in an ideal position to continue to generate long term value for all stakeholders. Over the last few years we have maintained a consistent strategy and in 2016 I was pleased that, as a signal of its ongoing success, the Board was able to reinstate the interim dividend in August and now can also announce a proposed final dividend payout of $7 million.

Operationally, 2016 was characterised by a strong first full year from our top-tier Inmaculada operation in Peru. There were also improved contributions from Arcata - its best since 2010 - and from our Argentinian mine, San Jose, reflecting a much more promising economic environment in the country. In line with the production growth, cost reduction continued for a fourth straight year and together with a supportive precious metal price environment, the Company generated strong cashflow throughout the year. Consequently, the Company has been able to follow through decisively on our promise to reduce leverage by repaying $127 million of debt during the year and building up a healthy cash balance. We are now in an increasingly solid financial position to manage our remaining debt profile whilst giving management the flexibility to invest in further organic growth options and continue to return capital to shareholders.

Hochschild has always aimed to invest in mineralised districts with the possibility to grow over time and in this regard we are excited by the potential of our portfolio. The discovery and subsequent resource growth of our new Pablo vein district at Pallancata demonstrates our ability to reinvigorate existing operations, at a low cost through local exploration. We believe that there are significant further opportunities to capitalise on latent processing capacity at our plants as well as to extend the lives of our mines and expand their capacity. The Board is confident that the ambitious exploration programme announced in the third quarter will deliver substantial low cost resources and provide the Company with further growth optionality in the years to come.

Precious metal prices once again experienced periods of volatility in 2016 although both silver and gold did rise to levels not seen since 2013 thereby providing the Company with an unanticipated boost to already strong cashflow generation. However, the subsequent sharp decline in prices at the end of the year illustrated the ongoing unpredictability of our markets and consequently I am encouraged by the Company's continuing emphasis on cost control and debt repayment.

Sustainability

Despite the progress made in 2016 as the third consecutive year without any fatalities, it is with huge regret that an accident at the Inmaculada mine early in 2017 resulted in two deaths. On behalf of the Board, I would like to convey our deepest condolences to the families of the victims involved. The accident serves as a reminder of the high level of risks emanating from mining operations in general. I would like to thank those across the Group whose efforts are focused on making our operations a safe place to work and to whom I pledge the Board's unequivocal support in the belief that every accident is avoidable.

With regards to our environmental efforts, I am pleased to report that the Group continued to improve its environmental performance and maintained its corporate ISO 14001 certification. Furthermore, as part of our ongoing focus on aligning remuneration with our strategic goals, a new environmental scorecard has been adopted, performance against which bonus entitlements will be calculated for senior management over and above the usual operational and financial metrics.

Our relations with local communities are of the utmost importance and we dedicate significant resources in recognition of the social licence granted to us. Details on the varied programmes that the Group has run focusing on our core themes of education, health and socio-economic development can be found in our Sustainability Report and online.

Board

I wish to thank the employees across the business and my fellow Board members for their dedication and support over the year. At the Board level, the stabilised operating environment during the year led to the resumption of our Non-Executive succession plan and I was delighted that we were able to announce the appointment, in November, of Eileen Kamerick and, from the start of this year, Sanjay Sarma. Each brings a varied skill set to the board table and we look forward to our future board discussions. It leaves me to pay special thanks, on behalf of the Board, to Roberto Dañino and Nigel Moore who have served as Directors since the IPO in 2006 and will be retiring at the forthcoming AGM. Their contribution over the past decade has been invaluable and we wish them the very best for the future.

Outlook

The Company is determined to retain emphasis on our low cost organic growth strategy and the ongoing repayment of debt particularly given the already unpredictable nature of 2017 so far. We are confident in the sizeable potential shown in the areas surrounding our operations as well as our team's ability to bring early stage projects through the pipeline and combined with an embedded cost control culture, the prospects for further shareholder return are very strong.

Eduardo Hochschild, Chairman

7 March 2017

CHIEF EXECUTIVE OFFICER'S STATEMENT

2016 has proved to be a watershed year for the Company. We are now fully benefitting from the results of our growth and cost focused strategy with a consistent record of operational excellence driving significantly improved cashflows, reduced leverage and increased shareholder returns. Furthermore, our exploration team is working on a variety of opportunities for securing additional low cost growth in the areas surrounding our mines which we believe will allow for capacity improvements and life-of-mine extensions at our operations.

Operations

A consistent delivery of annual production targets has become a trademark for our Company and 2016 was no exception. We produced a record 35.5 million attributable silver equivalent ounces, an 11% improvement on our original 32 million ounce target with Inmaculada's output at almost 17 million ounces (229 million gold equivalent ounces). In its first full year, the all-in sustaining cost at this world class operation was a highly competitive $8.7 per silver equivalent ounce ($644 per gold equivalent ounce) which resulted from robust operational delivery. We also saw a successful year at Arcata, which produced just over 8 million ounces at a cost of $13.7 per silver equivalent ounce. At San Jose, continuing operational consistency combined with a vastly improved fiscal environment in Argentina led to an 18% reduction in AISC and strongly improved cashflow generation. The renewed Pallancata mine experienced a transitional year as we prepare to move production to low cost feed from the new Pablo vein district during 2017. We have maintained our focus on cost control at all operations and the resulting 13% reduction in overall all-in sustaining costs to $11.2 per silver equivalent ounce demonstrates the effectiveness of our policies. As a management team, we are committed to ensuring a safe working environment and we will redouble our efforts in the area of safety in light of the tragic accident at Inmaculada earlier this year.

Exploration

In September, following a number of years of prospective work by our brownfield team, we announced the launch of a new long-term exploration programme with the expectation of not only replacing our production but materially improving our reserves and resources by 2020. We are confident that this key organic growth strategy can deliver further low cost growth through the potential to fill our existing spare plant capacity as well as increase our visible resource life-of-mine. Part of the programme focuses on the Pablo vein at Pallancata and, in 2016, we successfully increased the quality and quantity of resources with the discovery of the high grade Pablo Piso structures. Total resources from this new vein system have now increased to 40 million silver equivalent ounces from 23 million a year ago. In addition, in order to ensure a high future conversion of our resources to reserves, we have made the prudent decision to exclude material in our deposits that has a low probability of being mined. This has reduced our overall operational resources by almost 15% but represents a more robust approach to classification.

Financial position

The proactive management of our balance sheet in order to de-risk the Company has been a clear aim during the construction and subsequent first 18 months of operation at Inmaculada from its commissioning. The strong cashflow from the operations has ensured that in 2016 we made considerable further progress in reducing our debt position. $127 million of short to medium term lines were repaid and we still ended the year with a healthy cash and cash equivalents position of $140 million. In 2017, our aim is to continue to strengthen the financial position in anticipation of the Company's option to redeem some or all of the remaining Senior Notes from January 2018 and thereby reduce our financing costs. It is worth adding that currently, we no longer have any hedging agreements in place.

Financial results

As mentioned above, our average price achieved improved in 2016, by 5% for gold and by 6% for silver and consequently when combined with the 25% production increase, revenue rose strongly, by 47% in 2016 to $688 million (2015: $469 million). The improved cost performance led to Adjusted EBITDA of $329 million (2015: $139 million), an increase of 137% versus 2015, reflecting a year of higher margin contribution from Inmaculada. This strong cashflow generation has finally offset the finance costs arising from our 2014 bond issue and adjusted earnings per share therefore rose to $0.11 per share from a loss of $(0.14) per share. We ended the year with net debt of $187 million (2015: $351 million) which translates to a leverage ratio of 0.57x (2015: 2.5x), significantly below guidance for the year.

Outlook

Overall, 2017 is expected to be another record year for the Company with attributable production set to rise to 37 million silver equivalent ounces (or 500,000 gold equivalent ounces) driven by another 17 million ounces from Inmaculada and a first contribution from our highly prospective new Pablo vein at Pallancata with production there expected to be second-half weighted. The all-in sustaining cost per silver equivalent ounce is forecast to be between $12.2 to $12.7 which reflects a stable underlying unit cost and includes an increased investment in brownfield growth as well as a tailings dam expansion at Inmaculada and the initial infrastructure for the development of Pablo.

2016 has represented the consolidation of our organic growth strategy and it is thanks to the efforts of not only our management team but all our employees that we have been able to execute so efficiently. We can look forward to a fifth year of increased production in 2017, further strengthening of our balance sheet and the potential for additional upside from our enhanced brownfield exploration plan.

Ignacio Bustamante, Chief Executive Officer

7 March 2017

OPERATING REVIEW

OPERATIONS

Note: silver/gold equivalent production figures assume a gold/silver ratio of 74:1.

Production

In 2016 Hochschild once again exceeded its full year production target, delivering attributable production of 35.5 million silver equivalent ounces, including 17.3 million ounces of silver and 246.1 thousand ounces of gold. The overall production target for 2017 is 37.0 million silver equivalent ounces, which consists of 17 million ounces from Inmaculada, approximately 7 million attributable ounces from the 51% owned San Jose operation and also from Arcata with the balance of 6 million ounces from Pallancata.

Total group production

	Year ended 31 Dec 2016	Year ended 31 Dec 2015
Silver production (koz)	20,562	18,037
Gold production (koz)	292.63	213.37
Total silver equivalent (koz)	42,217	33,827
Total gold equivalent (koz)	570.50	457.12
Silver sold (koz)	21,091	17,263
Gold sold (koz)	298.96	187.39

Total production includes 100% of all production, including production attributable to Hochschild's joint venture partner at San Jose.

Attributable group production

	Year ended 31 Dec 2016	Year ended 31 Dec 2015
Silver production (koz)	17,284	14,752
Gold production (koz)	246.08	166.02
Silver equivalent (koz)	35,493	27,037
Gold equivalent (koz)	479.64	365.37

Attributable production includes 100% of all production from Arcata, Inmaculada, Pallancata and 51% from San Jose.

Costs

The Company's all-in sustaining cost was reduced by 13% in 2016 to $11.2 per silver equivalent ounce driven by Inmaculada's very competitive $8.7 per silver equivalent ounce ($644 per gold equivalent ounce). A full year of production at Inmaculada, better than expected grades and operational initiatives contributed to the reduction. Please see page 11 of the Financial Review for further details on costs.

The all-in sustaining cost per silver equivalent ounce in 2017 is expected to be between $12.2 and $12.7 which includes the previously announced increased budget for brownfield exploration as well as further expenditure on the development of the Pablo vein. Excluding the increased investment in resource growth as well as the one-off investment in Pablo infrastructure, the all-in sustaining cost forecast is between $11.5 and $12.0 per silver equivalent ounce.

2017 AISC forecast split

Operation	2017 AISC ($/oz silver equivalent)	2017 AISC ($/oz silver equivalent) Excluding growth investment
Inmaculada	9.5-10.0	9.0-9.5
Arcata	15.3-15.8	14.5-15.0
Pallancata	14.2-14.7	12.5-13.0
San Jose	12.8-13.3	12.5-13.0

Inmaculada (Peru)

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

Inmaculada summary	Year ended 31 Dec 2016	Year ended 31 Dec 2015	% change
Ore production (tonnes)	1,306,606	659,737	98
Average silver grade (g/t)	133	115	16
Average gold grade (g/t)	4.21	4.36	(3)
Silver produced (koz)	4,908	2,055	139
Gold produced (koz)	162.71	84.64	92
Silver equivalent produced (koz)	16,948	8,318	104
Gold equivalent produced (koz)	229.03	112.41	104
Silver sold (koz)	5,004	1,638	205
Gold sold (koz)	164.75	67.51	144
Unit cost ($/t)	64.4	63.3	2
Total cash cost ($/oz Ag co-product)	5.2	4.6	13
All-in sustaining cost ($/oz)	8.7	7.3	19

Production

Inmaculada has delivered a very successful first full year with production reaching a better than expected 229 thousand gold equivalent ounces (16.9 million silver equivalent ounces) consisting of 162.7 thousand ounces of gold and 4.9 million ounces of silver. Throughout the year, grades and silver recoveries achieved were better than expected in the original mine plan in addition to higher tonnage per day being processed through the plant (3,850 tonnes versus 3,500 tonnes per day).

Costs

The all-in sustaining costs were better than expected in the original plan at $8.7 per silver equivalent ounce. This was driven by higher production resulting from stronger gold grades as well as operational efficiencies versus plan. AISC in 2017 is expected to be between $9.5 and $10.0 per silver equivalent ounce reflecting lower gold grades and a $15 million investment in the expansion of the tailings dam.

Arcata (Peru)

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

Arcata summary	Year ended 31 Dec 2016	Year ended 31 Dec 2015	% change
Ore production (tonnes)	677,309	648,051	5
Average silver grade (g/t)	337	323	4
Average gold grade (g/t)	1.24	0.99	25
Silver produced (koz)	6,343	5,613	13
Gold produced (koz)	22.54	15.67	44
Silver equivalent produced (koz)	8,011	6,772	18
Gold equivalent produced (koz)	108.26	91.52	18
Silver sold (koz)	6,346	5,653	12
Gold sold (koz)	22.04	15.29	44
Unit cost ($/t)	101.1	109.1	(7)
Total cash cost ($/oz Ag co-product)	11.0	11.7	(6)
All-in sustaining cost ($/oz)	13.7	14.3	(4)

Production

In 2016, Arcata delivered its best year since 2010 with 8.0 million silver equivalent ounces produced consisting of 6.3 million ounces of silver and 22.5 thousand ounces of gold. This represents an 18% improvement on 2015 (2015: 6.8 million ounces) with tonnage and grades strong throughout the year as well as better than expected silver recoveries.

Costs

In 2016, all-in sustaining costs fell by 4% to $13.7 per silver equivalent ounce (2015: $14.3 per ounce) substantially below the original 2016 forecast of $14.5 due to better than expected tonnage and grades resulting from the success of the Company's brownfield exploration programme.

Pallancata (Peru)

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

Pallancata summary	Year ended 31 Dec 2016	Year ended 31 Dec 2015	% change
Ore production (tonnes)	244,765	522,431	(53)
Average silver grade (g/t)	381	259	47
Average gold grade (g/t)	1.86	1.28	45
Silver produced (koz)	2,620	3,664	(28)
Gold produced (koz)	12.37	16.42	(25)
Silver equivalent produced (koz)	3,536	4,879	(28)
Gold equivalent produced (koz)	47.78	65.93	(28)
Silver sold (koz)	2,660	3,632	(27)
Gold sold (koz)	12.41	15.80	(21)
Unit cost ($/t)	131.0	98.9	32
Total cash cost ($/oz Ag co-product)	12.4	12.5	(1)
All-in sustaining cost ($/oz)	16.3	15.7	4

Production

The Pallancata mine produced 3.5 million silver equivalent ounces in 2016 (2015: 4.9 million ounces) comprising 2.6 million ounces of silver and 12.4 thousand ounces of gold. This result reflected a transitional year before the introduction of commercial production from the new Pablo vein in 2017.

During the fourth quarter, there was a reduction in the mine's output due to a road blockade by members of a local community which halted production from early November 2016. The dispute was subsequently resolved with production re-commencing on 25 January 2017.

Costs

All-in sustaining costs at Pallancata were $16.3 per silver equivalent ounce (2015: $15.7 per ounce). The moderate increase versus 2015 was due to capital invested in developing the access and infrastructure for Pablo as well as the effects of stoppage causing a significant fall in tonnage affecting unit costs. This was partially offset by increased grades and operational efficiencies. Costs are expected to fall substantially in 2017 when the Pablo vein begins production.

San Jose (Argentina)

The San Jose silver/gold mine is located in Argentina, in the province of Santa Cruz, 1,750 kilometres south-southwest of Buenos Aires. San Jose commenced production in 2007 and is a joint venture with McEwen Mining Inc. Hochschild holds a controlling interest of 51% in the mine and is the mine operator.

San Jose summary^*	Year ended 31 Dec 2016	Year ended 31 Dec 2015	% change
Ore production (tonnes)	536,024	532,488	1
Average silver grade (g/t)	444	448	(1)
Average gold grade (g/t)	6.28	6.36	(1)
Silver produced (koz)	6,691	6,706	-
Gold produced (koz)	95.01	96.64	(2)
Silver equivalent produced (koz)	13,721	13,857	(1)
Gold equivalent produced (koz)	185.42	187.26	(1)
Silver sold (koz)	7,081	6,340	12
Gold sold (koz)	99.76	88.79	12
Unit cost ($/t)	202.4	210.4	(4)
Total cash cost ($/oz Ag co-product)	9.7	10.8	(10)
All-in sustaining cost ($/oz)	11.5	14.1	(18)

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

Production

San Jose has again proved to be a solid performer with production of 13.7 million silver equivalent ounces consisting of 6.7 million ounces of silver and 95 thousand ounces of gold. This was in line with the 2015 result (13.9 million ounces) with a moderate increase in tonnage offsetting slightly lower grades.

Costs

At San Jose, all-in sustaining costs were reduced by 18% to $11.5 per silver equivalent ounce (2015: $14.1 per ounce) mainly driven by the significant fiscal changes in Argentina in the first half of the year. These included the elimination of export taxes and the restoration of the Patagonian port rebate (see below).

In November 2015, the Argentinean government restored the right to receive a rebate from goods exported through Patagonian ports (previously cancelled in 2009) and was applicable to Hochschild at a rate of approximately 9% of the FOB value of its exports. However, in the fourth quarter of 2016, the benefit was once again cancelled.

RESERVES AND RESOURCES

Total reserves and resources for core operations remained strong, reducing slightly to 183 million and 476 million silver equivalent ounces respectively driven by:

The reduction in the silver price assumption used for cutting both reserves and resources from $20.0 per ounce as at 31 December 2015 to $16.5 per ounce as at 31 December 2016 while maintaining the gold price assumption at $1,200 per ounce. The resulting impact in reserves and resources has been a small decrease, as previously anticipated in the sensitivity table published in the 2015 Preliminary Results statement.

In addition, the Group chose to eliminate resources with a low probability of conversion into reserves at Arcata, San Jose and the existing Pallancata veins. The reduction was mostly from inferred resources with low grades and resources located far from existing mine infrastructure. At Pallancata, the adjustment affects mineral from bridges and pillars in the original Pallancata vein where extraction would impact the stability of the mine structure. Resources at Inmaculada and at the Pablo vein have not been affected.

The decrease was partially offset by the addition of resources from the Pablo vein at Pallancata which is now over 40 million ounces with silver equivalent grade improving significantly to 529 silver equivalent grams per tonne.

These adjustments do not affect the Group's mine plans, future production or cost guidance. The Group believes that it will improve conversion ratios from resources into reserves and ensure a high quality resource base.

EXPLORATION

In September 2016, the Company announced details of a new five-year brownfield exploration plan. Significant brownfield potential has been identified which is expected to extend LOM at all operations and deliver additional low cost growth.

Inmaculada

In 2016, historical drill results were reviewed by the brownfield team and targets for 2017 were defined. The 2017 programme includes approximately 50,000 metres of resource drilling in the east of the deposit at the Millet and Olinda structures which is expected to start towards the end of the second quarter, subject to obtaining the requisite permits. In addition, 7,200 metres of potential drilling is planned to start in March 2017 in the east and also at the Puquiopata area.

Arcata

At Arcata, 8,166 metres were drilled during the year to test North-South structures in the central area of the mine as well as in the Tunel 4 zone, Roxana and Macarena veins in order to extend existing structures and identify new ones. Some highlights are presented below:

Vein

Results

Ramal Marion Sur

DDH-941-GE16:1.2m @ 1.8 g/t Au & 576 g/t Ag

DDH-943-GE16:1.2m @ 4.1 g/t Au & 2,157 g/t Ag

Tunel 4

DDH-912-GE16:1.8m @ 1.1 g/t Au & 205 g/t Ag

DDH-939-LM16:1.3m @ 3.6 g/t Au & 2,655 g/t Ag

In 2017, almost 45,000 metres of resource drilling is planned mostly in the first half of the year with the focus on the Paralelas, Tunels 2,3 and 4 and Ramal Mario Sur veins whilst 13,000 metres of potential drilling is planned in the second half of 2017 at the Alexia, Macarena East, Tunel 2,3 and 4, Tres Reyes, Luisa and Marciano structures.

Pallancata

During 2016, drilling was carried out at the new Pablo vein in Pallancata. The results confirmed the presence of several extensional vein sets adjacent to the main Pablo structure - Pablo Pisos (now renamed). In addition, the Company has identified an area in Pablo Piso that hosts higher grade mineralisation. Total inferred resources from the Pablo and associated structures have now reached 40.4 million silver equivalent ounces which is a 78% increase on the December 2015 figure and demonstrates the significant potential already discovered in the Pablo vein system.

Drill results in the Pablo Area

Vein

Results

Pablo Piso

DLYU-A109: 0.9m @ 0.3g/t Au & 183g/t Ag

DLPP-A07: 4.1m @ 1.4g/t Au & 483g/t Ag

DLPP-A11: 1.2m @ 0.1g/t Au & 52g/t Ag

DLPP-A09: 1.0m @ 0.1g/t Au & 32g/t Ag

DLPP-A05: 6.4m @ 1.1g/t Au & 322g/t Ag

DLPP-A10: 0.9m @ 0.3g/t Au & 125g/t Ag

DLPP-A06: 3.7m @ 2.6g/t Au & 813g/t Ag

DLPP-A08: 0.9m @ 1.3g/t Au & 246g/t Ag

DLPP-A12: 1.2m @ 7.4g/t Au & 2,282g/t Ag

DLPP-A16: 2.7m @ 1.0g/t Au & 356g/t Ag

Andres

(Pablo Piso 1)

DLPP-A07: 0.7m @ 0.7g/t Au & 211g/t Ag

DLPP-A05: 0.9m @ 0.2g/t Au & 79g/t Ag

DLPP-A06: 0.8m @ 0.4g/t Au & 126g/t Ag

DLPP-A04: 0.7m @ 0.1g/t Au & 44g/t Ag

DLPP-A12: 0.9m @ 1.2g/t Au & 547g/t Ag

DLPP-A01: 0.9m @ 1.0g/t Au & 177g/t Ag

DLPP-A18: 1.0m @ 5.3g/t Au & 1,652g/t Ag

DLPP-A16: 5.1m @ 1.2g/t Au & 408g/t Ag

Tomas

(Pablo Piso 2)

DLEP-A04: 0.8m @ 0.3g/t Au & 71g/t Ag

DLEP-A12: 0.8m @ 2.6g/t Au & 652g/t Ag

DLEP-A01: 0.6m @ 0.2g/t Au & 51g/t Ag

DLEP-A16: 0.7m @ 0.5g/t Au & 184g/t Ag

DLPP-A15: 1.0m @ 0.4g/t Au & 111g/t Ag

DLPP-A18: 0.6m @ 1.9g/t Au & 600g/t Ag

DLPP-A14: 1.3m @ 0.7g/t Au & 179g/t Ag

DLPP-A13: 0.8m @ 0.3g/t Au & 156g/t Ag

Simon

(Pablo Piso 3)

DLNE-A04: 0.9m @ 1.7g/t Au & 569g/t Ag

DLPP-A04: 0.9m @ 11.7g/t Au & 2,253g/t Ag

DLPP-A12: 0.6m @ 1.8g/t Au & 491g/t Ag

DLPP-A01: 0.8m @ 2.4g/t Au & 721g/t Ag

DLPP-A15: 0.8m @ 0.7g/t Au & 172g/t Ag

DLPP-A18: 0.6m @ 3.6g/t Au & 481g/t Ag

DLPP-A14: 2.7m @ 0.9g/t Au & 220g/t Ag

Pedro

(Pablo Piso 4)

DLPP-A01: 1.0m @ 0.6g/t Au & 207g/t Ag

DLPP-A14: 0.7m @ 0.5g/t Au & 149g/t Ag

Juan

(Pablo Piso 5)

DLPP-A01: 0.6m @ 0.2g/t Au & 65g/t Ag

DLPP-A17: 0.7m @ 0.0g/t Au & 13g/t Ag

DLPP-A14: 0.8m @ 0.3g/t Au & 101g/t Ag

In 2017, potential drilling will focus on the Pablo and Yanacochita-Farallon areas.

San Jose

At San Jose 1,240m was drilled in the fourth quarter mainly in the Aguas Vivas area with the programme continuing into 2017. In addition in 2017, 20,800 metres of drilling is also planned in the Platifero, Clara and Saavedra Norte structures.

FINANCIAL REVIEW

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

Revenue

Gross revenue

Gross revenue from continuing operations increased by 47% to $722.0 million in 2016 (2015: $492.5 million) driven by a significant increase in sales resulting from the first full year of production from the Company's Inmaculada mine as well as a rise in precious metal prices. ⁶

Silver

Gross revenue from silver increased by 30% in 2016 to $358.7 million (2015: $275.3 million) as a result of a 22% increase in the total amount of silver ounces sold to 21,091 koz (2015:17,263 koz) driven by the first full year contribution from Inmaculada as well as increased sales from Arcata and San Jose. In addition, silver revenue also benefited from a 6% increase in the average silver price received.

Gold

Gross revenue from gold increased 67% in 2016 to $363.4 million (2015: $217.2 million) as a result of a 60% rise in the total amount of gold ounces sold in 2016 (299.0 koz) as well as a 5% increase in the average gold price received. The increase in gold sales came from the first full year of output from the predominantly gold-producing Inmaculada operation.

Gross average realised sales prices

The following table provides figures for average realised prices (which are reported before the deduction of commercial discounts and include the effects of the hedging agreements in place during the year) and ounces sold for 2016 and 2015:

Average realised prices	Year ended 31 Dec 2016	Year ended 31 Dec 2015
Silver ounces sold (koz)	21,091	17,263
Avg. realised silver price ($/oz)	17.0	16.0
Gold ounces sold (koz)	298.96	187.39
Avg. realised gold price ($/oz)	1,215	1,159

Commercial discounts

Commercial discounts refer to refinery treatment charges, refining fees and payable deductions for processing concentrates, and are deducted from gross revenue on a per tonne basis (treatment charge), per ounce basis (refining fees) or as a percentage of gross revenue (payable deductions). In 2016, the Group recorded commercial discounts of $34.1 million (2015: $23.6 million). The increase is explained by the higher production and the decision to switch the production of Arcata back to concentrate as opposed to the previous year when most was sold as dore. The ratio of commercial discounts to gross revenue in 2016 was 5% (2015: 5%).

Net revenue

Net revenue increased by 47% to $688.2 million (2015 $469.1 million), comprising net gold revenue of $354.4 million and net silver revenue of $333.5 million. In 2016, gold accounted for 51% and silver 49% of the Company's consolidated net revenue (2015: gold 45% and silver 55%) with the increase in the gold contribution due to a full year of sales from the predominantly-gold Inmaculada mine.

Revenue by mine⁷

$000	Year ended 31 Dec 2016	Year ended 31 Dec 2015	% change
Silver revenue
Arcata	106,206	93,445	14
Inmaculada	83,642	25,223	232
Pallancata	44,500	59,803	(26)
San Jose	124,316	96,837	28
Commercial discounts	(25,139)	(16,929)	48
Net silver revenue	333,525	258,379	29
Gold revenue
Arcata	25,717	19,124	34
Inmaculada	196,466	77,080	155
Pallancata	14,994	19,929	(25)
San Jose	126,174	101,046	25
Commercial discounts	(8,993)	(6,688)	34
Net gold revenue	354,358	210,491	68
Other revenue	359	276	30
Net revenue	688,242	469,146	47

Costs

Total cost of sales was $487.7 million in 2016 (2015: $403.7 million). The direct production cost excluding depreciation was higher at $293.8 million (2015: $265.1 million) due to the first full year of Inmaculada. Depreciation in 2016 was $185.7 million (2015: $139.5 million) with the increase due to Inmaculada's depreciation of assets. Other items, which principally includes personnel related provisions, was $1.8 million in 2016 (2015: $9.3 million). Change in inventories was $6.5 million in 2016 (2015: ($10.3 million)).

$000	Year ended 31 Dec 2016	Year ended 31 Dec 2015	% Change
Direct production cost excluding depreciation	293,810	265,107	11
Depreciation in production cost	185,655	139,533	33
Other items	1,750	9,272	(81)
Change in inventories	6,487	(10,255)	163
Pre-exceptional cost of sales	487,702	403,657	21

Unit cost per tonne

The Company reported unit cost per tonne at its operations of $106.2 per tonne in 2016, a 10% decrease versus 2015 ($118.4 per tonne).

Unit cost per tonne by operation (including royalties)⁸:

Operating unit ($/tonne)	Year ended 31 Dec 2016	Year ended 31 Dec 2015	% change
Peru	83.2	90.7	(8)
Arcata	101.1	109.1	(7)
Inmaculada	64.4	63.3	2
Pallancata	131.0	98.9	32
Argentina
San Jose	202.4	210.4	(4)
Total	106.2	118.4	(10)

Cash costs

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

Cash cost reconciliation⁹

$000 unless otherwise indicated	Year ended Dec 2016	Year ended 31 Dec 2015	% change
Group cash cost	358,800	313,939	14
(+) Cost of sales	487,702	403,657	21
(-) Depreciation and amortisation in cost of sales	(180,317)	(135,645)	33
(+) Selling expenses	14,175	21,729	(35)
(+) Commercial deductions¹⁰	37,240	24,198	54
Gold	11,486	6,714	71
Silver	25,754	17,484	47
Revenue	688,242	469,146	47
Gold	354,358	210,491	68
Silver	333,525	258,379	29
Others	359	276	30
Ounces sold
Gold	298.9	187.4	59
Silver	21,091	17,263	22
Group cash cost ($/oz)
Co product Au	618	752	(18)
Co product Ag	8.2	10.0	(18)
By product Au	(2)	203	(101)
By product Ag	(0.3)	5.6	(105)

Cash costs are calculated based on pre-exceptional figures. Co-product cash cost per ounce is the cash cost allocated to the primary metal (allocation based on proportion of revenue), divided by the ounces sold of the primary metal. By-product cash cost per ounce is the total cash cost minus revenue and commercial discounts of the by-product divided by the ounces sold of the primary metal.

All-in sustaining cost reconciliation

All-in sustaining cash costs per silver equivalent ounce

Year ended 31 Dec 2016

$000 unless otherwise indicated	Arcata	Inmaculada	Pallancata	San José	Main operations	Corporate & others	Total
(+) Production cost excluding depreciation	68,155	83,796	33,650	108,209	293,810	-	293,810
(+) Other items in cost of sales	462	506	241	541	1,750	-	1,750
(+) Operating and exploration capex for units	20,819	54,199	16,130	32,670	123,818	255	124,073
(+) Brownfield exploration expenses	1,305	1	733	1691	3,730	2,806	6,536
(+) Administrative expenses (excl depreciation and before exceptional items)	1,441	3,420	674	8,180	13,715	32,932	46,647
(+) Royalties and special mining tax¹¹		3,243	639		3,882	3,869	7,751
Sub-total	92,182	145,165	52,067	151,291	440,705	39,862	480,567
Au ounces produced	22,541	162,710	12,374	95,006	292,631	-	292,631
Ag ounces produced (000s)	6,343	4,908	2,620	6,691	20,562	-	20,562
Ounces produced (Ag Eq 000s oz)	8,011	16,948	3,536	13,721	42,216	-	42,216
Sub-total ($/oz Ag Eq)	11.5	8.6	14.7	11.0	10.4	-	11.4
(+) Commercial deductions	15,383	1,650	5,038	15,169	37,240	-	37,240
(+) Selling expenses	1,973	1,130	721	10,351	14,175	-	14,175
(-) Export credits	-	-	-	(19,029)	(19,029)		(19,029)
Sub-total	17,356	2,780	5,759	6,491	32,386	-	32,386
Au ounces sold	22,043	164,754	12,407	99,761	298,965	-	298,965
Ag ounces sold (000s)	6,346	5,004	2,660	7,081	21,091	-	21,091
Ounces sold (Ag Eq 000s oz)	7,977	17,196	3,578	14,463	43,214	-	43,214
Sub-total ($/oz Ag Eq)	2.2	0.2	1.6	0.4	0.7	-	0.7
All-in sustaining costs ($/oz Ag Eq)	13.7	8.7	16.3	11.5	11.2	-	12.1

Year ended 31 Dec 2015

$000 unless otherwise indicated	Arcata	Inmaculada	Pallancata	San José	Main operations	Corporate & others	Total
(+) Production cost excluding depreciation	71,128	32,765	51,599	108,101	263,593	-	263,593
(+) Other items in cost of sales	2,133	1,544	1,610	5,499	10,786	-	10,786
(+) Operating and exploration capex for units	14,600	13,704	10,683	38,451	77,438	1,193	78,631
(+) Brownfield exploration expenses	62	6	2,457	1,463	3,988	1,990	5,978
(+) Administrative expenses (excl depreciation and before exceptional items)	2,641	2,515	1,796	7,095	14,047	22,569	36,616
(+) Royalties and special mining tax¹¹	-	1,037	741	-	1,778	-	1,778
Sub-total	90,564	51,571	68,886	160,609	371,630	25,752	397,382
Au ounces produced	15,670	72,226	16,419	96,638	200,953		200,953
Ag ounces produced (000s)	5,613	1,746	3,664	6,706	17,729	-	17,729
Ounces produced (Ag Eq 000s oz)	6,772	7,090	4,879	13,857	32,598	-	32,598
Sub-total ($/oz Ag Eq)	13.4	7.3	14.1	11.6	11.4	-	12.2
(+) Commercial deductions	5,144	4	6,687	12,363	24,198	-	24,198
(+) Selling expenses	962	12	1,048	19,707	21,729	-	21,729
Sub-total	6,106	16	7,735	32,070	45,927	-	45,927
Au ounces sold	15,289	67,513	15,795	88,793	187,390	-	187,390
Ag ounces sold (000s)	5,653	1,638	3,632	6,340	17,263	-	17,263
Ounces sold (Ag Eq 000s oz)	6,784	6,634	4,801	12,910	31,129	-	31,129
Sub-total ($/oz Ag Eq)	0.9	0.0	1.6	2.5	1.5	-	1.5
All-in sustaining costs ($/oz Ag Eq)	14.3	7.3	15.7	14.1	12.9	-	13.7

Administrative expenses

Administrative expenses before exceptional items increased by 26% to $48.0 million (2015: $38.1 million) primarily due to increased personnel expenses.

Exploration expenses

In 2016, exploration expenses were flat at $9.2 million (2015: $9.3 million). In addition, the Group capitalises part of its brownfield exploration, which mostly relates to costs incurred converting potential resource to the Inferred or Measured and Indicated category. In 2016, the Company capitalised $1.3 million relating to brownfield exploration compared to $2.6 million in 2015, bringing the total investment in exploration for 2016 to $10.5 million (2015: $11.8 million).

Selling expenses

Selling expenses decreased by 35% versus 2015 to $14.2 million (2015: $21.7 million) mainly due to the elimination of export duties at San Jose. Selling expenses in 2016 consisted mainly of logistic costs for the sale of concentrate in addition to approximately 1.5 months of export duties on concentrate until its elimination on 12 February 2016. Previously, export duties in Argentina were levied at 10% of revenue for concentrate and 5% of revenue for dore.

Other income/expenses

Other income before exceptional items was $33.1 million (2015: $8.0 million). This mainly consisted of income from the Patagonian port benefit ($16.9 million) reintroduced towards the end of 2015, incremental revenue from logistic services provided to third parties and a reduction in mine closure provisions ($6.3 million).

Other expenses before exceptional items were reduced to $13.9 million (2015: $15.3 million).

Adjusted EBITDA

Adjusted EBITDA increased by 137% over the period to $329.0 million (2015: $138.8 million) driven primarily by the significant effect of a full year's contribution from the low cost Inmaculada mine as well as higher metal prices.

Adjusted EBITDA is calculated as profit from continuing operations before exceptional items, net finance costs and income tax plus non-cash items (depreciation and changes in mine closure provisions) and exploration expenses other than personnel and other exploration related fixed expenses.

$000 unless otherwise indicated	Year ended 31 Dec 2016	Year ended 31 Dec 2015	% change
Profit from continuing operations before exceptional items, net finance cost, foreign exchange loss and income tax	148,188	(10,886)	1,461
Depreciation and amortisation in cost of sales	180,317	135,645	33
Depreciation and amortisation in administrative expenses	1,331	1,534	(13)
Exploration expenses	9,193	9,255	(1)
Personnel and other exploration related fixed expenses	(3,947)	(4,301)	8
Other non cash (income)/ expenses¹²	(6,068)	7,590	(180)
Adjusted EBITDA	329,014	138,837	137
Adjusted EBITDA margin	48%	30%

Finance income

Finance income before exceptional items of $1.1 million reduced slightly from 2015 ($1.9 million) and mainly includes interest received on deposits.

Finance costs

Finance costs before exceptional items decreased from $31.4 million in 2015 to $30.5 million in 2016, principally due to the reduction of interest resulting from the repayment of $50.0 million of the medium term loan, $57.5 million of short-term loans and $20.0 million of the amounts owed to Graña y Montero. In 2015, interest expenses were net of amounts capitalised during the construction of Inmaculada in line with IFRS.

Foreign exchange losses

The Group recognised a foreign exchange loss of $1.8 million (2015: $5.6 million loss) as a result of exposures in currencies other than the functional currency specifically the Peruvian Nuevo Sol and Argentinean Peso.

Income tax

The Company's pre-exceptional income tax charge was $47.6 million (2015: $20.4 million). The substantial increase in the charge is explained by the Company's significant increase in profitability in the period, as well as an increase in the mining royalties paid in Peru, the level of which is based on the operating margin achieved by the Company´s Peruvian operations.

Exceptional items

Exceptional items in 2016 totalled a $6.4 million loss after tax (2015: $173.3 million loss). Exceptional items principally included: a penalty payment for changing the energy supplier at Arcata ($4.3 million) which will result in energy cost savings; a $2.7 million gain on the reversal of the mining reserve tax in Argentina (eliminated by the Argentine Government) in addition to the reversal of the associated interest on the reserve tax ($1.0 million); costs related to the stoppage at Pallancata ($2.5 million); costs related to improvements to the Ares tailings dam ($2.2 million); write-off of a now uncontested fee payable to a local authority of $1.8 million; and a property, plant and equipment ("PP&E" )write-off of $1.6 million.

These items excluded the exceptional tax effect that amounted to a $2.2 million tax charge (2015: $36.9 million tax credit).

Cash flow and balance sheet review

Cash flow:

$000	Year ended 31 Dec 2016	Year ended 31 Dec 2015	Change
Net cash generated from operating activities	316,073	133,256	182,817
Net cash used in investing activities	(127,364)	(223,319)	95,955
Cash flows (used in)/generated in financing activities	(132,165)	61,027	(193,192)
Net increase/(decrease in cash and cash equivalents) during the year	56,544	(29,036)	85,580

Operating cash flow increased from $133.3 million in 2015 to $316.1 million in 2016, mainly due to the maiden full year cash contribution from the Inmaculada mine in addition to higher prices. Net cash used in investing activities decreased to $127.4 million in 2016 from $223.3 million in 2015 mainly due to the completion of the Inmaculada mine in the middle of 2015. Finally, cash from financing activities changed to $132.2 million used in the year from $61.0 million generated in 2015, primarily due to the $107.4 million of debt repayment in 2016 versus the raising of short term debt in Peru in 2015 ($75.0 million). As a result, total cash flows resulted in a net increase of $56.5 million from a net decrease of $29.0 million in 2015 ($85.5 million difference).

Working capital

$000	Year ended 31 Dec 2016	Year ended 31 Dec 2015
Trade and other receivables	93,837	135,014
Inventories	57,056	70,286
Other financial (liability)/assets	(1,726)	20,126
Income tax (payable)/receivable	(9,025)	17,628
Trade and other payables and provisions	(211,277)	(249,788)
Working capital	(71,135)	(6,734)

The Group's movement in the working capital position improved by $64.4 million to a $71.1 million reduction in 2016 from a $6.7 million reduction in 2015. This was primarily explained by: lower trade and other receivables ($41.2 million) mainly due to VAT recoveries of $22.0 million and a reduction in trade receivables of $25.0 million; positive movement in other financial (liability)/assets of $21.9 million from an asset position in 2015 (explained by hedging contracts), to a liability position in 2016 resulting from the embedded derivative associated with provisional pricing; and lower inventories ($13.2 million). These effects were partially offset by lower trade and other payables and provisions ($38.5 million) mainly resulting from the payment of amounts owed to Graña y Montero.

Net debt

$000 unless otherwise indicated	Year ended 31 Dec 2016	Year ended 31 Dec 2015
Cash and cash equivalents	139,979	84,017
Long term borrowings	(291,073)	(339,778)
Short term borrowings¹³	(36,312)	(94,760)
Net debt	(187,406)	(350,521)

The Group reported net debt position was $187.4 million as at 31 December 2016 (2015: $350.5 million). The reduction in 2016 includes the net effect of: the prepayment of the Scotiabank medium term loan ($50 million); the repayment of short-term loans ($57.4 million) and; the operating cash generated mainly in Inmaculada.

Capital expenditure¹⁴

$000	Year ended 31 Dec 2016	Year ended 31 Dec 2015
Arcata	20,819	14,600
Ares	16	25
Selene	25	139
Pallancata	16,105	10,683
San Jose	35,311	38,451
Inmaculada¹⁵	54,199	166,336
Operations	126,475	230,234
Crespo	2,982	2,842
Volcan	691	958
Azuca	1,237	211
Other	260	3,914
Total	131,645	238,159

2016 capital expenditure of $131.6 million (2015: $238.2 million) mainly comprised of operational capex of $126.5 million (2015: $230.2 million) with the reduction due to the inclusion in 2015 of a portion of Inmaculada project capital expenditure.

Forward looking Statements

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

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

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

Statement of Directors' responsibilities

The Directors confirm that to the best of their knowledge:

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

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

CONSOLIDATED INCOME STATEMENT

For the year ended 31 December 2016

		Year ended 31 December 2016			Year ended 31 December 2015
	Notes	Before exceptional items US$000	Exceptional items (note 11) US$000	Total US$000	Before exceptional items US$000	Exceptional items (note 11) US$000	Total US$000
Continuing operations
Revenue	3,5	688,242	-	688,242	469,146	-	469,146
Cost of sales	6	(487,702)	-	(487,702)	(403,657)	(1,514)	(405,171)
Gross profit		200,540	-	200,540	65,489	(1,514)	63,975
Administrative expenses	7	(47,979)	-	(47,979)	(38,148)	-	(38,148)
Exploration expenses	8	(9,193)	-	(9,193)	(9,255)	-	(9,255)
Selling expenses	9	(14,175)	-	(14,175)	(21,729)	-	(21,729)
Other income	12	33,131	2,667	35,798	8,021	-	8,021
Other expenses	12	(13,858)	(10,675)	(24,533)	(15,264)	-	(15,264)
Impairment and write-off of non-current assets	11	(278)	(1,634)	(1,912)	-	(207,146)	(207,146)
Profit/(loss) from continuing operations before net finance income/(cost), foreign exchange loss and income tax		148,188	(9,642)	138,546	(10,886)	(208,660)	(219,546)
Finance income	13	1,100	974	2,074	1,898	-	1,898
Finance costs	13	(30,541)	-	(30,541)	(31,414)	(1,486)	(32,900)
Foreign exchange loss		(1,800)	-	(1,800)	(5,627)	-	(5,627)
Profit/(loss) from continuing operations before income tax		116,947	(8,668)	108,279	(46,029)	(210,146)	(256,175)
Income tax (expense)/benefit	14	(47,641)	2,224	(45,417)	(20,370)	36,888	16,518
Profit/(loss) for the year from continuing operations		69,306	(6,444)	62,862	(66,399)	(173,258)	(239,657)
Attributable to:
Equity shareholders of the Company		53,154	(7,604)	45,550	(61,852)	(172,758)	(234,610)
Non-controlling interests		16,152	1,160	17,312	(4,547)	(500)	(5,047)
		69,306	(6,444)	62,862	(66,399)	(173,258)	(239,657)
Basic earnings/(loss) per ordinary share from continuing operations for the year (expressed in US dollars per share)	15	0.11	(0.02)	0.09	(0.14)	(0.38)	(0.52)
Diluted earnings/(loss) per ordinary share from continuing operations for the year (expressed in US dollars per share)	15	0.10	(0.01)	0.09	(0.14)	(0.38)	(0.52)

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2016

		Year ended 31 December
	Notes	2016 US$000	2015 US$000
Profit/(loss) for the year		62,862	(239,657)
Other comprehensive income to be reclassified to profit or loss in subsequent periods:
Exchange differences on translating foreign operations		(249)	(597)
Change in fair value of available-for-sale financial assets	19	774	(86)
Recycling of the loss on available-for-sale financial assets		(66)	104
Change in fair value of cash flow hedges		(39,989)	35,887
Recycling of the loss/(gain) on cash flow hedges		18,722	(18,962)
Deferred income tax relating to components of other comprehensive income	14	5,955	(4,739)
Other comprehensive (loss)/gain for the year, net of tax		(14,853)	11,607
Total comprehensive income/(expense) for the year		48,009	(228,050)
Total comprehensive income/(expense) attributable to:
Equity shareholders of the Company		30,697	(223,003)
Non-controlling interests		17,312	(5,047)
		48,009	(228,050)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 December 2016

	Notes	As at 31 December 2016 US$000	As at 31 December 2015 US$000
ASSETS
Non-current assets
Property, plant and equipment	16	975,483	1,045,516
Evaluation and exploration assets	17	138,985	138,171
Intangible assets	18	26,379	27,981
Available-for-sale financial assets	19	991	366
Trade and other receivables	20	25,717	10,187
Income tax receivable		-	47
Deferred income tax assets	27	1,027	-
		1,168,582	1,222,268
Current assets
Inventories	21	57,056	70,286
Trade and other receivables	20	68,120	124,827
Income tax receivable		20,988	20,384
Other financial assets		-	21,267
Cash and cash equivalents	22	139,979	84,017
		286,143	320,781
Total assets		1,454,725	1,543,049
EQUITY AND LIABILITIES
Capital and reserves attributable to shareholders of the Parent
Equity share capital		224,315	223,805
Share premium		438,041	438,041
Treasury shares		(426)	(898)
Other reserves		(217,288)	(203,649)
Retained earnings		258,269	218,093
		702,911	675,392
Non-controlling interests		90,442	90,113
Total equity		793,353	765,505
Non-current liabilities
Trade and other payables	24	1,266	20,379
Borrowings	25	291,073	339,778
Provisions	26	106,121	121,402
Deferred income	23	25,000	25,000
Deferred income tax liabilities	27	65,971	64,274
		489,431	570,833
Current liabilities
Trade and other payables	24	98,484	101,892
Other financial liabilities		1,726	1,141
Borrowings	25	36,312	94,760
Provisions	26	5,406	6,115
Income tax payable		30,013	2,803
		171,941	206,711
Total liabilities		661,372	777,544
Total equity and liabilities		1,454,725	1,543,049

These financial statements were approved by the Board of Directors on 7 March 2017 and signed on its behalf by:

Ignacio Bustamante, Chief Executive Officer

7 March 2017

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 December 2016

		Year ended 31 December
	Notes	2016 US$000	2015 US$000
Cash flows from operating activities
Cash generated from operations		345,856	166,234
Interest received		860	726
Interest paid		(27,074)	(36,445)
Payment of mine closure costs	26	(3,355)	(2,538)
Income tax (paid)/received, net		(214)	5,279
Net cash generated from operating activities		316,073	133,256
Cash flows from investing activities
Purchase of property, plant and equipment		(126,495)	(216,188)
Purchase of evaluation and exploration assets	17	(3,478)	(6,861)
Purchase of intangibles	18	(14)	(612)
Net proceeds from sale of subsidiary	4	807	-
Proceeds from sale of available-for-sale financial assets	19	149	3
Proceeds from sale of other assets	12	1,550	-
Proceeds from sale of property, plant and equipment		117	339
Net cash used in investing activities		(127,364)	(223,319)
Cash flows from financing activities
Proceeds of borrowings		70,000	175,948
Repayment of borrowings		(177,431)	(209,173)
Dividends paid to non-controlling interests	28	(17,736)	(964)
Dividends paid	28	(6,998)	-
Proceeds from issue of ordinary shares		-	95,216
Cash flows (used in)/generated from financing activities		(132,165)	61,027
Net increase/(decrease) in cash and cash equivalents during the year		56,544	(29,036)
Exchange difference		(582)	(2,946)
Cash and cash equivalents at beginning of year		84,017	115,999
Cash and cash equivalents at end of year	22	139,979	84,017

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year 31 December 2016

					Other reserves
	Notes	Equity share capital US$000	Share premium US$000	Treasury shares US$000	Unrealised gain on available-for-sale financial assets US$000	Unrealised gain/ (loss) on hedges 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 2015		170,389	396,021	(898)	14	3,126	(13,005)	(210,046)	2,576	(217,335)	451,047	799,224	95,160	894,384
Other comprehensive income/(expense)		-	-	-	18	12,186	(597)	-	-	11,607	-	11,607	-	11,607
Loss for the year		-	-	-	-	-	-	-	-	-	(234,610)	(234,610)	(5,047)	(239,657)
Total comprehensive income/(expense) for the year		-	-	-	18	12,186	(597)	-	-	11,607	(234,610)	(223,003)	(5,047)	(228,050)
Exercise of share options		220	-	-	-	-	-	-	(1,560)	(1,560)	1,340	-	-	-
Issuance of shares		53,196	46,812	-	-	-	-	-	-	-	-	100,008	-	100,008
Transaction costs related to issuance of shares		-	(4,792)	-	-	-	-	-	-	-	-	(4,792)	-	(4,792)
Share -based payments		-	-	-	-	-	-	-	3,639	3,639	316	3,955	-	3,955
Balance at 31 December 2015		223,805	438,041	(898)	32	15,312	(13,602)	(210,046)	4,655	(203,649)	218,093	675,392	90,113	765,505
Other comprehensive income/(expense)		-	-	-	708	(15,312)	(249)	-	-	(14,853)	-	(14,853)	-	(14,853)
Profit for the year		-	-	-	-	-	-	-	-	-	45,550	45,550	17,312	62,862
Total comprehensive income/(expense) for the year		-	-	-	708	(15,312)	(249)	-	-	(14,853)	45,550	30,697	17,312	48,009
Exercise of share options		510	-	472	-	-	-	-	(2,223)	(2,223)	1,241	-	-	-
Dividends	28	-	-	-	-	-	-	-	-	-	(6,998)	(6,998)	-	(6,998)
Dividends to non - controlling interests	28	-	-	-	-	-	-	-	-	-	-	-	(16,983)	(16,983)
Share-based payments		-	-		-	-	-	-	3,437	3,437	383	3,820	-	3,820
Balance at 31 December 2016		224,315	438,041	(426)	740	-	(13,851)	(210,046)	5,869	(217,288)	258,269	702,911	90,442	793,353

1 Notes to the consolidated financial statements

For the year ended 31 December 2016

The financial information for the year ended 31 December 2016 and 2015 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 2016 and 2015 have been extracted from the consolidated financial statements of Hochschild Mining plc for the year ended 31 December 2016 which have been approved by the directors on 7 March 2017 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

Basis of preparation

Having considered financial forecasts and projections which take into account (i) possible changes in commodity price scenarios; and (ii) the contingency measures that could be taken to alleviate pressure on the balance sheet in the event of a fall in prices, the Directors have a reasonable expectation that the Group have adequate resources, including access to contingent resources, that would see it continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting.

Changes in accounting policy and disclosures

The accounting policies adopted in the preparation of the consolidated financial statements are consistent with those applied in the preparation of the consolidated financial statement for the year ended 31 December 2015. Amendments to standards and interpretations which came into force during the year did not have a significant impact on the Group's financial statements.

Standards, interpretations and amendments to existing standards that are not yet effective and have not been previously adopted by the Group

Certain new standards, amendments and interpretations to existing standards have been published and are mandatory for the Group's accounting periods beginning on or after 1 January 2017 or later periods but which the Group has not previously adopted. Those that are applicable to the Group are as follows:

· IFRS 15 Revenue from Contracts with Customers, applicable for annual periods beginning on or after 1 January 2018.

· This standard outlines the principles an entity must apply to measure and recognise revenue. The Group is planning to apply the standard when it became mandatory, analysing all the variables during the first quarter of 2017, including the method of implementation and the restatement of the previous year financial information. IFRS 15 is not expected to have a significant effect on the financial statements.

· IFRS 9 Financial Instruments, applicable for annual periods beginning on or after 1 January 2018. IFRS 9 is the replacement of IAS 39 Financial Instruments: Recognition and Measurement. The standard includes requirements for recognition and measurement, impairment, derecognition and general hedge accounting. IFRS 9 should be applied retrospectively in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, subject to certain exemptions and exceptions. The Group do not anticipate a significant effect over the financial statements.

· IFRS 16 Leases, applicable for annual periods beginning on or after 1 January 2019. IFRS 16 specifies how an IFRS reporter will recognise, measure, present and disclose leases. The standard provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value. Lessors continue to classify leases as operating or finance, with IFRS 16's approach to lessor accounting substantially unchanged from its predecessor, IAS 17.The Group is analysing the adoption of this new standard and expected not to have a significant impact on the Group´s financial position or performance.

· IAS 7 Statement of cash flows, applicable for annual periods beginning on or after 1 January 2017. The amendments require entities to provide disclosures about changes in their liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes. The adoption of these amendments would not have impact on the Group´s financial position or performance.

· IAS 12 Income Taxes, applicable for annual periods beginning on or after 1 January 2017. The amendments clarify the accounting for deferred tax assets for unrealised losses on debt instruments measured at fair value. Entities are required to apply the amendments retrospectively. The adoption of these rules would not have impact on the Group´s financial position or performance.

· IFRS 2 Classification and Measurement of Share-based Payment Transactions - Amendments to IFRS 2, applicable for annual periods beginning on or after 1 January 2018.

The amendments are related to the classification and measurement of share-based payment transactions and it does not require to restate prior periods. The adoption of these amendments would not have impact on the Group´s financial position or performance.

The Group is analysing the effect of the standards and plans to adopt the new standard on the required effective date.

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 similar 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 at market prices. 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 units - Arcata and San Jose, which generate revenue from the sale of gold, silver, dore and concentrate.

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

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

· 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 costs charged to the profit and loss and capitalised as assets.

· Other - includes the profit or loss generated by Empresa de Transmisión Callalli S.A.C. (a power transmission company, absorbed by Empresa de Transmisión Aymaraes S.A.C.on 1 June 2016), Empresa de Transmisión Aymaraes S.A.C. (a power transmission company), Ares unit, and the Selene plant (used to process some of the Group's production).

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

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

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

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

(a) Reportable segment information

	Arcata US$000	Pallancata US$000	San Jose US$000	Inmaculada US$000	Exploration US$000	Other¹ US$000	Adjustment and eliminations US$000	Total US$000
Year ended 31 December 2016
Revenue from external customers	117,358	54,456	235,961	280,108	-	359	-	688,242
Inter segment revenue	-	-	-	-	-	2,062	(2,062)	-
Total revenue	117,358	54,456	235,961	280,108	-	2,421	(2,062)	688,242

Segment profit/(loss)	22,924	11,284	57,259	97,595	(9,155)	(2,273)	(462)	177,172
Others²								(68,893)
Profit from continuing operations before income tax								108,279

Other segment information
Depreciation³	(22,196)	(10,606)	(53,012)	(98,243)	(1,834)	(4,877)	-	(190,768)
Amortisation	-	-	(1,060)	-	(462)	(138)	-	(1,660)
Impairment and write-off of assets	(87)	(885)	(278)	(414)	(2)	(246)	-	(1,912)

Assets
Capital expenditure	20,819	16,105	35,311	54,199	4,910	301	-	131,645

Current assets	6,721	7,017	53,299	22,899	30	3,911	-	93,877
Other non-current assets	48,843	55,380	196,056	589,666	185,825	65,077	-	1,140,847
Total segment assets	55,564	62,397	249,355	612,565	185,855	68,988	-	1,234,724
Not reportable assets⁴	-	-	-	-	-	220,001	-	220,001
Total assets	55,564	62,397	249,355	612,565	185,855	288,989	-	1,454,725

1 Other revenue relates to revenues earned by Empresa de Transmisión Callalli S.A.C.and Empresa de Transmisión Aymaraes S.A.C.

2 Comprised of administrative expenses of US$47,979,000, other income of US$35,798,000, other expenses of US$24,533,000, impairment and write-off of assets of US$1,912,000, finance income of US$2,074,000, finance expense of US$30,541,000, and foreign exchange loss of US$1,800,000.

3 Includes depreciation capitalised in the Crespo project (US$2,215,000), San Jose unit (US$2,640,000), Arcata unit (US$117,000) and the Pallancata unit (US$3,000).

4 Not reportable assets are comprised of available-for-sale financial assets of US$991,000, other receivables of US$57,016,000, income tax receivable of US$20,988,000, deferred income tax asset of US$1,027,000 and cash and cash equivalents of US$139,979,000.

	Arcata US$000	Pallancata US$000	San Jose US$000	Inmaculada US$000	Exploration US$000	Other¹ US$000	Adjustment and eliminations US$000	Total US$000
Year ended 31 December 2015
Revenue from external customers	107,425	73,045	186,097	102,303	-	276	-	469,146
Inter segment revenue	-	-	-	-	-	2,437	(2,437)	-
Total revenue	107,425	73,045	186,097	102,303	-	2,713	(2,437)	469,146

Segment profit/(loss)	(1,340)	(17,002)	13,297	49,759	(10,710)	384	(1,397)	32,991
Others²								(289,166)
Loss from continuing operations before income tax								(256,175)

Other segment information
Depreciation³	(33,506)	(35,415)	(45,286)	(32,093)	(1,496)	(2,816)	-	(150,612)
Amortisation	-	-	(1,013)	-	(457)	(34)	-	(1,504)
Impairment and write-off of assets, net	(72,718)	(39,245)	(57)	-	(95,113)	(13)	-	(207,146)

Assets
Capital expenditure	14,600	10,683	38,451	166,336	4,011	4,078	-	238,159

Current assets	17,456	13,818	63,941	31,958	30	5,435	-	132,638
Other non-current assets	53,458	50,591	220,307	633,169	181,662	72,481	-	1,211,668
Total segment assets	70,914	64,409	284,248	665,127	181,692	77,916	-	1,344,306
Not reportable assets⁴	-	-	-	-	-	198,743	-	198,743
Total assets	70,914	64,409	284,248	665,127	181,692	276,659	-	1,543,049

1 'Other' revenue relates to revenues earned by Empresa de Transmisión Callalli S.A.C.and Empresa de Transmisión Aymaraes S.A.C.

2 Comprised of administrative expenses of US$38,148,000, other income of US$8,021,000, other expenses of US$15,264,000, impairment and write-off of assets of US$207,146,000, finance income of US$1,898,000, finance expense of US$32,900,000, and foreign exchange loss of US$5,627,000.

3 Includes US$1,793,000 and US$6,077,000 of depreciation capitalised in the Crespo and the Inmaculada projects respectively.

4 Not reportable assets are comprised of available-for-sale financial assets of US$366,000, other receivables of US$72,662,000, income tax receivable of US$20,431,000, other financial assets of US$21,267,000 and cash and cash equivalents of US$84,017,000.

(b) Geographical information

The revenue for the period based on the country in which the customer is located is as follows:

	Year ended 31 December
	2016 US$000	2015 US$000
External customer
USA	225,073	229,229
Peru	78,248	63,328
Canada	181,569	58,154
Germany	4,506	7,428
Switzerland	89,838	12,174
United Kingdom ¹	(1,689)	17,273
Korea	92,769	81,580
Bulgaria	16,334	-
Japan	1,594	(20)
Total	688,242	469,146
Inter-segment
Peru	2,062	2,437
Total	690,304	471,583

1 Corresponds to the realised loss on the silver zero cost collar contract with JP Morgan Chase Bank, National Association, London Branch, settled on 30 December 2016 (2015: Corresponds to the realised gain on the gold and silver swap contracts with JP Morgan Chase Bank, National Association, London Brach, settled on 30 and 31 December 2015 respectively) (refer to note 5).

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 2016			Year ended 31 December 2015
	US$000	% Revenue	Segment	US$000	% Revenue	Segment
Asahi Refining Canada Ltd.	160,312	23%	Arcata and Inmaculada	34,362	7%	Arcata and Inmaculada
Republic Metals Corporation	103,405	15%	Arcata, Inmaculada and San Jose	106,339	23%	Arcata, Inmaculada and San Jose
Auramet Trading Llc.	97,616	14%	Arcata and Inmaculada	14,781	3%	Arcata and Inmaculada
LS Nikko	92,769	14%	Pallancata and San Jose	81,580	17%	Pallancata and San Jose

Non-current assets, excluding financial instruments and deferred income tax assets, were allocated to the geographical areas in which the assets are located as follows:

	As at 31 December
	2016 US$000	2015 US$000
Peru	850,605	897,824
Argentina	196,056	220,307
Mexico	30,990	31,005
Chile	63,196	62,532
Total non-current segment assets	1,140,847	1,211,668
Available-for-sale financial assets	991	366
Trade and other receivables	25,717	10,187
Income tax receivable	-	47
Deferred income tax assets	1,027	-
Total non-current assets	1,168,582	1,222,268

4 Disposals of subsidiaries

HMX S.A. de C.V.

On 22 February 2016 the Group sold its Mexican subsidiary HMX S.A. de C.V. to Sergio Salinas and Servicios de Integración Fiscal S.A. de C.V., for nil consideration. The carrying value of the net assets disposed was US$60,000 and the transaction resulted in a loss of US$60,000.

Asociación Sumac Tarpuy

On 17 May 2016 the Group transferred all its rights over its non-for-profit subsidiary Asociación Sumac Tarpuy to Inversiones ASPI S.A. ("ASPI"), recognising a gain on disposal of US$811,000. The gain on disposal was determined as follows:

		US$000
Cash consideration		1,100
Assets and liabilities disposed:
Cash and cash equivalents		293
Other payables		(4)
Net assets disposed		289
Gain on disposal		811

		US$000
Net cash inflow arising on disposal
Consideration received in cash and cash equivalents		1,100
Less: cash and cash equivalents disposed of:		(293)
		807

5 Revenue

	Year ended 31 December
	2016 US$000	2015 US$000
Gold (from dore bars)	263,010	142,077
Silver (from dore bars)	177,450	142,397
Gold (from concentrate)	91,348	68,414
Silver (from concentrate)	156,075	115,982
Services	359	276
Total	688,242	469,146

Included within revenue is a loss of US$6,667,000 relating to provisional pricing adjustments representing the change in the fair value of embedded derivatives (2015: loss of US$7,275,000) arising on sales of concentrates and dore.

Revenue is disclosed net of commercial deductions of $37,240,000 (2015: $24,198,000) split between gold $11,486,000 (2015: $6,714,000) and silver $25,754,000 (2015: 17,484,000).

The realised loss on gold and silver swaps and zero cost collar contracts in the period recognised within revenue was US$18,722,000 (gold: US$10,030,000, silver: US$8,692,000) (2015: gain of US$18,962,000, gold: US$7,012,000, silver: US$11,950,000).

6 Cost of sales

Included in cost of sales are:

	Year ended 31 December
	2016 US$000	2015 US$000
Depreciation and amortisation in production costs¹	185,655	139,533
Personnel expenses (notes 10 and 11)	103,130	107,823
Mining royalty (note 30)	7,506	5,968
Change in products in process and finished goods	6,487	(10,255)

1 The depreciation and amortisation in cost of sales and inventory is US$180,317,000 (2015: US$135,645,000) and US$5,338,000 (2015: US$3,888,000) respectively.

7 Administrative expenses

	Year ended 31 December
	2016 US$000	2015 US$000
Personnel expenses (note 10)	33,028	22,427
Professional fees	3,075	3,095
Social and community welfare expenses¹	384	597
Lease rentals	1,455	1,415
Travel expenses	598	576
Communications	438	560
Indirect taxes	2,057	2,147
Depreciation and amortisation	1,798	1,534
Technology and systems	678	745
Security	656	790
Supplies	109	134
Other ²	3,703	4,128
Total	47,979	38,148

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

2 Predominatly related to third party services of US$972,000 (2015: US$962,000), technical services of US$533,000 (2015: US$423,000), repair and maintenance of US$492,000 (2015: US$527,000 and impairment of receivables of US$312,000 (2015: US$209,000).

8 Exploration expenses

	Year ended 31 December
	2016 US$000	2015 US$000
Mine site exploration¹
Arcata	1,305	62
Ares	297	50
Inmaculada	1	6
Pallancata	733	2,457
San Jose	1,691	1,463
	4,027	4,038
Prospects²
Peru	316	303
Argentina	11	43
Chile	26	71
	353	417
Generative³
Peru	866	499
	866	499
Personnel (notes 10)	3,476	2,967
Others	471	1,334
Total	9,193	9,255

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

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

3 Generative expenditure is 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 Group determines the cash flows which relate to the exploration activities of the companies engaged only in exploration. Exploration activities incurred by Group operating companies are not included since it is not practicable to separate the liabilities related to the exploration activities of these companies from their operating liabilities.

Cash outflows on exploration activities were US$1,168,000 in 2016 (2015: US$1,190,000).

9 Selling expenses

	Year ended 31 December
	2016 US$000	2015 US$000
Transportation of dore, concentrate and maritime freight	5,410	3,548
Sales commissions	84	200
Personnel expenses (note 10)	254	254
Warehouse services	1,861	1,610
Taxes¹	1,495	12,994
Other	5,071	3,123
Total	14,175	21,729

1 The export taxes over dore and concentrates in Argentina were reduced to zero percent on 18 December 2015 and 12 February 2016 respectively.

10 Personnel expenses¹

	Year ended 31 December
	2016 US$000	2015 US$000
Salaries and wages	98,741	103,433
Workers' profit sharing²	-	-
Other legal contributions	20,552	20,735
Statutory holiday payments	6,361	6,534
Long Term Incentive Plan	10,528	1,013
Restricted share plan	3,181	2,843
Termination benefits	2,577	3,623
Other	1,951	1,584
Total	143,891	139,765

1 Personnel expenses are distributed in cost of sales, administrative expenses, exploration expenses, selling expenses, other expenses and capitalised as property plant and equipment amounting to US$103,130,000 (2015: US$107,823,000), US$33,028,000 (2015: US$22,427,000), US$3,476,000 (2015: US$2,967,000), US$254,000 (2015: US$254,000), US$2,406,000 (2015: US$1,218,000) and US$1,597,000 (2015: US$5,076,000) respectively.

2 As there is a taxable loss in Compañía Minera Ares S.A.C., and worker´s profit sharing is calculated over the taxable income of each year of companies in Peru, there is no provision during 2016 and 2015 periods.

Average number of employees for 2016 and 2015 were as follows:

	Year ended 31 December
	2016	2015
Peru	2,825	2,575
Argentina	1,125	1,129
Chile	3	3
United Kingdom	11	10
Total	3,964	3,717

11 Exceptional items

Exceptional items are those significant 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 facilitate comparison with prior years. Unless stated, exceptional items do not correspond to a reporting segment of the Group.

	Year ended 31 December 2016 US$000	Year ended 31 December 2015 US$000
Cost of sales
Termination benefits¹	-	(1,514)
Total	-	(1,514)
Other income
Reversal of reserves tax²	2,667	-
Total	2,667	-
Other expenses		-
Work stoppage at Pallancata mine unit³	(2,474)	-
Penalty for termination of agreement⁴	(4,254)	-
Damage of tailing dump in Ares mine unit⁵	(2,150)	-
Provision for impairment of other receivables⁶	(1,797)	-
Total	(10,675)	-
Impairment and write-off of non-current assets
Impairment and write-off of non-current assets⁷	(1,634)	(207,146)
Total	(1,634)	(207,146)
Finance income
Reversal of interests on reserves tax²	974	-
Total	974	-
Finance costs
Interest on disputed tax charges⁸	-	(1,486)
Total	-	(1,486)
Income tax benefit⁹	2,224	36,888
Total	2,224	36,888

1 Termination benefits in 2015 paid to workers following the cashflow optimisation programme approved by management, amounting to US$1,514,000, corresponding to the San José reporting segment.

2 Corresponds to the reversal of the reserves tax liability recorded in previous periods and their associated interests as a result of the settlement agreed between Minera Santa Cruz S.A.C. and the Fiscal Authority in Argentina.

3 From 16 November 2016 until the end of the year, due to actions by the communities surrounding the Pallancata mine unit, the extracting and treatment operations were temporarily suspended. At 31 December 2016 the fixed indirect costs related to abnormal decrease in production from the work stoppage amounted to US$2,474,000, corresponding to the Pallancata reporting segment.

4 Penalty for early termination of the energy supply contract between Compañia Minera Ares S.A.C. and SDF Energia.

5 A section of the Ares tailings dam lateral walls showed unusual decay. A comprehensive study was conducted to determine long-term stability and the conclusion was that certain areas needed to be repaired. This failure was not anticipated and required works aimed at repairing and reinforcing the walls and ensure the long term sustainability of the dam had to be conducted. The expenditure incurred was not part of our mine closure provision and reflects an unexpected, one-off event.

6 Provision for impairment of the account receivable with a third party due to the uncertainty surrounding the outcome of the legal dispute and hence its recoverability.

7 As at 31 December 2016 corresponds to the write-off of non-current assets of Compañia Minera Ares S.A.C. of US$1,634,000 arising from events falling outside the entity's ordinary activities. The charge was generated by the change of the exploitation method in the Pallancata mine unit, from mechanised to conventional. As at 31 December 2015 corresponds to the impairment of the Pallancata mine unit of US$39,026,000, the Arcata mine unit of US$72,424,000, the Crespo project of US$14,350,000, the Azuca project of US$12,766,000, the Volcan project of US$57,070,000 and the San Felipe project of US$10,927,000, and to the write-off of non-current assets of US$583,000.

8 Interest on overdue tax charges owed by the Group following a change in circumstances surrounding a tax dispute with the Peruvian tax authority, resulting in the exposure now being assessed as 'probable', rather than 'possible'.

9 Mainly corresponds to the current tax credit arising from the costs of the work stoppage at Pallancata mine unit, the penalty for early termination of agreement in Compañia Minera Ares S.A.C., the costs incurred due to the damage of tailing dump in Ares mine unit and the reversal of reserves tax in Argentina (US$1,212,000) and the deferred tax credit arising from the write-off of non-current assets and the account receivable (US$1,012,000). For the period ended December 2015, primarily related to the deferred tax benefit arising from the impairment recorded.

12 Other income and other expenses before exceptional items

	Year ended 31 December 2016	Year ended 31 December 2015
	Before exceptional items US$000	Before exceptional items US$000
Other Income
Decrease in provision for mine closure (note 26(3))	6,346	-
Export credits	19,029	2,743
Lease rentals	391	443
Gain on sale of other assets¹	1,550	-
Gain on sale of subsidiaries (refer to note 4)	751	-
Logistic services	4,288	3,699
Other	776	1,136
Total	33,131	8,021
Other expenses
Increase in provision for mine closure (note 26(3))	-	(7,590)
Tax on mining reserves in Argentina (note 30)	-	(441)
Provision of obsolescence of supplies	(2,162)	(1,046)
Contingencies	(570)	(108)
Donations (refer to note 29)	(1,000)	-
Write off of value added tax	(1,208)	(795)
Corporate social responsibility contribution in Argentina²	(3,146)	-
Other ³	(5,772)	(5,284)
Total	(13,858)	(15,264)

1 Corresponds to a gain in Compañía Minera Arcata S.A. generated by the sale of a royalty purchase agreement signed with Minera Bateas S.A.C. to Lemuria Royalties Corp.

2 Relates to a new contribution in Argentina to the Santa Cruz province, effective since January 2016 and calculated as a proportion of sales.

3 Mainly corresponds to the expenses in Ares mine unit of US$1,910,000 (2015: US$2,308,000), concessions of US$1,210,000 (2015: US$447,000) and rentals of US$440,000 (2015: US$333,000)

13 Finance income and finance costs before exceptional items

	Year ended 31 December 2016	Year ended 31 December 2015
	Before exceptional items US$000	Before exceptional items US$000
Finance income
Interest on deposits and liquidity funds	1,011	648
Interest income	1,011	648
Gain on repurchase of bonds	-	856
Other	89	394
Total	1,100	1,898
Finance costs
Interest on secured bank loans (note 25)	(2,602)	(5,842)
Other interest	(1,106)	(1,657)
Interest on bond (note 25)	(23,925)	(22,096)
Interest expense	(27,633)	(29,595)
Unwind of discount on mine rehabilitation	(46)	(69)
Loss on discount of other receivables	(2,257)	(436)
Loss from changes in the fair value of financial instruments	-	(116)
Other	(605)	(1,198)
Total	(30,541)	(31,414)

14 Income tax expense

	Year ended 31 December 2016			Year ended 31 December 2015
	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	31,701	(1,212)	30,489	5,200	(259)	4,941
Current mining royalty charge (note 30)	3,882	-	3,882	1,778	-	1,778
Current special mining tax charge (note 30)	3,869	-	3,869	755	-	755
Withholding taxes	552	-	552	(142)	-	(142)
	40,004	(1,212)	38,792	7,591	(259)	7,332
Deferred taxation
Origination and reversal of temporary differences from continuing operations (note 27)	6,364	(961)	5,403	12,637	(36,629)	(23,992)
Effect of change in tax rate¹	1,273	(51)	1,222	142	-	142
	7,637	(1,012)	6,625	12,779	(36,629)	(23,850)
Total taxation charge/(credit) in the income statement	47,641	(2,224)	45,417	20,370	(36,888)	(16,518)

1 In December 2016, the Peruvian government approved an increase of the statutory income tax rate, from its current level of 28% to 29.5% with effect from the 1 January 2017

The weighted average statutory income tax rate was 30.1% for 2016 and 25.4% for 2015. 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
	2016 US$000	2015 US$000
Deferred taxation:
Deferred income tax relating to fair value (losses)/ gains on cash flow hedges	(5,955)	4,739
Total tax (credit)/charge in the statement of other comprehensive income	(5,955)	4,739

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
	2016 US$000	2015 US$000
Profit/(loss) from continuing operations before income tax	108,279	(256,175)
At average statutory income tax rate of 30.1% (2015: 25.4%)	32,570	(65,017)
Expenses not deductible for tax purposes	1,051	1,040
Deferred tax recognised on special investment regime	(1,715)	(691)
Movement in unrecognised deferred tax¹	2,705	16,565
Change in statutory income tax rate²	1,222	142
Withholding tax	552	(142)
Special mining tax and mining royalty³	7,751	2,533
Derecognition of deferred tax asset	316	1,251
Foreign exchange rate effect⁴	2,383	24,964
Other	(1,418)	2,837
At average effective income tax rate of 41.9% (2015: 6.4%)	45,417	(16,518)
Taxation charge/(credit) attributable to continuing operations	45,417	(16,518)
Total taxation charge/(credit) in the income statement	45,417	(16,518)

1 Includes the income tax credit on mine closure provision of US$1,925,000 (2015: includes the effect of the impairment of Volcan and San Felipe projects of US$11,414,000 and US$3,278,000 respectively).

2 In December 2016, the Peruvian government approved an increase of the statutory income tax rate, from its current level of 28% to 29.5% with effect from the 1 January 2017.

3 Corresponds to the impact of a mining royalty and special mining tax in Peru (note 30).

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

15 Basic and diluted earnings per share

Earnings per share ('EPS') is calculated by dividing profit/(loss) 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 a result of the rights issue being at a discounted price, the number of ordinary shares outstanding has increased due to the bonus element resulting in the calculation of basic and diluted earnings per share for all periods presented having been adjusted retrospectively.

As at 31 December 2016 and 2015, EPS has been calculated as follows:

	As at 31 December
	2016	2015
Basic earnings/(loss) per share from continuing operations
Before exceptional items (US$)	0.11	(0.14)
Exceptional items (US$)	(0.02)	(0.38)
Total for the year and from continuing operations (US$)	0.09	(0.52)
Diluted earnings/(loss) per share from continuing operations
Before exceptional items (US$)	0.10	(0.14)
Exceptional items (US$)	(0.01)	(0.38)
Total for the year and from continuing operations (US$)	0.09	(0.52)

Profit/(loss) from continuing operations before exceptional items and attributable to equity holders of the parent is derived as follows:

	As at 31 December
	2016	2015
Profit/(loss) attributable to equity holders of the parent - continuing operations (US$000)	45,550	(234,610)
Exceptional items after tax - attributable to equity holders of the parent (US$000)	7,604	172,758
Profit/(loss) from continuing operations before exceptional items attributable to equity holders of the parent (US$000)	53,154	(61,852)
Profit/(loss) from continuing operations before exceptional items attributable to equity holders of the parent for the purpose of diluted earnings per share (US$000)	53,154	(61,852)

The following reflects the share data used in the basic and diluted earnings/(loss) per share computations:

	As at 31 December
	2016	2015
Basic weighted average number of ordinary shares in issue (thousands)	505,521	449,511
Effect of dilutive potential ordinary shares related to contingently issuable shares (thousands)1	9,435	-
Weighted average number of ordinary shares in issue for the purpose of diluted earnings per share (thousands)	514,956	449,511

1 The potential ordinary shares related to the contingently issuable shares under the Enhanced Long Term Incentive Plan and Restricted Share Plan have not been included in the calculation of diluted EPS for 2015 as they had an antidilutive effect.

16 Property, plant and equipment

	Mining properties and development costs¹ 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 2016
Cost
At 1 January 2016	1,097,107	472,093	480,747	6,151	103,386	62,392	2,221,876
Additions	80,565	6,695	15,379	-	-	25,514	128,153
Change in discount rate	-	-	-	-	(2,367)	-	(2,367)
Change in mine closure estimate	-	-	-	-	(5,629)	-	(5,629)
Disposals	-	-	(3,420)	(298)	-	(56)	(3,774)
Write-offs	-	-	(8,500)	(85)	-	-	(8,585)
Transfer to intangibles	-	-	-	-	-	(44)	(44)
Transfers and other movements²	3,232	9,698	52,723	442	-	(62,863)	3,232
At 31 December 2016	1,180,904	488,486	536,929	6,210	95,390	24,943	2,332,862
Accumulated depreciation and impairment
At 1 January 2016	678,547	179,036	253,388	4,447	59,790	1,152	1,176,360
Depreciation for the year	112,526	39,243	33,921	462	4,616	-	190,768
Disposals	-	-	(3,361)	(283)	-	-	(3,644)
Write-offs	-	-	(6,591)	(82)	-	-	(6,673)
Transfers and other movements²	568	(156)	335	10	74	(263)	568
At 31 December 2016	791,641	218,123	277,692	4,554	64,480	889	1,357,379
Net book amount at 31 December 2016	389,263	270,363	259,237	1,656	30,910	24,054	975,483

There were borrowing costs capitalised in property, plant and equipment amounting to US$825,000 (2015: US$8,252,000). The capitalisation rate used was 7.23% (2015: 6.79%).

1 Mining properties and development costs related to Crespo projects (2016: US$27,321,000, 2015: US$24,797,000) are not currently being depreciated.

2 Net of transfers and other movements of US$2,664,000 were transferred from evaluation and exploration assets (note 17).

At the end of 2015, given the continued challenging environment for the mining sector, the Group carried out an impairment review of all of its operating mines (Arcata, Pallancata, Inmaculada and San Jose), and its growth projects (Crespo, Azuca, San Felipe and Volcan). As a result of this review the Group recognised an impairment charge in the Pallancata mine unit of US$39,026,000, the Arcata mine unit of US$72,424,000, the Crespo project of US$14,350,000, the Azuca project of US$12,766,000, San Felipe project of US$10,927,000 and the Vocan project of US$57,070,000. The impairment recognised in property plant and equipment was US$118,653,000, in evaluation and exploration assets was US$74,550,000 and in intangibles was US$13,360,000 (refer to note 17 and 18).

The recoverable values of these CGUs were determined using a fair value less costs of disposal (FVLCD) methodology. FVLCD was determined using a combination of level 2 and level 3 inputs to construct a discounted cash flow model to estimate the amount that would be paid by a willing third party in an arm's length transaction. The key assumptions on which management has based its determination of FVLCD, and the associated recoverable values calculated are presented below.

Gold and silver prices

US$ per oz.	2016	2017	2018	2019	Long-term
Gold	1,175	1,200	1,213	1,240	1,224
Silver	16	17	18	19	18

Other key assumptions

Arcata

Pallancata

San Jose

Inmaculada

Crespo

Azuca

San Felipe

Volcan

Discount rate (post tax)

6.3%

9.7%

6.3%

7.8%

n/a

Value per in-situ ounce (per tonne in the case
of San Felipe) (US$)

n/a

0.25

16.21

6.55

1 With respect to the Azuca, Volcan and San Felipe growth projects, given their early stage, the Group applied a value in-situ methodology, which applies a realisable 'enterprise value' to unprocessed mineral resources. The methodology is used to determine the fair value less costs of disposal of the Azuca, Volcan which includes the water permits held by the Group, and San Felipe CGUs. The enterprise value used in the calculation performed at 31 December 2015 was US$6.55 per gold equivalent ounce of resources (Volcan), US$0.25 per silver equivalent ounce of resources (Azuca) and US$16.21 per zinc equivalent tonne of resources (San Felipe).

The enterprise value figures are based on observable external market information.

Current carrying value of CGU, net of deferred tax (US$000)		Arcata		Pallancata		San Jose		Inmaculada		Crespo		Azuca		San Felipe		Volcan
31 December 2015		42,956		49,331		160,055		587,208		46,275		26,102		4,218		62,512

Crespo, Azuca and San Felipe projects correspond to the exploration segment.

Sensitivity analysis

Other than as disclosed below, management believes that no reasonably possible change in any of the key assumptions above would cause the carrying value of any of its cash generating units to exceed its recoverable amount.

The estimated recoverable amounts of the following of the Group's CGUs are equal to, or not materially greater than, their carrying values; consequently, any adverse change in the following key assumptions would, in isolation, cause an impairment loss to be recognised:

Approximate impairment resulting from the following changes (US$000)	Arcata	Pallancata	San Jose	Inmaculada	Crespo	Azuca	San Felipe	Volcan
Prices (10% decrease)	(42,956)	(14,892)	(89,961)	(86,439)	(16,308)	n/a	n/a	n/a
Post tax discount rate (3% increase)	(5,354)	(3,525)	(28,570)	(50,812)	(12,348)	n/a	n/a	n/a
Production costs (10% increase)	(42,956)	(8,082)	(48,914)	(20,495)	(7,397)	n/a	n/a	n/a
Value per in-situ ounce (per tonne in the case of San Felipe) (10% decrease)	n/a	n/a	n/a	n/a	n/a	(2,610)	(422)	(6,251)

	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 2015
Cost
At 1 January 2015	999,777	257,171	389,042	6,030	96,213	237,308	1,985,541
Additions	91,862	632	31,455	-	-	106,737	230,686
Change in discount rate	-	-	-	-	(755)	-	(755)
Change in mine closure estimate	-	-	-	-	7,928	-	7,928
Disposals	-	(195)	(952)	(196)	-	-	(1,343)
Write-offs			(2,382)	(118)		(5)	(2,505)
Transfer from intangibles	582	-	-	-	-	-	582
Transfers and other movements¹	4,886	214,485	63,584	435	-	(281,648)	1,742
At 31 December 2015	1,097,107	472,093	480,747	6,151	103,386	62,392	2,221,876
Accumulated depreciation and impairment
At 1 January 2015	526,824	134,638	193,210	3,663	49,486	1,410	909,231
Depreciation for the year	91,129	23,333	32,053	913	3,184	-	150,612
Disposals	-	(179)	(223)	(124)	-	-	(526)
Impairment	60,259	20,752	30,451	71	7,120	-	118,653
Write-offs	-	-	(1,839)	(83)	-	-	(1,922)
Transfers and other movements¹	335	492	(264)	7	-	(258)	312
At 31 December 2015	678,547	179,036	253,388	4,447	59,790	1,152	1,176,360
Net book amount at 31 December 2015	418,560	293,057	227,359	1,704	43,596	61,240	1,045,516

1 Net of transfers and other movements of US$1,430,000 were transferred from evaluation and exploration assets.

17 Evaluation and exploration assets

	Azuca US$000	Crespo US$000	San Felipe US$000	Volcan US$000	Others US$000	Total US$000
Cost
Balance at 1 January 2015	79,954	25,556	55,950	92,035	9,244	262,739
Additions	211	224	-	958	5,468	6,861
Transfers to property, plant and equipment	-	-	-	-	(1,742)	(1,742)
Balance at 31 December 2015	80,165	25,780	55,950	92,993	12,970	267,858
Additions	1,237	251	-	691	1,299	3,478
Transfers to property plant and equipment	-	-	-	-	(3,232)	(3,232)
Balance at 31 December 2016	81,402	26,031	55,950	93,684	11,037	268,104
Accumulated impairment
Balance at 1 January 2015	33,292	5,510	14,907	-	1,740	55,449
Impairment¹	12,584	4,368	10,927	44,381	2,290	74,550
Transfers to property, plant and equipment	-	-	-	-	(312)	(312)
Balance at 31 December 2015	45,876	9,878	25,834	44,381	3,718	129,687
Transfers to property, plant and equipment	-	-	-	-	(568)	(568)
Balance at 31 December 2016	45,876	9,878	25,834	44,381	3,150	129,119
Net book value as at 31 December 2015	34,289	15,902	30,116	48,612	9,252	138,171
Net book value as at 31 December 2016	35,526	16,153	30,116	49,303	7,887	138,985

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

1 In 2015 the Group recognised an impairment charge of US$74,550,000, mainly related to the Volcan project (refer to note 16). The FVLCD calculation is detailed in note 16.

18 Intangible assets

	Transmission line¹ US$000	Water permits² US$000	Software licences US$000	Legal rights³ US$000	Total US$000
Cost
Balance at 1 January 2015	22,157	26,583	1,773	6,681	57,194
Additions	-	-	25	587	612
Transfer	-	-	-	(582)	(582)
Balance at 31 December 2015	22,157	26,583	1,798	6,686	57,224
Additions	-	-	14	-	14
Transfer	-	-	44	-	44
Balance at 31 December 2016	22,157	26,583	1,856	6,686	57,282
Accumulated amortisation and impairment
Balance at 1 January 2015	11,124	-	1,248	2,007	14,379
Amortisation for the year⁴	946	-	67	491	1,504
Impairment⁵	-	12,686	-	674	13,360
Balance at 31 December 2015	12,070	12,686	1,315	3,172	29,243
Amortisation for the year⁴	1,004	-	56	600	1,660
Balance at 31 December 2016	13,074	12,686	1,371	3,772	30,903
Net book value as at 31 December 2015	10,087	13,897	483	3,514	27,981
Net book value as at 31 December 2016	9,083	13,897	485	2,914	26,379

1 The transmission line is amortised using the units of production method. At 31 December 2016 the remaining amortisation period is approximately 9 years.

2 Corresponds to the acquisition of water permits of Andina Minerals Group ("Andina"). They have an indefinite life according to Chilean law. In the case of the water permits the Group applied a value in situ methodology, which applies a realisable 'enterprise value' to unprocessed mineral resources. The methodology is used to determine the fair value less costs of disposal of the Volcan cash-generating unit, which includes the water permits held by the Group. The enterprise value used in the calculation performed at 31 December 2016 was US$6.90 (2015: US$6.55) per gold equivalent ounce of resources. The enterprise value figures are based on observable external market information.

3 Legal rights correspond to expenditures required to give the Group the right to use a property for the surface exploration work, development and production. At 31 December 2016 the remaining amortisation period is from 8 to 20 years.

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

5 Correspond to the impairment of the Crespo and Volcan projects (refer to note 16).

The carrying amount of the Volcan CGU, which includes the water permits, is reviewed annually to determine whether it is in excess of its recoverable amount.

Key assumptions

	2016	2015
Risk adjusted value per in-situ (gold equivalent ounce) US$	6.90	6.55
(US$000)	2016	2015
Current carrying value of Volcan CGU	63,187	62,512

Sensitivity analysis

Other than as disclosed below, management believes that no reasonably possible change in any of the key assumptions above would cause the carrying value exceed its recoverable amount.

The estimated recoverable amount is not materially greater than its carrying value; consequently, a change in the value in situ assumption could cause an impairment loss or reversal of impairment to be recognised in 2016:

Approximate impairment resulting from the following changes (US$000)		2016	2015
Risk adjusted value per in-situ (gold equivalent) ounces (10% decrease)		(3,896)	(6,251)

19 Available-for-sale financial assets

	Year ended 31 December
	2016 US$000	2015 US$000
Beginning balance	366	455
Fair value change recorded in equity	774	(86)
Disposals	(149)	(3)
Ending balance	991	366

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

The carrying value of available for sale financial assets relate only to listed shares. All unlisted investments (Pembrook Mining Corp. and ECI Exploration and Mining Inc.) are recognised at cost less any recognised impairment loss as there is no active market for these investments. These investments are fully impaired as at 31 December 2015 and 2016.

20 Trade and other receivables

	As at 31 December
	2016		2015
	Non-current US$000	Current US$000	Non-current US$000	Current US$000
Trade receivables	-	36,821	-	62,352
Advances to suppliers	-	2,458	-	6,567
Duties recoverable from exports of Minera Santa Cruz ¹	19,065	-	4,698	-
Receivables from related parties (note 29(a))	-	71	-	11
Loans to employees	856	230	991	149
Interest receivable	-	151	-	36
Receivable from Kaupthing, Singer and Friedlander Bank	-	198	-	252
Other²	2,188	10,205	1,567	13,518
Provision for impairment³	-	(6,342)	-	(5,327)
Assets classified as receivables	22,109	43,792	7,256	77,558
Prepaid expenses	44	2,590	60	1,157
Value Added Tax (VAT)⁴	3,564	21,738	2,871	46,112
Total	25,717	68,120	10,187	124,827

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

1 Relates to export benefits through Port Patagonico and silver refunds in Minera Santa Cruz, discounted over 24 months (2015: 24 months) at a rate of 6.39% (2015: 5.72%) for dollar denominated accounts and 23.31% (2015: 28.90%) for Argentinian pesos. The loss on discount is recognised within finance costs.

2 Mainly corresponds to account receivables from contractors for the sale of supplies of US$3,968,000 (2015: US$4,791,000), and other tax claims of US$5,333,000 (2015: US$2,840,000).

3 Includes the provision for impairment of trade receivable from a customer in Peru of US$1,043,000 (2015: US$1,108,000), the impairment of deposits in Kaupthing, Singer and Friedlander of US$198,000 (2014: US$252,000), the impairment of the account receivable from a third party of US$1,797,000 and other receivables of US$3,304,000 (2014: US$3,967,000) that mainly relates to an exploration project that would be recovered through an ownership interest if it succeeds.

4 Primarily relates to US$16,030,000 (2015: US$13,078,000) of VAT receivable related to the San Jose project that will be recovered through future sales of gold and silver and also through the sale of these credits to third parties by Minera Santa Cruz S.A. It also includes the VAT of Compañía Minera Ares S.A.C. of US$4,776,000 (2015: US$32,086,000) and Empresa de Transmisión Aymaraes S.A.C. of US$3,665,000 (2015: US$2,909,000). The VAT is valued at its recoverable amount.

Movements in the provision for impairment of receivables:

		Individually impaired US$000
At 1 January 2015		5,136
Provided for during the year		446
Released during the year		(255)
At 31 December 2015		5,327
Provided for during the year		2,061
Released during the year		(1,046)
At 31 December 2016		6,342

As at 31 December 2016 and 2015, none of the financial assets classified as receivables (net of impairment) were past due.

21 Inventories

	As at 31 December
	2016 US$000	2015 US$000
Finished goods valued at cost	3,515	14,120
Finished goods at net realisable value	-	1,856
Products in process valued at cost	20,727	13,632
Products in process at net realisable value	-	1,121
Raw materials	33	-
Supplies and spare parts	40,241	44,855
	64,516	75,584
Provision for obsolescence of supplies	(7,460)	(5,298)
Total	57,056	70,286

Finished goods include ounces of gold and silver, dore and concentrate. Products in process include stockpiles and precipitates.

The Group either sells dore bars as a finished product or if it is commercially advantageous to do so, delivers the bars for refining into gold
and silver ounces which are then sold. In the latter scenario, the dore bars are classified as products in process. The amount of dore on hand at 31 December 2016 included in products in process is US$nil (2015: US$3,827,000).

Concentrate is sold to smelters, but in addition could be used as a product in process to produce dore.

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

The amount of expense recognised in profit and loss related to the consumption of inventory of supplies, spare parts and raw materials is US$86,754,000 (2015: US$78,525,000).

Movements in the provision for obsolescence comprise an increase in the provision of US$2,162,000 (2015: US$1,046,000) and the reversal
of US$nil relating to the sale of supplies and spare parts, that had been provided for (2015: US$nil).

22 Cash and cash equivalents

	As at 31 December
	2016 US$000	2015 US$000
Cash at bank	353	368
Liquidity funds¹	203	337
Current demand deposit accounts²	68,643	47,717
Time deposits³	70,780	35,595
Cash and cash equivalents considered for the statement of cash flows⁴	139,979	84,017

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

1 The liquidity funds are mainly invested in certificates of deposit, commercial papers and floating rate notes with a weighted average maturity of 16 days as at 31 December 2016 (2015: average of 14 days).

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

3 These deposits have an average maturity of 3 days (2015: Average of 2 days).

4 As at 31 December 2015 funds deposited in Argentinean institutions were effectively restricted for transfer to other countries and were invested locally. Included within cash and cash equivalents at 31 December 2015 was US$11,696,000, which was not readily available for use in subsidiaries outside of Argentina.

23 Deferred income

On 3 August 2011, Hochschild entered into an agreement with Impulsora Minera Santa Cruz ("IMSC") whereby IMSC acquired the right to explore the San Felipe properties and an option to purchase the related concessions. Under the terms of this agreement the Group has received the following non-refundable payments to date:

	As at 31 December
	2016 US$000	2015 US$000
San Felipe contract	25,000	25,000

These payments reduce the total consideration IMSC will be required to pay upon exercise of the option by 1 December 2017, and constitute an advance of the final purchase price, rather than an option premium, as such, they were recorded as deferred income. On 30 November 2016, IMSC renegotiated terms of the agreement, extending the validity of the agreement to 1 December 2017.

24 Trade and other payables

	As at 31 December
	2016		2015
	Non-current US$000	Current US$000	Non-current US$000	Current US$000
Trade payables¹	-	55,381	-	58,655
Salaries and wages payable²	-	28,500	-	20,278
Dividends payable	-	75	-	826
Taxes and contributions	43	4,962	57	9,605
Guarantee deposits	-	5,073	-	7,163
Mining royalty (note 30)	-	679	-	796
Accounts payable to related parties (note 29)	-	94	-	40
Account payable to Graña & Montero³	-	-	20,322	-
Other	1,223	3,720	-	4,529
Total	1,266	98,484	20,379	101,892

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

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

2 Salaries and wages payable relates to remuneration payable. There were Board members remuneration payable of US$2,000 (2015: US$nil) and long term incentive plan payable of US$6,279,000 (2015: US$nil) at 31 December 2016.

3 Related to the construction of Inmaculada mine unit. Included the principal of US$20,000,000 plus interest calculated at a 5% interest rate. The payment of the amount owing was to be made in four instalments every six months starting in September 2017. This amount, together with the related interest of US$1,080,000, was fully repaid on 29 September 2016.

25 Borrowings

	As at 31 December
	2016			2015
	Effective interest rate	Non-current US$000	Current US$000	Effective interest rate	Non-current US$000	Current US$000
Bond payable (a)	8.56%	291,073	8,778	8.56%	290,230	8,777
Secured bank loans (b)
· Pre-shipment loans in Minera Santa Cruz (note 21)	2.70% to 3.00%	-	2,524	29.64%	-	10,554
· Medium-term bank loan	-	-	-	3.82%	49,548	229
· Short-term bank loans	0.65%	-	25,010	0.70% to 1.35%	-	75,200
Total		291,073	36,312		339,778	94,760

(a) Bond payable

On 23 January 2014 the Group issued US$350,000,000 7.75% Senior Unsecured Notes of Compañía Minera Ares S.A.C. guaranteed by Hochschild Mining plc and Hochschild Mining (Argentina) Corporation S.A. The interest is paid semi-annually, until maturity in 23 January 2021. During November and December 2015, the Group repurchased bonds amounting to US$55,225,000 for US$54,369,000, giving rise to a gain on repurchase of US$856,000 (see note 13). The balance at 31 December 2016 comprises the carrying value, including accrued interest payable, of US$299,851,000 (2015: US$299,007,000) determined in accordance with the effective interest method.

The following options could be taken before the maturity:

· Optional Redemption with Make-Whole Premium: At any time prior to 23 January 2018, the issuer may redeem all or part of the notes, at a price equal to 100% of the outstanding principal amount of the notes plus accrued and unpaid interest and additional amounts, if any, to the redemption date, plus a "make-whole" premium at Treasury Rate + 50 bps.

· Optional Redemption without Make-Whole Premium: The issuer may redeem all or part of the notes on or after 23 January 2018 at
the redemption prices specified plus accrued and unpaid interest and additional amounts, if any, to the redemption date. The Make
Whole Premium requires repayment of 103.875%, 101.938% or 100% of the outstanding principal balance if exercised in 2018, 2019
or 2020 respectively.

· Optional Redemption Upon Tax Event: 100% of the outstanding principal amount plus accrued and unpaid interest and additional amounts, if any.

· Change of Control Offer: 101% of principal amount plus accrued and unpaid interest.

(b) Secured bank loans:

Medium-term bank loan:

Credit agreement of US$100,000,000 with Scotiabank Peru S.A.A. acting as Lead Arranger and The Bank of Nova Scotia and Corpbanca as lenders. The borrower is Compañía Minera Ares S.A.C. and the loan is guaranteed by Hochschild Mining plc. The loan has an interest rate of LIBOR + 2.6% payable quarterly. On November 2015, the Group paid US$50,000,000 of principal and modified the schedule of repayments, starting on 30 March 2018 until maturity on 30 December 2019. On July 2016, the Group paid the remaining principal amount of US$50,000,000. The carrying value including accrued interest payable at 31 December 2016 of US$nil (2015: US$49,777,000) was determined in accordance with the effective interest method.

Short-term bank loans:

Two credit agreements signed by Compañía Minera Ares S.A.C. with BBVA Continental. The loans have an interest rate of 0.65% (2015: from 0.70% to 1.35%). The carrying value including accrued interest payable at 31 December 2016 is US$25,010,000 (2015: US$75,200,000). The due date of both loans is 7 February 2017.

The movement of short-term bank loans during the 2016 period is as follows:

	As at 1 January 2016 US$000	Additions US$000	Repayments US$000	As at 31 December 2016 US$000
Short term bank loans	75,000	55,000	(105,000)	25,000
Accrued interests	200	608	(798)	10
Total	75,200	55,608	(105,798)	25,010

The maturity of non-current borrowings is as follows:

	As at 31 December
	2016 US$000	2015 US$000
Between 1 and 2 years	-	-
Between 2 and 5 years	291,073	49,548
Over 5 years	-	290,230
Total	291,073	339,778

The carrying amount of current borrowings differs their fair value only with respect to differences arising under the effective interest rate calculations described above. 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
	2016 US$000	2015 US$000	2016 US$000	2015 US$000
Secured bank loans	-	49,548	-	48,223
Bond payable	291,073	290,230	318,062	274,878
Total	291,073	339,778	318,062	323,101

The fair value of secured bank loans as at 31 December 2015 was determined by discounting the remaining principal and interest payments at the three month U.S. LIBOR rate plus 2.6%. The U.S. LIBOR rate is a Level 1 input.

In the case of the bond payable, the fair value was determined with reference to the quoted price of these bonds in an active market, another Level 1 input.

26 Provisions

	Provision for mine closure1 US$000	Long Term Incentive Plan2 US$000	Other US$000	Total US$000
At 1 January 2015	107,787	594	6,240	114,621
Additions	-	544	108	652
Accretion	69	-	-	69
Change in discount rate	(755)	-	-	(755)
Change in estimates	15,5173	(175)	-	15,342
Foreign exchange effect	-	-	126	126
Payments	(2,538)	-	-	(2,538)
At 31 December 2015	120,080	963	6,474	127,517
Less current portion	2,000	-	4,115	6,115
Non-current portion	118,080	963	2,359	121,402
At 1 January 2016	120,080	963	6,474	127,517
Additions	-	9,965	570	10,535
Accretion	46	-	-	46
Change in discount rate	(2,367)	-	-	(2,367)
Change in estimates	(11,975)3	-	-	(11,975)
Foreign exchange effect	-	-	(547)	(547)
Transfer to trade and other payables	-	(6,279)	(2,048)	(8,327)
Payments	(3,355)	-	-	(3,355)
At 31 December 2016	102,429	4,649	4,449	111,527
Less: current portion	3,580	-	1,826	5,406
Non-current portion	98,849	4,649	2,623	106,121

1 The provision represents the discounted values of the estimated cost to decommission and rehabilitate the mines at the expected date of closure of each of the mines. The present value of the provision has been calculated using a real pre-tax annual discount rate, based on a US Treasury bond of an appropriate tenure adjusted for the impact of quantitative easing as at 31 December 2016 and 2015 respectively, and the cash flows have been adjusted to reflect the risk attached to these cash flows. Uncertainties on the timing for use of this provision include changes in the future that could impact the time of closing the mines, as new resources and reserves are discovered. The discount rate used was 0.25% (2015: 0.07%). Expected cash flows will be over a period from two to nine years.

2 Corresponds to the provision related to awards granted under the Long Term Incentive Plan ('LTIP') to designated personnel of the Group. Includes the following benefits: (i) 2016 awards, granted in March 2016, payable in March 2019 (ii) 2015 awards, granted in March 2015, payable in March 2018. Only employees who remain in the Group's employment on the vesting date will be entitled to a cash payment, subject to exceptions approved by the Remuneration Committee of the Board. The percentage of the award granted is determined 70% by the Company's TSR ranking relative to a tailored peer group of mining companies, and 30% by the Company's TSR ranking relative to a peer group of FTSE 350 companies. The liability for the LTIP is measured, initially and at the end of each reporting period until settled, at the fair value of the awards, by applying the Monte Carlo pricing model, taking into account the terms and conditions on which the awards were granted, and the extent to which the employees have rendered services to date. Changes to the provision of US$9,965,000 (2015: US$369,000) have been recorded as administrative expenses US$9,298,000 (2015: US$372,000) and exploration expenses US$667,000 (2015: US$-3,000 credit).

The following tables list the inputs to the Monte Carlo model used for the LTIPs as at 31 December 2015 and 2016, respectively:


	LTIP 2014			LTIP 2015	LTIP 2016
For the period ended	31 December 2016 US$000	31 December 2015 US$000	31 December 2016 US$000	31 December 2015 US$000	31 December 2016 US$000	31 December 2015 US$000
Dividend yield (%)	-	0.00	0.49	0.00	0.49	-
Expected volatility (%)	-	3.47	3.89	3.47	3.89	-
Risk-free interest rate (%)	-	0.38	0.12	0.74	0.12	-
Expected life (years)	-	1	1	2	2	-
Weighted average share price (pence £)	-	146.03	100.68	100.68	63.49	-

The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the awards and is indicative of future trends, which may not necessarily be the actual outcome.

3 Based on the 2016 internal and external review of mine rehabilitation estimates, the provision for mine closure decreased by US$11,975,000. The net decrease mainly corresponds to the Arcata mine unit of US$6,648,000, the Ares mine unit of US$1,622,000, the Selene mine unit of US$698,000, the Pallancata mine unit of US$447,000 and the San José mine unit of US$4,166,000, net of the increase in Inmaculada mine unit of US$1,651,000. US$2,320,000 related to mines already closed and US$4,026,000 related to the Arcata mine unit which reduction of the estimated costs exceeded the carrying value of the mine asset. Therefore, both effects have been recognised as a credit directly in the income statement. In 2015, the internal review of mine rehabilitation budgets determined a recognition of an increase of US$15,517,000. The net increase mainly corresponds to the Arcata mine unit of US$1,746,000, the Inmaculada mine unit of US$1,133,000, the Selene mine unit of US$922,000, the Crespo project of US$116,000, the San José mine unit of US$5,071,000 and the Sipan mine unit of US$6,750,000 net of the decrease in Pallancata mine unit of US$171,000 of which US$7,590,000 related to mines already closed has been recognised directly in the income statement.

27 Deferred income tax

The changes in the net deferred income tax assets/(liabilities) are as follows:

	As at 31 December
	2016 US$000	2015 US$000
Beginning of the year	(64,274)	(83,385)
Income statement (credit)/charge (note 14)	(6,625)	23,850
Deferred income tax arising on net unrealised gains on cash flow hedges recognised in equity (note 14)	5,955	(4,739)
End of the year	(64,944)	(64,274)

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred income tax assets and liabilities relate to the same fiscal authority.

The movement in deferred income tax assets and liabilities before offset during the year is as follows:

	Differences in cost of PP&E US$000	Mine development US$000	Financial instruments US$000	Others US$000	Total US$000
Deferred income tax liabilities
At 1 January 2015	41,917	79,981	3,325	2,174	127,397
Income statement (credit)/charge	6,050	(19,874)	-	2,588	(11,236)
Deferred income tax arising on net unrealised gains on cash flow hedges recognised in equity	-	-	4,739	-	4,739
At 31 December 2015	47,967	60,107	8,064	4,762	120,900
Income statement (credit)/charge	(6,319)	8,235	-	(1,938)	(22)
Deferred income tax arising on net unrealised gains on cash flow hedges recognised in equity	-	-	(5,955)	-	(5,955)
Transfer	-	-	(2,109)	-	(2,109)
At 31 December 2016	41,648	68,342	-	2,824	112,814

	Differences in cost of PP&E US$000	Provision for mine closure US$000	Tax losses US$000	Mine developmentUS$000	Financial instruments US$000	Others US$000	Total US$000
Deferred income tax assets
At 1 January 2015	9,547	14,535	8,551	697	2,262	8,420	44,012
Income statement credit/(charge)	(1,685)	8,318	8,263	257	(9)	(2,530)	12,614
At 31 December 2015	7,862	22,853	16,814	954	2,253	5,890	56,626
Income statement credit/(charge)	8,463	(3,319)	(15,868)	(42)	160	3,959	(6,647)
Transfer	-	-	-	-	(2,109)	-	(2,109)
At 31 December 2016	16,325	19,534	946	912	304	9,849	47,870

The amounts after offset, as presented on the face of the Statement of Financial Position, are as follows:

	As at 31 December
	2016 US$000	2015 US$000
Deferred income tax assets	1,027	-
Deferred income tax liabilities	(65,971)	(64,274)

Tax losses expire in the following years:

	As at 31 December
	2016 US$000	2015 US$000
Unrecognised
Expire in one year	2,268	1,075
Expire in two years	3,231	2,733
Expire in three years	4,594	3,903
Expire in four years	2,295	3,978
Expire after four years	111,630	109,315
	124,018	121,004

Other unrecognised deferred income tax assets comprise (gross amounts):

	As at 31 December
	2016 US$000	2015 US$000
Provision for mine closure¹	54,197	66,577
Impairments of assets²	14,692	14,692

1 This relates to provision for mine closure expenditure which is expected to be incurred in periods in which taxable profits are not expected against which the expenditure can be offset.

2 Related to the impairment of San Felipe and Volcan project (note 17).

Unrecognised deferred tax liability on retained earnings

At 31 December 2016, there was no recognised deferred tax liability (2015: nil) for taxes that would be payable on the unremitted earnings of certain of the Group's subsidiaries as the intention is that these amounts are permanently reinvested.

28 Dividends

	2016 US$000	2015 US$000
Dividends paid and proposed during the year
Equity dividends on ordinary shares:
Final dividend for 2015: nil US cents per share (2014: nil US cents per share)	-	-
Interim dividend for 2016: 1.38 US cents per share (2015: nil US cents per share)	6,998	-
Total dividends paid on ordinary shares	6,998	-
Proposed dividends on ordinary shares:
Final dividend for 2016: 1.38 US cents per share (2015: nil US cents per share)	7,000	-

Dividends paid to non-controlling interests: US$0.10 per share (2015: US$nil per share)	16,983	-
Dividends paid to non-controlling interest related to 2014 and previous periods	753	964
Total dividends paid to non-controlling interests	17,736	964

Dividends per share

The interim dividends paid in September 2016 were US$6,998,398 (1.38 US cents per share). A proposed dividend in respect of the year ending 31 December 2016 of 1.38 US cents per share, amounting to a total dividend of US$7,000,000, is subject to approval at the Annual General Meeting on 11 May 2017 and are not recognised as a liability as at 31 December 2016.

29 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 2016 and 2015. The related parties are companies owned or controlled by the main shareholder of the parent company or associates.

	Accounts receivable as at 31 December		Accounts payable as at 31 December
	2016 US$000	2015 US$000	2016 US$000	2015 US$000
Current related party balances
Cementos Pacasmayo S.A.A.¹	71	11	94	40
Total	71	11	94	40

1 The account receivable relates to reimbursement of expenses paid by the Group on behalf of Cementos Pacasmayo S.A.A. The account payable relates to the payment of rentals.

As at 31 December 2016 and 2015, all 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
	2016 US$000	2015 US$000
Income
Gain on sale of Asociacion Sumac Tarpuy to Inversiones ASPI S.A.	811	-
Expenses
Donation to the Universidad de Ingenieria y Tecnologia "UTEC"	(1,000)	-
Expense recognised for the rental paid to Cementos Pacasmayo S.A.A.	(200)	(285)

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)	2016 US$000	2015 US$000
Short-term employee benefits	5,459	5,613
Long Term Incentive Plan, Deferred Bonus Plan and Restricted Share Plan	6,622	2,641
Total compensation paid to key management personnel	12,081	8,254

This amount includes the remuneration paid to the Directors of the Parent Company of the Group of US$5,487,769 (2015: US$4,155,759).

(c) Participation in rights issue by Pelham Investment Corporation ("Pelham") and Inversiones ASPI SA ("ASPI")

As at the record date of the rights issue, Eduardo Hochschild held his investment in the Company through Pelham. Following receipt of its entitlement under the rights issue, Pelham transferred, for nil consideration, its nil paid rights in respect of 74,745,101 new ordinary shares to ASPI an entity that is also under the control of Eduardo Hochschild. Under the terms of an irrevocable undertaking signed between Pelham, ASPI and the Company, it was agreed that:

(i) ASPI would, among other things, subscribe for at least 68,887,508 new ordinary shares at an issue price of 47 pence per new ordinary share (the "Subscription Commitment"); and

(ii) the Company would, among other things, pay ASPI a fee of 1% of the Subscription Commitment of approximately US$500,000.

30 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 sold, 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
additional tax is calculated by applying a progressive scale of rates ranging from 2% to 8.4%, of the quarterly operating profit.

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

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

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.

d) In the case of the Arcata mine unit, the company left the tax stability agreement, but has maintained the agreement for the mining royalties, such that the Arcata unit, is liable for the new SMT but the mining royalties remain payable at the same rate as they were, before the modification in 2011.

As at 31 December 2016, the amount payable as under the former mining royalty (for the Arcata mining unit), the new mining royalty (for the Ares, Pallancata and Inmaculada mining units), and the SMT amounted to US$170,000 (2015: US$272,000), US$769,000 (2015: US$1,080,000), and US$737,000 (2015: US$745,000) respectively. The former mining royalty is recorded as 'Trade and other payables', and the new mining royalty and SMT as 'Income tax payable' in the Statement of Financial Position. The amount recorded in the income statement was US$1,759,000 (2015: US$1,205,000) representing the former mining royalty, classified as cost of sales, US$3,882,000 (2015: US$1,778,000) of new mining royalty and US$3,869,000 (2015: US$755,000) of SMT, both classified as income tax.

Argentina

In accordance with Argentinian legislation, Provinces (being the legal owners of the mineral resources) are entitled to collect royalties from mine operators. For San Jose, the mining royalty was originally fixed at 1.85% of the pit-head value of the production where the final product is dore and 2.55% where the final product is mineral concentrate or precipitates. In October 2012 a new provincial law was passed, which increased the mining royalty applicable to dore and concentrate to 3% of the pit-head value. Since November 2012 Minera Santa Cruz S.A. has been paying and expensing the increased 3% royalty. As at 31 December 2016, the amount payable as mining royalties amounted to US$509,000 (2015: US$524,000). The amount recorded in the income statement as cost of sales was US$5,747,000 (2015: US$4,763,000).

On 13 June 2013, the congress of the Province of Santa Cruz passed Law No. 3318, which created a tax on mining reserves. Accordingly, the owners of mining concessions located in the Province of Santa Cruz were requires to pay a tax on mining reserves at a rate of 1%, calculated at the end of each year and determined according to the international price of metals at that date. According to these applicable regulations, the tax applied only on "proved reserves" and certain deductions (related to the production cost) applied Minera Santa Cruz S.A. (a subsidiary of Hochschild Mining plc) was affected by this tax. On 20 December 2013, Minera Santa Cruz S.A. filed before the Argentine Supreme Court a legal claim against the tax on mining reserves. Such legal claim challenged the legality of the tax on mining reserves arguing its unconstitutionality on the grounds that it violated the Federal Mining Policy created by national law No. 24.196. Additionally, on 2 November 2015, Minera Santa Cruz S.A. filed a precautionary measure under which it requested the Argentine Supreme Court to order the Province of Santa Cruz not to claim to Minera Santa Cruz S.A. the payment of any amount related to the tax on mining reserves until a final decision on the constitutionality of the tax is rendered. The precautionary measure was granted on 9 December 2015, furthermore no tax was paid during 2015. The tax on mining reserves was eliminated on 30 December 2015. On 1 March 2016 Minera Santa Cruz S.A. and the Province of Santa Cruz entered into an agreement under which each party agreed not to make to the other party any claim related to the tax on mining reserves. Consequently, the amount payable as at 31 December 2015 as tax on mining reserves of US$4,054,000, which was presented as 'Trade and other payables', have been written back and credited to the income statement within other income (US$2,667,000) and financial income (US$974,000) (see footnote 3 of note 11). The expense recognised as other expenses in the year ended 31 December 2015 with respect to this tax amounted to US$441,000 (note 12).

31 Subsequent events

a) On 7 February 2017, US$25,000,000 of short term debt was repaid.

b) The Group received a letter of intent dated 26 January 2017 outlining a proposed transaction between Americas Silver Corporation and Santacruz Mining Ltd (IMSC). Following this letter, the Group signed the following agreements which supersede all previous contracts:

On 20 February 2017, the Group and IMSC signed a new agreement pursuant to which IMSC will acquire properties comprising the El Gachi project (part of San Felipe) for a total consideration of US$500,000 which is due on 31 March 2017.

On 28 February 2017, the Group signed a new option agreement with IMSC for the remaining San Felipe properties amounting to US$10,000,000. An initial payment of US$2,000,000 was due to the Group on 7 March 2017. The IMSC option expires on 1 December 2017.

On 2 March 2017 it was announced that IMSC had entered into an agreement with Americas Silver Corporation to assign 100% of its interest in the San Felipe Project.

Profit by operation¹

(Segment report reconciliation) as at 31 December 2016

Company (US$000)	Arcata	Pallancata	Inmaculada	San Jose	Consolidation adjustment and others	Total/HOC
Revenue	117,358	54,456	280,108	235,961	359	688,242
Cost of sales (Pre consolidation)	(92,461)	(42,451)	(181,383)	(168,351)	(3,056)	(487,702)
Consolidation adjustment	(132)	600	2,499	89	(3,056)	-
Cost of sales (Post consolidation)	(92,329)	(43,051)	(183,882)	(168,440)	-	(487,702)
Production cost excluding depreciation	(68,155)	(33,650)	(83,796)	(108,209)	-	(293,810)
Depreciation in production cost	(22,083)	(10,989)	(101,207)	(51,376)	-	(186,655)
Other items	(462)	(241)	(506)	(541)	-	(1,750)
Change in inventories	(1,629)	1, 829	1,627	(8,314)	-	(6,487)
Gross profit	24,897	12,005	98,725	67,610	(2,697)	200,540
Administrative expenses	-	-	-	-	(47,979)	(47,979)
Exploration expenses	-	-	-	-	(9,193)	(9,193)
Selling expenses	(1,973)	(721)	(1,130)	(10,351)	-	(14,175)
Other income/expenses	-	-	-	-	11,265	11,265
Operating profit before impairment	22,924	11,284	97,595	57,259	(48,604)	140,458
Impairment of assets	-	-	-	-	(1,912)	(1,912)
Finance income	-	-	-	-	2,074	2,074
Finance costs	-	-	-	-	(30,541)	(30,541)
FX loss	-	-	-	-	(1,800)	(1,800)
Profit/(loss) from continuing operations before income tax	22,924	11,284	97,595	57,259	(80,783)	108,279
Income tax	-	-	-	-	(45,417)	(45,417)
Profit/(loss) for the year from continuing operations	22,924	11,284	97,595	57,259	(126,200)	62,862

1 On a post exceptional basis.

RESERVES AND RESOURCES

Ore reserves and mineral resources estimates

Hochschild Mining plc reports its mineral resources and reserves estimates in accordance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves 2004 edition ("the JORC Code"). This establishes minimum standards, recommendations and guidelines for the public reporting of exploration results and mineral resources and reserves estimates. In doing so it emphasises the importance of principles of transparency, materiality and confidence. The information on ore reserves and mineral resources on pages 43 to 45 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 2016, unless otherwise stated. Mineral resources that are reported include those mineral resources that have been modified to produce ore reserves. All tonnage and grade information has been rounded to reflect the relative uncertainty in the estimates; there may therefore be small differences. The prices used for the reserves calculation were: Au Price: US$1,200 per ounce and Ag Price: US$16.5 per ounce.

ATTRIBUTABLE METAL RESERVES AS AT 31 DECEMBER 2016

Reserve category	Proved and probable (t)	Ag (g/t)	Au (g/t)	Ag (moz)	Au (koz)	Ag Eq (moz)
OPERATIONS¹
Arcata
Proved	479,515	371	1.1	5.7	17.3	7.0
Probable	811,996	327	1.1	8.5	29.7	10.7
Total	1,291,511	343	1.1	14.3	47.0	17.7
Inmaculada
Proved	3,254,366	144	3.9	15.1	412.7	45.7
Probable	2,568,907	182	4.7	15.0	388.9	43.8
Total	5,823,274	161	4.3	30.1	801.6	89.4
Pallancata
Proved	632,793	477	2.0	9.7	40.8	12.7
Probable	371,752	331	1.4	4.0	17.2	5.2
Total	1,004,545	423	1.8	13.7	58.0	18.0
San Jose
Proved	593,089	502	7.3	9.6	139.9	19.9
Probable	333,455	401	6.6	4.3	70.4	9.5
Total	926,544	465	7.1	13.9	210.4	29.4
Proved	4,959,763	252	3.8	40.1	610.7	85.3
Probable	4,086,111	242	3.9	31.8	506.2	69.2
TOTAL	9,045,874	247	3.8	71.9	1,116.9	154.5

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 Operations were audited by P&E Consulting.

ATTRIBUTABLE METAL RESOURCES AS AT 31 DECEMBER 2016¹

Resource category	Tonnes (t)	Ag (g/t)	Au (g/t)	Zn (%)	Pb (%)	Cu (%)	Ag Eq (g/t)	Ag (moz)	Au (koz)	Ag Eq (moz)	Zn (kt)	Pb (kt)	Cu (kt)
OPERATIONS
Arcata
Measured	1,109,214	414	1.25	-	-	-	506	14.8	44.7	18.1	-	-	-
Indicated	1,942,187	385	1.29	-	-	-	481	24.0	80.7	30.0	-	-	-
Total	3,051,401	395	1.28	-	-	-	490	38.8	125.4	48.1	-	-	-
Inferred	4,030,857	341	1.25	-	-	-	433	44.1	162.1	56.1	-	-	-
Inmaculada
Measured	2,977,597	178	4.83	-	-	-	535	17.0	462.7	51.2	-	-	-
Indicated	2,635,187	219	5.58	-	-	-	632	18.6	473.0	53.6	-	-	-
Total	5,612,784	197	5.19	-	-	-	581	35.6	935.7	104.8	-	-	-
Inferred	3,165,478	133	3.37	-	-	-	383	13.6	343.3	39.0	-	-	-
Pallancata
Measured	1,052,621	453	1.92	-	-	-	596	15.3	65.1	20.2	-	-	-
Indicated	693,465	332	1.45	-	-	-	439	7.4	32.4	9.8	-	-	-
Total	1,746,086	405	1.74	-	-	-	534	22.7	97.5	30.0	-	-	-
Inferred	3,637,800	357	1.37	-	-	-	459	41.8	160.7	53.7	-	-	-
San Jose
Measured	840,329	564	8.20	-	-	-	1,171	15.2	221.6	31.6	-	-	-
Indicated	964,641	404	6.26	-	-	-	867	12.5	194.1	26.9	-	-	-
Total	1,804,970	479	7.16	-	-	-	1,009	27.8	415.7	58.5	-	-	-
Inferred	529,566	404	6.40	-	-	-	878	6.9	109.0	14.9	-	-	-
GROWTH PROJECTS
Crespo
Measured	5,211,058	47	0.47	-	-	-	82	7.9	78.6	13.7	-	-	-
Indicated	17,298,228	38	0.40	-	-	-	67	21.0	222.5	37.4	-	-	-
Total	22,509,286	40	0.42	-	-	-	71	28.8	301.0	51.1	-	-	-
Inferred	775,429	46	0.57	-	-	-	88	1.1	14.2	2.2	-	-	-
Azuca
Measured	190,602	244	0.77	-	-	-	301	1.5	4.7	1.8	-	-	-
Indicated	6,858,594	187	0.77	-	-	-	243	41.2	168.8	53.7	-	-	-
Total	7,049,197	188	0.77	-	-	-	245	42.7	173.5	55.5	-	-	-
Inferred	6,946,341	170	0.89	-	-	-	236	37.9	199.5	52.7	-	-	-
Volcan
Measured	105,918,000	-	0.738	-	-	-	55	-	2,513.1	186.0	-	-	-
Indicated	283,763,000	-	0.698	-	-	-	52	-	6,368.0	471.2	-	-	-
Total	389,681,000	-	0.709	-	-	-	52	-	8,882.7	657.3	-	-	-
Inferred	41,553,000	-	0.502	-	-	-	37	-	670.7	49.6	-	-	-
OTHER PROJECTS²
Measured	1,393,716	69	0.02	7.12	3.10	0.39	315	3.1	0.9	14.1	99.3	43.1	5.5
Indicated	1,354,261	82	0.06	6.14	2.73	0.31	295	3.6	2.4	12.9	83.2	37.0	4.2
Total	2,747,977	76	0.04	6.64	2.92	0.35	305	6.7	3.3	27.0	182.4	80.1	9.7
Inferred	13,445,001	8	0.30	0.58	0.21	1.22	160	3.4	128.6	69.0	77.8	28.5	163.6
GRAND TOTAL
Measured	118,693,138	20	0.89	0.08	0.04	0.00	88	74.8	3,391.5	336.8	99.3	43.1	5.5
Indicated	315,509,563	13	0.74	0.03	0.01	0.00	69	128.3	7,541.9	695.5	83.2	37.0	4.2
Total	434,202,700	15	0.78	0.04	0.02	0.00	74	203.1	10,934.9	1,032.3	182.4	80.1	9.7
Inferred	74,083,472	62	0.75	0.10	0.04	0.22	142	148.9	1,788.0	337.3	77.8	28.5	163.6

1 Prices used for resources calculation: Au: $1,200/oz and Ag: $16.5/oz.

2 Includes the Jasperoide copper project and the San Felipe zinc/silver project. The silver equivalent grade (147 g/t Ag Eq) has being calculated applying the following ratios, Cu/Ag=96.38 and Au/Ag=60

CHANGE IN ATTRIBUTABLE RESERVES AND RESOURCES

Ag equivalent content (million ounces)	Category	Percentage attributable December 2016	December 2015 Att.¹	December 2016 Att.¹	Net difference	% change
Arcata	Resource	100%	122.3	104.2	(18.1)	(14.8%)
	Reserve		20.1	17.7	(2.3)	(11.5%)
Inmaculada	Resource	100%	159.1	143.8	(15.3)	(9.6%)
	Reserve		104.2	89.4	(14.8)	(14.2%)
Pallancata	Resource	100%	102.3	83.6	(18.7)	(18.3%)
	Reserve		14.9	18.0	3.1	20.9%
San Jose	Resource	51%	92.8	73.5	(19.4)	(20.9%)
	Reserve		31.2	29.4	(1.8)	(5.7%)
Crespo	Resource	100%	53.3	53.3	-	-
	Reserve		-	-	-	-
Azuca	Resource	100%	108.2	108.2	-	-
	Reserve		-	-	-	-
Volcan	Resource	100%	706.9	706.9	-	-
	Reserve		-	-	-	-
	Reserve		-	-	-	-
Other projects total	Resource	100%	96.0	96.0	-	-
	Reserve		-	-	-	-
Total	Resource		1,441.1	1,369.6	(71.5)	(5.0%)
	Reserve		170.4	154.5	(15.8)	(9.3%)

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

SHAREHOLDER INFORMATION

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, and dividends and to report changes in personal details:

BY POST

Capita Asset Services, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU.

BY TELEPHONE

If calling from the UK: 0371 664 0300 (Calls charged at the standard geographic rate and will vary by provider. Lines are open 8.30am-5.30pm Mon to Fri).

If calling from overseas: +44 371 664 0300 (Calls charged at the applicable international rate).

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 28 April 2017 in respect of the 2016 final dividend.

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 in respect of the 2016 final dividend, a dividend mandate form, also available from the Company's registrars, should be completed and returned to the registrars by 28 April 2017. 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.

Financial Calendar

Dividend dates	2017
Ex-dividend date	20 April
Record date	21 April
Deadline for return of currency election forms	28 April
Payment date	17 May

17 Cavendish Square

London

W1G 0PH

United Kingdom

¹Revenue presented in the financial statements is disclosed as net revenue and is calculated as gross revenue less commercial discounts plus services revenue

²Adjusted EBITDA is calculated as profit from continuing operations before exceptional items, net finance costs, foreign exchange loss and income tax plus depreciation, and exploration expenses other than personnel and other exploration related fixed expenses and other non-cash (income)/expenses

³ Includes gross debt repayments of $177.4 million and $20 million paid to Graña y Montero (Inmaculada EPC contractor) offset by $70 million of refinanced short-term borrowings

⁴All-in sustaining cost per (AISC) silver equivalent ounce: Calculated before exceptional items and includes cost of sales less depreciation and change in inventories, administrative expenses, brownfield exploration, operating capex and royalties divided by silver equivalent ounces produced using a gold/silver ratio of 74:1

⁵All equivalent figures assume the average gold/silver ratio of 74:1

⁶ Includes revenue from services

⁷ Reconciliation of gross revenue by mine to Group net revenue

⁸ Unit cost per tonne is calculated by dividing mine and treatment production costs (excluding depreciation) by extracted and treated tonnage respectively

⁹Cash costs are calculated to include cost of sales, treatment charges, and selling expenses before exceptional items less depreciation included in cost of sales

¹⁰ Includes commercial discounts (from the sales of concentrate) and commercial discounts from the sale of dore

¹¹ Royalties arising from revised royalty tax schemes introduced in 2011 and included in income tax line

¹² Adjusted EBITDA has been presented before the effect of significant non-cash (income)/expenses related to changes in mine closure provisions and the write-off of property, plant and equipment

¹³Includes pre-shipment loans and short term interest payables

¹⁴Includes additions in property, plant and equipment and evaluation and exploration assets (confirmation of resources) and excludes increases in the expected closure costs of mine asset

¹⁵ Inmaculada was accounted for as a project in H1 2015 and therefore the 2015 capital expenditure figure includes project expenditure

This information is provided by RNS

The company news service from the London Stock Exchange

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