Slide 1: Hochschild Mining plc 2008 Annual Results
Hochschild Mining plc 2008 Annual Results Miguel Aramburú, CEO Ignacio Rosado, CFO Raymond Jannas, VP Exploration Isabel Lutgendorf, Head of IR 0
Slide 2: Disclaimer
Disclaimer Some statements contained in this presentation or in documents referred to in it are or may be forward‐ looking statements. Actual results may differ from those expressed in such statements, depending on a variety of factors. Past performance of the Company or its shares cannot be relied
Slide 3: Company Overview
Company Overview CANADA Lake Shore Gold Corp. (40%) • A leading precious metals company • 40 years operating experience x MEXICO • Specialising in underground, high x Moris* (70%) San Felipe (100%) grade, epithermal vein mining El Aguila (15%) PERU x • FTSE 250 company listed on the Arcata* (100%) A
Slide 4: 3rd largest primary silver producer
3rd largest primary silver producer No. Company 2008 production (moz Ag) 1 BHP Billiton 42 2 KGHM Polska Miedz 38 Primary silver producers 3 Fresnillo 35 Fresnillo 35 4 Volcan 23 5 Pan American Silver 19 Pan American 19 6 Hochschild Mining 17 Hochschild 17 7 Kazakhmys 17 Polymetal 17 8 Polymetal 17
Slide 5: A developing producer of gold
A developing producer of gold Select mid‐cap gold producers 2008 production (koz Au) % of global Randgold d 428 0.6% Peter Hambro o 394 0.5% Agnico Eagle 300 0.4% 0.4% Polymetal 285 0.3% Oceana 264 0.3% Fresnillo 264 0.2% Aurizon n 159 0.2% Hochschild Mining 153 0.2% Alamos Gold d 151 0.1% Western
Slide 6: 2008: A challenging year
2008: A challenging year H1 2008: H2 2008: • 92% increase in revenue to $231.8 million driven by increased volume and • Market crash prices • Gold prices down2: 28% • 86% increase in adjusted EBITDA to $104 million • Silver prices down2: 54% • 30% increase in pre‐exceptional EPS to • Industry inflat
Slide 7: Swift reaction to market conditions
Swift reaction to market conditions Produce profitable ounces: • Assess viability of small mines (Selene and Moris) • Change reserve & resource cut‐offs • Renegotiate contracts with suppliers Drastically reduce overhead: • 150 positions cut • Aggressive renegotiation of third party services Preserve
Slide 8: 2008 Financial Highlights
2008 Financial Highlights • 42% increase in revenue to $434 million driven by increase in silver ounces sold and higher gold prices • Contained unit cost per tonne inflation below industry levels at 14.3 %1 • Pre‐exceptional EPS2 down from 0.27 to 0.08 due to market conditions • Exceptional items of
Slide 9: 2008 Operational Highlights
2008 Operational Highlights • Achieved production target of 26 million silver equivalent ounces • Increase in plant capacity of 29%1 year‐on‐year; all mine expansions completed on schedule • Delivered on M&A strategy with over $260 million in investments • 40% of Lake Shore Gold 164.0 million • 30%
Slide 10: 2008 P&L Summary – Pre Exceptionals
2008 P&L Summary – Pre Exceptionals Explanation of decrease in Gross margin US$ millions 2008 2007 20084 20074 % (except unit cost and gross margin) Tonnage treated (MT) 1.9 1.3 46.2 Revenue 434 305 Av. gross price Au ($) 879 639 37.5 Cost of sales (240)1 (106)1 Av. gross price Ag ($) 14.0 14.1 ‐0.7
Slide 11: 2008 P&L Summary – Pre Exceptionals
2008 P&L Summary – Pre Exceptionals 2008 2007 Diff • Increase in selling expenses Gross profit 194 199 (5) due to higher volume and Administrative (69) (69) ‐ export tax Exploration (24) (27) 3 Selling (11) (3) (8) • Other net mainly provisions for Other net (3) 4 (7) mine closure Operating profit 8
Slide 12: 2008 Exceptionals: impairments
2008 Exceptionals: impairments US$ million1 Impairments in operating units: Selene: uneconomic reserve base Selene and Moris2 14.2 Moris: small reserve and Impairment of advanced exploration projects: resource base San Felipe: declining zinc San Felipe 15.4 prices and cash preservation Investments a
Slide 13: 2008 Reserves and Resources
2008 Reserves and Resources1 • As a result of higher operating costs, cutoff Attributable reserves (moz Ag eq.) grades were increased by 18% 116 108 104 • This has a significant impact on reserves as marginally economic ore is removed • As a consequence: • Reserve tonnage has decreased by 17% Dec 06
Slide 14: 2008 life of Mine (LOM)
2008 life of Mine (LOM)1 LOM reserves 4.6 -0.6 4.0 -0.8 3.2 • Life of mine decreased mainly due to mine expansions Dec 2007 New cutoffs Expansions Dec 2008 • Significant additions from exploration + additions offset decrease in LOM LOM resources 7.4 7.4 -1.2 • Successful track record bringing in new
Slide 15: Delivering on our commitments
Delivering on our commitments Operations Exploration M&A /investments 9All expansions completed on 9Impressive drill results at 9Acquired Lake Shore (40%) schedule since IPO, doubling the existing operations and 9Acquired San Felipe (100%) Group’s plant capacity projects 9Acquired Liam JV (50%) 9200
Slide 16: Solid position in 2009
Solid position in 2009 Hochschild’s position going into 2009: Continued focus on growth strategy: • Leaner company as a result of cost saving 1 Organic Growth: measures • Production target of 28 million Ag eq. oz • Capex self financed • Year end cash balance of $116.1m • Limited short term downside:
Slide 17: Organic Growth: 2009 Operating Capex
Organic Growth: 2009 Operating Capex US$ million • 2009 capex self financed by each operation -37% • Capex mainly sustaining with the exception of already committed investments: 198 • Arcata: $35 million 125 • Selene: $20 million • Pallancata: $30 million • San José: $30 million 2008 2009 • On track
Slide 18: Exploration Growth
Exploration Growth • Gained efficiency through redundancies • 2009 mine exploration focused on replacement of reserves and resources and increasing LOM on core assets • Drill projects with discovery/resources and advance to greenfield prospects to drill stage • Increased support for projects with su
Slide 19: Exploration projects in 2009
Exploration projects in 2009 Azuca Peru Intensive drilling to reach scoping study Encrucijada, Chile Recent discovery, testing additional high quality targets Crespo, Peru Realize mineralized potential into resources Flora‐Pinos, Argentina Advance prospects to drill‐ready stage 18
Slide 20: M&A Growth
M&A Growth Q109 Investments $ million Benefits Lake Shore 18.0 Participated in refinancing, maintained ownership at 40%. Proceeds to be used for underground rehabilitation and development work at Bell Creek mine and Vogel properties in support of an advanced underground exploration program Southwest
Slide 21: Lake Shore Gold Corp.
Lake Shore Gold Corp. • Low acquisition cost: $ 180 /gold ounce including capex • Ownership: 40% • Production expected to start in 2009 at 30 koz Au, with significant ramp up in the following years • Fully funded to production at Timmins West, Bell Creek mill and mine & Vogel mines Provides access t
Slide 22: Gold Resources Corp. (GRC)
Gold Resources Corp. (GRC) • Acquired 15% of Gold Resources Corp. for $17.9m • Acquisition provides exposure to high grade, low cost ounces in Mexico – deposit comprises 75% Au/Ag • Proceeds will be used to develop GRC’s flagship property, El Aguila: • Commissioning of plant at 850 tpd by mid 2009 w
Slide 23: Underground
Underground Samples (Sample Width 1-2m) Au g/t Ag g/t 35.3 64.8 57.6 61.6 131.5 19.0 15.6 34.0 53.0 74.0 /) 16m @ 6.56 g/t Au i 6m @ 16.65 g/t Au Vi ING \ 7 @ 9.4 g/t Au .) Underground Samples (Sample Width 1-2m) Au git Ag git 50.1 1.6 62.5 90.6 39.2 120.0 26.3 192.0 28.3 193.0 45.0 58.0 20.9 140.0
Slide 24: Southwestern Resources (SWG)
Southwestern Resources (SWG) • Signed a binding letter of agreement on 23 March 09 to acquire 100% of SWG for $17.5m*, which includes remaining 50% of Liam JV • Consolidates our position in southern Peru: leverage existing infrastructure & regional knowledge • Increases stake in Pacapausa to 80% (pr
Slide 25: 2009 Outlook
2009 Outlook • 2009 attributable production target of 28 moz silver equivalent, 7% y‐on‐y increase • Expect unit cost per tonne to decrease due to expansions and lower projected input prices • Stable cashflow to fund operating capex, exploration and future M&A • Committed to developing reserve and r
Slide 26: Conclusion
Conclusion • Regional knowledge and underground mining expertise • Diversified asset base; stronger than ever project pipeline • Proven track record of reserve replacement • 2009 production target of 28 moz Ag eq, an increase of 7% on 2008, in line with our growth plan • Focusing on profitable ounce
Slide 27: Questions and answers
Questions and answers 26 HOCHSCHILD MINING