Focused on the
core business
Hochschild Mining PLC
Annual Report & Accounts 2023
Features
• A focus on the core
2
• A bright future
4
At a glance
8
Market review
10
Chair’s statement
16
Chief executive officer Q & A
18
Chief executive officer’s
statement
22
Senior leadership team
24
Our business model
26
Our strategy
28
Key Performance Indicators 30
Operating review
33
Financial review
40
Stakeholder engagement
48
Sustainability report
52
Climate-related Financial
Disclosures
76
Risk Management
90
Viability Statement
97
Board of directors
100
Directors’ Report
102
Corporate Governance
Report
104
Directors’ Remuneration
Report
123
Supplementary Information 145
Statement of Directors’
responsibilities
149
01–
99
100–
149
About us
Hochschild Mining PLC is a leading precious metals
company listed on the London Stock Exchange with
a primary focus on the exploration, mining, processing
and sale of silver and gold. Hochschild has 60 years of
experience in the mining of precious metal epithermal
vein deposits and currently operates two underground
epithermal vein mines, one located in southern Peru and
one in southern Argentina as well as the Mara Rosa open
pit mine in Brazil. It also has numerous long-term projects
throughout the Americas.
HOCHSCHILD MINING PLC
Strategic Report
Governance
Independent Auditor’s
Report
150
Consolidated income
statement
157
Consolidated statement
of comprehensive income
157
Consolidated statement
of financial position
158
Consolidated statement
of cash flows
159
Consolidated statement
of changes in equity
160
Notes to the consolidated
financial statements
161
Parent company statement
of financial position
215
Parent company statement
of cash flows
216
Parent company statement
of changes in equity
217
Notes to the parent company
financial statements
218
150–
226
Focused on the
core business
Financial Statements
Profit by operation
227
Reserves and resources
228
Shareholder information
231
227–
231
Further Information
Hochschild is focused on responsible
development at all our core mines
and projects across the Americas.
We always prioritise value creation for
every stakeholder and a key part of
the Company’s ethos has been strong
relationships with our communities
throughout the mining life cycle.
Strategic Report
1—99
Governance
100—149
Financial Statements
150—226
Further Information
227—231
Hochschild Mining PLC
Annual Report & Accounts 2023
1
FEATURE
A focus on the core
Long-term
commitment
to Peru
In August 2023, the Peruvian
government approved Inmaculada’s
Modified Environmental Impact
Assessment. With this welcome step,
the Company is now in an excellent
position to optimise the mine and
unlock its impressive geological
potential, complete construction
of our new Mara Rosa operation
in Brazil and advance the new
Royropata discovery at Pallancata.
The permitting teams worked for
four years on the project with the
result that Inmaculada will remain a
key part of Hochschild’s portfolio for
many years to come. The extension
reaffirms our commitment to our
stakeholders in the Ayacucho region
and its communities as well as to
Peru overall.
Modified
environmental
permit approved
for 20 years
READ MORE
Operating review
page 34
Hochschild Mining PLC
Annual Report & Accounts 2023
2
Our flagship operation
Environment
To fully embed our
Environmental Culture
Transformation Programme
into our everyday operations,
we invite employees, across
all levels, to be part of our
Environmental Ambassador
Programme. Our ambassadors
serve as catalysts,
accelerating the impact of
the transformation process.
The current Peruvian
government has made mining
investment a priority and, over
the last year, pursued a series
of initiatives to actively promote
the Peruvian mining industry.
This has included: high-level
government delegations being
sent to key mining conferences;
strengthening of the
government’s “Delivery Unit”
in the Ministry of Economy
& Finance to guide project
permitting; and approval of
critical permits for key mining
projects such as Zafranal (Teck
Resources), Inmaculada and
Toromocho (Chinalco).
Production over the next few years is expected to be around
200,000 gold equivalent ounces per annum whilst costs are
forecast to peak in 2024 before falling thereafter. The permit
approval allows access to high grade resources as well as a
large land package covering some 262 hectares and a new
brownfield programme has recently started with the aim of
increasing the resource quantity and quality. We are currently
targeting zones to the north of the deposit’s original Angela
vein along the so-called Eduardo belt.
Further initiatives have also
been launched to streamline
the country’s overall permitting
process such as:
– Prime Minister-led
commission launched
to facilitate investment
projects in key sectors,
including mining
– Single permitting platform
established for mining permits
– Simplification of
environmental permitting
and the process of
indigenous prior consultation
for exploration projects
Employment
We have worked to strengthen
our social engagement
strategy and find meaningful
ways of supporting our local
communities. In Peru, for
example, this included
increasing local employment
and procurement, supporting
local governments with public
infrastructure, and positively
engaging local communities
through educational, health
and digital connectivity
programmes.
Education
The “Aprender para Triunfar”
programme provides
academic and entrepreneurial
support to primary and
secondary school students,
parents and teachers. Since
2012, over 300 students have
benefited each year from this
educational programme.
Health
Our Ccalaccapcha medical
campaign was held in Q4 2023
and provided the population of
the Ccalaccapcha community
and surrounding areas with
comprehensive care. The Cora
Cora Health Network and the
Pausa Micro-Network along
with our Inmaculada mine
team, provided a total of 21
specialists for the campaign as
well as equipment and supplies.
Located in the Ayacucho region in
southern Peru, we have been operating
the Inmaculada underground operation
for almost nine years and there are
significant areas still to be explored.
ESG projects
Government
support for mining
204
k
AU EQ PRODUCTION IN 2023
1.1
mt
TOTAL ANNUAL THROUGHPUT
4.1
g/t
AVERAGE GOLD GRADE
177
g/t
AVERAGE SILVER GRADE
Strategic Report
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Governance
100—149
Financial Statements
150—226
Further Information
227—231
Hochschild Mining PLC
Annual Report & Accounts 2023
3
FEATURE
A bright future
Mara Rosa
project
completion
Mara Rosa is an open pit gold project
located in the mining friendly jurisdiction
of Goiás State in Brazil. The brownfield
project benefits from existing
infrastructure and attractive costs.
Aligned with our core strengths
and long-term strategy
A mid-sized project in a mining
friendly jurisdiction which has
economic stability, excellent
local infrastructure and a
wealth of experienced local
talent as well as a friendly
community who recognise
the project benefits.
Exploration
Hochschild is initiating a
near-mine exploration
programme which is aiming to
add another 1 million ounces
of gold resources by 2030.
During 2024, we are expecting
to drill three targets including
the Posse, Martinho and
Caxias shear zones.
Attractive
long-life asset
READ MORE
Operating review
page 38
In 2023, we made excellent progress in advancing construction
of the new mine to completion so that in Q1 2024, we were able
to deliver first gold pour and are on track to meet our production
forecast for the year of between 83,000 and 93,000 ounces
of gold.
The purchase of this asset aligned with our core strengths
and long-term strategy of acquiring and optimising
development stage projects in the Americas and was the result
of a long-term Company review process of a wide range of
growth opportunities. The addition of Mara Rosa increased our
reserves by 75%, is expected to increase our overall production
by 34% and, with its forecast low operating costs, is also
expected to reduce Hochschild’s group all-in-sustaining cost.
The project has benefited from a complementary ESG-led
approach with strong local community and government support
and we have continued that focus during 2023. In August,
Hochschild announced a partnership with Solatio Energia
(a photovoltaic sector specialist) to implement a solar energy
project that will supply renewable energy for 100% of the Mara
Rosa Project’s operations. All production from the new solar
plant will be fed into the National Interconnected System (SIN),
offsetting the total volume of energy consumed by the
operations in Mara Rosa. Construction work on the new solar
plant began in October 2023, and production is scheduled to
begin in January 2025.
Hochschild´s health and safety corporate standards have
also been being implemented, including the introduction of
the Company’s “Seguscore” safety indicator. The project has
completed approximately five million hours without loss time
accident. Frequency and severity indices for 2023 were 0.54
and 2, respectively, both better than our corporate goals.
Hochschild Mining PLC
Annual Report & Accounts 2023
4
BRAZIL
MARA ROSA
MARA RO
GOIAS STATE, BRAZI
Pilar
(Pilar Gold)
Chapada
(Lundin Min
Serra Grande
(Anglo Gold)
BRASILIA
MARA ROSA
GOIAS STATE, BRAZIL
Pilar
(Pilar Gold)
Chapada
(Lundin Mining)
Serra Grande
(Anglo Gold)
Strong local community
engagement
The Knowledge Trail is an
environmental and heritage
education project developed
by Hochschild and aimed at
the communities of Mara Rosa,
Amaralina and the region. The
project is dedicated to Science,
Culture and Education, with
the aims of disseminating
scientific knowledge, raising
environmental awareness
and valuing the region’s
cultural heritage.
Complementary
ESG-led approach
82-
105
koz Au
ANNUAL PRODUCTION
23.8
mt
P&P RESERVES
Government support
Mining is permitted and
regulated at the state level
and the project has received
strong levels of support from
all key departments of the
Goiás State. All permits have
been granted on time and this
government approach is key
to the ability of the Company
to bring the project in on time
and on budget.
Strategic Report
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Governance
100—149
Financial Statements
150—226
Further Information
227—231
Hochschild Mining PLC
Annual Report & Accounts 2023
5
FEATURE
A bright future
An asset
renewed
Hochschild Mining PLC
Annual Report & Accounts 2023
6
Marco W
900m
Intercepted drill
Economic Area
Vein
Andesitic flow
Andesitic tuff
Dacitic tuff
Agglomerate
Ash tuff
W
E
OPEN
Yanacochita
Marco W
700m
0.9m @1.7g/t Au; 618g/t Ag
5.2m @0.2g/t Au; 15g/t Ag
4.0m @0.8g/t Au; 336g/t Ag
1.9m @0.5g/t Au; 230g/t Ag
1.0m @18g/t Au; 1702g/t Ag
1.8m @2.3g/t Au; 430g/t Ag
8.8m @0.6g/t Au; 147g/t Ag
3.7m @0.8g/t Au; 251g/t Ag
17.6m @8.5g/t Au; 2520g/t Ag
2.4m @10.5g/t Au; 3217g/t Ag
23.7m @1.7g/t Au; 512g/t Ag
1.7m @2.6g/t Au; 405g/t Ag
2.5m @2.1g/t Au; 215g/t Ag
Anticlavo
500m
Anticlavo
500m
Yurika
600m
Pablo
800m
Although it is outside the permitted area and will require
approximately three years to receive the necessary government
approvals, the size of the resource is already over 700,000 gold
equivalent ounces with significant exploration upside. We are
confident that this new zone will be the future of mining in the
area in the medium to long term, despite the recent necessity
to place Pallancata on temporary care and maintenance.
The area is located in the Ayacucho region in southern Peru,
in Hochschild and we believe that the Modified Environmental
Impact Statement process should be less complex than the
Inmaculada permit. The existing Peruvian government has
been promoting the mining industry and has targeted the
streamlining of the permitting process across the industry. In
addition, the Royropata zone has a much-reduced scope than
the one covering Inmaculada and Hochschild has implemented
a number of initiatives to aid the process still further. These
include: the appointment of an overall steering committee to
manage the process; the selection of a single company for
the engineering and environmental work; and continued
independent peer group review to ensure quality control.
The existing discovery of 700,000 ounces is expected to
continue to grow with the Company targeting a doubling of
resources of similar quality. The key metrics for the existing
resources are detailed on this page, to the right.
Significant exploration potential
In 2022, the brownfield exploration team
made a significant discovery close to
Pallancata, within the Royropata zone.
READ MORE
Operating review
page 36
Royropata zone
3,162
TONNES
515
AG GRAMS PER TONNE
1.9
AU GRAMS PER TONNE
700
AU KOZ
5
AVERAGE WIDTH (METRES)
Resources
Project metrics
Estimated production start
2027
Average annual production
100koz AuEq
Initial capex
$55-65m
Average AISC (per AuEq oz)
$1,000-1,100
Pre-tax IRR
45-55%
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Governance
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Financial Statements
150—226
Further Information
227—231
Hochschild Mining PLC
Annual Report & Accounts 2023
7
AT A GLANCE
Where we operate
Mining operations
Hochschild operates two
underground epithermal
deposits, one of which is
located in the southwest of
Peru and one in the southern
Argentinian province of
Santa Cruz. It also operates
a recently commissioned
open-pit mine in the Goiás
State in Brazil.
Operations
Inmaculada (Peru)
San Jose (Argentina)
Mara Rosa (Brazil)
Project pipeline
Hochschild currently has a
number of projects in Peru
and Chile. These include an
Advanced Project, former
operations that still have
strong geological potential
through to our early stage
opportunities and regional
targets close to our
current mines.
Development Projects
Royropata (Peru)
Volcan (Chile)
Exploration Projects
Ares (Peru)
Arcata (Peru)
8
Azuca (Peru)
5
8
4
1
7
6
2
3
Responsible mining
in Latin America
Hochschild Mining PLC
Annual Report & Accounts 2023
8
Our business in numbers
We are a leading underground precious
metals company, focusing on the
exploration, mining, processing and
sale of gold and silver in the Americas.
Responsible and innovative mining
committed to a better world.
—
Innovation
—
Inspiring others
—
Recognising talent
—
Seeking efficiencies
—
Demonstrating responsibility
Our purpose
Our values
Who we are
Our commitment to sustainability
READ MORE
Operating review
page 33
READ MORE
Sustainability report
page 52
Our commitment to sustainability
underlies how we operate as a business;
it shapes our culture and how we work
in our teams day-to-day. It shapes our
relationships with our communities,
sub-contractors and local governments,
and it underpins how we interact with the
environment and the physical landscape
in which we operate.
9.5
m oz
SILVER PRODUCTION IN 2023
186
k oz
GOLD PRODUCTION IN 2023
3,982
employees (incl. contractors)
$75.8m
wages paid
$5.8m
taxes and royalties
$51.4m
local procurement spend
2,382
employees (incl. contractors)
$3.2m
wages paid
$Nil
taxes and royalties
$59.2m
local procurement spend
Brazil
Peru
1,761
employees (incl. contractors)
$71.1m
wages paid
$Nil
taxes and royalties
$45.4m
local procurement spend
Argentina
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Financial Statements
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Further Information
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Hochschild Mining PLC
Annual Report & Accounts 2023
9
Gold (NYM $/ozt) Continuous (GC00-USA)
Silver (NYM $/ozt) Continuous (SI00-USA)
Source: Nasdaq
115
110
105
100
9
9
8
8
Jan 23
Feb 23
Mar 23
Apr 23
May 23
Jun 23
Jul 23
Aug
Gold and silver prices in 2023 (indexed)
MARKET REVIEW
Hochschild is subject to external market dynamics associated with the
precious metals industry that inform decision-making and influence
our business performance. In addition, our operations, located in Peru
and Argentina, are exposed to changing country-specific factors that
can impact our business.
Working in changing markets
Hochschild Mining PLC
Annual Report & Accounts 2023
10
23
Sep 23
Oct 23
Nov 23
Dec 23
READ MORE
Our strategy
page 28
READ MORE
Operating review
page 33
The silver price ended 2023
at US$24.1/oz which was flat
on the 2022 closing price.
$
24.1
/oz
2023 YEAR-END PRICE
The average 2023 silver
price of US$23.5 /oz –
was 8% higher than 2022.
+
8
%
AVERAGE PRICE VERSUS 2022
Silver
The gold price ended 2023 at
US$2,072/oz – a record high
year-end close – generating
an annual return of 13%.
$
2,072
/oz
2023 YEAR-END PRICE
The average 2023 gold
price of US$1,955 /oz –
also a record – was 8%
higher than 2022.
+
8
%
AVERAGE PRICE VERSUS 2022
Gold
Strategic Report
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Further Information
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Hochschild Mining PLC
Annual Report & Accounts 2023
11
Jewellery
49%
Technology
7%
Investment
21%
Central banks
23%
R
ecycled
gold
Mine
production
26%
74%
MARKET REVIEW
CONTINUED
Summary
Gold is a precious metal bought
by people across the world
for different reasons, often
influenced by socio-cultural
factors, market conditions,
and macro-economic drivers
in their country.
Demand
$1,955
/oz
Average 2023 price
Gold experienced a strong year with its performance
controlled by the ongoing reaction to war in Ukraine
and latterly in the Middle East and the ebb and flow
of US interest rate expectations, the US economy
and therefore its impact on the US dollar.
Supply
Hochschild Mining PLC
Annual Report & Accounts 2023
12
Possible drivers for gold in 2024
Total investment
is likely to be higher in 2024 but, much of this
demand could come from the less visible OTC segment. Early
weakness in gold ETFs could see a turnaround by mid-year,
aided by anticipated rate cuts and continued geopolitical risk.
Bar and coin demand is likely to stay healthy and in line with
the 10-year average, as Chinese and Indian demand strength
offsets European weakness.
Central banks
are expected to keep buying, in excess of the
pre-2022 annual average of around 500t. They almost matched
their 2022 total last year and the expectation is for another solid
year of buying, albeit lower than 2023.
Jewellery
demand may struggle to remain high, as economic
slowdowns and high gold prices start to bite whilst technology
demand is expected to benefit from strong positive guidance
on semiconductors and from AI fever.
Total supply
is expected to rise with planned expansions/
higher grades taking primary production to new highs. Global
economic resilience should help contain volumes although many
economies are set to slow further.
Source: World Gold Council, Metals Focus
The price rose early in the year to a high of around $1,950
an ounce but as interest rates reduced, expectations were
tempered by strong US data in February, the price fell to just
over $1,800. However, with worries over the health of US banks,
the price rallied in April to a level of over $2,000 per ounce
before falling sharply in September and early October due to
the acceleration of US retail inflation, which raised the odds
for another rate hike. The price then rallied to all-time highs in
December as geopolitical risk increased due to the war in the
Middle East as well as rising expectations of US interest rate
cuts in 2024. The gold price ended the year close to highs at
$2,072 with the 2023 average at approximately $1,955, an 8%
rise on 2022.
Annual gold demand of 4,448t was 5% below a very strong 2022.
Inclusive of significant OTC and stock flows (398t), total gold
demand in 2023 was the highest on record at 4,899t. Central
bank buying was strongly maintained during the year with
annual net purchases of 1,037t almost matching the 2022
record, falling just 45t short. Global gold ETFs saw a third
consecutive annual outflow, losing 244t although the pace of
outflows slowed markedly into year-end, but October’s hefty
outflows dominated the Q4 picture.
Annual bar and coin investment saw a mild contraction (-3% y/y)
as divergent trends in key Western and Eastern markets offset
one another. On the other hand, annual jewellery consumption
held steady at 2,093t, even in the very high gold price
environment with China’s recovery supporting the robust global
total. Finally, despite a Q4 recovery in electronics, the annual
volume of gold used in technology fell below 300t for the first
recorded time.
Full-year global investment demand (the sum of bars, coins
and ETFs) was the lowest since 2014. Gold ETFs contributed
to much of the decline, as global outflows continued. However,
thanks to a positive gold price performance, global assets under
management in these products grew by 6% in US dollar terms.
Bar and coin investment moderated as a sharp decline in
Europe (largely due to rising interest rates and the cost-of-living
crisis) outweighed strong growth in China and Turkey.
Total supply in 2023 increased by 3%, the second successive
year of modest increases. Annual production of 3,644t was
the highest since 2018 as major production disruptions were
generally absent. Higher gold prices prompted a 9% gain in
recycling, to 1,237t. Early estimates suggest a small increase
in outstanding producer hedge books (e.g. Hochschild) but the
large amount of positions due to maturing in Q4 2023 mean
there is lower than usual confidence about the end-of-year
position for the gold mining industry.
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Financial Statements
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Further Information
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Hochschild Mining PLC
Annual Report & Accounts 2023
13
Industrial uses
55%
Photography
2%
Jewellery &
Silverware
20%
Net physical
investment
23%
R
ecycled
silver
Mine
production
8%
82%
MARKET REVIEW
CONTINUED
Summary
Silver is known for its lustrous
appearance, malleability,
and conductivity and has
been prized for centuries
in jewellery, currency, and
industrial applications. With a
rich history tied to wealth and
craftsmanship, silver plays
a vital role in various sectors,
from technology to medicine.
Average 2023 price
$23.5
/oz
Silver has tended to perform in line with gold
demonstrating its store-of-value characteristics
although with over 50% of silver demand coming
from industrial uses, the metal can also move
with other industrial metals in line with global
growth expectations.
Demand
Supply
Hochschild Mining PLC
Annual Report & Accounts 2023
14
Possible drivers for silver in 2024
Global silver demand
is forecast to reach 1.2 billion ounces in 2024,
the second-highest level recorded. With stronger industrial offtake
the principal catalyst.
US interest rate cuts
appear less likely in the very short term so
investment in precious metals could be under pressure. This should
change in the second half of the year, the economic backdrop is
expected to turn more favourable to silver investment when the
US Fed may begin cutting rates.
Global silver demand
is expected to rise 1%, pushed higher by the
continued strength of industrial end-uses and a recovery in jewellery
and silverware demand.
Total global silver supply
is forecast to grow by 3% in 2024 to an
eight-year high of 1.02 billion ounces, entirely led by a recovery
in mined output although this growth is reliant on undisrupted
operations at the major mines as well as commissioning at
Polymetal’s Prognoz silver mine in Russia, the start-up of Gold Field’s
Salares Norte gold mine in Chile, and the continued ramp-up of
operations at Coeur’s Rochester expansion project in the US.
Source: Silver Institute, Metals Focus
This might account for the silver price movements in 2023 being
highly volatile, trading between just over $20 per ounce in March
but jumping by some 30% to $26 by early May as worries over
the US banks caused both silver (and gold) to recover strongly.
Moving with gold throughout the remainder of the year, the silver
rise fell in October on worries over the war in the Middle East
before recovering by the end of December to be virtually flat
on the year. The average for the year was approximately
$23.5 per ounce.
Overall, despite weaker demand and a slight drop in total supply,
the global silver market is forecast to see another sizeable physical
deficit in 2023, marking the third consecutive year of an annual
deficit. At 140 million ounces, this will be 45% lower than 2022’s
all-time high, but this is still elevated by historical standards.
Industrial demand in 2023 is expected to be a new annual high.
Key drivers in this growth are being driven by a strong green
economy, including investment in photovoltaics (PV), power
grids and 5G networks, as well as increased use of automotive
electronics and supporting infrastructure. Improvements in PV
were particularly noticeable as the increase in cell production
exceeded silver thrifting, which helped drive electronics and
electrical demand higher.
Silver jewellery and silverware demand have fallen by 22% and
47%, respectively, to 182m oz and 39m oz in 2023. Losses are led
by India, where full-year demand is expected to have normalised
after a surge in 2022. Excluding India, global jewellery demand is
expected to have edged slightly higher in 2023, while silverware
will fall by 12%.
Physical investment in 2023 is projected to have fallen by
21% to a three-year low of 263m oz. While most markets have
seen weaker volumes, losses have been concentrated in India
and Germany. US investment has also turned lower, but only
modestly, thanks to buoyant safe-haven demand following the
regional banking crisis. The resilience of the US market helps
explain why the global total has stayed historically high.
Like gold, silver ETFs are forecast to have recorded net outflows
for the second year in a row. As was the case in 2022, the bulk of
year-to-date redemptions reflect continued monetary tightening
and its consequential boost to yields, especially in real terms.
However, the decline in holdings in 2023 is expected to be lower
at 40m oz in 2023, roughly a third of 2022’s record outflows.
In 2023, global mined silver production is expected to have fallen
by 2% year-on-year to 820m oz, driven by lower output from
operations in Mexico and Peru (e.g. Pallancata). Even so, overall
production from primary silver mines will still rise this year, driven
by the expected ramp-up at the Juanicipio mine. Silver output
from lead/zinc mines will also increase as Udokan in Russia comes
on-stream.
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Financial Statements
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Further Information
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Hochschild Mining PLC
Annual Report & Accounts 2023
15
CHAIR’S STATEMENT
2023 has proved to be a momentous year for Hochschild Mining.
We are proud of the significant progress we have made in the
execution of our strategy which has included securing
Inmaculada’s Modified Environmental Impact Assessment
(MEIA) in August and the recent completion of our first mine
in Brazil. I am also delighted with the appointment of Eduardo
Landin as our new CEO and believe we will be able to count on
his experience and leadership qualities. We believe that the
Company has reached an inflection point, with strong
momentum in the business. Furthermore, this is supported by
our ongoing drive to ensure our people feel safe, empowered
and respected thereby creating a work environment where
everyone can be at their best.
On the subject of making people feel safe, I am proud and
humbled by the efforts of management and all across the
business for achieving our best safety performance in the
Company’s history. Our key performance indicators objectively
demonstrate that our safety initiatives – all implemented as
part of our Safety Culture Transformation Plan, are successfully
embedding a safety-first culture. We cannot use this as a
reason to be complacent, and so we will continue to work on
maintaining our focus on achieving our strategic goals without
compromising the safety of our people.
The Company’s commitment to managing its environmental
impact has also been clearly evident during 2023. I am pleased
to report that, during the year, Hochschild became the first
mining company in Peru to secure a green loan. This innovative
form of financing sees interest costs adjusted according to
the Company’s environmental performance on three ESG
indicators: safety frequency index, fresh water consumption and
waste disposal. It is therefore particularly gratifying to note that
the Company’s overall ECO Score for 2023 was the highest since
its implementation in 2015 reflecting, most notably, our highest
level of efficiency in terms of water consumption and waste
production. The year also saw the setting of our 2030 ambitions
in the area of ESG (Environmental, Social and Governance) and
which, with respect to our greenhouse gas emissions, will see us
on our way to achieving Net Zero by 2050.
In acknowledgement of our social licence to operate, our
community programmes during the year focused on digital
inclusion, health and nutrition, education and the promotion
of socio-economic development. Examples of the education
programmes organised by Hochschild include the delivery of
technical skills’ training through the digital centres established as
part of the Future Connection initiative. In addition, we have held
healthcare campaigns in conjunction with local authorities in
remote communities close to the Inmaculada mine, as well as
providing healthcare services as part of our “Always Healthy”
programme. In seeking to promote socio-economic development,
the Company has taken a varied approach, from contracting
with local vegetable producers for catering supplies for the
Inmaculada mine and providing training on creating digital
content for female entrepreneurs in Perito Moreno, the town close
to our San Jose operation. Further details on these programmes
can be found in our Annual Report.
Another important year
for strategic development
Eduardo Hochschild
Company Chair
I am proud and humbled by the
efforts of management and all
across the business for achieving
our best safety performance in
the Company’s history.
Hochschild Mining PLC
Annual Report & Accounts 2023
16
$274
m
ADJUSTED EBITDA
2022: US$249m
Strategically, Brazil has become an important jurisdiction for us
with an attractive mix of economic stability, strong government
support for mining, excellent infrastructure and a very
experienced local talent pool. We recently achieved first gold
pour at our new Mara Rosa mine which has been constructed
on schedule and on budget, a rarity in the industry. We are very
proud of the entire team in Goiás and are confident that the
ramp-up period will progress smoothly. The mine will produce
between 83,000 to 93,000 ounces of low-cost gold this year
and we can look forward to increasing production and
reducing costs in the next few years.
Our entry into Brazil is also yielding further business
development opportunities. We recently announced that we
have secured an option to acquire 100% of Cerrado Gold’s
Monte Do Carmo gold project in the state of Tocantins. This
low-cost opportunity will build on the template established at
Mara Rosa and, if exercised, provide the Company with a further
leg of growth at a compelling cost profile in a mining-friendly
jurisdiction. We plan to explore its geological potential, confirm
the operational assumptions of the project and advance the
permitting process. We will invest a limited sum before making
a final acquisition decision in the next 12 months.
The brownfield team’s exploration plans for 2023 were affected
by the permitting delays at Inmaculada and consequently
started later in the year in Peru. We have already had some
encouraging drill results at high grade areas of Inmaculada but
there is still work to be done there as well as at San Jose. We will
update on the overall results during 2024. At Pallancata, work
on the MEIA required for our exciting Royropata discovery was
started during the year and has made good progress and we
have also applied for the requisite exploration permit to drill for
additional resources for the deposit. We expect this area to start
yielding new low-cost production in 2027.
Our operational team had to respond to a degree of disruption
during 2023 including local and national social disturbances
in Peru at the start of the year and subsequently the ongoing
impact from delays to the Inmaculada MEIA, which impacted
exploration and mine development work. However, we are proud
of the overall performance of all our teams during the remainder
of the year and we were therefore able to meet our revised
production and cost targets. In addition, with another year of
strong precious metal prices, the business generated strong
cash flow and was able to comfortably finance our capital
commitments at Mara Rosa whilst maintaining a robust
balance sheet position.
During the year, we saw changes in the composition of the Board
with Eileen Kamerick and Nicolas Hochschild stepping down as
Non-Executive Directors at the 2023 AGM and, as part of our
Board succession plan, I am pleased that Joanna Pearson
joined the Board on 1 October 2023. Given her extensive
experience in public company reporting, Joanna will assume
the Chair of the Audit Committee at the conclusion of this year’s
AGM. I would like to thank Jill Gardiner for chairing the Audit
Committee so diligently during this interim period.
Finally, I would like to take the opportunity to thank Ignacio
Bustamante, who stepped down from the Board after having
ensured a smooth succession to Eduardo Landin following his
appointment in August. Ignacio has been with the Company
for over 30 years and 13 years of that as CEO and we are very
grateful to him for his strong leadership, and we wish him all the
best for the future.
Outlook
In 2023, precious metal prices continued to experience volatility
albeit within a fairly tight range. Gold fell to almost $1,800 per
ounce in the first quarter of the year as unexpectedly strong
US economic data propelled both yields and the US dollar
higher. However, it then rebounded quickly and although there
was another fall in September due to stronger US interest rate
expectations, the price ended the year close to record highs of
$2,100 per ounce. 2024 has so far continued the price strength,
so we remain confident that when combined with the new
low-cost ounces set to be delivered from Mara Rosa in the
first half onwards, we will continue to generate good cash flow.
At this time, our financial targets include the reduction of our
existing debt levels in the medium term and for this reason,
we have continued to take advantage of the gold price strength
and executed a number of hedges for the next few years at
Inmaculada and Mara Rosa. In addition, with that in mind, the
Board has decided that it would be inappropriate to restore
the final dividend at this stage but will reassess the potential
for capital return at the interim results in August.
Let me end by thanking the new leadership team and the
several thousand Hochschild employees, contractors and
partners who delivered for our Company and its stakeholders
during the year.
Eduardo Hochschild
Chair
12 March 2024
$694
m
REVENUE
2022: $736m
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Further Information
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Hochschild Mining PLC
Annual Report & Accounts 2023
17
CHIEF EXECUTIVE OFFICER — Q&A
Eduardo Landin
Chief Executive Officer
Hochschild has been operating for
over 100 years, has a proven track
record and the potential to deliver
considerable growth and value for
all of our stakeholders.
Hochschild Mining PLC
Annual Report & Accounts 2023
18
Q —
Why did the opportunity to become CEO at Hochschild
excite you?
A.
The strength of the underlying business speaks for itself.
Hochschild has been operating for over 100 years, has a proven
track record and the potential to deliver considerable growth
and value for all of our stakeholders. We have an exciting
operating, exploration and development asset portfolio, and a
clear roadmap to growing production and reducing costs while
supplementing our business with additional resources from our
existing projects. The business is primed for growth and, having
worked at Hochschild for over 17 years, I can see clearly how we
can deliver on this growth opportunity and unlock significant
shareholder value. This, combined with my confidence in my
ability to lead the Company through this next phase of growth,
underpins my excitement at taking on the role.
Q —
You have recently laid out an evolved strategy for the
Company. What gives you confidence Hochschild can deliver it?
A.
Our growth strategy is incredibly simple: it revolves around
reducing our cost base while increasing our annual production
rates. We held a Capital Markets Day in November 2023,
illustrating how we will deliver this year-on-year into the medium
term. At the same time, we will continue our extensive brownfield
development programme, with this being a clear growth driver
as we continue to explore the land surrounding our existing
assets, with a disciplined approach to capital deployment and
delivering a best-in-class ESG performance.
I am confident that the strategy we set out was compelling and
will result in delivering considerable value for all of our internal
and external stakeholders. This is absolutely the right approach
for driving our growth.
Biography
Eduardo Landin became
CEO of Hochschild Mining
PLC in August 2023.
READ MORE
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Hochschild Mining PLC
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19
Q —
South America has given miners their fair share of
turbulence recently. How do you look at the landscape in the
countries where Hochschild operates?
A.
We acknowledge the geopolitical and regulatory challenges
faced in South America, not only by Hochschild but a number
of others in recent years.
However, I have to report that we are currently not facing any
operating difficulties in any of our regions of focus.
We continue to enjoy operating in Brazil under the economic
stability provided by the Lula government, with the state of
Goiás in particular, being incredibly mining-friendly.
As reported at the Capital Markets Day, we are finding Peru
significantly easier to operate in the last year, with the
government actively promoting the mining sector in the last
year and with the social backdrop improving.
Our long-standing presence in these critical regions has given
us a nuanced understanding of local geology, regulatory
frameworks, and community dynamics, providing us with
a significant competitive edge and point of differentiation.
My confidence is supported by the fact that we have
an incredibly experienced, talented, and motivated team,
all of whom have spent a considerable amount of time at the
Company and in the industry. I have been at the Company for
over 18 years whilst our CFO Eduardo Noriega has been here
for 17 years. We will leverage this expertise to execute our
strategy effectively. The Company is incredibly experienced at
bringing development projects into production, including the
construction of five mines since our IPO in 2006. We also have
a proven track record of resource replacement. I have full faith
in their capabilities.
Ultimately, it is our people and culture that will underpin the
delivery of this strategy.
Q —
Brownfield development is core to the Company’s
growth plans. What should investors have their eyes on?
A.
Brownfield development is absolutely the right internal
growth driver for us. It represents a highly effective means of
adding low-cost ounces and increasing the life of our projects,
particularly at our epithermal deposits where the formal mine
life is typically shorter.
At Inmaculada, we have successfully added 2.4 million gold
equivalent ounces through drilling since production began in
2015, with the potential for an additional 2.5 million ounces yet to
be discovered. Inmaculada includes a large land package that
the team is continuing to explore, and we are confident there will
be a number of significant discoveries here based on experience
and the work carried out to date.
Royropata, a brownfield discovery in close proximity to
our Pallancata mine, is anticipated to become a low-cost,
100,000-ounce-per-year mine in the medium term, with
commissioning expected to be in 2027. Royropata will utilise
the existing infrastructure at Pallancata, lowering the capex
associated with this project and reinforcing my confidence
in its delivery.
We are also engaged in an exploration programme at Mara
Rosa, our new mine in Goiás, Brazil, and look forward to updating
shareholders on this in the near future.
The Company is incredibly
experienced at bringing
development projects into
production, including the
construction of five mines
since our IPO in 2006.”
We acknowledge the geopolitical
and regulatory challenges faced
in South America, not only by
Hochschild but a number of
others in recent years.”
CHIEF EXECUTIVE OFFICER — Q&A
CONTINUED
Hochschild Mining PLC
Annual Report & Accounts 2023
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Q —
Mara Rosa has all the hallmarks of being a great
acquisition, but creating value through M&A in the precious
sector is notoriously difficult; how will you approach it?
A.
I am delighted by the progress made at Mara Rosa, which
is an excellent asset that we are proud to have brought into
production. The project is progressing according to plan, being
on time and on budget, and provides the opportunity to increase
production and reserves at an attractive cost. Mara Rosa also
boasts promising brownfield exploration prospects, which we
continue to explore in pursuit of future growth.
We have also established clear parameters for assessing future
M&A opportunities. We are specifically interested in profitable
pre-production assets where our construction, operational and
brownfield exploration strengths differentiate us from other
potential buyers and leave us well-placed to progress the
project. For example we recently made steps to potentially add,
in the medium term, another low-cost project in Brazil to our
pipeline. The option agreement we have executed with Cerrado
Gold for their Monte Do Carmo project in Tocantins state
delivers an opportunity in a mining-friendly jurisdiction and
will add significant increase in reserves with strong exploration
upside. The transaction structure is also to our advantage
by limiting the upfront consideration to secure an advanced
development project.
Q —
The sector continues to battle cost inflation. What gives
you confidence that Hochschild can manage it?
A.
Rising costs are a significant issue across the sector, although
I’m confident that Hochschild will be able to execute our strategy
to reduce our all-in sustaining costs by 20% by 2026.
We are implementing a stringent cost reduction project at
Inmaculada, optimising the asset’s operating expenditure while
simultaneously boosting productivity through integrating new
technologies and enhancing our supply chain management
processes to ensure robustness and efficiency.
The construction of Mara Rosa in a new jurisdiction, on time and
on budget, demonstrates the strong track record the Company
has in cost and capex management.
Q —
What Company ESG achievements have made you proud,
and where are your priorities?
A.
ESG is fundamental to our purpose and is a fundamental
component of the growth strategy I delivered at the Capital
Markets Day. We are committed to minimising our environmental
impact, and have set a number of ambitious goals to this end.
These ambitious targets include a 30% reduction in Scopes 1
and 2 emissions by 2030 and achieving net-zero greenhouse gas
emissions by 2050. Equally important is our dedication to creating
a positive impact on the local communities where we operate and
fostering strong community relationships. We prioritise local
employment, with 59% of our total workforce hired locally.
In 2023, we achieved our ongoing target of zero fatalities
and the lowest Lost Time Injury Frequency Rate (LTIFR) in the
Company’s recent history at 0.99. The team is incredibly proud
of this achievement, at a rate that is considerably below the
local and industry average.
Moving forward, our priorities include further enhancing
workplace safety, reducing our environmental footprint,
fostering inclusive growth and development in our communities,
and upholding our commitment to ethical business practices
and social responsibility.
Q —
How do you define success for Hochschild in the next three
to five years?
A.
Ultimately, success will be measured by our ability to deliver
on the strategic targets we have outlined to the market. This
includes achieving growth in production while simultaneously
responsibly reducing costs.
This also includes delivering growth via brownfield
exploration projects and value accretive M&A, both of which
I have set our clear parameters regarding and we are pursuing
these to drive growth.
Equally important is our dedication to developing the local
communities in which we operate. We aim to be recognised
as a trusted partner for local people, driving value for all
stakeholders. This means actively engaging with
communities, fostering economic development, and
promoting social well-being.
With an experienced and motivated team, an exciting asset
portfolio, and a commitment to excellence, we are well-
positioned to realise these goals while generating meaningful
shareholder value.
We aim to be recognised
as a trusted partner for
local people, driving value
for all stakeholders.”
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Hochschild Mining PLC
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21
CHIEF EXECUTIVE OFFICER’S STATEMENT
Eduardo Landin
Chief Executive Officer
Our commitment to being a
responsible mining company
is unqualified, and so I am very
proud of the breadth of progress
made during the year in the
different key areas of ESG focus.
I was honoured to be appointed as CEO of Hochschild Mining
PLC in August 2023 and believe that a relationship with our
stakeholders should be based on trust and a thorough
appreciation of our key strengths. We are dedicated to
transparency and responsible business practices. Our core
competencies drive success and our leadership team has
recently outlined a renewed strategy based around brownfield
exploration, operational efficiency and disciplined capital
allocation which we believe will deliver profitable growth from
our key Latin American mining jurisdictions. This is supported
by a focus on consistent ESG performance and the capacity
to continually learn from experience.
The first eight months of 2023 were challenging for Hochschild
as we reached the final stages of securing Inmaculada’s MEIA.
The delay in securing the approval unfortunately impacted our
operational and exploration strategy in the short term and will
have a knock-on effect for 2024. However, with the approval
secured, the Company is now in a strong position to optimise
the Inmaculada mine and unlock its impressive geological
potential. The approval also reaffirms our commitment to our
stakeholders in the Ayacucho region and its communities as
well as to Peru overall.
We have also recently completed construction at Mara Rosa
in Brazil and are now in the ramp-up phase, a testament to our
proven development expertise. I am also excited by the potential
at the new Royropata deposit which we believe will add
significant additional growth to the Company in the next
few years.
ESG
Our commitment to being a responsible mining company is
unqualified, and so I am very proud of the breadth of progress
made during the year in the key areas of ESG focus. It gives me
great pleasure that we have brought our corporate culture of
social responsibility to our new operation in Brazil. Examples of
this include the Knowledge Trail at Mara Rosa which was given
the Sustainable Goiás Award by the Goiás State Environment
and Sustainable Development Department and our partnership
to implement a solar energy project that, in time, will see the
Mara Rosa operation supplied entirely by renewable energy.
Finally, I would like to echo the Chair’s comments on the
Company’s robust overall performances in the areas of
safety and environmental performance.
Operations
Hochschild’s output in 2023, although revised by the MEIA delay
at Inmaculada, continued our strong track record of meeting
annual guidance. Overall attributable production was 300,749
gold equivalent ounces (25.0 million silver equivalent ounces)
which was only slightly lower than the original 2023 budgeted
figure of between 301,000 and 314,000 gold equivalent ounce
range. This was produced at an all-in sustaining cost of
$1,454 per gold equivalent ounce ($17.5 per silver equivalent
ounce) which was, as expected, slightly higher than 2022
reflecting the lower grades at the declining Pallancata mine
and lower production at San Jose in Argentina. Pallancata was
An exciting future for
growth in the Americas
Hochschild Mining PLC
Annual Report & Accounts 2023
22
placed on temporary care and maintenance during the fourth
quarter, and this will remain until we secure the permits to mine
the new large, high-quality resources discovered in the
Pallancata area at Royropata.
Despite a degree of disruption from the local and national
protests in late 2022 and early 2023, in addition to the delays to
the MEIA approval, the team at Inmaculada had another strong
year producing 203,849 gold equivalent ounces (2022: 226,363
ounces) at $1,287 per gold equivalent ounce. At Pallancata,
production in 2023 reflected a mining area that was almost
depleted with output at 2.4 million silver equivalent ounces (2022:
3.3 million ounces) at a cost of $25.3 per silver equivalent ounce.
In Argentina, the San Jose mine was impacted by lower resource
grades but nevertheless production was only 6% below the 2022
figure at 11.1 million silver equivalent ounces (2022: 11.8 million
ounces) with costs at $18.9 per silver equivalent ounce. These
costs are expected to moderate in the next few months following
the recent devaluation of the currency in Argentina.
Projects
At the Mara Rosa project in the state of Goiás in Brazil, we have
made excellent progress during the year and are proud to have
recently achieved first gold pour at the new operation, having
completed construction on time and within budget. We are
currently in the ramp-up phase and expect to reach full
production in June. The mine remains on track to produce
between 83,000 and 93,000 ounces in 2024 at a low all-in
sustaining cost of between $1,090 and $1,120 per ounce of gold.
I am also excited that our business development team has
recently made steps to potentially add, in the medium term,
another low-cost project in Brazil to our pipeline. The option
agreement we have executed with Cerrado Gold for their Monte
Do Carmo project in Tocantins state delivers an opportunity to
build on our emerging Brazilian platform by adding a significant
increase in reserves with strong exploration upside in a mining-
friendly jurisdiction. The transaction structure limits the upfront
consideration to secure an advanced development project.
Exploration
As mentioned by our Chair above, the brownfield programme
for 2023 was also affected by the MEIA delay and only started
towards the end of the year at Inmaculada and San Jose. Plans
for 2024 include adding high grade resources close to the
mining area at Inmaculada at the Angela North East and nearby
vein structures. At San Jose we will continue with our aim to
increase the life-of-mine and there will also be directional and
infill drilling at Pallancata and additional brownfield work close
to Mara Rosa.
Financial position
With production remaining robust and a healthy price
environment, the Company generated good cash flow with the
result that liquidity remains strong. Cash and cash equivalents
of $89.1 million at the end of December (2022: $143.8 million)
reflect capital expenditure of $121 million at Mara Rosa during
2023. This, along with the draw-down of $60 million from the
$200 million medium-term loan facility, has led to a net debt
position of $257.9 million at 31 December 2023 (31 December
2022: $175.1 million).
Financial results
Total Group production was 10% lower than 2022 and, although
this was partially offset by a 10% rise in the gold price received
and a 1% rise in the silver price, revenue decreased by 6% to
$693.7 million (2022: $735.4 million). All-in sustaining costs were
in line with revised guidance at $1,454 per gold equivalent ounce
or $17.5 per silver equivalent ounce (2022: $1,448 per gold
equivalent ounce or $17.4 per silver equivalent ounce). Adjusted
EBITDA of $274.4 million (2022: $249.6 million) increased by 10%
versus 2022 reflecting the price rises and a recent devaluation
of the currency in Argentina. Pre-exceptional earnings per share
of $0.02 (2022: $0.01 per share) includes the impact of a decrease
in gross profit due to lower gold and silver production, lower
exploration expenses mainly due to termination of the option
over Snip project and an increase in income tax mainly due to
the higher profitability and currency devaluation in Argentina
impacting the deferred income tax. Post-exceptional loss per
share was $0.10 (2020: $0.01 earnings per share) and includes:
the impairment losses at the Azuca and Crespo projects of
$63.3 million and the San Jose mining unit of $17.4 million; the
restructuring charges in Pallancata of $9.0 million resulting from
placing the operation in care & maintenance; and the impairment
of the investment in Aclara Resources Inc. of $7.2 million. The net
after-tax effect of exceptional items is a loss of $69.5 million.
Outlook
We expect attributable production in 2024 of between
343,000-360,000 gold equivalent ounces. This will be driven
by: 200,000-205,000 gold equivalent ounces from Inmaculada;
an attributable contribution of 60,000-62,000 gold equivalent
ounces from San Jose; and first production from the new
Mara Rosa mine of between 83,000 and 93,000 ounces. All-in
sustaining costs for operations are expected at between $1,510
and $1,550 per gold equivalent ounce. This forecast reflects
$45 million of capital expenditure at Inmaculada which were
previously deferred due to the MEIA delay which mostly consists
of the expansion of the tailings dam and the construction of a
reverse osmosis plant.
A project capex budget of $10 million has been assigned to
complete the Mara Rosa project in the first few months of the
year, whilst the budget for brownfield exploration has recently
been set at approximately $33 million.
The construction of Mara Rosa and the approval of the
Inmaculada MEIA have been key milestones for Hochschild
during the year. Having been in the role of CEO for over six
months, I believe we have a compelling investment case based
around the next 20 years of our Inmaculada flagship mine,
near-term growth from Brazil and Peru and a focus on capital
discipline which includes debt repayment, replenishing our
project pipeline and capital return. 2024 has started with a
much calmer social situation in Peru and we welcome the
government’s initiatives to promote mining in Peru worldwide.
A consistent execution of our strategy gives me great confidence
in our ability to generate long-term value for our shareholders,
partners and stakeholders. In my first Full Year reporting as CEO,
I want to be clear: I believe Hochschild is a great company, and
we will constantly aim to ensure we become a great investment
in a responsible manner.
Eduardo Landin
Chief Executive Officer
12 March 2024
9.5
m oz
SILVER PRODUCTION
2022: 11.0m oz
186
k oz
GOLD PRODUCTION
2022: 206k oz
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Hochschild Mining PLC
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SENIOR LEADERSHIP TEAM
A highly skilled and
experienced team
Eduardo Landin
Chief Executive Officer
Eduardo Landin was
appointed CEO on 26 August
2023. Eduardo previously
served as Hochschild’s COO
for over 10 years.
He joined the Group in January
2008 as General Manager of
the Company’s operations in
Argentina. In 2011 he became
General Manager of Projects
with direct responsibility over
the development of the
Inmaculada and Crespo
Advanced Projects.
Before joining Hochschild,
Eduardo held the position
of Corporate Development
Manager at Cementos
Pacasmayo and, prior to that,
he worked in the Peruvian
Ministry of Energy and Mines.
Eduardo began his career at
Repsol S.A. where he worked
for over 10 years in England,
Spain and Peru. Eduardo is
a Chartered Mechanical
Engineer and holds a B.Eng
(Honours) in Mechanical
Engineering from Imperial
College, London and an
Executive MBA from the
Universidad de Piura, Peru.
He is a Fellow of the Institution
of Mechanical Engineers.
Eduardo Noriega
Chief Financial Officer
Eduardo Noriega was
appointed Chief Financial
Officer of Hochschild Mining
on 10 December 2021 having
joined the Company in March
2007. Eduardo previously
served as Head of Group
Finance with responsibility
for financial planning and
controls, treasury, corporate
finance, tax and accounting.
Prior to joining Hochschild,
Eduardo worked in various
finance roles for Dell Inc.,
Union de Cervecerías Peruana
Backus & Johnston and Del
Mar Fishing Company.
Eduardo is a graduate in
Business Administration from
Universidad del Pacifico and
holds an MBA from the
University of Texas.
Hochschild Mining PLC
Annual Report & Accounts 2023
24
Rodrigo Nunes
Chief Operating Officer
Rodrigo Nunes was appointed
Chief Operating Officer of
Hochschild Mining in August
2023 having joined the
Company in 2021 as
Corporate Director, Technical
Services & Projects, covering
the Company’s operations,
development projects and
M&A efforts globally. Prior
to that, he was Vice President
of Mining for Optimize Group,
a consulting engineering
company based in Toronto.
Rodrigo also held key technical
and leadership roles in global
mining companies including
Yamana Gold, Vale and
ArcelorMittal. He holds a
Mining Engineering degree
from the Universidade Federal
de Minas Gerais, an MBA,
Project Management degree
from the Fundação Getulio
Vargas and a Master of
Science, Mining and Mineral
Engineering degree from the
Universidade de São Paulo.
José Augusto Palma
Vice President, Legal
& Corporate Affairs
José Augusto Palma has more
than 14 years of professional
experience in the mining sector
and has served in various
positions in Hochschild.
José has also been very
active in the mining industry
association has served as
President of the Mining Sector
in the Mining, Electricity and
Petroleum Industry Association
of Peru. Before joining
Hochschild, José had a
successful career in private
practice in the United States,
where he was a partner at the
law firm of Swidler Berlin, and
later worked at the World Bank.
José also served two years
in the Government of Peru.
He holds law degrees from
Georgetown University and the
Universidad Iberoamericana
in Mexico.
Oscar Garcia
Vice President,
Brownfield Exploration
Oscar Garcia was promoted
to the position of VP,
Brownfield Exploration on
1 January 2019 having joined
Hochschild Mining in 2007
as an Ore Control geologist.
He has previously worked
at Hochschild as Corporate
Manager for Underground
Geology, Ore Control and
Brownfield Exploration. Prior
to Hochschild Mining, Oscar
worked as a geologist at
Barrick Gold, Lonrho Mining
Group and Compañia Minera
Aguilar. Oscar qualified as a
geologist at the Universidad
Nacional de Cordoba in 1981.
Eduardo Villar
Vice President,
Human Resources
Eduardo Villar has been with
the Group since 1996. Prior
to his current position, he
served as Human Resources
Manager, Deputy HR Manager
and Legal Counsel. Eduardo
holds a law degree from the
Universidad de Lima and an
MBA from the Universidad
Peruana de Ciencias
Aplicadas. In addition,
Eduardo has postgraduate
qualifications in Business from
IESE Business School and
Harvard Business School and
in Human Resources from
London Business School and
the University of Michigan.
Strategic Report
1—99
Governance
100—149
Financial Statements
150—226
Further Information
227—231
Hochschild Mining PLC
Annual Report & Accounts 2023
25
C
O
M
M
U
NI
T
Y
S
U
S
T
A
I
N
A
B
I
L
I
T
Y
Market
E
N
V
I
R
O
N
M
E
N
T
H
E
A
L
T
H
&
S
A
F
E
T
Y
OUR BUSINESS MODEL
Our well established and resilient business model reflects our long-term
commitment to our employees, communities and society as a whole as
well as providing an attractive investment proposition.
Creating sustainable value
Inputs
These inputs are key in consistently
achieving productive, safe and
environmentally sound operations.
Responsibility
We are focused on: operating
a safe workplace to enable our
employees to thrive; seeking
to generate social value within
our surrounding communities;
and minimising our
environmental impact.
Governance
We maintain high standards
of controls and processes
to protect and enhance
stakeholder interests.
Expertise
We have specific expertise
in mining a variety of deposit
types including underground
and open pit deposits in complex
geological conditions throughout
the Americas.
Experience
We have steadily built an
enviable track record in
managing mines, developing
projects, identifying growth
options, dealing with permitting
processes, and utilising best
practice social environmental
and policies.
Discipline
We deploy capital in a disciplined
manner underpinned by
our long-standing financial
relationships and a focus on
value accretive opportunities.
Innovation
We are dedicated to the
development of more efficient
business practices through the
adoption of new technologies.
Our core activities
Technical expertise is the key attribute underpinning our business model
Our strategic pillars:
Brownfield
Operational
Efficiency
ESG
Disciplined Capital
Allocation
Hochschild Mining PLC
Annual Report & Accounts 2023
26
The efficacy and resilience of our business model allows us to invest
in the future of our employees, redistribute profit to our host
communities through a wide variety of collaborative programmes
and deliver long-term value for all our shareholders.
Outputs
Communities
Over many decades, Hochschild has been able to invest
in a number of local programmes focusing on our core
themes of education, health and socio-economic
development and allowing us to operate collaboratively
with communities across our regions. We have also
been able to deliver a range of innovative employment
and business opportunities whilst retaining our respect
for the environment and cultural traditions.
59
%
WORKFORCE FROM LOCAL
COMMUNITIES
Employees
The success of our business model helps us to provide
personal development, competitive compensation
and proper working conditions. We aim to empower
our employees with learning opportunities and
new challenges in a positive, healthy and safe work
environment. In addition, there is an ongoing
recognition that all should have opportunities to
contribute and develop their capabilities through
volunteer work as well as direct initiatives.
66
%
WORKFORCE TRAINED IN 2023
Shareholders
We are committed to our aims of profitable and safe
operations, a strong local and international reputation
and stability. We believe that if we can deliver
sustainable low-cost growth and consequently
generate solid free cash flow, we can use that to repay
all our stakeholders. Since the middle of 2016 we have
paid out $126 million in equity dividends. Due to the
significant disruption to our operations from the
2022/2023 Peruvian political situation and the delay to
the approval of the Inmaculada Modified Environment
Assessment in 2023, we halted dividend payments but
following the completion of Mara Rosa, our Board will
address the potential for capital return in August 2024.
$126
m
DIVIDENDS PAID SINCE 2016
2. Develop
We are able to progress our projects
efficiently in a short space of time and the
ability to operate in remote locations and
high altitudes remains a core competitive
advantage. We have extensive knowledge
of the key mining jurisdictions throughout
the Americas and believe our experience
in managing all project requirements
including permitting, local community and
government support, places us in a strong
position with regards to the execution of
precious metal opportunities whether open
pit or underground.
1. Discover
We have strong expertise in discovering and
developing long-term geological districts.
Our highly experienced exploration team
believes that there is strong potential across
all our properties to continue to generate
strong returns from the Company’s existing
resource base. Furthermore, our business
development team are always seeking to
identify profitable pre-production assets
where our construction, operational and
brownfield exploration capabilities
differentiate us from other potential buyers.
3. Extract
We have developed an extensive in-house
knowledge base of the challenges inherent
in a range of different ore bodies, varying
metals as well as in a variety of environments
throughout our regions. This has resulted in
us consistently meeting annual operational
targets, implementing significant cost
efficiency programmes and replacing and
adding to our resource base. In addition,
our growing commitment to innovation is
allowing us to incorporate key technological
advances and apply them to our business.
Strategic Report
1—99
Governance
100—149
Financial Statements
150—226
Further Information
227—231
Hochschild Mining PLC
Annual Report & Accounts 2023
27
OUR STRATEGY
Strategic pillars
Key priorities
2023 activities
2024 priorities
Brownfield
Generating long-term
value
Extending life-of-mine
Focused on mineable
resources
– Inmaculada brownfield
programme start delayed
due to permitting delays
– Encouraging first
economics for Royropata
deposit at Pallancata
– MEIA process for Royropata
started incorporating
lessons learnt from
Inmaculada
– $33million budget set for
brownfield exploration
– Aim to add further
resources at all three
existing mines
– Focus on drilling Eduardo
belt at Inmaculada and
adding resources at
San Jose and Mara Rosa
Operational
efficiency
Lean philosophy
Process optimisation
Proven development
record
On Time On Budget
– Mara Rosa set to be
completed on time
and on budget
– Costs set to fall in
2025-2026
– Complete final capital
expenditure on Mara Rosa
– Take further advantage of
devaluation in Argentina
– Explore potential for further
cost efficiencies
ESG
Driving responsibility
& respect
World-class safety
performance
2030 ESG KPIs in place
Net Zero by 2050
ambition
– 5.76/6 in ECO Score:
best performance since
inception
– Very low Lost Time Injury
Frequency Rate of 0.99
– Very low Accident Severity
Index of 37
– 59% of total workforce
is local
– Continue record of zero
work related fatalities in last
few years
– Continue Mara Rosa
record of 4 million hours
accident free
– Focused on long-term
positive social, economic
& environmental results
to further Sustainable
Development Goals
Disciplined capital
allocation
Funding organic growth
Debt repayment
Capital return
Value accretive M&A
– Drew down $60 million
from new $200 million
medium-term loan
– Completed project
expenditure on Mara Rosa
project
– Brownfield exploration –
focused on securing cash
flow at non-core properties
– Debt repayment –
disciplined debt levels
to drive further growth
– Evaluate shareholder
returns as earnings and
cash flows strengthen
– M&A – clear parameters
to evaluate opportunities
– Acquired option on Monte
Do Carma project in Brazil
(Q1 2024)
A renewed strategy for
continued delivery and growth
Hochschild Mining PLC
Annual Report & Accounts 2023
28
Key metrics
Risks
Sustainability strategy
+3.5
moz
AU EQ: TOTAL RESOURCES DISCOVERED SINCE 2006
– Political, legal and regulatory
– Community relations
– Personnel: recruitment and retention
To ensure that our purpose is
achieved, we have established
a 2030 ambition across our five
strategic pillars:
Serving our communities
We have worked to strengthen our
social engagement strategy and find
meaningful ways of supporting our
local communities.
Protecting the environment
Our 2030 ambition is to reduce our
GHG scope 1+2 emissions by 30%
vs 2021. This will require the use of
renewable electricity and transitioning
towards more efficient vehicles.
Ensuring health & safety
The safety of our people is an integral
measure of our corporate success
and remains our highest priority.
Empowering our people
Driving gender diversity in our own
workforce remains a key challenge
in this industry and a top priority
for Hochschild.
A responsible business
Acting honestly and ethically
is central to our business.
AISC:
REDUCTION OF APPROXIMATELY
21
%
BY 2026
– Political, legal and regulatory
– Community relations
– Personnel: recruitment and retention
0.99
LTIFR IN 2023
– Political, legal and regulatory
– Community relations
– Personnel: recruitment and retention
$15
m
COST OF OPTION SECURED ON MONTE DO CARMO
PROJECT IN BRAZIL
– Political, legal and regulatory
– Commodity prices
READ MORE
Key Performance
Indicators
page 30
READ MORE
Risk
Management
page 90
READ MORE
Sustainability
Report
page 52
READ MORE
Sustainability Report
page 52
UN SDGs
Strategic Report
1—99
Governance
100—149
Financial Statements
150—226
Further Information
227—231
Hochschild Mining PLC
Annual Report & Accounts 2023
29
KEY PERFORMANCE INDICATORS
Definition
Total silver equivalent production
equals total gold production
multiplied by a gold/silver ratio
for 2023 & 2022 of 83x, 2019-2021
of 86x and added to the total
attributable silver production.
Performance
Total silver equivalent production
decreased by 10% versus 2022 due
to the scheduled fall in production
from Pallancata and San Jose and
the disruption to Inmaculada from
the permit delay.
Outlook
Total silver equivalent production
is forecast to be between 33.0
and 35.0 million silver equivalent
ounces in 2024 assuming a gold/
silver conversion ratio of 83x.
PRODUCTION
Links to strategy:
Links to remuneration:
Yes
(Page 123)
Risks:
Operational performance.
274
$m
Definition
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.
Performance
Adjusted EBITDA increased by 7%
versus 2022 due to the impact of
the devaluation of the Argentinian
peso and a strong performance
from Inmaculada.
Outlook
Adjusted EBITDA result for 2024
will depend on precious metal
prices and cost and expenses
performance along with the
ability of the operations to
operate normally.
ADJUSTED EBITDA
Links to strategy:
Links to remuneration:
Yes
(Page 123)
Risks:
Operational performance and
commodity price.
693
$m
Definition
Revenue presented in the financial
statements is disclosed as net
revenue and is calculated as gross
revenue less commercial discounts.
Performance
Total revenue decreased by 6%
versus 2022 due to the scheduled
fall in production.
Outlook
Total silver equivalent production
is forecast to be between 33.0
and 35.0 million silver equivalent
ounces in 2024 assuming a gold/
silver conversion ratio of 83x.
REVENUE
Links to strategy:
Links to remuneration:
Yes
(Page 123)
Risks:
Operational performance
and commodity price.
Measuring our
performance
FINANCIAL MEASURES
30.4
M oz Ag equivalent
0.02
$ pre-exceptional
Definition
The per-share (using the
weighted average number
of shares outstanding for the
period) profit available to equity
shareholders of the Company
from continuing operations
before exceptional items.
Performance
Pre-exceptional earnings per share
remained flat at $0.02 due to the
rise in Adjusted EBITDA being
offset by the impact of an FX loss.
Outlook
Pre-exceptional earnings per
share will depend on EBITDA
performance and the effective
tax rate which may be impacted
if local currencies including the
Peruvian sol and Argentinian peso
continue to depreciate.
BASIC EARNINGS PER SHARE
Links to strategy:
Links to remuneration:
No
Risks:
Operational performance and
commodity price.
23
30.4
33.9
33.6
24.9
40.0
22
21
20
19
23
693
736
811
622
756
22
21
20
19
23
274
255
383
271
343
22
21
20
19
23
0.02
0.01
0.14
0.06
0.09
22
21
20
19
Hochschild Mining PLC
Annual Report & Accounts
0
.
US cents per share
Definition
The per-share (using the weighted
average number of shares
outstanding for the period)
dividend paid to equity
shareholders of the Company
as recommended by the Board.
Performance
The Board decided not to pay an
interim or final dividend for .
Outlook
Dividend per share for will
depend on the level of profitability
of the Company and the available
uses of cash and is at the
discretion of the Board.
DIVIDEND PER SHARE
Links to strategy:
Links to remuneration:
No
Risks:
Operational performance.
.
$/oz Ag equivalent
Definition
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 :.
Performance
All-in sustaining costs from
operations were flat versus
mainly as a result of the scheduled
decline in production in being
offset by capex deferrals due to
the delays to the Inmaculada
permit.
Outlook
The all-in sustaining cost from
operations in is expected to
be between $, and $, per
gold equivalent ounce (or $. and
$. per silver equivalent ounce).
ALL-IN SUSTAINING COSTS
Links to strategy:
Links to remuneration:
Yes
(Page 123)
Risks:
Operational performance.
.
$/oz Ag equivalent
Definition
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.
Performance
Total silver cash costs for the
Company increased by % versus
due to increases in unit
costs in Peru but offset mostly
by a significant fall in unit costs
in Argentina.
Outlook
Cash costs performance in
is expected to be dependent on
operational performance, levels
of local cost inflation and levels of
local currency devaluation in
Argentina and Peru.
TOTAL SILVER CASH COSTS
Links to strategy:
Links to remuneration:
No
Risks:
Operational performance.
23
0.0
2.0
4.3
4.0
2.0
22
21
20
19
23
17.5
17.4
16.0
12.9
11.9
22
21
20
19
23
12.8
12.6
11.0
9.3
7.8
22
21
20
19
2
Brownfield
Operational efficiency
ESG
Disciplined capital allocation
3
4
Strategic pillars:
READ MORE
Risk Management Report
page 0
Strategic Report
1—
Governance
100—149
Financial Statements
150—226
Further Information
227—231
Hochschild Mining PLC
Annual Report & Accounts
1
KEY PERFORMANCE INDICATORS
CONTINUED
2
Brownfield
Operational efficiency
ESG
Disciplined capital allocation
3
4
Strategic pillars:
.
LTIFR
ACCIDENT SEVERITY INDEX
,
M oz Ag equivalent
RESOURCE BASE
N0N-FINANCIAL MEASURES
Definition
Calculated as total number of
accidents per million labour hours.
Performance
LTIFR reduced by % to a
record low.
Outlook
The Company remains focused on
its “Safety . Hochschild Safety
Transformation” plan and
introduced the safety equivalent
of the ECO Score – the Seguscore.
Links to strategy:
Links to remuneration:
Yes
(Page 123)
Risks:
Health and safety risks.
Definition
Total attributable silver
equivalent metal resources
as at December .
Performance
Total attributable silver equivalent
metal resources decreased by
a moderate % due to the
brownfield programme beginning
late resulting from the Inmaculada
permit delays as well as a
reduction in resources at
Inmaculada due to production.
Outlook
Resource increases in will
depend on the ability to achieve
permits in Peru and the level
of ongoing success in finding
potential resources and the
ability to turn these resources
into the inferred and measured
and indicated categories
through drilling.
Links to strategy:
Links to remuneration:
Yes
(Page 123)
Risks:
Exploration and revenue and
resource replacement, political,
legal and regulatory and
community relations.
Definition
Calculated as total number of days
lost per million labour hours.
Performance
The Accident Severity index
decreased to in due to
zero fatalities and an excellent
safety performance overall.
Outlook
The Company remains focused on
its “Safety . Hochschild Safety
Transformation” plan and
introduced the safety equivalent
of the ECO Score – the Seguscore.
Links to strategy:
Links to remuneration:
Yes
(Page 123)
Risks:
Health and safety risks.
23
0.99
1.37
1.26
1.38
1.05
22
21
20
19
23
37
93
676
474
54
22
21
20
19
23
1,506
1,542
1,273
1,425
1,446
22
21
20
19
READ MORE
Risk Management Report
page 0
Hochschild Mining PLC
Annual Report & Accounts
Operating
review
Attributable 0 Group production
Year ended
1 Dec 0
Year ended
31 Dec 2022
Silver production (koz)
9,517
11,003
Gold production (koz)
186.09
206.01
Silver equivalent (koz)
24,962
28,102
Gold equivalent (koz)
300.75
338.57
Attributable production includes 100% of all production from Inmaculada, Pallancata
and 51% from San Jose.
Total 0 Group production
Year ended
1 Dec 0
Year ended
31 Dec 2022
Silver production (koz)
11,683
13,596
Gold production (koz)
225.77
244.63
Total silver equivalent (koz)
30,423
33,900
Total gold equivalent (koz)
366.54
408.43
Silver sold (koz)
11,547
13,536
Gold sold (koz)
221.40
242.89
Total production includes 100% of all production, including production attributable
to Hochschild’s minority shareholder at San Jose.
Attributable 0 production forecast split
Operation
Oz Au Eq
Moz Ag Eq
Inmaculada
200,000-205,000
16.6-17.0
Pallancata
83,000-93,000
6.9-7.7
San Jose
60,000-62,000
5.0-5.2
Total
,000-0,000
8.5-.
0 AISC forecast split
Operation
$/oz Au Eq
$/oz Ag Eq
Inmaculada
1,610-1,640
19.4-19.8
Pallancata
1,090-1,120
13.1-13.5
San Jose
1,670-1,730
20.1-20.8
Total from operations
1,510-1,550
18.-18.
,
koz
TOTAL GROUP
PRODUCTION OF SILVER
: ,koz
.
koz
TOTAL GROUP
PRODUCTION OF GOLD
:: .koz
,
koz
TOTAL GROUP SILVER
PRODUCTION SOLD
: ,koz
.
koz
TOTAL GROUP GOLD
PRODUCTION SOLD
: .koz
OPERATIONS
Note: 2023 and 2022 equivalent figures calculated assume
the average gold/silver ratio for 2022 and 2023 of 83x.
Production
In , Hochschild delivered attributable production of ,
gold equivalent ounces or . million silver equivalent ounces,
in line with the upper end of the Company’s revised guidance.
Higher production from Inmaculada and Pallancata was
partially offset by lower production in San Jose.
The overall attributable production target for is
,-, gold equivalent ounces or .-. million
silver equivalent ounces.
Costs
All-in sustaining cost from operations in was $, per
gold equivalent ounce or $. per silver equivalent ounce (:
$, per gold equivalent ounce or $. per silver equivalent
ounce), lower than revised guidance, but as anticipated, slightly
higher than mainly as a result of: lower production in
Inmaculada due to lower tonnage resulting from the MEIA delay;
higher production costs due to a higher proportion of semi-
mechanised mining methods; and higher mine development
capex executed once the MEIA was approved in August. These
effects were partially offset by lower costs at Pallancata as a
result of lower capex and exploration expenses and lower costs
in San Jose in line with the devaluation of the Argentinian peso.
The all-in sustaining cost from operations in is expected to
be between $, and $, per gold equivalent ounce (or
$. and $. per silver equivalent ounce).
Strategic Report
1—
Governance
100—149
Financial Statements
150—226
Further Information
227—231
Hochschild Mining PLC
Annual Report & Accounts
Inmaculada
The 100% owned Inmaculada gold/silver
underground operation is located in the
Department of Ayacucho in southern Peru.
It commenced operations in June 2015.
Peru
204koz
Mining
operation:
Location:
0 gold
equivalent
production:
OPERATING REVIEW
CONTINUED
Hochschild Mining PLC
Annual Report & Accounts
Inmaculada
Gold and silver production (%)
Gold
Silver
67
33
Inmaculada summary
Year ended
1 Dec 0
Year ended
Dec
% change
Ore production (tonnes)
1,1,10
1,329,177
(14)
Average silver grade (g/t)
1
156
13
Average gold grade (g/t)
.0
3.81
7
Silver produced (koz)
5,515
5,936
(7)
Gold produced (koz)
1.0
154.85
(11)
Silver equivalent produced (koz)
1,1
18,788
(10)
Gold equivalent produced (koz)
0.85
226.36
(10)
Silver sold (koz)
5,88
5,918
(7)
Gold sold (koz)
1.
154.93
(12)
Unit cost ($/t)
1.
118.7
20
Total cash cost ($/oz Au co-product)
80
701
15
All-in sustaining cost ($/oz Au Eq)
1,8
1,109
16
Production
The Inmaculada mine delivered
gold equivalent production of
0,8 ounces (0: ,
ounces), higher than the
revised forecast published in
August 0 and, as expected,
lower than that in 0 mainly
due to delayed MEIA approval
impacting tonnage treated,
and due to community road
blockages during Q1 0.
These effects were partially
offset by higher grades.
Costs
All-in sustaining cost was
$, per gold equivalent
ounce (: $, per
ounce) with the increase
versus explained by
lower tonnage resulting from
MEIA approval delay and by
higher production costs due
to the use of more semi-
mechanised mining methods.
$,
ALL-IN SUSTAINING COST ($/OZ AU EQ)
2022: 1,058
$.
UNIT COST ($/T)
2022: 118.7
Strategic Report
1—
Governance
100—149
Financial Statements
150—226
Further Information
227—231
Hochschild Mining PLC
Annual Report & Accounts
5
Gold
Silver
26
74
Pallancata
Gold and silver production (%)
OPERATING REVIEW
CONTINUED
Pallancata
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.
Peru
28koz
Mining
operation:
Location:
0 gold
equivalent
production:
Production
In 0, Pallancata produced
. million silver equivalent
ounces (0: . million
ounces), higher than the
revised guidance, and as
anticipated, lower than 0
mainly due to lower tonnage,
as a result of being placed on
care and maintenance in
November 0.
Costs
All-in sustaining cost was
$. per silver equivalent
ounce, lower than the revised
guidance and significantly
lower year-on-year (:
$. per ounce) due to
lower exploration expenses,
operating capex and lower
production costs.
Pallancata summary
Year ended
1 Dec 0
Year ended
Dec
% change
Ore production (tonnes)
1,0
559,799
(26)
Average silver grade (g/t)
155
151
3
Average gold grade (g/t)
0.
0.69
(7)
Silver produced (koz)
1,
2,368
(26)
Gold produced (koz)
.
10.98
(33)
Silver equivalent produced (koz)
,5
3,279
(28)
Gold equivalent produced (koz)
8.
39.50
(28)
Silver sold (koz)
1,85
2,315
(23)
Gold sold (koz)
.5
10.76
(30)
Unit cost ($/t)
1.
131.9
(7)
Total cash cost ($/oz Ag co-product)
.0
26.6
(10)
All-in sustaining cost ($/oz Ag Eq)
5.
31.3
(19)
Hochschild Mining PLC
Annual Report & Accounts
Gold and silver production (%)
Gold
Silver
6
4
San Jose
San Jose
The San Jose silver/gold mine is located in Argentina,
in the province of Santa Cruz, 1,750 kilometres
south west of Buenos Aires. San Jose commenced
production in 2007. Hochschild holds a controlling
interest of 51% and is the mine operator. The
remaining 49% is owned by McEwen Mining Inc.
Argentina
134koz
Mining
operation:
Location:
0 gold
equivalent
production:
San Jose summary
Year ended
1 Dec 0
Year ended
Dec
% change
Ore production (tonnes)
5,01
507,189
11
Average silver grade (g/t)
0
369
(27)
Average gold grade (g/t)
5.0
5.55
(9)
Silver produced (koz)
,
5,292
(16)
Gold produced (koz)
80.
78.80
3
Silver equivalent produced (koz)
11,1
11,833
(6)
Gold equivalent produced (koz)
1.
142.57
(6)
Silver sold (koz)
,
5,303
(19)
Gold sold (koz)
.
77.20
–
Unit cost ($/t)
.0
285.0
(11)
Total cash cost ($/oz Ag co-product)
15.
14.4
10
All-in sustaining cost ($/oz Ag Eq)
18.
20.1
(6)
Production
San Jose’s production in
0 totalled 11.1 million
silver equivalent ounces
(0: 11.8 million ounces)
with the decrease versus 0
reflecting lower grades. This
effect was partially offset by
higher tonnage.
Costs
All-in sustaining costs were
at $. per silver equivalent
ounce (: $. per ounce)
with the reduction versus
mainly due to the devaluation
of the peso although this was
partially offset by lower grades.
Strategic Report
1—
Governance
100—149
Financial Statements
150—226
Further Information
227—231
Hochschild Mining PLC
Annual Report & Accounts
Mara
Rosa
OPERATING REVIEW
CONTINUED
The Mara Rosa project is progressing on schedule and budget
with total project progress at .8% as of the end of February.
On 0 February 0, the team at the mine achieved the first
gold pour with commercial production expected in June.
Health and safety
Proactive corporate safety indicators are being monitored to
ensure optimal working conditions for all personnel and the
project has completed approximately five million hours without
a loss time accident. Frequency and severity indices for
were . and , respectively, both better than corporate goals.
Procurement
Main plant reagents and materials, including cyanide, balls for
the mills, lime and activated carbon have been purchased and
deliveries are on track to be in time for the start of operations.
Mine and pre-stripping
Total pre-stripping volume was , kt of which there is
approximately . kt to guarantee availability of mineral for
the ramp-up and operation. Waste dumps and ore stockpiles
are completed and in operation.
Processing plant
The crushing and screening areas were commissioned during
Q whilst commissioning began of the thickener and ball mill.
Full project commissioning and the beginning of the project’s
ramp-up is expected during the first quarter.
Infrastructure
Construction of the dry stack was completed in December
and the Pequi water reservoir is fully operational and filled to
% capacity with the water required for operations.
The administrative buildings are fully operational including
offices, cafeteria, first aid and nursery areas.
Permitting and sustainability
The project received the Operating Licence from the
environmental agency of Goiás SEMAD in February .
The Company organised three festivities to celebrate Children’s
Day in Mara Rosa and Amaralina with over , participants and
on November, a meeting with the local communities from both
towns was held with the objective of updating them on project
progress and strengthening local relationships and dialogue.
Mara Rosa
Brazil
ADVANCED
PROJECT
Location:
Hochschild Mining PLC
Annual Report & Accounts
8
DEVELOPMENT PROJECT: VOLCAN
On August , Hochschild issued an update on the
Volcan Gold Project (“Volcan”) which detailed a number of key
milestones that have been achieved at the %-owned project
(the “Project”) located in the Maricunga Region of Chile:
– Created a new Canadian Company, Tiernan Gold Corp
(“Tiernan”), as a subsidiary of Hochschild Mine Holdings UK
– Restructured the Project to be owned by Tiernan
– Completed an updated Mineral Resource Estimate to
Canadian NI - standards, which outlined:
•
. Mt of Measured and Indicated Resources at . g/t gold
for . million ounces of gold contained
•
. Mt of Inferred Resources at . g/t gold for an additional
. million ounces of gold contained
– Completed a positive Preliminary Economic Assessment to
Canadian NI - standards, which highlighted:
•
mtpa open-pit, heap leach operation with a -year
mine life
•
Average of , ounces per year of gold production for first
years of operations with . million ounces produced over
the estimated mine life
•
Initial capital cost of $ million, with life-of-mine sustaining
capital an additional $ million
•
Cash costs of $/oz and all-in sustaining costs of $,/oz,
life of mine
•
NPV (%) = $ million and IRR = % at $,/oz gold price,
after-tax
– Executed an agreement for a $ million financing with the
sale of a new .% NSR royalty on the Project to Franco-
Nevada
– Engaged Canaccord Genuity to evaluate strategic
alternatives for Tiernan
Further details can be found in the separate press
release ( August ) on the Company’s website
at
hochschildmining.com
BROWNFIELD EXPLORATION
The brownfield programme for was delayed until the
approval of the Inmaculada MEIA in August.
Inmaculada
In Q , the Company performed m of potential drilling,
intercepting two new structures, Nicolas and Andrea, which will
be further investigated in .
Vein
Results (potential drilling)
Nicolas
IMS23-207: 1.8m @ 27.0g/t Au & 5,768g/t Ag
Andrea
IMS23-207: 3.3m @ 19.4g/t Au & 79g/t Ag
Saly
IMS23-207: 2.2m @ 3.2g/t Au & 90g/t Ag
San Jose
At San Jose, the brownfield team carried out m of potential
drilling and ,m of resource drilling in the Suspiro, Sigmoid
Molle, Guadaluoe veins with the key vein expected to be the
Suspira quartz sulphide vein which has high silver grades.
Vein
Results (potential/resource drilling)
Suspira
SJD-2737: 1.2m @ 17.4g/t Au & 2,477g/t Ag
Tensiona EW
SJM-647: 1.0m @ 7.7g/t Au & 938g/t Ag
RML861V
SJD-2728: 1.1m @ 6.9g/t Au & 615g/t Ag
Sig Molle
SJM-647: 2.8m @ 5.7g/t Au & 656g/t Ag
RML861w
SJD-2731: 1.3m @ 5.5g/t Au & 8g/t Ag
The plan for the first quarter of is to perform ,m of
potential drilling at San Jose in the Telken North and Cerro
Saavedra areas.
Strategic Report
1—
Governance
100—149
Financial Statements
150—226
Further Information
227—231
Hochschild Mining PLC
Annual Report & Accounts
FINANCIAL REVIEW
Eduardo Noriega
Chief Financial Officer
Disciplined capital allocation
to maximise value creation
$
m
REVENUE
2022: $736m
$.
EARNINGS PER SHARE
2022: $0.01
$
m
ADJUSTED EBITDA
2022: $249m
$
m
NET DEBT
2022: $175m
Revenue
Gross revenue
1
Gross revenue decreased by % to $. million in (:
$. million) due to lower silver and gold production. Output
was mainly impacted by the delay in the approval of the MEIA
at Inmaculada, scheduled lower production at Inmaculada and
Pallancata, and lower grades in San Jose. This was partially
offset by higher average realised gold and silver prices.
Gold
Gross revenue from gold in increased to $. million
(: $. million) due to the % increase in the average
realised gold price partially offset by lower gold produced at
Inmaculada and Pallancata.
Silver
Gross revenue from silver decreased in to $. million
(: $. million) mainly due to lower silver produced across
all operations; partially offset by the % increase in the average
realised silver price.
The reporting currency of Hochschild Mining PLC is US dollars.
In discussions of financial performance, the Group removes the
effect of exceptional items, unless otherwise indicated, and in
the income statement results are shown both pre and post such
exceptional items. Exceptional items are those items, which due
to their nature or the expected infrequency of the events giving
rise to them, are disclosed separately on the face of the income
statement to enable a better understanding of the financial
performance of the Group and to facilitate comparison with
prior years.
Includes revenue from services. Gross revenue is the net revenue plus
commercial discounts.
Hochschild Mining PLC
Annual Report & Accounts
0
Gross average realised sales prices
The following table provides figures for average realised prices (before the deduction of commercial discounts) and ounces sold for
and :
Average realised prices
Year ended
1 Dec 0
Year ended
Dec
Silver ounces sold (koz)
11,5
13,536
Avg. realised silver price ($/oz)
.
23.3
Gold ounces sold (koz)
1.0
242.89
Avg. realised gold price ($/oz)
1,
1,791
, gold ounces of production were hedged at $, per ounce and . million silver ounces of production were
hedged at $ per ounce, boosting the realised price. On April , the Company hedged , ounces of gold
production at $, per ounce, on June the Company hedged , ounces of , and gold production
(, per year) at $,, $, and $, per ounce respectively, and on December the Company hedged ,
ounces of gold production using gold collars with a strike put of $, per ounce and a strike call of $, per ounce.
Commercial discounts
Commercial discounts refer to refinery treatment charges, refining fees and payable deductions for processing concentrate,
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 , the Group recorded commercial discounts of $. million (: $. million).
The ratio of commercial discounts to gross revenue in was %, in line with .
Net revenue
Net revenue was $. million (: $. million), comprising net gold revenue of $. million (: $. million) and net
silver revenue of $. million (: $. million). In , gold accounted for % and silver % of the Company’s consolidated
net revenue (: gold % and silver %).
Reconciliation of gross revenue by mine to Group net revenue
$000
Year ended
1 Dec 0
Year ended
Dec
% change
Silver revenue
Inmaculada
1,5
137,033
(6)
Pallancata
,80
62,986
(31)
San Jose
100,1
115,477
(13)
Commercial discounts
(,)
(10,334)
(5)
Net silver revenue
,
305,162
(14)
Gold revenue
Inmaculada
,188
276,895
(4)
Pallancata
1,85
19,459
(23)
San Jose
15,8
138,782
12
Commercial discounts
(,1)
(5,335)
34
Net gold revenue
,88
429,801
–
Other revenue
55
680
(17)
Net revenue
,1
735,643
(6)
Strategic Report
1—
Governance
100—149
Financial Statements
150—226
Further Information
227—231
Hochschild Mining PLC
Annual Report & Accounts
1
FINANCIAL REVIEW
CONTINUED
Cost of sales
Total cost of sales was $. million in (: $. million). The direct production cost excluding depreciation was lower at
$. million (: $. million) mainly due to lower production in Inmaculada and Pallancata, partially offset by a scheduled
higher proportion of conventional mining methods across all mining units. Depreciation in production cost increased to
$. million (: $. million) mainly due to higher future capex depreciation in Pallancata (Royropata) and the impact on
depreciation of the reversal in impairment loss at Pallancata of $. million as at December , partially offset by lower
depreciation in Inmaculada due to lower production. Fixed costs incurred during total or partial production stoppages were
$. million in (: $. million).
$000
Year ended
1 Dec 0
Year ended
Dec
% change
Direct production cost excluding depreciation
,80
384,183
(5)
Depreciation in production cost
1,81
137,747
5
Other items and workers profit sharing
1,8
3,321
(44)
Fixed costs during operational stoppages and reduced capacity
,1
8,023
(59)
Change in inventories
(,5)
(5,631)
(16)
Cost of sales
508,1
527,643
(4)
Fixed costs during operational stoppages and reduced capacity
$000
Year ended
1 Dec 0
Year ended
Dec
% change
Personnel
,0
4,498
(33)
Third party services
85
3,090
(72)
Supplies
146
(77)
Depreciation and amortisation
–
2
–
Others
(1)
287
(315)
Cost of sales
,1
8,023
(59)
Unit cost per tonne
The Company reported unit cost per tonne at its operations of $. per tonne in , an % increase versus ($. per
tonne) resulting from lower treated tonnage in Inmaculada and Pallancata, and a scheduled higher proportion of conventional
mining methods across all mining units.
Unit cost per tonne by operation (including royalties)
Operating unit ($/tonne)
Year ended
1 Dec 0
Year ended
Dec
% change
Peru
1.0
122.9
11
Inmaculada
1.
118.7
20
Pallancata
1.
131.9
(7)
Argentina
San Jose
.0
285.0
(7)
Total
11.1
158.7
8
Cash costs
Cash costs include cost of sales, commercial deductions and selling expenses before exceptional items, less depreciation included
in cost of sales.
Unit cost per tonne is calculated by dividing mine and treatment production costs (excluding depreciation) by extracted and treated tonnage respectively.
Hochschild Mining PLC
Annual Report & Accounts
Cash cost reconciliation
Year ended 1 Dec 0
$000 unless otherwise indicated
Inmaculada
Pallancata
San Jose
Total
(+) Cost of sales
4
234,627
72,118
197,399
50,1
(-) Depreciation and amortisation in cost of sales
(75,306)
(18,964)
(48,901)
(1,11)
(+) Selling expenses
533
461
13,868
1,8
(+) Commercial deductions
5
3,057
4,319
12,923
0,
Gold
2,079
891
6,440
,10
Silver
978
3,428
6,483
10,88
Group cash cost
1,11
5,
15,8
,1
Gold
267,188
14,094
148,600
,88
Silver
129,456
39,952
93,861
,
Revenue
,
5,0
,1
,151
Ounces sold
Gold
136.7
7.5
77.2
1.
Silver
5,488
1,785
4,274
11,5
Group cash cost ($/oz)
Co product Au
803
2,010
1,391
1,110
Co product Ag
9.7
24.0
15.9
1.0
By product Au
238
1,936
970
551
By product Ag
(19.4)
24.1
4.8
(.)
Year ended 1 Dec 0
$000 unless otherwise indicated
Inmaculada
Pallancata
San Jose
Total
(+) Cost of sales
6
239,277
83,926
193,840
51,0
(-) Depreciation and amortisation in cost of sales
(80,633)
(8,671)
(47,123)
(1,)
(+) Selling expenses
796
622
12,614
1,0
(+) Commercial deductions
7
2,957
4,879
11,254
1,00
Gold
2,131
969
4,630
,0
Silver
826
3,910
6,624
11,0
Group cash cost
1,
80,5
10,585
1,8
Gold
276,895
18,490
134,416
,801
Silver
137,033
59,076
109,053
05,1
Revenue
1,8
,5
,
,
Ounces sold
Gold
154.9
10.8
77.2
.
Silver
5,918
2,315
5,303
1,5
Group cash cost ($/oz)
Co product Au
701
1,789
1,220
Co product Ag
9.1
26.6
14.4
1.
By product Au
158
1,652
711
00
By product Ag
(19.7)
26.5
6.0
(1.8)
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.
Cash costs are calculated to include cost of sales, commercial discounts and selling expenses items less depreciation included in cost of sales.
Does not include Fixed costs during operational stoppages and reduced capacity of $. million (: $ million).
Includes commercial discounts (from the sales of concentrate) and commercial discounts from the sale of dore.
Does not include Fixed costs during operational stoppages and reduced capacity of $. million (: $ million)
Includes commercial discounts (from the sales of concentrate) and commercial discounts from the sale of dore.
Strategic Report
1—
Governance
100—149
Financial Statements
150—226
Further Information
227—231
Hochschild Mining PLC
Annual Report & Accounts
All-in sustaining cost reconciliation
8
All-in sustaining cash costs per silver equivalent ounce
Year ended 1 Dec 0
$000 unless otherwise indicated
Inmaculada
Pallancata
San Jose
Main
Operations
Corporate &
others
Total
(+) Direct production cost excluding depreciation
162,570
49,940
150,470
362,980
–
,80
(+) Other items and workers profit sharing in cost of sales
1,373
489
–
1,862
–
1,8
(+) Operating and exploration capex for units
9
86,031
2,458
40,834
129,323
57
1,80
(+) Brownfield exploration expenses
1,371
1,070
8,233
10,674
3,171
1,85
(+) Administrative expenses (excl depreciation)
3,498
491
5,433
9,422
36,507
5,
(+) Royalties and special mining tax
10
3,978
542
–
4,520
2,278
,8
Sub-total
58,81
5,0
0,0
518,81
,01
50,
Au ounces produced
137,399
7,390
80,985
225,774
–
5,
Ag ounces produced (000s)
5,515
1,746
4,422
11,683
–
11,8
Ounces produced (Ag Eq 000s oz)
16,919
2,359
11,144
30,422
–
0,
All-in sustaining costs per ounce produced ($/oz Ag Eq)
15.
.
18.
1.1
1.
18.
(+) Commercial deductions
3,057
4,319
12,923
20,299
–
0,
(+) Other items
11
–
–
(21,164)
(21,164)
–
(1,1)
(+) Selling expenses
533
461
13,868
14,862
–
1,8
Sub-total
,50
,80
5,
1,
–
1,
Au ounces sold
136,661
7,516
77,227
221,404
–
1,0
Ag ounces sold (000s)
5,488
1,785
4,274
11,547
–
11,5
Ounces sold (Ag Eq 000s oz)
16,831
2,409
10,684
29,924
–
,
Sub-total ($/oz Ag Eq)
0.
.0
0.5
0.5
–
0.5
All-in sustaining costs per ounce sold ($/oz Ag Eq)
15.5
5.
18.
1.5
1.
18.
All-in sustaining costs per ounce sold ($/oz Au Eq)
1,8
,0
1,50
1,5
115
1,5
Year ended 1 Dec 0
$000 unless otherwise indicated
Inmaculada
Pallancata
San Jose
Main
Operations
Corporate &
others
Total
(+) Direct production cost excluding depreciation
156,551
75,472
152,160
384,183
–
8,18
(+) Other items and workers profit sharing in cost of sales
1,777
1,544
–
3,321
–
,1
(+) Operating and exploration capex for units
12
78,176
12,340
47,604
138,120
584
18,0
(+) Brownfield exploration expenses
2,946
6,000
7,700
16,646
2,537
1,18
(+) Administrative expenses (excl depreciation)
3,893
730
6,242
10,865
41,265
5,10
(+) Royalties and special mining tax
13
4,032
756
–
4,788
2,658
,
Sub-total
,5
,8
1,0
55,
,0
0,
Au ounces produced
154,846
10,977
78,802
244,625
–
,5
Ag ounces produced (000s)
5,936
2,368
5,292
13,596
–
1,5
Ounces produced (Ag Eq 000s oz)
18,788
3,279
11,833
33,900
–
,00
All-in sustaining costs per ounce produced ($/oz Ag Eq)
1.
.5
18.1
1.5
1.
1.8
(+) Commercial deductions
2,957
4,879
11,254
19,090
–
1,00
(+) Selling expenses
796
622
12,614
14,032
–
1,0
Sub-total
,5
5,501
,88
,1
–
,1
Au ounces sold
154,930
10,759
77,204
242,893
–
,8
Ag ounces sold (000s)
5,918
2,315
5,303
13,536
–
1,5
Ounces sold (Ag Eq 000s oz)
18,777
3,208
11,711
33,696
–
,
Sub-total ($/oz Ag Eq)
0.
1.
.0
1.0
–
1.0
All-in sustaining costs per ounce sold ($/oz Ag Eq)
1.
1.1
0.1
1.
1.
18.8
All-in sustaining costs per ounce sold ($/oz Au Eq)
1,10
,5
1,8
1,8
115
1,5
FINANCIAL REVIEW
CONTINUED
Calculated using a gold/silver ratio of :.
Operating capex from San Jose does not include capitalised DD&A resulting from mine equipment utilised for mine developments.
Royalties arising from revised royalty tax schemes introduced in and included in income tax line.
Includes the impact of devaluation of the Argentine peso resulting from the Argentinian Government export programme to settle a portion of San Jose exports at
the blue chip exchange rate during the last quarter of of $. million.
Operating capex from San Jose does not include capitalised DD&A resulting from mine equipment utilised for mine developments.
Royalties arising from revised royalty tax schemes introduced in and included in income tax line.
Hochschild Mining PLC
Annual Report & Accounts
Administrative expenses
Administrative expenses were lower at $. million (: $. million) mainly due to lower bonus provision and professional fees.
Exploration expenses
In , exploration expenses decreased to $. million (: $. million) mainly due to lower exploration expenses at the
Snip project of $. million due to the termination of the option (: $. million), lower exploration expenses at Pallancata of
$. million (: $. million), lower personnel expenses of $. million (: $. million), lower prospects expenditure in USA
of $. million (: $. million), and lower exploration expenses at Inmaculada of $. million (: $. million).
In , the Group capitalised $. million of its brownfield exploration, which mostly relates to costs incurred converting potential
resources to the Inferred or Measured and Indicated categories (: $Nil).
Selling expenses
Selling expenses increased slightly to $. million (: $. million) mainly due to higher gold prices.
Other income/expenses
Other income before exceptional items was higher at $. million (: $. million) principally due to: the impact of currency
devaluation in Argentina resulting from the Argentinian Government export programme to settle a portion of San Jose exports
at the blue chip exchange rate during the last quarter of of $. million, the collection of a British Columbia tax credit of
$. million from the Snip project in , and the insurance reimbursement received in in connection with damage to
Inmaculada’s machine belt in of $. million.
Other expenses before exceptional items were higher at $. million (: $. million) mainly due to mine closure provision
increases of $. million (: $. million).
Adjusted EBITDA
Adjusted EBITDA increased by % to $. million (: $. million) mainly due to the rise in metal prices, and the impact of
local currency devaluation of the currency in Argentina. These were partially offset by the impact of lower gold and silver production.
Adjusted EBITDA is calculated as profit from continuing operations before exceptional items, net finance costs, foreign exchange
losses and income tax plus non-cash items (depreciation and amortisation and changes in mine closure provisions) and exploration
expenses other than personnel and other exploration related fixed expenses.
$000 unless otherwise indicated
Year ended
1 Dec 0
Year ended
Dec
% change
Profit from continuing operations before exceptional items, net finance income/(cost), foreign exchange
loss and income tax
8,18
45,190
82
Depreciation and amortisation in cost of sales
1,11
136,427
5
Depreciation and amortisation in administrative expenses and other expenses
,05
2,135
(3)
Exploration expenses
1,
56,826
(63)
Personnel and other exploration related fixed expenses
(5,)
(10,602)
(49)
Other non-cash income, net
14
1,0
19,629
58
Adjusted EBITDA
,0
249,605
10
Adjusted EBITDA margin
39%
34%
15
Finance income
Finance income before exceptional items of $. million increased from ($. million) mainly due to higher interest on deposits
of $. million (: $. million).
Adjusted EBITDA has been presented before the effect of significant non-cash (income)/expenses related to changes in mine closure provisions which were
$. million in and $. million in , and the write-off of property, plant and equipment.
Strategic Report
1—
Governance
100—149
Financial Statements
150—226
Further Information
227—231
Hochschild Mining PLC
Annual Report & Accounts
5
Finance costs
Finance costs before exceptional items decreased from $. million in to $. million in principally due to: the
capitalisation of interest expenses of $. million that are directly attributable to the construction of Mara Rosa (: $. million);
lower foreign exchange transaction costs in Argentina of $. million (: $. million); a loss on the sale of C Metals Inc. shares of
$. million in (: recorded a loss on the fair value of C Metals Inc. shares of $. million). These effects were partially offset
by higher interest expense on loans before capitalisation at $. million (: $. million) mainly due to higher interest rates and
an additional $ million medium-term debt facility drawn down in August , and the loss on the unwinding of discount of the
mine closure provision of $. million (: gain of $. million).
Foreign exchange (losses)/gains
The Group recognised a foreign exchange loss of $. million (: $. million) mainly due to the impact of the Argentinian local
currency devaluation on monetary assets of $. million.
Income tax
The Company’s pre-exceptional income tax charge was $. million (: $. million). The increase in the charge is mainly
explained by higher profitability versus .
The effective tax rate (pre-exceptional) for the period was .% (: .%), compared to the weighted average statutory income
tax rate of .% (: .%). The higher effective tax rate in versus the average statutory rate is mainly explained by: the
effect of foreign exchange in Argentina and Brazil increasing the rate by .%, the additions to the mine closure provision
increasing the rate by .%, non-deductible expenses increasing the rate by .%, Royalties and the Special Mining Tax which
increased the effective rate by .%, and the impact of non-recognised tax losses in non-operating companies increasing the rate
by .%.
Exceptional items
Exceptional items in totalled a $. million loss after tax (: $. million loss after tax) related to impairment losses at the
Azuca and Crespo projects of $. million and the San Jose mining unit of $. million; the restructuring charges in Pallancata of
$. million resulting from placing the operation in care & maintenance; and the impairment of the investment in Aclara Resources
Inc. of $. million.
The tax effect of these exceptional items was a $. million tax gain (: $. million tax loss). The net attributable loss of
exceptional items was $. million.
Cash flow and balance sheet review
Cash flow
$000
Year ended
1 Dec 0
Year ended
Dec
Change
Net cash generated from operating activities
18,1
102,918
90,843
Net cash used in investing activities
(5,50)
(337,580)
77,074
Cash flows generated/(used in) from financing activities
,
(6,588)
29,357
Foreign exchange adjustment
(10,)
(1,695)
(9,047)
Net increase in cash and cash equivalents during the year
(5,18)
(242,945)
188,227
Net cash generated from operating activities increased from $. million in to $. million in mainly due to higher
Adjusted EBITDA of $. million (: $. million), working capital changes, lower exploration expenses and lower taxes paid.
Net cash used in investing activities decreased from $. million in to $. million in mainly due to the consideration
paid for the acquisition of Amarillo Gold on April of $. million, partially offset by higher construction capex in Mara Rosa
of $. million (: $. million).
Cash from financing activities increased to an inflow of $. million from an outflow of $. million in , primarily due to the
draw-down of $ million from the $ million medium-term loan facility (: proceeds from Minera Santa Cruz stock market
promissory notes of $. million) and no dividends paid in (: $. million); partially offset by the $ million repayment
of the $ million medium-term loan facility, and the $. million repayment of Minera Santa Cruz stock market promissory notes.
FINANCIAL REVIEW
CONTINUED
Hochschild Mining PLC
Annual Report & Accounts
Working capital
$000
As at
1 December
0
As at
December
Trade and other receivables
80,5
85,408
Inventories
8,1
61,440
Derivative financial assets/(liabilities)
()
2,186
Income tax receivable, net
1,
7,100
Trade and other payables
(15,8)
(144,102)
Provisions
(,1)
(24,177)
Working capital
(1,)
(12,145)
The Group’s working capital position decreased by $. million from $(.) million to $(.) million. The key drivers of the decrease
were: lower income tax receivable, net of $. million; lower trade and other receivables of $. million; partially offset by lower trade
and other payables of $. million.
Net (debt)/cash
$000 unless otherwise indicated
As at
1 December
0
As at
December
Cash and cash equivalents
8,1
143,844
Non-current borrowings
(,)
(275,000)
Current borrowings
15
(11,0)
(43,989)
Net cash/(net debt)
(5,)
(175,145)
The Group’s reported net debt position was $. million as at December ( December : $. million). The increase
is mainly explained by: capital expenditure of $. million at Mara Rosa (: $. million), partially offset by cash generated by
the business. Borrowings increased mainly due to the draw-down of $ million from the $ million medium-term loan facility, net
of the $ million repayment of the $ million medium-term loan facility.
Capital expenditure
$000
Year ended
1 Dec 0
Year ended
Dec
Inmaculada
8,01
78,176
Pallancata
,8
13,518
San Jose
,8
50,112
Operations
10,11
141,806
Mara Rosa
16
15,80
193,218
Aclara
–
–
Other
,
4,842
Total
88,
339,866
capital expenditure decreased from $. million in to $. million in mainly due to the capex acquired in
the acquisition of Amarillo Gold on April of $. million, partially offset by higher construction capex in Mara Rosa of
$. million (: $. million), and higher capitalised interest expenses that are directly attributable to the construction
of Mara Rosa of $. million (: $. million).
Includes pre-shipment loans and short term interest payables.
includes $. million increase due to foreign exchange effect, and construction aggregates project of $.million.
Strategic Report
1—
Governance
100—149
Financial Statements
150—226
Further Information
227—231
Hochschild Mining PLC
Annual Report & Accounts
STAKEHOLDER ENGAGEMENT
Our six key stakeholder groups
We are focused on driving long-term sustainable
performance for the benefit of our customers,
shareholders and wider stakeholders.
Engaging with
our stakeholders
Shareholders
Employees
Suppliers/
Lenders
Social
Customers
Government/
Regulators
Section 172
On these pages, we
describe our key
stakeholders and
summarise the engagement
that has been undertaken
across the business. How
the Board develops an
understanding of the
interests of stakeholders,
and how it considers
stakeholders’ interests in its
principal decisions and the
section () statement can
be found in the Corporate
Governance Report on
page .
Hochschild Mining PLC
Annual Report & Accounts
8
Stakeholder group
Engagement activities
Issues raised in 0
Additional info
Shareholders
Our shareholders are
investors and owners of
the business. We seek to
establish and maintain
constructive relations with
all shareholders through
open dialogue and an
ongoing programme
of engagement.
We interact with our shareholders and
seek a better understanding of their
expectations through various channels
during the year with the participation of
the CEO, CFO, members of the Board,
the Company Secretary and the Head of
Investor Relations. These channels take
different forms and include participation
at sector-specific conferences, discussions
with proxy agencies as well as direct
meetings with significant shareholders.
During , our regular calendar was
supplemented by:
– A Capital Markets event which
provided an opportunity for the new
management team to give an update on
the Company’s latest developments and
to discuss Hochschild’s growth strategy
– An open engagement with our largest
shareholders during the third quarter,
led by the Senior Independent Director
and Chair of the Sustainability
Committee, on executive remuneration
and governance matters
– Updates on the
Inmaculada MEIA
– Progress with the
construction of the
Mara Rosa mine
– Changes in the executive
management team
– Social and political situation
in Peru
– Macro-economic and
political developments
in Argentina
– LTIP performance conditions
(including the use of
ESG-related conditions)
– Chair succession
READ MORE
Corporate Governance
Report (Shareholder
Engagement)
page 10
Employees
We acknowledge that our
success relies greatly on
our people. We seek to
attract, retain and develop
our people through
competitive remuneration,
a positive and safe working
environment and equal
opportunities for all.
Employee engagement generally
takes many forms and includes the use
of surveys, presentations and Q&A
sessions with management. Our
programme included:
– The continued use of the Brilla HOC
platform to acknowledge the
achievements of our people
– A Strategic Alignment workshop led
by the CEO, Eduardo Landin, with the
senior managers across the operations
in Peru, Argentina and Brazil
– The continuation of the online
forums chaired by Tracey Kerr, the
Non-Executive Director designated
for Workforce Engagement
– Regular meetings with labour unions
to negotiate collective agreements
and discuss matters of interest
– The Group’s new strategic
direction following the
change in CEO
– Progress of the Group’s
strategies on Environmental,
Social and Governance
matters
– The form and nature of
corporate communications
received in Argentina
– Enhancements to mine-site
facilities
READ MORE
Sustainability Report
(Our people)
page 1
Risk Management
(Personnel risks)
pages and
Strategic Report
1—
Governance
100—149
Financial Statements
150—226
Further Information
227—231
Hochschild Mining PLC
Annual Report & Accounts
Stakeholder group
Engagement activities
Issues raised in 0
Additional info
Social
We recognise our social
commitments to (a)
produce the smallest
environmental footprint
possible and (b)
understand the needs and
expectations of our local
communities. Through
close collaboration we
implement social
investment programmes
in our areas of focus.
We adopt a varied approach to engaging
with local communities including:
– Direct interaction with local mayors
and residents
– Our Permanent Information Office at
Pallancata and Inmaculada and town
hall meetings
– Community surveys
– Participation in formal roundtables
with the participation of community
representatives and national authorities
– Collaborative activities, for example
environmental monitoring
– The implementation of local purchasing
and hiring protocols
– Environmental issues
– Local hiring and purchasing
– Provision of scholarships for
primary, secondary and
technical education
– Support for cultural activities
– Terms and conditions of
existing agreements with
local stakeholders, including
access to new land
– Infrastructure projects,
such as primary care
medical facilities
READ MORE
Sustainability
Report (Environment
Management
& Communities)
from page 58
Risk Management
(Environmental risks)
page 5
Risk Management
(Community relations)
page
Government/
Regulators
It is our aim to maintain a
constructive relationship
and open dialogue
with the various
governmental authorities
we interact with in each
of the countries where
we operate.
The Vice President of Corporate Affairs
oversees regular interaction with relevant
authorities and regulators, both at a
Company level but also through the
National Mining Association. Various
teams also regularly interact with public
officials and regulators as part of their
operational functions.
The equivalent role in our Argentinian
joint venture is undertaken by the General
Manager and General Counsel. We also
play an active role through the National
Mining Association.
In Brazil, the General Manager and
General Counsel lead engagement
activities with governmental authorities.
– Permitting
– Health & Safety and
environmental performance
and compliance
– Climate Change reporting
– Contribution to regional
development such as
through local job creation
and investment in social
programmes/infrastructure
– Employment related
matters, including minor
claims for overtime pay filed
by employees of contractors
in Brazil
READ MORE
Risk Management
(Political, Legal &
Regulatory risks)
page
STAKEHOLDER ENGAGEMENT
CONTINUED
Hochschild Mining PLC
Annual Report & Accounts
50
Stakeholder group
Engagement activities
Issues raised in 0
Additional info
Suppliers/
Lenders
As a key influence on how
we operate our business,
we seek a relationship
of mutual benefit while
requiring high standards
of conduct.
The General Managers of our Peruvian,
Argentinian and Brazilian operations
maintain ongoing dialogue with suppliers
to the mine sites. Other suppliers,
including lenders, are managed by the
relevant functional department such as
IT, Group Finance, etc.
– The maintenance of stocks
of critical consumables
and spare parts to mitigate
supply chain risks
– Ongoing discussions with
suppliers due to inflationary
pressures
– With regards to its lenders,
the Group maintains an
open dialogue with its
relationship contacts on
relevant developments
including operational, social
and political issues and their
impact on the business
READ MORE
Risk Management
(Business Interruption/
Supply Chain risks)
page
Customers
Due to the nature of what
we produce, Hochschild
has relatively few
customers. As a result,
successful relations with
our customers are of
critical importance to
our business.
Our sales and logistics teams oversee a
relationship of co-operation and constant
dialogue. During the year, the Company
sought to establish new commercial
relationships to mitigate the risk of a
concentrated customer base and its
vulnerability to geopolitical developments.
In addition to usual relationship
management, Hochschild attended
LME Week in London and CESCO Week
in Chile for customer engagement.
– Continued increase in the
cost of logistics due to global
factors; and
– Shipping schedules and the
availability of containers
due to ongoing challenges
relating to logistics.
READ MORE
Risk Management
(Commercial
Counterparty risk)
page
Strategic Report
1—
Governance
100—149
Financial Statements
150—226
Further Information
227—231
Hochschild Mining PLC
Annual Report & Accounts
51
Responsibility is at the
core of our corporate
values and sustainability
ambition
SUSTAINABILITY REPORT
Tracey Kerr
Chair, Sustainability
Committee
Dear shareholder
Our purpose at Hochschild is to create long-term positive
social, economic and environmental results. Sustainability
is fundamental to this purpose.
Our commitment to sustainability underlies how we operate
as a business; it shapes our culture and how we work in our
day-to-day. It shapes our relationships with our communities,
contractors and local governments, and it underpins how we
interact with the environment and the physical landscape in
which we operate.
In the next few sections of this report, I am pleased to share
the sustainability-related milestones that we have been
working towards in and highlight our newly-launched
sustainability ambitions for .
The sustainability ambitions were established across
five strategic pillars: Serving our Communities; Protecting
the Environment; Promoting Health & Safety; Empowering our
People; and Being a Responsible Business. Progress against
these areas is measured through a set of core ESG Key
Performance Indicators (KPIs) and ambitions that have been
developed, reviewed and approved by the Board in August of
this year. It has been encouraging to see our regional teams
across Peru, Argentina and Brazil working together through
multiple workshops to establish these long-term goals. Our
year-to-year performance against these will drive a more
informed view of our progress against our material topics
and deliver greater transparency for our stakeholders.
This year I am proud to report that Hochschild became the
first mining company in Peru to receive a green loan. This
loan is a significant milestone for us and demonstrates our
commitment to being a responsible and innovative mining
company. The loan carries an interest rate which can be
adjusted based on our performance in two distinct areas:
our environmental performance, as measured by the ECO Score,
and our safety performance as tracked by the Lost Time Injury
Frequency Rate (LTIFR) indicator.
We achieved our strongest collective ECO Score result this
year since its implementation in ; our results exceeded
this year’s target range, the most ambitious to date. Since ,
we have reduced our potable water consumption by % and
our domestic waste per person by %. On the strength of our
ECO Score performance, Hochschild was recognised this year,
alongside other world-class companies, in the Sustainability
Leadership category by the Business Intelligence Group.
Hochschild Mining PLC
Annual Report & Accounts
5
Since the Company’s inception, we have endeavoured to
maintain and reinforce our corporate values of respecting
the well-being of our employees, the environment and the
communities in which we operate.
Beyond our KPI monitoring, we have worked to strengthen our
environmental culture across our business and operations. This
includes launching an updated Environmental Management
System (EMS), reviewing and restructuring our Environmental
Culture Transformation Plan and investing in our own
environmental ambassadors.
Climate change and biodiversity remain top priorities for
our business. Achieving net zero using today’s technologies
will foremost require the procurement of green electricity,
operational changes in existing mines, and close collaboration
with our contractors through procurement tools. Our approach
is driven by our interim ambition to decrease our greenhouse
gas (GHG) Scope & emissions by % by . In , we
will quantify the financial impact of climate on our business and
undertake a detailed low-carbon transition assessment to refine
our climate-related strategy and strengthen our CFD-aligned
reporting. We have continued our focus on monitoring
biodiversity levels in our areas of direct influence and continue
to raise awareness of the biodiversity in our local communities.
An example of this has been our Knowledge Trail in Mara Rosa,
Brazil, which we opened in , and for which we have been
formally recognised through the Sustainable Goiás Award,
presented by the Goiás State Environment and Sustainable
Development Department. We look forward to developing our
biodiversity strategy in to set our nature-positive ambition.
The safety of our people is an integral measure of our corporate
success and remains our highest priority. In , we achieved
the best results in our recorded company history across our
three main safety indicators. This historic progress is a strong
testament to the dedication of our teams who are using
innovation and technology to continually improve the safety
of our operations.
Since I joined Hochschild in , I have witnessed the
consistent strengthening of our business’ safety culture;
I am proud to see this result in real change over the last two
years, particularly in maintaining a zero rate of fatal incidents
at our sites.
We have worked to strengthen our social engagement
strategy and find meaningful ways of supporting our local
communities. In Peru, for example, this included increasing
local employment and procurement, supporting local
governments with public infrastructure, and positively
engaging local communities through educational, health
and digital connectivity programmes.
Driving gender diversity in our own workforce remains a key
challenge in this industry and a top priority for Hochschild. Our
mentorship and training programmes have built on our
progress and I am particularly pleased to report that, this
year, we have increased the proportion of women in leadership
roles in the Company to %, up from % in . Additionally,
Hochschild hired nine women who completed our “Women of
Gold” programme in . This is a good example of how we
can drive long-term and meaningful opportunities for women
in mining. These women, who are trained professionals in
metallurgy, mine, maintenance and geology, now have the
opportunity to pursue a career with Hochschild at our
Inmaculada mine.
In the coming - years, our strategic focus will be guided
and informed by the progress against our ESG KPIs within our
ambition areas. We look forward to reviewing next year
the individual plans to meet these annual KPI ambitions and
also to developing our next standalone sustainability report,
which will detail our progress.
Strategic Report
1—
Governance
100—149
Financial Statements
150—226
Further Information
227—231
Hochschild Mining PLC
Annual Report & Accounts
5
$
m
VALUE OF GOODS AND SERVICES
PROCURED FROM LOCAL PROVIDERS
2022: $119.4m
$.
m
INVESTED IN LOCAL
COMMUNITIES
2022: $6.89m
.
ECO SCORE
(VS TARGET OF 5.5-)
2022: 5.27
%
WOMEN IN LEADERSHIP ROLES
2022: 15%
th
0 MERCO TALENTO RANKING (OUT
OF 1 MINING COMPANIES IN PERU)
2022: 2ND PLACE OUT OF 16 COMPANIES
SUSTAINABILITY REPORT
CONTINUED
Minimal
footprint
Best
in class
Robust
culture
Maximise
innovation
Transparency
Sustainability
Strategy
Protecting the
Environment
PAGE
Serving our
Communities
PAGE 58
Ensuring
Health and
Safety
PAGE
Being a Responsible
Business
PAGE
Empowering
our People
PAGE 1
O
u
r
a
r
e
a
s
o
f
f
o
c
u
s
Hochschild’s approach to sustainability
The aim behind our long-term business strategy is to provide
an attractive investment proposition for our shareholders
whilst also enhancing value for our customers, employees,
suppliers, and local communities. To ensure that both of these
objectives are met, we focus our efforts and operational
delivery on the areas where we can have the biggest impact,
supported by our commitment to the United Nations
Sustainable Development Goals (UN SDGs).
We work with an external agency periodically to undertake a
sustainability materiality assessment refresh. This enables us
to identify and report on the sustainability topics that may
pose a) financial or reputational risks or opportunities to our
business and b) positive or negative contributions to society
and the environment. Our sustainability focus areas provide
an overview of how our material topics feed into our broader
sustainability activities. In / we plan to undertake a
refresh of our / materiality assessment. This two to
three-year refresh timeframe ensures that our material topics
reflect changes in our business and in the wider external
environment, including regulatory developments.
Hochschild Mining PLC
Annual Report & Accounts
5
Governance
Our Board of Directors holds the ultimate accountability for
creating policies on sustainability, ensuring that the Company
complies with both international and national regulations,
and establishing sustainability as a source of lasting
competitive advantage.
The Sustainability Committee, an official sub-committee of
the Board, consists of the CEO and two Independent Directors
and is tasked with overseeing sustainability matters. Regular
attendees are the COO and the Vice Presidents of Legal &
Corporate Affairs, and of Human Resources. The role of the
Sustainability Committee is to oversee and to make all
necessary recommendations to the Board in connection
with ESG issues as they affect the Company’s operations. For
example, the ESG KPI ambitions for were recommended
by management and were presented to the Sustainability
Committee for review and consideration. After adequate review
and discussion with management, the Sustainability Committee
then took these ambitions to the Board for approval.
The Sustainability Committee also focuses on compliance with
national and international standards to ensure that effective
systems of standards, procedures and practices are in place
at each of the Company’s operations. The Committee is also
responsible for reviewing Management’s investigation of
incidents or accidents that occur in order to assess whether
policy improvements are required. As part of its policy and risk
management activities, the Committee approved an updated
Environmental Policy last year which includes specific provisions
regarding climate change and biodiversity protection. For
further detail on how Hochschild manages climate-related risks,
please see our CFD report on page .
Tracey Kerr chairs the Sustainability Committee and has
Board-level responsibility for ESG matters. She is also the
Designated Non-Executive Director for Workforce Engagement.
The COO and Vice Presidents of Legal & Corporate Affairs,
and Human Resources report to Tracey Kerr as Chair of the
Sustainability Committee.
Committee membership and attendance at Committee
meetings held during the year are detailed in the table below:
0 Meeting attendance
Members
Independent
Maximum
possible
attendance
Actual
attendance
Tracey Kerr,
Non-Executive Director (Chair)
Yes
4
4
Ignacio Bustamante,
Chief Executive Officer*
No
3
3
Eileen Kamerick,
Non-Executive Director**
Yes
2
2
Eduardo Landin,
Chief Executive Officer*
No
1
1
Mike Sylvestre,
Non-Executive Director
Yes
4
4
*
On August , Ignacio Bustamante stepped down from the Committee
following his resignation as CEO and was succeeded by Eduardo Landin.
**
Eileen Kamerick stepped down from Committee on retiring from the Board on
June .
Robust sustainability governance is
paramount to our long-term success
and resilience as a business. I am proud to
say that Hochschild has made significant
strides this year in developing a
comprehensive set of 2030 ambition areas
which will serve as our guiding compass
towards a more sustainable future. These
ambition areas not only measure our
environmental impact but also underline
our commitment to social responsibility,
ethical governance and transparent
reporting practices. By fostering
accountability at all levels and promoting
transparency in our decision-making
processes, we are laying a solid foundation
for our long-term sustainable growth.”
Eduardo Landin
, CEO
Strategic Report
1—
Governance
100—149
Financial Statements
150—226
Further Information
227—231
Hochschild Mining PLC
Annual Report & Accounts
55
SUSTAINABILITY REPORT
CONTINUED
Sustainability reporting
We are encouraged that our external sustainability ratings have
improved in maturity against the FTSEGood, Sustainalytics
and MSCI benchmarks.
In terms of environmental-related reporting, our Climate
report for CDP received a B rating, which is higher than the
average rating of C for the metallic mineral mining industry.
Our overall S&P score for () shows that Hochschild
continues to perform at a higher maturity level than the current
average () across the following three dimensions: Governance
& Economic, Environmental, and Social.
0
0
CDP Climate
B
B
CDP Water
B-
B-
FTSE4Good (/5)
3.6
2.4
Sustainalytics
Medium risk
(28.6)
High risk
(37.2)
MSCI
BB
B
S&P (/100)
36
41
For climate-specific disclosure, we developed our report
based on the CFD framework, which can be found from page .
Using these external disclosure frameworks, we are committed
to providing our stakeholders with an ongoing and transparent
account of our material topics and to outlining the steps we are
continually taking to improve our sustainability performance.
We periodically publish a standalone Sustainability Report
which covers, in detail, the sustainability activities and
performance of Hochschild. Our latest standalone report
was published in and was prepared in accordance with
the
“Core” option of the Global Reporting Initiative Standards.
It can be found via our homepage:
sustainability-reports-and-policies/
Our next standalone Sustainability Report will be published
in .
The Committee conducted the following key activities
during :
Core areas of focus
– Monitoring the execution of the annual plan in key areas:
Serving our communities, Protecting the environment,
Ensuring health and safety, Empowering our people,
and, in conjunction with the Audit Committee, Being
a responsible business
– Oversight of the ongoing Environment Culture Transformation
Plan, Safety Culture Transformation Plan, and the Social
Culture Transformation Plan which seeks to enhance the
Company’s social engagement strategy
– Received regular updates on the redundancy process at
Pallancata which was placed on care and maintenance
towards the end of
Policy & risk management
– Reviewing key sustainability-related risks faced by the
Company and evaluating the adequacy of the mitigation
measures put in place
Reporting & monitoring
– Approving the Sustainability Report and TCFD Report for
inclusion in the Annual Report
– Receiving updates on external ESG-related disclosure
initiatives, for example, the Company’s participation in the
Carbon Disclosure Project (CDP), MSCI and Sustainalytics
– Considering and proposing to the Board, for adoption, the
ambitions for the ESG related KPIs in alignment with
the Company’s overall strategy
Hochschild Mining PLC
Annual Report & Accounts
5
The selected KPIs are as follows:
SERVING OUR COMMUNITIES
00
Ambition
Local workforce vs total workforce (%)
60%
Local procurement vs total procurement (%)
20%
Social investment vs revenue (%)
0.90%
PROTECTING THE ENVIRONMENT
00
Ambition
GHG scope 1+2 emissions (%)
-30%
Freshwater utilised per ore processed (m
3
/ tonne
0.22%
Recycled waste vs waste generated (%)
80%
Domestic waste landfilled (kg/person/day)
0.90
Potable water consumption (l/person/day)
174
PROMOTING HEALTH, SAFETY AND WELL-BEING AT WORK
00
Ambition
Fatal accidents
0
Lost time injury frequency (LTFR)
1
1.2
Lost time injury severity rate (LTISR)
2
270
EMPOWERING OUR PEOPLE
00
Ambition
Women in workforce (%)
11%
Women in leadership roles (%)
20%
Women in Board seats (%)
40%
Voluntary turnover (%)
<5%
BEING A RESPONSIBLE BUSINESS
00
Ambition
Board members considered by investors to be independent
(%) (excl. Chair)
>50%
Average tenure of Non-Executive Directors (excl. Chair)
6 years
Calculated as total number of accidents per million labour hours.
Calculated as total number of days lost per million labour hours.
These KPIs can also be found on our website:
sustainability-reports-and-policies/
The Company will monitor the continued relevance of the
selected KPIs and will be supplemented as appropriate, for
example, by the revision of key climate change related targets
on completion of Hochschild’s Climate Strategy that sets an
ambition to achieve Net Zero by .
During , specific plans, including technical and financial
considerations to achieve the goal for each KPI, will be
developed. Yearly performance will be published on our website
and in our Sustainability and/or Annual Reports.
Developing our 00 ambition
After a comprehensive internal review, the Board of Directors
approved, in August , Hochschild’s ambition for .
This ambition takes into account the most recent materiality
assessment, which identified areas of importance for
Hochschild to both internal and external stakeholders.
These ambition areas are supported by a robust selection
of KPIs that will be measured against the baseline year.
Performance against these KPIs will be reported on an
annual basis.
Our interim 2030 ambition provides us
with a framework for measuring and
managing our impacts in a transparent and
robust way. These are the areas which are
most material to our business and where
we can have the most impact on the
environment and society.”
David Vexler
, Corporate Sustainability Director
Strategic Report
1—
Governance
100—149
Financial Statements
150—226
Further Information
227—231
Hochschild Mining PLC
Annual Report & Accounts
5
SUSTAINABILITY REPORT
CONTINUED
Our approach to serving our communities
Our social engagement strategy is focused on generating
positive impact. We do this through fostering strong
partnerships with local communities and through developing a
range of programmes, based on the needs of our communities.
These partnerships respect the unique cultural heritage,
practices and social dynamics of these communities. We
also keep our communities informed of any relevant company
developments that may affect them and actively engage them
to address their questions and concerns. Our programmes cover
a breadth of development areas, from the provision of medical
support and digital facilities to the coaching of female
entrepreneurs and the technical training of mining students.
To ensure that our programmes address the specific needs
and expectations of our communities, we invest resources to
understand what these needs are and maintain open and
transparent dialogue in our engagement.
Our approach to generating positive impact is guided by our
Community Relations Policy, which emphasises our dedication
to building trust and listening to community concerns. We also
consider how our operations may impact the local community,
either directly or indirectly; this consideration is formally
included within our application for environmental permits, under
the Free Prior Informed Consent (FPIC) process. We also work
with government authorities to ensure our social investment
strategies are successfully implemented. As an example, this
year we developed a multi-year Interinstitutional Agreement
with the Municipality of La Unión in Peru for the benefit of the
local population.
We are pleased to report that, this year, local workers
represented % of our total workforce. This figure includes both
Hochschild’s direct employees and permanent contractors in
our mining sites in Peru and Argentina. This is an encouraging
improvement from % in the previous year, against a
ambition of %.
$.
m
SPENT OR DONATED TO BENEFIT LOCAL
COMMUNITIES AND LOCAL GOVERNMENTS IN
PERU, AND ARGENTINA
(0: $.8m)
$
m
LOCAL PROCUREMENT*
IN PERU, ARGENTINA AND BRAZIL
(0: $11.m)
%
LOCAL MINE WORKFORCE* VS TOTAL MINE
WORKFORCE IN PERU AND ARGENTINA
(0: 5%)
Supporting the social and economic development of our local
communities is a core commitment at Hochschild. Within this
strategic pillar, we have identified the following material topics
related to this pillar: Positively Impacting Local Communities
and Respecting Human Rights.
Serving our
Communities
*
Local refers to people working at the mines or
businesses that belong to the regions where the
Company operates (Peru: Apurimac, Arequipa,
Ayacucho and Cajamarca; Argentina: Santa Cruz;
Brazil: Goiás).
Highlights
Alignment to UN SDGs
Hochschild Mining PLC
Annual Report & Accounts
58
Progress against our ambition
01
Baseline
0
0
00
Ambition
Local workforce vs total workforce (%)
51%
53%
59%
60%
Local procurement vs total
procurement (%)
12%
15%
17%
20%
Social investment vs revenue (%)
0.84%
0.94%
1.18%
0.90%
Key achievements 0
–
Digital inclusion:
In , we continued to provide training
to employees and community members to drive wider digital
inclusion. This includes addressing digital skill gaps within our
own workforce through the training of senior individuals
in ICT (Information and Communication Technology) skills.
The “Conexión Futuro” (Future Connection) programme aims
to increase employability in the rural areas surrounding our
mines in Peru through technical skills training. Access to digital
centres is provided, free of charge, in communities where there
is typically a large student population. This year, over
community members benefited from digital centres across
the localities of Oyolo, Pacapausa, Ccalaccapcha and Aniso,
an increase from the number of beneficiaries in ().
Equipped with projectors, wireless network systems and sound
systems, these centres offer digital training and have provided
students and teachers with ICT support since .
Beneficiaries of the 4* Digital Centres in Peru in 2023
614
Students attending technical certification courses
170**
ICT issues resolved
2,203***
*
Number of digital centres in December .
** Includes female students.
*** Includes interactions with women.
–
Education:
Through a range of different initiatives, we provide
academic support, career guidance and socio-emotional
and entrepreneurial skills for our local pupils and students.
We aim to promote local employment in the mining industry,
focusing on supporting individuals from communities near
our operations.
To cater to the needs of the mining industry, we sponsor
higher education scholarships in technical subjects relevant
to this industry through our “Quri Yachay” (Golden knowledge
in Quechua) scholarship programme. The mining training
programme is led by Cetemin, a Peruvian educational
institution that offers technical programmes related to mining.
The young individuals, who live in communities surrounding
our Inmaculada mine, receive training to enhance their
employability in the mining industry and thus improve their
quality of life and that of their families. The technical courses
cover a range of topics related to plant, mine, laboratory
and infrastructure requirements. Initiated years ago, this
programme has so far provided technical training to over
students (female and male). We are delighted to say
that approximately % of these alumni students are now
employed by Hochschild. In , a new cohort of students
successfully graduated from their programme for mine
drilling assistants.
Additional educational initiatives in Peru include a
Vocational Guidance Fair for secondary school students in
the rd, th and th grades, and “Fun Summer Workshops”.
We also continued our educational programme “Aprender
Para Triunfar” (Learn to Succeed), detailed below.
The Learn to Succeed programme provides academic and
entrepreneurial support to primary and secondary school
students, parents and teachers. Since , over students
have benefited each year from this educational programme.
In , we engaged with students, teachers and parents from
seven communities in areas of our direct influence, through
workshops aimed at educational and psychological
development. As an example, our “Soft Skills” workshops
focused on enhancing life skills recommended by the United
Nations (UN), including social, emotional and cognitive skills.
Our “Life Project” sessions, meanwhile, helped th and th
year secondary students gain clarity on planning their future
career paths. Through the whole suite of workshops, which
also included “Vocational Guidance”, “Psychological Support”,
“Entrepreneurship Promotion”, “Parent Schools” and “Teacher
Training”, we benefited over students and over
teachers. As a result, we have seen significant progress made
in reading, writing and mathematics amongst primary pupils.
Guidance shared during observation and feedback
sessions has also helped to improve teachers’ pedagogical
skills, enabling them to progress in innovative and
comprehensive teaching practices. We have also seen
stronger collaboration between teachers and learning
specialists through our complementary inter-school activities.
Beneficiaries of the Aprender Para Triunfar programme in 2023
411
Number of parent-teacher meetings
7
Number of teacher observation and feedback sessions
25
Number of trained teachers
58*
Number of workshops
783**
*
Primary level: ; Secondary level: .
**
Primary level: ; Secondary level: .
Our local communities are, and will always
be, one of Hochschild’s most important
stakeholders. From supporting health, to
driving entrepreneurship, we are proud to
see the value we bring. Our long-standing
programmes have resulted into higher levels
of digital inclusion, stronger economic
networks and real career opportunities
for underrepresented workers.”
Amalia Ruiz,
Community Relations Manager – Peru
Strategic Report
1—
Governance
100—149
Financial Statements
150—226
Further Information
227—231
Hochschild Mining PLC
Annual Report & Accounts
5
SUSTAINABILITY REPORT
CONTINUED
–
Health and nutrition:
Through our Ccalaccapcha medical
campaign held in October, we provided the population of
the Ccalaccapcha community and surrounding areas with
comprehensive care. The Cora Cora Health Network and the
Pausa Micro-Network, both part of the Ministry of Health
(MINSA) in Peru, along with our Inmaculada mine team,
provided a total of specialists for the campaign as well as
equipment and supplies. In collaboration with these health
networks, we provided comprehensive care for the entire
population covering different specialties. This included
informing and educating individuals in the risks of various
diseases, their causes, and their side effects on physical,
psychological, and social health.
– As a result of this campaign, which includes educational
sessions on prevention, promotion, and recovery measures,
the community members have strengthened their knowledge,
behaviours, and attitudes towards their own health. The
campaign has also worked to detect the main diseases
affecting the paediatric and adult populations and invested
in care related to different medical specialities to help improve
the general health status of the locality.
Specialists provided
21
Attendees during 3 days of care
800
The “Siempre Sanos” (Always Healthy) programme addresses
the medical needs of local communities. This programme
offers free medical care, supports new parents with infant
nutrition and educates community members on preventative
care. We continued with this programme in , with more
than beneficiaries from the area of influence of the
Inmaculada mine. Experts in specialised nutrition and early
stimulation carried out visits in local communities near
Inmaculada. We also organised a campaign with multi-
speciality medical professionals to improve the communities’
knowledge of healthcare.
Beneficiaries of the Siempre Sanos programme in 2023
512
Number of multi-speciality medical campaigns
1
Number of home visits carried out by specialised nutrition and
early stimulation personnel
350
–
Socio-economic development:
Hochschild continues to
support the local economies of its communities in Peru and
Argentina. In , this ranged from implementing a training
programme for alpaca breeders, and standardising product
quality through external laboratory tests at the collection
centre for the “Red del Valle Huanca Huanca” productive
network, to the following activities detailed below.
–
Procuring from local food suppliers:
To ensure that we support
our local producers in a meaningful way, we have reactivated
the supply of locally grown vegetables to Sodexo, our food
services supplier at our Inmaculada mine. The sale of these
vegetables, such as squash and carrots, provides the
beneficiary producer families with greater marketing
opportunities, thus helping to promote the wider economic
development of our local communities.
–
Empowering female entrepreneurs
: In October, Hochschild
conducted a training session on “Creating Digital Content
for Female Entrepreneurs” in the locality of Perito Moreno, in
Argentina. Facilitated by an external consultant, the six-hour
session was attended by female entrepreneurs and
provided training on a range of topics, from clothes sales and
art to sports-related activities. By equipping business owners
with tools to develop and grow their projects, the initiative not
only fosters community engagement but also upholds our
commitment to contribute to the town’s growth. The exclusive
training was organised by the Human Resources and
Community Relations departments of our San Jose mine.
–
Strawberry cultivation
: In collaboration with Instituto
Nacional de Tecnología Agropecuaria (INTA) and the
Provincial Agricultural Council, Hochschild facilitated a
productive strawberry cultivation project in Argentina’s Perito
Moreno region. The project aimed to optimise agricultural
processes through the financing and provision of machinery.
The mechanisation initiative streamlined bed preparation,
irrigation tape placement, and soil covering into a singular
operation, boosting efficiency and yield per hectare.
Over local families in Perito
Moreno participated in the
initiative, receiving necessary
materials and strawberry
seedlings. Both INTA and the
Provincial Agricultural Council
supervised the project and
operating equipment whilst
also offering cultivation
guidance. This initiative
not only supports local
communities but also aligns
with Hochschild’s commitment
to fostering productive projects
in key mining site regions.
Hochschild Mining PLC
Annual Report & Accounts
0
–
Technical capabilities:
Hochschild’s “Impulso Productivo”
(Boosting Productivity) programme continued in ,
strengthening the technical capabilities at the individual
and/or organisational level of all agricultural producers in the
breeding of large and small animals and the cultivation of
crops. The ongoing programme is framed within sustainable
production in communities located near the Inmaculada mine,
with a focus on food security and sustainable market access.
Business networks are developed to increase networking and
create bonds of trust among producers identified as potential
suppliers. Alongside developing investment plans, the
programme provides continuous training and technical
assistance, develops pilot actions and drives the successful
management and direction of business units. This year, a key
objective has been to generate sustainable products and
proposals by maintaining the operation of the primary
processing centre in Santa Rosa de Cascara, and the fruit
and vegetable collection centre in San Javier de Alpabamba.
Sales of guinea pigs, chickens and fruits & vegetables
$72,857
Assistance sessions provided for livestock
1,058
Assistance sessions provided for crops
550
Material topics in serving our communities
Positively impacting local communities
At Hochschild we are proud to run a range of short- and
long-term initiatives in our local communities. These initiatives
are focused around our strategic areas: connectivity, education,
health and nutrition, and socio-economic development. Where
possible, we collaborate with our local governments to maximise
the impact and reach of our initiatives and broader social
investment strategies.
We engage in a regular dialogue with our community members
and gather detailed feedback through focus groups, site visits
and meetings with authorities to understand the needs and
expectations of our social impact on our communities.
Additionally, we have established Permanent Information
Offices in communities near the Inmaculada and Pallancata
mines, and in Perito Moreno for the San Jose mine. These
offices serve as a central point of contact for communities to
ask questions or express concerns about our mining operations.
In , we received grievances and inquiries and responded
to , with the last three underway.
Hochschild made social investments of approximately $. million in
towards projects in Peru and Argentina, the aforementioned
strategic areas, in ad-hoc philanthropic campaigns and in
providing technical assistance to municipalities.
Education
$897,001
Health and nutrition
$491,837
Socio-economic development
$1,332,311
Philanthropic campaigns
$244,009
Culture and communication
$379,812
Donations
$1,077,266
Local governments support
$3,752,810
Respecting human rights
Hochschild is committed to upholding and respecting human
rights within the Company and throughout our value chain.
Our Human Rights Policy is aligned with the Universal
Declaration of Human Rights, the United Nations Guiding
Principles, the UN Global Compact and the International
Labour Organisation’s (ILO) core conventions. The policy
provides a framework of guidelines that sets out how our
contractors and suppliers must conduct their activities. In ,
we plan to update this policy to include explicit reference of
human trafficking, freedom of association and the right to
collective bargaining, in line with our existing Code of Conduct.
In we will begin developing a new due diligence approach
to strengthen our existing Human Rights processes. In addition,
we undertake a periodical review and update of our
Whistleblowing portal to allow the registration of human rights
violations/grievances (see “Being a responsible business”).
Strategic Report
1—
Governance
100—149
Financial Statements
150—226
Further Information
227—231
Hochschild Mining PLC
Annual Report & Accounts
1
Our approach to protecting the environment
Our Environmental Policy guides all of our actions with the goal
of minimising the environmental impact of our mining and metal
production activities. The Company has clear and defined roles
and responsibilities for implementing our environmental
management policy. The Policy measures include reducing
water usage, improving energy efficiency, and increasing the
use of recycled waste among other environmentally conscious
measures. In we will develop our biodiversity strategy,
allowing Hochschild to meet the business’ medium- and
long-term nature-related objectives through clear and
appropriate targets.
In , we reduced our potable water consumption by .%, in
comparison to levels, and exceeded our ambition for
the second consecutive year. We have also continued to reduce
levels of domestic waste sent to landfill, achieving a reduction of
.% in in comparison with . The reduction in GHG
emissions reflects the changes in the operations, and in
we expect an increase once Mara Rosa is incorporated into
this indicator.
Progress against our ambition
01
Baseline
0
0
00
Ambition
GHG scope 1+2 emissions (%)
0%
-0.7%
-5.1
-30%
Freshwater utilised per ore
processed (m
3
/ tonnes)
0.24
0.27
0.27
0.22
Recycled waste (%)
73%
68%
63%
80%
Domestic waste landfilled
(kg/person/day)
1.00
1.05
0.93
0.90
Potable water consumption
(l/person/day)
193
171
162.83
174
.
0 ECO SCORE (VS TARGET OF 5.5-)
0: 5.
%
REDUCTION IN POTABLE WATER CONSUMPTION
COMPARED WITH 015
0: 58%
%
DECREASE IN DOMESTIC SOLID WASTE GENERATED
COMPARED WITH 015
0: %
At Hochschild, we are committed to producing metals with the lowest
possible environmental footprint. We monitor our environmental impact
through the following material topics: Climate Change Resilience, Water
Management, Safeguarding Biodiversity and Natural Resources through
effective Land Use, and Responsible Management of Waste and Tailings.
Protecting the
Environment
Highlights
Alignment to UN SDGs
SUSTAINABILITY REPORT
CONTINUED
Hochschild Mining PLC
Annual Report & Accounts
Key achievements 0
–
Environmental Management System:
In January , we
launched our updated Environmental Management System
(EMS) to further strengthen our environmentally-conscious
culture across our business and operations. Our EMS is ISO
aligned, and builds upon the wealth of knowledge and
professional experience of our personnel, resulting in a
tailor-made system that works best for the Company.
The main environmental standards and procedures were
developed and published in the EMS portal on the Hochschild
intranet. In , the implementation of the EMS in our mines
focused on the following Processes: environmental leadership,
risk assessments, and field controls.
In , we will roll out further training on EMS to reinforce
our workforce’s understanding of each Process; we will also
perform an internal audit (led by our own specialists) to
measure the effectiveness of our first year of implementation
and identify opportunities for improvement. Additionally, we
continue to conduct “managerial” or “corporate” inspections
at all sites.
–
Environmental Culture Transformation Plan (ECTP)
: In ,
we reviewed and restructured the ECTP in line with our
updated EMS Processes and Company attributes. The graphic
below shows how our ECTP and EMS align, alongside key
activities in for each segment.
Environmental Culture Transformation Plan (ECTP) structure
INNOVATION — EMS Processes & 1
We participated in a family workshop and launched an
internal monthly publication to improve visibility in the
Company regarding the work of the Environmental team.
COMMUNICATION — EMS Process
We continued working with our Environmental Ambassadors
(see overleaf for more information).
RESPONSIBILITY — EMS Process
We organised activities in each country to promote an
environmental culture among workers and their families
(see country-specific activities in this section for Brazil,
Argentina and Peru).
TRAINING — EMS Process
We prepared training material to be distributed across
Peru, Argentina and Brazil, that is aligned with the EMS
and country-specific regulations.
0 activities
0 activities
LEADERSHIP — EMS Process 1
We prepared the ECO HOC podcast (to be launched in
early ) for leadership. The podcast will help reinforce
the concepts of Hochschild’s Environmental Policy.
We also prepared a pocket handbook for leaders with
the Environmental Policy, EMS Processes, and
incident reporting.
Strategic Report
1—
Governance
100—149
Financial Statements
150—226
Further Information
227—231
Hochschild Mining PLC
Annual Report & Accounts
–
Environmental Ambassadors Programme:
To fully embed
our ECTP into our everyday operations, we invite employees,
across all levels, to be part of our Environmental Ambassador
Programme. Our ambassadors serve as catalysts,
accelerating the impact of the transformation process.
In , our ambassadors:
•
led and advocated actions in operations related to the ECTP;
•
acted as guardians of best environmental practices;
•
proposed new initiatives aligned with environmental care;
•
participated in environmental calendar activities, training
sessions, and field visits;
•
shared knowledge, such as guidance for shift handovers in
their areas;
•
led housekeeping campaigns in their areas of work;
•
collaborated with the environmental team on planned
inspections of their areas and other internal inspections;
•
documented visits and activities through photos and videos.
–
ECO Score – Hochschild’s internal performance monitoring tool:
The ECO score is a scoring framework that allows Hochschild to
quantify the business’ environmental performance within a
single metric, expressing environmental management in a way
that is easily understood. The collective annual score includes
indicators on environmental culture, incidents, environmental
audits, water quality, water use and waste generation. The ECO
score serves as a powerful and innovative tool for managing
environmental issues, holding employees accountable, and
generating value for our stakeholders. The ECO Score
results will undergo independent verification by Ernst & Young
(EY) Peru, following the International Standard on Assurance
Engagements (ISAE) .
In , we increased our ECO score target range from -, to
.–. Compared to an environmental efficiency score of .
in , we improved our score to . in , pushing
Hochschild closer to the higher band of our target range.
We are pleased to report that, since , we have improved
our environmental efficiency score by %.
This year, we have continued our Interinstitutional Alliance
Cooperation partnership with Landscape Reserve Sub Cuenca
del Cotahuasi, for the third consecutive year. Funding was used
for environmental education, participative management, and
sustainable economic activities. This included holding the third
edition of the “Emprendedores por Cotahuasi” (Entrepreneurs
for Cotahuasi) programme, which supports local entrepreneurs,
supporting beneficiaries across three winning projects.
Material topics in protecting the environment
Climate change resilience
Our ambition is to reduce our GHG Scope + emissions
by % against a baseline. Our aim is to reach net-zero
GHG emissions by . Achieving our interim ambition
will require the use of renewable electricity and transition towards
more efficient vehicles with lower GHG emissions. In , we
sourced % of energy from renewable sources. As shown by
the Mara Rosa Green Energy Project case study below, the
production of renewable energy will also play an increasing role
in enabling Hochschild to reduce its Scope & GHG emissions.
Mara Rosa Green Energy Project
In , Hochschild announced a partnership with Solatio
Energia (a photovoltaic sector specialist) to implement a solar
energy project that will supply % of the energy required by
Mara Rosa’s operations from renewable energy sources. The
solar project involves constructing a photovoltaic plant in the
municipality of Jaboticatubas, in the metropolitan region of
Belo Horizonte (MG).
All production from the new solar plant will be fed into the
National Interconnected System (SIN), offsetting the total
volume of energy consumed by the operations in Mara Rosa.
Construction work on the new solar plant began in October
, and production is scheduled to begin in Q . With a
capacity of . MW of energy, the solar plant will guarantee
that the amount of energy produced will meet % of the
energy demand throughout the mine’s useful life, initially
planned for years.
Our ambition will also require operational changes in
existing mines and operations (including process changes, asset
upgrades and the use of future technological advancements)
alongside the use of offsets or neutralisation projects to
eliminate residual GHG emissions.
Our mining operations in both Peru and Argentina have a lower
GHG emissions intensity compared to other gold and silver
mines globally (. tCO
e/koz Ag eq; . tCO
e/oz Au eq).
This is due to the underground nature of our mining operations,
which having lower emissions compared to open pit mines, using
low-carbon grid-based electricity, and prioritising the use of
renewable energy when available.
SUSTAINABILITY REPORT
CONTINUED
Reducing our impact on the planet
is at the core of Hochschild’s culture
and values. To further strengthen this
environmentally-conscious culture,
we have updated our Environmental
Management System (EMS). We are also
pleased to have exceeded our ECO Score
target this year and look forward to
developing our biodiversity strategy
in the short-medium term.”
Claudia Revilla,
Environmental Officer
Hochschild Mining PLC
Annual Report & Accounts
Our annual GHG footprint calculations are shown below. From onwards, Brazil will be included in these calculations following
the commencement of operations at Mara Rosa.
Greenhouse gas emissions data
1,
(tonnes of CO
e)
0
0
01
00
01
018
01
01
015
01
Emissions from combustion of fuel
and operation of facilities (tCO
2
e)
42,475
45,374
46,339
40,647
39,341
38,939
47,265
46,033
46,892
73,244
Emissions from total purchased
electricity (tCO
2
e)
4
65,542
68,116
58,133
41,254
82,833
85,084
94,249
91,893
78,163
69,933
Emissions from purchased electricity
– non-renewable sources (tCO
2
e)
5
13,691
13,389
12,820
6,591
n/a
n/a
n/a
n/a
n/a
n/a
Total Scope 1 & Scope emissions
(tCO
e)
108,017
113,490
104,472
81,901
122,174
124,023
141,514
137,926
125,055
143,178
Emissions intensity, per thousand
ounces of total silver equivalent
produced (CO
2
e/k oz)
6,7
3.55
3.64
3.11
2.76
2.64
2.60
3.16
3.27
3.70
5.08
Scope emissions (tCO
e)
25,872
29,734
24,821
3
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Energy consumption
435,824,161
477,278,230
465,027,594 366,955,382 446,288,131
n/a
n/a
n/a
n/a
n/a
From combustion of fuel (kWh)
8
144,796,179
159,336,476 165,114,299
132,414,133 143,763,206
n/a
n/a
n/a
n/a
n/a
From purchased electricity (kWh)
291,027,982
317,941,753 299,913,295
234,541,249 302,524,925
n/a
n/a
n/a
n/a
n/a
Method used based on ISO - Standard and GHG Protocol Corporate Accounting and Reporting Standard, using IPCC and Peruvian emission factors. Gases included in the
calculation of all three scopes: CO
, CH
, N
O.
Includes data for the whole year for Peru (former and current operating assets, warehouses and office locations), Argentina (San Jose and Buenos Aires office) and London office.
The Group’s UK operations consist of a single office with an occupancy of three. Its total Scope and Scope emissions and energy consumption represent less than .% of the
Group’s reported totals.
Restated following a review of underlying data and external verification of the emissions from Inmaculada, Pallancata, Selene and San Jose.
Location-based emissions. Total purchased electricity from both renewable and non-renewable sources.
Market-based emissions. Excludes electricity purchased from renewable sources, hydropower in Peru and wind power in Argentina.
Emissions (and intensity) reflect combustion of fuel and operation of facilities (Scope ) and purchased electricity (Scope ) – location-based emissions.
Total production includes % of all production, including that attributable to the joint venture partner at San Jose.
Collected information has been converted to kWh from gallons of fuel using net calorific values obtained from the Peruvian Ministry of Environment. Corresponds to fuel
calculated for Scope .
Risks relating to climate change are managed at the highest governance levels through our Sustainability Committee, Risk
Committee and the Audit Committee. Our CFD-aligned report, (see pages to ) details specific information on our approach to
managing climate risks and opportunities, including governance, strategy, metrics and targets, and risk management. In , the
business will conduct an assessment of financial and transition risks relating to climate change.
Strategic Report
1—
Governance
100—149
Financial Statements
150—226
Further Information
227—231
Hochschild Mining PLC
Annual Report & Accounts
5
Water management
Hochschild’s strategy for responsible water management is
designed to make optimal use of water resources. In , .%
of all water used in processing plants was reused, maintaining
our level of water reuse and helping Hochschild to minimise
intake of freshwater. At the Inmaculada mine, % of the water
used was reclaimed (: %), at the Selene mine, the figure
was % (: %) and at the San Jose mine, it was %
(: %). It is noteworthy that the Inmaculada mine operates
in an area with high water stress, and the Selene mine operates
in an area with medium-high water stress.
We have continued to reduce our water footprint at the
Inmaculada mine in line with the project implemented as part of
the Blue Certificate programme by the Peruvian Water Authority
(ANA). The Blue Certificate requires companies to assess their
water use, implement reduction plans, and engage with local
communities in a shared value programme. Our water savings
in from this project amounted to , m
at the
Inmaculada processing plant (: , m
).
We have also continued to reduce our potable water
consumption year-on-year, from . m
in to . m
in . This amounts to a % reduction in potable water
consumption since . Potable water consumption rate
in was the lowest to date.
We closely monitor water discharge to the environment to
ensure it complies with national regulations, with around ,
parameters monitored annually. In we had incidents of
non-compliance with national standards.
SUSTAINABILITY REPORT
CONTINUED
Freshwater use (m
)
Year
Freshwater used in process plants
2020
454,527
2021
589,904
2022
651,066
2023
578,919
Potable water use (litres/person/day)
0
0
01
00
01
018
01
01
015
162.83
171.2
192.83
230.67
206.01
224.78
214.08
293.71
408.35
Safeguarding biodiversity and natural resources through
effective land use
While Hochschild will never operate inside a protected area,
several of our sites are located inside or near the buffer zone of
the Landscape Reserve Sub Cuenca del Cotahuasi, a legally-
recognised national protected area in the Arequipa region in
Peru. We conduct flora and fauna programmes in areas of direct
influence of our mines and we annually monitor biodiversity
levels at all sites. Our objective is to mitigate the environmental
footprint of our operations, with the aim of returning the
environment to a state similar to that which existed before
our intervention. We also invest resources into developing
environmental education, environmental and social awareness,
and appreciation of local cultural heritage (see Knowledge Trail
case study).
To minimise the effect of our operations on the surrounding
area, we implement specific measures, including compensation
programmes; to avoid significant environmental or landscape
impacts from mine operation and closure.
In , we received approval for two compensation plans that
will allow Hochschild to maintain and increase the ecological
equivalence at our Inmaculada mine (see Inmaculada
compensation case study). Compensation has also been
embedded into the design of the Mara Rosa mine development
and, as such, has been a key consideration since the beginning
of the construction process (see Terra Ronca biodiversity
case study).
Hochschild Mining PLC
Annual Report & Accounts
Mine closure:
Following a mine closure, the future use of the land
is a fundamental consideration in our operations, as well as in the
rehabilitation of the intervened areas. In line with this objective,
the areas must be restored to a safe and stable physical
condition in accordance with the surrounding landscape. In terms
of managerial responsibility for land closure and rehabilitation,
Hochschild has a specific department (and a Closure Manager)
that is responsible for the execution and fulfilment of the closing
commitments of our mines and exploration projects. As part of
this process, we make financial provisions to cover closure and
rehabilitation. The closure provision is assessed annually both
internally and externally by specialised auditors. Third party
experts are typically contracted every three years to incorporate
changes in scope, cost estimates and the life of mine. The
resulting reports inform closure plan approvals by the authorities.
We report on environmental and social closure activities for all
of our operational and closed mining units according to
applicable regulations.
In we continued work on the closure of the Ares mine TSF.
This work includes the dewatering of the TSF, via a state-of-the-
art water treatment plant with a reverse osmosis system that
ensures compliance with Peruvian Maximum Permissible limits;
it also includes increasing the area of tailings covered with inert
material and raincoat.
Responsible management of waste and tailings
Our ECO Score includes an indicator for monitoring effluent
quality, which reflects any non-compliances with national
standards in all of our discharges to the environment and
prevents any toxic emissions. As a result, we are pleased to
report that we achieved our target of non-compliances with
national standards for water discharge to the environment.
Hochschild has no significant air emissions and air quality is
periodically monitored at all mining sites to ensure compliance
with environmental quality standards. In , Hochschild
recorded one minor environmental incident at our Inmaculada
mine. This incident did not impact the soil due to the timely
response and clean-up measures.
We also have extensive Waste Management Plans in place
to ensure each specific waste stream is managed in the best
manner possible. We strive to minimise the waste that ends up in
landfills and we prioritise recycling/reuse opportunities. In ,
our composting and domestic waste reuse efforts increased
and now San Jose and Inmaculada are testing this onsite
at a small scale. As a result of these efforts, including the
implementation of the ECO Score, domestic waste generation
has decreased by % since .
Knowledge Trail – Environmental and heritage education
project, Brazil
The Knowledge Trail is an environmental and heritage
education project developed by Hochschild in the town of Mara
Rosa in Goiás. The project is dedicated to Science, Culture and
Education, with the aims of disseminating scientific knowledge,
raising environmental awareness and valuing the region’s
cultural heritage. In recognition of this, the Knowledge Trail was
awarded st place in the edition of the Sustainable Goiás
Award, in the Innovation, Science and Education category, by
SEMAD (State Secretariat for the Environment). The
Sustainable Goiás Award aims to recognise and reward
sustainable actions carried out in the State of Goiás. SEMAD
received entries for the award, from which it selected three
finalists in six categories and awarded the best project in each
group: (i) Public Servant; (ii) Public Policy; (iii) Press; (iv) Rural
and Business Activity; (v) Innovation, Science and Education;
and (vi) Third Sector.
Terra Ronca biodiversity, forest preservation
and compensation, Brazil
“The Terra Ronca State Park” (PETeR) is home to one of the
most important speleological complexes in South America. In
, the Goiás State launched a campaign to recognise this
park as a World Natural Heritage Site by the United Nations
Educational, Scientific and Cultural Organization (UNESCO).
To fulfil the legal obligation for forest compensation, resulting
from the removal of vegetation for the construction of the Mara
Rosa Project, Hochschild proposed the donation of an area
within this conservation unit. After a two-year consultation
process, Hochschild received approval by the SEMAD to
acquire and donate to the State of Goiás, hectares of land.
hectares of the land donated by Hochschild is planned for
Forestry Compensation, for the removal of native species
protected by law in Permanent Preservation Areas (APP).
hectares remain available for compensation and the relocation
of legal reserves (registered and proposed). As a result, this
area can be preserved successfully as an important
Conservation Unity for the Cerrado’s biodiversity.
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Hochschild Mining PLC
Annual Report & Accounts
Domestic waste generation (kg/person/day)
0
0
01
00
01
018
01
01
015
0.93
1.05
1.00
1.18
1.04
1.13
1.13
1.33
1.94
Generation of waste by type (tonnes)
0
0
01
00
01
018
Domestic waste
1,520
1,832
1,808
1,565
1,547
2,100
Recyclable waste
777
956
792
599
642
706
Scrap metal
1,593
1,180
1,250
977
1,288
1,528
Recyclable
hazardous waste
181
193
198
147
231
304
Non-recyclable
hazardous waste
1,182
1,157
1,136
610
748
807
Electronic waste
9
8
12
9
11
8
Commercialisation/Repurposing of waste (tonnes)
0
0
01
00
01
018
Sold/repurposed
waste
3,330
3,630
3,769
2,201
3,870
2,924
All waste rock and tailings generated as part of mining and
processing are managed in accordance with our environmental
permits, and have purpose-made engineered facilities for each
waste type at all mines.
Hochschild has TSFs in total, nine of which are downstream
with rock buttresses and two with central berms with
impoundments on both sides. Of these, four were operational for
the majority of – two in Peru and two in Argentina. By the
end of , one of these tailings storage facilities was no longer
operational due to the planned suspension of the Pallancata
mine in Peru. In , external audits were conducted on all TSFs
in Peru. An internal audit was conducted in Argentina.
We fully support the need for greater transparency in the mining
sector and we disclose comprehensive details on each of our
TSFs and their management. Our most recent Church of
England report on TSFs, published in , is provided below;
this is based on the ICMM Global Industry Standard on
Tailings Management.
church-of-england-info-request-v090622.pdf
SUSTAINABILITY REPORT
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Hochschild Mining PLC
Annual Report & Accounts
8
Our approach to ensuring health and safety
Everyone at Hochschild is responsible to conduct their work
in the safest way possible. We are currently the only mining
company to hold Det Norske Veritas (DNV) ISRS level and we
are committed to upholding these high safety standards. The
Company recognises that an informed and attentive workforce,
where individuals are engaged with health and safety in a way
that looks out for themselves and others, is vital to managing
safety and health risks.
We are extremely pleased to report that Hochschild is on track
to achieve the business’ ambition and that Hochschild
recorded no fatal accidents in . This marks the second
year in a row that we have achieved this critical result. Equally
encouraging are the results for our two major safety
indicators: the Lost Time Frequency Rate (LTFR) and the Lost
Time Injury Severity Rate (LTISR); our results in these
indicators are the best in Hochschild’s history.
Progress against our ambition
01
Baseline
0
0
00
Ambition
Fatal accidents
2
0
0
0
Lost time injury frequency rate (LTFR)
1.26
1.37
0.99
1.2
Lost time injury severity rate (LTISR)
676
93
37
270
Key achievements in 0
–
Safety Initiatives:
The Seguscore, launched in , is an
in-house integrated safety performance indicator that
incorporates proactive or “leading” safety indicators such
as the measurement of leadership presence, behavioural
observations, planned task observations and random mini
audits, as well as reactive or “lagging” safety indicators such
as lost time injury frequency rate (LTIFR), lost time injury
severity rate (LTISR), and High Potential Events (HPEs) i.e.
events that may result in severe injury or lost time injuries.
In , the Seguscore was reframed by Hochschild as a
qualitative tool. Following a review of the scoring approach and
process, Hochschild determined, for instance, that leadership
presence cannot be measured only by field inspections.
WORK-RELATED FATALITIES
0: 0
LOST TIME INJURY
SEVERITY RATE
0:
.
LTIFR
0: 1.
Employee safety is a key measure of our corporate success. The high-risk
nature of the mining process means that this topic must be prioritised to
protect our people and the overall success of our operations. We strongly
believe that a healthy, satisfied and motivated workforce plays a crucial
role in driving the growth of our Company. Our material topic relating to
this pillar is: Occupational health, safety and well-being.
Ensuring Health
and Safety
Highlights
Alignment to UN SDGs
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Hochschild Mining PLC
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SUSTAINABILITY REPORT
CONTINUED
In this case, the new scoring approach requires that deviations
detected during field inspections must be resolved within a set
time period, according to the level of risk that they present.
This approach provides our supervisors with valuable site-
specific information, allowing them to demonstrate their
presence in the field, the number of deviations, and, more
importantly, how fast we are closing those gaps so that the
safety conditions are promptly improved to avoid the
occurrence of safety events.
–
Investigating and learning from safety incidents:
All Incidents
were investigated promptly and appropriate response
measures were implemented. We remain committed to health
and safety by continuing to promote the improvement of all
activities and assess the potential occurrence of HPEs. In the
event of an HPE occurring, our CEO leads a meeting with the
COO and all the Operational Unit Managers to review the
internal investigation. In this meeting, the root causes are
discussed, and control actions are reinforced at the corporate
level to share the lessons learned with the entire organisation.
During , six HPEs were evaluated. Hochschild continues
to work to reduce this number of HPEs to zero through a range
of initiatives:
•
We improved the fatigue control system installed in all our
buses and x pickup trucks in Peru to enhance road safety in
the transportation of personnel between cities and mine sites.
This system collects data analysed through a business
intelligence dashboard to predict potential incidents
•
Our Peruvian and Argentinian operations implemented a
smartwatch/wristband for all personnel (company and
contractors) who operate heavy machinery. This smartwatch/
wristband monitors sleep time to prevent fatigue at work which
can increase the risk of incidents
–
Well-being:
To support the mental health and well-being of
our employees, we continued the “Conversemos en familia”
(Talk as a family) programme that was launched in in
Peru. In conjunction with the ECTP, a family workshop was
held in Arequipa, Peru. This included conversations on
parenting topics and interactive activities for the adults and
children in attendance; the aim was to help communication
with the parents, and provide a healthy environment for the
children to thrive.
Material topic in ensuring health and safety
Occupational health, safety and well-being
Hochschild offers a safe, healthy and secure workplace in which
our direct employees, as well as our contractors, can feel safe
and thrive. We adopt practical measures to avoid workplace
fatalities, eliminate occupational health hazards and support
employee well-being.
To ensure a safe working environment, we implement a
systematic risk management approach, supported by our
Occupational Health and Safety (OHS) Management System.
In , we carried out internal audits which were conducted
by internal Hochschild-trained auditors. Our OHS Management
System applies to all sites, Hochschild employees and contractors.
Safety performance
676
93
2
38
4
,264
93
474
‘
‘
‘
‘
‘
‘
‘
‘
‘
2*
Nil
Nil
Nil
Nil
4
3
‘
‘
‘
‘
‘
‘
Nil
‘
‘
‘
.26
.37
.8
2.2
.38
2.69
.
.74
‘
‘
‘
‘
‘
‘
‘
‘
‘
.
Fatal accidents
Lost Time Injury Frequency Rate (LTIFR)
Accident Severity Index
*
Taking into account the ICCM’s Health and Safety Guidance, the Sustainability Committee took the view that the Pallancata bus highway accident would not be
reportable by Hochschild in its safety KPIs as it took place outside of Hochschild Mining’s operation and involved third party transportation.
Hochschild Mining PLC
Annual Report & Accounts
0
Our approach to supporting our people
The importance that we place on our people is underpinned by
the commitments laid out in our Corporate Diversity & Inclusion
Policy, including respecting human rights and promoting diversity
and inclusion as part of our corporate purpose. We strive to
provide a safe and healthy workplace environment that, above
all, promotes a healthy work-life balance and demonstrates
inclusion. As part of this commitment, we invest in wellness
initiatives and professional development for our employees,
and offer competitive compensation and benefits.
Progress against our ambition
01
Baseline
0
0
00
Ambition
Women in workforce (%)
9%
9%
10%
11%
Women in leadership roles* (%)
15%
15%
18%
20%
Women in Board seats (%)
33%
33%
38%
40%
Voluntary turnover (%)
5.0%
3.9%
4.5%
<5%
*
Leadership roles include senior, middle and junior management.
.
%
VOLUNTARY EMPLOYMENT TURNOVER
0: %
.
%
WOMEN IN THE WORKFORCE
0: %
%
WOMEN IN LEADERSHIP ROLES
0: 15%
Our people drive the success of our business and the positive impact we
have on the planet and society. By creating a working environment that
is supportive and empowering, we can improve employee satisfaction,
provide better and more equal employee opportunities and increase
retention rates. We identified the following material topics relating to this
pillar: Labour Relations, Diversity and Inclusion, Recruitment, Retention
and Engagement and Innovation through Technological Solutions.
Empowering
our People
Highlights
Alignment to UN SDGs
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Hochschild Mining PLC
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1
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Key achievements in 0
–
Internships for Women:
We strongly believe that diversity helps
promote new and innovative ideas that can contribute to our
overall business success. Our continued focus on gender
diversity, in a male-dominant industry, is reflected in our
“Mujeres de Oro” (Women of Gold) internship programme.
This programme offers young women professionals rotations
across eight different departments at the Inmaculada mine,
such as plant, mine, safety, community relations, and
environment. The programme also offers mentorship, training,
and the potential for a permanent career with Hochschild. In
, Hochschild hired nine out of ten women who started the
programme in and finished in .
–
Increasing gender diversity at Hochschild:
This year,
Hochschild has successfully increased the representation
of women at multiple levels of the organisation. We have
increased the percentage of women in our entire workforce
from % to .%. Similarly, the percentage of women in
leadership roles has risen from % to %. As a result, we are
proud that we are moving closer to our gender diversity
ambition. As a mining company, we recognise the challenges
faced by our industry to build female representation. These
incremental improvements are reflective of the important
progress that is needed. We will continue, each year, to
promote the participation, education, training, development
and leadership of women within our organisation.
–
Anti-sexual harassment:
In we carried out the third
annual ELSA survey, a comprehensive diagnostic and
intervention tool that helps companies respond preventatively
to sexual harassment in the workplace. Our findings help
Hochschild to identify existing gaps and other opportunities
for improvement.
The survey found that:
•
% of employees know and have read the Anti-Harassment
Policy
•
% have received training on the subject
•
% were aware of the investigation process for complaints
Material topics in empowering our people
Diversity and inclusion
At Hochschild, diversity, inclusion and a safe work environment
that promotes equal opportunities for all are fundamental to the
sustainability of our Company and to our corporate purpose.
We are committed to respecting human rights and promoting
diversity and inclusion. As such, we reject any acts of
discrimination that are based on race, gender, religion, ethnicity,
age or any other distinguishing characteristic or trait. Our
Diversity and Inclusion Policy outlines our commitment to
promoting equal opportunities for all, including the participation,
education and empowerment of women in the workplace.
Gender diversity
0
0
01
00
01
018
01
01
Number of
employees
Men
,1
3,282 3,347 3,155 3,024 3,894 3,849 3,859
Women
11
316
316
275
218
245
235
222
Number of senior
managers
Men
8
44
43
41
37
37
36
35
Women
5
6
2
1
1
1
1
1
Number of Board
members
Men
5
6
6
7
7
7
7
8
Women
3
3
2
1
1
1
1
Age structure
Employees
Board
<30
510
0
30-50
2,374
1
>50
348
7
Our employees are the lifeblood of our
organisation. We are proud to be externally
recognised for our talent retention and
attraction efforts which provide our valued
employees with the opportunities and
culture to develop as professionals and
reach their full potential. Through this
environment, we aim to build female
representation at all levels at Hochschild,
with the broader aim of advancing
improvements in gender diversity across
the mining sector more widely.”
Cristina Arbe,
Manager of Attraction,
Communication and Culture
Hochschild Mining PLC
Annual Report & Accounts
Labour relations
We recognise and respect the right to freedom of association
and collective bargaining, in accordance with the laws and
regulations of the countries in which we operate. Underpinning
our relations with our workforce are principles and practices
related to fair compensation, job security and professional
development opportunities. In , approximately % of our
total workforce was represented by a trade union or similar
body. We recorded strikes or lockouts during .
Recruitment, retention and engagement
We are committed to attracting and retaining a skilled
workforce by creating a workplace that is engaging, innovative
and defined by our corporate purpose and values. In ,
nearly % of our employees were permanent full-time workers,
with a low voluntary turnover rate of .%. In the , Merco
Talento ranking, Hochschild was ranked th among mining
sector companies in Peru and placed th out of the top
companies in Peru based on our talent retention and attraction
efforts. The ranking promotes the improvement of human
capital management within organisations, providing them with
various metrics and evaluation elements that contribute to a
better understanding of the aspirations of the individuals
working within them.
Contracts in 0
Permanent contracts
Fixed term contracts
Men
2,755
166
Women
274
37
Total
,0
0
Innovation through technological solutions
We strive to promote innovation in all aspects of our business
to increase productivity, improve worker safety and reduce our
impact on the environment. Our ongoing Innova platform allows
Hochschild to receive initiatives from every level of the Company.
Launched in , the objective of the tool is to incorporate
technology and innovation into our processes, proposed by our
workers. Anyone, at any time, can use the platform to upload
their disruptive, applied, or incremental initiatives so that they
can be evaluated and implemented in a timely way.
In , we developed two Innova Campaigns on the following
topics:
– ChatGPT and Artificial Intelligence for efficiency at Hochschild
– Conversemos en familia, for the families who participated
in the family workshop in October, as part of the ECTP
– Eight projects were implemented this year, having been
proposed between -. A further four projects have
passed the Evaluation stage and are expected to be
implemented in
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Our Innova platform
Step 1: Submission
Step : Evaluation
Step : Implementation
Step : Reward
Submit an idea that could help the business solve a
current problem or make a difference for our Company.
An expert from the site of the proposed idea will review and
then distribute the idea to a wider network of specialists for
evaluation. Here, different evaluation methods are used,
including scoring card scores, voting and evaluation forms.
Experts are selected according to their organisational
structure and subject matter expertise.
If the idea is successful, the Innova tool will assemble a project
team to implement the idea.
The potential monetary gain for the business, from a
successfully implemented idea, is calculated. Subsequently,
a proportional prize is awarded to the project team.
Our approach to responsible business
Our approach to acting responsibly is guided by our robust
corporate governance framework of policies, procedures,
and systems. This framework holds the business to account in
driving positive economic, social and environmental outcomes.
It goes beyond minimum compliance with legal and regulatory
requirements and involves advancing a corporate culture that
is aligned with our shared values: Innovation, Inspiring
others, Recognising talent, Seeking efficiencies, and
Demonstrating responsibility.
%
DIRECTORS CONSIDERED TO BE INDEPENDENT
(0: %)
Acting honestly and ethically is central to our business. We are resolute
in our dedication to ethical business practices and are committed
to maintaining the highest level of responsibility in our operations,
relationships, and transactions. Within this governance pillar, we have
identified the following topics as material for our business: Responsible
Business Conduct and Ethics, Advocacy for Positive Change and
Responsible Supply Chain Management.
Being a Responsible
Business
Highlights
Alignment to UN SDGs
SUSTAINABILITY REPORT
CONTINUED
Operating as a responsible business
underpins Hochschild’s ability to have
a positive impact on sustainability
issues whilst simultaneously delivering
value for our stakeholders. Achieving
our 2030 sustainability ambition
requires maintaining the highest levels
of ethical standards, both in our own
operations and in our supply chain, whilst
ensuring robust corporate governance
systems are in place.”
Raj Bhasin,
Company Secretary
Hochschild Mining PLC
Annual Report & Accounts
Key achievements in 0
–
Policies:
We updated our Prevention and Criminal Compliance
Manual and Interaction with Public Officials Policy. Our
operations in Peru and Argentina underwent evaluations for
corruption risks in accordance with the Compliance Manual.
–
Recognition:
Although no external anti-bribery audit was
required in , we successfully passed an assessment to
re-confirm our eligibility to undergo an external audit in ,
to recertify our previous certification in anti-bribery from the
organisation Entrepreneurs for Integrity. In the meantime,
we have continued to implement the latest anti-bribery
standards to maintain our certification ahead of our
assessment next year.
Material topics in ensuring we are a responsible business
Responsible business conduct and ethics
Hochschild is committed to upholding the highest ethical
standards in our operations and supply chain. Our Board is
responsible for ensuring that our Company values are reflected
in our behaviour. To embody this, we have established a Code
of Conduct, along with supporting policies, that apply to all
individuals acting on behalf of the Company. In early we
distributed an updated version, with a more robust
Environmental section.
Our Code of Conduct is distributed to all employees and
outlines the ethical standards and values that we expect of
our employees to promote responsible behaviour, establish
accountability, and foster a positive corporate culture. In
addition to the Code of Conduct, our supplementary policies
cover topics such as anti-corruption, anti-bribery, and money
laundering prevention among others. Any violations of the Code
of Conduct are considered serious misconduct and handled
with the utmost urgency.
The Company has a long-established Whistleblowing Policy and
an online portal, available /, to provide any person working
with or at Hochschild, with a means of raising concerns,
anonymously or otherwise. The Company values all genuine
reports received through this portal as they contribute to
upholding the high ethical standards established by the Group.
We have a policy of zero tolerance towards retaliation; for this
reason, we are committed to maintaining strict confidentiality
regarding genuine complaints received and the identity of those
filing them. The Group encourages those submitting a report to
provide their name as it enables Hochschild to collect further
details that could assist with the investigation. In , we
received reports through this system, all of which have
been addressed.
Created in and estimated to launch early in , the
Internal Legal and Compliance Portal will provide all employees
centralised and immediate access to all documents and
initiatives related to business conduct and ethics. This establishes
the availability of resources that support compliance with the
Company’s rules, policies and documents.
The Compliance Integrity Programme was implemented in
in Brazil. The goal is to prevent and detect breaches of law and
regulations. This reinforces Hochschild’s commitment to
integrity, and upholds the Company’s reputation. The
programme involved: high leadership support, risk identification
and mapping, creation of policies and a Code of Conduct,
trainings, internal controls, whistleblowing, and more.
This year, the HOC Compliance Podcast was created and
launched in Brazil. It provides employees with accessible content
related to themes of compliance. Complementary to the Code of
Conduct, this will support employee awareness and adherence
to the Company’s processes and procedures. The podcast
initiative will also be replicated in Peru and Argentina.
The launch of online compliance training provides employees
with access to an intuitive and clear format of Compliance and
Legal training. In animated format, this content was designed to
be engaging and allow easy assimilation of information. Starting
with the topic of Conflicts of Interest in Brazil, this training
implements standardised learning that underpins compliance
with laws and the Company’s internal rules.
Advocacy for positive change
We actively engage with policymakers, professionals, and civil
society to collectively discuss, shape and approve new initiatives
aimed at enhancing regulations in mining and environmental
sectors. In demonstration of our commitment to promoting ESG
guidelines and practices within the mining industry, we play an
active role in various industry associations and professional
forums such as the Sociedad de Minería and Petróleo y Energía
(SNMPE) in Peru, Cámara Argentina de Empresarios Mineros
(CAEM) in Argentina, the Confederação Nacional da Indústria
(CNI) in Brazil. We also participate in the Instituto Brasileiro de
Mineração (IBRAM), a key institution within Brazil’s mining
industry that promotes responsible mining practices, influences
policy decisions, fosters innovation, and facilitates collaboration
among various stakeholders in Brazil’s mining industry.
Responsible supply chain management
We place great importance on ensuring that we are part of
a value chain that protects human rights, safeguards the
environment, and promotes sustainable outcomes. For this
reason, our suppliers are required to comply with the specific
standards outlined in our updated Supplier Code of Conduct.
In Brazil, preventative due diligence of strategic suppliers and
monitoring of % of the entities with which Hochschild has a
commercial relationship within the country ensures that we only
contract with entities who share our corporate values.
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Hochschild Mining PLC
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5
CLIMATE-RELATED FINANCIAL DISCLOSURES
FOR THE YEAR ENDED DECEMBER
Introduction
At Hochschild we understand
the significant role that we,
and the mining industry in
general, have to play in
supporting the global
transition to a net-zero
world. We are committed
to responsibly managing
our impact on the climate
as well as the potential
impacts of climate change
on our business.
This is reflected in the actions
which we have undertaken
in recent years including
our ambition to reduce our
Scope and Greenhouse
Gas (GHG) emissions by
% by , against our
baseline, as well as our
commitment to achieve a
net-zero emissions profile
by .
The most recent Intergovernmental
Panel on Climate Change (IPCC)
Assessment Report identifies
that human activities (primarily
associated with the combustion
of fossil fuels) have unequivocally
caused global warming. We
recognise that climate change
is one of the greatest challenges
facing humanity and that it could
significantly change the physical,
social and economic environment
in which we operate.
Hochschild Mining PLC
Annual Report & Accounts
Task Force on Climate-Related Financial Disclosures (TCFD) requirements
Outlined below is a summary of how we are managing our impact on climate change, and climate change’s impacts on
our business in alignment with the TCFD recommendations. These cover four “areas”, including: Governance, Strategy, Risk
Management and Metrics & Targets. Hochschild also falls within scope of the climate-related reporting requirements of the UK
Financial Conduct Authority (FCA) which also require us to disclose, on a comply or explain basis, against the recommendations
of the TCFD (as outlined in the table at the end of this report).
The global transition to a low-carbon
economy marks a shift in the materials
required to develop and manufacture
technologies that are essential for
reducing future greenhouse gas
emissions and tackling climate change.
The transition to a low-carbon economy will require an increase
in the use of low-carbon technologies such as Solar PV and
Electric Vehicles (EV). These green technologies will require
significant quantities of precious metals, including gold and
silver, in order to be manufactured – which could lead to an
increase in demand for the gold and silver that Hochschild
produces. The graphs to the right illustrate future projected
increases in global capacity for solar PV and mineral demand
for EVs, under a range of climate scenarios.
This presents Hochschild with a unique opportunity to support
the transition to a low-carbon economy and to assist in the
global adoption of low-carbon technologies.
Please note that the IEA data for total mineral demand for EV does not include silver
(but instead it includes other minerals such as copper, graphite, nickel, etc.). However
the data point has been selected as an indicator to represent the likely demand for
silver in the future.
Capacity for Solar PV (GW) under the State Policies,
Announced Pledges and Net-Zero by 050 scenario (IEA, 0)
Mineral demand for EV (kt) under the State Policies,
Announced Pledges and Net-Zero by 050 scenario (IEA, 0)
1
2,
8,
6,
4,
2,
,
8,
6,
4,
2,
222
Net Zero Emissions by 2 Scenario
22
23
23
24
24
2
Capacity for solar PV (GW)
Stated Policies Scenario
Announced Pledges Scenario
6,
4,
2,
,
8,
6,
4,
2,
222
Net Zero Emissions by 2 Scenario
22
23
23
24
24
2
Mineral demand for EV (kt)
Stated Policies Scenario
Announced Pledges Scenario
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Financial Statements
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Further Information
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Hochschild Mining PLC
Annual Report & Accounts
CLIMATE-RELATED FINANCIAL DISCLOSURES
FOR THE YEAR ENDED DECEMBER
Governance of climate-related issues
Board of Directors
At Hochschild, we recognise that clear governance
structures are essential to ensure that climate-related risks
and opportunities are managed responsibly and effectively.
As sustainability has become increasingly important to
Hochschild’s stakeholders, sustainability and topics relating to
ESG (environmental, social and governance) have been further
integrated into our operations and governance structures.
At the highest level, our Board of Directors has overall
accountability and oversight of the management of policies
and initiatives related to sustainability and climate change.
This includes the consideration of climate-related risks and
opportunities which could, ultimately, impact several aspects of
the Group’s financial statements such as production costs, capital
expenditure and closure costs as well as influence the Group’s
approach to strategic planning and risk management. Each of
our Board members brings experience from their respective
careers and, collectively, the Board has previous experience in
managing sustainability in mining and responsibility for climate
change and water management which is utilised to assess the
suitability of our operations in the face of climate change.
Our Board of Directors’ involvement in sustainability issues is
facilitated through quarterly interactions with the Sustainability
and Audit Committees, both of which are responsible for
reporting climate-related issues to the Board. At these meetings,
key sustainability topics are presented, including risks associated
with climate, water management and other environmental risks,
as well as annual progress against the Company’s ESG ambitions.
Presently, there is no additional process for the Board of Directors
to supervise development against GHG emissions and other
climate-related targets. However, in we plan to introduce a
formal process following the formation of necessary action plans
for our ambitions. Progress in this area has already been
made through the completion of a Climate Risk Assessment
(CRA), the quantification and reporting of GHG emissions and
the initial development of a carbon reduction strategy.
Hochschild Mining PLC
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8
Managing climate-related risks
Our climate-related risk and opportunity monitoring process
is led by the Risk Committee which is made up of the CEO, Vice
Presidents, Country General Managers, and the head of the
Internal Audit function. The Risk Committee is primarily responsible
for executing the risk management process at Hochschild and
monitoring the impact and effectiveness of controls to support
Hochschild’s business objectives. The Committee meets in the
lead up to the quarterly Board meetings and approves the latest
version of the risk register for consideration by (a) the Group’s
Audit Committee, which has oversight of risk management on
behalf of the Board, and (b) the Board, in its consideration of the
principal and emerging risks faced by the business. In addition,
sustainability risks and mitigation plans of such risks are
monitored by the Sustainability Committee.
Environmental management
The Sustainability Director has responsibility over the ESG team
and reports to the Vice President of Legal and Corporate Affairs.
The ESG team monitors Hochschild’s ESG performance through
data gathering on the Company’s ESG metrics, including GHG
emissions, energy usage, water consumption, and waste
generation. The reporting, disclosure, and communication of
Hochschild’s progress within these ESG areas to both internal
and external stakeholders are also managed by the ESG team.
At Hochschild we have a Remuneration Policy in place to
incentivise a reduction in our environmental impact, the details
of which are available in the “Metrics and Targets” section on
page .
Sustainability Committee
The role of directly overseeing sustainability systems and
policies at Hochschild has been delegated to the Sustainability
Committee since . Led by the Committee Chair who is an
independent Director, the Committee comprises the CEO and
one other independent Director. The COO and the Vice
Presidents of Legal and Corporate Affairs, and Human
Resources are regular attendees. Although the Committee has a
wide scope of responsibilities, the discussion and management
of climate-related issues are a scheduled agenda item during
every quarterly meeting. One of the Sustainability Committee’s
key roles during these quarterly meetings is to provide
recommendations to the Board of Directors on topics relating
to climate change and GHG emissions that are material to
Hochschild’s operations and business plans.
The Committee also manages the processes around ESG-related
risks and opportunities, oversees Hochschild’s compliance with
relevant national and international standards and reviews the
policies and procedures in place for investigating relevant
incidents. The yearly ECO Score targets are also reviewed and
presented to the Board for approval. Details on the Sustainability
Committee’s activities in are available on page .
Alongside the Sustainability Committee, special working groups
are established in response to specific climate-related events.
For example, the El Niño phenomenon triggered the formation
of a taskforce in August that included the Safety Manager,
Logistics Manager, Peruvian General Manager and the Head of
Internal Audit. This group is responsible for monitoring and
managing the business risks that might emerge by working to
understand the situation alongside government authorities,
implementing weather monitoring systems and providing
support to the mines that could be potentially impacted.
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Hochschild Mining PLC
Annual Report & Accounts
Our Governance Structure
Board
Sustainability
Committee
Exploration Working
Group
Audit
Committee
Remuneration
Committee
Chair
(Non-Independent)
Non-Independent
Directors
5
Independent
Directors
Chair
(Independent),
CEO and
Chair
(Independent)
and
1
Independent
Director
Independent
Directors
Risk
Committee
Chair
(CEO)
and Senior Management
Vice Presidents,
Country General Managers,
Head of Internal Audit
Chair
(Independent)
and
Independent
Directors
CLIMATE-RELATED FINANCIAL DISCLOSURES
FOR THE YEAR ENDED DECEMBER
Climate-related risks, opportunities, and strategies
Our approach to assessing physical and transition
climate-related risks and opportunities
At Hochschild, we understand the importance of fully
considering how climate change could impact our business.
As a result, we have already undertaken an assessment focusing
on how climate change could impact our current and future
exposure to physical risks and transition risks and opportunities.
The focus of the physical CRA was to identify the climate-
related risks posed by extreme weather under current and
future projected climatic conditions, across five of our mining
facilities (with four of these sites being located in Peru and one
being located in Argentina).
Here at Hochschild, climate-related risks and opportunities are
integrated into our business-wide Enterprise Risk Management
framework. As with other business risks, each identified physical
climate-related risk was assigned a consequence of impact
rating, that represented the potential damage and/or associated
loss of service, and a probability/likelihood rating that
represented the likelihood of a climate hazard/event occurring.
Based on these consequence and probability ratings, a x risk
matrix, shown in the table to the right, is used to map each risk
under baseline and future projected climatic conditions ().
This produces an overall risk rating that is classified as a Low,
Medium, or High Risk. Once risk ratings were assigned, the
potential impact of each risk was also qualitatively assessed,
and next steps were recommended to further manage each
risk. We have also undertaken an initial review of the exposure
of our business to climate-related risks and opportunities
associated with the transition to a low-carbon economy.
As a part of this review, transition risks and opportunities
were assessed in alignment with the risk and opportunity
categories outlined by the TCFD (including: current regulations,
emerging regulations, technology, legal, market, reputation).
The initial review identified risks or opportunities classified as
important to stakeholders, or anticipated to have a high impact
or likelihood. A qualitative assessment of the potential time
horizons associated with each identified risk/opportunity was
also identified. As outlined below, the results of our high-level
transition risk and opportunity review have been utilised to
understand which key transition risks and opportunities are
most likely to materialise in the short to medium term, and if
we require, or already have, appropriate actions in place to
mitigate/capitalise on these impacts.
To ensure that physical and transition risks are appropriately
considered, significant and emerging climate-related risks
faced by our business have been integrated and mapped onto
our mining units existing risk matrices and are consistently
reviewed during our quarterly Risk Committee and Board
meetings in the process described above. This ensures that we
are consistently monitoring and managing climate-related risks
and incorporating them into our financial strategy and budget
allocations. For example, mine planning at Hochschild takes into
account weather-related factors, indicating how climate change
has been, and continues to be, reflected in the Group’s financial
statements, including with respect to .
Risk evaluation matrix
Risk classifications and recommended actions matrix
Very High
5
10
15
High
4
8
12
Moderate
3
6
9
Low
2
4
6
Insignificant
1
2
3
Low
Medium
High
Consequence of
Impact Rating (S)
Probability/Likelihood
Rating (P)
Risk
Category
Risk
Score
Hochschild Mining PLC
Recommended Actions
Low
Risk
-
Routine procedures are required
to address risks
Medium
Risk
-
Requires management to
assign responsibilities
High
Risk
-
Requires Management/
Top Management attention
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Following the completion of these preliminary assessments, we
intend to continue to develop the maturity of our physical and
transition CRA over the course of and . This will include:
– The development of a ambition action plan
– The undertaking of a more detailed transition CRA to better
understand the resilience of our business model and strategy
to climate change (including the consideration of additional
climate scenarios, time horizons and newly acquired/newly
operational assets)
– Using the results of the CRA to inform the quantification of
climate-related financial risks and opportunities in relation
to our business
The scenarios that we use:
In order to assess how physical risks and transition risks and
opportunities could impact our business in the future, our
physical and transition assessments utilised climate scenario
data. For the physical CRA, we utilised the IPCC’s Representative
Concentration Pathway . (RCP .). RCP . represents a
high-emissions scenario – resulting in a potential warming of
more than °C relative to the preindustrial period (-)
by the end of the st Century. This scenario was selected to
ensure we are considering how the most extreme physical
impacts of climate change could affect our business.
For the transition risk and opportunity assessment, we
utilised the International Energy Agency’s (IEA) Environmental
Technology Perspective DS (DS) equivalent scenario. The IEA
DS scenario represents a low-emissions scenario that limits
global temperature increases at °C relative to the preindustrial
period (-) by the end of the st Century. This scenario
was selected to help us understand the potential risks and
opportunities our business may be faced with if the goal of the
Paris Agreement (to keep global temperature increases as a
result of climate change below °C) is achieved.
Over the course of and , we will undertake a more
detailed analysis of the physical and transition risks and
opportunities, across our three countries of operation, related to
our business. This will include the use of updated physical and
transition scenario data (i.e. those from the IPCC and IEA) and
the assessment of assets which have been acquired/started
operating since the undertaking of our assessment.
The time horizons that we use:
Within our transition assessment, risks and opportunities were
assessed across three timeframes covering the short term ( to
years), medium term ( to years) and long term ( to
years). These time horizons were selected due to their relevance
to the operational lifetime of the mining facilities that we have in
operation. However, within future transition risk assessments we
aim to extend the long-term time horizons that we consider – to
ensure that our assessments fully align with the operational
lifetimes of our mining facilities.
Within our physical CRA, we took a different approach and
assessed physical risks and opportunities across two key time
horizons – representing the baseline (-) and future
climate by (-). Although the time horizons used
within our physical CRA cover the operational lifetime of our
mining facilities, we aim to include interim time horizons (e.g.
) within future assessments (as these are deemed more
relevant to our operations).
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CLIMATE-RELATED FINANCIAL DISCLOSURES
FOR THE YEAR ENDED DECEMBER
Hazard
Maximum Risk Score
(by under the RCP. scenario)
Argentina
Peru
Freezing Days
Intense Rainfall Flooding
Drought
Lightning/Atmospheric
Discharge
High Winds
The physical risk profile of our operations in Argentina and Peru
The physical CRA conducted for the San Jose Mine in Argentina
and the Arcata, Pallancata, Selene and Inmaculada mines in Peru
considered seven climate hazards. This assessment concluded
that, by under the RCP. scenario, % of the identified
risks at the Argentina site are rated as “high” according to their
risk matrix, % as “medium”, and the remaining % as “low” risk.
Similar risk score outcomes were produced for the Peru sites where
% of the risks were rated as “high”, % as “medium”, and the
remaining % as a “low” risk.
The results of this assessment are summarised in the table below.
The hazards, and the resulting risks for each of the site groups, are
described alongside any mitigation measures or policies for the
capitalisation of opportunities. Meanwhile, the traffic light symbols
described below display the maximum risk score categories for
each hazard at each of the site groups.
Low risk
Medium risk
High risk
Of the hazards considered, extreme heat and snowfall each
produced low risk scores across all sites and, as such, have not
been included within the following risk summary table. It should
be noted that, as an underground mining company, our current
operating assets (Inmaculada and San Jose) have shorter active
lives than traditional open-pit mines. Therefore, the longer-term
nature of the physical risks associated with climate change may
mean that the financial impacts of climate change on our assets
may be reduced.
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Description
Risk/Opportunity Response
All sites:
– Extreme cold presents a risk due to its potential impact on the processing facilities.
Cold temperatures could cause pipes to freeze, interrupting ore processing, and have
a material impact on the mines and their operations, potentially reducing revenues.
This has been identified as a high risk for the Argentina sites.
– This hazard could also impact other infrastructure on-site, such as mine access
routes, administration and operations buildings, and the drinking water supply.
– Increased stocking of critical materials.
– Maintenance of all water-related infrastructure.
– Continuous weather tracking.
– Undertaking future CRAs using multiple scenarios to
further improve project design.
All sites:
– Extreme rainfall flooding poses a risk primarily through the impact that it could have
on the tailings facilities. Heavy rains in the local area or further upstream could lead to
rising water levels at the tailings dam, increasing the hydraulic load on the dam and
potentially leading to structural failure. Rainfall could also directly erode the dam,
creating weak points in its structure and increase the likelihood of failure, increasing
capital expenditure. Finally, a series of intense rainfall or snow events could increase
the levels in the tailings pond and lead to overtopping which could release waste into
the local environment. This is the highest risk facing the Peru sites and, although it is
considered a moderate risk for Argentina, it has a high severity score.
– Other mine infrastructure face a lower risk, such as buildings, access routes,
processing facilities, and the drinking water supply, but could also be impacted by
extreme rainfall flooding.
Peru sites only:
– The transportation networks that the mines rely on, including the mine access routes
and local roads, face a high risk from extreme rainfall flooding. Roads could be
washed out by heavy rainfall and the resulting, a risk that could be intensified by the
steep slopes of the local topography. This could impact the accessibility of sites and
local mine operations.
– Other mine infrastructure, such as buildings, processing facilities, and the ore or waste
rock piles could also be impacted by extreme rainfall flooding but are less exposed.
– Continuous weather tracking.
– Continuous monitoring of the freeboard in the
Company’s Tailings Storage Facilities (TSFs).
– Internal and external audits are conducted on a regular
basis to ensure the stability of our operational tailings
facilities. For example, in , an external audit was
conducted on all TSFs in Peru, and an internal audit for
TSFs in Argentina.
– Once TSFs complete their operational life, these are
closed in accordance with permits.
– Maintenance of all water-related infrastructure.
– Monitor roads to identify areas of high erosion/
washouts.
– Increased stocking of critical materials.
All sites:
– Water stress and drought conditions are a risk due to the impact that a limited water
supply could have on the processing facilities and the ore treatment processes. This
could impact our business objectives, and potentially reduce revenues. The potential
impact of drought on processing facilities is the highest risk facing the Argentina site.
Argentina site only:
– Water shortages pose a high risk to the drinking water supply at the mine site.
– Reusing water within our processing plants.
For example, in , water reuse was .%.
– Implementing water reduction measures. For example,
Inmaculada uses treatment domestic wastewater to
reduce freshwater used within its processing plant.
– Reducing potable water consumption, encouraged
through our ECO Score.
– Established water reduction ambitions for :
– Reduce freshwater consumption in processing plants
to . m
/tonne of ore processed.
– Reduce Potable water consumption to l/person/day.
All sites:
– Lightning and atmospheric discharge is considered a risk as it could damage
communications infrastructure at the mine site, disrupting operations and reducing
revenues. This has been identified as a high risk for both the Argentina and Peru sites.
– The hazard could also impact other site areas that are considered to be at a low risk
level. Electrical equipment across the mine site could be damaged by voltage surges,
disrupting the mine operations. Lightning also represents a health and safety risk to
site personnel.
– Lightning poses a risk to other mine infrastructure including buildings, processing
plants, electrical transmission infrastructure, and the drinking water supply.
– Continuous weather tracking.
– Undertaking future CRAs using multiple scenarios to
further improve project design.
All sites:
– High winds are projected to be a risk for mine infrastructure including buildings,
electrical transmission networks, and communications towers. Damage could
increase operational expenditure for repairs.
– Continuous weather tracking.
– Undertaking future CRAs using multiple scenarios to
further improve project design.
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Hochschild Mining PLC
Annual Report & Accounts
8
CLIMATE-RELATED FINANCIAL DISCLOSURES
FOR THE YEAR ENDED DECEMBER
Category
Time Horizon
Description
Risk Response
Current
regulations
– Our customers and shareholders are taking regulatory and/or
voluntary positions to reduce energy and GHG emissions associated
with operations.
– The most mature organisations are expecting value chain GHG
emission reductions.
– Failure to meet regulatory and/or voluntary positions could lead to
additional operating costs being incurred or reputational damage.
– While we are not yet exposed to specific
requirements, we have set ambitions to
reduce our Scope and emissions.
– Committed investment in technology
e.g., electrification of vehicles.
Emerging
regulations
– Mining is already a highly regulated industry whereby multiple
permits can lead to increased delays and costs. Changes in the legal,
tax and regulatory landscape could result in restrictions or
suspensions to operations which could lead to further delays and
costs for our business.
– Emerging carbon regulations may impact our operational costs as
renewable portfolio standards, renewable fuel requirements and
carbon taxes could increase fuel and energy costs.
– To meet carbon targets, capital costs are likely to increase as more
energy efficient and lower emission technologies are integrated into
our operations.
– We have calculated a high-level financial
impact figure for potential carbon prices using
our market-based GHG emissions and
a price range of -$/tonne to understand
the potential impacts of carbon prices on our
business.
Technology
– Technology advancements could impact our operational
competitiveness. As the market for off-road vehicle and engine
manufacturers matures, slow adaptation of these options can pose a
potential short-term risk to our competitiveness (particularly if
competitors are able to adopt low/no-carbon vehicles at a higher
pace), and therefore, to our revenues.
– The demand for our products could also change in light of technology
advancement (e.g., increased adoption of renewable energy and EVs).
However, given the regulatory trends to assist with the low-carbon
transition, this could be an opportunity for the Company (as detailed
in the opportunities table below).
– Actions include improving processes on energy
conservation and transitioning to power
sourced from renewable energy.
Legal
– At Hochschild, we recognise the risks of not embedding climate
change into our strategy – including climate-related legal action,
reputational issues and investor risk which could increase costs, result
in further permitting delays, higher interest loans or reduced access
to capital.
– While we have not experienced any climate-
related legal issues so far, we anticipate in the
medium-long term that legal carbon risks may
be prevalent for companies that are not
reducing their carbon footprint. As an action, we
actively monitor regulatory changes occurring
within the jurisdictions where we operate, or
have current project developments.
Market
– We are currently monitoring the risk of changing demand for our
metal products under a low-carbon economy.
– The changing demand for the Company’s metal products could pose
a risk if not carefully managed. In a low-carbon economy customers
and investors are likely to demand higher ESG performance as part of
procurement (customers) and investment (investors) criteria which, if
not met, could lead to reputational damage and reduced revenues.
– We have undertaken a high-level transition CRA
to try to understand what our silver and gold
demand may look like under a °C scenario.
– We continuously engage with our customers
and investors to understand their requirements
and align with their goals, and have begun
implementing our Net Zero by strategy
and completing a CRA.
Reputation
– Poor performance in managing climate-related risks and
opportunities could lead to public and regulatory opposition to our
projects and operations, leading to a potential increase cost of capital
and perceived risk amongst investors.
– Increased efforts to collect and process
information and intelligence regarding potential
social conflicts.
– Increased interaction with local government
and key stakeholders.
– Continue to maximise local hiring and local
purchasing practices.
– Continue executing social programmes with
surrounding communities.
Our transition risk profile
In comparison to the physical risk assessment where we have
assigned maximum risk scores for each climate hazard, our initial
transition risk assessment provides a qualitative overview of our
potential transition risks utilising the International Energy Agency’s
(IEA) Environmental Technology Perspective DS (DS) equivalent
scenario, and considering the relevance to our business’ time
horizons, as indicated below.
Short term
Medium term
Long term
The risks identified align with the risk categories outlined by
the TCFD (including: current regulations, emerging regulations,
technology, legal, market and reputation). Currently, of the risks
identified, we are unable to distinguish to what extent each risk
may impact our business, however we aim to further develop our
understanding of our transition risks through a more detailed
scenario analysis in .
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8
Category
Time Horizon
Description
Opportunity Response
Market
– Demand for our products may increase as a result of regulatory or
market curtailments.
– It is anticipated that there will be an increase in the uptake of battery
powered vehicles and G networks which incorporate silver and gold
within hardware components – e.g., Bloomberg estimates that % of
vehicles will be electric vehicles by .
– Gold is also used in nanomaterial technologies such as solar PV which
are likely to be used to facilitate the transition to a low-carbon economy.
– While this could have positive impacts on our business growth
and revenues, we need to undertake a further assessment of this
opportunity to fully understand the potential changes in scale,
and integrate this into our strategic planning.
– Undertake a more detailed transition CRA to
further understand the potential impact of this
opportunity.
Market
– It is the expectation of investors that companies will work to manage
climate-related risks and opportunities, while improving shareholder
value, and social and environmental performance. This presents an
opportunity for the Company to improve its ESG rating.
– We are therefore already taking actions to embed this within our
business strategy, as detailed in the risk response column.
– We quantify our environmental performance
through the ECO Score.
– We produced a standalone sustainability
report.
– We undertook a CRA in .
– We are developing the action plan to achieve
our GHG emissions reduction ambition.
Technology
– In order to continue reducing our emissions, we recognise the potential
to capitalise on alternate fuels/energy saving technology to reduce our
GHG emissions and improve our operational energy efficiency
– We are therefore already taking actions to embed this within our
business strategy, as detailed in the risk response column
– We are implementing a carbon strategy to
reduce GHG emissions
– Set a Net Zero by target
– Established a % reduction in Scope &
(market-based) emissions by
– Signed a renewable energy contract for our Ares
and Arcata mines which started in January
Opportunities associated with the transition
to a low-carbon economy
Similarly to transition risks, we have undertaken a qualitative
overview of our transition opportunities utilising the International
Energy Agency’s (IEA) Environmental Technology Perspective DS
(DS) equivalent scenario, and considering the relevance to our
business’ time horizons, as indicated below.
Short term
Medium term
Long term
While not an exhaustive list, the opportunities identified in this initial
assessment are in alignment with the risk categories outlined by
the TCFD. In our future transition assessment we therefore aim to
increase coverage of our potential transition opportunities, as well
as our understanding of the extent to which these opportunities
could materialise.
The resilience of our strategy:
While our physical risk assessment has identified risks across
both our Argentinian and Peruvian mines, we consider that
our business strategy is somewhat resilient to these risks. For
example, our expected Life of Mine (LOM), which is amended
from time to time as more resources at the mine are identified,
is typically no more than years and most physical climate
risks are expected to materialise over longer-term time horizons
(within the regions where we operate). Additionally, for those
hazards that pose a higher risk to our mines (e.g. flooding)
mitigation measures have been implemented including
continuous monitoring of the freeboard in the Company’s
TSFs, weather tracking and maintenance of water-related
infrastructure, which, in turn, has decreased our exposure and
increased our resilience to climate-related risks. This approach
will be reviewed if the Group’s average LOM changes significantly.
We also anticipate that our business will be resilient to transition
risks. While carbon pricing is anticipated to be a more material
risk to our business in the short term, we have set Scope and
emission reduction targets by and are increasing our
energy efficiency and renewable energy procurement which
has the ability to increase our resilience to this risk.
To deepen our resilience, we are seeking to undertake further
physical and transition risk assessments to improve our
understanding of the potential climate-related risks that we
may be exposed to, as well as the available and implementable
resilience measures that these might demand. This would
include, where relevant, financially quantifying potentially
material climate-related risks – which will allow us to review and
amend our strategy and management of each of these risks.
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Our model for monitoring and measuring progress
against key metrics and targets
The components of the ECO Score
CLIMATE-RELATED FINANCIAL DISCLOSURES
FOR THE YEAR ENDED DECEMBER
Our climate-related metrics and targets
At Hochschild, we are committed to being the leading global
mining company in environmental excellence and recognise the
importance of monitoring and measuring our progress against key
metrics and targets relating to GHG emissions, water, and waste.
ECO Score
We have developed an ECO Score internally to quantify our
environmental performance and to help monitor and measure
progress against our targets. It is calculated by tracking
performance at both the individual mining site and Group level,
using a range of metrics and Key Performance Indicators (KPIs)
which assess compliance with discharge limits, zero-tolerance of
environmental accidents, regulatory findings and environmental
management relating to water consumption and waste
generation. Progress against each of the KPIs within the ECO
Score is weighted to provide an overview of performance
against each target.
While the ECO Score incorporates multiple indicators to
measure its environmental performance, this section focuses
primarily on the waste and water components as relevant
metrics and targets associated with the climate-related risks
and opportunities which were identified in our previously
completed CRA (e.g., water stress and drought for physical risk
and reputation for transition risk).
The ECO Score facilitates the establishment of positive
relationships with employees and stakeholders and significantly
reduces risks for the Company through our remuneration
incentive. We have established an annual Individual Performance
Objectives plan which is aligned to our Corporate Objectives
relating to production, profitability, and occupational safety.
Performance against the annual ECO Score objective determines
the extent of the annual bonus payouts to eligible employees,
incentivising a reduction in our environmental footprint.
Hochschild Mining PLC
Annual Report & Accounts
8
Annual Plan
Environmental Monitoring
Environmental Incidents
Environmental Audits
Environmental Management
Corporate and individual
By levels
Annual Bonus
What
How
Objectives
Vice Presidents
Corporate Managers
General Managers
Superintendents/Chiefs
Employees
Results
Competencies
Attitudes
-
Deviation in effluent quality from the maximum
permissible limits
- Number of environmental incidents
-
Number of “Observations” from inspections
at mining units
- Water consumption per worker
- Waste generation per worker
- Percentage of marketable waste
- Environmental culture (compliance inspections)
Since the development of our ECO Score in , results have
improved by %, which is reflective of our increasing level of
engagement with environmental initiatives. In , our ECO
Score was . out of and, our best result to date. The
results will undergo independent verification by EY Perú against
the International Standard on Assurance Engagements (ISAE)
. As we acquired a new mine in , we aim to use this year
to understand the potential impacts of the new mine on our ECO
Score, which may lead to review and changes to our targets to
ensure continued progress in our metrics and targets.
The Company’s ECO Score
In addition to monitoring our potable water consumption, we are
also working towards increasing the recirculation of water in our
processing plants to reduce freshwater intake. While freshwater
use and water recycling are not formally incorporated into the
ECO Score, we recognise the importance of monitoring this part
of our operations as a significant proportion of our water
requirements for our operations is met through recycled water,
and if insufficient recycled water is available, freshwater is
utilised. In , . m
of freshwater was used per tonne of ore
processed and it is our intention to reduce freshwater
consumption to . m
/tonne by . To minimise the intake of
freshwater, we utilise recycled water in our processing plants. In
, .% of all water used in processing plants was recycled,
maintaining the level reached in .
Waste
We also understand the multiple benefits to reducing our waste
generation, including conserving resources and reducing GHG
emissions, and therefore monitor our waste generation and
recycling rates using various metrics and targets. Between
and , the Company has reduced landfilled domestic waste by
%, with a decrease in waste generated per person per day from
. kg to . kg. To further reduce our waste generation, the
Company has set a target for waste generated to be . kg
per person per day. Simultaneously we seek to increase the
percentage of waste that is recycled to % by , compared to
% in .
The Company’s waste generation
(kg per person per day) and 00 target
.94
.33
.3
.3
.4
.8
23
Ambition:
<.9 kg/
person/
day
.
.
.93
.
.
.
2.
2
26
27
28
29
22
22
222
223
The following sections present further details relating to the
waste and water aspects of the ECO Score.
Water
At Hochschild, we understand the importance of managing our
water resources in the regions where we operate. This is due to the
water-intensive nature of our operations and the potential risk from
drought our sites face as identified in our physical risk assessment.
As a result, we use multiple metrics to monitor our consumption of
water resources and have set targets to reduce our on-site potable
water consumption and freshwater consumption in operations.
Between and , a reduction in potable water consumption
(litres per person per day) of % has been achieved, with
representing our lowest recorded potable water consumption at
litres per person per day. As our score already exceeded
our target of litres per person per day, we will review this
target following the integration of the new mine into our ECO
Score results to identify if this target can be stretched further.
The Company’s potable water consumption
(litres per person per year) and 00 target
48
294
24
22
26
23
23
Ambition:
<74 l/
person/
day
93
7
63
4
3
2
26
27
28
29
22
22
222
223
.
OUT OF
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Governance
100—149
Financial Statements
150—226
Further Information
227—231
Hochschild Mining PLC
Annual Report & Accounts
8
CLIMATE-RELATED FINANCIAL DISCLOSURES
FOR THE YEAR ENDED DECEMBER
Introduction to GHG Emissions and net-zero commitments
At Hochschild, we have been reporting our Scope and
emissions since and our Scope emissions (Category
: Fuel and energy-related activities, Category : Upstream
transportation and distribution, Category : Business Travel) since
. For a full breakdown of Scope , and emissions for ,
please refer to the Environmental section of the Sustainability
Report on page . Emissions are calculated on a yearly basis in
alignment with the ISO - Standard and the GHG Protocol
Corporate Accounting and Reporting Standard.
We have committed to become Net Zero by across both our
operations and value chain. In we have also set an ambition
to reduce our Scope and (market-based) emissions by % by
, compared to our baseline.
Next steps
Over the course of the next year, we will continue to review
and, adapt as necessary, our governance structures, risk
management practices, strategy and targets relating to climate
change – in alignment with the UK’s CFD and TCFD’s
recommendations. Although we have already begun to make
progress in this respect, we are aware that further action is
required to fully align with TCFD’s recommendations. Within the
following table, we have detailed the current status of our
compliance with each of the TCFD’s recommendations and our
planned next steps to increase our compliance. It should also
be noted that we have not yet financially quantified climate-
related risks and opportunities associated with our business,
and therefore we have not included any climate-related
disclosures within our annual financial report.
We are also aware of emerging regulatory requirements which
we will also need to monitor and consider when publishing
future disclosures associated with climate-related issues (from
onwards). For example:
– The International Sustainability Standards Board (ISSB) (of the
International Financial Reporting Standards – IFRS) which has
released the new “IFRS S Sustainability Disclosure Standard”.
The IFRS S supersedes the TCFD’s recommendations and
requires a number of additional climate-related disclosures
(when compared with the TCFD’s recommendations)
– The UK government’s Department for Business and Trade
(DBT) is currently developing the UK’s Sustainability
Disclosure Standards (SDS) – which are due to be published
by July . The UK SDS will be based upon the IFRS’s
Sustainability Disclosure Standards – and will form the basis
of any future requirements in UK legislation/regulation for
companies to report on risks and opportunities relating to
climate change and sustainability
We will continue to monitor the UK’s regulatory landscape to
ensure that we are disclosing in alignment with all relevant
climate-related disclosure requirements.
-3%
2,
4,
6,
22
222
223
23
2
Hochschild’s Scope 1 and GHG emissions reduction
ambition for 00 and net zero target for 050
To achieve our target of Net Zero by across the value chain
we understand the need to work closely with our suppliers in order
to implement a Scope emission reduction strategy thereafter.
However, a Carbon Roadmap focusing on Scope and GHG
emission reductions has been developed which has allowed our
business to understand some of the activities/investments that
may be required to reach this target including, but not limited to:
– Utilising low-carbon grid-based electricity, and prioritising the
use of renewable energy when available (already ongoing)
– Implementing behaviour change programmes across the
business (already ongoing)
– Using higher efficiency vehicles, with lower GHG emissions
As we start to implement these measures, we recognise the
importance of monitoring and assessing progress against our
GHG emission reduction targets. Therefore, an action plan will
be established within the next year for the Board of Directors to
oversee progress against our GHG emission reduction targets and
ensure continued progress towards our Scope and reduction
ambition by .
Hochschild Mining PLC
Annual Report & Accounts
88
0% reduction
by 00
Net Zero
by 050
Scope 1 Scope
Scope 1 Scope Scope
TCFD Pillar/Recommendation
Status
Next steps
Governance
.
Describe the board’s oversight of
climate-related risks and opportunities
Partially
consistent
Establishment of governance processes and monitoring and
reporting programmes relating to the managing of climate-related
topics. We aim to complete this in .
.
Describe management’s role in assessing
and managing climate-related risks and
opportunities
Partially
consistent
Develop an action plan for the Board of Directors to oversee progress
against our GHG emission reduction targets and ensure continued
progress towards our Scope and reduction ambition by . We
aim to complete this in .
Risk
Management
.
Describe the organization’s processes
for identifying and assessing
climate-related risks.
Partially
consistent
Undertake additional physical and transition assessments which
consider a wider range of time horizons, updated climate scenario
data and newly acquired/newly operational assets – to better
understand the potential impact of climate-related risks and
opportunities on our assets, business model and strategy. We aim to
complete this in /.
.
Describe the organization’s processes
for managing climate-related risks.
Partially
consistent
.
Describe how processes for identifying,
assessing, and managing climate-related
risks are integrated into the organization’s
overall risk management.
Partially
consistent
Strategy
.
Describe the climate-related risks and
opportunities the organization has identified
over the short, medium, and long term.
Consistent
–
.
Describe the impact of climate-related risks
and opportunities on the organization’s
businesses, strategy, and financial planning.
Partially
consistent
Based upon the results of our previously completed and future
planned physical and transition assessments quantify the financial
impact of potentially material climate-related risks and opportunities.
We aim to complete this in /.
Integrate the results of our previously completed and future planned
physical and transition assessments into our business strategy – to
inform future financial planning. We aim to complete this in /.
.
Describe the resilience of the organization’s
strategy, taking into consideration different
climate-related scenarios, including a °C
or lower scenario.
Partially
consistent
Undertake additional physical and transition assessments (as
described in the next steps for TCFD recommendation //) – to
better understand the resilience of our business model and strategy
under a range of climate scenarios. We aim to complete this in
/.
Metrics &
Targets
.
Disclose the metrics used by the
organization to assess climate-related risks
and opportunities in line with its strategy
and risk management process.
Partially
consistent
Hochschild will continue to explore the use of additional metrics which
could be used to support our management of climate-related risks
and opportunities (including the consideration of metrics related to
any climate-related risks and opportunities which may be quantified
in future assessments – as described in the next steps associated
with TCFD recommendation ).
.
Disclose Scope , Scope , and if
appropriate, Scope greenhouse gas
(GHG) emissions, and the related risks.
Consistent
–
.
Describe the targets used by the
organization to manage climate-related
risks and opportunities and performance
against targets.
Consistent
–
Strategic Report
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Governance
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Financial Statements
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Further Information
227—231
Hochschild Mining PLC
Annual Report & Accounts
8
Management of the Group’s operations and execution of
its growth strategies are subject to a number of risks, the
occurrence of which could adversely affect the performance
of the Group. The Group’s risk management framework is
premised on the continued monitoring of the prevailing
environment, the risks posed by it, and the evaluation of
potential actions to mitigate those risks.
The Risk Committee is a management committee tasked with
implementing the Group’s policy on risk management and
monitoring the effectiveness of controls in support of the
Group’s business objectives. It meets four times a year and more
frequently if required. The Risk Committee comprises the CEO,
the Vice Presidents, Country General Managers and the head of
the Internal Audit function. A “live” risk matrix is reviewed which
maps the significant risks faced by the business as well as those
considered to be emerging risks. The matrix is updated at each
Risk Committee meeting, and the most significant current and
emerging risks, as well as actions to mitigate them, are reported
to the Group’s Audit Committee, and if considered appropriate,
also to the Board. In light of their strategic importance,
sustainability risks, if any, and their mitigation plans are
monitored by the Sustainability Committee.
Risk appetite
Defining risk appetite is crucial in ensuring that a risk
management system is embedded into Hochschild’s
organisational culture. Our risk appetite approach is to minimise
our exposure to reputational, compliance and excessive financial
risk, whilst accepting a certain level of risk to achieve our strategic
goals. As part of setting risk appetite, the Board will consider and
monitor the level of acceptable risk it is willing to take in each of
the principal risk areas.
Appetite for risk will vary according to the activity undertaken,
and is predicated on the fact that a risk will only be tolerated
after a full understanding of the potential benefits and its
implications before proceeding with a course of action, and that
sensible mitigation measures are identified and implemented.
0 risks
Details of the principal and emerging risks affecting the Group
and the associated mitigating actions are provided on the
following pages. The risks presented differ from those reported
in the Annual Report by the removal of Liquidity Risk
as a significant risk in light of the granting of the Inmaculada
Modified Environmental Impact Assessment in August .
In the second half of , the Group entered El Niño as a new
risk on the Group’s risk register given the initial potentially
severe predictions of the impact of this weather event on the
Pacific coastal areas of Peru. In December , the Peruvian
Government downgraded its assessment of the severity of El
Niño. For the purposes of presentation, the actions taken by the
Company in H to mitigate this specific risk are detailed
within the commentary of Climate Change risks.
Reasons for the year-on-year change in the profile of a specific
risk can be found in the commentary section of the relevant risk.
RISK MANAGEMENT
Our risk appetite approach is to minimise our exposure to reputational,
compliance and excessive financial risk, whilst accepting a certain level
of risk to achieve our strategic goals.
How we identify
and manage risks
Hochschild Mining PLC
Annual Report & Accounts
0
Probability
High
Low
Low
Impact
High
1
8
4
9
11
10
12
13
2
7
6
5
3
14
To assist the reader in assessing the relative
significance of each risk discussed in this section,
the heat map indicates the Board’s assessment of
the likelihood of the unmitigated risk occurring as
well as the extent of the impact on the Group.
The key to the map indicates how the profile of a
risk has changed (whether in terms of impact or
probability) relative to the prior year.
.
Commodity price
.
Commercial counterparty
.
Operational performance
.
Business interruption/supply chain
.
Information security and cybersecurity
Exploration and reserve and resource replacement
.
Personnel: recruitment and retention
.
Personnel: labour relations
Project development
.
Political, legal and regulatory
Health and safety
.
Environmental
.
Climate change
.
Community relations
Risk heat map
Risk management process
Risks as at December
Unchanged
Higher
Lower
Identify
Business processes are reviewed to identify
risks to Hochschild’s strategic objectives with
a risk matrix prepared for each process.
Measure
Each risk identified is analysed for probability
of occurrence and scale of impact to determine
the level of threat to strategic objectives.
Manage
Taking into consideration the relevant risk
appetite and the scale of risk, mitigating actions
and controls are designed and implemented.
Monitor
Mitigation and controls monitored to ensure
effectiveness and to take all actions necessary
to achieve a level of risk management within
the defined appetite for risk.
Report
Established reporting within the business
on risk management by Internal Audit
function. Principal and emerging risks
reported on quarterly basis to Audit
Committee and the Board.
Proactive risk identification
and management process
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Financial Statements
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Further Information
227—231
Hochschild Mining PLC
Annual Report & Accounts
1
Risk, change & impact
Mitigation
Commentary
1. Commodity price
Adverse movements in precious metal
prices could materially impact the
Group in various ways beyond a
reduction in the financial results of
operations. These include impacts on
the feasibility of projects, the economics
of mineral resources, heightened
personnel retention and sustainability
related risks.
See the Market Review on pages to
for further details on how commodity
prices performed in
– Constant focus on maintaining
a low all-in sustaining cost of
production and an efficient level
of administrative expense.
– Policy to maintain reasonable levels
of financial leverage to ensure
flexibility through price cycles.
– Flexible hedging policy that allows
the Company to contract hedges to
mitigate the effect of price
movements taking into account the
Group’s asset mix, forecast
production and debt profile.
The Group’s principal strategy to mitigate against commodity price volatility is
focused on conserving capital and optimising cash flow through:
– controlling operating and administrative costs;
– optimising sustaining capital expenditure; and
– maintaining low working capital.
To ensure an ongoing level of cash flow stability, the Company executed
hedges during for the following years in respect of production from the
specified operation:
Inmaculada
: , ounces of gold with an average floor at $, per ounce and an
average cap of $, per ounce.
Mara Rosa
: , ounces of gold at a fixed price of $, per ounce
: , ounces of gold at a fixed price of $, per ounce
: , ounces of gold at a fixed price of $, per ounce
: , ounces of gold at a fixed price of $, per ounce
. Commercial counterparty
Insolvency of a customer or other
business counterparty (bank, insurance
company, contractor, etc) could result in
the Group’s inability to collect accounts
receivable or to access funds or to
receive services which could adversely
impact the Group’s profitability.
– Active assessment of customers and
business counterparties.
– Risk mitigation practices seeking to
diversify the Group’s customer base
and/or to limit the size of shipments.
– Ongoing assessment of methods to
mitigate collection risk.
During the year, the Group undertook the following:
– Commercial counterparty monitoring: The Company undertakes an annual
review of existing customers which encompasses analysis of corporate
governance, balance sheet strength and other aspects impacting credit
quality. Customers and financial counterparties are also the subject of
ongoing monitoring. During the year, such monitoring revealed the potential
risk of lost revenue following the discovery of fraud by a significant customer
involving its suppliers and employees. Shipments were suspended and
payment terms were renegotiated until the Company was reassured that no
significant risk existed.
– Review of financial counterparties: The Group continued to implement
policies to identify suitable financial counterparties to support the Group’s
treasury and insurance needs. On an ongoing basis, the Group has adopted
a number of practices such as the placing of limits on cash balances
invested with financial institutions and monitoring credit ratings.
Operational risks
Risk, change & impact
Mitigation
Commentary
. Operational performance
Failure to meet production targets and
manage the cost base could adversely
impact the Group’s profitability.
– Close monitoring of operational
performance, costs and capital
expenditure as well as the overall
profitability at all stages of the
mining value chain.
– Monitoring the adequacy of key
mining components such as tailings
storage facilities, waste rock deposits
and pipelines in close liaison with
relevant departments ensuring that
procurement, construction and
permitting are undertaken
appropriately.
In the Group’s production was , gold equivalent ounces.
In setting budgets for the year, the Group continued to focus on maintaining
controlled levels of costs, capital expenditure and expenses.
As reported in the Financial Review from page , the all-in sustaining cost
from operations was better than the revised guidance for the year, at
$, per gold equivalent ounce. A committee comprising members of the
Operations team continued to meet during the year to oversee the adequacy
of key components. Projects including the expansion of various components
at Inmaculada including the Tailings Storage Facility, waste rock deposit and
reverse osmosis plant were deferred until due to the delay in securing the
approval of the Inmaculada MEIA.
. Business interruption/
supply chain
Assets used in the Group’s operations
may cease to function or the provision of
supplies or of electricity may be
disrupted (e.g. as a result of technical
malfunction or earthquake damage)
thereby causing production stoppages
with material effects.
– Insurance coverage to protect
against major risks.
– Management reporting systems to
support appropriate levels of
inventory.
– Inspections every months by
insurance brokers and insurers (to
coincide with policy renewals) assist
management’s efforts to understand
and mitigate operational risks.
– Negotiation of long-term power
supply contracts and the
procurement of contingent
generators and transformers.
In addition to maintaining insurance policies covering machinery breakdown,
mitigating actions taken during the year include the following:
– the use of a Maintenance Module of SAP HANA to monitor critical supplies
and inventory;
– maintaining back-up equipment to ensure power supply in Peru and
Argentina; and
– a Crisis Response Plan (CRP) on how to mount a coordinated response to
unforeseen disruption.
Specifically with regards to supply chain risks across the Group, the Company:
– has identified alternative suppliers for numerous critical consumables;
– has restored stocks of critical consumables and strategic spare parts to
pre-pandemic levels;
– requires, of certain suppliers, the maintenance of minimum stock levels; and
– monitors the financial position of key suppliers.
Financial risks
Change in risk profile vs 0
Unchanged
Higher
Lower
N
New
RISK MANAGEMENT
CONTINUED
Hochschild Mining PLC
Annual Report & Accounts
Risk, change & impact
Mitigation
Commentary
5. Information security
and cybersecurity
Failure of any of the Group’s business
critical information systems as a result of
unauthorised access by third parties
may affect the Group’s ability to operate.
– Compliance with ISO , an
internationally recognised
certification to evaluate information
security management systems.
– Dedicated team within the IT
department focused on preventing
cyber-attacks.
– Audits performed by the internal
audit department and third parties
to test systems and issue
recommendations.
– Primary information processing
supported by SAP Hana which has
best-in-class security features.
Security of the Group’s information and networks are assured through the
following means:
– we have world-class cybersecurity tools supported by artificial intelligence
that secure and protect our network as well as our computer assets and the
information that resides in them. Additionally, we have a CiberSOC (Cyber
Security Operation Center) that works x to monitor the different events
and possible attacks that may arise;
– every year we perform ethical hacking evaluations to identify possible
vulnerabilities at the level of our technological infrastructure as well as the
different applications that we use to operate;
– we commissioned a review, by external consultants, of the vendor that
provides cybersecurity monitoring services;
– we train colleagues and keep them informed about the risks that exist
relating to cybercrime and information theft, as well as good practices
associated with cybersecurity;
– our Information Security Management System (ISMS) is ISO certified; and
– we added another layer of our server backups in the cloud to enhance the
level of protection.
. Exploration and reserve
and resource replacement
The Group’s future operating margins
and profitability depend upon its ability
to find mineral resources and to
replenish reserves.
– Implementing and maintaining an
annual exploration drilling plan.
– Ongoing evaluation of acquisition
and joint venture opportunities to
acquire additional ounces.
– Implementation of a comprehensive
permitting strategy led by a
Permitting Committee.
– Comprehensive engagement
activities with communities and
governmental authorities (see later
sections on Macro-economic and
Sustainability risks).
General
The Group has an internal Permitting Committee to co-ordinate efforts with a
view to streamlining the permitting process for exploration and operational
requirements. Senior executives actively participate in industry initiatives to
simplify the permitting process.
Limited greenfield exploration is undertaken, with the aim of providing the
Group with a balanced portfolio of advanced and early-stage opportunities in
stable jurisdictions in the Americas.
Developments during the year
Securing permits from the communities for exploration remains challenging.
The Company’s annual exploration drilling programme, which was suspended
during the year pending approval of the Inmaculada MEIA, resumed once
approval came through in August .
The year-on-year changes in the Company’s attributable Reserves and
Resources were -.% and -.% respectively.
Further details on brownfield exploration are provided on page .
Reserves stated in this Annual Report
are estimates.
– Alternate use of independent experts
and internal qualified persons to
undertake annual audit of mineral
reserve and resource estimates.
– Adherence to the JORC Code and
guidelines therein.
The Group’s annual audit of mineral reserve and resource estimates as
at December has been undertaken internally by an appropriately-
qualified competent person. An external audit will be commissioned for the
annual audit.
See page for further details.
. Personnel: recruitment and
retention
Inability to attract or retain personnel
through a shortage of skilled personnel.
For further details see the Directors’
Remuneration Report on page
– The Group’s approach to
recruitment and retention provides
for the payment of competitive
compensation packages, well
defined career plans, training and
development opportunities and the
overall employee value proposition.
General
The Group has undertaken a number of initiatives to improve the retention of
employees. These include the use of financial benefits such as the LTIP and
non-financial benefits (e.g. flexible working arrangements for office-based
staff) and personal development through tailored personal plans, training on
leadership and cultural transformation in the areas of social, safety and
environmental as well as diversity and sexual harassment training. In addition,
initiatives have been launched on causes valued by employees; providing
employees with the opportunity to contribute to the relaunched purpose of
the Company which includes innovation, community relations and
environmental performance.
Strategic Report
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Financial Statements
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Further Information
227—231
Hochschild Mining PLC
Annual Report & Accounts
Risk, change & impact
Mitigation
Commentary
8. Personnel: labour relations
Failure to maintain good labour relations
with workers and/or unions may result in
work slowdown, stoppage or strike.
– Development of a tailored labour
relations strategy focusing on profit
sharing, working conditions,
management style, development
opportunities, motivation and
communication.
– Periodic meetings with mineworkers
and unions to ensure a complete
understanding of expectations and
to keep all parties updated on the
Group’s financial performance.
Peru
The Group’s Peruvian operation generated sufficient taxable income to give
rise to an entitlement to statutory profit sharing for Peruvian mineworkers.
As reported earlier in the Annual Report, the Pallancata mine was placed on
care and maintenance at the end of . The redundancy packages for
affected workers were successfully negotiated with the three trade unions.
The Boluarte government has not taken further steps following the enactment
of new laws by Pedro Castillo’s Government to empower labour unions and
prompting the risk of increased industrial unrest. We monitor, on an ongoing
basis, the social risk and work with all stakeholders to prevent disruption
arising from these risks.
Argentina
In Argentina the Company maintains constructive relations with the labour
unions through ongoing and regular dialogue. In addition to AOMA (Mining
National Union for hourly workers), ASIJEMIN (National Union for mining
employees) has been confirmed by the national authorities as a union with
legitimate rights of representation and with whom the Company maintains
open and regular dialogue.
Following his election, President Milei has implemented austerity measures
and reforms which are being contested by the country’s labour unions who
called for a -hour nationwide strike and which was subsequently held in
December .
Brazil
In Brazil, in advance of start of operations at Mara Rosa, Hochschild
established a Union Negotiation Committee. In November , discussions
were initiated with the Union of Workers in Extractive Industries of Vale do Rio
Crixás which represents the mining sector in the region. Meetings with the
participation of all employees were held in December and January
to discuss matters chosen by employees.
. Project development
Failure to manage the timely
construction/development of projects
within budget could adversely impact
the Group’s financial position,
production profile and reputation.
– Cross-disciplinary project teams,
which report to the relevant
Vice-President, monitor execution
against agreed timelines and
budget.
– Support by corporate departments,
such as HR, Internal Audit and
Procurement, to ensure compliance
with Group procedures and
standards.
Mara Rosa (Brazil)
During the year, the Company successfully progressed with the construction
of the Mara Rosa mine on schedule and on budget, resulting in the first gold
pour in February and the full plant ramp-up starting in Q .
For further details on Mara Rosa, the Company’s first mine in Brazil, see pages
and , and page .
Snip (Canada)
Having conducted a detailed review of the project economics and in line with
its disciplined approach to capital allocation, the Group terminated its option
over the Snip project in British Columbia in April .
10. Political, legal
and regulatory
Changes in the government, political,
legal, tax and regulatory landscape
could result in significant additional
expense, restrictions on or suspensions
of operations and may lead to delays in
the development of current operations
and projects.
Delays in granting/securing the
necessary environmental and
operational permits for exploration or
operations, including specifically
Pallancata’s Third Modified
Environmental Impact Assessment
(MEIA) and operational permit for the
new areas of Inmaculada could affect
future production and financial results of
the Group.
– Local specialist personnel
continually monitor and react, as
necessary, to policy changes. In
addition, political, social and
communications advisers have been
engaged to support the Group in
responding to developments.
– Participation in local industry
organisations.
Peru
Political
The impeachment of former president Castillo, following his failed coup in
which he attempted to dissolve Congress and control the judiciary, triggered
violent protests across the country. Protesters blocked key highways and
roads, and invaded airports and destroyed public and private property,
demanding the resignation of his successor Dina Boluarte, the dissolution of
Congress, and the approval of a constituent assembly to draft and approve a
new constitution.
Boluarte’s government was able to contain the social unrest, but the
government’s high disapproval generates uncertainty and constitutes a risk.
Environmental permits
Inmaculada’s MEIA was approved on August .
The Company has commenced the environmental permitting process to
enable production from the Royropata zone at Pallancata and to support the
ongoing associated brownfield activities.
Easement and other permits
The Company is in the process of renewing, for an additional -year period,
the easement by the State over the land on which the key mining components
of the Inmaculada mine are located.
Argentina
President Milei started his presidential term on December . President
Milei has embarked on a series of economic reforms and institutional reforms
to reign-in Argentina’s economic crises, where high levels of inflation, poverty
and socialist policies have become the norm. Labour unions and other
socialist leaning organisations have initiated strikes and other measures to
pressurise Milei’s government to halt these reforms.
Brazil
President Lula da Silva took office and is governing based on a centre-left
political and economic platform. The Governor of the State of Goiás, where
Mara Rosa is located, was re-elected for another term.
Operational risks
(continued)
Change in risk profile vs 0
Unchanged
Higher
Lower
N
New
RISK MANAGEMENT
CONTINUED
Hochschild Mining PLC
Annual Report & Accounts
Sustainability risks
Risk, change & impact
Mitigation
Commentary
11. Health and safety
Group employees working in the mines
may be exposed to severe health and
safety risks.
Failure to manage these risks may result in
occupational illness, accidents, a work
slowdown, stoppage or strike and/or may
damage the reputation of the Group and
hence its ability to operate.
– Health and safety operational
policies and procedures reflect the
Group’s zero tolerance approach to
accidents.
– Use of world-class DNV safety
management systems.
– Dedicated personnel to ensure the
safety of employees at the
operations via stringent controls,
training and prevention
programmes.
– Systematic programme of training,
communication campaigns and
other initiatives promoting safe
working practices.
– Use of reporting and management
information systems to monitor the
incidence of accidents and enable
preventative measures to be
implemented.
The Group is pleased to report on its continued strong safety performance in
with our principal KPIs at all-time lows, with the accident frequency at
. (: .) and accident severity at (: ) and the attainment of our
ongoing objective of Zero Fatalities (: Zero fatalities).
Management continued with the implementation of ”Safety .”, an action
plan to reinforce a safety-first culture. The plan, which combines technical and
people-led approaches, comprises seven key pillars covering training, effective
communication, recognition and aligning compensation with measurable
safety performance. A risk perception programme designed in-house was
implemented during the year yielding very encouraging results. This
behaviour-based programme uses past examples as case studies to
learn from.
Following its roll-out in , the Company made continued use of the
Seguscore, which is a holistic measure of the Group’s safety performance
combining traditional indicators (including those referred to above) with
leading indicators reflecting the outcome of internal and external safety
audits.
For further details on the Seguscore and other safety initiatives, please refer to
the safety section of the Sustainability Report on pages and .
1. Environmental
The Group may suffer from reputational
risk and may be liable for losses arising
from environmental hazards associated
with the Group’s activities and
production methods, ageing
infrastructure, or may be required to
undertake corrective actions or extensive
remedial clean-up action or pay for
governmental remedial clean-up actions
or be subject to fines and/or penalties.
– The Group has a dedicated team
responsible for environmental
management.
– The Group has adopted a number of
policies and procedures to manage
its environmental footprint.
– The Group has developed a tool
which allows it to measure and
manage environmental
performance.
– The Group continues to adopt
measures to minimise natural
resource use, with particular
emphasis on water consumption in
its operations.
– A specific tailings management
framework is in place for TSFs,
including independent third party
review.
In , the Group performed strongly in its ECO Score (with a score of . out
of (: .)), reflecting the following notable achievements:
– three operations achieving a perfect score of out of (Ares, Arcata and
Sipan);
– the lowest water consumption since ( l/person/day);
– the lowest domestic waste generated since (. kg/person/day); and
– the Group maintains a very high level of environmental culture compliance
(using an internal scoring system).
In addition, during the year:
– we continued to implement our tailor-made Environmental Management
System on schedule;
– the Environmental team continued with its efforts on reporting widely on the
Group’s environmental performance by participating in numerous reporting
initiatives resulting in improvements in the rating updates; and
– reviewed and restructured the Environmental Culture Transformation Plan
(ECTP) in line with our updated EMS Processes and Company attributes
which in included training for Environmental Ambassadors and
environmental workshops for key stakeholders in Peru, Argentina and Brazil.
As disclosed in the Operational risks section, the Group has published
information on its website regarding its TSFs, including their construction
method and risk profile. It also continues to commission independent third
party reviews and monitors their stability on an ongoing basis.
For further details, please refer to the environmental section of the
Sustainability Report on pages to .
Strategic Report
1—
Governance
100—149
Financial Statements
150—226
Further Information
227—231
Hochschild Mining PLC
Annual Report & Accounts
5
Change in risk profile vs 0
Unchanged
Higher
Lower
N
New
RISK MANAGEMENT
CONTINUED
Sustainability risks
(continued)
Risk, change & impact
Mitigation
Commentary
1. Climate change
Changes in climate and weather
patterns, including the occurrence of
extreme weather events such as higher
rainfall, droughts and storm conditions,
may cause operational disruption and,
at worse, could result in a suspension of
operations.
Failure to comply with climate-related
laws and regulations could result in
reputational risks for the Group,
increased costs and longer permitting
delays.
Lack of climate change actions could
result in restricted access to capital.
Read our CFD Report from page .
– Enhanced management oversight
and operating protocols to:
– quantify and verify carbon
footprint, including Scope ;
– maximise the efficient use of
natural resources and minimise
energy consumption;
– maximise the use of renewable
energy; and
– promoting transparency with
regards to the Group’s
performance through participation
in investor-led reporting initiatives.
Actions taken in include:
– Set an ambition to reduce our Scope and Greenhouse Gas emissions by
% by , against our baseline; and
– Ongoing reporting to the Board and Sustainability Committee on status of
climate change-related risks.
Reporting of the Group’s performance has been enhanced through:
– continued external assurance of the calculation of the Group’s carbon
footprint at operations;
– reporting in line with the Task Force on Climate-related Financial Disclosures
(TCFD). Reporting in will be in compliance with the mandatory
Climate-related Financial Disclosure (CFD) requirements for companies
across the UK, which have been developed and adapted from the TCFD; and
– participation in CDP information request (improved score from C in to B
in ).
Coastal El Niño Preparedness
In response to the Peruvian Government’s assessment of a potentially severe
El Niño event affecting the Pacific coastal regions, the Company took a
number of actions seeking to mitigate the impact on the Company and its
operations. These included:
– the establishment of a taskforce headed by the General Manager of the
Peruvian operations to identify potential impacts on people, assets and
processes, and to formulate mitigating measures;
– the sourcing of equipment, such as frontloaders, to carry out any necessary
roadworks close to Inmaculada;
– specific reviews of critical stocks required by the Peruvian operations; and
– the appointment of a meteorologist to monitor the latest national
assessments as well as the conditions local to our Peruvian operations.
As stated in the introduction to the Risk Management report, the initial
predictions of the impact of the Coastal El Niño were downgraded in late /
early .
1. Community relations
Communities living in the areas
surrounding the Group’s operations may
oppose the activities carried out at
existing mines or, with respect to
development projects and prospects,
may invoke their rights to be consulted
under new laws.
These actions may result in loss of
production, increased costs and
decreased revenues, longer lead times,
additional costs for exploration and
have an adverse impact on the Group’s
ability to obtain the relevant permits.
– The Group has a dedicated team
responsible for Community
Relations.
– Constructive engagement with local
communities based on several years
of positive relations.
– Community Relations strategy
focuses on promoting education,
health and nutrition, and sustainable
development.
– Policy to actively recruit workers
from local communities.
– Policy of hiring service providers
from local communities.
– The Group has also engaged with
local governments to support public
investment initiatives through
technical assistance and direct
investment.
Overall
The polarised political climate in Peru has led to an increase in social conflicts
by some local communities, which are trying to take advantage of the situation
to increase their economic demands. As a result, social conflicts (e.g.
blockades of access roads to the mining units) have become common as a
mechanism to pressure mining companies into giving into their demands.
Despite the existence of pre-existing agreements, many communities refuse to
recognise their validity and demand renegotiation of the agreements, which
has led to numerous rounds of discussions. These discussions are continuing
at the time of writing.
Governmental authorities remain very sensitive to conflicts between
communities and mining companies and typically take a cautious approach
by prioritising dialogue between parties and supporting social demands
regardless of their merit.
Hochschild developments
The Group continues to implement its social engagement strategy in
recognition of its responsibilities to host communities. The Group invested
significant resources to understand the needs and expectations of local
communities and governments and actively participates in discussions with
different stakeholders, some of which include the participation of the State.
During the year:
– the Group spent or donated $. million (: $. million) to benefit local
communities and supported local communities and local governments;
– we continued to support the communities with a wide range of programmes
covering our areas of focus: education, health and nutrition, and sustainable
development; and
– the Community Relations team continued to support the business, for
example, in relation to permitting and environmental studies.
– the Company maintained a close dialogue with various community leaders
in Mara Rosa – from public authorities to representatives from different
economic sectors – to help us generate a direct positive impact on the
development of the municipality. At the end of , % of Hochschild’s
Brazilian workforce was from Mara Rosa and the region.
Further details can be found in the Sustainability Report from page .
Hochschild Mining PLC
Annual Report & Accounts
In accordance with provision 1 of the UK Corporate Governance
Code, the Directors have assessed the viability of the Group taking
into account the Group’s current position and principal risks.
Period of Viability Statement
The Directors have reviewed the length of time to be covered by
the Viability Statement, particularly given its primary purpose of
providing investors with a view of financial viability that goes
beyond the period of the Going Concern statement.
It has been concluded that the period from the date of this
statement and ending at the end of the second calendar year
(the “Viability Period”) is the appropriate time horizon in light of:
– the inherent uncertainty of longer-term forecasting in a
cyclical industry which, in the case of precious metals, is
largely driven by global macro-economic factors; and
– the large number of external variables that need to be taken
into account in establishing any meaningful forecast of the
Group’s business.
Approach to assessing viability
In assessing the Group’s viability, the Directors have considered
a number of scenarios affecting the Inmaculada and/or Mara
Rosa mines which are within reasonable contemplation taking
into account the principal risks to which the Group is exposed.
Read more in our Risk Management Report from page .
Inmaculada and Mara Rosa are collectively expected to
generate c.% of attributable Group production in .
In their assessment of the financial impact of each of the above
scenarios, the Directors made the same assumptions as those used
for the Base Case Scenario in the Going Concern analysis, namely:
– December consensus prices as detailed below:
$/oz
0
05
0
Au
,
,
,
Ag
.
.
.
– operational forecasts are in line with the budget for
and the LOM plans for onwards;
– debt repayments between and will proceed as planned;
– the US$ million medium-term credit facility will be drawn
down in as currently expected;
– US$ million of the Group’s medium-term facility is
refinanced in with a two-year grace period;
– in the cases where a scenario envisages a mine or plant
stoppage which results in a delay in production, production will
be recovered once plant capacity at the relevant mine/(s)
becomes available, albeit after the three-year time horizon ; and
– with regards to Pallancata, the forecasts incorporate the
expenses relating to the MEIA incurred in , and the
construction capex to be paid in and .
The financial impact of outstanding hedges as at the date of this
report (as detailed in the commentary accompanying
Commodity Price risk on page ) has been reflected in the
forecasts used to analyse the selected scenarios.
The following scenarios were analysed:
Scenario 1: A community-led protest results in a blockade of a
principal road to/from the mine and damage to a critical plant
component
A protest by a local community obstructs the access road to
Inmaculada for two months. Furthermore, it is assumed that a
component of the plant is damaged and repair works will take six
months to complete. The impact analysis takes into account the
cost of negotiating a settlement and other associated expenses.
Scenario : A strike by mineworkers
A widespread mineworkers’ strike results in a suspension of
operations at Inmaculada and Mara Rosa for one month in
different months. The impact analysis takes into account the
cost of negotiating a settlement and other associated expenses.
Scenario : The occurrence of a material safety accident
A severe fatal accident occurs at Inmaculada and Mara Rosa
which results in a one-month stoppage of operations. The impact
analysis takes into account other financial liabilities that may
result including the cost of remedial work and regulatory fines.
Scenario : The occurrence of a material environmental incident
A key part of Inmaculada and Mara Rosa’s plant infrastructure is
compromised which results in a major spillage of contaminants.
The impact analysis assumes a suspension of operations of one
month in different months and takes into account the cost of
repairs, remediation and regulatory fines and other
associated expenses.
Scenario 5: The failure of the mill or other critical plant component
A major failure of one of the mills at Inmaculada’s plant causes a
stoppage of six months which requires civil works, repairs and
the acquisition of spare equipment. The impact analysis takes
into account the cost of the works and replacement costs as well
as contributions from relevant insurance policies.
Scenario : Precious metal prices fall to a level that is 10% below
the annual average consensus prices
Following such a fall in prices, the Company would seek to
reduce variable costs and capital expenditure by %.
In their assessment of the financial impact of each of the above
scenarios, the Directors concluded that upon the occurrence of
one of the scenarios, the Company would be viable. Taking into
account the causes of operational stoppages in the past and
the extent of the disruption caused, the Directors are of the
opinion that a combination of two or more of the above
scenarios taking place concurrently is remote.
Should prices fall further than the Assumed Prices or the
scenarios in reality are more severe than those modelled or a
combination of scenarios occurs, the Board would oversee the
implementation of mitigating actions which include:
– the use of lines of credit with relationship banks, noting that over
$ million of pre-approved, but uncommitted, working capital
credit lines were already available (subject to compliance with
covenant ratios under the medium-term credit facilities);
– refinancing one or both of the medium-term credit facilities;
– raising capital at either the corporate or asset levels; and
– other measures such as pay-outs under insurance policies, working
capital management, asset sales and commodity price hedging.
For examples of the actions taken by the Board during the year
under review to mitigate the impact of the Group’s principal
risks, please refer to the commentary in the Risk Management
section of this report.
Conclusion
While it is always possible that combinations of weak precious
metal prices and the occurrence of more than one of the above
referenced scenarios could threaten the solvency and liquidity
of the Company over the next three years, such combinations
are considered to be remote. The Directors have therefore
assessed the impact of each scenario, using the Assumed Prices
and other factors considered to be reasonable, and, accordingly,
can confirm that they have a reasonable expectation that the
Company will be able to continue in operation and meet its
obligations over the next three years.
VIABILITY STATEMENT
Strategic Report
1—
Governance
100—149
Financial Statements
150—226
Further Information
227—231
Hochschild Mining PLC
Annual Report & Accounts
Group non-financial information statement
The information below is produced to comply with sections CA and CB of the Companies Act .
The information is incorporated by cross-reference.
Reporting requirement
Relevant policies
Further information
KPIs
Business model
Business model (page )
Principal risks
– Risk Management & Viability
(page )
– Audit Committee report
(page )
Environmental matters
– Code of Conduct*
– Corporate Sustainability
Policy*
– Corporate Environmental
Policy
Environment section of
the Sustainability Report
(page )
– GHG emissions
– GHG intensity
– ECO Score
– Electricity consumption
– Water consumption
– Waste generation
Employees
– Code of Conduct*
– Corporate Sustainability
Policy*
– Protocol for the Prevention
of Covid-
– Corporate Health & Safety
Policy
The following sections of the
Sustainability Report:
Our People (page ),
Health & Safety (page )
– % workforce unionised
– Health consultations
– High Potential Events rate
– Fatalities
– Injury Frequency rate
– Accident Severity rate
Social matters
– Corporate Sustainability
Policy*
– Corporate Community
– Relations Policy*
Community Relations section
of the Sustainability Report
(page )
– Community employment
– Community investment
– Services and goods
provided by suppliers from
communities
Human rights
– Corporate Sustainability
Policy*
– Corporate Human
Rights Policy*
– Diversity & Inclusion Policy*
– Sexual Harassment
Prevention Policy
Our People section of
the Sustainability Report
(page )
– Workforce by gender
Anti-corruption and Anti-
bribery matters
– Code of Conduct*
– Anti-corruption
and Anti-bribery Policy*
– Whistleblowing Policy*
Audit Committee report
(page )
*
Copies available from http://www.hochschildmining.com/en/responsibility.
Eduardo Landin
Chief Executive Officer
March
STRATEGIC REPORT
CONTINUED
Hochschild Mining PLC
Annual Report & Accounts
8
Strategic Report
1—
Governance
100—149
Financial Statements
150—226
Further Information
227—231
Hochschild Mining PLC
Annual Report & Accounts
Eduardo Hochschild
Chair of the Board
Key skills and competencies
– Over years’ involvement with the Group
– Extensive board experience of
companies in Latin America
– Proven ability to implement long-term
strategies in both the non-profit and
corporate sectors
Current external appointments
Commercial:
Cementos Pacasmayo S.A.A.
(Chair), Aclara Resources Inc. (Chair)
Non-profit
:
UTEC (Chair), TECSUP,
Museum of Contemporary Art, Lima
(Chair), Conferencia Episcopal Peruana
Previous experience
Eduardo joined the Hochschild Group
in as Safety Assistant at the Arcata
unit, becoming Head of the Hochschild
Mining Group in .
Eduardo is the Company’s largest
shareholder with a c.% interest.
Joined the Group in and
appointed Board Chair in .
Committee membership
Eduardo Landin
Chief Executive Officer
Key skills and competencies
– Long-standing operational experience
– Broad knowledge of strategic planning
and operational control
– Qualified Mechanical Engineer
Current external appointments
Non-profit:
Patronato Universidad
del Pacifico
Previous experience
Prior to his appointment as CEO in August
, Eduardo served as COO of the
Company since March . He joined the
Company in January as General
Manager of Argentinian operations and,
In , became General Manager of
Projects with direct responsibility for the
development of the Inmaculada and
Crespo Advanced Projects. Eduardo
previously worked at Cementos
Pacasmayo, in the Government of Peru’s
Ministry of Energy and Mines and at
Repsol S.A. in England, Spain and Peru.
Appointed to the Board
in August .
Committee membership
Jorge Born Jr.
Non-Executive Director
Key skills and competencies
– Extensive experience of managing
international businesses
– Deep understanding of socio-political
issues in Latin America
– Corporate finance
Current external appointments
Commercial:
President of Consult & Co.
and Non-Executive Director of Aclara
Resources Inc.
Non-profit:
Bunge and Born Charitable
Foundation (President)
Previous experience
Jorge served as a Director and Deputy
Chairman of international agribusiness
Bunge between and . He
previously served as Head of European
operations and Head of the UK
operations. Jorge previously served as
a Non-Executive Director of Dufry AG.
Appointed to the Board in .
Committee membership
Jill Gardiner
Independent Non-
Executive Director
Key skills and competencies
– Long-standing career in investment
banking in Canada focusing on strategy
and M&A
– Significant experience on listed
company boards
– In-depth knowledge of corporate
governance/finance
Current external appointments
Commercial
:
Non-Executive Chair
of Capital Power Corporation
Non-profit:
ARC Foundation
Previous experience
Jill spent over years in the investment
banking industry having served in a
number of senior leadership roles at RBC
Capital Markets. She provided strategic
advice to and helped raise capital for
companies with a focus on the power,
pipeline, infrastructure and certain
commodity related industries. Jill
previously served as Chair of Trevali
Mining Corporation.
Appointed to the Board in August
.
Committee membership
Tracey Kerr
Independent Non-
Executive Director
Key skills and competencies
– Extensive experience of managing
sustainability in mining
– Geology, having overseen global
exploration activities
– UK listed company governance
Current external appointments
–
Commercial:
Non-Executive Director
of Weir Group PLC, Jubilee Metals PLC
and Antofagasta plc
Previous experience
Tracey spent almost years working for
Anglo American plc, most recently as the
Group Head of Sustainable Development
having previously also been accountable
for safety, operational risk management
and sustainable development. Prior to
working in sustainability, Tracey worked
as a geologist where she oversaw Vale’s
exploration activities in the Americas and
subsequently joined Anglo American as
Group Head of Exploration. Tracey
previously served as a Non-Executive
Director of Polymetal International PLC.
Appointed to the Board in
December . Designated
Non-Executive Director for
workforce engagement.
Committee membership
BOARD OF DIRECTORS
Audit Committee
Nomination Committee
Remuneration Committee
Sustainability Committee
Chair
A highly skilled and
experienced Board
Hochschild Mining PLC
Annual Report & Accounts
100
Male
/
Female
/
- years
%
- years
%
+ years
%
Gender of Directors on the Board
Tenure of Independent Non-Executive Directors
Joanna Pearson
Independent Non-Executive
Director
Key skills and competencies
– Extensive experience of public
company financial reporting
and risk management
– Mining sector experience
– UK listed company governance
Current external appointments
Commercial:
Non-Executive Director
of Goldshore Resources Inc.
Previous experience
Joanna was formerly Executive Vice
President and Chief Financial Officer of
the FTSE company, Endeavour Mining
plc, and, prior to that, was an audit partner
at Deloitte LLP, Vancouver for years
where she conducted multinational audit
engagements for US and Canadian listed
companies primarily in mining and
emerging markets.
Joanna is a Chartered Professional
Accountant of British Columbia.
Appointed to the Board in October
.
Committee membership
Michael Rawlinson
Senior Independent Director
Key skills and competencies
– Significant knowledge of the mining
sector
– Corporate finance, strategy and M&A
– UK listed company governance
Current external appointments
Commercial:
Adriatic Metals Plc (Chair)
and Non-Executive Director of Capital
Limited and Andrada Mining
Previous experience
Michael’s career of over years
culminated in his role as Global
Co-Head of Mining and Metals at
Barclays Investment Bank. Before that,
he was one of the co-founding directors
at boutique investment bank Liberum
Capital, having worked as a corporate
financier and equity research analyst
covering the mining sector at JP
Morgan, Cazenove and Flemings.
Appointed to the Board in and
as Senior Independent Director
in January .
Committee membership
Mike Sylvestre
Independent Non-Executive
Director
Key skills and competencies
– Extensive experience of managing
mining operations
– In-depth knowledge of the Canadian
market, a key mining hub
– Mining Engineering (B.Sc and M.Sc.
from McGill University and Queen’s
University respectively)
Current external appointments
Commercial:
Non-Executive Director of
TSX-listed Nickel Creek Platinum Corp.
and Vista Gold Corp.
Previous experience
Mike spent eight years at Kinross Gold
Corp, most recently as SVP, Operations
until his retirement in December . He
previously served as Director and Interim
CEO of TSX-listed Claude Resources Inc.
having spent a significant portion of his
career with Vale Canada (formerly Inco
Ltd). During his time there he held the
positions of CEO New Caledonia and
President, Manitoba Operations. Mike is a
member of the Professional Engineers of
Ontario and a graduate of the Institute of
Corporate Directors (ICD) in partnership
with the Rotman School of Management.
Appointed to the Board in May .
Committee membership
Raj Bhasin
Company Secretary
Key skills and competencies
Raj is a solicitor and Chartered
Secretary with over years’
experience in FTSE-listed companies.
He has significant experience in
corporate and commercial law.
Previous experience
Raj previously served as Deputy
Company Secretary and Commercial
Counsel at Burberry Group plc.
Joined the Group and appointed
Company Secretary in .
Strategic Report
01—99
Governance
100—1
Financial Statements
150—226
Further Information
227—231
Hochschild Mining PLC
Annual Report & Accounts
101
DIRECTORS’ REPORT
The Directors present their report for the year ended
December .
Information in Directors’ Report
The Directors’ Report comprises the Corporate Governance
Report from pages to , this Report on pages and
, and the Supplementary Information on pages to .
Other information that is relevant to the Directors’ Report, and
which is incorporated by reference, comprises:
– greenhouse gas emissions data and the steps taken by the
Company to increase its energy efficiency, included in the
Sustainability Report from page ; and
– policy on financial risk management in note to the
consolidated financial statements.
For the purposes of compliance with Disclosure Guidance and
Transparency Rules ..R() and ..R, the Strategic Report
and this Directors’ Report (including the other sections of the
Annual Report incorporated by reference) comprise the
Management Report.
Dividend
The Directors did not declare an interim dividend in respect of
the year ended December and are not recommending
the payment of a final dividend.
Dividend waiver
The trustee of the Hochschild Mining Employee Share Trust
(“the Employee Trust”) has waived, on an ongoing basis, the right
to dividend payments on shares held by the Employee Trust.
Directors
The names, functions and biographical details of the Directors
serving at the date of this report are given on pages and
. Other than Eduardo Landin and Joanna Pearson, who were
appointed on August and October respectively,
all of the Directors were in office for the duration of the year
under review. Nicolas Hochschild and Eileen Kamerick resigned
from the Board at the conclusion of the AGM on June
and Ignacio Bustamante stepped down from the Board on
December .
All Directors will be retiring and seeking re-election (or, election
in the case of Eduardo Landin and Joanna Pearson) by
shareholders at the AGM in line with the UK Corporate
Governance Code.
Directors’ and officers’ liability insurance
The Company’s Articles of Association (the “Articles”) contain
a provision whereby each of the Directors may be indemnified
by the Company in respect of liability in relation to: (i) any
negligence, default, breach of duty or breach of trust relating to
the Company or any associated company; (ii) execution of his/
her duties as Director of the Company; and (iii) the activities of
the Company or any associated company as trustee of an
occupational pension scheme. For these purposes, associated
company has the meaning given to it by section of the
Companies Act .
However, a Director will not be indemnified for any liability
incurred by him/her to the Company or Group companies; any
criminal or regulatory fines; the costs of defending any criminal
proceedings in which he/she is convicted; or the costs of
defending any civil proceedings brought by the Company in
which judgment is given against him/her.
The Company has purchased and maintains liability insurance
for its Directors and officers as permitted by law and Deeds of
Indemnity on terms consistent with the Articles have been
executed by the Company in favour of the Directors.
Political and charitable donations
The Company does not make political donations. During the
year, the Group spent or donated a total of $. million to benefit
local communities (either directly or through local authorities)
(: $. million).
Relationship Agreement
Pelham Investment Corporation (the “Significant Shareholder”),
Eduardo Hochschild (who together with the Significant
Shareholder are collectively referred to as the “Controlling
Shareholders”) and the Company entered into a relationship
agreement (“the Relationship Agreement”) in preparation for the
Company’s IPO in and which was amended and restated
during .
The principal purpose of the Relationship Agreement is to
ensure that the Group is capable of carrying on its business for
the benefit of the shareholders of the Company as a whole, and
that transactions and relationships with the Controlling
Shareholders and any of their respective associates are at arm’s
length and on normal commercial terms.
Further details of the Relationship Agreement with regard to the
conduct of the Significant Shareholder are set out in the Corporate
Governance Report on page and, with regard to the right to
appoint Directors to the Board, are set out on page .
Hochschild Mining PLC
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10
As required by the Listing Rules, the Directors confirm that,
with respect to the year under review:
– the Company has complied with the independence provisions
included in the Relationship Agreement; and
– so far as the Company is aware:
•
the independence provisions included in the Relationship
Agreement have been complied with by the Controlling
Shareholders or any of their associates; and
•
the procurement obligation included in the Relationship
Agreement has been complied with by the Controlling
Shareholders.
Conflicts of interest
The Companies Act allows directors of public companies
to authorise conflicts and potential conflicts of interest of
directors where the Company’s Articles of Association contain a
provision to that effect. Amendments to the Company’s Articles
of Association were approved by shareholders in , which
included provisions giving the Directors authority to authorise
matters which may result in the Directors breaching their duty
to avoid a conflict of interest.
The Board has established effective procedures to enable
the Directors to notify the Company of any actual or potential
conflict situations and for those situations to be reviewed and,
if appropriate, to be authorised by the Board, subject to any
conditions that may be considered necessary. In keeping with
the approach agreed by the Board, Directors’ conflicts were
reviewed during the year under review.
Directors of the Company who have an interest in matters
under discussion at Board meetings are required to declare
this interest and to abstain from voting on the relevant matters.
Any related party transactions are approved by a committee of
the Board consisting solely of Independent Directors. In addition,
the Directors will be able to impose limits or conditions when
giving any authorisation, if they think this is appropriate.
Going concern
After their thorough review of Group liquidity and covenant
forecasts the Directors have a reasonable expectation that the
Group and the Company have adequate resources to continue
in operational existence for the period to April which is
at least months from the date of these financial statements.
Accordingly, they continue to adopt the going concern basis of
accounting in preparing the annual financial statements. Please
refer to note (d) to the consolidated financial statements for full
details of the Directors’ assessment of going concern.
AGM
The th AGM of the Company will be held at .am on June
. The shareholder circular incorporating the Notice of AGM
will be sent separately to shareholders or, for those who have
elected to receive electronic communications, will be available
for viewing at
The shareholder circular contains details of the business to be
considered at the meeting.
Auditor
A resolution to reappoint Ernst & Young LLP as Auditor will be
put to shareholders at the forthcoming AGM.
Statement on disclosure of information to Auditor
Having made enquiries of fellow Directors and of the Company’s
Auditor, each Director confirms that, to the best of his/her
knowledge and belief, there is no relevant audit information
of which the Company’s Auditor is unaware.
Furthermore, each Director has taken all the steps that he/she
ought to have taken as a Director in order to make himself/
herself aware of any relevant audit information and to establish
that the Company’s Auditor is aware of that information.
This confirmation is given, and should be interpreted, in
accordance with the provisions of section () of the
Companies Act .
Directors’ responsibilities
The Directors confirm that to the best of their knowledge:
– that the consolidated financial statements, prepared in
accordance with UK-adopted international accounting
standards give a true and fair view of the assets, liabilities,
financial position and profit of the parent company and
undertakings included in the consolidation taken as a
whole; the Annual Report, including the Strategic 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; and
– that they consider the Annual Report, taken as a whole, is fair,
balanced and understandable and provides the information
necessary for shareholders to assess the Company’s position,
performance, business model and strategy.
See page for a detailed description of the Directors’
responsibilities in the preparation of the Annual Report and
the Group and Parent Company financial statements.
Disclaimer
Neither the Company nor the Directors accept any liability to
any person in relation to this Annual Report except to the extent
that such liability could arise under English law. Accordingly, any
liability to a person who has demonstrated reliance on any
untrue or misleading statement or omission shall be determined
in accordance with section A of the Financial Services and
Markets Act .
On behalf of the Board.
Raj Bhasin
Company Secretary
March
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Hochschild Mining PLC
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CORPORATE GOVERNANCE REPORT
Dear Shareholder
I am pleased to present the Corporate Governance Report
for .
In this section of the Annual Report, we report on the Company’s
compliance with the provisions of the edition of the UK
Corporate Governance Code (“the Code”) and the application
of its principles.
was a defining year for the Company; with the approval
of the vital Modified Environmental Impact Assessment (MEIA)
for our flagship asset, Inmaculada, for another years,
and the continued excellent progress with the construction
of Hochschild’s first mine in Brazil, Mara Rosa. Given the
importance of the former, it is unsurprising that the Board
devoted a lot of its time in the first half of the year in meeting
on an ad-hoc basis and receiving updates from management
on relevant developments and, out of prudence, overseeing
the necessary actions in preparing for an extended delay or
unfavourable outcome. A summary of the matters discussed
at these ad-hoc and our scheduled meetings are provided later
in this report.
Ensuring the Board is fit for purpose
With the planned retirement of Eileen Kamerick from the Board
earlier in the year, I am happy to report that the Nomination
Committee oversaw the successful execution of the Board
succession plan which resulted in the appointment of Joanna
Pearson as a Non-Executive Director in October. With her
long-standing expertise and experience in financial reporting
in the sector, she is ideally placed to assume the role of Audit
Committee Chair following this year’s Annual General Meeting.
In relation to the change in executive leadership, the Board
was pleased to be able to appoint Eduardo Landin, who was our
Chief Operating Officer for years, as our new Chief Executive
Officer. The transition of responsibilities has been a smooth one,
and for that we thank Ignacio who remained on the Board, as a
Non-Executive Director, until the end of the year.
Engaging With Our Investors
Since securing the approval of the Inmaculada MEIA, there is a
common theme that has informed, and will continue to inform,
the Directors’ approach to governance at Hochschild Mining;
that of engaging with our investors and seeking their views.
As described in the Directors’ Remuneration Report, the
Remuneration Committee launched an open engagement
programme seeking the views of our significant shareholders
on matters of governance and executive remuneration. In
November, we were pleased to host a Capital Markets event and
retail investor presentation setting out the Company’s strategic
objectives and latest developments in key areas such as ESG
(environmental, social and governance matters) and our
exploration programme. Finally, as set out in Jill Gardiner’s
introductory letter to the Audit Committee Report, the Company
will be undertaking a tender of the audit engagement. As a
critical provider of assurance for our investors, we are inviting
views from our shareholders on the tender process before its
launch in the second half of the year.
I trust you will find this report to be informative. If you should
have any queries, please do not hesitate to contact me at
Chairman@hocplc.com.
Eduardo Hochschild
Company Chair
A robust approach to
corporate governance
The Board and the Committees
took active steps to ensure
continuity of leadership and
reaching out to key stakeholders.”
“
Eduardo Hochschild
Company Chair
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Introduction
This report, together with the Directors’ Remuneration Report,
describes how the Company has applied the Principles of the
UK Corporate Governance Code (“the Code”) ( edition)
in respect of the year ended December . A copy of the
Code is available on the website of the Financial Reporting
Council (FRC) at www.frc.org.uk.
Disclosures to be included in the Corporate Governance Report
in relation to share structure, shareholder agreements and the
Company’s constitutional provisions pursuant to the Disclosure
Guidance and Transparency Rules are provided in the
Supplementary Information section on pages to .
Provision
Explanation
The Chairman has been in post beyond nine
years from the date of his first appointment to
the Board
As a major shareholder of the Company and given his significant experience of mining in Peru, the
Directors consider Mr Hochschild’s continued role as Board Chair to be in the best interests of the
Company. As described later in this report, the Company’s governance structure incorporates a
number of checks and balances to ensure ongoing objectivity and that undue influence is not
exercised.
The Company’s remuneration schemes and
policies should include provisions that would
enable the Company to recover sums or share
awards (i.e. clawback)
In order to overcome the legal difficulties in enforcing clawback in Peru, the Group’s policy wording
relating to the events which may lead to the application of malus has been clarified so as to include
references to misconduct, reputational damage, error in calculation and any material breach of an
individual’s employment contract.
Statement of Compliance
The Board confirms that, in respect of the year under review,
the Group has complied with the provisions contained in the
Code with the exceptions noted below:
Our governance structure
Board
Audit Committee
1
Sustainability Committee
1
Nomination Committee
1
Remuneration Committee
1
Chair
Jill Gardiner
Company Chair
Eduardo Hochschild
Chair
Eduardo Hochschild
Chair
Michael Rawlinson
Chair
Tracey Kerr
READ MORE
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READ MORE
Page 5
READ MORE
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READ MORE
Page 1
Exploration Working Group
A working group consisting of management and
Non-Executive Directors which reviews detailed
reports on, and progress against, brownfield and
greenfield exploration programmes.
Non-independent Directors
5 Independent Directors
Terms of reference are available at www.hochschildmining.com
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CORPORATE GOVERNANCE REPORT
CONTINUED
Health and safety
–
Updates on the ongoing implementation of the Company’s Safety Culture Transformation Plan (see page for further
details); and
–
Quarterly reviews of the Company’s Health Dashboard detailing a number of health-related indicators for each of the
Company’s sites.
Financial
–
The stress-tested scenarios and the underlying assumptions used in the going concern and viability statements in support
of the annual financial statements and half-yearly financial statements;
–
Approval of the Annual Report and Accounts and the Half-Yearly Report;
–
The Group’s ongoing financial position and projected cash flows. This included consideration of securing future cash flow
certainty by hedging a limited amount of future production from Inmaculada and Mara Rosa;
–
The revised production and cost guidance following receipt of the Inmaculada MEIA approval;
–
Updates on unbudgeted expenditure; and
–
The budget.
Strategy & Growth
–
The Group’s annual strategic plan†;
–
Receiving updates on work at the Snip project and the subsequent decision to terminate the option to earn-in a %
interest in the property†;
–
The identification of business development opportunities for the short term and medium/long term;
–
The sale of the Crespo project which is due to complete in Q ;
–
A review of the Company’s investments since IPO; and
–
Updates on the Group’s operational innovation projects.
Business
performance
–
Detailed updates on operational performance including progress on securing key permits/regulatory approvals such as
the Inmaculada MEIA;
–
Presentations on progress against the project plans for the construction of the Mara Rosa mine; and
–
The scheduled suspension of operations at the Pallancata mine which was placed on care and maintenance at the end of
the year.
Risk
–
Political developments in the Company’s countries of operation;
–
The Group’s Risk Register detailing the significant and emerging risks faced by the Group and their corresponding
mitigation plans. As reported in the Risk Management report. Liquidity Risk was removed from the Risk Register following
the approval of the Inmaculada MEIA. In addition, the risks posed by the potential coastal El Niño impacting Peru were
considered before the Peruvian Government downgraded its severity assessment; and
–
Renewal of the Group’s Directors’ and Officers’ Liability Insurance.
Leadership and purpose
The Board
The Board is responsible for approving the Company’s
strategy and monitoring its implementation, for overseeing
the management of operations and for providing leadership
and support to the senior management team in achieving
sustainable added value for shareholders. It is also responsible
for enabling the efficient operation of the Group by providing
adequate financial and human resources and an appropriate
system of financial control to ensure these resources are fully
monitored and utilised.
There is an agreed schedule of matters reserved for the Board
which includes the approval of annual and half-yearly results,
the Group’s strategy, the annual budget and major items of
capital expenditure.
0 Board meetings
Board meetings were held during the year, of which five were
scheduled meetings. The ad-hoc meetings were convened to:
– primarily consider periodic updates from management on:
•
the progress of the Peruvian government’s review of the
Inmaculada MEIA;
•
potential contingent financing arrangements in the event
of an extended delay in securing, or a refusal of, the
Inmaculada MEIA;
•
the social climate in the regions close to the Company’s
operations; and
– the appointments of Eduardo Landin as Chief Executive
Officer and Rodrigo Nunes as Chief Operating Officer.
Attendance at the scheduled Board meetings convened during
is summarised in the table below:
Director
Attendance (Maximum)
Jorge Born
4 (5)
Jill Gardiner
5 (5)
Eduardo Hochschild
5 (5)
Tracey Kerr
5 (5)
Eduardo Landin
1
2 (2)
Joanna Pearson
2
1 (1)
Michael Rawlinson
5 (5)
Mike Sylvestre
5 (5)
Former Directors
Ignacio Bustamante
3
5 (5)
Nicolas Hochschild
4
2 (2)
Eileen Kamerick
4
2 (2)
Eduardo Landin joined the Board following his appointment as CEO on August .
Joanna Pearson joined the Board on October .
Ignacio Bustamante resigned as Chief Executive Officer (CEO) on August but
continued to serve on the Board, until December , as a Non-Executive Director
nominated by the Company’s largest shareholder, Pelham Investment Corporation
(controlled by Eduardo Hochschild).
Nicolas Hochschild and Eileen Kamerick retired from the Board at the conclusion
of the AGM on June .
In addition to the regular updates from across the business,
the principal matters considered by the Board during
are detailed below. In keeping with Board practice, meetings
incorporate reports from each of the Committee Chairs on the
business considered at their respective meetings. Any significant
matters arising from those meetings are discussed by the full
Board and feature among the matters described below.
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Senior executives of the organisation are invited to attend
Board meetings and to make presentations on their areas of
responsibility. In the event a Director is unable to attend a Board
or Committee meeting, comments are encouraged to be fed
back to the Chairman of the relevant meeting who ensures that
the absent Director’s views are conveyed.
In between Board meetings, Directors are kept informed of latest
developments through monthly management reports on the
Company’s operations, safety performance, exploration activity
and financial position. In addition, monthly update meetings are
diarised which provide an opportunity for the CEO to brief the
Board on the latest developments.
Purpose and culture
The Group was established over a hundred years ago and
over time it has characterised itself not only through sound
operations but also in striving to achieve the highest standards
of safety and with regards to its social impact. This approach is
reflected and described in further detail in the Code of Conduct,
originally adopted in and last updated in , which sets
out the standards and behaviours expected from all levels within
the Company as well as our partners, namely: professionalism,
honesty, integrity, respect for our stakeholders and a
commitment to safety, our communities and the environment.
These are further reiterated in the Group’s anti-bribery and
corruption policies.
The Company launched its reformulated corporate purpose
in as part of a rebranding – “Responsible and Innovative
Mining Committed to a Better World” – and, in tandem, set out
the values which create a culture that is aligned with the
purpose (see diagram overleaf).
The Company frequently implements programmes to reinforce
the Company’s purpose and culture. During these included
a series of events themed around the Olympics which sought to
highlight the key values associated with the Company’s culture.
Setting the tone
The Board sets the tone from the top, reflecting these values
in its deliberations and decision-making. The Chief Executive
Officer (CEO) is the crucial conduit through which the tone is
cascaded throughout the organisation. Examples of the key
communications and initiatives led by the CEO related to the
following topics:
– the values and behaviours that emanate from Hochschild’s
corporate purpose;
– the launch of a review of business processes to improve
operational efficiency; and
– safety and environmental responsibility.
In addition, on assuming the role of CEO in late August ,
Eduardo Landin met with senior personnel across the
organisation setting out his vision and priorities for the Group.
Governance
–
The changes in executive leadership with the appointments of Eduardo Landin as Chief Executive Officer and Rodrigo
Nunes as Chief Operating Officer;
–
The appointment of Joanna Pearson as an Independent Non-Executive Director;
–
Updates and presentations from the Company Secretary and the Company’s external legal advisers on governance
developments and Directors’ duties and responsibilities;
–
An update on the implementation of the Board evaluation recommendations;
–
The process for the internally-led Board evaluation and the findings of the review; and
–
The annual reviews of the Directors’ conflicts of interest and the independence of Non-Executive Directors.
Sustainability
–
Reviews of the social climate in Peru, Argentina and Brazil and their potential impact on the Group as well as the Company’s
redefined social engagement strategy;
–
Performance of the Group against the internally-designed environmental corporate scorecard (the ECO Score) and updates
on the Company’s implementation of the Environmental Cultural Transformation Plan;
–
Adoption of ambitions in relation to various aspects of ESG performance;
–
Review of the Sustainability and TCFD Reports; and
–
Feedback on employees’ views following the Online Employee Forum hosted by Tracey Kerr.
Investors’ views
–
Regular reports from the Head of Investor Relations on investor sentiment as part of the Group’s comprehensive
engagement schedule (see later section headed Shareholder engagement in on page );
–
Feedback from investors and proxy voting agencies on the AGM business; and
–
Views of major shareholders on governance and remuneration matters during the open engagement programme which
commenced in H led by Michael Rawlinson as Senior Independent Director & Chair of the Remuneration Committee.
† See pages and on how wider stakeholders’ interests were considered in relation to these key Board decisions.
HOC Olympics at Inmaculada
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CORPORATE GOVERNANCE REPORT
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Brilla
The Company has developed the Brilla programme (“Shining”
in English) uses a points-based system to acknowledge
colleagues who have been recognised by their peers for
outstanding contributions aligned with Hochschild’s cultural
attributes. The top from each of HOC’s sites were selected
for initiatives such as mentoring a colleague, leading
innovation projects or implementing new processes which
have generated operational savings.
The award ceremony was held in each location led by the Unit
Manager and, in the case of Lima, was hosted by the CEO. As
part of the recognition for the first-place winners, a video was
made where the winner finds out the news in the company of
their family.
Cultural Olympics
The Cultural Olympics took place at Inmaculada, aiming
to promote and strengthen our cultural attributes through
sports, recreational activities, and challenges that colleagues
highly value. The events saw the participation of teams,
each consisting of members, and were held over three days.
Our corporate values
These values not only represent key inputs in our business model in the performance of our core activities but they also
inform our approach to our growth strategy. See the Strategy section on page .
Inspiring others
Innovation
Demonstrating responsibility
Recognising talent
Seeking efficiencies
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Assessing and monitoring culture
The Board assessed and monitored the Company’s culture
using a dashboard of measures, some of which are reported
on a monthly basis.
Dashboard
Responsibility
Safety
– Accident Frequency Index (LTIFR),
Accident Severity Index, High Potential Event rate,
Leading indicators, Seguscore (see page for
further details)
Environmental
– ECO Score
Ethical practices/Integrity
– Whistleblowing
reports (online and offline channels), compliance
training, internal audit reports
Innovation
Submissions of operational efficiency projects via
the Innova platform
Inspiring others
and promoting
talent
Team and individual development plans, staff
turnover/retention rates, results of diversity and
inclusion programmes
Efficiency
Operational KPIs including AISC, Production and
Brownfield Exploration results, Financial KPIs
including Adjusted EBITDA, Working Capital,
Cash Balance, Debt Covenant ratios
The Company periodically commissions working climate surveys
as a key tool of gauging the views of employees and the success
of the Company’s programmes on corporate culture. The timing
of our next working climate survey is under review with a
decision to be taken in the second half of . Action plans
to address key areas identified in the last survey conducted in
continue to be implemented, tailored by each department
and which are focused on the following general themes:
– recognising others’ achievements;
– improving training programmes;
– reflecting the corporate culture in the style of management;
and
– improving the employee value proposition.
Engagement
The Directors receive briefings from the Company Secretary
and legal advisers on their duties under English law to promote
the success of the Company. As in other large companies,
these duties are, in part, discharged through a framework
of delegated authorities.
The Board ensures there is regular and sustained engagement
with its shareholders and other stakeholders which is fed back
to the Board and taken into consideration in discussions and
decision-making. This section of the report includes the s()
statement and, by cross-referencing other parts of this report,
summarises how engagement was undertaken and how
stakeholders were considered in the key decisions taken
during the year.
Shareholder engagement in 2023
The following table summarises the shareholder engagement
initiatives and events during the year:
Date
Event
January
(and May, July,
October)
Conference calls following each
Quarterly Production Report
February/March
BMO Global Metals & Mining Conference
April
annual results presentation & UK
roadshow
May
BoA Merrill Lynch Global Metals, Mining
and Steel Conference
June
AGM
August
H results presentation
September
H results UK roadshow
Denver Gold Forum
October
Open engagement with major shareholders on
governance and remuneration-related matters
November
Capital markets event & virtual retail
investor presentation
An extensive investor relations schedule resulted in management
holding approximately investor meetings during the year.
The Company continued its use of the Investor Meet Company
platform whereby approximately individual investors were
able to attend virtually a live presentation from the CEO on the
day of the Capital Markets event in November and submit
questions. This enabled the Company to facilitate engagement
with retail investors on occasions which would previously have
been attended exclusively by institutional investors.
In addition to the above, the Non-Executive Directors are
available to meet shareholders on request.
Copies of presentations given at
the above events are available at
results-reports-presentations
Shareholders
Our approach
The Board Chair, with the support of the Senior Independent
Director and the Company Secretary, is available to engage with
major shareholders on matters of governance and performance
against strategy.
The Chief Executive Officer is responsible for discussing
strategy and business performance with the Company’s
shareholders and conveying their views to the other members of
the Board. He is supported in this regard by the Chief Financial
Officer and the Head of Investor Relations who is based in the
London corporate office.
In addition to the direct means of contact as detailed in the table
below, Directors are kept informed of major shareholders’ views
through copies of (i) relevant analysts’ and brokers’ briefings, (ii)
voting recommendation reports issued by institutional investor
agencies, and (iii) significant correspondence from shareholders
with respect to the business to be put to shareholder vote at
General Meetings.
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0 AGM
The resolutions put to the AGM were passed with the support
of an average of over % of the votes cast, with the exception of
the re-election of the Board Chair, Eduardo Hochschild. This voting
outcome reflected concerns with respect to the tenure of Eduardo
Hochschild as Chair and the lack of a defined succession plan and
a publicly disclosed definitive timeline for retirement.
The Board believes that, taking into account Eduardo
Hochschild’s long-standing involvement with the Company,
his significant shareholding, and the governance structure
and practices that have been adopted as described later in
this report, his continued role as Board Chair remains in the
best interests of the Company.
As is the case for all senior positions, the Company has a
succession plan in place in relation to the Chair. Whilst there
are no short or medium-term plans for Eduardo Hochschild
to retire, he has informed the Board that, absent any change
in circumstances, his intention is to retire by the age of
(being within the next years).
Other stakeholders
On pages to of the Strategic Report, we have identified our
key stakeholder groups, described how the Company engages
with them and an indication of the issues raised by each group
during the year.
The Directors are aware of their duty under English company law
(the “section duties”) to act in the way that is considered, in good
faith, as most likely to promote the success of the Company for the
benefit of its shareholders and other factors. These include the likely
consequences of any decisions in the long term, the interests of the
Company’s employees, the need to foster the Company’s business
relationships with all stakeholders, the impact of the Company’s
operations on the community and environment, and the desire to
maintain a reputation for high standards of business conduct.
By understanding stakeholders’ views and expectations, the Board
is able to successfully steer the Company towards achieving its
strategic goals in a sustainable manner and which acknowledges
its licence to operate.
Impact on wider stakeholder group of key decisions in 0
In discharging their section duties the Directors have regard
to the factors set out above as well as other factors which are
considered relevant to the decision being made. It is acknowledged
that every decision we make will not necessarily result in a positive
outcome for all our stakeholders. By considering the Company’s
purpose together with its strategic priorities, and having a process
in place for decision-making, the aim is to make sure that decisions
reflect the Group’s corporate values.
For details on how our Board operates and the matters we
discussed and debated during the year, please see pages and
. We set out below examples of how the Directors had regard to
the matters set out in section ()(a)-(f) when discharging their
section duties on certain decisions taken during the year.
(a) Annual Strategic Review
As it does each year, the Board carried out a review of the Group’s
strategy. The discussion in identified six strategic objectives
as key drivers for growth, with a five-year target set for each one.
Each objective reflects the pillars of Hochschild’s corporate
purpose and incorporates taking a leading role in promoting
good ESG practices as well as seeking to become an employer
CORPORATE GOVERNANCE REPORT
CONTINUED
0 Online Employee Forum
During the year, Tracey Kerr chaired an Online Employee
Forum with participants from the San Jose operation in
Argentina. The forum, which was launched in , has
proven to be valuable for Directors who learn, first-hand,
the views of colleagues across the business on a variety
of subjects. During this session, colleagues expressed their
satisfaction with the support they receive from across the
organisation as well as acknowledging the importance placed
by management on safety. Feedback was also received on
areas of improvement for consideration by management
including specific improvements to the office buildings and
the frequency and form of corporate communications.
Open engagement programme
In Autumn , an open engagement programme was
launched to discuss governance and remuneration-related
matters with the participation of Michael Rawlinson, as the
Senior Independent Director and Chair of the Remuneration
Committee, Tracey Kerr as Chair of the Sustainability
Committee and Non-Executive Director designated for
Workforce Engagement and the Company Secretary.
The invitation, which was made to major investors (being
holders of more than % of the Company’s shares) and three
proxy voting agencies, resulted in feedback from two investors
and meetings with two additional investors and two proxy
voting agencies. Topics covered during these meetings
included CEO succession, executive remuneration,
the Board Chair’s tenure, and the proposed changes to
the Directors’ Remuneration Policy.
Below, we have summarised how the Board receives feedback from
its key stakeholder groups:
Employees
Tracey Kerr, as Chair of the Sustainability
Committee, is our designated Director to oversee
workforce engagement who, in addition to receiving
quarterly updates from the Vice President of Human
Resources on discussions with trade unions and
other employee group meetings, also chaired an
online employee forum during the year. See below
for further information.
Social
Reported to the Sustainability Committee, which
feeds back to the Board.
Government/
Regulators
Reported to the Board (a) on a routine basis in
relation to significant matters, such as developments
relating to the Inmaculada MEIA and (b) as part of
its consideration of the quarterly Risk Management
updates on the political/regulatory climate.
Suppliers/
Lenders
Reported to the Board as part of its consideration of
the quarterly Risk Management updates in relation
to Counterparty and Business Interruption & Supply
Chain risks.
Customers
Significant matters are reported to the Board by
the Chief Financial Officer who is responsible for
managing the sales and logistics department. There
were no material matters raised during the year.
Hochschild Mining PLC
Annual Report & Accounts
110
of choice by providing a positive working environment. By taking
this approach, the Board has mandated that every strategic
business decision should promote sustainability for a wide range
of stakeholders.
(b) Termination of the Snip option
The Board took a balanced approach in its decision to terminate
the option to acquire a % interest in the Snip project in British
Columbia. On the one hand, it considered (a) the interests of
employees, local stakeholders and government who would
benefit from the generation of sustainable value at the project,
(b) shareholders’ concerns with respect to (i) the limited scope
for growth from the Company’s existing portfolio of operating
assets and (ii) the lack of geographic diversification. On the
other hand, the Board considered and concluded the overriding
need to preserve shareholder value by redeploying capital
elsewhere in the Group in light of the projected investment
required to maintain and, ultimately, exercise the option.
Division of responsibilities
Board composition
As detailed in the notes accompanying the table on Board
meeting attendance on page , there were a number of
changes to the composition of the Board during the year.
Notwithstanding these changes, the Board comprised, at all
times, a majority of Non-Executive Directors considered to
be of independent judgement and character. As previously
announced by the Company, with the exception of Eduardo
Hochschild, Jorge Born is the only serving non-independent
Non-Executive Director as he has been nominated to the Board
by the Company’s largest shareholder under its rights pursuant
to the Relationship Agreement (further details of which can be
found on page of the Directors’ Report).
Chair and Chief Executive
The Board is led by the Chair, Eduardo Hochschild, who controls
Pelham Investment Corporation, the largest shareholder of the
Company with a c.% holding (the “Significant Shareholder”).
The Board has approved a document which sets out the
division of responsibilities between the Chair and Chief
Executive Officer.
As Chair of the Board, Eduardo Hochschild is responsible for
leading the Board of Directors and ensuring that the Board is
enabled to play a full and constructive part in the development
and determination of the Group’s strategy and overall
commercial objectives.
Eduardo Landin, who was appointed Chief Executive Officer on
August , is responsible for the formulation of the vision
and long-term corporate strategy of the Group, the approval
of which is a matter for the full Board.
The Chief Executive Officer is responsible for leading the
executive team in the day-to-day management of the
Group’s business.
Status of the Chair
In light of his significant shareholding, Eduardo Hochschild is
not considered to be independent. However, the other Directors
of the Board continue to assert that he chairs the Board in an
objective manner and encourages open and full debate. The
Directors are satisfied that the composition of the Board and
the implementation of certain contractual arrangements act
as additional measures which prevent the exercise of undue
influence by Eduardo Hochschild.
Firstly, the significant presence of Independent Directors and
the active role of the Senior Independent Director ensure that
the views of minority shareholders are well represented.
Secondly, the undertakings provided in the Relationship
Agreement (as described below) ensure that the Company
and its subsidiaries are capable of carrying on their business
independently of Eduardo Hochschild and his associates.
The Relationship Agreement, which was revised in following
the implementation of new rules governing such agreements
(the “ Listing Rules”), contains undertakings from each of
Eduardo Hochschild and the Significant Shareholder that:
– all transactions with the Company (and its subsidiaries) will be
conducted at arm’s length and on normal commercial terms;
– neither of them (nor their associates) (the “Relevant Parties”)
will take any action that would have the effect of preventing
the Company from complying with its obligations under the
UK Listing Rules;
– the Relevant Parties will not propose, and neither will they
procure the proposal of, a shareholder resolution intended
or which appears to be intended to circumvent the proper
application of the UK Listing Rules; and
– the Relevant Parties will not take any action that would
preclude or inhibit any member of the Group from carrying
on its business independently of any of them.
Certain confirmations are required to be given by the Board
under the Listing Rules with regards to the Company’s
compliance with the independence provisions which can be
found in the Directors’ Report on page .
Senior Independent Director
Michael Rawlinson is the Senior Independent Director. His
role is not only to act as a central point of contact for the
Non-Executive Directors as a group but to also act as a
conduit between the Non-Executive Directors and the executive
management team. To facilitate this, Michael Rawlinson chairs
meetings of the Non-Executive Directors and of the Independent
Non-Executive Directors after each Board meeting. This
provides the opportunity to gather feedback and thoughts on
Board discussions which are subsequently relayed to the Board
Chair and/or the executive team as appropriate. A crucial part
of the role of the Senior Independent Director is to meet with
major shareholders if concerns have not been addressed by the
executive team. While no such meetings were requested during
the year, Michael led two meetings with investors as detailed in
the earlier section entitled “Shareholder engagement in ”.
Non-Executive Directors
The Company’s Non-Executive Directors have held senior
positions in the corporate sector. Each such Director brings
their experience and independent perspective to enhance the
Board’s capacity to help develop proposals on strategy and to
oversee and grow the operations within a sound framework of
corporate governance.
Details of the tenure of appointment of Non-Executive Directors
are provided in the Directors’ Remuneration Report.
Independence of Non-Executive Directors
In keeping with its usual practice, the Board considered, during
the year, the independence of Non-Executive Directors taking
into account the circumstances set out in Provision of the
Code. The Board has concluded that, with the exception of
Eduardo Hochschild in light of his shareholding, and Jorge Born,
who is a nominee director of the Significant Shareholder, all other
Non-Executive Directors are considered to be independent.
Strategic Report
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Governance
100—1
Financial Statements
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Further Information
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Hochschild Mining PLC
Annual Report & Accounts
111
CORPORATE GOVERNANCE REPORT
CONTINUED
Company Secretary
The Company Secretary is appointed and removed by the
Board and is responsible for advising the Board on governance
matters and the provision of administrative and other
services to the Board. All the Directors have access to the
Company Secretary.
Composition, succession and evaluation
Appointments and re-election of Directors
The Board has established a Nomination Committee which
recommends nominations to the Board. The report of the
Nomination Committee appears on pages to .
The Company has adopted the practice of requiring Directors
to seek annual re-election by shareholders in keeping with
the UK Corporate Governance Code. The biographies of the
Directors can be found on pages and which, in addition
to specifying other positions, also highlight the key skills and
experience of each Board member.
Under the terms of the Relationship Agreement, the Significant
Shareholder has (i) the right to appoint up to two Non-Executive
Directors to the Board for so long as the Significant Shareholder
holds an interest of % or more in the Company and (ii) the
right to appoint one Non-Executive Director for so long as it has
an interest of % or more in the Company, and in each case to
remove any such Director(s) previously appointed.
The Relationship Agreement continues for so long as the
Company’s shares are traded on the London Stock Exchange
or until such time as the Controlling Shareholders (including
Eduardo Hochschild) cease to own or control in aggregate a
minimum of % of the issued share capital or voting rights
of the Company.
In the exercise of its nominating rights, the Significant
Shareholder appointed (a) Nicolas Hochschild on May
who served until the conclusion of the AGM on June
; (b) Ignacio Bustamante on August who served
until December ; and (c) Jorge Born who replaced
Ignacio Bustamante.
Board development
It is the responsibility of the Board Chair to ensure that the
Directors update their knowledge and their skills and are
provided with the necessary resources to continue to do so.
This is achieved through the various means described as follows.
Briefings
The Directors receive regular briefings from the Company
Secretary on developments in the areas of corporate law
and corporate governance that affect their roles as Directors
of a UK listed company. By way of example, during the year, the
Company Secretary gave presentations, on among other things,
the reform of audit governance in the UK. In addition, the
Directors have ongoing access to the Company’s officers and
advisers with presentations arranged periodically on topics such
as Directors’ duties and disclosure obligations.
Advice
The Company has procedures by which members of the Board
may take independent professional advice at the Company’s
expense in the furtherance of their duties.
Board effectiveness
The Board is committed to the process of continuous
improvement and so, during the year (a) took a number of
actions to implement the findings of the internal evaluation
in , and (b) undertook an internally facilitated evaluation.
Induction
New Board appointees are offered the opportunity to meet
with key management personnel and the Company’s principal
advisers as well as undertaking visits to the Group’s operations.
In addition, where appointees will serve on any of the Board
Committees, sessions with the relevant Committee Chair
are organised.
Joanna Pearson selection and induction process
1. Selection
Search firm, London Search Associates, engaged to compile a long-list of candidates
with the skills and experience sought by the Nomination Committee
Designated members of the Nomination Committee compile a short-list of candidates
.
Interviews
Board Chair
and designated
members of
the Nomination
Committee
5.
The Board
Perspective
Meets with other
Board members
.
Conflicts
of Interest
Nomination
Committee
considers and
approves any
conflicts of
interest and
recommends
Joanna Pearson’s
appointment to
the Board
.
The Operational
Perspective
Meetings with the
CEO, CFO, COO
.
Provision of Key
Documentation
On Governance,
Key Corporate
Policies, Directors’
& Officers’ Liability
Insurance and
other useful
information
.
Briefings
Vice Presidents,
Head of Internal
Audit, Head of
Investor Relations
and Company
Secretary
Hochschild Mining PLC
Annual Report & Accounts
11
Implementation of 0 Board evaluation
The table below sets out the key actions taken in in respect of the principal recommendations arising from the prior
year’s review.
Area of Focus
Action
Update
Workings of the Board
–
Ongoing review of Board material to facilitate
detailed discussions on matter under consideration
–
Exploring options to maximise time for discussion
between Board members outside of the boardroom
–
Enhancing the post-Board meeting reviews and
process of feeding back to executive management
Enhancements to Board material have been
implemented, facilitating a more in-depth discussion of
the specific subject matter.
Meetings of specified attendees are held after each
Board meeting to allow comprehensive feedback to be
conveyed to executive management. These in-camera
sessions comprise, meetings of (a) the Directors without
management present, (b) the Non-Executive Directors
only, and (c) the Independent Directors only.
Maximising Board input
on Strategic Reviews
Implementing practical suggestions on strategy
planning and periodic updates on progress against
agreed objectives
Suggestions adopted in advance of annual
strategic review which, among other things, illustrated
progress made against the prior year’s strategic
objectives. This practice will continue to be implemented
for future Board strategy sessions.
Risk Reporting
Ongoing review to incorporate tolerance thresholds in risk
reporting and detailed contingency scenario planning
Relevant Board material incorporates review of downside
scenarios and key risks
Workings of the
Committees
Specific topics for further consideration identified for
further discussion by the Remuneration and Nomination
Committees and the Exploration Working Group
Steps taken include:
–
Increased scope of senior leadership succession
planning implemented by Nomination Committee
–
Consideration of alternative LTIP performance
measures incorporated into the Directors’
Remuneration Policy review by the Remuneration
Committee
–
Reformatting of material for Exploration Working
Group (EWG) to be implemented on resumption of
brownfield/greenfield activities post approval of the
Inmaculada MEIA
0 Board evaluation
Process
The Board evaluation, undertaken in the latter part of the year, took the form of one-to-one interviews led by
Michael Rawlinson, as Senior Independent Director supported by the Company Secretary.
The interviews were wide-ranging and covered a number of areas including:
–
The Board:
its workings, composition and specific aspects of its role, e.g. Strategy & M&A, Governance & Risk, and Culture & People
–
Developing:
retrospective review, and identifying short-/medium-term areas of focus
–
The Committees:
a review of their workings and deeper dives into specific areas of responsibility
–
Peer Reviews:
consideration of the skills and strengths around the Board table. The evaluation of the Chair’s performance
was considered by the Non-Executive Directors led by the Senior Independent Director
Findings
The principal recommendations arising from the Board evaluation process include the following:
Area of focus
Action
Workings & Composition
of the Board
–
The resumption of Board meetings in Lima and mine sites would provide further opportunities for Directors
to meet with colleagues across the business
–
Matters identified as key priority areas/concerns by the Directors to be reflected in Board material
–
Specific skillsets considered desirable around the Board table to be incorporated into the Nomination
Committee’s brief when recruiting additional Non-Executive Directors
Retrospective Review
Review papers with regards to specific matters to be produced for Board discussion
Workings of the
Committees
Specific practical suggestions to support the work of the Committees including:
–
Increasing the visibility of workplace diversity below Board level
–
Training & development of the Directors to be facilitated by the participation of expert speakers at meetings
of the Directors
–
Increased oversight of relevant matters of strategic importance by the Sustainability Committee
Evaluation
Strategic Report
01—99
Governance
100—1
Financial Statements
150—226
Further Information
227—231
Hochschild Mining PLC
Annual Report & Accounts
11
CORPORATE GOVERNANCE REPORT
CONTINUED
Dear Shareholder
I am pleased to present the Audit Committee Report for the
year ended December .
Firstly, I would like to thank my predecessor Eileen Kamerick
who, having chaired the Committee for over six years, retired
from the Board at the AGM. During the year we welcomed
Mike Sylvestre to the Committee who brings mining operational
expertise and, in addition, we were able to announce Joanna
Pearson’s appointment to the Board and the Committee.
Having assumed the role of Committee Chair on an interim
basis, I am delighted that Joanna will be succeeding me from
the conclusion of this year’s AGM. Joanna brings extensive
experience of financial reporting, audit and risk management
as an experienced auditor and also as a former CFO of a
London-listed mining company.
The Audit Committee had a busy year. In the early part of ,
the Committee considered the financial reporting implications
for the Annual Report and Accounts of the uncertainty
caused by the extended delay in securing the Inmaculada
MEIA, which was ultimately approved in August. As a result,
significant time was spent reviewing with management and
the auditors numerous scenarios and disclosures related to
the assessment of Going Concern and the Viability Statement.
As the Company made progress with the construction of its first
operation in Brazil, the Committee received regular updates
from the Internal Audit function on the continued roll-out of the
Hochschild compliance programme. This brings together, among
other things, the implementation of Group procedures on ethics
and training to colleagues at our office in Belo Horizonte and
on-site at Mara Rosa. Further details can be found on page .
With respect to the financial statements, the Committee
has reviewed management’s material accounting judgements
and disclosures where the issues of impairments and mine
closure costs in particular were closely scrutinised. Further details
on these key accounting matters are provided on page .
Finally, as detailed later in this report, the Audit Committee will
be overseeing the tender of the Group’s audit engagement in
the second half of this year. This process has been scheduled
such that the Company can meet the requirement to appoint
a new auditor to replace EY by , as well as ensuring a
sufficient handover period. As a key provider of assurance for
investors, the Audit Committee would be pleased to receive
shareholders’ views on the conduct of the tender which can
be conveyed by email to info@hocplc.com
Jill Gardiner
Committee Chair
0 meeting attendance
Members
Independent
Maximum
possible
attendance
Actual
attendance
Jill Gardiner,
Non-Executive Director (Chair)*
Yes
Joanna Pearson,
Non-Executive Director**
Yes
Michael Rawlinson,
Non-Executive Director
Yes
Mike Sylvestre,
Non-Executive Director ***
Yes
Former Member
Eileen Kamerick, Non-Executive
Director (Former Chair)*
Yes
*
Jill Gardiner assumed the Chair of the Committee following Eileen Kamerick’s
retirement from the Board on June .
**
Joanna Pearson joined the Committee on
October .
*** Mike Sylvestre joined the Committee on June .
Audit Committee Report
Jill Gardiner
Audit Committee Chair
In addition to its usual financial reporting
responsibilities, the Audit Committee played
an active role in integrating processes in
Brazil and planning for an audit tender.”
“
Hochschild Mining PLC
Annual Report & Accounts
11
Key roles and responsibilities
– To monitor the integrity and material accuracy of the
Company’s financial statements and related disclosures;
– To monitor the effectiveness of the Company’s internal
controls and risk management systems and review the
preparation of the going concern and viability statements;
– To review, on behalf of the Board, the Company’s procedures
for detecting fraud, the Company’s systems and controls for
the prevention of bribery and to review and conclude on
non-compliance;
– Oversight of the Internal Audit function, review of its annual
work plan and its findings;
– To oversee the relationship with the Company’s external Auditor;
– To review the effectiveness of the external audit process; and
– To report to shareholders annually on the Committee’s
activities including details of the significant audit issues
encountered during the year and how they have been
addressed.
Membership
Eileen Kamerick was the chair of the Audit Committee until her
retirement from the Board on June . Eileen was formerly a
Chief Financial Officer of a number of US-based companies
operating in the mining, oil and gas, investment banking and
recruitment sectors. Eileen currently chairs the audit committees
of the Legg Mason Closed End Mutual Funds and NASDAQ-listed
ACV Auctions Inc. Eileen holds the Directorship Certification of
the US National Association of Corporate Directors (NACD) and is
a Board Leadership Fellow of the NACD.
Following Eileen’s retirement from the Board, Jill Gardiner was
appointed Committee Chair on an interim basis while the
recruitment of a permanent successor was overseen by the
Nomination Committee. Jill Gardiner was formerly an investment
banker at RBC Capital Markets with a focus on certain
commodity and energy related industries and has built up
extensive experience of public company corporate governance
and financial reporting through numerous Board and Committee
positions. Jill currently serves as Chair of TSX-listed Capital Power
Corporation and as an ex-officio member of its Audit Committee
and, until recently, she served on the Board and Audit Committee
of NYSE-listed Compass Minerals.
Michael Rawlinson’s career in banking specialised in the mining
sector, having initially worked as an analyst and corporate
financier, serving most recently as Global Co-Head of Mining and
Metals at Barclays Investment Bank from until his retirement
from that role in June . Michael currently serves as Chair of
Adriatic Metals Plc and sits on its Audit and Risk Committee. He
also serves on the Boards and Audit Committees of London-listed
Capital Limited and AIM-listed Andrada Mining Limited (formerly
AfriTin Mining).
Mike Sylvestre spent a significant portion of his career with Vale
Canada (formerly Inco Ltd), a world leading producer of nickel
where he held key senior management positions domestically
and internationally. Most notably, he held the position of CEO New
Caledonia and President, Manitoba Operations. He previously
served as Vice President of Operations for PT Vale Indonesia.
He is a member of the Professional Engineers of Ontario and
a graduate of the Institute of Corporate Directors (ICD) in
partnership with the Rotman School of Management.
Joanna Pearson joined the Audit Committee on appointment to
the Board on October . She was formerly Executive Vice
President and Chief Financial Officer of the FTSE company,
Endeavour Mining plc (-), and, prior to that, was an
audit partner at Deloitte LLP, Vancouver for years where she
conducted multinational audit engagements for US and Canadian
listed companies primarily in mining and emerging markets. Since
June , Joanna has been a Non-Executive director of Goldshore
Resources Inc., a junior resource exploration company listed on
the TSX-Venture exchange in Canada, where she also chairs the
company’s Audit Committee. Joanna is a Chartered Professional
Accountant of British Columbia. Joanna will assume the Chair of
the Audit Committee at the conclusion of the forthcoming AGM.
The Committee members are considered to be Independent
Directors and the Board is satisfied that at least one member has
recent and relevant financial experience and that the Committee,
as a whole, has competence relevant to the sector in which the
Company operates.
For further details on the skills and experience of the Committee
members, please refer to the biographical details on pages
and . The performance of the Committee was considered as
part of the annual Board evaluation process which was considered
by the whole Board.
Attendees
The lead partner of the external Auditor, EY, the Chair of the
Company, the Chief Executive Officer, the Chief Financial Officer,
the Vice President of Legal & Corporate Affairs and the Head of
Internal Audit attend each Audit Committee meeting by invitation.
The Company Secretary acts as Secretary to the Committee.
Activity during the year
The Committee considered the following principal matters
during the year:
Financial reporting
The Annual Report and Accounts and the Half-Yearly
Report were reviewed by the Committee before recommending
their adoption by the Board. In its review of these financial
reports, the Audit Committee considered that appropriate
accounting policies, estimates and judgements were applied
in preparing the relevant statements and the transparency
and clarity of disclosures contained within them.
Review of audit plans
In line with its usual practice, the Committee considered reports
from the external Auditor on the scope and structure of the review
of the half-yearly results and audit of the annual results and any
recommendations on the Company’s processes and controls.
During the year, the Committee members held meetings with
the external Auditor without executive management to discuss
matters relating to the annual audit and the Half-
Yearly Report.
Risk management
Consideration and challenge of risk management assessments
which incorporate a risk matrix detailing (i) the most significant
and emerging risks facing the Group, (ii) an evaluation reflecting
the likelihood of the occurrence of the risk and the extent of the
potential impact on the Group, and (iii) commentary on the steps
taken to manage each specific risk. See page for a description
of the process by which the Group’s principal and emerging risks
are identified and monitored, and the actions taken during the
year to mitigate them.
Strategic Report
01—99
Governance
100—1
Financial Statements
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Further Information
227—231
Hochschild Mining PLC
Annual Report & Accounts
115
CORPORATE GOVERNANCE REPORT
CONTINUED
Internal audit
The Audit Committee continued to oversee and challenge the
Group’s adoption of a risk-based approach to internal audit.
The Audit Committee Chair receives a quarterly report from
the Head of Internal Audit which sets out specific areas covered,
improvements being recommended and introduced, and
proposals for the programme over the following three months.
The CEO and Chief Financial Officer also receive copies of these
reports who ensure that adequate support is provided for the
activities of the Internal Audit function. During the year, the
Committee met with the Head of Internal of Audit without the
presence of executive management to discuss, among other
things, the scheduled work plan.
Internal control
Through the processes described on page , the Audit
Committee reviewed the adequacy of the Group’s internal
control environment and risk management systems.
Whistleblowing
In line with the Corporate Governance Code, the Audit
Committee reviewed, on behalf of the Board, the adequacy
of the Group’s whistleblowing arrangements. Whistleblowing
reports are circulated to a group comprising the Audit
Committee Chair (“AC Chair”), the Head of Internal Audit,
the Vice-President of Human Resources and the Company
Secretary (“the Reporting Group”); the AC Chair has a
preliminary discussion with the Head of Internal Audit on
the approach to the investigation; and the findings of the
investigation are then reported, in the first instance, to the
AC Chair and the Reporting Group and to the next scheduled
meeting of the Audit Committee. The Head of Internal Audit
also circulates, on a periodic basis, summaries of ongoing
investigations into matters raised through the Company’s
whistleblowing channels, and their relevant status.
Fraud and bribery
The Audit Committee continued to review and challenge
the actions taken by management to promote ethical and
transparent working practices.
The Group’s Code of Conduct describes the values and
standards of behaviour expected of our employees and our
business partners. In addition, the Group has adopted a specific
anti-bribery and anti-corruption policy to reflect the Board’s
zero tolerance to these types of acts. The Code of Conduct
was reviewed in and circulated earlier this year with all
recipients required to confirm receipt online and confirming
their agreement to its terms.
External audit
Ongoing Relationship Management
The Audit Committee oversees the relationship with the
external Auditor. EY was first appointed by the Company as
Auditor in and, following a tender process undertaken
in Q , was reappointed. The Audit Committee evaluated
the performance of EY in and concluded that it was
appropriate to recommend the reappointment of EY as
external Auditor at the Annual General Meeting. The Audit
Committee reviewed the findings of the external Auditor and
management letters, and reviewed and approved the audit fees.
In line with its usual practice, the Audit Committee evaluated
the effectiveness of EY and the external audit process taking
into account the results of Hochschild management’s internal
survey relating to EY’s performance as well as views and
recommendations from management and its own experiences
with the external Auditor. Key criteria of the evaluation included
resources and expertise, quality and timeliness of the audit
process, quality of communication and reporting to the
Audit Committee.
Mandatory audit tender
In line with relevant legal and regulatory requirements, EY is
subject to mandatory rotation on completion of years and,
therefore, must be replaced as the Company’s external Auditor
by October (the “Statutory Deadline”). In August ,
the Audit Committee approved a detailed timeline for the tender
process which will be undertaken in the second half of with
a view that the successor firm will be selected by the end of the
year and, subject to approval at the AGM, will undertake
the H and subsequent reviews, and the annual audits
Brazil Compliance Programme:
During , the Company rolled out a Compliance and
Ethics programme at its new sites in Brazil. This included:
– Campaigns on harassment at the workplace, with training
for all employees and installation of visual signs throughout
the Mara Rosa unit
– The launch of a podcast and an online portal, through
which employees have centralised and intuitive access to
policies and related documents
– Online training on related subject matters, such as dealing
with conflicts of interest
– Pro-active due diligence of significant suppliers and
ongoing monitoring of all suppliers to our Brazilian sites
Compliance HOC Podcast was produced to provide colleagues with accessible content
See page of our Sustainability Report for more details
Hochschild Mining PLC
Annual Report & Accounts
11
from . The timing of the tender is considered to be in the
best interests of the Company’s shareholders as it provides
certainty in good time before the Statutory Deadline and allows
for sufficient time to ensure a smooth transition to the successor
firm. Details of the conduct of the tender will be provided in the
Annual Report and Accounts.
Auditor objectivity
The Audit Committee has adopted a policy on the use of the
external Auditor for the provision of non-audit services (see later
section on Auditor independence for more details). In addition,
objectivity is also ensured by the regular rotation of the lead
audit partner which, in the case of Hochschild, is due to next
take place after approval of the financial statements.
Governance
The Audit Committee received updates from the Auditor and
the Company Secretary on regulatory and other developments
impacting the Committee’s role such as the status of reforms of
UK audit governance.
Evaluation
The Committee’s performance was evaluated as part of the
annual Board review which, as reported earlier in this Corporate
Governance Report, was facilitated during the year by the
Senior Independent Director and the Company Secretary.
Aspects of the Committee’s role were discussed in the one-to-
one interviews held with each Board member.
Tax compliance strategy
The Audit Committee approved on behalf of the Board a
document on the Group’s approach to UK tax matters. The
document can be found at: https://www.hochschildmining.com/
media/wmwptyk/uk-tax-strategy-approved-.pdf
Significant issues relating to the 0 financial statements
As recommended by the Code, the following is a summary of
the significant issues considered by the Committee in relation
to the financial statements and how these issues have
been addressed.
(a) Impairments
The Audit Committee considered management’s analysis of
potential indicators of impairment and impairment reversals
across the Group’s operating and development stage assets.
In addition, the Committee considered the analysis undertaken
with respect to (a) the Group’s exploration assets, namely
Crespo, Volcan, Arcata, Azuca, and Volcan; and (b) the Group’s
investment in Aclara.
Having concluded on the presence, or not, of triggering factors,
the Audit Committee:
– reviewed and challenged the discount rate used for the
impairment analysis with respect to San Jose; and
– the basis of the calculation of the proposed impairment
charges in relation to Crespo, Azuca and the Group’s
investment in Aclara.
In conclusion, the Audit Committee concurred with
management that, in addition to the impairments recognised
and previously reported in the half-yearly financial statements
with respect to San Jose, Azuca and Aclara, an additional
impairment of c.$ million be recognised with respect to
Crespo, such that in respect of the full year, the asset is subject
to a total impairment of $ million.
(b) Mine rehabilitation provision
The Audit Committee considered the judgement exercised
by management in assessing the amounts required to be paid
by the Company to rehabilitate the Group’s assets.
In its assessment of the analysis undertaken by management
and, where relevant, with the input provided by specialist
experts, the Audit Committee took into account:
– the basis of the estimation of future rehabilitation costs;
– the discount rate applied;
– the significant changes in estimates and the basis and level
of the increased costs; and
– the accounting for the changes in the provisions.
The Audit Committee concluded the provision to be appropriate.
(c) Accounting for hedges
The Audit Committee reviewed management’s use of hedge
accounting in respect of various forward contracts, gold
hedging arrangements and option contracts relating to future
production at Inmaculada and Mara Rosa.
The Committee:
– reviewed the basis of the valuation and the calculation of
any realised and unrealised gains or losses on the hedging
arrangements; and
– considered the presentation of the proposed accounting
treatment in the statement of other comprehensive income
or the income statement, as appropriate.
In conclusion, the Committee was comfortable with the related
presentation and disclosures in the consolidated financial
statements were appropriate.
Auditor independence
The Audit Committee continues to oversee the implementation
of specific policies designed to safeguard the independence
and objectivity of the Auditor, which includes the Group’s policy
on the provision of non-audit services.
Policy on the use of Auditor for non-audit services
Following the issue of the Revised Ethical Standard by the
Financial Reporting Council (the “FRC”), the Audit Committee
adopted a revised policy on the use of the Auditor for non-audit
services (the “ NAS Policy”).
The NAS Policy reflects the Revised Ethical Standard in
permitting the engagement of the Auditor only for additional
services that are directly linked to the audit or are required by
law and/or regulation. The NAS Policy requires (i) the Audit
Committee and Chief Financial Officer to approve all non-audit
services undertaken by the external Auditor and (ii) that the cost
of non-audit services rendered by the external Auditor, in any
financial year, cannot exceed % of the average of the audit
fees paid to the external Auditor in the last three consecutive
financial years.
The Audit Committee continuously monitors the level of fees for
non-audit services compared to the audit fees paid to the
Auditor in the last three consecutive financial years.
0 Audit and non-audit fees
Please refer to note to the consolidated financial statements
for details of the fees paid to the external Auditor.
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Hochschild Mining PLC
Annual Report & Accounts
11
Safeguards
Additional safeguards to ensure Auditor objectivity and
independence include:
– six-monthly reports to the Audit Committee from the Auditor
analysing the fees for non-audit services rendered; and
– an annual assessment, by the Audit Committee, of the
Auditor’s objectivity and independence in light of all
relationships between the Company and the audit firm.
Compliance Statement required under Article .1 of the
Statutory Audit Services for Large Companies Market
Investigation (Mandatory Use of Competitive Tender Processes
and Audit Committee Responsibilities) Order 01 (the “Order”)
The Company confirms that it has complied with the Order
during the year under review.
Internal control and risk management
The system of internal control is designed to manage rather
than eliminate the risk of failure to achieve business objectives
and it must be recognised that such a system can only provide
reasonable and not absolute assurance against material
misstatement or loss.
Audit Committee’s assessment
At its March meeting, the Audit Committee reviewed the
process described above and is satisfied that, for the year under
review and the period from January to the date of
approval of the Annual Report and Accounts, internal controls
are in place at the operational level within the Group.
Board’s assessment
Risk management
Throughout the year, the Board considered its risk appetite
which was considered to be appropriate. The Board confirms
that its assessment of the emerging and principal risks facing
the Company, including those that would threaten its business
model, future performance, solvency or liquidity, and which are
set out in the Risk Management and Viability section, was robust.
Internal control
As detailed above, the Board, through the delegated authority
granted to the Audit Committee, monitors the ongoing process
by which critical risks to the business are identified, evaluated
and managed. This process is consistent with the FRC’s
“Guidance on Risk Management, Internal Control and Related
Financial and Business Reporting” published in .
The Directors confirm that, with the support of the Audit
Committee, the effectiveness of the Company’s system of
risk management and internal controls has been reviewed
during the year under review. These covered material controls,
which included controls covering operational, financial and
compliance matters. The controls operated effectively during
the financial year although, as is the case for many large
companies, additional controls were implemented or further
strengthened during the year. The Audit Committee was made
aware of the control changes and there was no significant
impact on the financial results. The Directors confirm that no
significant failings or weaknesses were identified as a result
of the review of the effectiveness of the Group’s system of
internal control.
CORPORATE GOVERNANCE REPORT
CONTINUED
Reports from the Head of the Internal Audit function;
Reviews of accounting and financial reporting processes
together with the internal control environment at Group level.
This involves the monitoring of performance and the taking
of relevant action through the monthly review of Key
Performance Indicators and, where required, the production
of revised forecasts. The Group has adopted a standard
accounting manual to be followed by all finance teams,
which is continually updated to ensure the consistent
recognition and treatment of transactions and production
of the consolidated financial statements;
The external Auditor’s observations
of the Company’s
internal control environment;
Review of budgets
and reporting against budgets; and
Consideration of progress
against strategic objectives.
Hochschild Mining PLC
Annual Report & Accounts
118
0 Meeting attendance
Members
Independent
Maximum
possible
attendance
Actual
attendance
Eduardo Hochschild,
Committee Chair
No
Jorge Born,
Non-Executive Director
No
1
Jill Gardiner,
Non-Executive Director
Yes
Tracey Kerr,
Non-Executive Director
Yes
Joanna Pearson,
Non-Executive Director
2
Yes
Michael Rawlinson,
Non-Executive Director
Yes
Mike Sylvestre,
Non-Executive Director
Yes
Former Members
Ignacio Bustamante,
Non-Executive Director
3
No
Nicolas Hochschild,
Non-Executive Director
4
No
Eileen Kamerick,
Non-Executive Director
4
Yes
As a Non-Executive Director nominated by the Significant Shareholder, Jorge Born
is not considered to be independent.
Joanna Pearson joined the Committee on appointment to the Board on October .
Ignacio Bustamante was a member of the Committee between August ,
when his role changed from CEO to Non-Executive Director, and December
when he stepped down from the Board.
Nicolas Hochschild and Eileen Kamerick stepped down from the Committee on
June having stepped down from the Board.
Dear Shareholder
I am pleased to present the Nomination Committee’s
report.
The year brought into focus the issue of succession; not only
with respect to the Board, but also with regards to the executive
leadership of the Company. I am pleased therefore that the
process of recruiting an Independent Non-Executive Director
to chair the Audit Committee which was overseen by the
Committee resulted in the appointment of Joanna Pearson.
Her past experience as an auditor and, in particular, of
companies in the natural resources sector, makes her
ideally-placed for the role.
Later in this report, we discuss the change in executive
leadership and the Committee’s considerations in appointing
Eduardo Landin as our new CEO. We welcome Eduardo to the
Board and thank Ignacio for agreeing to serve, as a Non-
Executive Director, until the end of the year after having
ensured a smooth transition.
Finally, at the end of the year, Jorge Born, who has served as a
Non-Executive Director since , became a nominee director
of Pelham Investment Corporation under the terms of the
Relationship Agreement. While the Directors and management
have valued, and will continue to value, Jorge’s objective and
independent approach to Board discussions, his status as a
director nominated by a significant shareholder means that
under the UK Corporate Governance Code, he now serves as
a non-independent Non-Executive Director.
Eduardo Hochschild
Committee Chair
Nomination Committee Report
Eduardo Hochschild
Committee Chair
The year brought into focus the issue of
succession; not only with respect to the
Board, but also with regards to the executive
leadership of the Company.”
“
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Hochschild Mining PLC
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CORPORATE GOVERNANCE REPORT
CONTINUED
Key roles and responsibilities
– identify and nominate candidates for Board approval;
– make recommendations to the Board on composition
and balance;
– oversee the succession planning of Board and senior
management positions; and
– review the Directors’ external interests with regards to actual,
perceived or potential conflicts of interest.
Membership and meetings
The members of the Committee are listed in the table opposite
which also details the changes to the Committee composition during
the year. At all times, a majority of the members of the Committee
were independent.
The Company Secretary acts as Secretary to the Committee.
Activity during the year
The Committee met five times during the year and a summary
of the matters considered is provided below. In addition, the
Committee passed a number of written resolutions in relation
to the consideration of conflicts of interest arising (a) from any
proposed external directorships or (b) prior to appointment to
the Board (see section headed “Conflicts of Interest” below).
Reporting and monitoring
– The approval of the report of the Committee’s activities for
inclusion in the Annual Report
– The recommended adoption of objectives with respect
to Board gender diversity, independence and Director tenure
as part of the Company’s ESG ambitions
Board/Committee composition
– The search and recruitment for an Independent Non-
Executive Director to act as Chair of the Audit Committee,
which resulted in the appointment of Joanna Pearson
– The appointment of Ignacio Bustamante as a Non-Executive
Director nominated by the Company’s Significant Shareholder
and the subsequent appointment of Jorge Born as his successor
– The recommended appointments to the Board Committees
as a result of changes in the composition of the Board during
the year
Executive leadership changes
– The recommended appointments of Eduardo Landin as CEO
and Rodrigo Nunes as COO.
Following the resignation of Ignacio Bustamante, the
Nomination Committee considered the approved management
succession plan in light of the prevailing key priorities, primarily
the continued focus on securing the approval of the Inmaculada
MEIA and minimising disruption to the business by avoiding a
prolonged or uncertain transition. In addition, the Committee
considered the challenges associated with the recruitment of
an external candidate given the limited pool of suitably qualified
senior executives with experience of operating in Hochschild’s
countries of operation. In conclusion, it was agreed that
Eduardo Landin’s long-standing operating experience in Latin
America and Rodrigo’s project-development skills made them
the best candidates for the CEO and COO roles respectively.
Succession planning
Board succession plan
– To support the search process which resulted in the
appointment of Joanna Pearson, the Committee conducted
its annual review of the Board skills matrix. This document
maps the extent to which key strategic skills and other
desirable attributes are represented around the Board table,
thereby identifying any present gaps and those that could
arise following anticipated changes to the composition of the
Board (see Board skills table above). For further details on the
succession of the Chair, please refer to page .
Executive succession and development plan (the HOC Talent
Review Plan)
– Considered the HOC Talent Review Plan which, in addition to
setting out the developmental needs for senior executives, also
identifies successors to “Critical Positions” and their personal
development strategies. In reviewing this Plan, the Committee
also seeks to improve the diversity on the pipeline of talent
coming through to executive management level.
Conflicts of interest
Considered any existing or potential conflicts of interest:
(a)
prior to the acceptance of external directorships by the
following Board members:
(i)
Jill Gardiner’s appointment to the Board of Compass
Minerals International
(ii)
Nicolas Hochschild’s appointment to the Board of Aclara
Resources Inc.
(iii) Ignacio Bustamante’s appointment to the Board of a
private base metal mining company
(b)
prior to the recommended appointment of Joanna Pearson
to the Board
Board skills matrix
1
5
8
10
11
Eduardo Hochschild
x
x
x
x
x
x
Jorge Born
x
x
x
x
x
Jill Gardiner
x
x
x
Tracey Kerr
x
x
x
x
x
Eduardo Landin
x
x
x
Joanna Pearson
x
x
x
Michael Rawlinson
x
x
x
x
x
x
Mike Sylvestre
x
x
x
x
1
Operational Mining Experience,
Geology,
Experience of operating/overseeing Latam
business,
Peruvian Government relations,
5
Recent & relevant audit/financial experience,
Corporate Finance,
M&A Experience,
8
UK corporate governance,
Relations with
UK institutional investors,
10
New Technologies/Innovation,
11
Experience of ESG/regional
socio-political issues.
Hochschild Mining PLC
Annual Report & Accounts
10
Appointments to the Board
The Company’s approach
In seeking candidates for appointment to the Board, regard is
given to relevant experience and the skills required to complete
the composition of a balanced Board (with reference to the
Board skills matrix) and taking into account the challenges
and opportunities facing the Company. Other factors are also
considered such as the opportunity to increase diversity and
the time commitment for the role. With respect to the latter,
the Company does not take a prescribed approach with
reference to the number of other Board positions but rather
an assessment on a case-by-case basis of the capacity to
assume the responsibilities required of the role in question.
Recruitment process
The recruitment process for Joanna Pearson commenced in
June supported by search firm London Search Associates.
The firm provided a long-list of potential candidates with
experience of financial reporting and audit. A short-list was
drawn up by a sub-committee of the Nomination Committee,
the members of which carried out interviews in August
prior to recommending Joanna’s appointment to the Board.
Other than with respect to previous Non-Executive Director
searches, neither the Company nor any individual Director
has any connection with London Search Associates.
Diversity
Policy on Board appointments
The Board is committed to the overriding principle that every
member and potential appointee must be able to demonstrate
the skills and knowledge to be able to make a valued
contribution to the Board. It is also acknowledged that diversity
brings new perspectives which can drive superior business
performance and promote innovation.
The Directors have therefore adopted a multifaceted approach
to Board (and, by extension, Committee) recruitment which:
– primarily considers a candidate’s merits; and
– seeks opportunities to ensure the ongoing diversity of
the Board whether of gender, culture, race, professional
background, nationality or otherwise and which reflects
the Company’s specific circumstances, primarily that it is
headquartered in Peru with operating assets located solely
in South America.
Compliance with LR .8.R() (Diversity Disclosures)
The following tables are included in compliance with
the FCA Listing Rules requirements on Board/Senior
management diversity.
The information used to complete the tables below was
requested of each Director by the Company Secretary who
provided the categories and sub-categories of ethnicity referred
to in the FCA Listing Rules (based on those used by the UK
Office for National Statistics).
Each Director was provided the opportunity to appear in the
following tables as “not specified/preferred not to say”.
Statement of Compliance
Target
Compliance
Explanation (where non-compliant)
At least 0% of the
board are women
No
While the Company has made
significant progress in a relatively
short of period of time in
improving the gender diversity
of the Board, the proportion of
women on the Board as at
December is just short of
the target, at %.
At least one of the
senior board
positions (Chair,
CEO, Senior
Independent
Director or CFO) is
held by a woman
No
While the Company is not
currently compliant with this
target, the Board succession plan
envisages the appointment of
Tracey Kerr as Senior Independent
Director to succeed Michael
Rawlinson.
It is noted that two of the Board
Committees are chaired by
women.
At least one
member of the
board is from a
minority ethnic
background
Yes
There have been no changes to the above information since
December up until the date of approval of this report.
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Hochschild Mining PLC
Annual Report & Accounts
11
Gender diversity
Number
of Board
members
Percentage
of the
Board*
Number of senior positions
on the Board (CEO, CFO, SID
and Chair)**
Number in executive
management
Percentage of executive
management
Men
5
63%
4
6
100%
Women
3
37%
0
0
0
Not specified/
prefer not to say
–
–
–
–
–
* Subject to rounding
** The CFO is not a Board member
Ethnic background
Number
of Board
members
Percentage
of the
Board*
Number of senior positions
on the Board (CEO, CFO, SID
and Chair)**
Number in executive
management
Percentage of executive
management
White British or other White
(including minority-white
groups)
7
88%
2
0
0
Mixed/Multiple Ethnic
Groups
0
0
0
0
0
Asian/Asian British
0
0
0
1
17%
Black/African/Caribbean/
Black British
0
0
0
0
0
Other ethnic group,
including Arab
1
12%
2
5
83%
Not specified/
prefer not to say
0
0
0
0
0
* Subject to rounding.
** The CFO is not a Board member.
Increasing workforce diversity
The Company is committed to redressing the diversity imbalance in its workforce which is reflective of the mining industry in general.
Please refer to page for further details of the diversity and inclusion initiatives and the progress made by the Company over the
course of .
CORPORATE GOVERNANCE REPORT
CONTINUED
Hochschild Mining PLC
Annual Report & Accounts
1
Michael Rawlinson
Remuneration Committee Chair
Dear Shareholder
On behalf of the Board, I am pleased to present the Directors’
Remuneration Report for the year ending December
which is split into three sections: this Annual Statement, the
Directors’ Remuneration Policy and the Annual Report on
Remuneration.
0 Annual Bonus
Firstly, I would like to provide shareholders with a brief update
on the Remuneration Committee’s decision with regards to the
annual bonus. As reported in my letter last year, given the
significant uncertainty of securing approval of the Inmaculada
MEIA, the Remuneration Committee took the decision in April
to defer annual bonus outcomes until it was clear
whether its release in whole or in part would be appropriate.
Following its approval in August , the Committee took into
account a number of factors including the significance of the
MEIA for the Group, the improved financial health of the
Company and, the significant efforts of the various teams in
securing approval. Accordingly, it was considered appropriate
that the bonus be released in full.
Pay and performance in 0
0 Performance
General
was very much a year of two parts, with management’s
focus initially on securing the approval of the Inmaculada MEIA
which, as mentioned above, was ultimately achieved in August
, thereby effectively extending our ability to operate our
flagship mine for another years.
Up until August , management maintained its focus on cash
conservation, which affected the Company’s ability to pursue
mine development and the brownfield exploration programme,
thereby impacting production (and hence, revenues) and our
brownfield-led growth strategy. This all changed in the second
half of the year, after the MEIA was approved, when the
Company benefited from a much stronger performance, with
production at the top end of the range of the year’s revised
guidance, and costs, overall, in line with expectations. Looking
at the year’s performance overall, the key operational objectives
set at the beginning of the year were only partially achieved.
Strategic growth
A notable highlight of the year was, undoubtedly, the impressive
progress made on the construction of the Mara Rosa mine
which was completed on budget and on schedule with first gold
pour having recently taken place. The Company is confident
that commercial production will commence during this first half
of . Management also made good strides with the
permitting of the Royropata deposit which will see future
production restarting from the Pallancata mine.
Responsibility
Safety underpins everything we do at Hochschild and it is a
matter of great pride that our key safety indices demonstrate
the Company’s strongest performance on this front in recent
history. This is all the more commendable given the higher
safety-risk profile of construction works, which continued at
Mara Rosa throughout the year. The Group also had a strong
year of environmental performance as highlighted by our
full-year ECO Score.
DIRECTORS’ REMUNERATION REPORT
2023 saw the Remuneration
Committee take several factors into
consideration in its decision making.
It has sought to reflect the impact of
the delayed MEIA, the impressive
progress at Mara Rosa and the
unprecedented levels of safety and
environmental performance.”
“
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Hochschild Mining PLC
Annual Report & Accounts
1
We continued to look at wider employee pay matters by
reviewing the alignment of elements of pay across the
organisation with our strategic objectives. Our community
relations initiatives, while subject to budgetary constraints in
light of the delay with the Inmaculada MEIA, remained targeted
on supporting education, connectivity, health and nutrition, and
promoting socio-economic development.
You can read further about these initiatives in our Sustainability
Report from page .
Assessing performance
The Remuneration Committee reflected on what was a
challenging year, balancing on one side, the wide-ranging
negative impact of the delayed MEIA on the business. This was
set against the strategic importance of the progress made in
permitting for future production at Pallancata, the hugely
impressive progress at Mara Rosa and the unprecedented levels
of safety and environmental performance. It was concluded that
as the operational objectives set at the beginning of the year in
relation to production, EBITDA and costs were only partially met,
overall the final bonus outcome for was just over % of
maximum. Further details of the performance outcomes are
set out in the Annual Report on Remuneration.
LTIP vesting
The LTIP awards have reached the end of their
performance period (being the , and financial
years) and are due to vest on May . The awards
were subject to three performance measures based on the
Company’s relative TSR performance against a tailored peer
group (%), the additions of measured and indicated resources
(%), and a consistency metric measured against average
bonus scorecard outcomes (%). The LTIP awards will vest
as to .% of maximum and further details of the performance
outcomes are also set out in the Annual Report on Remuneration.
Renewal of Directors’ Remuneration Policy at 0 AGM
We will be renewing our three-yearly Directors’ Remuneration
Policy at our AGM. Following extensive consultation with
our top shareholders, and proxy agencies, we are proposing to
largely roll forward our current Directors’ Remuneration Policy
and the only material changes that we are proposing to make
are to:
– increase our post-employment shareholding requirement so
that it will apply at the full guideline level – currently % of
base salary – for two years from cessation of employment (at
present this requirement tapers after one year to % of the
guideline level); and
– replace the consistency metric on LTIP awards (which
determined % of the vesting of the overall award) from
onwards with objectives aligned with the Group’s strategies
relating to ESG and workforce diversity and inclusion. For
further information on the Remuneration Committee’s
consideration of alternative performance conditions, such
as emissions-related targets, please refer to page of the
Annual Report on Remuneration.
No other material changes are proposed to the compensation
package available to our Executive Directors or in the overall
architecture of the incentive plans which we operate and which
we believe continue to be appropriate.
Board changes
(i) Ignacio Bustamante stepping down as CEO
We announced in May that our Chief Executive Officer,
Ignacio Bustamante would be stepping down to relocate to
London and assume a new role at another company. The
remuneration-related arrangements for Ignacio leaving
Hochschild are set out in the Annual Report on Remuneration,
and the Committee is satisfied that these are fully in line with
our Directors’ Remuneration Policy whereby:
– he continued to receive fixed pay reflecting contractual
entitlements until he stepped down as CEO on August
; and
– he is not eligible to receive a bonus for and all his
in-flight LTIPs lapsed on stepping down as CEO.
To assist in a smooth CEO transition, Ignacio agreed to
continue to serve on the Board as a Non-Executive Director
(representing our largest shareholder, Pelham Investment
Corporation) until the end of the financial year. He received a
standard base fee for his role as Non-Executive Director during
that period, consistent with our Directors’ Remuneration Policy.
(ii) Eduardo Landin’s appointment as CEO
Eduardo Landin succeeded Ignacio Bustamante as CEO on
August and joined the Board as an Executive Director
on that date. His remuneration arrangements on promotion to
the Board were determined by the Remuneration Committee
according to the Directors’ Remuneration Policy and market
conditions for the role. His starting salary as CEO was
US$, (compared to Ignacio’s salary of US$,).
Eduardo is eligible for the same opportunity for annual bonus
and LTIP as his predecessor (being % of base salary and
% of base salary respectively) but each will be pro-rated
for to reflect his time in role. In light of his performance
since appointment, the Remuneration Committee has agreed
an increase in Eduardo Landin’s salary to US$,. Further
details can be found later in the report.
Format of the report and matters to be approved at our
0 AGM
At the AGM, shareholders will be asked to approve three
resolutions related to Directors’ remuneration matters. These
resolutions are:
– To approve the Directors’ Remuneration Report
– To approve the updated Directors’ Remuneration Policy
– To renew the Deferred Bonus Plan
The vote to approve the Directors’ Remuneration Report is the
normal annual advisory vote on such matters. If approved by
our shareholders, the Directors’ Remuneration Policy will apply
for a maximum of three years from the AGM and will
replace the Directors’ Remuneration Policy previously approved
at the AGM. The Deferred Bonus Plan is our existing plan
for the deferral of annual bonus into awards over Company
shares. It was first established in and, as is normal, the
authority to operate this plan must be renewed after years.
As in past years, I would like to assure all our shareholders that
the Committee welcomes all input on remuneration matters,
and if you have any comments or questions on any element of
the Directors’ Remuneration Report, please do not hesitate to
contact me at info@hocplc.com.
Michael Rawlinson
Chair of the Remuneration Committee
DIRECTORS’ REMUNERATION REPORT
CONTINUED
Hochschild Mining PLC
Annual Report & Accounts
1
This report has been prepared according to the requirements of the Companies Act (“the Act”), Regulation and Schedule
of the Large and Medium-Sized Companies and Groups (Accounts and Reports) (Amendment) Regulations , the Companies
(Miscellaneous Reporting) Regulations , the Companies (Directors’ Remuneration Policy and Directors’ Remuneration Report)
Regulations and other relevant requirements of the FCA Listing Rules. In addition, the Board has applied the principles of good
corporate governance set out in the UK Corporate Governance Code, and has considered the guidelines issued by its leading
shareholders and bodies such as ISS (Institutional Shareholder Services), the Investment Association, and Glass Lewis.
Directors’ Remuneration Policy (unaudited)
This section sets out our new Remuneration Policy (the Policy), which will be presented to shareholders for approval at, and
take effect from, the AGM. The principal objectives of the Remuneration Policy are to:
– attract, retain, and motivate the Group’s executives and senior management;
– provide management incentives that align with and support the Group’s business strategy; and
– align management incentives with the creation of shareholder value.
The Group seeks to achieve this alignment over both the short and long term through the use of an annual performance-related
bonus, which rewards the achievement of a balanced mix of financial, operational and other relevant performance measures, and the
use of a Long-Term Incentive Plan (LTIP) which is linked to longer-term critical measures of financial and non-financial performance.
The Committee takes into consideration the remuneration arrangements for the wider employee population in making its decisions
on remuneration for senior executives. Remuneration decisions are also driven by external considerations, in particular relating to
the global demand for talent in the mining sector.
The Committee is satisfied the principles of provision of the UK Corporate Governance Code relating to the design of
remuneration policies and practices have been applied:
Clarity:
we ensure pay for performance and our policy is designed to be logical and transparent
Simplicity:
Executive Director remuneration comprises a minimum of components, based on a regular package including fixed pay,
and short- and long-term variable pay
Risk:
a significant proportion of the Executive Director remuneration package is delivered in long-term or deferred pay which
ensures the longer-term impact of decisions is reflected in pay. Furthermore, the combination of in-post and post-employment
shareholding requirements, as well as capturing several categories of performance in the variable pay elements, helps to ensure
appropriate risk management by senior executives
Predictability:
variable pay is subject to the achievement of specific and transparent performance targets, and the Committee has
the ability to apply its discretion to ensure variable pay outcomes reflect underlying corporate health
Proportionality:
the Executive Director pay mix is similar to that at comparable international mining peers, and the Committee has
the ability to apply its discretion to ensure overall pay outcomes are proportionate to the Company’s long-term performance
Alignment to culture:
variable pay captures several categories of performance, including non-financial objectives such as those
relating to safety and environmental performance, helping to ensure pay reflects multiple perspectives on performance, and not
just financial outcomes
Summary of Policy changes
The table below sets out the key changes between the Policy and the Policy, to be approved by shareholders at the
AGM:
Policy element
Description of change
LTIP
The Consistency Performance Condition, which acknowledges the consistent performance of annual operational and
ESG objectives has been replaced by specific objectives aligned with the Group’s strategies on ESG, and workforce
diversity and inclusion
Post-employment shareholding
requirements
The current requirement tapers for the second year post-employment to half of the level required for the first year
The new requirement will increase the post-employment shareholding requirement to apply in full for all of two-year
period following termination of employment, at the lower of the actual shareholding at time of leaving and the in-post
shareholding requirement (250% of salary)
The increased requirement will apply to new LTIP awards granted to Executive Directors from the introduction of the
new Policy
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Policy Table
The table below provides a summary of each element of the Remuneration Policy for Executive Directors.
Element:
Base salary and Compensation for Time Services (CTS)
Objective and link to strategy:
To support recruitment and retention
Operation
Opportunity
Performance
metrics
Salary is reviewed annually, usually in March, or following a
significant change in responsibilities.
Salary levels are targeted to be competitive and relevant to the
global mining sector, with reference to the relative cost of living.
The Committee also takes into consideration general pay levels
for the wider employee population.
To avoid setting expectations, there is no prescribed maximum
salary.
In respect of existing Executive Directors, it is anticipated that
salary increases will generally be in line with the wider employee
population. In exceptional circumstances (including, but not
limited to, a material increase in job size or complexity, the
reversal of a previous salary reduction, or if an Executive
Director has not received an increase for a number of years), the
Committee has discretion to make appropriate adjustments to
salary levels.
None
Executive Directors receive CTS and profit share, both of which are
provided for by Peruvian law
CTS is a legal entitlement for employees in Peru which provides
for a fund in the event of termination of employment. CTS in
respect of base salary is calculated as one month’s wages and is
deposited biannually in an employee’s interest-accruing bank
account and prior to the end of employment, employees can
gain access to the deposited amount to the extent it exceeds
four months’ wages. CTS in respect of other forms of
remuneration such as incentive payouts, that are considered to
be “non-extraordinary”, is currently calculated at a rate of /th.
For the profit share, an amount equal to % of the relevant
Peruvian company’s taxable income for the year is distributable
to its employees. This amount is mandated by Peruvian law, and
any increases are not within the control of the Group. The
amount receivable by each Executive Director is determined
with reference to annual base salary (plus other incentive
payouts, if any) and the number of days worked during the
calendar year.
If an Executive Director is not subject to Peruvian law (such as
CTS), the Committee may make payments in consideration of
pension as applicable in the Director’s country of residence and
in line with other company employees in that country.
None
Element:
Benefits
Objective and link to strategy:
Helps recruit and retain high-calibre Executive Directors
Operation
Opportunity
Performance
metrics
Executive Directors receive certain allowances which may
include medical insurance, the use of a car and driver, and
personal security.
The value of the other benefits varies by role and individual
circumstances; eligibility and cost are reviewed periodically.
The Committee retains the discretion to approve a higher cost
of benefits in exceptional circumstances (for example
relocation) or in circumstances where factors outside the
Company’s control have changed materially (for example
increases in insurance premiums).
None
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Element:
Annual bonus
Objective and link to strategy:
To achieve alignment with the Group’s annual objectives and commitment to operating responsibly
Operation
Opportunity
Performance metrics
Performance measures, targets and weightings are set at the
start of the year. At the end of the year, the Committee
determines the extent to which targets have been achieved,
taking into account individual performance.
Bonus payments of up to % of salary are delivered in cash;
any bonus earned above % of salary is deferred in
Hochschild shares, under the Deferred Bonus Plan, for two
years.
If deferral is applied, the Committee retains the discretion to
allow dividends (or equivalent) to accrue over the deferral period
in respect of the awards that vest.
The maximum
annual bonus
opportunity is
% of salary.
For “threshold”
and “target” levels
of performance,
the bonus earned
is up to % and
% of maximum,
respectively.
Performance is determined by the Committee by reference to a
scorecard made up of Group growth, profitability and
operational excellence measures as well as measures on
corporate social responsibility. The corporate social
responsibility measures are typically weighted no higher than
% of maximum.
The Committee may adjust year-on-year the weightings for
individual measures, to ensure alignment with the business
priorities for the year. Performance targets are generally
calibrated with reference to the Company’s budget for the year.
Each objective in the scorecard has a “threshold”, “target” and
“maximum” performance target, achievement of which
translates into a score for each objective.
The Committee uses its judgement to determine the overall
scorecard outcome based on the achievement of the targets
and the Committee’s broad assessment of Company and
individual performance. A review of the quality of earnings is
conducted by the Committee to determine whether any
adjustments should be made to the reported profit for the
purpose of bonus outcomes. This ensures that bonus outcomes
are not impacted by unbudgeted non-recurring or one-off
items, or circumstances outside of management’s control such
as material changes in commodity prices that could distort the
overall quality of earnings.
Malus provisions apply, i.e. the Committee has the discretion to
reduce bonus payments and/or deferred bonus awards on the
occurrence of an adverse event that is attributable (directly or
indirectly) to an act or failure to act by the individual. Such
events include those related to health and safety, the
environment or community relations. Other trigger events
include misconduct; or material error, material misstatement,
material failure of risk management, action or omission resulting
in serious reputational damage, or any material breach of an
individual’s employment contract.
To the extent permitted by applicable law, the Committee also
has the discretion to claw back deferred bonus awards which
have already vested, if it considers appropriate to do so, in
certain circumstances. Such circumstances include misconduct
or material error, material misstatement, material failure of risk
management and action or omission resulting in serious
reputational damage.
Details of the measures, weightings and targets applicable for
the financial year under review are provided in the Annual
Report on Remuneration, unless they are considered to be
commercially sensitive.
Element:
Long-Term Incentive Plan (LTIP)
Objective and link to strategy:
To directly incentivise sustained shareholder value creation through long-term operational
performance and to support the recruitment of senior positions and longer-term retention
Operation
Opportunity
Performance metrics
Awards are made annually, in the form of a conditional right to a
cash payment, with vesting subject to the attainment of specific
performance conditions and continued employment.
Awards have a performance and vesting period of at least three
years. Vested awards are invested in Company shares and
normally required to be held for a further two years. Dividends, if
any, will accrue to shares during the holding period.
Maximum annual
award level is
% of salary
(% of salary in
exceptional
circumstances
relating to the
recruitment of an
Executive Director).
Threshold
performance will
result in vesting of
% of an award.
Vesting of LTIP awards is based on performance measures linked
to the Group’s strategic priorities and may vary cycle-to-cycle.
Malus provisions apply, i.e. the Committee can reduce or prevent
vesting if it determines either that (i) the overall underlying
business performance of the Company is not satisfactory or (ii) an
act or failure to act, which is attributable (directly or indirectly) to
an award-holder has resulted in, among other things, an adverse
event related to health and safety, the environment or community
relations; or (iii) on the occurrence of certain trigger events
including misconduct, material misstatement, material failure of
risk management, action or omission resulting in serious
reputational damage, or any material breach of an individual’s
employment contract.
Due to legal difficulties arising from its enforcement in Peru, the
Committee is unable to operate clawback.
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Hochschild Mining PLC
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Shareholding requirements
Executive Directors are required to acquire and retain a beneficial shareholding in the Company equal to at least % of base
salary whilst in employment. Directors’ shareholdings are reviewed to ensure compliance with the requirements. An extended
post-employment shareholding requirement will apply to equity-based awards granted after the effective date of the
Remuneration Policy, requiring Executive Directors on the termination of their employment to hold the lower of (i) their shareholding
at the date of termination and (ii) shares equivalent to their in-post shareholding requirement for a two-year period post-employment.
Shares from awards made prior to the AGM will be subject to the post-employment shareholding requirement applicable at the
time which those awards were made.
Notes to the Policy Table
Committee discretions
The Committee will operate the annual bonus plan, the Deferred Bonus Plan and LTIP according to their respective rules and
the above policy table. The Committee retains discretion, consistent with market practice, in a number of respects, in relation
to the operation and administration of these plans.
These discretions include, but are not limited to, the following:
– selection of participants;
– the timing and size of awards (within the overall limits of this policy);
– the determination of performance measures and targets and resultant vesting;
– various discretions required when dealing with a change of control (e.g. the timing of testing performance conditions) or
restructuring of the Group;
– determination of a good/bad leaver based on the rules of each plan and the appropriate treatment chosen; and
– adjustments in certain circumstances, such as rights issues, corporate restructuring events and special dividends.
Payments from existing awards
Executive Directors are eligible to receive payment from any award made prior to the approval and implementation of the
Remuneration Policy detailed in this report (such as awards made under a previous policy, or awards made prior to appointment
to the Board). Details of any such payments will be set out in the Annual Report on Remuneration as they arise.
Performance measurement selection and approach to target-setting
The measures used under the annual bonus are selected annually to reflect the Group’s main strategic objectives for the year
and reflect both financial and non-financial priorities.
Performance targets are set to be stretching and achievable, taking into account the Company’s strategic priorities and the
economic environment in which the Company operates. Targets are set taking into account a range of reference points including
the Group’s strategic and operating plan.
The Committee considers a combination of relative TSR and internal KPIs to be the most appropriate measures of long-term
performance for the Company and together with the annual bonus measures, provide a balance between absolute and relative
performance, between short-term and long-term performance measures, and between external and internal measures of
performance. TSR, in particular, aligns with the Company’s focus on shareholder value creation and rewards management for
performance relative to sector peers, and is transparent, visible and motivational to executives.
For both annual bonus and LTIP, performance conditions will generally remain unchanged once set. However, the Committee
has discretion to vary the performance condition for in-flight awards in certain circumstances to ensure they continue to be fair,
reasonable and fulfil the commercial purposes of the original condition. For example, in the event of corporate activity amongst the
TSR comparator group during a performance period, the Committee may make adjustments to the comparator group (for example,
excluding that company, replacing that company with the acquiring company, including a substitute for that company, or tracking
the future performance of that company by reference to the median of the remaining comparators). Other examples of special
circumstances include but are not limited to rights issues, corporate restructuring, and special dividends.
DIRECTORS’ REMUNERATION REPORT
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Hochschild Mining PLC
Annual Report & Accounts
18
Remuneration Policy for other employees
The Committee takes into consideration the remuneration arrangements for the wider employee population in making its
decisions on remuneration for senior executives. The Company’s approach to annual salary reviews is consistent across the Group,
with consideration given to the scope of the role, level of experience, responsibility, individual performance and pay levels in
comparable companies.
In general, the Remuneration Policy and principles which apply to other senior executives are broadly consistent with those set out
in this report for the Executive Directors. Generally, remuneration is linked to Company and individual performance in a way that is
ultimately aimed at reinforcing the delivery of shareholder value.
Senior employees above a specific grade are eligible to participate in an annual bonus scheme with a similar design to that for the
Executive Directors. Opportunities and specific performance conditions vary by organisational level with business area-specific
metrics incorporated where appropriate.
All employees based in Peru participate in the statutory profit share scheme whereby an amount equal to % of the relevant
Peruvian company’s taxable income for the year is distributable to its employees. The amount receivable by each employee is
determined with reference to their annual base salary and bonus, if any, and the number of days worked in the calendar year.
Pay scenario chart
The chart below provides an estimate of the potential future reward opportunities for the CEO, and the potential split between
the different elements of remuneration under four different performance scenarios: “minimum”, “on-target”, “maximum” and
“maximum +%”.
Potential reward opportunities are based on the proposed Remuneration Policy, applied to the CEO’s base salary to be paid for
of $, (see page for more details).
Performance scenario – CEO
Maximum with
share price growth
Maximum
Fixed Pay
Minimum
On-target
22%
37%
37%
37%
22%
43%
4%
$3,32k
$3,32k
$,32k
$67k
4%
2%
%
$
$
$,
$,
$2,
$2,
$3,
$3,
Single-year variable
Multi-year variable
The “minimum” scenario shows base salary and benefits (that is, fixed remuneration), and associated CTS. These are the only
elements of the CEO’s remuneration package which are not at risk.
The “on-target” scenario reflects fixed remuneration, plus statutory profit share, a target payout of % of the maximum annual
bonus and threshold vesting of % of the maximum award under the LTIP, and associated CTS.
The “maximum” scenario reflects fixed remuneration, plus full payout of all incentives, and associated CTS.
The “maximum +%” scenario reflects the requirement for a scenario where % share price appreciation is included. As the LTIP
is not denominated in shares until after the end of the performance period, this scenario is the same as the “maximum” scenario.
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Hochschild Mining PLC
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Approach to remuneration on recruitment or promotion
The Committee’s policy is to set the remuneration package for a new Executive Director in accordance with the approved
Remuneration Policy at the time of the appointment. The overarching aim is to ensure that the Company pays no more than
is necessary to appoint individuals of an appropriate calibre.
In the cases of appointing a new Executive Director, the Committee may make use of any of the existing components of
remuneration as set out in the Policy Table. In determining the appropriate remuneration for a new Executive Director, the
Committee will take into consideration all relevant factors (including the nature of remuneration and where the candidate was
recruited from) to ensure that arrangements are in the best interests of Hochschild and its shareholders. Where an individual is
appointed on an initial base salary that is below market, any shortfall may be managed with phased increases over a period of time,
subject to the individual’s development in the role. This may result in salary increases that are above those received by the wider
employee population during this period.
In addition to the components of remuneration as set out in the Policy Table, the Committee may also make an award in respect
of a new appointment to “buy-out” incentive arrangements forfeited on leaving a previous employer on a like-for-like basis, having
regard to the fair value of the instruments, as determined by the Committee. In doing so, the Committee will consider relevant
factors including any performance conditions attached to these awards and the likelihood of those conditions being met and the
vesting dates of the forfeited awards. The Committee aims to use the current remuneration structure in making recruitment awards,
but in some cases it may be required to use the flexibility afforded by Listing Rule ..R, if appropriate, in relation to such buy-out
awards. For the avoidance of doubt, buy-out awards are not subject to a formal cap. Any awards to a newly recruited Executive
Director which are not buy-outs will be subject to the limits for the annual bonus plan and LTIP as stated in the general policy.
In cases of appointing a new Executive Director by way of internal promotion, the Committee will determine remuneration in line
with the Policy for external appointees as detailed above. Where an individual has contractual commitments made prior to his or
her promotion to the Board, the Company will continue to honour these arrangements. Incentive opportunities for below-Board
employees are typically no higher than for Executive Directors, but measures may vary to provide better line-of-sight.
For external and internal appointments, the Committee may agree that the Company will meet certain relocation expenses in the
year of appointment and for a further two financial years, as it considers appropriate.
Service contracts
In accordance with the UK Corporate Governance Code, notice periods for an Executive Director shall not exceed a maximum
of months. Required treatment on termination of an employee under Peruvian law is summarised below, in relation to the service
contract of the CEO.
Executive Director
Date of service contract
Eduardo Landin
3 October 2011
Executive Director service contracts, including arrangements for early termination, are carefully considered by the Committee.
Eduardo Landin was appointed CEO and a Director of the Company with effect from August and is employed under a
contract of employment with Compañia Minera Ares S.A.C. (Ares) dated October . The contract is subject to Peruvian law and,
as such, has no fixed term and may be terminated (i) by the executive on days’ notice and (ii) by Ares without notice. Under Peruvian
law, termination by Ares other than termination for certain prescribed reasons (such as gross negligence) gives rise to an entitlement
to compensation of no less than . times the monthly base salary for each year of service completed, up to a maximum of months’
base salary. In addition to these provisions and to reflect Peruvian market and company practice, the Committee has discretion to
award senior executives up to an additional months’ base salary on termination (other than for the prescribed reasons outlined
above). The prevailing circumstances and shareholder expectations will be taken into consideration at the time of termination.
DIRECTORS’ REMUNERATION REPORT
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Annual Report & Accounts
10
Non-Executive Directors
The Group’s Non-Executive Directors serve under Letters of Appointment as detailed in the table below. In accordance with their
terms, the Non-Executive Directors serve for an initial period of three years which is automatically extended for further three-year
terms. Notwithstanding this, all Directors are subject to annual re-election by the Company in general meeting in line with the UK
Corporate Governance Code, and the appointments of Non-Executive Directors may be terminated by the Board or the Director
giving not less than three months’ notice. Details of the terms of appointment of the Company’s Non-Executive Directors are shown
in the table below. The appointment and reappointment and the remuneration of Non-Executive Directors are matters reserved for
the full Board.
Non-Executive Director
Letter of appointment dated
Anticipated expiry of present term of
appointment (subject to annual re-election)
Eduardo Hochschild
30 January 2015
1 January 2025
Jorge Born Jr.
16 October 2006
16 October 2024
Jill Gardiner
17 July 2020
1 August 2026
Michael Rawlinson
18 December 2015
1 January 2025
Tracey Kerr
4 December 2021
10 December 2024
Mike Sylvestre
22 February 2022
27 May 2025
Joanna Pearson
20 September 2023
1 October 2026
Note: Copies of the Directors’ letters of appointment and service agreements are available for inspection at the Company’s registered office.
The Non-Executive Directors are not eligible to participate in the Company’s performance-related incentive plans and do not
receive any pension contributions. As part of his change of role from Executive to Non-Executive Chairman on January , the
Committee agreed that Mr Hochschild would retain his eligibility for benefits received in respect of his time as an Executive Director,
consisting primarily of personal security, car and driver, and medical insurance.
The Non-Executive Directors’ fees have been set at a level to reflect the amount of time and level of involvement required in order to
carry out their duties as members of the Board and its Committees.
Details of the Policy on fees paid to our Non-Executive Directors are set out in the table below:
Objective
Details
Opportunity
Performance
metrics
To attract and retain
Non-Executive Directors of
the highest calibre with broad
commercial and other
experience relevant to the
Company.
Fee levels are reviewed from time to time, with
any adjustments typically effective from March
each year.
The fee paid to the Chairman is determined by
the Committee, and base fees to Non-Executive
Directors are determined by the Board.
Additional fees are payable for acting as Chair
of the Board’s Committees and/or as Senior
Independent Director and can also be paid for
memberships of Committees.
Fee levels are reviewed by reference to
FTSE-listed companies and other precious
metal companies of similar size and complexity.
Time commitment, level of involvement required
and responsibility are taken into account when
reviewing fee levels.
The Company repays any reasonable expenses
that a Non-Executive Director incurs in carrying
out their duties, including travel, hospitality-
related and other benefits and related tax
liabilities, if appropriate.
In exceptional circumstances, if there is a
temporary yet material increase in the time
commitments for Non-Executive Directors, the
Company may pay extra fees on a pro rata
basis to recognise the additional workload.
Non-Executive Director fees will typically only
be increased during the term of this Policy in
line with general market levels of NED fee
inflation.
In the event that there is a material
misalignment with the market or a change in
the complexity, responsibility or time
commitment required to fulfil a Non-Executive
Director role, the Board has discretion to make
an appropriate adjustment to the fee level.
The maximum aggregate annual fee for all
Directors provided in the Company’s Articles of
Association is £ million p.a.
None
In recruiting a new Non-Executive Director, the Committee will use the Policy as set out in the table above.
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Leaver and change-of-control provisions
Payments to a departing Executive Director will be determined by the local employment law, the terms of the Executive Director’s
service contract, and the rules of any relevant variable incentive plan. For a summary of the payments required to be made to a
departing Executive Director under Peruvian law, please see the summary in the “Service Contracts” section, above.
When determining termination payments in the event of early termination, the Committee will take into account a variety of
factors including length of service, personal and Group performance, the Director’s obligation to mitigate their loss, statutory
compensation to which a Director may be entitled and other payments which may be payable under a settlement agreement.
As part of a settlement agreement, the Company may reimburse reasonable legal costs incurred in connection with a termination
of employment and/or agree to make a contribution towards outplacement services, if the Committee considers it appropriate.
The table below summarises how the awards under the annual bonus and LTIP are typically treated in specific circumstances.
When considering the appropriate treatment, the Committee reviews all potential incentive outcomes to ensure they are fair
to both shareholders and participants.
Reason for leaving
Treatment of awards
Timing of vesting
Annual bonus
Good leaver: Retirement, ill health, disability,
death or any other reasons the Committee
may determine in its absolute discretion
Cash bonuses will only be paid to the extent that Group and personal objectives set
at the beginning of the year have been achieved. Any resulting bonus would
typically be pro-rated for time served during the year.
Normal payment
date, although the
Committee has
discretion to
accelerate
Change-of-control and company/business
sale
The Committee would determine the most appropriate treatment in the
circumstances.
The Committee has discretion to determine whether deferral would be applied.
On date of event
Any other reason
No bonus is paid.
Not applicable
LTIP
Good leaver: Retirement, ill health, disability,
redundancy, injury or any other reasons the
Committee may determine in its absolute
discretion
Any outstanding awards will be pro-rated for time and performance. The
Committee has a standard ability to vary time pro-rating.
Normal vesting
date, although the
Committee has
discretion to
accelerate
Death
Any outstanding awards will be pro-rated for time and performance, unless the
Committee determines otherwise.
On date of event
Change-of-control and company/business
sale
Any outstanding awards will be pro-rated for time and performance. The
Committee has a standard ability to vary time pro-rating. On a
change-of-control, Hochschild awards may alternatively be exchanged for new
equivalent awards in the acquirer, where appropriate.
On date of event
Any other reason
Awards lapse.
Not applicable
Deferred Bonus Plan (DBP)
Good leaver: Death, ill health, disability,
redundancy, injury, retirement with
agreement of the Director, sale of employer of
transfer of employment, or any other reasons
the Committee may determine in its absolute
discretion
Any outstanding awards would be retained by the good leaver.
Normal vesting
date, although the
Committee has
discretion to
accelerate
Change-of-control and company/business
sale
Any outstanding awards would typically accelerate in full subject to time pro
rating. On a change-of-control, Hochschild awards may alternatively be
exchanged for new equivalent awards in the acquirer, where appropriate.
On date of event
Any other reason
Awards lapse.
Not applicable
The Remuneration Committee has discretion to determine the most appropriate treatment of vested LTIP awards that are subject
to a holding period, based on the individual circumstances at the time.
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Annual Report & Accounts
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External appointments policy
The Board recognises that Executive Directors may be invited to serve as directors of other companies, which can bring benefits to the
Group. Executive Directors are entitled to accept appointments outside the Company providing that the Chair’s permission is sought
and granted. The Policy is that fees may be retained by the Director, reflecting the personal risk assumed in such appointments.
Details of external appointments and the associated fees received are included in the Annual Report on Remuneration.
Consideration of employee conditions elsewhere in the Company
The Committee does not currently consult with employees specifically on the effectiveness and appropriateness of the executive
Remuneration Policy and framework. However, the Company seeks to promote and maintain good relationships with employee
representative bodies as part of its employee engagement strategy and consults on matters affecting employees and business
performance as required in each case by law and regulation in the jurisdictions in which the Company operates. Although the
Committee does not consult directly with employees on the Directors’ Remuneration Policy, the Committee takes into consideration
the remuneration arrangements for the wider employee population in making its decisions on remuneration for senior executives.
Consideration of shareholder views
When determining remuneration, the Committee takes into account views of shareholders and best practice guidelines issued by
institutional shareholder bodies. The Committee will continue to monitor trends and developments in corporate governance and
market practice to ensure the structure of the executive remuneration remains appropriate.
The Committee is always open to feedback from shareholders on Remuneration Policy and arrangements, and commits to
undergoing shareholder consultation in advance of any significant changes to Remuneration Policy. Further details on the votes
received in respect of remuneration resolutions presented at last year’s AGM and any remuneration related matters discussed with
shareholders during the year are provided in the Annual Report on Remuneration.
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Annual Report on Remuneration
The following section provides details of how Hochschild’s approved Directors’ Remuneration Policy was implemented during
the financial year ending December , and how the Remuneration Committee intends to implement the updated Directors’
Remuneration Policy in . Any information contained in this section of the report that is subject to audit has been marked as such.
Remuneration Committee membership
The Remuneration Committee was chaired during the year under review by Michael Rawlinson, and its other members were Jill
Gardiner, Tracey Kerr and Joanna Pearson (from October ). The Remuneration Committee has comprised, at all times, only
Independent Non-Executive Directors. The composition of the Remuneration Committee and its terms of reference comply with the
provisions of the UK Corporate Governance Code and the terms of reference are available for inspection on the Company’s website
Members of senior management attend meetings at the invitation of the Committee. During the year, such members included the
Chair, the CEO and the Vice President of Human Resources. No Director or senior executive is present when his or her own
remuneration arrangements are considered by the Committee. The Company Secretary acts as Secretary to the Committee.
The Committee’s terms of reference
The duties of the Remuneration Committee are to determine and agree with the Board the broad policy for the remuneration of the
Executive Directors, the other members of senior management and the Company Secretary, as well as their specific remuneration
packages including pension rights and, where applicable, any compensation payments. In determining such policy, the Remuneration
Committee shall take into account all factors which it deems necessary to ensure that members of the senior executive management
of the Group are provided with appropriate incentives to encourage strong performance, and are rewarded in a fair and responsible
manner for their individual contributions to the success of the Group.
The Remuneration Committee met six times during the year, of which five were scheduled meetings. Attendance at the scheduled
meetings is detailed below:
0 Meeting attendance
Members
Independent
Maximum
possible
attendance
Actual
attendance
Michael Rawlinson, Non-Executive Director (Chair)
Yes
5
5
Jill Gardiner, Non-Executive Director
Yes
5
5
Tracey Kerr, Non-Executive Director
Yes
5
5
Joanna Pearson, Non-Executive Director
Yes
1
1
The Committee undertook the following items of business:
0 Remuneration and reporting
– Reviewed and approved incentive outcomes for ( annual bonus and vesting of LTIP awards);
– Considered and approved full deferral of the bonus payable to the CEO and partial deferral to other selected employees in
light of uncertainty regarding the renewal of the MEIA and the subsequent release of those amounts following the MEIA renewal
being approved in August ;
– Considered and approved the Directors’ Remuneration Report;
0 Remuneration
– Reviewed Ignacio Bustamante’s total remuneration, including salary for (which remained unchanged from the level set
in );
– Reviewed and approved the remuneration treatments connected with Ignacio Bustamante stepping down as our CEO;
– Reviewed and approved the total remuneration for Eduardo Landin on his appointment as CEO;
– Considered and approved objectives for each CEO;
– Approved the opportunity/award level and performance targets for annual bonus and LTIP awards;
Policy and keeping informed
– Considered feedback from shareholders regarding the Directors’ Remuneration Report;
– Engaged with major shareholders and the leading proxy advisory services regarding renewal of the Directors’ Remuneration
Policy at our AGM;
– Reviewed potential ESG-related key performance indicators for possible inclusion in the LTIP;
– Regularly considered market trends in executive remuneration and key themes for and ; and
– Received updates on workforce remuneration across the Group.
DIRECTORS’ REMUNERATION REPORT
CONTINUED
Hochschild Mining PLC
Annual Report & Accounts
1
Advisers
During the year, in order to enable the Committee to reach informed decisions on executive remuneration, advice on market data
and trends was obtained from independent consultants FIT Remuneration Consultants LLP (FIT).
FIT reported directly to the Committee Chair in and are signatories to and abide by the Code of Conduct for Remuneration
Consultants (which can be found at www.remunerationconsultantsgroup.com). Other than advice on remuneration, no other
services were provided by FIT to the Company. The Committee is satisfied that the advice provided by FIT in was independent
and objective.
FIT was appointed as the independent adviser to the Remuneration Committee following a competitive tender process in . The
fees paid to FIT in respect of work carried out in were £,., excluding expenses and VAT, and were charged on the basis
of FIT’s standard terms of business for advice provided.
Summary of shareholder voting
The table below shows the results of the binding vote on the Remuneration Policy at the AGM and of the advisory vote on
the Annual Report on Remuneration at our AGM:
01 Remuneration
Policy
0 Annual Report
on Remuneration
Total number
of votes
% of votes cast
Total number
of votes
% of votes cast
For (including discretionary)
359,539,286
85.60%
320,257,876
96.02%
Against
60,498,907
14.40%
13,287,776
3.98%
Total votes cast (excluding withheld votes)
420,038,193
333,545,652
Votes withheld
34,381
36,814,653
Note: Votes withheld are not included in the final proxy figures as they are not recognised as votes in law.
The Committee is committed to listening to and engaging with the views of our shareholders and takes an interest in voting
outcomes. The Committee will continue to be transparent in our remuneration decision-making and to engage with our
shareholders on remuneration matters. In Autumn we engaged with our major shareholders and with leading proxy agencies
regarding our plans to renew our Directors’ Remuneration Policy at the AGM.
During the year, the Committee received and considered a report summarising the base salaries, benefits and incentives received
by each category of Group staff and summarising the bonus potential and performance metrics used in each of the annual bonus
schemes in operation across the Group. In addition, the Committee ensures that it remains informed regarding mandatory profit
sharing for Peru-based employees.
The Company undertakes varied forms of engagement with employees. In , this included a Strategic Alignment workshop led
by the newly appointed CEO, Eduardo Landin, with the senior managers across the operations in Peru, Argentina and Brazil. The
year also saw the continuation of the roundtable sessions hosted by Tracey Kerr as the Non-Executive Director designated for
workforce engagement (and a member of the Remuneration Committee). In addition, there are frequent and periodic meetings held
by mine management with mine-site employees as well as regular engagement with workers’ appointed representatives regarding
many aspects of the business. These processes provide an opportunity for feedback on Executive Directors’ pay to be given and
explanations to be shared, although most of the engagement process is focused on wider employee welfare; a report on any
material feedback regarding remuneration is received by the Remuneration Committee.
Strategic Report
01—99
Governance
100—1
Financial Statements
150—226
Further Information
227—231
Hochschild Mining PLC
Annual Report & Accounts
15
Single total figure of remuneration for Executive Directors (audited)
The table below sets out a single figure for the total remuneration received by Ignacio Bustamante, until he moved to a Non-
Executive role in August, and Eduardo Landin, our new Chief Executive Officer, for the year ended December and (where
relevant) the prior year:
Eduardo Landin
1
Ignacio Bustamante
1
August –
December
0
(US$000)
(US$)
January
– August
0
(US$000)
(US$)
Base salary
2
190
–
409
702
Taxable benefits
3
7
–
29
29
Total fixed
1
–
8
1
Single-year variable
4
253
–
–
1,075
Multi-year variable
5
240
–
–
0
Profit share
6
23
–
43
69
Total variable
51
–
1,1
Compensation for Time Service (CTS)
7
36
–
34
104
Tax refunds
8
2
–
4
7
Total remuneration
51
–
51
1,8
All figures are rounded to the nearest $
Notes for values (unless otherwise stated):
Eduardo Landin succeeded Ignacio Bustamante as Chief Executive Officer on August . Ignacio became a Non-Executive Director from that date and his remuneration for
that role is reported separately in the table for Non-Executive Directors, below.
Figures disclosed include, where appropriate, certain statutory payments accounted for internally within base salary (“Statutory Supplements”) including additional pay for Labour
Day (Eduardo Landin : $Nil, Ignacio Bustamante : $Nil, : $,).
Taxable benefits include: company car (Ignacio Bustamante: $k; Eduardo Landin: $Nil) and medical insurance (Ignacio Bustamante: $k; Eduardo Landin: $k).
Outcomes for performance during the year under the Annual Bonus Plan. See following sections for further details.
Multi-year variable value relates to the partial vesting of the LTIP awards based on performance to December . See following sections for further details.
All-employee profit share mandated by Peruvian law. Amount received by Ignacio Bustamante in was pro-rated in light of his resignation as CEO on August .
CTS is a legal entitlement for employees in Peru which provides for a fund in the event of termination of employment. CTS in respect of base salary is calculated as one month’s wages
and is deposited biannually in an employee’s interest-accruing bank account and prior to the end of employment. Employees can gain access to the deposited amount to the extent it
exceeds four months’ wages. CTS in respect of other forms of remuneration such as incentive payouts, that are considered to be “non-extraordinary”, is currently calculated at a rate of
/th. For CTS comprises: CTS on base salary (Ignacio Bustamante: $k; Eduardo Landin: $k), on LTIP (Ignacio Bustamante: $NIL; Eduardo Landin: $k) and on bonus (Ignacio
Bustamante: $Nil; Eduardo Landin: $k) (difference due to rounding). CTS comprises: CTS on base salary (Ignacio Bustamante: $k) and on bonus (Ignacio Bustamante: $k).
Refunds payable in relation to social security following a change in regulations.
Single total figure of remuneration for Non-Executive Directors (audited)
The table below sets out a single figure for the total remuneration for the year ended December and the prior year received
by each Non-Executive Director serving during the year:
Base fee
(US$000)
Additional fees
(US$000)
Taxable benefits
(US$000)
Total
(US$000)
0
0
0
0
Eduardo Hochschild
1
400
2
400
0
0
665
601
1,058
1,001
Jorge Born Jr
87
87
0
0
0
0
87
87
Jill Gardiner
87
87
22
10
0
0
109
97
Tracey Kerr
2
87
87
30
20
0
0
117
107
Michael Rawlinson
87
87
47
45
0
0
134
132
Mike Sylvestre
3
87
48
10
3
0
0
97
51
Joanna Pearson
4
15
n/a
3
n/a
0
n/a
18
n/a
Former Directors
Ignacio Bustamante
5
30
n/a
0
n/a
0
n/a
30
n/a
Nicolas Hochschild
6
38
34
0
0
0
0
38
34
Eileen Kamerick
7
39
87
13
27
0
0
52
114
All figures are rounded to the nearest $. Non-Executive Directors’ fees are denominated in GBP and accordingly differences in USD:GBP exchange rates impact the
comparisons between Non-Executive Directors’ fees for the year being reported and the comparative prior year.
Notes:
Eduardo Hochschild was an Executive Director until December and, as reported in the Annual Report, Eduardo Hochschild retained eligibility to receive benefits
following his transition to the Non-Executive Chairman role comprising personal security, medical insurance and use of a company car and driver.
Amounts actually paid to Tracey Kerr and Eduardo Hochschild in were adjusted to correct overpayments in due to payroll processing errors as disclosed in last year’s
Remuneration Report. The table therefore reflects the intended amounts paid in respect of .
Mike Sylvestre was appointed to the Board on May .
Joanna Pearson was appointed to the Board on October .
Ignacio Bustamante became a Non-Executive Director on August when he stepped down as Chief Executive Officer and stepped down from the Board on December .
Nicolas Hochschild was appointed to the Board on May and stepped down from the Board on June .
Eileen Kamerick retired from the Board on June .
DIRECTORS’ REMUNERATION REPORT
CONTINUED
Hochschild Mining PLC
Annual Report & Accounts
1
Salary and fees for the year ended 1 December 0
Executive Director
Executive Director
Base salary from
1 March 0
or date of appointment
(US$000)
Base salary from
1 March 0
(US$000)
% change
Eduardo Landin
550
n/a
n/a
Ignacio Bustamante
700
700
–
Base salary above excludes CTS. All salaries are denominated in US dollars.
Non-Executive Directors
The Non-Executive Directors’ fees have been set at a level to reflect the amount of time and level of involvement required in order
to carry out their duties as members of the Board and its Committees. The annual rates of fees payable to the Non-Executive
Directors of the Company in and are set out in the table below. All Non-Executive Directors receive a base fee, and
additional fees are paid for acting as Chair or member of one of the Board Committees (excluding the Nomination Committee) and
as Senior Independent Director. No changes were made to the base fees and the Committee Chair, Committee member and Senior
Independent Director fees in .
Fee level from
1 March 0
(Stated currency p.a.)
Previous fee level
(Stated currency p.a.)
% change
Non-Executive Chairman’s fee
US$400,000
US$400,000
–
Non-Executive Directors’ base fee
£70,000
£70,000
–
Additional fees
Senior Independent Director
£14,000
£14,000
–
Chair of the Audit, Remuneration and Sustainability Committees
£14,000
£14,000
–
Committee membership fee (Audit; Remuneration; Sustainability)
£5,000
£5,000
–
Incentive outcomes for the year ended 1 December 0 (audited)
Annual bonus in respect of 0 performance
Objectives for the bonus were set by the Committee at the beginning of the year and assessment of performance during the
year was undertaken at the March Committee meeting.
Details of the bonus paid to the CEO (Eduardo Landin) for , including the specific performance metrics, weightings and
performance against each of the metrics, are provided in the table below:
0 Targets
0 Assessment
Objective
KPI
Target
weighting
Threshold
Target
Maximum
0 result
Final bonus
score/
(Maximum)
Profitable production
and financial results
Adjusted Production (Oz Ag Eq)
1
15%
24.6m
25.2m
25.9m
25.09m
6.85% (15%)
Adjusted EBITDA
2
15%
US$180m
US$195m
US$210m
US$187.7m
6.03% (15%)
AISC from operations with growth
3
15%
US$17.6/oz
US$17.2/oz
US$16.8/oz
US$17.1/oz
9.67% (15%)
Strategy
Strategic advancement
15%
Remco Assessment
Full Vesting
15% (15%)
Brownfield exploration
Inferred resources (subject to permits
available) (Oz Ag Eq)
10%
Remco Assessment
Partial Vesting
7% (10%)
Responsibility
Accident frequency rate (LTIFR)
10%
2.50
–
1.60
0.99
10% (10%)
Accident Severity Index
5%
300
–
150
37
5% (5%)
Social key milestones
5%
Remco Assessment
Partial Vesting
4.5% (5%)
ECO Score
4
10%
4.75
–
5.25
5.76
10% (10%)
Bonus payable (as a percentage of maximum opportunity)
.05%
Notes:
Production was adjusted to neutralise the impact on production caused by external factors i.e. the national protests in Q following the impeachment of President Castillo.
Adjusted EBITDA is used for the annual bonus and is determined based on EBITDA adjusted primarily to neutralise price effects, unbudgeted expenditure or external factors. Such
adjustments in included (a) commodity prices which were higher than those used for the preparation of the budget (c.US$ million), (b) lost revenue resulting from, and
costs associated with, the above-mentioned national protests, (c) higher-than-budgeted provision for bonuses, and (d) unbudgeted social-related expenses.
All-in sustaining cost (AISC) is adjusted to ensure comparability with the objective set at the beginning of the year and therefore disregards (a) additional costs incurred as a result
of the above-mentioned national protests, (b) higher-than-budgeted provision for bonuses, and (c) the additional costs due to higher-than-forecast commodity prices.
Refer to www.hochschildmining.com for further details on the methodology of calculating the Group’s ECO Score (the internally designed measurement of the Company’s
environmental performance).
Strategic Report
01—99
Governance
100—1
Financial Statements
150—226
Further Information
227—231
Hochschild Mining PLC
Annual Report & Accounts
1
General approach
The determination of the bonus payout is at the discretion of the Committee, taking into account performance during the year
against the above scorecard. Each objective in the scorecard has a “threshold”, “target” and “maximum” performance target,
achievement of which translates into a score for each objective. The bonus scores for each objective are summed which translates
into a percentage which is applied to the maximum bonus opportunity.
Adjustments were made in line with the Company’s usual practice to maintain the quality of earnings by primarily disregarding the
impact of factors outside of management’s control such as the price of silver and gold (as compared to budgeted prices).
Assessing performance against 0 bonus objectives
In arriving at the above bonus scorecard, the Committee paid particular attention to the following aspects of the Company’s performance:
–
Operational performance
As mentioned in the Annual Statement, operational performance in was largely influenced by the process of securing
approval of the Inmaculada MEIA; with the period up until its approval in August seeing management prioritising cash
conservation with the associated impacts on production, mine development and brownfield exploration. After the MEIA approval,
the Company benefited from a robust performance in the second half of the year which concluded with annual production at the
top end of the range of the year’s revised guidance, and costs, overall, in line with expectations.
Overall, the full year operational performance was judged against the objectives set at the beginning of the year in relation to
production, EBITDA and costs (adjusted, where appropriate, for external factors as described in the footnotes to the table above)
which were only partially satisfied.
–
Safety
The Company’s robust safety performance in which, in addition to seeing the Company achieve its long-term objective of
Zero Fatalities, saw record lows in our accident frequency and severity rates. This was considered to be all the more commendable
in light of the higher safety risk profile associated with the ongoing construction of Mara Rosa and the increased use of manual
mining methods at Pallancata during the latter stages of that operation.
–
ECO Score
The overall ECO Score for the year is . against a stretch target of .. This internally designed award-winning measure of
environmental management reflects the following:
•
our lowest water consumption since (. l/person/day)
•
domestic waste generation of . kg/person/day
Further details on the ECO Score can be found on the Company’s website at www.hochschildmining.com
–
Strategic advancement
In evaluating performance against this objective, the Committee considered a range of actions taken to position the Company for
long-term and sustainable growth to benefit our shareholders, including:
Mara Rosa mine (Brazil)
•
the achievement of several notable milestones resulting in the timely completion of construction of the mine and within budget. The
Company was pleased to announce the first gold pour in February
Pallancata MEIA (Peru)
•
approval of the preliminary environmental evaluation approved by the Peruvian Governmental Authority
•
the considerable progress made with the feasibility studies in line with the project plan
–
Brownfield exploration
The work done during the year against the objectives set for each of the Company’s sites. Given the suspension of the brownfield
exploration programme due to the Inmaculada MEIA delay, the Committee assessed this objective to have only partially vested.
–
Social key milestones
The Remuneration Committee’s consideration of performance against this objective took into account the actions taken by
management to implement a new community relations strategy overseen by a reorganised Community Relations department
and external advisers to identify key opportunities. In addition, the occurrence of minor levels of local disruption, which did not
impact production, was a contributory factor in determining that this objective was only partially met.
DIRECTORS’ REMUNERATION REPORT
CONTINUED
Hochschild Mining PLC
Annual Report & Accounts
18
–
Experience of key stakeholders
The Committee also took into account the experience of the Group’s key stakeholders during the year, noting::
– the share price performance during the year with the positive headwinds caused by the approval of the Inmaculada MEIA:
– the Group has not made use of any government-sponsored schemes or grants in any of the countries in which it operates;
– the Company’s ongoing programme of initiatives to assist local communities and other local stakeholders; and
– the continued reporting initiatives undertaken in reinforcing the Group’s commitment to transparency.
For further details see the Sustainability Report on page .
In conclusion, the Committee agreed that Eduardo Landin be awarded a bonus of .% of the maximum opportunity in respect of
his performance as CEO (which amount was pro-rated for time in that role). In addition, Eduardo has separately received a bonus in
respect of his performance in his previous role as Chief Operating Officer.
01 LTIP vesting
On May , Ignacio Bustamante and Eduardo Landin were each granted an award under the LTIP with a face value of
US$,, and US$, respectively. The LTIP award held by Ignacio Bustamante lapsed when he stepped down as CEO
(along with his other LTIP awards).
Vesting of the LTIP was dependent on (i) three-year relative TSR performance against a tailored peer group (% of the total
award) and (ii) internal KPIs as summarised in the table below (% of the total award). There was no retesting of performance.
Further details of the performance conditions are shown in the table below.
Performance measure
Weighting
Performance targets
Relative TSR
1
performance vs. tailored peer group
2
50%
Upper quintile (80th percentile): full vesting
Upper tercile (67th percentile): 75% vesting
Median (50th percentile): 25% vesting
Straight-line vesting between these points
Internal KPIs:
Measured & Indicated Resources (M&IR) per share
3
– absolute
growth over three-year performance period 2021-2023
25%
180 Ag Eq Moz growth in M&IR – full vesting
160 Ag Eq Moz growth in M&IR – 75% vesting
120 Ag Eq Moz growth in M&IR – 25% vesting
Straight-line vesting between these points
MI&R growth measured as Total M&I Resource
Additions over three years
Consistency Performance Condition
25%
Average bonus scorecard outcome 2021-2023 with
threshold vesting of 25% requiring an average
achievement of 60% scorecard attainment with
straight-line vesting up to full vesting requiring an
average of 100% scorecard attainment. There is an
overriding underpin whereby if the annual scorecard
achievement is less than 60% in any one year, then
the vesting of this LTIP component will be nil.
Notes:
TSR is calculated in common currency.
The LTIP peer group, at the time of measurement of the award, comprised: Agnico-Eagle Mines, Alamos Gold, AngloGold Ashanti, Barrick Gold, Centamin, Cia des Minas
Buenaventura, Coeur Mining, Eldorado Gold, Endeavour Silver, First Majestic Silver, Fortuna Silver Mines, Fresnillo, Gold Fields, Hecla Mining, IAMGOLD, Kinross Gold, Newmont
Mining, OceanaGold Corp, Pan American Silver and SSR Mining.
M&IR additions only in the three-year period.
The Remuneration Committee considered the outcome of the performance conditions between January and December
, noting in particular:
(i)
that the Company’s TSR over the performance period ranked below median for the tailored peer group thereby resulting in nil
vesting as to % of the award
(ii)
that the Company’s M&IR additions totalled . Ag Eq Moz resulting in % vesting as to % of the award
(iii)
that the average bonus scorecard was .% of maximum resulting in .% vesting as to % of the award
Accordingly, the LTIP awards will vest as to .%.
Strategic Report
01—99
Governance
100—1
Financial Statements
150—226
Further Information
227—231
Hochschild Mining PLC
Annual Report & Accounts
1
Scheme interests awarded in 0
(audited)
On April , Ignacio Bustamante and Eduardo Landin were each granted a cash-settled award under the LTIP with a face
value of $,, and $,, respectively. The LTIP award held by Ignacio Bustamante lapsed when he stepped down as
CEO (along with his other outstanding LTIP awards).
Vesting is dependent on performance conditions measured from January to December , with % of the award
based on TSR performance against a tailored peer group and % based on internal KPIs as summarised in the table below.
Awards normally vest on the third anniversary of the date of grant, subject to continued employment, and are subject to potential
malus in line with the Company’s Malus policy (see page for further details). Due to legal difficulties arising from its enforcement
in Peru, the Remuneration Committee is unable to operate clawback.
After payment of tax, all of the vested cash award will be required to be invested in Hochschild shares which will be held for a further
period of two years. Dividends, if any, will accrue to shares during the holding period. Further details, including vesting schedules, are
provided in the table below:
Executive Director
Grant date
Performance period
Face value of
award at grant
Award value for
threshold performance
Ignacio Bustamante
1
20.04.23
1 January 2023 to
31 December 2025
$1,400,000
$350,000
Eduardo Landin
20.04.23
1 January 2023 to
31 December 2025
$595,000
$148,750
Notes:
Ignacio Bustamante’s LTIP award lapsed when he stepped down as CEO on August (as well as his other outstanding LTIP awards).
Performance measure
Weighting
Performance targets
TSR
Relative TSR
1
performance
vs. tailored peer group
2
50%
Upper quintile (80th percentile): full vesting
Upper tercile (67th percentile): 75% vesting
Median (50th percentile): 25% vesting
Straight-line vesting between these points
Internal KPIs
Measured & Indicated Resources
(M&IR) per share
3
– absolute
growth over three-year
performance period 2023-2025
25%
180 Ag Eq Moz growth in M&IR – full vesting
160 Ag Eq Moz growth in M&IR – 75% vesting
120 Ag Eq Moz growth in M&IR – 25% vesting
Straight-line vesting between these points
MI&R growth measured as Total M&I Resource Additions over three years
Consistency Performance
Condition
25%
Average bonus scorecard outcome 2023-2025 with threshold vesting of 25% requiring an
average achievement of 60% scorecard attainment with straight-line vesting up to full
vesting requiring an average of 100% scorecard attainment. There is an overriding
underpin whereby if the annual scorecard achievement is less than 60% in any one year,
then the vesting of this LTIP component will be nil.
Notes:
TSR is calculated on the basis of common currency.
The LTIP peer group, at the date of grant, comprised: Agnico-Eagle Mines, Alamos Gold, AngloGold Ashanti, Barrick Gold Corp, Centamin, Cia des Minas Buenaventura, Coeur
Mining, Eldorado Gold Corp, Endeavour Silver Corp, Equinox Gold, First Majestic Silver Corp, Fortuna Silver Mines, Fresnillo, Gold Fields, Hecla Mining, IAMGOLD, Kinross Gold,
Kirkland Lake, Newmont Mining, OceanaGold Corp, Pan American Silver, Polymetal International and SSR Mining.
M&IR additions only in the three-year period.
Exit payments made in the year (audited)
Ignacio Bustamante stepped down as Chief Executive Officer on August . Mr Bustamante continued to serve on the Board
as a Non-Executive Director representing Pelham Investment Corporation, Hochschild’s largest shareholder controlled by Eduardo
Hochschild until December to assist with a smooth CEO handover. Mr Bustamante continued to receive his normal fixed
pay as CEO until August in accordance with his contractual entitlements. He will not be eligible to receive a bonus in respect
of and his outstanding LTIP awards have lapsed in full.
Payments to past Directors (audited)
No payments were made to past Directors in the year.
Implementation of Remuneration Policy for 0
A summary of how the Remuneration Policy will be applied for the year ended December is provided below.
Salary
The Committee reviewed the CEO’s salary and has determined that it will be increased by % to $, with effect from March .
The review, which took place as originally intended following Eduardo’s appointment as CEO, reflected the Board’s overall positive
assessment of his first six months in the role. In addition, the Board felt it appropriate to acknowledge the positive outcomes of key
stakeholder interactions including the Capital Markets Event in November , and the leadership demonstrated in the
achievement of key strategic milestones such as the incorporation of Mara Rosa as the first Brazilian asset in Hochschild’s portfolio.
DIRECTORS’ REMUNERATION REPORT
CONTINUED
Hochschild Mining PLC
Annual Report & Accounts
10
The Remuneration Committee reserves the right to further adjust the salary upwards above inflation should it be considered
appropriate to do so.
Annual bonus
The maximum annual bonus opportunity for the CEO for the financial year will be % of salary. The bonus payment will be
subject to performance against broadly the same measures as those used in . Further disclosure of measures and targets,
where not commercially sensitive, will be provided in next year’s Annual Report on Remuneration.
As in previous years, the Committee will assess performance against the objectives set and calculate an overall bonus score which
will be applied to the maximum bonus opportunity. The bonus will be subject to malus provisions in line with the Remuneration Policy
and, a discretionary override will be applied such that the occurrence of any fatality during the year at the Group’s operations will
result in the reduction, to nil, of the safety-related objectives.
Any bonus earned above % of salary will be paid in shares and deferred for two years.
LTIP
The Committee will make awards in at levels up to % of base salary. The awards will be made on the same terms as those
applying to the awards with the exception that the Consistency performance condition will be replaced with targets aligned
with the Group’s strategies on ESG and workforce diversity and inclusion.
Vested LTIP awards will be invested (on a post-tax basis) in the Company’s shares which are required to be held for a further two years.
The performance conditions are:
– Relative TSR performance vs tailored peer group (% weighting: same median to upper quintile range as for awards)
– Measured & Indicated Resources (M&IR) per share (% weighting: growth over three-year performance period -,
reflecting the same absolute growth targets as for , and awards)
– ESG Performance Condition (% weighting: subject to year-on-year improvements over the three-year performance period in at
least % of the selected ESG key performance indicators covering communities, environmental management, people and
health & safety)
The Committee had considered the incorporation of objectives related to the Company’s Net Zero by goal but this was not yet
considered to be the appropriate time given the nature of the actions that would need to occur to see significant reductions in the
Company’s relatively low GHG emissions. These include the renewal of electricity supply contracts to providers who source
electricity from a higher proportion of renewable sources and eventual fleet renewal/upgrades as and when technology permits.
Malus provisions will apply to LTIP awards granted in in line with the Remuneration Policy.
Non-Executive fees
Fees for the Chair and Non-Executive Directors (i.e. base, additional and Committee membership fees) will be the subject of a %
increase with effect from March .
Annual percentage change in Directors’ remuneration
The tables below show the percentage change in Board Directors’ remuneration between and compared with the
percentage change in remuneration for all other employees.
0
% change
Base salary
1
/
Non-Executive fees
1a
Taxable benefits
Single-year variable
Executive Directors
Eduardo Landin
n/a
n/a
n/a
Ignacio Bustamante
4
-41.7%
0%
-100%
Non-Executive Directors
Eduardo Hochschild
-1.8%
10.6%
n/a
Jorge Born Jr
0%
n/a
n/a
Ignacio Bustamante
4
n/a
n/a
n/a
Jill Gardiner
12.4%
n/a
n/a
Nicolas Hochschild
11.8%
n/a
n/a
Eileen Kamerick
5
-54.4%
n/a
n/a
Tracey Kerr
9.3%
n/a
n/a
Michael Rawlinson
1.5%
n/a
n/a
Mike Sylvestre
90.2%
n/a
n/a
Joanna Pearson
n/a
n/a
n/a
Average all employees
8
6%
n/a
-16%
Strategic Report
01—99
Governance
100—1
Financial Statements
150—226
Further Information
227—231
Hochschild Mining PLC
Annual Report & Accounts
11
0
% change
Base salary
1
/
Non-Executive fees
1a
Taxable benefits
Single-year variable
Executive Directors
Ignacio Bustamante
0%
7.4%
-1.5%
Non-Executive Directors
Eduardo Hochschild
0%
-9.6%
n/a
Dr Graham Birch
5
-60%
n/a
n/a
Jorge Born Jr
-9.3%
n/a
n/a
Jill Gardiner
1%
n/a
n/a
Nicolas Hochschild
6
n/a
n/a
n/a
Eileen Kamerick
-1%
n/a
n/a
Tracey Kerr
7
1,867%
n/a
n/a
Michael Rawlinson
-2.2%
n/a
n/a
Dionisio Romero Paoletti
5
-61.5%
n/a
n/a
Mike Sylvestre
6
n/a
n/a
n/a
Average all employees
8
7.0%
n/a
14%
01
% change
Base salary
1
/
Non-Executive fees
1a
Taxable benefits
Single-year variable
Executive Directors
Ignacio Bustamante
0%
–10%
5.7%
Non-Executive Directors
Eduardo Hochschild
0%
17%
n/a
Dr Graham Birch
9
3.4%
n/a
n/a
Jorge Born Jr
0%
n/a
n/a
Jill Gardiner
0%
n/a
n/a
Eileen Kamerick
0%
n/a
n/a
Tracey Kerr
0%
n/a
n/a
Michael Rawlinson
0%
n/a
n/a
Dionisio Romero Paoletti
0%
n/a
n/a
Average all employees
8
6.2%
n/a
0.8%
00
% change
Base salary
1
/
Non-Executive fees
1a
Taxable benefits
Single-year variable
Executive Directors
Ignacio Bustamante
0%
4.5%
–5.3%
Non-Executive Directors
Eduardo Hochschild
0%
2%
n/a
Dr Graham Birch
0%
n/a
n/a
Jorge Born Jr
0%
n/a
n/a
Jill Gardiner
n/a
n/a
n/a
Eileen Kamerick
0%
n/a
n/a
Michael Rawlinson
0%
n/a
n/a
Dionisio Romero Paoletti
0%
n/a
n/a
Average all employees
8
5.8%
n/a
3.8%
Notes:
Base salary only (i.e. excluding Statutory Supplements – see footnote to table on single figure of total remuneration for Executive Directors on page ).
a
Note that Non-Executive Director fees other than those paid to Eduardo Hochschild are denominated in British Pounds but are reported in US Dollars at the relevant rate for
reporting purposes. % changes from are therefore the result of a combination of (i) differences in exchange rates used for reporting purposes and (ii) the introduction of
Committee membership fees from March . Where “%” is stated, this means that there was no change in the relevant fee as denominated.
Taxable benefits comprise (a) for Ignacio Bustamante, a company car and medical insurance and (b) for Eduardo Hochschild, the use of a car and driver, personal security and
medical insurance. See footnote to table on single figure of total remuneration for details of taxable benefits paid to Executive Directors on page ).
Single-year variable comprises (a) bonus (calculated with reference to base salary only, i.e. before CTS and tax rebates) and (b) statutory profit-share.
Ignacio Bustamante stepped down as CEO on August but remained on the Board as a Non-Executive Director until December .
Year-on-year % reductions reflect the fact that Dr Graham Birch and Dionisio Romero Paoletti retired from the Board on May and Eileen Kamerick retired on June .
Nicolas Hochschild and Mike Sylvestre were appointed to the Board on May .
Year-on-year % increase reflects the fact that Tracey Kerr was appointed to the Board on December .
“All employees” comprises full-time salaried employees in Peru. percentage change is an approximation only, as final data is not available as at the date of the report.
As previously reported, to align the position with that of the other committees, the Board approved the payment of the additional fee to Dr Birch as Chair of the Sustainability
Committee from November .
DIRECTORS’ REMUNERATION REPORT
CONTINUED
Hochschild Mining PLC
Annual Report & Accounts
1
Relative importance of spend on pay
The table below shows the percentage change in total employee pay expenditure and shareholder distributions (i.e. dividends) from
the financial year ended December to the financial year ended December .
Distribution to shareholders (US$000)
1
Employee remuneration (US$000)
0
0
% change
0
0
% change
NIL
10,000
N/A
174,208
172,049
2
1.3%
Notes:
Comprises all cash dividends paid in respect of each year.
value has been restated (see note to the consolidated financial statements for further information).
The Directors are not recommending the payment of a final dividend for the year ended December .
Pay for performance
The following graph shows the TSR for the Company compared to the FTSE Precious Metals and Mining Index and FTSE
Index, assuming £ was invested on December . The Board considers that the FTSE Precious Metals and Mining Index
is an appropriate published index as it reflects the sector that Hochschild operates in, and the FTSE Index provides a view of
performance against a broad equity market index of which Hochschild has been a constituent for the majority of the past years.
The table below details the CEO’s single figure remuneration and actual variable pay outcomes over the same period.
Hochschild Mining PLC
FTSE 250
FTSE 350 Precious Metals and Mining Index
2022
2023
2013
2014
2015
2016
2017
2018
2020
2021
2019
0
50
100
150
200
250
300
CEO
Ignacio
Bustamante
Ignacio
Bustamante
and
Eduardo
Landin
01
015
01
01
018
01
00
01
0
0
CEO single figure
of remuneration ($000)
924
1,328
3,474
4,519
4,174
3,665
1,933
1,996
1,986
IB 519
EL 751
Annual bonus outcome
(% of maximum)
67%
67%
83%
83%
90%
95%
90%
78.5%
85.35%
74.05%
LTI vesting outcome
(% of maximum)
0%
0%
0%
(ELTIP)
90%
(LTIP)
86%
(ELTIP)
100%
(LTIP)
43%
(ELTIP)
100%
(LTIP)
34%
(ELTIP)
0%
(LTIP)
0%
(LTIP)
0%
(LTIP)
0%
(LTIP)
40.3%
(LTIP)
Notes:
The figures represent the single figure of total remuneration for Ignacio Bustamante from January to August and Eduardo Landin from August to
December .
Strategic Report
01—99
Governance
100—1
Financial Statements
150—226
Further Information
227—231
Hochschild Mining PLC
Annual Report & Accounts
1
Directors’ interests
(audited)
The interests of the Directors and their families in the ordinary shares of the Company as at December are detailed in the table below.
The Company has adopted shareholding guidelines whereby all Executive Directors (currently only the CEO) are required to acquire and
retain a beneficial shareholding in the Company equal to at least % of base salary. The CEO is required to invest the entire amount of a
vested LTIP for two years (on a net basis) regardless of his achievement of the shareholding guideline.
Shares held
Owned outright
or vested at 1
Dec 0 (or date
of appointment
if later)
Owned outright
or vested at 1
Dec 0 (or date
of retirement
if earlier)
Vested but
subject to
holding
period
Unvested and
subject to
performance
conditions
Unvested and
subject to
deferral only
Shareholding
requirement
(% of salary)
Current
shareholding
(% of salary)
Requirement
met?
Eduardo Landin
0
1
0
1
0
0
0
250%
0
1
No
Ignacio Bustamante
2
1,214,115
1,214,115
0
0
0
250%
235%
3
No
Eduardo Hochschild
196,900,306
196,900,306
Jorge Born Jr
0
0
Jill Gardiner
0
0
Tracey Kerr
0
0
Michael Rawlinson
0
0
Mike Sylvestre
0
0
Joanna Pearson
0
4
0
Former Directors
Nicolas Hochschild
0
0
Eileen Kamerick
0
0
Notes:
A review of the Company’s internal records following approval of this report found that the numbers and percentage disclosed in the table for Eduardo Landin should have
reflected a shareholding of , ordinary shares as at the date of appointment (as announced by the Company on August ) and as at December which
represents % of salary (using the data referred to in footnote below).
Ignacio Bustamante stepped down as CEO on August but remained on the Board until December .
Using the Company’s closing share price and GBP/USD exchange rate as at December (being the last trading day of the year) of £. and £:$. respectively.
As at October , being the date on which Joanna Pearson was appointed to the Board.
There have been no changes to Directors’ shareholdings since December .
Directors’ interests in share options, shares and cash awards in Hochschild Long-Term Incentive Plans
Details of Directors’ interests in shares and cash awards under Hochschild’s Long-Term Incentive Plans are set out in the table below.
Eduardo Landin
Date
of grant
Share price
at grant
Exercise price
at grant
Number of
shares
awarded
Max value
Performance
period
Vesting
date
2021 LTIP
27.05.21
n/a
n/a
n/a
$595,000
01.01.21 – 31.12.23
27.05.24
2022 LTIP
23.02.22
n/a
n/a
n/a
$595,000
01.01.22 – 31.12.24
23.02.25
2023 LTIP
20.04.23
n/a
n/a
n/a
$595,000
01.01.23 – 31.12.25
20.04.26
As noted above, all LTIP awards previously held by Ignacio Bustamante lapsed when he stepped down as CEO on August .
None of the Directors had an interest in the shares of any subsidiary undertaking of the Company or in any significant contracts of the Group.
External appointments
The table below details the fees received in respect of external directorships by Ignacio Bustamante, being the only Executive
Director in office during in receipt of such fees.
Name of Executive
Director
Name of company
Fee received
Ignacio Bustamante
Profuturo AFP
US$28,000
Ignacio Bustamante
Scotiabank Peru SAA
US$40,000
Signed on behalf of the Board.
Michael Rawlinson
Chair of the Remuneration Committee
12 March 2024
DIRECTORS’ REMUNERATION REPORT
CONTINUED
Hochschild Mining PLC
Annual Report & Accounts
1
SUPPLEMENTARY INFORMATION
Introduction
References in this section to “the Articles” are to the Company’s
Articles of Association as at the date of this report, copies of
which are available from the Registrar of Companies or on
request from the Company Secretary.
References in this section to “the Companies Act” are to the
Companies Act .
Share capital
Issued share capital
The Company’s issued share capital comprises ,,
ordinary shares of pence each (“shares”). , shares were
issued during the year to satisfy the vesting of awards granted
to employees under the Company’s Deferred Bonus Plan.
The Hochschild Mining Employee Share Trust (“the Trust”) is an
employee share trust established to hold shares on trust for the
benefit of employees within the Group.
The Trustee of the Trust has absolute discretion to vote or
abstain from voting in relation to the shares held by it from time
to time and in doing so may take into account the interests of
current and future beneficiaries and other considerations.
Current share repurchase authority
The Company obtained shareholder approval at the AGM held
in June for the repurchase of up to ,, shares
which represents % of the Company’s issued share capital
(“the Authority”). Whilst no purchases have been made by
the Company pursuant to the Authority, it is intended that
shareholder consent will be sought on similar terms at this year’s
AGM when the Authority expires.
Additional share capital information
This section provides additional information as at December
.
(a)
Structure of share capital
The Company has a single class of share capital which is divided into
ordinary shares of pence each, which are in registered form.
Further information on the Company’s share capital is provided in
note to the consolidated financial statements.
(b)
Rights and obligations attaching to shares
The rights attaching to the ordinary shares are described in full
in the Articles. In summary, on a show of hands and on a poll at a
general meeting or class meeting, every member present in
person or, subject to the below, by proxy has one vote for every
ordinary share held. However, in the case of a vote on a show of
hands, where a proxy has been appointed by more than one
member, the proxy has one vote for and one vote against if the
proxy has been instructed by one or more members to vote
for the resolution and by one or more members to vote against
the resolution.
Members are entitled to appoint a proxy to exercise all or any
of their rights to attend and to speak and vote on their behalf
at a general meeting or class meeting. A member that is a
corporation is entitled to appoint more than one individual to
act on its behalf at a general meeting or class meetings as a
corporate representative.
(c)
Transfer of shares
The relevant provisions of the Articles state that:
– registration of a transfer of an uncertificated share may be
refused in the circumstances set out in the CREST Regulations
and where, in the case of a transfer to joint holders, the
number of joint holders to whom the uncertificated share is to
be transferred exceeds four;
– the Directors may, in their absolute discretion, decline to
register any transfer of any share which is not a fully paid
share. The Directors may also decline to recognise any
instrument of transfer relating to a certificated share unless
the instrument of transfer:
•
is duly stamped (if required) and is accompanied by the
relevant share certificate(s) and such other evidence of the
right to transfer as the Directors may reasonably require; and
•
is in respect of only one class of share.
– the Directors may:
•
in their absolute discretion, refuse to register a transfer if it is
in favour of more than four persons jointly; and
•
decline to register a transfer of any of the Company’s shares
by a person with a .% interest, if such a person has been
served with a notice under the Companies Act after failure
to provide the Company with information concerning
interests in those shares required to be provided under the
Companies Act.
(d) Restrictions on voting
No member shall be entitled to vote at any general meeting or
class meeting in respect of any shares held by him or her, if any
call or other sum then payable by him or her in respect of that
share remains unpaid. Currently, all issued shares are fully paid.
In addition, no member shall be entitled to vote if he or she failed
to provide the Company with information concerning interests in
those shares required to be provided under the Companies Act.
(e)
Deadlines for voting rights
Votes are exercisable at the general meeting of the Company in
respect of which the business being voted upon is being heard.
Votes may be exercised in person, by proxy or, in relation to
corporate members, by a corporate representative. Under
the Articles, the deadline for delivering proxy forms cannot
be earlier than hours (excluding non-working days) before
the meeting for which the proxy is being appointed.
Strategic Report
01—99
Governance
100—1
Financial Statements
150—226
Further Information
227—231
Hochschild Mining PLC
Annual Report & Accounts
15
Shareholder agreements
The Relationship Agreement entered into prior to the IPO
between, amongst others, the Major Shareholder (as defined
in the Relationship Agreement) and Eduardo Hochschild
(collectively “the Controlling Shareholders”) and the Company:
– Contains provisions restricting the Controlling Shareholders’
rights to exercise their voting rights to procure an
amendment to the Articles that would be inconsistent with
the Relationship Agreement
– Contains an undertaking by the Controlling Shareholders that
they will, and will procure that their Associates will, abstain
from voting on any resolution to approve a transaction with a
related party (as defined in the FCA Listing Rules) involving the
Controlling Shareholders or their Associates
Significant agreements
A change of control of the Company following a takeover bid
may cause a number of agreements to which the Company,
or any of its trading subsidiaries, is party to take effect, alter
or terminate. Such agreements include commercial trading
contracts, joint venture agreements and financing arrangements.
Further details are given below of those arrangements where the
impact may be considered to be significant in the context of
the Group.
(a)
$00 million Credit Agreement and $00 million Credit
Agreement
1
(the “Credit Agreements”)
Under the terms and conditions of the Credit Agreements which
are between, amongst others, the Group and BBVA Securities
Inc, and The Bank of Nova Scotia, a Change of Control obliges
the Group to prepay all Advances (as defined in the agreement)
unless any Lender notifies the Group that it is declining any such
prepayment in which case the Advances owing to such declining
Lender shall not be prepaid.
In summary, a Change of Control means an event or series of
events by which: (a) the Permitted Holders (being Eduardo
Hochschild, his spouse, either of their descendants or estate or
guardian of any of the aforementioned, a trust for the benefit of
one or more of the aforementioned or any entity controlled by
any one or more of the aforementioned) shall for any reason
cease, individually or in the aggregate, to be the beneficial
owners (as so defined) of at least % of the Company’s shares;
or (b) the Permitted Holders shall for any reason cease,
individually or in the aggregate, to have the power to appoint
at least the number of the members of the Board of Directors
or other equivalent governing body of the Company that the
Permitted Holders are permitted to elect as at September
; or (c) the Company shall for any reason cease, directly or
through one or more of its Subsidiaries, to be the “beneficial
owner” (as so defined) of more than % of the Equity Interests
in the Borrowers. In the case of the $ million Credit
Agreement, the “Borrower” is Compania Minera Ares S.A.C.
(“Ares”) and, in the case of the $ million Credit Agreement,
“Borrower” is either Ares or Amarillo Mineracao do Brasil Ltda.
(b) Long-Term Incentive Plans
Awards made under the Group’s Long-Term Incentive Plan shall,
upon a change of control of the Company, vest early unless a
replacement award is made. Vesting will be pro-rated to take
account of the proportion of the period from the award date
to the normal vesting date falling prior to the change of control
and the extent to which performance conditions (and any other
conditions) applying to the award have been met.
Summary of constitutional and other provisions
Appointment of Directors
Under the terms of the Articles Directors may be appointed by
the Company by ordinary resolution or by the Board. A Director
appointed by the Board holds office only until the next following
AGM and is then eligible for election by shareholders but is not taken
into account in determining the Directors or the number of Directors
who are to retire by rotation at that meeting.
The Directors may from time to time appoint one or more of their
body to be the holder of any executive office for such period (subject
to the Companies Act) and on such terms as they may determine
and may revoke or terminate any such appointment.
Each Director is subject to periodic re-election by shareholders at
intervals of no more than every three years. Each Director (other
than the Chairman and any Director holding executive office) shall
retire at each AGM following the ninth anniversary of the date on
which he or she was elected by the Company.
Approach to appointments adopted by the Board
Under law, the Company is entitled to adopt such practices
which are no less stringent than those set out in the Articles.
Accordingly, notwithstanding the above, the Board has adopted
the recommendation of the UK Corporate Governance Code
that all Directors should seek annual re-election by shareholders.
Substantial shareholdings
The Company has been notified of the interests detailed in the table below in the Company’s shares in accordance with Chapter
of the Financial Conduct Authority’s Disclosure Guidance and Transparency Rules (DTRs).
As at 1 December 0
Number of
ordinary
shares/voting
rights
Percentage of
issued share
capital
Nature of
holding
Eduardo Hochschild
1
196,900,306
38.27%
Indirect
BlackRock
Below 5%
Below 5%
–
Majedie Asset Management Limited
25,384,745
4.93%
Indirect
Equinox Partners Investment Management, LLC
15,907,641
3.09%
Direct
Van Eck Associates Corporation
15,465,722
3.01%
Direct
The shareholding of Mr Eduardo Hochschild is held through Pelham Investment Corporation.
The information disclosed is taken from the latest notification received by the Company from Majedie Asset Management Limited in October .
Subsequent to December , the Company was notified by Equinox Partners Investment Management, LLC that it no longer
had an interest in the Company’s shares that is notifiable under the DTRs.
SUPPLEMENTARY INFORMATION
CONTINUED
Hochschild Mining PLC
Annual Report & Accounts
1
01 Listing Rules
Following the implementation, in , of new Listing Rules by
the Financial Conduct Authority (in its capacity as the UK Listing
Authority), as a company with a controlling shareholder, the
election or re-election of any Independent Director must be
approved by: (i) all shareholders of the Company; and (ii) the
independent shareholders of the Company (i.e. any person
entitled to vote on the election of Directors of the Company who
is not a controlling shareholder).
If either shareholder resolution to elect or re-elect the
Independent Director is defeated, the Company may propose a
further resolution to elect or re-elect the proposed Independent
Director provided that the further resolution must not be voted
on within days from the date of the original vote but it must
then be voted on within a period of days from the end of the
-day period. It may then be passed by a simple majority of the
shareholders of the Company voting as a single class.
Removal of Directors
The Company may, in accordance with and subject to the provisions
of the Companies Act by ordinary resolution of which special notice
has been given, remove any Director before the expiration of his/her
term of office. The office of Director shall be vacated if: (i) s/he is
prohibited by law from acting as a Director; (ii) s/he resigns or offers
to resign and the Directors resolve to accept such offer; (iii) s/he
becomes bankrupt or compounds with his/her creditors generally;
(iv) a relevant order has been made by any court on the grounds of
mental disorder; (v) s/he is absent without permission of the Directors
from meetings of the Board for six months and the Directors resolve
that his/her office be vacated; (vi) his/her resignation is requested in
writing by not less than three quarters of the Directors for the time
being; or (vii) in the case of a Director other than the Chairman and
any Director holding an executive office, if the Directors shall resolve
to require him/her to resign and within days of being given notice
of such notice s/he so fails to do.
Relationship Agreement
In addition, under the terms of the Relationship Agreement:
•
for as long as the Major Shareholder has an interest of % or
more in the Company, it is entitled to appoint up to two
Non-Executive Directors and to remove such Directors so
appointed; and
•
for as long as the Major Shareholder has an interest of % or
more of the Company, it is entitled to appoint up to one Non-
Executive Director and to remove such Director so appointed.
Amendment of Articles of Association
Any amendments to the Articles may be made in accordance with
the provisions of the Companies Act by way of special resolution.
Powers of the Directors
Subject to the Articles, the Companies Act and any directions
given by special resolution, the business and affairs of the
Company shall be managed by the Directors who may exercise
all such powers of the Company.
Subject to applicable statutes and other shareholders’ rights,
shares may be issued with such rights or restrictions as the
Company may by ordinary resolution decide or, in the absence
of any such resolution, as the Directors may decide. Subject to
applicable statutes and any ordinary resolution of the Company,
all unissued shares of the Company are at the disposal of the
Directors. At each AGM, the Company puts in place an annual
shareholder authority seeking shareholder consent to allot
unissued shares, in certain circumstances for cash, in accordance
with the guidelines of certain Investor Protection Committees.
Repurchase of shares
Subject to authorisation by shareholder resolution, the
Company may purchase its own shares in accordance with the
Companies Act. Any shares which have been bought back may
be held as Treasury shares or, if not so held, must be cancelled
immediately upon completion of the purchase, thereby reducing
the amount of the Company’s issued share capital. The
minimum price which must be paid for such shares is specified
in the relevant shareholder resolution.
Dividends and distributions
Subject to the provisions of the Companies Act, the Company
may by ordinary resolution from time to time declare dividends
not exceeding the amount recommended by the Directors.
The Directors may pay interim dividends whenever the financial
position of the Company, in the opinion of the Directors, justifies
their payment. If the Directors act in good faith, they are not
liable to holders of shares with preferred or pari passu rights
for losses arising from the payment of interim dividends on
other shares.
Strategic Report
01—99
Governance
100—1
Financial Statements
150—226
Further Information
227—231
Hochschild Mining PLC
Annual Report & Accounts
1
SUPPLEMENTARY INFORMATION
CONTINUED
Section
Matter
Location
(1)
Interest capitalised
Note 16 to the consolidated financial statements
(2)
Publication of unaudited financial information
Not applicable
(4)
Details of specified long-term incentive scheme
None
(5)
Waiver of emoluments by a Director
None
(6)
Waiver of future emoluments by a Director
None
(7)
Non pre-emptive issues of equity for cash
None
(8)
Item (7) in relation to major subsidiary undertakings
None
(9)
Parent participation in a placing by a listed subsidiary
None
(10)(a)
Contract of significance in which a Director is interested
Directors’ Report
(10)(b)
Contract of significance with controlling shareholder
Directors’ Report
(11)
Provision of services by a controlling shareholder
Directors’ Report
(12)
Shareholder waivers of dividends
Directors’ Report
(13)
Shareholder waivers of future dividends
Directors’ Report
(14)
Agreement with controlling shareholder
Directors’ Report
Additional disclosures
Disclosure table pursuant to Listing Rule .8.C R
For the purposes of LR ..C R, the information required to be disclosed by LR .. R can be found in the following parts of this
Annual Report:
Hochschild Mining PLC
Annual Report & Accounts
18
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report
and the Group and Parent Company financial statements in
accordance with applicable United Kingdom law and regulations.
Company law requires the Directors to prepare Group and Parent
Company financial statements for each financial year. Under that
law the Directors have elected to prepare the Group and Parent
Company financial statements in accordance with UK-adopted
international accounting standards (IFRS). Under company law
the Directors must not approve the financial statements unless
they are satisfied that they give a true and fair view of the state of
affairs of the Group and the Parent Company and of their profit
or loss for that period.
Under the Financial Conduct Authority’s Disclosure Guidance
and Transparency Rules, Group financial statements are required
to be prepared in accordance with UK-adopted international
accounting standards.
In preparing those financial statements, the Directors are
required to:
– select suitable accounting policies in accordance with IAS
Accounting Policies, Changes in Accounting Estimates and
Errors and then apply them consistently;
– make judgements and accounting estimates that are
reasonable and prudent;
– present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
– provide additional disclosures when compliance with the
specific requirements in IFRS is insufficient to enable users to
understand the impact of particular transactions, other events
and conditions on the Group and Parent Company financial
position and financial performance;
– in respect of the Group financial statements, state whether
UK-adopted international accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements;
– in respect of the Parent Company financial statements, state
whether UK-adopted international accounting standards have
been followed, subject to any material departures disclosed
and explained in the financial statements; and
– prepare the financial statements on the going concern basis
unless it is appropriate to presume that the Parent Company
and/or the Group will not continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Parent
Company’s and Group’s transactions and disclose with
reasonable accuracy at any time the financial position of the
Parent Company and the Group and enable them to ensure that
the Parent Company and the Group financial statements comply
with the Companies Act . They are also responsible for
safeguarding the assets of the Parent Company and the Group
and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic Report, Directors’ Report,
Directors’ Remuneration Report and Corporate Governance
Statement that comply with that law and those regulations.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company’s website. Legislation in the UK governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
Strategic Report
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Governance
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Financial Statements
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Further Information
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Hochschild Mining PLC
Annual Report & Accounts
1
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF HOCHSCHILD MINING PLC
Opinion
In our opinion:
– Hochschild Mining PLC’s Group financial statements and
Parent Company financial statements (the ‘financial
statements’) give a true and fair view of the state of the Group’s
and of the Parent Company’s affairs as at December
and of the Group’s loss for the year then ended;
– the Group financial statements have been properly prepared in
accordance with UK adopted international accounting
standards;
– the Parent Company financial statements been properly
prepared in accordance with UK adopted international
accounting standards as applied in accordance with section
of the Companies Act ; and
– the financial statements have been prepared in accordance
with the requirements of the Companies Act .
We have audited the financial statements of Hochschild Mining
PLC (the ‘Parent Company’) and its subsidiaries (the ‘Group’) for
the year ended December which comprise:
Group
Parent Company
Consolidated statement of
financial position as at
December
Statement of financial position as
at December
Consolidated income statement
for the year then ended
Statement of changes in equity for
the year then ended
Consolidated statement of
comprehensive income for the
year then ended
Statement of cash flows for the
year then ended
Consolidated statement of
changes in equity for the year
then ended
Related notes to to the financial
statements including material
accounting policy information
Consolidated statement of cash
flows for the year then ended
Related notes to to the
consolidated financial
statements, including material
accounting policies
The financial reporting framework that has been applied in their
preparation is applicable law and UK adopted international
accounting standards and as regards to the Parent Company
financial statements, as applied in accordance with section
of the Companies Act .
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor’s responsibilities for the audit of the financial statements
section of our report below.
We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinion.
Independence
We are independent of the Group and Parent Company in
accordance with the ethical requirements that are relevant to
our audit of the financial statements in the UK, including the
Financial Reporting Council’s (FRC) Ethical Standard as applied
to listed public interest entities, and we have fulfilled our other
ethical responsibilities in accordance with these requirements.
The non-audit services prohibited by the FRC’s Ethical Standard
were not provided to the Group or the Parent Company and we
remain independent of the Group and the Parent Company in
conducting the audit.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the
directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate. Our
evaluation of the Directors’ assessment of the Group and Parent
company’s ability to continue to adopt the going concern basis
of accounting included:
– Confirming our understanding of the Directors’ going concern
assessment process and the key factors and assumptions that
were considered in their assessment;
– Auditing the key factors and assumptions adopted in the
assessment of going concern and the cash flow model,
including considering whether management had exercised
any bias in selecting their assumptions, by comparing against
past performance and available market data;
– Checking the reasonableness of all key assumptions in
management’s forecasts, including the forecast gold and
silver price used; the production profiles which form the basis
of the cash flow forecast; and the mitigating factors that exist
and that can be utilised to ensure the liquidity of the Group.
– Obtaining the Director’s going concern assessment, including
cash flow forecast and covenant calculations for the going
concern period which covers months from the audit report
date to April . The Directors have modelled a number
of adverse scenarios in order to incorporate unexpected
changes to the forecast liquidity of the Group. We evaluated
the sufficiency of the sensitivities performed, by assessing
whether the adverse scenarios were appropriately severe
based on historical track record;
– Understanding the operation of management’s model,
checking the clerical accuracy of management’s modelling,
and recalculating management’s forecasts of their
compliance with borrowing covenants throughout the
assessment period under management’s scenarios;
– Verifying the terms, maturity, interest rates, and any
restrictions or covenants of the borrowings held by the Group
at the date of approving the financial statements against the
original contracts;
Hochschild Mining PLC
Annual Report & Accounts
150
– Obtaining the contract with Cerrado Gold in relation to Project
Marlin to verify the terms, required consideration and
exploration expenses, to ensure they are consistent with the
cash flows recognised in management’s model;
– Checking the consistency of the factors and assumptions
adopted in the going concern assessment with other areas of
our audit, including the Group’s asset impairment tests;
– Challenging the adequacy of the going concern assessment
period until April , considering whether any events or
conditions foreseeable after the period indicated a longer
review period would be appropriate;
– Considering the results of the reverse stress tests in order to
identify what factors would lead to the Group utilising all
liquidity during the going concern period. We assessed the
likelihood of these factors in the context of the outlook for
production and for commodity prices and against historic
market lows, as well as our own industry experience;
– Obtaining bank confirmations covering over % of the
Group’s cash and cash equivalents as at December .
We also obtained bank statements to validate the Group’s
cash and cash equivalents as of January and
February ; and
– Reviewing the support prepared by management and the
disclosures relating to the viability assessment and considered
whether they accurately represented the process followed by
management and whether the Group complied with the UK
Corporate Governance Code disclosure requirements.
Based on the work we have performed, we have not identified
any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the
Group and Parent company’s ability to continue as a going
concern for a period to April .
In relation to the Group and Parent Company’s reporting on how
they have applied the UK Corporate Governance Code, we have
nothing material to add or draw attention to in relation to the
Directors’ statement in the financial statements about whether
the Directors considered it appropriate to adopt the going
concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with
respect to going concern are described in the relevant sections
of this report. However, because not all future events or
conditions can be predicted, this statement is not a guarantee
as to the Group’s ability to continue as a going concern.
Overview of our audit approach
Audit scope
– We performed an audit of the complete financial
information of four components, and audit procedures on
specific balances for a further two components and for the
remaining components we performed other audit
procedures.
– The components where we performed full or specific audit
procedures accounted for % of Adjusted EBITDA, % of
Revenue and % of Total Assets.
Key audit
matters
We identified recoverability of the carrying value of the
Group’s mining assets and associates as a key audit
matter that, in our professional judgement, had the
greatest effect on our overall audit strategy, the
allocation of resources in the audit and in directing the
audit team’s efforts.
Materiality
We tested to an overall Group materiality of US$.m.
Final materiality was calculated as US$.m based on %
of the Group’s Adjusted EBITDA. Given our planning
materiality was lower than the final materiality we
continued to use US$.m as our materiality.
An overview of the scope of the Parent Company
and Group audits
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and
our allocation of performance materiality determine our audit
scope for each company within the Group. Taken together, this
enables us to form an opinion on the consolidated financial
statements. We take into account size, risk profile, the
organisation of the Group and effectiveness of Group-wide
controls, changes in the business environment and other factors,
such as recent Internal Audit results, when assessing the level of
work to be performed at each component.
In assessing the risk of material misstatement to the Group
financial statements, and to ensure we had adequate
quantitative coverage of significant accounts in the financial
statements, of the reporting components of the Group, we
selected six components covering entities within the UK, Peru,
Argentina, Brazil and Chile, which represent the principal
business units within the Group.
Of the six components selected, we performed an audit of the
complete financial information of four components (“full scope
components”) which were selected based on their size or risk
characteristics. For the remaining two components (“specific
scope components”), we performed audit procedures on
specific accounts within those components that we considered
had the potential for the greatest impact on the financial
statements either because of the size of these accounts or their
risk profile.
The reporting components where we performed audit procedures
accounted for % (: %) of the Group’s Adjusted EBITDA
(on an absolute basis), % (: %) of the Group’s
Revenue and % (: %) of the Group’s Total Assets.
For the current year, the four full scope components contributed
% (: %) of the Group’s Adjusted EBITDA (on an absolute
basis), % (: %) of the Group’s Revenue and % (:
%) of the Group’s Total Assets. The two specific scope
components contributed % (: %) of the Group’s Total
Assets. The audit scope of these specific scope components will
not have included testing of all significant accounts of the
component but will have contributed to the coverage of some
significant accounts tested for the Group.
The remaining components together represent % of the
Group’s Adjusted EBITDA (on an absolute basis) (: %), For
these components, we performed other procedures, including
analytical reviews, testing of cash balances, testing of
consolidation journals and enquiry of management about
unusual transactions in these components, to respond to any
potential risks of material misstatement to the Group financial
statements.
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Financial Statements
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Further Information
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Hochschild Mining PLC
Annual Report & Accounts
151
The charts below illustrate the coverage obtained from the work
performed by our audit teams.
Adjusted EBITDA
%
Full scope
components
%
Other procedures
%
Revenue
%
Total assets
%
Full scope
components
%
Full scope
components
%
Specific scope
components
%
Other procedures
%
Changes from the prior year
Our audit scope remains largely consistent with , with the
primary change of Amarillo Mineração do Brasil Ltda from a
specific scope entity to a full scope entity as capital expenditure
and related activity has increased in that component compared
with .
Involvement with component teams
In establishing our overall approach to the Group audit, we
determined the type of work that needed to be undertaken at
each of the components by us, as the primary audit
engagement team, or by component auditors from other EY
global network firms operating under our instruction. Of the four
full scope components, audit procedures were performed on
two of these by component audit teams, and directly by the
primary audit team on the other two. For the two specific scope
components, the work was performed by the primary audit
team. Where the work was performed by component auditors,
we determined the appropriate level of involvement to enable us
to determine that sufficient audit evidence had been obtained
as a basis for our opinion on the Group as a whole.
The Group audit team continued to follow a programme of
planned visits that has been designed to ensure that the Senior
Statutory Auditor visits each of the primary operating locations
where the Group audit scope is focused. During the current
year’s audit cycle, visits were undertaken by the primary audit
team to the component teams in Peru and Argentina and also to
local management in Brazil. These visits involved discussing the
audit approach with the component team and any issues arising
from their work, and meetings with local management. The
primary team interacted regularly with the component teams
where appropriate during various stages of the audit, reviewed
relevant working papers and were responsible for the scope and
direction of the audit process. This, together with the additional
procedures performed at Group level, gave us appropriate
evidence for our opinion on the Group financial statements.
Climate change
Stakeholders are increasingly interested in how climate change will
impact Hochschild Mining PLC. The Group has determined that the
most significant future impacts from climate change on its
strategy and operations will be from potential governmental and
societal responses to climate change risks, changes in weather
patterns and consequential restricted access to capital as a result
of failing to respond to these risks. These are explained on pages
to in the Task Force for Climate related Financial Disclosures
(‘TCFD’) report and on page in the principal risks and
uncertainties. All these disclosures form part of the ‘Other
information’, rather than the audited financial statements. Our
procedures on these unaudited disclosures therefore consisted
solely of considering whether they are materially inconsistent with
the financial statements, or our knowledge obtained in the course
of the audit or otherwise appear to be materially misstated, in line
with our responsibilities on ‘Other information’.
In planning and performing our audit we assessed the potential
impacts of climate change on the Group’s business and any
consequential material impact on its financial statements.
As explained in Note to the Consolidated Financial Statements
and the TCFD report on pages to the governmental and
societal responses to climate change risks are still developing, and
are interdependent upon each other, and consequently the
financial statements cannot capture all possible future outcomes
as these are not yet known. The degree of certainty of these
changes may also mean that they cannot be taken into account
when determining asset and liability valuations and the timing of
future cash flows under the requirements of UK adopted
International Accounting Standards.
Our audit effort in considering the impact of climate change on the
financial statements was focused on evaluating management’s
assessment of the potential impacts of climate risk, physical and
transition, and whether these have been appropriately reflected in
the disclosures in Note to the Consolidated Financial Statements.
We also challenged the Directors’ considerations of climate change
risks in their assessment of going concern and viability and
associated disclosures.
The Group is in the process of formulating its Carbon Neutral
Strategy. We note that, new as of , Hochschild have introduced
a interim ambition as a part of their overarching ambition to
be net zero by . Specifically, the interim ambition relates
to reducing greenhouse gas emissions (GHG) scope and
emissions by %, against the baseline emissions level, by
. We note that the Group are intending to conduct a financial
impact assessment in / to determine the financial
statement impact of these measures. Therefore, until this
assessment has been completed, we are unable to determine the
full future economic impact on its business model and operational
plans and therefore the potential impacts are not fully
incorporated in these financial statements.
Based on our work we have not identified the impact of climate
change on the financial statements to be a key audit matter or to
impact a key audit matter.
INDEPENDENT AUDITOR’S REPORT
CONTINUED
Hochschild Mining PLC
Annual Report & Accounts
15
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of
resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of
the financial statements as a whole, and in our opinion thereon, and we do not provide a separate opinion on these matters. In addition
to the matter described in the material uncertainties related to going concern section, we have determined the matters described
below to be the key audit matters to be communicated in our report.
Risk
Our response to the risk
Key observations
communicated to the
Audit Committee
Recoverability of the carrying value of the
Group’s mining assets
Refer to the Audit Committee Report;
Accounting policies (page 163); and Notes
16,17 and 18 of the Consolidated Financial
Statements (pages 186 to 191)
At December the carrying values
of the Group’s mining assets were:
– Property, plant and equipment: US$,.m
(: US$.m);
– Evaluation and exploration assets: US$.m
(: US$.m); and
– Intangible assets: US$.m
(: US$.m)
– Investments in associates: US$.m (:
US$.m)
IFRS requires companies to test cash generating
units (CGUs) for impairment whenever an
indicator exists. An intangible asset with an
indefinite useful life is tested for impairment at
least annually and whenever there is an
indication that the asset might be impaired. For
the Group, CGUs represent individual mines
and advanced exploration projects.
Additionally, IFRS requires testing of CGUs for
impairment reversal at the end of each
reporting period where there is any indicator
that an impairment loss recognised in prior
periods (for an asset other than goodwill) may
no longer exist, or may have decreased.
For the Group, the appropriate CGUs are:
– Operating mines: Pallancata, Inmaculada,
San Jose and Mara Rosa;
– Advanced exploration projects: Volcan,
Azuca, Arcata and Crespo; and
– Investment in associate: Aclara
In August the Group received approval of
the Modified Environmental Impact
Assessment (‘MEIA’) for the Inmaculada mine
from the Peruvian Authorities, allowing that
mine to be operated for years from the
MEIA issuance date.
The Volcan CGU includes an intangible asset
with an indefinite useful life and therefore is
tested for impairment at least annually.
A number of impairment indicators were
identified across the Group’s CGUs, including
but not limited to:
– challenging macroeconomic conditions in
Argentina, impacting San Jose;
– the receipt of an offer for Crespo, Azuca and
Arcata; and
– a reduction in share price for the Aclara
Investment in associate.
As disclosed in Notes and to the
consolidated financial statements, total
impairment charges of $.m were
recognised in the year, consisting of:
– $.m in San Jose;
– $.m in Crespo;
– $.m in Azuca; and
– $.m in Aclara.
The risk relating to recoverability of the
carrying value of mining assets has increased
in comparison to the prior year.
Our approach focused on the following procedures:
– We obtained an understanding of management’s key controls over
impairment of mining assets in supporting the prevention, detection and
correction of material errors in the financial statements.
– We also obtained an understanding of management’s process to obtain
and extend the mining operating permits, assessing the respective life of
mines of the Group’s assets.
– We obtained management’s assessment of whether any indicators of
impairment or reversal of impairment were present at December .
– We challenged the validity of the indicators identified by management,
with a focus on the following key assumptions:
– comparing and assessing management’s prices to analysts’ consensus
forecasts for gold and silver as at December .
– obtaining relevant support of management’s position on market
interest rates and other macro-economic factors.
– challenging the economic performance of the CGUs during the year,
discussed with management and reviewed the approved mine plans
and/or budgets.
– for exploration projects, obtaining an understanding of management’s
plans to recover the carrying value in full from successful development
or by sale. We also obtained technical reports from third-parties for E&E
projects.
– obtaining relevant support about expected renewal/extension of mining
permits.
– We obtained the recoverable value model from management for the
Group’s CGUs, E&E assets and Investment in associate. We performed the
following procedures:
– assessed the appropriateness of the methodology applied in preparing
each model by reference to industry and valuation practices;
– undertook an assessment of management’s track record of accuracy in
forecasting to determine the reliability of current forecasts. We further
agreed the main inputs to the approved mine plans, budgets, technical
reports and historic figures.
– involved our valuation specialists to assist us in challenging and
assessing the appropriateness of the discount rate used in the
calculation.
– challenged management on its forecasts for Argentina, by reference to
forecast inflation and currency devaluation, along with ongoing political
uncertainty.
– with respect to the Crespo asset, verified the consideration offered to
the Group to sell the asset, including contingent consideration for a
.% Net Smelter Return (NSR) Royalty. We additionally engaged EY
valuations specialists to assist us in critically assessing management’s
contingent consideration calculations and methodology.
– assessed managements held for sale disclosures in relation to Crespo
to ensure these were in line with IFRS
Non-current Assets Held for Sale
and Discontinued Operations
– With respect to the Volcan asset, challenged management on the
valuation with regards to potential contra-evidence, corroborating its
position including through discussion with regional hydrological
specialists, EY Chile mining teams and through an assessment of the
revenue royalty received in the year.
– With respect to the recoverable value model for the Azuca CGU,
considered by way of an enterprise valuation under FVLCD, we agreed
the main inputs used to information from third party/independent
sources and involved our valuation specialists to assist us in assessing
the appropriateness of the methodology and EV (Enterprise Valuation) of
comparable entities.
– With respect to Aclara challenged management on the quantum of the
impairment recognised and any potential reversal by reference to
Management’s discounted cashflow model; and
– We reviewed, by reference to the FRC’s guidance, the appropriateness,
sufficiency, and clarity of the impairment-related disclosures, including
around reasonably possible changes in estimates.
The above audit procedures over this risk area, covering % of the
amount at risk, were performed by the Group audit team.
As a result of the audit
procedures performed, we
have concluded that
management’s impairment
indicator analysis and
impairment assessment for
the Group’s CGUs has been
carried out appropriately
and in accordance with the
requirements of IFRS.
We further concluded that
the significant assumptions
used in the recoverable
value models prepared by
management were
appropriate, and where
applicable, fell within the
range of acceptable
outcomes that we had
calculated.
Based on the procedures
performed, we consider the
impairment charges
recorded by management
to be reasonable.
We are satisfied that the
carrying values of the
Inmaculada, San Jose, Mara
Rosa and Volcan do not
require impairment nor
reversal of impairment as at
December .
We concluded that the
related disclosures in the
Group financial statements
are appropriate
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Financial Statements
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Further Information
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Hochschild Mining PLC
Annual Report & Accounts
15
The accounting for Amarillo Gold acquisition and going concern
was considered to be a Key Audit Matter in as the
accounting for acquisitions under IFRS can be complex and
required management to form a number of judgements and
estimates around matters including (but not limited to): the
method of accounting to be applied the accounting treatment
of royalties; the fair value of assets and liabilities; and whether
any deferred tax should be provided on any adjustments. This
matter also had a significant effect on the allocation of
resources in the audit. In the current year this is no longer a Key
Audit Matter as the acquisition was fully completed in .
Revenue recognition is a significant risk presumed by ISAs (UK).
It is not included above, as Hochschild’s revenue streams are
largely routine in nature and do not involve significant
judgement or use of significant estimates. Consequently, the
auditing of revenue recognition did not have the greatest effect
on our overall audit strategy, the allocation of resources in the
audit or in directing the efforts of the engagement team.
As part of our audit, we also address the risk of management
override of internal controls, including evaluating whether there
is evidence of bias by the Directors that may represent a risk of
material misstatement due to fraud. We determined that the risk
of management override does not represent a separate key
audit matter, on the basis that it is our assessment that this risk
principally manifests itself through recoverability of the carrying
value of the Group’s mining assets, where there are a number of
significant judgements and estimates involved that are
susceptible to management bias.
Our application of materiality
We apply the concept of materiality in planning and performing
the audit, in evaluating the effect of identified misstatements on
the audit and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually
or in the aggregate, could reasonably be expected to influence
the economic decisions of the users of the financial statements.
Materiality provides a basis for determining the nature and extent
of our audit procedures.
We determined planning materiality for the Group to be US$.m
(: US$.m), the level on which we based our testing Final
materiality was calculated as US$.m based on % (: %)
of the Group’s Adjusted EBITDA. Given our planning materiality
was lower than the final materiality we continued to use US$.m
as our materiality for our testing. We believe that Adjusted
EBITDA is an earnings-based measure that is significant to users
of the financial statements. This is considered to be a critical
measure for users of the financial statements, given the focus
on this metric by the Group’s shareholders, investors and
external lenders. In addition, the Adjusted EBITDA measure
is used to assess the Group’s compliance with key restrictive
covenants on the Group’s borrowings.
We determined materiality for the Parent Company to be
US$.m (: US$.m), which is % (: %) of Equity.
The Parent Company materiality is higher than the Group
materiality as it is based on Equity, which we consider to be
an appropriate basis for materiality for a holding company,
as the users of the financial statements focus on a capital-
based measure.
INDEPENDENT AUDITOR’S REPORT
CONTINUED
.
– Profit from operations before net
finance income/(cost), foreign
exchange loss and income tax
(US$.m)
– Add: Depreciation and amortisation
in cost of sales and in administrative
expenses (US$.m)
– Add: Exploration expenses other than
personnel and other exploration
related fixed expenses (US$.m)
– Deduct: Other non-cash expenses
(US$.m)
– US$.m Adjusted EBITDA
– Materiality of US$.m (% of
materiality basis).
– During the course of our audit we
reassessed our initial materiality and
we maintained our Planning Materiality
level for the purpose of completing our
audit procedures as the same was
below our final materiality
Starting basis
Adjustments
Materiality
Performance materiality
The application of materiality at the individual account or
balance level. It is set at an amount to reduce to an appropriately
low level the probability that the aggregate of uncorrected and
undetected misstatements exceeds materiality.
On the basis of our risk assessments, together with our
assessment of the Group’s overall control environment, our
judgment was that performance materiality was % (:
%) of our planning materiality, namely US$.m (:
US$.m). We have set performance materiality at this
percentage due to our understanding of the Group’s control
environment, and that there have been no significant events
that would alter our expectation that there is a low likelihood of
misstatements that would be material individually or in
aggregate to the financial statements.
Audit work at component locations for the purpose of obtaining
audit coverage over significant financial statement accounts is
undertaken based on a percentage of total performance
materiality. The performance materiality set for each
component is based on the relative scale and risk of the
component to the Group as a whole and our assessment of the
risk of misstatement at that component. In the current year, the
range of performance materiality allocated to components was
US$.m to US$.m (: US$.m to US$.m).
Reporting threshold
An amount below which identified misstatements are considered
as being clearly trivial.
We agreed with the Audit Committee that we would report to
them all uncorrected audit differences in excess of US$k
(: US$k), which is set at % of planning materiality, as
well as differences below that threshold that, in our view,
warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both
the quantitative measures of materiality discussed above and
in light of other relevant qualitative considerations in forming
our opinion.
Hochschild Mining PLC
Annual Report & Accounts
15
Other information
The other information comprises the information included in the
Annual Report set out on pages to , including the Strategic
Report and Governance sections (including the Directors’ Report,
Corporate Governance Report, Supplementary Information,
Directors’ Remuneration Report and Statement of Directors’
Responsibilities), other than the financial statements and our
auditor’s report thereon. The Directors are responsible for the
other information contained within the Annual Report.
Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated in
this report, we do not express any form of assurance conclusion
thereon.
Our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
course of the audit, or otherwise appears to be materially
misstated. If we identify such material inconsistencies or
apparent material misstatements, we are required to determine
whether this gives rise to a material misstatement in the financial
statements themselves. If, based on the work we have performed,
we conclude that there is a material misstatement of the other
information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the
Companies Act
In our opinion, the part of the Directors’ Remuneration report to
be audited has been properly prepared in accordance with the
Companies Act .
In our opinion, based on the work undertaken in the course of
the audit:
– the information given in the Strategic Report and the
Directors’ Report for the financial year for which the financial
statements are prepared is consistent with the financial
statements; and
– the Strategic Report and the Directors’ Report have been
prepared in accordance with applicable legal requirements.
Matters on which we are required to report
by exception
In the light of the knowledge and understanding of the Group
and the Parent Company and its environment obtained in the
course of the audit, we have not identified material
misstatements in the Strategic Report or the Directors’ Report.
We have nothing to report in respect of the following matters in
relation to which the Companies Act requires us to report
to you if, in our opinion:
– adequate accounting records have not been kept by the
Parent Company, or returns adequate for our audit have not
been received from branches not visited by us; or
– the Parent Company financial statements and the part of the
Directors’ Remuneration Report to be audited are not in
agreement with the accounting records and returns; or
– certain disclosures of Directors’ remuneration specified by law
are not made; or
– we have not received all the information and explanations we
require for our audit.
Corporate Governance Statement
We have reviewed the Directors’ statement in relation to going
concern, longer-term viability and that part of the Corporate
Governance Statement relating to the Group and Company’s
compliance with the provisions of the UK Corporate Governance
Code specified for our review by the Listing Rules.
Based on the work undertaken as part of our audit, we have
concluded that each of the following elements of the Corporate
Governance Statement is materially consistent with the financial
statements or our knowledge obtained during the audit:
– Directors’ statement with regards to the appropriateness of
adopting the going concern basis of accounting and any
material uncertainties identified set out on page and Note
(d) of the Consolidated Financial Statements;
– Directors’ explanation as to its assessment of the Company’s
prospects, the period this assessment covers and why the
period is appropriate set out on pages ;
– Director’s statement on whether it has a reasonable
expectation that the Group will be able to continue in
operation and meets its liabilities set out on pages and
Note (d) of the Consolidated Financial Statements;
– Directors’ statement on fair, balanced and understandable set
out on page ;
– Board’s confirmation that it has carried out a robust
assessment of the emerging and principal risks set out on
page ;
– The section of the Annual Report that describes the review of
effectiveness of risk management and internal control
systems set out on page ; and;
– The section describing the work of the Audit Committee set
out from page .
Responsibilities of Directors
As explained more fully in the Directors’ responsibilities
statement set out on page , the Directors are responsible for
the preparation of the financial statements and for being
satisfied that they give a true and fair view, and for such internal
control as the Directors determine is necessary to enable the
preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are
responsible for assessing the Group and Parent Company’s
ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern
basis of accounting unless the Directors either intend to
liquidate the Group or the Parent Company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the
financial statements
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to
issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with ISAs (UK) will always
detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken
on the basis of these financial statements.
Strategic Report
01—99
Governance
100—149
Financial Statements
150—
Further Information
227—231
Hochschild Mining PLC
Annual Report & Accounts
155
Explanation as to what extent the audit was considered
capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with our
responsibilities, outlined below, to detect irregularities, including
fraud. The risk of not detecting a material misstatement due to
fraud is higher than the risk of not detecting one resulting from
error, as fraud may involve deliberate concealment by, for
example, forgery or intentional misrepresentations, or through
collusion. The extent to which our procedures are capable of
detecting irregularities, including fraud is detailed below.
However, the primary responsibility for the prevention and
detection of fraud rests with both those charged with
governance of the Company and management.
– We obtained an understanding of the legal and regulatory
frameworks that are applicable to the Group and determined
that the most significant and directly relevant to specific
assertions in the financial statements are those related to the
reporting frameworks (UK adopted international accounting
standards), the Companies Act , the UK Corporate
Governance Code, the Listing Rules of the UK Listing Authority
and the relevant tax compliance regulations in the
jurisdictions in which the Group operates (principally UK, Peru,
Argentina and Brazil). In addition, we concluded that there are
certain significant laws and regulations that may have an
effect on the determination of the amounts and disclosures in
the financial statements, mainly relating to health and safety,
employee matters, bribery and corruption practices,
environmental and certain aspects of company legislation
recognising the regulated nature of the Group’s mining
activities and its legal form.
– We understood how Hochschild Mining PLC is complying with
those frameworks by making enquiries of management,
internal audit, those responsible for legal and compliance
procedures and the Company Secretary. We corroborated our
enquiries through our review of Board minutes, papers
provided to the Audit Committee and correspondence
received from regulatory bodies, and noted there was no
contradictory evidence.
– We assessed the susceptibility of the Group’s financial
statements to material misstatement, including how fraud
might occur, by meeting with management from various parts
of the business, including outside the finance function, to
understand what areas were susceptible to fraud. We also
considered performance targets and their propensity to
influence management to manage the Group’s earnings.
– We considered the programmes and controls that the Group
has established to address risks identified, or that otherwise
prevent, deter and detect fraud; and how senior management
monitors those programmes and controls. Where risk was
considered as higher, we performed audit procedures to
address each identified fraud risk.
– Based on this understanding we designed our audit
procedures to identify non-compliance with such laws and
regulations that could have a material impact on the financial
statements. Our procedures involve: incorporated data
analytics across our audit approach, journal entry testing with
a focus on manual consolidation journals and journals
meeting our defined risk criteria based on our understanding
of the business; enquiries of the legal counsel, Group
management, internal audit and all full and specific scope
management; review of Board and Audit Committee reporting;
evaluating any investigations into matters of non-compliance
with support from our IT, forensics and legal specialists as
necessary; and focused testing as referred to in the key audit
matters section above.
– We ensured our global team has appropriate industry
experience through working for many years on relevant audits,
including experience of mining. Our audit planning included
considering external market factors, for example geopolitical
risk, the potential impact of climate change, commodity price
risk and major trends in the industry.
A further description of our responsibilities for the audit of the
financial statements is located on the Financial Reporting
Council’s website at https://www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor’s report.
Other matters we are required to address
– Following the recommendation from the Audit Committee, we
were appointed by the Company on October to audit
the financial statements for the year ending December
and subsequent financial periods. Following a
competitive tender process, we were reappointed as auditor of
the Company for the period ending December and
subsequent financial periods.
The period of total uninterrupted engagement including
previous renewals and reappointments is years, covering
the years ending December to December .
– The non-audit services prohibited by the FRC’s Ethical
Standard were not provided to the Group or the Parent
Company and we remain independent of the Group and the
Parent Company in conducting the audit.
– The audit opinion is consistent with the additional report to the
Audit Committee.
Use of our report
This report is made solely to the Company’s members, as a body, in
accordance with Chapter of Part of the Companies Act .
Our audit work has been undertaken so that we might state to the
Company’s members those matters we are required to state to
them in an auditor’s report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company and the Company’s members
as a body, for our audit work, for this report, or for the opinions we
have formed.
William Binns
(Senior statutory auditor)
for and on behalf of
Ernst & Young LLP, Statutory Auditor
London
March
INDEPENDENT AUDITOR’S REPORT
CONTINUED
Hochschild Mining PLC
Annual Report & Accounts
15
FINANCIAL STATEMENTS
Consolidated income statement
For the year ended 31 December 2023
Year ended 31 December 2023
Year ended 31 December 2022
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
Revenue
5
Cost of sales
6
(508,214 )
(508,214 )
(527,643 )
(527,643 )
Gross
profit
Administrative expenses
7
(47,192 )
(47,192 )
(54,158 )
(54,158 )
Exploration expenses
8
(21,297 )
(21,297 )
(56,826 )
(56,826 )
Selling expenses
9
(14,862 )
(14,862 )
(14,032 )
(14,032 )
Other income
12
Other expenses
12
(47,553 )
(8,960 )
(56,513 )
(39,302 )
(39,302 )
(Impairment)/reversal of impairment and write-off of
non-current assets, net
(2,731 )
(80,843 )
(83,574 )
(1,832 )
(Loss)/profit before net finance income/(cost), foreign
exchange loss and income tax
(89,803 )
(7,675 )
Share of loss of an associate
19
(2,277 )
(7,183 )
(9,460 )
(1,677 )
(9,923 )
(11,600 )
Finance income
13
Finance costs
13
(18,199 )
(18,199 )
(21,776 )
(21,776 )
Foreign exchange loss, net
13
(15,620 )
(15,620 )
(2,622 )
(2,622 )
(Loss)/profit before income tax
(96,986 )
(43,481 )
Income tax (expense)/benefit
14
(44,000 )
(16,552 )
(17,581 )
(3,353 )
(20,934 )
(Loss)/profit
for
the
year
(69,538 )
(60,033 )
(1,913 )
Attributable to:
Equity shareholders of the Parent
(63,997 )
(55,006 )
(1,913 )
Non-controlling interests
(5,541 )
(5,027 )
(69,538 )
(60,033 )
(1,913 )
Basic (loss)/earnings per ordinary share for the year
(expressed in US dollars per share)
15
(0.12 )
(0.10 )
Diluted (loss)/earnings per ordinary share for the year
(expressed in US dollars per share)
15
(0.12 )
(0.10 )
Consolidated statement of comprehensive income
For the year ended 31 December 2023
Year ended 31 December
Notes
2023
US$000
2022
US$000
(Loss)/profit
for
the
year
(60,033 )
Other comprehensive income that might be reclassified to profit or loss in subsequent periods, net of tax:
Net loss on cash flow hedges
39(a)
(19,704 )
(16,929 )
Deferred tax benefit on cash flow hedges
39(e)
Exchange differences on translating foreign operations
(12,739 )
Share of other comprehensive income of an associate
19
(855 )
(23,391 )
Other comprehensive income that will not be reclassified to profit or loss in subsequent periods, net of tax:
Net loss on equity instruments at fair value through other comprehensive income (OCI)
20
(49 )
(152 )
(49 )
(152 )
Other comprehensive income/(loss) for the year, net of tax
(23,543 )
Total comprehensive loss for the year
(56,302 )
(18,711 )
Total comprehensive loss attributable to:
Equity shareholders of the Parent
(51,275 )
(20,582 )
Non-controlling interests
(5,027 )
(56,302 )
(18,711 )
Hochschild Mining PLC
Annual Report & Accounts 2023
157
Strategic Report
01—99
Governance
100—
149
Financial
Statements
150—
226
Further Information
227—
231
FINANCIAL STATEMENTS
CONTINUED
Consolidated statement of financial position
As at 31 December 2023
Notes
As at
31 December
2023
US$000
As at
31 December
2022
US$000
ASSETS
Non-current assets
Property, plant and equipment
16
Evaluation and exploration assets
17
Intangible assets
18
Investment in an associate
19
Financial assets at fair value through OCI
20
Financial assets at fair value through profit and loss
21
Trade and other receivables
22
Deferred income tax assets
31
Current assets
Inventories
23
Trade and other receivables
22
Derivative financial assets
39(a)
Income tax receivable
14
Other financial assets
24
Cash and cash equivalents
24
Assets held for sale
25
Total assets
EQUITY AND LIABILITIES
Capital and reserves attributable to shareholders of the Parent
Equity share capital
30
Share premium
30
Other reserves
(234,837 )
(238,800 )
Retained earnings
Non-controlling interests
Total equity
Non-current liabilities
Trade and other payables
26
Derivative financial liabilities
39(a)
Borrowings
28
Provisions
29
Deferred income tax liabilities
31
Current liabilities
Trade and other payables
26
Derivative financial liabilities
39(aa)
Borrowings
28
Provisions
29
Income tax payable
14
Liabilities directly associated with assets held for sale
25
Total liabilities
Total equity and liabilities
These financial statements were approved by the Board of Directors on 12 March 2024 and signed on its behalf by:
Eduardo Landin
Chief Executive Officer
12 March 2024
158
Hochschild Mining PLC
Annual Report & Accounts 2023
Consolidated statement of cash flows
For the year ended 31 December 2023
Year ended 31 December
Notes
2023
US$000
2022
US$000
Cash flows from operating activities
Cash generated from operations
35
Interest received
Interest paid
28
(24,839 )
(12,962 )
Payment of mine closure costs
29
(13,325 )
(10,409 )
Income tax, special mining tax and mining royalty paid
1
(5,599 )
(20,391 )
Net cash generated from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
(259,730 )
(210,372 )
Purchase of evaluation and exploration assets
17
(2,523 )
(122,988 )
Purchase of intangibles
18
(124 )
(353 )
Purchase of Argentinian bonds
13
(10,204 )
Proceeds from sale of Argentinian bonds
13
Proceeds from sale of financial assets at fair value though profit and loss
21
Proceeds from sale of property, plant and equipment
Sale of royalty related to Volcan project
Net cash used in investing activities
(245,506 )
(337,580 )
Cash flows from financing activities
Proceeds from borrowings
28
Repayment of borrowings
28
(111,980 )
(11,557 )
Payment of lease liabilities
27
(2,338 )
(1,639 )
Dividends paid to non-controlling interests
32
(326 )
(286 )
Dividends paid
32
(22,017 )
Cash flows generated/(used in) from financing activities
(6,588 )
Net decrease in cash and cash equivalents during the year
(43,976 )
(241,250 )
Exchange difference
(10,742 )
(1,695 )
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
24
1
Taxes paid have been offset with value added tax (VAT) credits of US$10,175,000 (2022: US$31,302,000).
Hochschild Mining PLC
Annual Report & Accounts 2023
159
Strategic Report
01—99
Governance
100—
149
Financial
Statements
150—
226
Further Information
227—
231
FINANCIAL STATEMENTS
CONTINUED
Consolidated statement of changes in equity
For the year 31 December 2023
Fair value
reserve of
financial
assets at
Share of other
Other reserves
Unrealised
Share-
Capital and
reserves
attributable
Equity
fair value comprehensive
Cumulative
gain/
based
Total
to
Non-
share
Share
through
loss of an Dividends
translation
(loss) on
Merger payment
other Retained
shareholders controlling
Total
capital premium
OCI
associate
expired adjustment
hedges
reserve
reserve
reserves earnings
of the Parent
interests
equity
Balance
at
Notes
US$000
US$000
US$000
US$000
US$000
US$000
US$000
US$000
US$000
US$000
US$000
US$000
US$000 US$000
1 January 2022
(9 )
(25,163 )
Other
comprehensive
(23,543 )
income/(expense) for
(23,543 )
(286 )
(286 )
Cancellation of share
premium account
30
Nominal value
reduction
30 (217,445 )
Share-
based
payments
30(c)
Forfeiture of share
options
30(c)
(1,886 )
(1,886 )
Balance
at
31 December 2022
(78 )
(37,902 )
Other comprehensive
income/(expense)
(49 )
(855 )
(13,087 )
Loss for the year
(55,006 )
(5,027 ) (60,033 )
Total comprehensive
income/(expense)
for
the year
(49 )
(855 )
(13,087 )
(51,275 )
(5,027 ) (56,302 )
Cancellation of
dividends expired
(99 )
(99 )
Dividends to non-
controlling interests
32
(326 )
(326 )
Exercise of
share-based
payments
30(c)
(584 )
(584 )
Accrual of
share-based
payments
30(c)
Forfeiture of share
options
30(c)
(1,528 )
(1,528 )
Balance
at
31 December 2023
(127 )
(20,180 ) (11,546 ) (210,046 )
160
Hochschild Mining PLC
Annual Report & Accounts 2023
income/(expense)
Profit for the year
(152 )
(12,739 )
(11,935 )
Total comprehensive
the year
(152 )
(12,739 )
(11,935 )
Dividends
32
Dividends paid to
non-controlling
interests
32
Issuance of deferred
bonus shares
30
Cancellation of
deferred bonus
shares
30
(303,268 )
(23,543 )
(20,582 )
(22,017 )
(22,017 )
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Corporate
information
Companies Act 1985 as a Limited Company and registered in England and Wales with registered number 05777693 . The
Company’s registered office is located at 17 Cavendish Square, London W1G 0PH, United Kingdom .
The ultimate controlling party of the Company is Mr Eduardo Hochschild whose beneficial interest in the Company and its
subsidiaries (together “the Group” or “Hochschild Mining Group”) is 38.27% and it is held through Pelham Investment Corporation
(“Pelham”), a Cayman Islands company.
On 8 November 2006, the Company’s shares were admitted to the Official List of the UKLA (United Kingdom Listing Authority) and
to trading on the London Stock Exchange.
operating mine (Inmaculada) located in southern Peru and one operating mine (San Jose) located in Argentina. The Group’s
previously operating Pallancata mine went into care and maintenance in November 2023. The Group also has a late-stage
development project in Brazil, Mara Rosa, which is expected to be commissioned in the first half of 2024. The Group also has a
portfolio of projects located across Peru, Argentina, United States, Canada, Brazil, and Chile, at various stages of development.
These consolidated financial statements were approved for issue by the Board of Directors on 12 March 2024.
The Group’s subsidiaries are as follows:
Equity interest at
31 December
Company
Principal activity
Country of
incorporation
2023
%
2022
%
Hochschild Mining (Argentina) Corporation S.A.
1
Holding company
Argentina
100
100
MH Argentina S.A.
2
Exploration office
Argentina
100
100
Minera Santa Cruz S.A.
1 and 11
Production of gold and silver
Argentina
51
51
Minera Hochschild Chile S.C.M.
3
Exploration
Chile
100
100
Andina Minerals Chile SpA (formerly Andina Minerals Chile Ltd.)
3
Exploration
Chile
100
100
Southwest Minerals (Yunnan) Inc.
4
Exploration
China
100
100
Hochschild Mining Holdings Limited
5
Holding company
England and Wales
100
100
Hochschild Mining Ares (UK) Limited
5
Administrative office
England and Wales
100
100
Southwest Mining Inc.
4
Exploration
Mauritius
100
100
Southwest Minerals Inc.
4
Exploration
Mauritius
100
100
Minera Hochschild Mexico, S.A. de C.V.
6
Exploration
Mexico
100
100
Hochschild Mining (Peru) S.A.
4
Holding company
Peru
100
100
Compañía Minera Ares S.A.C.
4
Production of gold and silver
Peru
100
100
Compañía Minera Arcata S.A.
4
Production of gold and silver
Peru
99.1
99.1
Empresa de Transmisión Aymaraes S.A.C.
4
Power transmission
Peru
100
100
Minera Antay S.A.C.
4 and 10
Exploration
Peru
–
100
Compañía Minera Crespo S.A.C.
4
Exploration
Peru
100
–
Hochschild Mining (US) Inc.
7
Holding company
USA
100
100
Hochschild Mining Canada Corp
8
Exploration
Canada
100
100
Hochschild Mining Brazil Holdings Corp. (formerly 1334940 BC)
8
Holding company
Canada
100
100
Tiernan Gold Corp.
8
Holding company
Canada
100
100
Amarillo Mineracao do Brasil Ltda.
9
Exploration
Brazil
100
100
1
Registered address: Av. Santa Fe 2755, floor 9, Buenos Aires, Argentina.
2
Registered address: Sargento Cabral 124, Comodoro Rivadavia, Provincia de Chubut, Argentina.
3
Registered address: Av. Apoquindo 4775 of 1002, Comuna Las Condes, Santiago de Chile, Chile.
4
Registered address: La Colonia 180, Santiago de Surco, Lima, Peru.
5
Registered address: 17 Cavendish Square, London, W1G0PH, United Kingdom.
6
Registered address: Calle Aguila Real No 122, Colonia Carolco, Monterrey, Nuevo Leon, CP 64996, Mexico.
7
Registered address: 1025 Ridgeview Dr. 300, Reno, Nevada 89519, USA.
8
Registered address: Suite 1700, Park Place, 666 Burrard Street, Vancouver BC, V6C 2X8.
9
Registered address: Fazenda Invernada s/n, Zona Rural, Mara Rosa - Goiás – Brazil, CEP: 76.490-000.
10
The Company was liquidated on 22 February 2023.
11
The Group has a 51% interest in Minera Santa Cruz S.A. (Minera Santa Cruz), while the remaining 49% is held by a non-controlling interest. The significant financial information
in respect of this subsidiary before intercompany eliminations as at and for the years ended 31 December 2023 and 2022 is as follows:
Hochschild Mining PLC
Annual Report & Accounts 2023
161
Strategic Report
01—99
Governance
100—
149
Financial
Statements
150—
226
Further Information
227—
231
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
Corporate information
continued
As at December
US$
US$
Non-current assets
,
,
Current assets
,
,
Non-current liabilities
(,)
(,)
Current liabilities
(,)
(,)
Equity
(,)
(,)
Cash and cash equivalents
,
,
Revenue
,
,
Depreciation and amortisation
(,)
(,)
Interest income
,
Interest expense
(,)
(,)
Income tax
(,)
,
Profit for the year and total comprehensive income
(,)
,
Net cash generated from operating activities
,
,
Net cash used in investing activities
(,)
(,)
Net cash (used in)/generated from financing activities
(,)
,
(Loss)/profit attributable to non-controlling interests in the consolidated income statement, non-controlling interest in the
consolidated statement of financial position, and dividends declared to non-controlling interests in the consolidated statement of
changes in equity are solely related to Minera Santa Cruz.
Material accounting policies
(a)
Basis of preparation
The consolidated financial statements of the Group have been
prepared in accordance with UK adopted International
Accounting Standards.
The basis of preparation and accounting policies used in
preparing the consolidated financial statements for the years
ended December and are set out below. The
consolidated financial statements have been prepared on a
historical cost basis except for the revaluation of certain
financial instruments that are measured at fair value at the end
of each reporting period, as explained below. These accounting
policies have been consistently applied, except for the effects of
the adoption of new and amended accounting standard.
The financial statements are presented in US dollars (US$) and
all monetary amounts are rounded to the nearest thousand
($) except when otherwise indicated.
Changes in accounting policy and disclosures
The accounting policies adopted in the preparation of the
consolidated financial statements are consistent with those
followed in the preparation of the Group’s annual consolidated
financial statements for the year ended December .
Amendments and interpretations apply for the first time in ,
but do not have an impact on the consolidated financial
statements of the Group. The Group has not early adopted any
other standard, interpretation or amendment that has been
issued but is not yet effective.
– Definition of Accounting Estimates – Amendments to IAS
– Disclosure of Accounting Policies – Amendments to IAS
– Deferred Tax related to Assets and Liabilities arising from a
Single Transaction – Amendments to IAS
– International Tax Reform—Pillar Two Model Rules –
Amendments to IAS . The Group does not foresee any tax
implications from the implementation of this reform
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 January
or later periods but which the Group has not previously
adopted. These have not been listed as they are not expected to
impact the Group.
(b)
Judgements in applying accounting policies and key
sources of estimation uncertainty
Many of the amounts included in the financial statements
involve the use of judgement and/or estimation. These
judgements and estimates are based on management’s best
knowledge of the relevant facts and circumstances, having
regard to prior experience, but actual results may differ from the
amounts included in the financial statements. Information about
such judgements and estimates is contained in the accounting
policies and/or the notes to the financial statements.
Significant areas of estimation uncertainty and critical
judgements made by management in preparing the
consolidated financial statements include:
Significant estimates:
–
Useful lives of assets for depreciation and amortisation
purposes – note 2(f).
Estimates are required to be made by management as to the
useful lives of assets. For depreciation calculated under the unit
of-production method, estimated recoverable reserves and
resources are used in determining the depreciation and/or
amortisation of mine-specific assets. This results in a
depreciation/amortisation charge proportional to the depletion
of the anticipated remaining life-of-mine production. Each
item’s life, which is assessed annually, has regard to both its
physical life limitations and to present assessments of
economically recoverable reserves and resources of the mine
property at which the asset is located. These calculations
require the use of estimates and assumptions, including the
amount of recoverable reserves and resources. Changes are
accounted for prospectively.
Hochschild Mining PLC
Annual Report & Accounts
1
–
Ore reserves and resources – note 2(h).
There are numerous uncertainties inherent in estimating ore
reserves and resources. Assumptions that are valid at the time
of estimation may change significantly when new information
becomes available. Changes in the forecast prices of commodities,
exchange rates, production costs or recovery rates may change
the economic status of reserves and resources and may,
ultimately, result in the reserves and resources being updated.
–
Recoverable values of mining assets – notes 2(k), 16, 17 and 18.
The values of the Group’s mining assets are sensitive to a range
of characteristics unique to each mine unit. Key sources of
estimation for all assets include uncertainty around ore reserve
estimates and cash flow projections. In performing impairment
reviews, the Group assesses the recoverable amount of its
operating assets principally with reference to fair value less
costs of disposal, assessed using discounted cash flow models.
In performing impairment reviews, the Group assesses the
recoverable amount of its operating assets principally with
reference to fair value less costs of disposal, assessed using
discounted cash flow models. The recoverable values of the
CGUs and advanced exploration projects are determined
using a FVLCD methodology. FVLCD for CGUs was determined
using a combination of level and level inputs. The FVLCD of
the producing and developing stage mine assets is
determined using a discounted cash flow model (note ) and
for the advanced exploration projects is determined using a
discounted cash flow model or the value-in-situ methodology,
which applies a realisable “enterprise value” to unprocessed
mineral resources per ounce of resources, to estimate the
amount that would be paid by a willing third party in an arm’s
length transaction (notes and ()).
For the CGU’s discounted cash flow model, the Group uses two
approaches, depending on the circumstances: (i) the
traditional approach, which uses a single cash flow projection,
and (ii) the expected cash flow approach, which uses multiple,
probability-weighted cash flow projections. As at December
, the impairment reviews for the Group’s operating assets
were performed using a traditional approach.
There is judgement involved in determining the assumptions that
are considered to be reasonable and consistent with those that
would be applied by market participants. Significant estimates
used include future gold and silver prices, future capital
requirements, reserves and resources volumes, production costs
and the application of discount rates which reflect the macro-
economic risk in Peru and Argentina, as applicable. Judgement
is also required in determining the risk factor that will be applied
by market participants to take into account the water
restrictions imposed by the Chilean government over the Volcan
cash-generating unit. Changes in these assumptions will affect
the recoverable amount of the property, plant and equipment,
evaluation and exploration assets, and intangibles.
–
Mine closure costs – notes 2(o) and 29(1).
The Group assesses its mine closure cost provision
annually. Significant estimates and assumptions are made
in determining the provision for mine closure cost as there
are numerous factors that will affect the ultimate liability.
These factors include estimates of the extent and costs of
rehabilitation activities, technological changes, regulatory
changes, cost increases, mine life and changes in discount
rates. Those uncertainties may result in future actual
expenditure differing from the amounts currently provided. The
provision at the balance sheet date represents management’s
best estimate of the present value of the future closure costs
required. In July , the mine closure law for the province of
Santa Cruz in Argentina was published, establishing a period of
business days to present the Mine Closure Plan. The
regulation has not been published as of the date of the
financial statements. The Group considers the mine closure
provision in San Jose to be largely aligned with Argentina’s new
law, subject to further review once regulation is published.
–
Valuation of financial instruments – note 39.
The valuation of certain Group assets and liabilities reflects
the changes to certain assumptions used in the determination
of their value, such as future gold and silver prices (note ).
–
Non market performance conditions on LTIP 2021, LTIP 2022
and LTIP 2023 – note 30(c).
There are two parts to the performance conditions attached
to LTIP awards: % is subject to the Company’s TSR ranking
relative to a tailored peer group of mining companies, % is
subject to internal KPIs split equally between: (i) three-year
growth of the Company’s Measured and Indicated Resources
(MIR) per share (calculated on an enterprise value basis), and
(ii) average outcome of the annual bonus scorecard in respect
of , and , regarding LTIP ; , and
, regarding LTIP ; and , and ,
regarding LTIP , calculated as the simple mean of the
three scorecard outcomes.
Critical judgements:
–
Income tax – notes 2(t), 2(u), 14, 31 and 37(a).
Judgement is required in determining whether deferred tax
assets are recognised on the statement of financial position.
Deferred tax assets, including those arising from un-utilised
tax losses require management to assess the likelihood that
the Group will generate taxable earnings in future periods, in
order to utilise recognised deferred tax assets. Estimates of
future taxable income are based on forecast cash flows from
operations and the application of existing tax laws in each
jurisdiction. To the extent that future cash flows and taxable
income differ significantly from estimates, the ability of the
Group to realise the net deferred tax assets recorded at the
balance sheet date could be impacted. The Group analyses
the possibility of generating profit in all the companies and
determines the recognition of deferred tax. No deferred tax
asset is recognised in the holding and exploration entities as
they are not expected to generate any profit to settle the
temporary difference (refer to note ).
Judgement is also required when determining the recognition of
tax liabilities as the tax treatment of some transactions cannot be
finally determined until a formal resolution has been reached by
the tax authorities. Tax liabilities are also recorded for uncertain
exposures which can have an impact on both deferred and
current tax. Tax benefits are not recognised unless it is probable
that the benefit will be obtained and tax liabilities are recognised
if it is probable that a liability will arise (refer to note (a)). The
final resolution of these transactions may give rise to material
adjustments to the income statement and/or cash flow in future
periods. The Group reviews each significant tax liability or benefit
each period to assess the appropriate accounting treatment.
–
Life of mine (LOM).
There are several aspects which are determined by the life
of mine, such as ore reserves and resources, recoverable
values of mining assets, mine rehabilitation provision and
depreciation. The life of mine for an operation is specified in
the relevant Environmental Impact Assessment (EIA) which is
amended from time to time as more resources at the mine are
identified. EIAs are permits which are granted in the ordinary
course of business to the mining industry. While the processing
of such permits may be subject to delays, the Group has never
had an EIA denied. A crucial element of Peru’s legal framework
is the principle of predictability which, in essence, means that
if the legal requirements for any given permit have been
satisfied, the State cannot unlawfully deny the granting
of the permit. Taking this into consideration, as well as the
Group’s operational experience, the Group believes that
permits will be secured such that operations can continue
without interruption. In the unlikely scenario that this does not
occur, there could be material changes to those items in the
financial statements that are determined by the life of mine.
Hochschild Mining PLC
Annual Report & Accounts
1
Strategic Report
01—99
Governance
100—149
Financial Statements
150—
Further Information
227—231
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
Material accounting policies
continued
–
Determination of functional currencies – note 2(e).
The determination of functional currency requires
management judgement, particularly where there may be
several currencies in which transactions are undertaken and
which impact the economic environment in which the entity
operates. In Argentina, the exchange control restrictions limit
the companies to hold US dollars but do not restrict carrying
out transactions in US dollar.
–
Recognition of evaluation and exploration assets and transfer
to development costs – notes 2(g), 16 and 17.
Judgement is required in determining when the future
economic benefit of a project can reasonably be regarded as
assured, at which point evaluation and exploration expenses
are capitalised. This includes the assessment of whether there
is sufficient evidence of the probability of the existence of
economically recoverable minerals to justify the
commencement of capitalisation of costs; the timing of the
end of the exploration phase, the start of the development
phase; and the commencement of the production phase. For
this purpose, the future economic benefit of the project can
reasonably be regarded as assured when the Board
authorises management to conduct a feasibility study,
mine-site exploration is being conducted to convert resources
to reserves, or mine-site exploration is being conducted to
confirm resources, all of which are based on supporting
geological information.
–
Pandemic expenses
The Group analyses the effect of pandemics in its operations
and accounting treatment, because they generate stoppages,
low capacity production and incremental costs. In the case of
Covid-, the fixed “normal” production costs during
stoppages are recognised as expenses and are not considered
as costs of the inventories produced. In the Income Statement
these fixed costs are classified as “Pre-Exceptional”.
To determine whether the incremental Covid-related costs
should be recognised as exceptional expenses, consideration
has been made as to whether they meet the criteria as set out
in the Group’s accounting policy (note (z)), in particular
regarding the expected infrequency of the events that have
given rise to them.
The pandemic can be considered a single protracted globally
pervasive event with a financial impact over a number of
reporting periods. Management initial expectation was that
these cost would cease to be incurred at the end of or
early , and whilst the majority of the costs have reduced
over time as a result of the efficiencies made to the health
protocols and logistics required to operate throughout the
pandemic, some residual costs continue to be incurred to
date. In order to provide the users of the financial statements
with a better understanding of the financial performance of
the Group in the year, and to facilitate comparison with the
prior period, we have considered it appropriate to continue to
disclose separately as exceptional these incremental Covid-
related costs up to December .
Following the outbreak of the Omicron variant, the virus
appears to have shifted into an endemic phase. Consequently,
these costs will no longer be presented as exceptional items
from and will form part of the underlying profits.
–
Climate change
•
General
The Group is in the process of completing a climate change
risk assessment and strategy and developing an action plan
to continually reduce operational energy, GHG emissions
and water consumption, with the ultimate aim of reaching
net-zero GHG emissions. As a result, the Group is currently
unable to determine the full future economic impact of this
strategy on their business model and operational plans and
therefore the potential impacts are not fully incorporated in
these financial statements.
In addition, societal expectations are driving government
action that may impose further requirements and cost on
companies in the future. Therefore risks associated with
climate change could, over time impose changes that may
potentially impact (among other things) capital expenditure,
mine closure provisions and production costs. However,
currently the financial statements cannot capture such
possible future outcomes as these are not yet known. With
regards to the calculation of those items in the financial
statements that rely on life of mine calculations (such as
impairments, deferred tax and depreciation), it should be
highlighted that as an underground mining company,
Hochschild Mining’s operating assets have much lower lives
than conventional open-pit mining companies. As such, by
virtue of the longer-term time horizon of the physical risks of
climate change, the financial impact on such items will be
less pronounced than may otherwise be expected.
The adoption of the Group’s climate change strategy and
the implementation of climate-change regulations in the
countries where the Group operates may impact the Group’s
significant judgements and key estimates and could result in
material changes to financial results and the carrying values
of certain assets and liabilities in future reporting periods.
•
Physical risks
As previously stated, the Group is progressing work to assess
the potential impact of physical risks of climate change.
Given the ongoing nature of the Group’s physical risk
assessment process, reflecting adaptation risk in the
Group’s operating plans, and associated asset valuations, is
currently limited. As the Group progresses its adaptation
strategy, the identification of additional risks or the detailed
development of the Group’s response may result in material
changes to financial results and the carrying values of
assets and liabilities in future reporting periods.
–
Acquiring a subsidiary or a group of assets – note 4(a).
In identifying a business combination (note (c)) or acquisition
of assets the Group considers the underlying inputs, processes
and outputs acquired as a part of the transaction. For an
acquired set of activities and assets to be considered a
business there must be at least some inputs and processes
that have the capability to achieve the purposes of the Group.
Where significant inputs and processes have not been
acquired, a transaction is considered to be the purchase of
assets. For the assets and assumed liabilities acquired the
Group allocates the total consideration paid (including directly
attributable transaction costs) based on the relative fair
values of the underlying items. On April the Group
acquired the control of the Amarillo Gold Group (note (a)).
The transaction was accounted as a purchase of assets as no
systems, processes or outputs were acquired, with the main
asset acquired being the Mara Rosa project which is in a
development stage.
Hochschild Mining PLC
Annual Report & Accounts
1
(c)
Basis of consolidation
The consolidated financial statements set out the Group’s
financial position, performance and cash flows as at
December and December and for the
years then ended, respectively.
Subsidiaries are those entities controlled by the Group
regardless of the amount of shares owned by the Group. Control
is achieved when the Group is exposed, or has rights, to variable
returns from its involvement with the investee and has the ability
to affect those returns through its power over the investee.
Non-controlling interests’ rights to safeguard their interest are
fully considered in assessing whether the Group controls a
subsidiary. Specifically, the Group controls an investee if, and
only if, the Group has:
– power over the investee (i.e. existing rights that give it the
current ability to direct the relevant activities of the investee);
– exposure, or rights, to variable returns from its involvement
with the investee; and
– the ability to use its power over the investee to affect its returns.
Generally, there is a presumption that a majority of voting rights
result in control. To support this presumption and when the Group
has less than a majority of the voting or similar rights of an
investee, the Group considers all relevant facts and circumstances
in assessing whether it has power over an investee, including:
– the contractual arrangement with the other vote holders of the
investee;
– rights arising from other contractual arrangements; and
– the Group’s voting rights and potential voting rights.
The Group re-assesses whether or not it controls an investee if
facts and circumstances indicate that there are changes to one
or more of the three elements of control.
Basis of consolidation
Subsidiaries are consolidated from the date of their acquisition,
being the date on which the Group obtains control, and continue
to be consolidated until the date that such control ceases.
Assets, liabilities, income and expenses of a subsidiary acquired
or disposed of during the year are included in the consolidated
financial statements from the date the Group gains control until
the date the Group ceases to control the subsidiary.
Profit or loss and each component of OCI are attributed to the
equity holders of the parent of the Group and to the non-
controlling interests, even if this results in the non-controlling
interests having a deficit balance. When necessary, adjustments
are made to the financial statements of subsidiaries to bring
their accounting policies in line with the Group’s accounting
policies. All intra-group assets and liabilities, equity, income,
expenses and cash flows relating to transactions between
members of the Group are eliminated in full on consolidation.
A change in the ownership interest of a subsidiary, without loss
of control, is accounted for as an equity transaction, affecting
retained earnings. If the Group loses control over a subsidiary, it
(i) derecognises the assets (including goodwill) and liabilities of
the subsidiary; (ii) derecognises the carrying amount of any
non-controlling interest (NCI); (iii) derecognises the cumulative
translation differences, recorded in equity; (iv) recognises the
fair value of the consideration received; (v) recognises the fair
value of any investment retained; (vi) recognises any surplus or
deficit in profit or loss; and (vii) reclassifies the parent’s share of
components previously recognised in other comprehensive
income to profit or loss or retained earnings, as appropriate.
An NCI represents the equity in a subsidiary not attributable,
directly and indirectly, to the parent company and is presented
separately within equity in the consolidated statement of
financial position, separately from equity attributable to owners
of the parent.
Losses within a subsidiary are attributable to the NCI even if that
results in a deficit balance.
Business combinations
Business combinations are accounted for using the acquisition
method. The cost of an acquisition is measured as the
aggregate of the consideration transferred, measured at
acquisition date fair value and the amount of any NCI in the
acquiree. The choice of measurement of NCI, either at fair value
or at the proportionate share of the acquiree’s identifiable net
assets, is determined on a transaction by transaction basis.
Acquisition costs incurred are expensed and included in
administrative expenses.
Goodwill is initially measured at cost, being the excess of the
aggregate of the consideration transferred and the amount
recognised for the NCI, and any interest previously held, over the
net identifiable assets acquired and the liabilities assumed.
Assets acquired and liabilities assumed in transactions separate
to the business combinations, such as the settlement of
pre-existing relationships or post-acquisition remuneration
arrangements, are accounted for separately from the business
combination in accordance with their nature and applicable
IFRSs. Identifiable intangible assets meeting either the
contractual-legal or the separability criteria are recognised
separately from goodwill. Contingent liabilities representing a
present obligation are recognised if the acquisition date fair
value can be measured reliably.
(d) Going concern
Directors’ assessment
The Directors have reviewed Group liquidity, including cash
resources and borrowings (refer to note on details of the
US$ million and US$ million medium-term loans) and
related covenant forecasts to assess whether the Group is able
to continue in operation for the period to April (the
“Going Concern Period”) which is at least months from the
date of these financial statements. In line with their usual
practice, the Directors also considered the impact of a downside
scenario on the Group’s future cash flows and liquidity position
as well as debt covenant compliance. In this scenario,
consideration was given to the potential combined impact of
a three-month delay in Mara Rosa commencing commercial
production, Group-wide operational disruption, unforeseen
social-related costs and capital expenditure, and lower precious
metal prices (“the Downside Assumptions”).
More specifically, the scenarios reviewed by the Directors
included a base case (the “Base Scenario”), reflecting (among
other things) budgeted production for , life-of-mine
plans for Inmaculada, San Jose and Mara Rosa, and average
precious metal prices of $,/oz for gold and $./oz for silver,
being the average analysts’ consensus for the next months.
The Directors also considered a “Severe” scenario which took
into account the combined impact of the Downside
Assumptions, the occurrence of which are considered by the
Directors to be unlikely. Even in this Severe scenario it has been
assumed that all employees remain on full pay and that
mitigating actions, while available, would not be necessary to
maintain a comfortable level of liquidity.
Under the Base Scenario and the Severe Scenario, the Group’s
liquid resources remained more than adequate for the Group’s
forecast expenditure with sufficient headroom maintained to
comply with debt covenants. The results of reverse stress tests
were also considered.
Conclusion
After their review, the Directors have a reasonable expectation
that the Group and the Company have adequate resources to
continue in operational existence during the Going Concern
Period. Accordingly, they continue to adopt the going concern
basis of accounting in preparing the annual financial statements.
Hochschild Mining PLC
Annual Report & Accounts
15
Strategic Report
01—99
Governance
100—149
Financial Statements
150—
Further Information
227—231
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
Material accounting policies
continued
(e)
Currency translation
The functional currency for each entity in the Group is
determined by the currency of the primary economic
environment in which it operates. For the holding companies
and operating entities this currency is US dollars and for the
other entities it is the local currency of the country in which it
operates. The Group’s financial information is presented in US
dollars, which is the Company’s functional currency.
Transactions denominated in currencies other than the
functional currency of the entity are initially recorded in the
functional currency using the exchange rate prevailing at the
date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are remeasured at the
exchange rate prevailing at the statement of financial position
date. Exchange gains and losses on settlement of foreign
currency transactions which are translated at the rate prevailing
at the date of the transactions, or on the translation of monetary
assets and liabilities which are translated at period-end
exchange rates, are taken to the income statement. Non-
monetary assets and liabilities denominated in foreign
currencies that are stated at historical cost are translated to the
functional currency at the foreign exchange rate prevailing at
the date of the transaction. Exchange differences arising from
monetary items that are part of a net investment in a foreign
operation are recognised in equity and transferred to income on
disposal of such net investment.
Subsidiary financial statements expressed in their
corresponding functional currencies are translated into US
dollars by applying the exchange rate at period-end for assets
and liabilities and the transaction date exchange rate for
income statement items. The resulting difference on
consolidation is included as a cumulative translation adjustment
in equity. On disposal of a foreign operation, the component of
OCI relating to that particular foreign operation is reclassified to
profit or loss.
(f)
Property, plant and equipment
Property, plant and equipment is stated at cost or deemed
cost less accumulated depreciation and impairment losses.
Cost comprises its purchase price and directly attributable
costs of acquisition or construction required to bring the
asset to the condition necessary for the asset to be capable
of operating in the manner intended by management.
Economical and physical conditions of assets have not
changed substantially over this period.
The cost less residual value of each item of property, plant
and equipment is depreciated over its useful life. Each item’s
estimated useful life has been assessed with regard to both
its own physical life limitations and the present assessment of
economically recoverable reserves and resources of the mine
property at which the item is located. Estimates of remaining
useful lives are made on a regular basis for all mine buildings,
machinery and equipment, with annual reassessments for major
items. Depreciation is charged to cost of production on a units of
production basis for mine buildings and installations and plant
and equipment used in the mining production process, or
charged directly to the income statement over the estimated
useful life of the individual asset on a straight-line basis when
not related to the mining production process. Changes in
estimates, which mainly affect units of production calculations,
are accounted for prospectively. Depreciation commences when
assets are available for use. Land is not depreciated.
An asset’s carrying amount is written-down immediately to its
recoverable amount if the asset’s carrying amount is greater
than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing the
net proceeds with the carrying amount and are recognised
within other income/expenses, in the income statement.
The expected useful lives under the straight-line method are
as follows:
Years
Buildings
to
Plant and equipment
to
Vehicles
Borrowing costs directly attributable to the acquisition or
construction of an asset that necessarily takes a substantial
period of time to be ready for its intended use are capitalised as
part of the cost of the asset. All other borrowing costs are
expensed where incurred. For borrowings associated with a
specific asset, the actual rate on that borrowing is used.
Otherwise, a weighted average cost of borrowing is used. The
Group capitalises the borrowing costs related to qualifying
assets with a value of US$,, or more, considering that
the substantial period of time to be ready is six or more months.
Mining properties and development costs
Purchased mining properties are recognised as assets at their
cost of acquisition or at fair value if purchased as part of a
business combination. Costs associated with developments of
mining properties are capitalised.
Mine development costs are, upon commencement of
commercial production, depreciated using the units of
production method based on the estimated economically
recoverable reserves and resources to which they relate.
When a mine construction project moves into the production
stage, the capitalisation of certain mine construction costs
ceases and costs are either regarded as part of the cost of
inventory or expensed, except for costs which qualify for
capitalisation relating to mining asset additions or
improvements, underground mine development or mineable
reserve development. In addition, the revenue generated from
the sale of the inventory produced during the pre-operating
stage is recognised as a deduction of the costs capitalised for
this project.
Construction in progress and capital advances
Assets in the course of construction are capitalised as a
separate component of property, plant and equipment. Once
the asset moves into the production phase, the cost of
construction is transferred to the appropriate category.
Construction in progress is not depreciated. Capital advances
to suppliers related to the purchase of property, plant and
equipment are disclosed in construction in progress.
Subsequent expenditure
Expenditure incurred to replace a component of an item of
property, plant and equipment is capitalised separately with the
carrying amount of the component being written-off. Other
subsequent expenditure is capitalised if future economic
benefits will arise from the expenditure. All other expenditure
including repairs and maintenance expenditures are recognised
in the income statement as incurred.
(g)
Evaluation and exploration assets
Evaluation and exploration expenses are capitalised when the
future economic benefit of the project can reasonably be
regarded as assured. Exploration and evaluation costs related
to projects in the development phase are capitalised as assets
from the date that the Board authorises management to
conduct a feasibility study.
Expenditure is transferred to mine development costs once the
work completed to date supports the future development of the
property and such development receives appropriate approval.
Costs incurred in converting inferred resources to indicated and
measured resources (of which reserves are a component) are
capitalised as incurred. Costs incurred in identifying inferred
resources are expensed as incurred.
Hochschild Mining PLC
Annual Report & Accounts
1
(h)
Determination of ore reserves and resources
The Group estimates its ore reserves and mineral resources
based on information compiled by internal competent persons.
Reports to support these estimates are prepared each year and
are stated in conformity with the Joint Ore Reserves
Committee (JORC) code.
It is the Group’s policy to have the report audited annually
by a Competent Person. Reserves and resources are used
in the units of production calculation for depreciation as well
as the determination of the timing of mine closure cost and
impairment analysis.
(i)
Investment in associates
An associate is an entity over which the Group has significant
influence. Significant influence is the power to participate in the
financial and operating policy decisions of the investee, but is
not control or joint control over those policies.
The considerations made in determining significant influence
are similar to those necessary to determine control over
subsidiaries. The Group’s investment in its associate are
accounted for using the equity method.
Under the equity method, the investment in an associate
is initially recognised at cost. The carrying amount of the
investment is adjusted to recognise changes in the Group’s share
of net assets of the associate since the acquisition date. Goodwill
relating to the associate is included in the carrying amount of the
investment and is not tested for impairment separately.
The statement of profit or loss reflects the Group’s share of
the results of operations of the associate. Any change in OCI
of those investees is presented as part of the Group’s OCI.
In addition, when there has been a change recognised directly
in the equity of the associate, the Group recognises its share of
any changes, when applicable, in the statement of changes in
equity. Unrealised gains and losses resulting from transactions
between the Group and the associate are eliminated to the
extent of the interest in the associate.
The aggregate of the Group’s share of profit or loss of an
associate is shown on the face of the statement of profit or loss
outside operating profit and represents profit or loss after tax
and non-controlling interests in the subsidiaries of the associate.
The financial statements of the associate are prepared for the
same reporting period as the Group. When necessary,
adjustments are made to bring the accounting policies in line
with those of the Group.
After application of the equity method, the Group determines
whether it is necessary to recognise an impairment loss on its
investment in its associate. At each reporting date, the Group
determines whether there is objective evidence that the
investment in the associate is impaired. If there is such evidence,
the Group calculates the amount of impairment as the
difference between the recoverable amount of the investment
and its carrying value, and then recognises the loss within
“Share of profit of an associate” in the statement of profit or loss.
Upon loss of significant influence over the associate, the Group
measures and recognises any retained investment at its fair
value. Any difference between the carrying amount of the
associate upon loss of significant influence and the fair value
of the retained investment and proceeds from disposal is
recognised in profit or loss.
(j)
Intangible assets
Right to use energy of transmission line
Transmission line costs represent the investment made by
the Group to construct the transmission line on behalf of the
government to be granted the right to use it. This is an asset with
a finite useful life equal to that of the mine to which it relates and
that is amortised applying the units of production method for
that mine.
Water permits
Water permits are recorded at cost and allow the Group to
withdraw a specified amount of water from the ground for
reasonable, beneficial uses. This is an asset with an indefinite
useful life (note ()).
Legal rights
Legal rights correspond to expenditures required to give the
Group the right to use a property for the surface exploration
work, development and production. This is an asset with a finite
useful life equal to that of the mine to which it relates and that is
amortised applying the units of production method for that mine.
Other intangible assets
Other intangible assets are primarily computer software which
are capitalised at cost and are amortised on a straight-line
basis over their useful life of three years.
(k)
Impairment of non-financial assets
Assets that have an indefinite useful life are not subject to
amortisation and are tested annually for impairment.
The carrying amounts of property, plant and equipment and
evaluation and exploration assets are reviewed for impairment if
events or changes in circumstances indicate that the carrying
value may not be recoverable. If there are indicators of
impairment, an exercise is undertaken to determine whether the
carrying values are in excess of their recoverable amount. Such
review is undertaken on an asset by asset basis, except where
such assets do not generate cash flows independent of other
assets, and then the review is undertaken at the cash-
generating unit (CGU) level.
The assessment requires the use of estimates and assumptions
such as long-term commodity prices, discount rates, future
capital requirements, reserves and resources volumes (reflected
in the production volume). Changes in these assumptions will
affect the recoverable amount of the property, plant and
equipment and evaluation and exploration assets.
If the carrying amount of an asset or its cash-generating unit
(CGU) exceeds the recoverable amount, an impairment
provision is recorded to reflect the asset at the lower amount.
Impairment losses are recognised in the income statement.
Calculation of recoverable amount
The recoverable amount of assets is the greater of their value in
use (VIU) and fair value less costs of disposal (FVLCD) to sell.
FVLCD is based on an estimate of the amount that the Group
may obtain in a sale transaction on an arm’s length basis. VIU is
based on estimated future cash flows discounted to their
present value using a discount rate that reflects current market
assessments of the time value of money and the risks specific to
the asset. For an asset that does not generate cash inflows
largely independent of those from other assets, the recoverable
amount is determined for the CGU to which the asset belongs.
Hochschild Mining PLC
Annual Report & Accounts
1
Strategic Report
01—99
Governance
100—149
Financial Statements
150—
Further Information
227—231
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
Material accounting policies
continued
In performing impairment reviews, the Group assesses the
recoverable amount of its operating assets principally with
reference to fair value less costs of disposal, assessed using
discounted cash flow models. The recoverable values of the
CGUs and advanced exploration projects are determined using
a FVLCD methodology. FVLCD for CGUs was determined using a
combination of level and level inputs. The FVLCD of the
producing and developing stage mine assets is determined
using a discounted cash flow model (note ) and for the
advanced exploration projects is determined using a discounted
cash flow model or a the value-in-situ methodology, which
applies a realisable “enterprise value” to unprocessed mineral
resources per ounce of resources to estimate the amount that
would be paid by a willing third party in an arm’s length
transaction (notes and ()).
For the CGU’s discounted cash flow model, the Group uses two
approaches, depending on the circumstances: (i) the traditional
approach, which uses a single cash flow projection, and (ii) the
expected cash flow approach, which uses multiple, probability-
weighted cash flow projections. As at December , the
impairment reviews for the Group’s operating assets were
performed using a traditional approach.
Reversal of impairment
An impairment loss is reversed if there has been a change in the
estimates used to determine the recoverable amount. An
impairment loss is reversed only to the extent that the asset’s
carrying amount does not exceed the carrying amount that
would have been determined, net of depreciation or
amortisation, if no impairment loss had been recognised.
(l)
Inventories
Inventories are valued at the lower of cost or net realisable value.
Cost is determined using the weighted average method.
The cost of work in progress and finished goods (ore inventories)
is based on the cost of production. For this purpose, the costs of
production include:
– costs, materials and contractor expenses which are directly
attributable to the extraction and processing of ore;
– depreciation of property, plant and equipment used in the
extraction and processing of ore; and
– related production overheads (based on normal operating
capacity).
Net realisable value is the estimated selling price in the ordinary
course of business, less applicable variable selling expenses.
(m) Trade and other receivables
Current trade receivables are carried at the original invoice
amount less provision made for impairment of these receivables.
Non current receivables are stated at amortised cost. A
provision for impairment of trade receivables is established
using the expected credit loss impairment model according IFRS
. The amount of the provision is the difference between the
carrying amount and the recoverable amount and this
difference is recognised in the income statement. The
revaluation of provisionally priced contracts stated in (q) is
recorded as trade receivables.
(n) Share capital
Ordinary shares are classified as equity. Any excess above the
par value of shares received upon issuance of those shares is
classified as share premium. In the case the excess above par
value is available for distribution, it is classified as merger reserve
and then transferred to retained earnings. The Group had the
merger reserve available for distribution within retained earnings.
(o)
Provisions
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event, it is
probable that an outflow of resources will be required to settle
the obligation and a reliable estimate can be made of the
amount of the obligation (note ). If the effect of the time value
of money is material, provisions are determined by discounting
the expected future cash flows at a pre-tax rate that reflects
current market assessments of the time value of money and,
where appropriate, the risks specific to the liability. Where
discounting is used, the increase in the provision due to the
passage of time is recognised as a finance cost.
Mine closure cost
Provisions for mine closure costs are made in respect of the
estimated future costs of closure and restoration and for
environmental rehabilitation costs (which include the
dismantling and demolition of infrastructure, removal of residual
materials and remediation of disturbed areas) in the accounting
period when the related environmental disturbance occurs.
The provision is discounted and the unwinding of the discount
is included in finance costs. At the time of establishing the
provision, a corresponding asset is capitalised and is
depreciated over future production from the mine to which
it relates. The provision is reviewed on an annual basis for
changes in cost estimates, discount rates and operating lives
of the mines.
Changes to estimated future costs are recognised in the
statement of financial position by adjusting the mine closure
cost liability and the related asset originally recognised. If, for
mature mines, the related mine assets net of mine closure cost
provisions exceed the recoverable value, that portion of the
increase is charged directly to the income statement. Similarly, if
reductions to the estimated costs exceed the carrying value of
the mine asset, that portion of the decrease is credited directly
to the income statement. For closed sites, changes to estimated
costs are recognised immediately in the income statement.
Workers’ profit sharing and other employee benefits
In accordance with Peruvian legislation, companies in Peru must
provide for workers’ profit sharing equivalent to % of taxable
income in each year. This amount is charged to the income
statement within personnel expenses (note ) and is
considered deductible for income tax purposes. The Group has
no pension or retirement benefit schemes.
Other
Other provisions are accounted for when the Group has a
legal or constructive obligation for which it is probable there
will be an outflow of resources for which the amount can be
reliably estimated.
(p) Share-based payments
Cash-settled transactions
The fair value of cash-settled share plans is recognised as a
liability over the vesting period of the awards. Movements in that
liability between reporting dates are recognised as personnel
expenses. The fair value of the awards is taken to be the market
value of the shares at the date of award adjusted by a factor for
anticipated relative Total Shareholder Return (TSR)
performance. Fair values are subsequently remeasured at each
reporting date to reflect the number of awards expected to vest
based on the current and anticipated TSR performance.
Hochschild Mining PLC
Annual Report & Accounts
18
Equity-settled transactions
The cost of equity-settled transactions is determined by the fair
value at the date when the grant is made using an appropriate
valuation model and is recognised, together with a
corresponding increase in other reserves in equity, over the
period in which the performance and/or service conditions are
fulfilled. The cumulative expense recognised for equity-settled
transactions at each reporting date until the vesting date
reflects the extent to which the vesting period has expired and
the Group’s best estimate of the number of equity instruments
that vest. The income statement expense for a period
represents the movement in cumulative expense recognised
as at the beginning and end of that period and is recognised
in personnel expenses (note ).
Service and non-market performance conditions are not taken
into account when determining the grant date fair value of
awards, but the likelihood of the conditions being met is
assessed as part of the Group’s best estimate of the number
of equity instruments that will ultimately vest. Market
performance conditions are reflected within the grant date
fair value. Any other conditions attached to an award, but
without an associated service requirement, are considered to be
non-vesting conditions. Non-vesting conditions are reflected in
the fair value of an award and lead to an immediate expensing
of an award unless there are also service and/or performance
conditions. No expense is recognised for awards that do not
ultimately vest because non-market performance and/or
service conditions have not been met. Where awards include
a market or non-vesting condition, the transactions are treated
as vested irrespective of whether the market or non-vesting
condition is satisfied, provided that all other performance and/or
service conditions are satisfied. When the terms of an equity-
settled award are modified, the minimum expense recognised
is the grant date fair value of the unmodified award, provided
the original vesting terms of the award are met. An additional
expense, measured as at the date of modification, is recognised
for any modification that increases the total fair value of the
share-based payment transaction, or is otherwise beneficial to
the employee. Where an award is cancelled by the entity or by
the counterparty, any remaining element of the fair value of the
award is expensed immediately through profit or loss.
(q) Revenue recognition
The Group is involved in the production and sale of gold and
silver from dore and concentrate containing both gold and silver.
Dore bars are either sold directly to customers or are sent to a
third party for further refining into gold and silver before they
are sold. Concentrate is sold directly to customers.
Revenue from contracts with costumers is recognised when
control of the goods or services are transferred to the customer
at an amount that reflects the consideration to which the Group
expects to be entitled in exchange for those goods or services.
Revenue excludes any applicable sales taxes.
The revenue is subject to adjustment based on inspection of the
product by the customer. Revenue is initially recognised on a
provisional basis using the Group’s best estimate of contained
gold and silver. Any subsequent adjustments to the initial
estimate of metal content are recorded in revenue once they
have been determined.
In addition, certain sales are “provisionally priced” where the
selling price is subject to final adjustment at the end of a
period, normally ranging from to days after the start of
the delivery process to the customer, based on the market price
at the relevant quotation point stipulated in the contract.
Revenue is initially recognised when the conditions set out
above have been met, using market prices at that date. The
price exposure is considered to be an adjustment and hence
separated from the sales contract at each reporting date.
The provisionally priced metal is revalued based on the forward
selling price for the quotational period stipulated in the contract
until the quotational period ends. The selling price of gold and
silver can be measured reliably as these metals are actively
traded on international exchanges. The revaluation of
provisionally priced contracts is recorded as revenue.
Commercial discounts related to the refining, recovery and
treatment of minerals are presented netted from sales.
A proportion of the Group’s sales are sold under CIF Incoterms,
whereby the Group is responsible for providing freight/shipping
services (as principal) after the date that the Group transfers
control of the metal in concentrate to its customers. The Group,
therefore, has separate performance obligations for freight/
shipping services which are provided solely to facilitate sale of
the commodities it produces.
Other Incoterms commonly used by the Group are FOB, where
the Group has no responsibility for freight or insurance once
control of the products has passed at the loading port, and
Delivered at Place (DAP) where control of the goods passes
when the product is delivered to the agreed destination. For
arrangements which have these Incoterms, the only
performance obligations are the provision of the product at the
point where control passes.
For CIF arrangements, the transaction price (as determined
above) is allocated to the metal in concentrate and freight/
shipping services using the relative stand-alone selling price
method. Under these arrangements, a portion of consideration
may be received from the customer in cash at, or around, the
date of shipment under a provisional invoice. Therefore, some of
the upfront consideration that relates to the freight/shipping
services yet to be provided, is deferred. It is then recognised as
revenue over time using an output method (being days of
shipping/transportation elapsed) to measure progress towards
complete satisfaction of the service as this best represents the
Group’s performance. This is on the basis that the customer
simultaneously receives and consumes the benefits provided by
the Group as the services are being provided. The costs
associated with these freight/shipping services are also
recognised over the same period of time as incurred.
Income from services provided to related parties (note ) is
recognised in revenue when services are provided.
Deferred revenue results when cash is received in advance of
revenue being earned. Deferred revenue is recorded as a liability
until it is earned. Once earned, the liability is reduced and
revenue is recorded. The Group analyses when revenue is
earned or deferred.
Hochschild Mining PLC
Annual Report & Accounts
1
Strategic Report
01—99
Governance
100—149
Financial Statements
150—
Further Information
227—231
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
Material accounting policies
continued
(r)
Contingencies
A contingent liability is a possible obligation depending on
whether some uncertain future event occurs, or a present
obligation where payment is not probable or the amount cannot
be measured reliably. Contingent liabilities are not recognised in
the financial statements and are disclosed in notes to the
financial statements unless their occurrence is remote (note ).
A contingent asset is a possible asset that arises from past
events, and whose existence will be confirmed only by the
occurrence or non-occurrence of one or more uncertain future
events not wholly within the control of the entity. Contingent
assets are not recognised in the financial statements, but are
disclosed in the notes if their recovery is deemed probable
(note ).
(s)
Finance income and costs
Finance income and costs comprise interest expense on
borrowings, the accumulation of interest on provisions, interest
income on funds invested, unwind of discount, and gains and
losses from the change in fair value of derivative instruments.
Interest income is recognised as it accrues, taking into account
the effective yield on the asset.
(t)
Income tax
Income tax for the year comprises current and deferred tax.
Income tax is recognised in the income statement except to the
extent that it relates to items charged or credited directly to
equity, in which case it is recognised in equity.
Current tax expense is the expected tax payable on the taxable
income for the year, using tax rates enacted at the statement of
financial position date, and any adjustment to tax payable in
respect of previous years.
Deferred tax is provided using the balance sheet liability
method, providing for temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes, with the
following exceptions:
– where the temporary difference arises from the initial
recognition of goodwill or of an asset or liability in a
transaction that is not a business combination that at the time
of the transaction affects neither accounting nor taxable
profit or loss; and
– in respect of taxable temporary differences associated with
investments in subsidiaries and associates, where the timing
of the reversal of the temporary differences can be controlled
and it is probable that the temporary differences will not
reverse in the foreseeable future.
Deferred tax assets and liabilities are measured at the tax rates
that are expected to apply to the period when the asset is
realised or the liability is settled based on the tax rates (and tax
laws) that have been enacted or substantively enacted at the
statement of financial position date.
A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against
which the asset can be utilised. Deferred tax assets are reduced
to the extent that it is no longer probable that the related tax
benefit will be realised.
(u)
Uncertain tax positions
An estimated tax liability is recognised when the Group has a
present obligation as a result of a past event, it is probable that
the Group will be required to settle that obligation and a reliable
estimate can be made of the amount of the obligation. The
liability is the best estimate of the consideration required to
settle the present obligation at the balance sheet date, taking
into account risks and uncertainties surrounding the obligation.
Separate liabilities for interest and penalties are also recorded
if appropriate.
Movements in interest and penalty amounts in respect of tax
liability are not included in the tax charge, but are disclosed in
the income statement. Tax liabilities are based on
management’s interpretation of country-specific tax law and
the likelihood of settlement. This involves a significant amount
of judgement as tax legislation can be complex and open to
different interpretation. Management uses in-house tax experts,
professional firms and previous experience when assessing tax
risks. Where actual tax liabilities differ from the liabilities,
adjustments are made which can have a material impact on
the Group’s profits for the year. Refer to note (a) for specific
tax contingencies.
(v)
Leases
Right-of-use assets (note )
The Group recognises right-of-use assets at the commencement
date of the lease (i.e., the date the underlying asset is available
for use). Right-of-use assets are measured at cost, less any
accumulated depreciation and impairment losses, and adjusted
for any remeasurement of lease liabilities. The cost of right-of-use
assets includes the amount of lease liabilities recognised, initial
direct costs incurred, and lease payments made at or before the
commencement date less any lease incentives received.
The right-of-use asset is depreciated over the shorter of the
asset’s useful life and the lease term on a straight-line basis.
Right-of-use assets are subject to impairment.
Lease liabilities
At the commencement date of the lease, the Group recognises
lease liabilities measured at the present value of lease payments
to be made over the lease term. The lease payments include
fixed payments (including in-substance fixed payments) less
any lease incentives receivable, and amounts expected to be
paid under residual value guarantees. The lease payments also
include the exercise price of a purchase option reasonably
certain to be exercised by the Group and payments of penalties
for terminating a lease, if the lease term reflects the Group
exercising the option to terminate. The variable lease payments
are recognised as expense in the period in which the event or
condition that triggers the payment occurs.
In calculating the present value of lease payments, the Group
uses the incremental borrowing rate at the lease commencement
date if the interest rate implicit in the lease is not readily
determinable. After the commencement date, the amount of
lease liabilities is increased to reflect the accretion of interest,
and reduced for the lease payments made. In addition, the
carrying amount of lease liabilities is remeasured if there is a
modification, a change in the lease term, a change in the
in-substance fixed lease payments or a change in the
assessment to purchase the underlying asset.
Hochschild Mining PLC
Annual Report & Accounts
10
– Financial assets designated at fair value through OCI (equity
instruments)
Upon initial recognition, the Group can elect to classify
irrevocably its equity investments as equity instruments
designated at fair value through OCI when they meet the
definition of equity under IAS Financial Instruments:
Presentation and are not held for trading. The classification
is determined on an instrument-by-instrument basis.
Financial assets designated at fair value through OCI are
carried in the statement of financial position at fair value with
net changes in fair value recognised in the OCI. Gains and losses
on these financial assets are never recycled to profit or loss.
Dividends are recognised as other income in the statement of
profit or loss when the right of payment has been established,
except when the Group benefits from such proceeds as a
recovery of part of the cost of the financial asset, in which case,
such gains are recorded in OCI. Equity instruments designated
at fair value through OCI are not subject to impairment
assessment.
The Group has listed and non-listed equity investments under
this category.
– Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include
financial assets held for trading, financial assets designated
upon initial recognition at fair value through profit or loss, or
financial assets mandatorily required to be measured at fair
value. Financial assets are classified as held for trading if they
are acquired for the purpose of selling or repurchasing in the
near term. Derivatives, including separated embedded
derivatives, are also classified as held for trading unless they are
designated as effective hedging instruments. Financial assets
with cash flows that are not solely payments of principal and
interest are classified and measured at fair value through profit
or loss, irrespective of the business model. Notwithstanding the
criteria for debt instruments to be classified at amortised cost or
at fair value through OCI, as described above, debt instruments
may be designated at fair value through profit or loss on initial
recognition if doing so eliminates, or significantly reduces, an
accounting mismatch.
Financial assets at fair value through profit or loss are carried in
the statement of financial position at fair value with net changes
in fair value recognised in the statement of profit or loss.
The Group has listed equity investments and embedded
derivatives under this category. Dividends on listed equity
investments are also recognised as other income in the statement
of profit or loss when the right of payment has been established.
Derecognition
A financial asset (or, where applicable, a part of a financial asset
or part of a group of similar financial assets) is primarily
derecognised (i.e., removed from the Group’s consolidated
statement of financial position) when:
– The rights to receive cash flows from the asset have expired
– The Group has transferred its rights to receive cash flows from
the asset or has assumed an obligation to pay the received
cash flows in full without material delay to a third party under
a “pass-through” arrangement; and either (a) the Group has
transferred substantially all the risks and rewards of the asset,
or (b) the Group has neither transferred nor retained
substantially all the risks and rewards of the asset, but has
transferred control of the asset
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption
to its short-term leases of machinery and equipment (i.e., those
leases that have a lease term of months or less from the
commencement date and do not contain a purchase option). It
also applies the lease of low-value assets recognition exemption
to leases of office equipment that are considered of low value
(i.e., below US$,). Lease payments on short-term leases and
leases of low-value assets are recognised as expense on a
straight-line basis over the lease term.
(w) Financial instruments
A financial instrument is any contract that gives rise to a
financial asset of one entity and a financial liability or equity
instrument of another entity.
Financial assets
Initial recognition and measurement
Financial assets are classified, at initial recognition, as
subsequently measured at amortised cost, fair value through
other comprehensive income (OCI), and fair value through profit
or loss.
The classification of financial assets at initial recognition depends
on the financial asset’s contractual cash flow characteristics and
the Group’s business model for managing them.
The Group’s business model for managing financial assets
refers to how it manages its financial assets in order to generate
cash flows. The business model determines whether cash flows
will result from collecting contractual cash flows, selling the
financial assets, or both.
Purchases or sales of financial assets that require delivery of
assets within a time frame established by regulation or
convention in the market place (regular way trades) are
recognised on the trade date, i.e., the date that the Group
commits to purchase or sell the asset.
On July , the Group purchased AL bonds, which are
sovereign bonds denominated in US dollars that were paid with
Argentine pesos and that pay income in US dollars in local
accounts. They are national public securities issued in dollars
with a fixed rate of .% per year with a maturity date of July
. Its technical value is $. with a residual value of
.%.
Subsequent measurement
For purposes of subsequent measurement, the Group’s financial
assets are classified in the following categories:
– Financial assets at amortised cost (debt instruments)
The Group measures financial assets at amortised cost if both
of the following conditions are met:
– The financial asset is held within a business model with the
objective to hold financial assets in order to collect contractual
cash flows
– The contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments of
principal and interest on the principal amount outstanding
Financial assets at amortised cost are subsequently measured
using the effective interest (EIR) method and are subject to
impairment. Gains and losses are recognised in profit or loss
when the asset is derecognised, modified or impaired.
The Group’s financial assets at amortised cost includes
trade receivables.
Hochschild Mining PLC
Annual Report & Accounts
11
Strategic Report
01—99
Governance
100—149
Financial Statements
150—
Further Information
227—231
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
Derivative financial instruments and hedge accounting
In and , the Group signed silver and gold forward
agreements, respectively. The silver and gold forward is being
used to hedge the exposure to changes in the cash flows of the
silver and gold commodity prices. Consequently, the Group has
opted to apply hedge accounting under the requirements of
IFRS Financial Instruments.
Initial recognition and subsequent measurement
These derivative financial instruments were initially recognised
at fair value on the date on which the derivative contract was
entered into and were subsequently remeasured at fair value.
Derivatives are carried as financial assets when the fair value is
positive and as financial liabilities when the fair value is negative.
For the purpose of hedge accounting, hedges are classified as
cash flow hedges when hedging the exposure to variability in
cash flows that is either attributable to a particular risk
associated with a recognised asset or liability or a highly
probable forecast transaction or the foreign currency risk in an
unrecognised firm commitment.
At the inception of a hedge relationship, the Group formally
designates and documents the hedge relationship to which it
wishes to apply hedge accounting and the risk management
objective and strategy for undertaking the hedge.
The documentation includes identification of the hedging
instrument, the hedged item, the nature of the risk being
hedged and how the Group will assess whether the hedging
relationship meets the hedge effectiveness requirements
(including the analysis of sources of hedge ineffectiveness
and how the hedge ratio is determined). A hedging relationship
qualifies for hedge accounting if it meets all of the following
effectiveness requirements:
– There is “an economic relationship” between the hedged item
and the hedging instrument
– The effect of credit risk does not “dominate the value changes”
that result from that economic relationship
– The hedge ratio of the hedging relationship is the same as
that resulting from the quantity of the hedged item that the
Group actually hedges and the quantity of the hedging
instrument that the Group actually uses to hedge that
quantity of hedged item
Changes in the fair value of derivatives designated as cash flow
hedges are recognised in other components of equity until
changes in the fair value of the hedged item are recognised in
profit or loss. However, the ineffective portion of the changes in
the fair value of such derivatives is recognised in profit or loss.
The Group uses cash flow hedges for hedging the exposure to
variability in silver prices.
The amounts that have been recognised in other components of
equity relating to such hedging instruments are reclassified to
profit or loss when the hedged transaction affects profit or loss.
(x) Dividend distribution
Dividends on the Company’s ordinary shares are recognised
when they have been appropriately authorised and are no
longer at the Company’s discretion. Accordingly, interim
dividends are recognised when they are paid and final dividends
are recognised when they are declared following approval by
shareholders at the Company’s Annual General Meeting.
Material accounting policies
continued
Impairment of financial assets
The Group recognises an allowance for expected credit losses
(ECLs) for all debt instruments not held at fair value through
profit or loss. ECLs are based on the difference between the
contractual cash flows due in accordance with the contract and
all the cash flows that the Group expects to receive, discounted
at an approximation of the original effective interest rate.
For trade receivables, the Group applies a simplified approach
in calculating ECLs. Therefore, the Group does not track
changes in credit risk, but instead recognises a loss allowance
based on lifetime ECLs at each reporting date.
Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as
financial liabilities at fair value through profit or loss, loans and
borrowings, payables, or as derivatives designated as hedging
instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value and, in
the case of loans and borrowings and payables, net of directly
attributable transaction costs.
The Group’s financial liabilities include trade and other
payables, loans and borrowings including bank overdrafts, and
derivative financial instruments.
Subsequent measurement
The measurement of financial liabilities depends on their
classification, as described below:
– Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include
financial liabilities held for trading and financial liabilities
designated upon initial recognition as at fair value through profit
or loss.
– Loans and borrowings
This is the category most relevant to the Group. After initial
recognition, interest-bearing loans and borrowings are
subsequently measured at amortised cost using the EIR method.
Gains and losses are recognised in profit or loss when the
liabilities are derecognised as well as through the EIR
amortisation process.
Amortised cost is calculated by taking into account any
discount or premium on acquisition and fees or costs that are
an integral part of the EIR. The EIR amortisation is included in
finance costs in the statement of profit or loss.
This category generally applies to interest-bearing loans
and borrowings.
Derecognition
A financial liability is derecognised when the obligation under
the liability is discharged or cancelled or expires. When an
existing financial liability is replaced by another from the same
lender on substantially different terms, or the terms of an
existing liability are substantially modified, such an exchange or
modification is treated as the derecognition of the original
liability and the recognition of a new liability. The difference in
the respective carrying amounts is recognised in the statement
of profit or loss.
Hochschild Mining PLC
Annual Report & Accounts
1
(y)
Cash and cash equivalents
Cash and cash equivalents are carried in the statement of
financial position at cost. For the purposes of the statement of
financial position, cash and cash equivalents comprise cash on
hand and deposits held with banks that are readily convertible
into known amounts of cash and which are subject to
insignificant risk of changes in value. For the purposes of the
cash flow statement, cash and cash equivalents, as defined
above, are shown net of outstanding bank overdrafts.
Liquidity funds are classified as cash equivalents if the amount
of cash that will be received is known at the time of the initial
investment and the risk of changes in value is considered
insignificant.
(z)
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.
Exceptional items mainly include:
– impairments or write-offs of assets, property, plant and
equipment and evaluation and exploration assets;
– incremental cost due to pandemics which are not expected to
be recurring;
– gains or losses arising on the disposal of subsidiaries,
investments or property, plant and equipment;
– any gain or loss resulting from restructuring within the Group;
– the impact of infrequent labour action related to work
stoppages in mine units;
– the penalties generated by the early termination of
agreements with providers or lenders of the Group;
– the reversal of an accumulation of prior year’s tax expenses
that resulted from an agreement with the government; and
– the related tax impact of the above items.
(aa) Fair value measurement
The Group measures financial instruments, such as derivatives,
at each statement of financial position date.
Fair value is the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between
market participants at the measurement date. The fair value
measurement is based on the presumption that the transaction
to sell the asset or transfer the liability takes place either:
– In the principal market for the asset or liability, or
– In the absence of a principal market, in the most
advantageous market for the asset or liability
The principal or the most advantageous market must be
accessible by the Group.
The fair value of an asset or a liability is measured using the
assumptions that market participants would use when pricing
the asset or liability, assuming that market participants act in
their best economic interest.
A fair value measurement of a non-financial asset takes into
account a market participant’s ability to generate economic
benefits by using the asset in its highest and best use or by
selling it to another market participant that would use the asset
in its highest and best use. The Group uses valuation techniques
that are appropriate in the circumstances and for which
sufficient data are available to measure fair value, maximising
the use of relevant observable inputs and minimising the use of
unobservable inputs.
All assets and liabilities for which fair value is measured or
disclosed in the financial statements are categorised within the
fair value hierarchy, as described in note (e).
For assets and liabilities that are recognised in the financial
statements on a recurring basis at fair value, the Group
determines whether transfers have occurred between levels in
the hierarchy by re-assessing categorisation (based on the
lowest level input that is significant to the fair value
measurement as a whole) at the end of each reporting period.
The Group determines the policies and procedures for both
recurring fair value measurement and unquoted financial
assets, and for non-recurring measurement.
At each reporting date, the Group analyses the movements
in the values of assets and liabilities which are required to be
re-measured or re-assessed as per the Group’s accounting
policies. For this analysis, the Group verifies the major inputs
applied in the latest valuation by agreeing the information
in the valuation computation to contracts and other
relevant documents.
The Group, in conjunction with its external valuers where
applicable, also compares the changes in the fair value of each
asset and liability with relevant external sources to determine
whether the change is reasonable.
For the purpose of fair value disclosures, the Group has
determined classes of assets and liabilities on the basis of the
nature, characteristics and risks of the asset or liability and the
level of the fair value hierarchy as explained above.
(ab) Export incentive programme
On October the Argentinian Government approved that
exporters of crude oil, gas and derivatives, who meet certain
conditions, may receive % of the funds received from exports
through negotiable securities acquired in foreign currency and
settled in local currency.
On October the export incentive programme was
approved increasing the percentage to %. On November
the percentage increased to % and since December
changed to %. As at December the Group
recognised a benefit from the programme of US$,,,
disclosed as other income (refer to note ).
Hochschild Mining PLC
Annual Report & Accounts
1
Strategic Report
01—99
Governance
100—149
Financial Statements
150—
Further Information
227—231
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
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 at 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 unit – San Jose, which generates revenue from the sale of gold and silver (dore and concentrate)
– Operating unit – Pallancata, which generates revenue from the sale of gold and silver (concentrate). The Pallancata mine unit was
put into care and maintenance on November
– Operating unit – Inmaculada, which generates revenue from the sale of gold and silver (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 Aymaraes S.A.C.
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 the adopted IFRS accounting policies in the financial statements.
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
Inmaculada
US$
San Jose
US$
Pallancata
US$
Exploration
US$
Other
US$
Adjustment
and
eliminations
US$
Total
US$
Year ended December
Revenue from external customers
,
,
,
–
,
Inter-segment revenue
–
–
–
–
,
(,)
–
Total revenue from customers
,
,
,
–
,
(,)
,
Provisional pricing adjustment
,
()
–
–
–
,
Total revenue
,
,
,
–
,
(,)
,
Segment profit/(loss)
,
,
(,)
(,)
,
()
,
Others
(,)
Profit from operations before income tax
(,)
Other segment information
Depreciation
(,)
(,)
(,)
()
(,)
–
(,)
Amortisation
()
()
–
()
()
–
()
Impairment and write-off of assets, net
(,)
(,)
()
(,)
()
–
(,)
Assets
Capital expenditure
,
,
,
,
–
,
Current assets
,
,
,
,
,
–
,
Other non-current assets
,
,
,
,
,
–
,,
Total segment assets
,
,
,
,
,
–
,,
Not reportable assets
–
–
–
–
,
–
,
Total assets
,
,
,
,
,
–
,,
“Other” revenue relates to revenues earned by Empresa de Transmisión Aymaraes S.A.C.
Comprised of administrative expenses of US$,,, other income of US$,,, other expenses of US$,,, write-off of assets (net) of US$,,,
impairment of non-current assets of US$,,, share of losses of an associate of US$,,, finance income of US$,,, finance expense of US$,,, and
foreign exchange loss of US$,,.
Includes depreciation capitalised in the Crespo project (US$,), San Jose unit (US$,,), Mara Rosa project (US$,), products in process (US$,) and
recognised against the mine rehabilitation provision (US$,,).
Not reportable assets are comprised of financial assets at fair value through OCI of US$,, other receivables of US$,,, income tax receivable of US$,,,
deferred income tax asset of US$,, investment in associates US$,,, derivative financial assets of US$,, other financial assets of US$,,, assets held
for sale of US$,,, and cash and cash equivalents of US$,,.
Hochschild Mining PLC
Annual Report & Accounts
1
Inmaculada
US$
San Jose
US$
Pallancata
US$
Exploration
US$
Other
US$
Adjustment
and
eliminations
US$
Total
US$
Year ended December
Revenue from external customers
,
,
,
–
,
Inter-segment revenue
–
–
–
–
,
(,)
–
Total revenue from customers
,
,
,
–
,
(,)
,
Provisional pricing adjustment
()
()
–
–
–
(,)
Total revenue
,
,
,
–
,
(,)
,
Segment profit/(loss)
,
,
(,)
(,)
,
,
Others
(,)
Profit from operations before income tax
,
Other segment information
Depreciation
(,)
(,)
(,)
()
(,)
–
(,)
Amortisation
()
()
–
()
–
()
Reversal of impairment/(impairment) and
write-off of assets, net
()
–
,
(,)
()
–
,
Assets
Capital expenditure
,
,
,
,
,
–
,
Current assets
,
,
,
–
,
–
,
Other non-current assets
,
,
,
,
,
–
,,
Total segment assets
,
,
,
,
,
–
,,
Not reportable assets
–
–
–
–
,
–
,
Total assets
,
,
,
,
,
–
,,
“Other” revenue relates to revenues earned by Empresa de Transmisión Aymaraes S.A.C.
Comprised of administrative expenses of US$,,, other income of US$,,, other expenses of US$,,, write-off of assets (net) of US$,,, reversal of
impairment of non-current assets net of US$,,, share of losses of an associate of US$,,, finance income of US$,,, finance expense of US$,,,
and foreign exchange loss of US$,,.
Includes depreciation capitalised in the Crespo project (US$,), San Jose unit (US$,,), Mara Rosa project (US$,), products in process (US$,) and
recognised against the mine rehabilitation provision (US$,).
Not reportable assets are comprised of financial assets at fair value through OCI of US$,, financial assets at fair value through profit and loss of US$,,, other
receivables of US$,,, income tax receivable of US$,,, deferred income tax asset of US$,,, investment in associates US$,,, derivative financial
assets of US$,, and cash and cash equivalents of US$,,.
Hochschild Mining PLC
Annual Report & Accounts
15
Strategic Report
01—99
Governance
100—149
Financial Statements
150—
Further Information
227—231
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
Segment reporting
continued
(b) Geographical information
The revenue for the period based on the country in which the customer is located is as follows:
Year ended December
US$
US$
External customer
Switzerland
,
,
Canada
,
,
South Korea
,
,
Germany
,
,
Japan
,
Chile
–
()
United Kingdom
,
,
Finland
,
–
USA
,
,
China
–
,
Peru
,
Total
,
,
Inter-segment
Peru
,
,
Total
,
,
In the periods set out below, certain customers accounted for greater than % of the Group’s total revenues as detailed in the
following table:
Year ended December
Year ended December
US$
% Revenue
Segment
US$
% Revenue
Segment
Argor Heraus
,
%
Inmaculada and San Jose
,
%
Inmaculada and San Jose
Asahi Refining Canada
,
%
Inmaculada and San Jose
,
%
Inmaculada
LS MnM (formerly LS Nikko)
,
%
Pallancata and San Jose
,
%
Pallancata and San Jose
Aurubis AG
,
%
Pallancata and San Jose
,
%
Pallancata and San Jose
MKS Switzerland S.A.
,
%
Inmaculada
,
%
Inmaculada
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 December
US$
US$
Peru
,
,
Brazil
,
,
Argentina
,
,
Chile
,
,
Canada
–
Total non-current segment assets
,,
,,
Financial assets at fair value through OCI
Financial assets at fair value through profit and loss
–
,
Investment in associates
,
,
Trade and other receivables
,
,
Deferred income tax assets
,
Total non-current assets
,,
,,
Hochschild Mining PLC
Annual Report & Accounts
1
Acquisitions and disposals
(a)
Acquisition of Amarillo Gold Group (“Amarillo”)
On April , the Group acquired a % interest in Amarillo Gold Corporation (“Amarillo”) flagship Mara Rosa (“Mara Rosa”)
project located in Goiás State, Brazil, which included the construction stage Posse gold project as well as certain early-stage
exploration targets.
The Group has applied its judgement to weigh the characteristics of Amarillo’s acquisition and conclude whether it constitutes the
acquisition of a business or a set of assets and activities. Since there are no outputs acquired, the Group based its conclusion on the
fact that the processes acquired are not critical to the ability to develop or convert the actual inputs into outputs. In this context,
and in application of IFRS , the Group concluded that the acquisition of Amarillo does not constitute the acquisition of a business
but the acquisition of a set of assets.
The consideration paid for the transaction amounted to C$,, (US$,,), and transaction costs amounted to
US$,,. In addition, a % net smelter revenue royalty on certain exploration properties owned by Amarillo that are separate
from Posse was granted.
Amarillo consolidates its financial information with the Group from April , being the date on which the Group obtained control.
The fair value of assets acquired and liabilities assumed as at April comprise the following:
US$
Cash and cash equivalents
,
Other receivables
Intangibles
Evaluation and exploration assets (note )
,
Property, plant and equipment (note )
,
Deferred income tax asset
,
Income tax receivable
Total assets
11,8
Accounts payable and other liabilities
(,)
Total liabilities
(,)
Net assets acquired
18,50
Consideration for the acquisition of Amarillo Gold Canada shares
,
Transaction costs
,
Total consideration
18,50
Cash paid
,
Less cash acquired with the subsidiary
(,)
Net cash flow on acquisition
1,00
The Group recognises individual identifiable assets (and liabilities) by allocating the cost of acquisition on the basis of the relative
fair values at the date of purchase:
Step : Identify assets and liabilities acquired, adjusting them to the Group’s accounting policies and presentation
Step : Determine the purchase consideration
Step : Purchase Price Allocation: The consideration paid is allocated to the fair value of the identifiable assets and liabilities
assumed with the remainder allocated to the mineral property acquired
The fair value at the time of acquisition is the amount for which an asset could be exchanged, or a liability settled, between
knowledgeable, willing parties in an arm’s length transaction.
Revenue
Year ended December
Year ended December
Revenue from customers
1
Revenue from customers
Goods sold
US$
Shipping
services
US$
Total
US$
Provisional
pricing
US$
Total
US$
Goods sold
US$
Shipping
services
US$
Total
US$
Provisional
pricing
US$
Total
US$
Gold (from dore bars)
,
,
,
,
,
()
,
Silver (from dore bars)
,
,
,
,
,
,
Gold (from concentrates)
,
,
,
,
,
,
,
,
(,)
,
Silver (from concentrates)
,
,
,
()
,
,
,
,
,
Services
–
–
–
–
Total
,
,
,
,
,
,
,
,
(,)
,
Includes commercial discounts (refinery treatment charges, refining fees and payable deductions for processing concentrate), 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 , the Group recorded commercial discounts of
US$,, (: US$,,).
Hochschild Mining PLC
Annual Report & Accounts
1
Strategic Report
01—99
Governance
100—149
Financial Statements
150—
Further Information
227—231
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
Cost of sales before exceptional items
Cost of sales comprises:
Year ended December
US$
US$
Direct production costs excluding depreciation and amortisation
,
,
Depreciation and amortisation in production costs
,
,
Other items and workers profit sharing
,
,
Fixed costs during operational stoppages and reduced capacity
,
,
Change in inventories
(,)
(,)
Cost of sales
,
,
The main components included in cost of sales are:
Year ended December
US$
US$
Depreciation and amortisation in cost of sales
,
,
Personnel expenses (note )
,
,
Mining royalty (note )
,
,
Change in products in process and finished goods
(,)
(,)
Fixed costs at the operations during stoppages, reduced capacity and excess absenteeism
,
,
The depreciation and amortisation in production cost is US$,, (: US$,,).
Includes workers profit sharing of US$,, (: US$,,) and excludes personnel expenses of US$,, (: US$,,) included within unallocated fixed
cost at the operations (see below).
Corresponds to the unallocated fixed cost accumulated as a result of excess absenteeism and idle capacity. These costs mainly include personnel expenses of US$,,
(: US$,,), third party services of US$, (: US$,,), supplies of US$, (: US$,), depreciation and amortisation of US$Nil (:
US$,) and other costs of US$, (: US$,).
Administrative expenses
Year ended December
US$
US$
Personnel expenses (note )
,
,
Professional fees
,
,
Donations
,
Lease rentals
,
,
Third party services
Communications
Indirect taxes
,
,
Depreciation and amortisation
,
,
Depreciation of rights of use
Technology and systems
,
Security
Other
,
,
Total
,
,
Corresponds to audit fees of US$,, (: US$,,), legal fees of US$, (: US$,,), tax and advisory fees of US$,, (: US$,,),
and other professional fees of US$,, (: US$,,).
Predominantly relates to advertising costs of US$, (: US$,), insurance fees of US$, (: US$,), repair and maintenance of US$,
(: US$,), supplies costs of US$, (: US$,), tax penalties of US$, (: US$,), travel expenses of US$,, (: US$,) and
personnel transportation of US$, (: US$,).
Hochschild Mining PLC
Annual Report & Accounts
18
Exploration expenses
Year ended December
US$
US$
Mine site exploration
1
Arcata
Ares
Inmaculada
,
,
Pallancata
,
,
San Jose
,
,
Mara Rosa
–
,
,
Prospects
Peru
USA
,
Chile
()
()
Canada
,
,
Brazil
–
,
,
Generative
Peru
USA
Mexico
Brazil
,
,
Chile
()
–
,
,
Personnel (note )
,
,
Others
,
Depreciation right-of-use assets
Total
,
,
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.
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.
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.
Corresponds to the SNIP project managed by Hochschild Mining Canada Corp.
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$,, in (: US$,,).
Selling expenses
Year ended December
US$
US$
Personnel expenses (note )
Warehouse services
,
,
Taxes
,
,
Other
,
,
Total
,
,
Corresponds to the export duties in Argentina.
Mainly corresponds to insurance expenses of US$, (: US$,), other professional fees of US$, (: US$,), analysis services of US$, (:
US$,), and consumption of supplies of US$, (: US$,).
Hochschild Mining PLC
Annual Report & Accounts
1
Strategic Report
01—99
Governance
100—149
Financial Statements
150—
Further Information
227—231
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
Personnel expenses
Year ended December
US$
US$
Salaries and wages
,
,
Workers’ profit sharing (note )
,
,
Other legal contributions
,
,
Statutory holiday payments
,
,
Long-Term Incentive Plan
,
,
Termination benefits
,
,
Other
,
,
Total
,
,
Includes exceptional personnel expenses amounting to US$,, (: US$Nil) (refer to note ()). The Group’s previously operating Pallancata mine went into care and
maintenance in November and consequently employees were terminated in .
Mainly includes training expenses of US$, (: US$,,).
Personnel expenses are distributed as follows:
Year ended December
US$
US$
Cost of sales
,
,
Administrative expenses
,
,
Exploration expenses
,
,
Selling expenses
Other expenses
,
,
Capitalised as property, plant and equipment
,
,
Total
,
,
Personnel expenses related to unallocated fixed cost accumulated as a result of excess absenteeism and idle capacity included in cost of sales amount to US$,,
(: US$,,). Exceptional personnel expenses included in cost of sales amount to US$Nil (: US$Nil).
Exceptional personnel expenses included in other expenses amount to US$,, (: US$Nil).
The average number of employees for and were as follows:
Year ended December
Peru
,
,
Argentina
,
,
Chile
Brazil
Canada
United Kingdom
Total
,
,
Hochschild Mining PLC
Annual Report & Accounts
180
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
December
US$
Year ended
December
US$
Other expenses
Restructuring of the Pallancata mine unit
(,)
–
Total
(,)
–
(Impairment)/impairment reversal of non-financial assets, net
Impairment of non-financial assets
(,)
(,)
Reversal of impairment of non-financial assets
–
,
Total
(,)
,
Share of loss on an associate
Impairment of Aclara Resources Inc.
(,)
(,)
Total
(,)
(,)
Income tax benefit/(charge)
,
(,)
Total
,
(,)
The exceptional items for the year ended 1 December 0 and 0 correspond to:
Corresponds to the restructuring charges in Pallancata mine unit resulting from placing the operation in care and maintenance.
Corresponds to the impairment related to the Azuca project of US$,,, the impairment of the Crespo project of US$,, and the San Jose mine unit of
US$,, (: corresponds to the impairment related to the Azuca project of US$,,) (refer to notes , and ).
Reversals of impairment related to the Pallancata mine unit (refer to notes and ).
Corresponds to the impairment charge of US$,, (: US$,,) based on the updated valuation of the investment in Aclara Resources Inc. as at December
(refer to note ).
The current tax credit generated by the restructuring of the Pallancata mine unit of US$,, (: US$Nil) and the deferred tax credit generated by the impairment of
the Azuca project of US$,, (: US$,,), the impairment of the Crespo project of US$,, (: US$Nil), and the impairment of the San Jose mine unit of
US$,, (: US$Nil); net in of the deferred tax charge generated by the reversal of the impairment of the Pallancata mine unit of US$,,.
Hochschild Mining PLC
Annual Report & Accounts
181
Strategic Report
01—99
Governance
100—149
Financial Statements
150—
Further Information
227—231
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
Other income and other expenses before exceptional items
Year ended
December
Year ended
December
Before
exceptional
items
US$
Before
exceptional
items
US$
Other income
Gain on sale of property, plant and equipment
Logistic services
,
Income on recovery of expenses
,
Recovery of previously written off account receivable
–
Sale of mine concessions
,
–
Tax benefit in Canada
,
–
Income from export programme in Argentina
,
–
Other
,
Total
,
,
Other expenses
Increase in provision for mine closure (note ())
(,)
(,)
Provision of obsolescence of supplies (note )
(,)
()
Write off of value added tax
()
()
Corporate social responsibility contribution in Argentina
(,)
(,)
Care and maintenance expenses of Ares mine unit
(,)
(,)
Care and maintenance expenses of Arcata mine unit
(,)
(,)
Care and maintenance expenses of Pallancata mine unit
(,)
–
Care and maintenance expenses of Selene mine unit
()
–
Voluntary retirement plan in Argentina
–
(,)
Damage Inmaculada machine belt
–
(,)
Depreciation right-of-use assets
()
()
Contingency
()
(,)
Other
(,)
(,)
Total
(,)
(,)
British Columbia exploration tax credit generated in Hochschild Mining Canada, a Canadian subsidiary of the Group.
Benefit arising from being able to access the Argentina government’s Export Incentive Programme, allowing certain companies to translate a certain proportion of US dollar
sales at a preferential market exchange rate.
Mainly corresponds to the gain on sale of supplies of US$, (: gain on sale of supplies of US$,).
Relates to a contribution in Argentina to the Santa Cruz province calculated as a proportion of sales.
Related to payments made and the provision recognised under voluntary retirement plan in Minera Santa Cruz.
Mainly related to contingencies in Minera Santa Cruz related to labour lawsuits.
Mainly corresponds to the expenses due to penalties in CMA of US$,, (: US$,,), insurance of Minera Santa Cruz of US$Nil (: US$,), termination
benefits in Pallancata mine unit of US$Nil (: US$,).
Hochschild Mining PLC
Annual Report & Accounts
18
Finance income, finance costs and foreign exchange loss
Year ended
December
Year ended
December
US$
US$
Finance income
Interest on deposits and liquidity funds
,
,
Interest income
,
,
Unwind of discount on mine rehabilitation (note )
–
,
Other
,
Total
,
,
Finance costs
Interest on secured bank loans (note )
(,)
(,)
Other interest
(,)
(,)
Interest expense
(,)
(,)
Loss on discount of other receivables
()
()
Loss from changes in the fair value of financial instruments
(,)
(,)
Unwind of discount on mine rehabilitation (note )
(,)
–
Other
(,)
(,)
Total
(,)
(,)
Foreign exchange loss
Argentina
(,)
(,)
Peru
(,)
Others
Total
(,)
(,)
Interest on deposits and liquidity funds of US$, (: US$,,) that is directly attributable to the construction of Mara Rosa has been recognised in property, plant
and equipment as a reduction to construction in progress and capital advances and mining properties and development costs, and evaluation and exploration assets.
Mainly related to the effect of the discount of tax credits in Argentina and Peru.
Represents the loss on sale of the C Metals Inc shares of US$, (note ) (: fair value change of US$,, on the C Metals Inc shares) and the foreign exchange
effect of US$,, related to the bonds in San Jose (: the foreign exchange transaction costs of US$,, to acquire US$,, through the sale of bonds in
Argentina).
Increase of foreign exchange loss in Argentina due to the devaluation at the end of .
Income tax expense
Year ended December
Year ended December
Before
exceptional
items
US$
Exceptional
items
US$
Total
US$
Before
exceptional
items
US$
Exceptional
items
US$
Total
US$
Current corporate income tax
Corporate income tax expense
,
(,)
,
,
–
,
Prior year adjustment in Minera Santa Cruz
–
–
–
(,)
–
(,)
Withholding tax
–
–
,
(,)
,
,
–
,
Deferred taxation
Origination and reversal of temporary differences (note )
,
(,)
(,)
(,)
,
(,)
Prior year adjustment in Amarillo
–
–
–
()
–
()
,
(,)
(,)
(,)
,
(,)
Corporate income tax
,
(,)
,
,
,
,
Current mining royalties
Mining royalty charge (note )
,
–
,
,
–
,
Special mining tax charge (note )
,
–
,
,
–
,
Total current mining royalties
,
–
,
,
–
,
Total taxation expense/(benefit) in the income statement
,
(,)
,
,
,
,
The weighted average statutory income tax rate was .% for and .% for . 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.
Hochschild Mining PLC
Annual Report & Accounts
18
Strategic Report
01—99
Governance
100—149
Financial Statements
150—
Further Information
227—231
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
Income tax expense
continued
There were tax charges in relation to the cash flow hedge losses (: charges) recognised in equity during the year ended
December of US$,, (: US$,,).
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 December
US$
US$
Profit from operations before income tax
(,)
,
At average statutory income tax rate of .% (: .%)
(,)
,
Expenses not deductible for tax purposes
,
,
Taxable income on local currency (pesos) related to AL Bond Argentina
–
Deferred tax recognised on special investment regime
(,)
(,)
Movement in unrecognised deferred tax
,
,
Special mining tax and mining royalty deductible for corporate income tax
(,)
(,)
Current income tax adjustment in Minera Santa Cruz
–
(,)
Tax credit adjustment from Amarillo
()
()
Other
,
Corporate income tax at average effective income tax rate of -.% (: .%) before foreign exchange effect
and withholding tax
,
Foreign exchange rate effect
,
(,)
Corporate income tax at average effective income tax rate of -.% (: .%) before withholding tax
,
,
Special mining tax and mining royalty
,
,
Corporate income tax and mining royalties at average effective income tax rate of -.% (: .%) before
withholding tax
,
,
Withholding tax
Total taxation charge in the income statement at average effective tax rate -.% (: .%) from operations
,
,
Argentina benefits from a special investment regime that allows for a super (double) deduction in calculating its taxable profits for all costs relating to prospecting, exploration
and metallurgical analysis, pilot plants and other expenses incurred in the preparation of feasibility studies for mining projects.
Includes the income tax charge on mine closure provision of US$,, (: US$,), the tax charge related to the Inmaculada mine unit depreciation of
US$,, (: US$,), and the effect of not recognised tax losses of US$,, (: US$,,).
Corresponds to the impact of a mining royalty and special mining tax in Peru (note ).
The foreign exchange effect is composed of US$,, loss (: US$,, profit) from Argentina and a profit of US$, (: US$,, profit) from Peru and
a loss of US$,, (: US$,, profit) from Brazil. This mainly corresponds to the foreign exchange effect of converting tax bases and monetary items from local
currency to the corresponding functional currency. The main contributor of the foreign exchange effect on the tax charge in is the devaluation of the Argentinian pesos
(: Argentinian pesos).
The amounts after offset, as presented on the face of the statement of financial position, are as follows:
As at December
US$
US$
Income tax receivable
,
,
Income tax payable
(,)
(,)
Total
,
,
Mainly corresponds to the tax credit of Compañia Minera Ares of US$,, and Minera Santa Cruz of US$, (: Mainly corresponds to the tax credit of Compañia
Minera Ares of US$,,, Minera Santa Cruz of US$,, and Empresa de Transmisión Aymaraes S.A.C. of US$,).
Mainly corresponds to the mining royalties payables of Compañia Minera Ares of US$,, (: Mainly corresponds to the mining royalties payables of Compañia
Minera Ares of US$,,).
Hochschild Mining PLC
Annual Report & Accounts
18
Basic and diluted earnings per share
Earnings per share (EPS) is calculated by dividing profit for the year attributable to equity shareholders of the Parent by
the weighted average number of ordinary shares issued during the year.
The Company has antidilutive potential ordinary shares as at December .
As at December and , EPS has been calculated as follows:
As at December
Basic earnings per share
Before exceptional items (US$)
.
.
Exceptional items (US$)
(.)
–
Total for the year (US$)
(.)
.
Diluted earnings per share
Before exceptional items (US$)
.
.
Exceptional items (US$)
(.)
–
Total for the year (US$)
(.)
.
Profit before exceptional items and attributable to equity holders of the Parent is derived as follows:
As at December
Profit attributable to equity holders of the Parent (US$)
(,)
,
Exceptional items after tax – attributable to equity holders of the Parent (US$)
,
,
Profit before exceptional items attributable to equity holders of the Parent (US$)
,
,
Profit before exceptional items attributable to equity holders of the Parent for the purpose of diluted earnings per
share (US$)
,
,
The following reflects the share data used in the basic and diluted earnings per share computations:
As at December
Basic weighted average number of ordinary shares in issue (thousands)
,
,
Effect of dilutive potential ordinary shares related to contingently issuable shares (thousands)
–
,
Weighted average number of ordinary shares in issue for the purpose of diluted earnings per share (thousands)
,
,
Hochschild Mining PLC
Annual Report & Accounts
185
Strategic Report
01—99
Governance
100—149
Financial Statements
150—
Further Information
227—231
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
Property, plant and equipment
Mining
properties and
development
costs
US$
Land and
buildings
US$
Plant and
equipment
US$
and
Vehicles
US$
Mine
closure
asset
US$
Construction
in progress
and capital
advances
US$
and
Total
US$
Year ended December
Cost
At January
,,
,
,
,
,
,
,,
Additions
,
,
()
–
,
,
Change in discount rate (note ())
–
–
–
–
(,)
–
(,)
Change in mine closure estimate (note ())
–
–
–
–
,
–
,
Disposals
()
–
(,)
()
–
–
(,)
Write-offs
()
–
(,)
()
–
()
(,)
Foreign exchange effect
,
,
,
Transfers and other movements
(,)
(,)
(,)
()
(,)
(,)
At December
,,
,
,
,
,
,
,,
Accumulated depreciation and impairment
At January
,,
,
,
,
,
,
,,
Depreciation for the year
,
,
,
,
,
–
,
Disposals
–
–
()
()
–
–
()
Write-offs
–
–
(,)
()
–
–
(,)
Impairment
,
,
,
,
Foreign exchange effect
–
()
–
–
Transfers and other movements
(,)
(,)
(,)
()
(,)
(,)
At December
,,
,
,
,
,
,,
Net book value at December
,
,
,
,
,
,
,,
Within plant and equipment, costs of US$,, are subject to depreciation on a unit of production basis in line with accounting policy on note (f) for which the
accumulated depreciation is US$,, and depreciation charge for the year is US$,,.
Mainly includes the transfer of US$,, from evaluation and exploration assets (Inmaculada of US$,, and San Jose of US$,) (note ) as they are related to
conversion of resources in to reserves, the transfer to assets held for sale of US$,, related to the Crespo mine unit (refer to note ), and the transfer to intangibles of the
transmission line of Amarillo of US$,,.
There were borrowing costs capitalised in property, plant and equipment amounting to US$,,.
Vehicles include US$,, of right-of-use assets (note ).
Within construction in progress and capital advances there are capital advances amounting to US$,,, mainly related to Mara Rosa project of US$,,.
Corresponds to the write-off of property, plant and equipment as they will no longer be used in the Group due to obsolescence.
Plant and equipment include US$,, of right of use assets (note ).
Hochschild Mining PLC
Annual Report & Accounts
18
Mining
properties and
development
costs
US$
and
Land and
buildings
US$
Plant and
equipment
US$
and
Vehicles
US$
Mine
closure
asset
US$
Construction
in progress
and capital
advances
US$
and
Total
US$
Year ended December
Cost
At January
,,
,
,
,
,
,
,,
Additions
,
,
,
–
–
,
,
Change in discount rate (note ())
–
–
–
–
(,)
–
(,)
Change in mine closure estimate (note ())
–
–
–
–
,
–
,
Disposals
–
–
(,)
()
–
()
(,)
Write-offs
(,)
()
(,)
–
–
()
(,)
Acquisition of assets (note (a))
–
,
–
,
,
Foreign exchange effect
,
()
()
()
–
(,)
,
Transfers and other movements
,
,
,
–
(,)
,
Initial recognition
and
–
–
–
–
,
–
,
At December
,,
,
,
,
,
,
,,
Accumulated depreciation and impairment
At January
,,
,
,
,
,
,
,,
Depreciation for the year
,
,
,
,
,
–
,
Disposals
–
–
()
()
–
–
()
Write-offs
()
()
(,)
–
–
–
(,)
Impairment/(reversal of impairment) net
(,)
()
(,)
()
()
–
(,)
Foreign exchange effect
–
–
()
–
–
–
()
Transfers and other movements
()
–
()
At December
,,
,
,
,
,
,
,,
Net book value at December
,
,
,
,
,
,
,
Within mining properties and development costs and plant and equipment there are US$,, and US$,, related to the Crespo CGU that is not currently being
depreciated as the unit is not operating pending the feasibility of the project and considering that the depreciation method is units of production.
Within plant and equipment, costs of US$,, are subject to depreciation on a unit of production basis in line with accounting policy on note (f) for which the
accumulated depreciation is US$,, and depreciation charge for the year is US$,,.
Transfers and other movements include US$,, that was transferred from evaluation and exploration assets (Mara Rosa of US$,, and San Jose of
US$,) (note ) as they are related to conversion of resources in to reserves.
There were borrowing costs capitalised in property, plant and equipment amounting to US$,,.
Vehicles include US$,, of right-of-use assets (note ).
Recognition of the mine closure provision of the Mara Rosa project located in Brazil upon acquisition (note ).
Within construction in progress and capital advances there are capital advances amounting to US$,,, mainly related to Mara Rosa project of US$,,.
Corresponds to the write-off of property, plant and equipment as they will no longer be used in the Group due to obsolescence.
0
In June , management determined that there was a trigger of impairment in the San Jose mine unit due to the increase in the
discount rate from .% to .% mainly explained by the rise in country risk premium in Argentina, and higher costs than expected
due to local inflation. The impairment test performed over the San Jose CGU resulted in an impairment recognised as at June
of US$,, (US$,, in property, plant and equipment, US$, in evaluation and exploration assets and
US$, in intangibles).
The Group is conducting a sales process for its Azuca and Crespo projects. This decision to evaluate the sale of these assets is part
of the Group’s strategy to focus its capital on larger-scale projects.
As at June , based on preliminary discussions with interested parties on the investment and costs required for these
projects, given their operational capabilities, management determined that there were triggers of impairment in both the Azuca
and Crespo projects. An impairment test was carried out, adjusting the key inputs used to determine the projects recoverable value,
resulting in an impairment charge of US$,, (US$,, in property, plant and equipment, US$,, in evaluation
and exploration assets and US$, in intangibles) for Azuca, and Crespo.
The recoverable value of the San Jose, CGU, and the Crespo and Azuca assets was determined using a fair value less costs of
disposal (FVLCD) methodology.
The key assumptions on which management has based its determination of FVLCD and the associated recoverable values
calculated for the San Jose CGU and Crespo assets are gold and silver prices, future capital requirements, production costs,
reserves and resources volumes (reflected in the production volume), and the discount rate.
Hochschild Mining PLC
Annual Report & Accounts
18
Strategic Report
01—99
Governance
100—149
Financial Statements
150—
Further Information
227—231
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
Property, plant and equipment
continued
Real prices US$ per oz.
Long-term
Gold
,
,
,
,
,
Silver
.
.
.
.
.
San Jose
Crespo
Discount rate (post-tax)
.%
.%
The period of seven years and nine years was used to prepare the cash flow projections of San Jose mine unit and Crespo,
respectively, which were in line with their respective life of mines.
With respect to Azuca, given its 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
assets. The enterprise value used in the calculation performed as at June was $. per silver equivalent ounce of
resources. The enterprise value figure is based on observable external market information.
On December , the Group entered into an agreement with a third party whereby the third party acquired the assets and
liabilities of the Crespo project from Compañia Minera Ares (refer to note ). The closing of the transaction is expected to take
place in March , and the assets and liabilities were transferred to assets and liabilities related to assets held for sale,
respectively. The Group recognised an additional impairment of US$,, (US$,, in property, plant and equipment,
US$,, in evaluation and exploration assets and US$, in intangibles). The recoverable amount of Crespo project was
determined using a fair value less costs of disposal (FVLCD) methodology, based on the economic terms of the sale agreement.
As at December , Azuca does not meet the conditions to be classified as an asset held-for sale under IFRS Non-current
Assets Held for Sale and Discontinued Operations.
No indicators of impairment or reversal of impairment were identified in the other CGUs, which includes other exploration projects.
The estimated recoverable values of the Group’s CGUs are equal to, or not materially different than, their carrying values.
Sensitivity analysis
Other than as disclosed below, management believes that no reasonably possible change in any of the key assumptions above
would cause the carrying value of any of its CGUs to exceed its recoverable amount.
A change in any of the key assumptions would have the following impact:
US$
San Jose
Gold and silver prices (decrease by %)
(,)
Gold and silver prices (increase by %)
,
Production costs (increase by %)
(,)
Production costs (decrease by %)
,
Production volume (decrease by %)
(,)
Production volume (increase by %)
,
Post-tax discount rate (increase by %)
(,)
Post-tax discount rate (decrease by %)
,
Capital expenditure (increase by %)
(,)
Capital expenditure (decrease by %)
,
Management believed that a % change was a reasonably possible change in the post-tax discount rate in Argentina. However, changes in the perception of Argentina arising
from political, social and financial disruption may give rise to significant movement in the discount rate used in the assessment of the San Jose CGU.
0
The delay on the government decision on Inmaculada MEIA constituted a trigger for impairment as at December .
The Company used an expected cash flow approach, assigning probabilities to the following possible scenarios regarding the
government decision on Inmaculada’s MEIA: (i) MEIA is approved, (ii) MEIA is denied, reapplication is needed and consequently
Inmaculada is placed in care and maintenance by end of , resuming operations in H . Management considers scenario
(i) as the most likely one, and scenario (ii) to have a probability of less than % of occurrence. The valuation test performed over
Inmaculada CGU, using a probability weighted approach, resulted in no impairment. If the probability of occurrence of scenario
(ii) was higher than %, an impairment charge would be required for Inmaculada.
Hochschild Mining PLC
Annual Report & Accounts
188
The recoverable value of the Inmaculada CGU was determined using a FVLCD methodology. FVLCD was determined using a
combination of level and level inputs, which result in fair value measurements categorised in its entirety as level in the fair value
hierarchy, 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.
Real prices US$ per oz.
-
Gold
,
,
,
,
,
,
Silver
.
.
.
.
.
.
Inmaculada
Discount rate (post-tax)
.%
December (US$)
Inmaculada
Current carrying value of CGU, net of deferred tax
,
Sensitivity analysis
Other than as disclosed below, management believes that no reasonably possible change in any of the key assumptions above
would cause the carrying value of any of its CGUs to exceed its recoverable amount.
A change in any of the key assumptions would have the following impact:
US$
Inmaculada
San Jose
Gold and silver prices (decrease by %)
(,)
(,)
Gold and silver prices (increase by %)
,
,
Production costs (increase by %)
(,)
(,)
Production costs (decrease by %)
,
,
Production volume (decrease by %)
(,)
(,)
Production volume (increase by %)
,
,
Post-tax discount rate (increase by %)
(,)
(,)
Post-tax discount rate (decrease by %)
,
,
Capital expenditure (increase by %)
(,)
(,)
Capital expenditure (decrease by %)
,
,
As at December , management determined that the newly discovered area Royropata, west of current operations at
Pallancata, was a trigger for reversal of impairment. The new area is estimated to contain . million silver equivalent (“Ag Eq”)
ounces. These new resources constitute a significant change in the estimates used to determine the asset’s recoverable amount
since the last impairment loss was recognised as at December .
The valuation test performed over the Pallancata GCU resulted in a reversal of impairment recognised as at December of
US$,, in property, plant and equipment, and US$, in evaluation and exploration assets.
The recoverable value of the Pallancata CGU was determined using a FVLCD methodology. FVLCD was determined using a
combination of level and level inputs, which result in fair value measurements categorised in its entirety as level in the fair value
hierarchy, 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.
Real prices US$ per oz.
Gold
,
,
Silver
.
.
Pallancata
Discount rate (post-tax)
.%
December (US$)
Pallancata
Current carrying value of CGU, net of deferred tax
,
Sensitivity analysis
Given that Pallancata’s recoverable value is significantly higher than the reversal of impairment amount recognised, there is no
reasonably possible change in any of the key assumptions that would decrease the reversal of impairment amount recognised.
Hochschild Mining PLC
Annual Report & Accounts
18
Strategic Report
01—99
Governance
100—149
Financial Statements
150—
Further Information
227—231
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
Evaluation and exploration assets
Azuca
US$
Crespo
US$
Mara Rosa
US$
Volcan
US$
Others
US$
Total
US$
Cost
Balance at January
,
,
–
,
,
,
Additions
,
,
,
,
Acquisition (note b)
–
–
,
–
–
,
Foreign exchange effect
–
–
(,)
()
–
(,)
Transfers to property, plant and equipment (note )
–
–
(,)
–
()
(,)
Transfer to intangibles
–
–
(,)
–
–
(,)
Balance at December
,
,
,
,
,
Additions
–
,
Foreign exchange effect
–
–
(,)
–
(,)
Transfers to property, plant and equipment (note )
–
–
–
–
(,)
(,)
Other transfers and adjustments
–
(,)
–
(,)
–
(,)
Balance at December
8,1
–
1,
5,81
,0
,
Accumulated impairment
Balance at January
,
,
–
,
,
,
Impairment/(reversal of impairment) net
,
–
–
–
()
,
Foreign exchange effect
–
–
–
()
–
()
Transfers to property, plant and equipment (note )
–
–
–
–
()
()
Balance at December
,
,
–
,
,
,
Impairment
,
,
–
–
,
Foreign exchange effect
–
–
–
()
–
()
Transfers to property, plant and equipment (note )
–
–
–
–
()
()
Other transfers and adjustments
–
(,)
–
–
–
(,)
Balance at December
,
–
–
,
,
,
Net book value as at December
,
,
,
,
,
Net book value as at December
,
–
,
,
,
,
Corresponds to the transfer to assets held for sale of the Crespo project (Cost of US$,, net of the amortisation of US$,,) (refer to note ), and the adjustment
of the cost of US$,, related to the Volcan project due to the royalty agreement with Franco Nevada.
At December , the Group has recorded an impairment with respect to evaluation and exploration assets of the San Jose
mine unit of US$,, the Crespo project of US$,, and the Azuca project of US$,, (: reversal of
impairment with respect to evaluation and exploration assets of the Pallancata mine unit of US$, and an impairment of the
Azuca project of US$,,). The calculation of the recoverable values of the Pallancata mine unit is detailed in note .
There were borrowing costs capitalised in evaluation and exploration assets of US$, (: US$,,).
Hochschild Mining PLC
Annual Report & Accounts
10
Intangible assets
Transmission
line
US$
Water
permits
US$
Software
licences
US$
Legal rights
US$
Total
US$
Cost
Balance at January
,
,
,
,
,
Foreign exchange effect
–
()
–
()
Additions
–
–
–
Transfers
–
–
,
,
Balance at December
,
,
,
,
,
Foreign exchange effect
()
–
Additions
–
–
–
Transfers
,
–
–
(,)
,
Balance at December
,
,
,
,
,
Accumulated amortisation and impairment
Balance at January
,
,
,
,
,
Amortisation for the year
–
Transfers
–
–
–
Foreign exchange effect
–
()
–
–
()
Balance at December
,
,
,
,
,
Amortisation for the year
–
Transfers
–
–
–
(,)
(,)
Impairment
–
–
Foreign exchange effect
–
()
–
–
()
Balance at December
,
,
,
,
,
Net book value as at December
,
,
,
,
Net book value as at December
,
,
,
,
The transmission line in San Jose is amortised using the units of production method. At December the remaining amortisation period is approximately years (:
years) in line with the life of the mine. The transmission line in Mara Rosa is amortised using the units of production method. At December the Mara Rosa unit hasn’t
started amortisation.
Corresponds to the acquisition of water permits of Andina Minerals Group (“Andina”). These permits have an indefinite life according to Chilean law. The Group used a
discounted cash flow approach to determine the fair value less costs of disposal. The model is based on the Preliminary Economic Assessment (PEA).
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 December
the remaining amortisation period is years (: to years).
The amortisation for the period is included in cost of sales and administrative expenses in the income statement.
Mainly due to the transfer from property, plant and equipment of the transmission line in Mara Rosa of US$,,.
Corresponds to the transfer to assets held for sale of the Crespo mine unit (refer to note ).
The carrying amount of the Volcan CGU, which includes the water permits, is reviewed annually to determine whether it is in excess
of its recoverable amount. No impairments were recognised in and . The estimated recoverable amount is not materially
different than its carrying value.
US$
Current carrying value Volcan CGU
,
,
Sensitivity analysis
Management believes that no reasonably possible change in any of the key assumptions above would cause the carrying value
exceed its recoverable amount.
Hochschild Mining PLC
Annual Report & Accounts
11
Strategic Report
01—99
Governance
100—149
Financial Statements
150—
Further Information
227—231
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
Investment in an associate
The Group retains a .% interest in Aclara Resources Inc. (“Aclara”), a listed company involved in the exploration of rare-earth
metals in Chile. The company was incorporated under the laws of British Columbia, Canada, where the principal executive offices
are located. The operations are conducted through one wholly-owned subsidiary named REE UNO SpA, located in Chile.
Upon Aclara’s Initial Public Offering (IPO) on December , HM Holdings retained % of Aclara shares. The investment was
recorded at initial recognition at fair value, based on the IPO offering price, and is accounted for using the equity method in the
consolidated financial statements.
The following table summarises the financial information of the Group’s investment in Aclara Resources Inc:
As at
December
US$
As at
December
US$
Current assets
,
,
Non-current assets
,
,
Current liabilities
(,)
(,)
Non-current liabilities
(,)
()
Equity
,
,
Group’s share in equity (%)
,
,
Fair value adjustment allocated to the evaluation and exploration assets on initial recognition
,
,
Impairment
(,)
(,)
Group’s carrying amount of the investment %
,
,
Summarised consolidated statement of profit and loss
Revenue
–
–
Administrative expenses
(,)
(,)
Exploration expenses
(,)
(,)
Other income
–
Finance income
,
Finance cost
()
()
Foreign exchange gain/(loss)
()
Loss from operations for the year
(,)
(,)
Group’s share of loss for the year
(,)
(,)
Other comprehensive profit that may be reclassified to profit or loss in subsequent periods, net of tax
Exchange differences on translating foreign operations
(,)
,
Total comprehensive profit/(loss) for the year
(,)
,
Group’s share of comprehensive profit/(loss) for the year
()
,
.
This represents the % of the fair value adjustment, estimated by the Group, to Aclara’s exploration and evaluation assets on initial recognition, representing US$,,
(: US$,,).
This represents the % share in the total impairment, estimated by the Group, of Aclara’s exploration and evaluation assets of US$,, (US$,, impairment in
and US$,, in ) (: US$,,, impairment in of US$,,).
Hochschild Mining PLC
Annual Report & Accounts
1
The movement of investment in associate is as follows:
Year ended December
US$
US$
Beginning balance
,
,
Impairment
(,)
(,)
Share of loss for the period
(,)
(,)
Share of comprehensive profit/(loss) for the period
()
,
Ending balance
,
,
On July , Aclara announced the receipt of a notice from the Environmental Service Assessment in Chile of its decision to
terminate the review of Aclara’s application for an environmental impact assessment of the Penco Module due to the finding of
trees considered as “vulnerable species” in the area of the project. Aclara is currently working to refile a revised application.
Aclara’s announcement and the impact that it could have in the first production date of Penco project, were considered as
indicators of impairment. Therefore, in compliance with IAS , the Group has performed a valuation on Aclara, and determined an
impairment charge of US$,,.
The recoverable value of Aclara was determined using a value-in-use methodology. The key assumptions on which management
has based its valuation of Aclara’s shares are the independent technical report of Penco module issued in September ,
adjusted by: a three-year delay in the first production date, local inflation and additional risk impacting costs; latest forecast prices;
and a discount rate of .%.
Sensitivity analysis
An increase of % in the discount rate and a delay of one additional year in the first production date would have the following
impact in the Group’s investment in Aclara:
US$
Discount rate (increase by %)
(,)
Delay in first production date ( additional year)
(,)
In December , the decrease in the fair value of Aclara’s shares, and Aclara’s withdrawal of the application for an environmental
impact assessment (EIA) of its flagship project “Penco”, which is expected to result in a two-year delay to anticipated first
production date, were considered indications of impairment. Therefore, in compliance with IAS , the Group performed a valuation
on Aclara, and determined an impairment charge of US$,,.
The recoverable value of Aclara was determined using a value-in-use methodology. The key assumptions on which management
has based its valuation of Aclara’s shares are the independent technical report of Penco Module issued in September ,
forecast prices, a discount rate of .%, and a two-year delay in the first production date due to the withdrawal of the application for
the EIA.
Sensitivity analysis
An increase of % in the discount rate and a delay of one additional year in the first production date would have the following
impact in the Group’s investment in Aclara:
US$
Discount rate (increase by %)
(,)
Delay in first production date ( additional year)
(,)
The carrying amount of the investment recognised the changes in the Group’s share of net assets of the associate since the
acquisition date. The balance as at December , after recognising the changes in the Group’s share of net assets of the
associate and the impairment charge is US$,, ( December : US$,,).
The fair value of Aclara shares as at December amounted to US$,, ( December : US$,,).
No dividends were received from the associate during and .
The associate had no contingent liabilities or capital commitments as at December and December .
Hochschild Mining PLC
Annual Report & Accounts
1
Strategic Report
01—99
Governance
100—149
Financial Statements
150—
Further Information
227—231
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
Financial assets at fair value through OCI
Year ended December
US$
US$
Beginning balance
Fair value change recorded in OCI
()
()
Ending balance
The Group made the election at initial recognition to measure the below equity investments at fair value through OCI as they are
not held for trading. The fair value at December and December is as follows:
US$
Listed equity investments:
Power Group Projects Corp (formerly Cobalt Power Group)
Austral Gold
Skeena Resources Limited
Empire Petroleum Corp.
Total listed equity investments
Total non-listed equity investments
–
–
Total
Fair value of the listed shares is determined by reference to published price quotations in an active market and they are categorised
as level . The fair value of non-listed equity investments is determined based on financial information available of the companies
and they are categorised as level .
Financial assets at fair value through profit and loss
Year ended December
US$
US$
Beginning balance
,
,
Fair value change recorded in profit and loss (note ())
()
(,)
Disposals
()
–
Ending balance
–
,
During , the Group sold ,, shares of C Metals Inc., classified as financial assets at fair value through profit and loss, with a fair value at the date of the sale of
US$,, generating a loss on disposal of US$, which was recognised within finance costs.
The below equity investments are classified at fair value through profit and loss as they are held for trading. The fair value at
December and December is as follows:
US$
Listed equity investments:
C Metals Inc.
–
,
–
,
Fair value of the listed shares is determined by reference to published price quotations in an active market and they are categorised
as level .
Hochschild Mining PLC
Annual Report & Accounts
1
Trade and other receivables
As at December
Non-current
US$
Current
US$
Non-current
US$
Current
US$
Trade receivables
–
,
–
,
Advances to suppliers
–
,
–
,
Duties recoverable from exports of Minera Santa Cruz
–
–
Receivables from related parties (note (a))
–
–
Loans to employees
Interest receivable
–
–
Receivable from Kaupthing, Singer and Friedlander Bank
–
–
–
–
Tax claims
,
,
Other
,
,
,
Assets classified as receivables
,
,
,
,
Prepaid expenses
,
,
,
Value Added Tax (VAT)
,
,
,
,
Total
,
,
,
,
The fair values of trade and other receivables approximate their book value.
Net of a provision for impairment of trade receivables from customers in Peru of US$,, (: US$,,).
Relates to export benefits through the Patagonian Port and silver refunds in Minera Santa Cruz, discounted over months (: months) at a rate of .% (:
.%) for dollars denominated amounts and .% (: .%) for Argentinian pesos. The loss on the unwinding of the discount is recognised within finance expense
(: finance expense).
Net of a provision for impairment of receivables of US$, (: US$,).
Mainly corresponds to account receivables from contractors for the sale of supplies of US$,, (: US$,,), loan to third parties of US$, (:
US$,), and claim receivable of US$, (: US$,,), net of a provision for impairment of receivables of US$,, (: US$,,).
Primarily relates to US$,, (: US$,,) 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. It also includes the VAT of Minera Ares of US$,, (: US$,,), and Amarillo Mineracao do
Brasil of US$,, (: US$,,). The VAT is valued at its recoverable amount.
Movements in the provision for impairment of receivables:
Individually
impaired
US$
At January
,
Change for the year
Foreign exchange effect
At December
,
Change for the year
Foreign exchange effect
At December
,
As at December and , none of the financial assets classified as receivables (net of impairment) were past due.
Hochschild Mining PLC
Annual Report & Accounts
15
Strategic Report
01—99
Governance
100—149
Financial Statements
150—
Further Information
227—231
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
Inventories
As at December
US$
US$
Finished goods valued at cost
,
Products in process valued at cost
,
,
Products in process accrual valued at cost
,
,
Supplies and spare parts
,
,
,
,
Provision for obsolescence of supplies
(,)
(,)
Total
,
,
Includes in transit inventory of US$,, (: US$,,).
Finished goods include concentrate and dore. Products in process include stockpile and precipitates (: stockpile and
concentrate).
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. At
December and the Group had no dore on hand included in products in process.
Concentrate is sold to smelters, but in addition could be used as a product in process to produce dore.
Products in process accrual valued at cost include stockpile (: stockpile).
As part of the Group’s short-term financing policies, it acquires pre-shipment loans which are guaranteed by the sales contracts.
The Group has contracts as at December of US$,, (: US$,,) (refer to note ).
The amount of expense recognised in profit and loss related to the consumption of inventory of supplies, spare parts and raw
materials is US$,, (: US$,,).
Movements in the provision for obsolescence comprise an increase in the provision of US$,, (: US$,) and the
reversal of US$Nil related to supplies and spare parts, that had been provided for (: US$Nil).
Cash and cash equivalents and other financial assets
Cash and cash equivalents
As at December
US$
US$
Cash in hand
Current demand deposit accounts
,
,
Time deposits
,
,
Mutual funds
,
–
Cash and cash equivalents considered for the statement of cash flows (note (y))
,
,
Relates to bank accounts which are freely available and bear interest. The balance has checks in transit.
These deposits have an average maturity of days (: average of days).
Corresponds to common investment funds that are assets that are formed with the contributions made by the Group, consequently, becoming beneficiary of the fund in which
they decide to invest. As at December the balance of US$,, are deposited in Banco Santander and BBVA in Argentina.
Cash and cash equivalents comprise cash on hand and deposits held with banks that are readily convertible into known amounts of
cash and which are subject to insignificant risk of changes in value.
The fair value of cash and cash equivalents approximates their book value. The Group has US$,, of undrawn medium-
term debt facility (note ).
Other financial assets
As at December
US$
US$
Bonds in Minera Santa Cruz
,
–
Hochschild Mining PLC
Annual Report & Accounts
1
Assets held for sale
On December , the Group entered into an agreement with a third party whereby the third party will acquire the assets and
liabilities of the Crespo project from Compañia Minera Ares. Under the terms of this agreement, the Group will receive
US$,, as a non-refundable cash payment at closing, and a .% Royalty Net Smelter Return (NSR) over the Crespo project.
The third party will also assume the environmental liabilities of the project of $,.
The closing of the transaction is expected to take place in March , and in consequence, as the sale is highly probable to be
completed within the months of the year-end, the assets and liabilities were transferred to assets and liabilities related to asset
held for sale, respectively.
Prior to classifying Crespo’s disposal group as assets and liabilities related to asset held for sale, the Group recognised an
impairment of $,,. The recoverable amount of Crespo project was determined using a FVLCD methodology, based on the
economic terms of the sale agreement (refer to note ).
The major classes of assets and liabilities classified as assets held for sale as at December are as follows:
US$
Assets
Transfer from evaluation and exploration assets, net of impairment
,
Transfer from property, plant and equipment
,
Transfer from deferred tax asset
,
Total non-current assets
,
Liabilities
Transfer from provision for mine closure (note )
()
Total liabilities directly associated with assets held for sale
()
Net assets directly associated with assets held for sale
,
Trade and other payables
As at December
Non-current
US$
Current
US$
Non-current
US$
Current
US$
Trade payables
–
,
–
,
Salaries and wages payable
–
,
–
,
Dividends payable
–
–
–
Taxes and contributions
,
–
,
Guarantee deposits
–
,
–
,
Mining royalties (note )
–
,
–
,
Accounts payable to related parties (note (a))
–
–
Lease liabilities (note )
,
,
,
,
Other
,
,
Total
,
,
,
,
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.
Salaries and wages payable relates to remuneration payable. At December , there was Board members’ remuneration payable of US$, (: US$,) and no
Long-Term Incentive Plan payable (: US$Nil).
Guarantee deposits made by the contractors of the Group to guarantee the fulfilment of their tasks. The guarantee will be returned to the contractor at the end of the service
and when it is verified that it has been completed correctly.
Mainly due to the accrual of the six days of production from to December .
The fair value of trade and other payables approximate their book values.
Hochschild Mining PLC
Annual Report & Accounts
1
Strategic Report
01—99
Governance
100—149
Financial Statements
150—
Further Information
227—231
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
Leases
The Group has lease contracts for vehicles used in its operations and administrative offices. Leases of motor vehicles generally
have lease terms of three years. The Group’s obligations under its leases are secured by the lessor’s title to the leased assets.
The Group also has certain leases of assets with lease terms of months or less and leases of office equipment with low value.
The Group applies the short-term lease and lease of low-value assets recognition exemptions for these leases.
The following are the amounts recognised in profit or loss related to the leases according IFRS and the other leases that the
Group has not capitalised:
As at December
US$
US$
Depreciation expense for right-of-use assets (included in cost of sales, administrative, exploration and other expenses)
(,)
(,)
Interest expense on lease liabilities (included in finance expenses)
()
()
Expense relating to short-term leases (included in cost of sales, administrative, exploration and other expenses)
()
(,)
Expense relating to leases of low-value assets (included in cost of sales, administrative, exploration and other expenses)
()
(,)
Variable lease payments (included in cost of sales and exploration expenses)
(,)
(,)
Total amount recognised in profit or loss
(,)
(,)
The Group had total cash outflows for leases of US$,, in (: US$,,). There were additions to right-of-use
assets and lease liabilities during the year of US$,, (: US$Nil). The future cash outflows relating to leases that have not
yet commenced are US$,, (: US$,,). Short-term leases, leases of low-value assets and variable lease payments
are included in the operating cash flows.
The movement in IFRS lease liabilities in the years and is as follows:
As at
January
US$
Additions
US$
Repayments
US$
Interest
expense
US$
As at
December
US$
Lease liabilities
,
,
(,)
,
Less: current balance
(,)
(,)
Non-current balance
,
,
As at
January
US$
Additions
US$
Repayments
US$
Interest
expense
US$
As at
December
US$
Lease liabilities
,
–
(,)
,
Less: current balance
(,)
(,)
Non-current balance
,
,
Borrowings
As at December
Effective
interest rate
Non-current
US$
Current
US$
Effective
interest rate
Non-current
US$
Current
US$
Secured bank loans (a)
Pre-shipment loans in Minera Santa Cruz (note )
% to %
–
,
.% and .%
–
,
Medium-term bank loans
.% and .%
,
,
.%
,
,
Other loans (b)
Stock market promissory note in Minera Santa Cruz
–
–
,
–
–
,
Total
,
,
,
,
(a)
Secured bank loans:
Pre-shipment loans in Minera Santa Cruz:
– As at December , Minera Santa Cruz has seven loans with Citibank amounting to US$,, plus interests of
US$,, one loan with ICBC amounting to US$, plus interests of US$,, and one loan with Santander of US$,
plus interests of US$, ( December : two loans with Citibank amounting to US$,, plus interests of US$,).
Medium-term bank loans:
– In December , a five-year credit agreement was signed between Minera Ares and Scotiabank Peru S.A.A., The Bank of
Nova Scotia and BBVA Securities Inc, with Hochschild Mining PLC as guarantor. The US$,, medium-term loan was
payable in equal quarterly instalments from the second anniversary of the loan with an interest rate of three-month USD
Libor plus .% payable quarterly until maturity on December . In September , the Group negotiated with the
same counterpart a US$,, loan to replace the original loan, plus an additional US$,, optional loan.
US$,, was withdrawn on September , and the optional US$,, loan was withdrawn on December
. The maturity was extended until September , and the interest rate increased to three-month USD Libor plus a spread
of .%. A structuring fee of US$, was paid to the lender and additional US$, was incurred as transaction costs.
Hochschild Mining PLC
Annual Report & Accounts
18
In addition, a commitment fee of US$, was paid for the period that the optional US $,, loan remained undrawn.
This was considered a substantial modification to the terms of the loan, and consequently, it was treated as an extinguishment of
the loan which resulted in the derecognition of the existing liability and recognition of a new liability. The associated costs and fees
incurred have been recognised as part of the loss on the extinguishment. From September the Libor was replaced by the
three-month SOFR plus a spread of .%. The Group repaid US$,, of the loan on December . Financial
covenants under the agreement are: (i) Consolidated Leverage Ratio <= and (ii) Consolidated Interest Coverage Ratio ≥ ..
– In December , a credit agreement for up to $,, was signed between Amarillo Mineracao do Brasil Ltd and The Bank
of Nova Scotia and BBVA Securities Inc, with Hochschild Mining PLC as guarantor. The medium-term facility can be withdrawn
until December , and is payable in equal quarterly instalments from February through November , with an interest
rate of three-month SOFR plus a spread of .%. US$,, was withdrawn on August (refer to note (h)), and the
remaining balance of US$,, was undrawn as at December . Financial covenants under the agreement are: (i)
Consolidated Leverage Ratio <= and (ii) Consolidated Interest Coverage Ratio ≥ ..
(b) Other loans:
Stock market promissory note:
From January to May Minera Santa Cruz signed four stock market promissory notes with Max Capital, a finance advisory
company located in Argentina, amounting to US$,,,. The expiration date of the notes is from July to August .
During the year the Group repaid US$,,. The balance as at December is US$,, (from August to
November Minera Santa Cruz signed stock market promissory notes with Max Capital, amounting to US$,,.
The expiration date of the notes is from December to November . During the year the Group repaid US$,,.
The balance as at December was US$,,).
(c)
Capitalised borrowing costs:
Interest expense of US$,, that is directly attributable to the construction of Mara Rosa (US$,,) and Compañía
Minera Ares S.A.C. (US$,) has been capitalised and is included in property, plant and equipment within construction in
progress and capital advances (US$,,) and mining property and development costs (US$,,), and exploration and
evaluation assets (US$,) (: Interest expense of US$,, that is directly attributable to the construction of Mara Rosa
(US$,,) and Compañía Minera Ares S.A.C. (US$,) has been capitalised and is included in property, plant and
equipment within construction in progress and capital advances (US$,,) and mining property and development costs
(US$,,), and exploration and evaluation assets (US$,,)).
The carrying value including accrued interest payable of the medium-term bank loans as at December is US$,,
(: US$,,). The maturity of non-current borrowings is as follows:
As at December
US$
US$
Between and years
,
,
Between and years
,
,
Over years
–
–
Total
,
,
The carrying amount of the pre-shipment loans approximates their fair value. The carrying amount and fair value of the medium-
term bank loans are as follows:
Carrying amount
as at December
Fair value
as at December
US$
US$
US$
US$
Medium-term bank loans
,
,
,
,
Total
,
,
,
,
The movement in borrowings during the years and are as follows:
As at
January
US$
Additions
US$
Repayments
US$
Reclassifications
and others
US$
As at
December
US$
Current
Pre-shipment loans
,
,
(,)
()
,
Medium-term bank loans
,
,
(,)
,
,
Stock market promissory note
,
,
(,)
–
,
,
,
(,)
,
,
Non-current
Medium-term bank loans
,
,
–
(,)
,
,
,
–
(,)
,
Total current and non-current borrowings
,
,
(,)
()
,
Accrued interest
,
,
(,)
,
,
Reclassification and others from non-current of US$,, includes transfer from non-current to current borrowings of US$,,. Current reclassifications and
other of US$,, includes transfer from non-current borrowings of US$,, and foreign exchange effect of US$,. Reclassifications and others of accrued
interests includes transfer of recognition of transaction costs of US$,, capitalisation of interests of US$,, ((c)), and foreign exchange effect of US$,.
Hochschild Mining PLC
Annual Report & Accounts
1
Strategic Report
01—99
Governance
100—149
Financial Statements
150—
Further Information
227—231
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
Borrowings
continued
As at
January
US$
Additions
US$
Repayments
US$
Reclassifications
and others
US$
As at
December
US$
Current
Pre-shipment loans
–
,
(,)
(,)
,
Medium-term bank loan
–
–
–
,
,
Stock market promissory note
–
,
(,)
–
,
–
,
(,)
,
,
Non-current
Bank loans
,
–
–
(,)
,
,
–
–
(,)
,
Total current and non-current borrowings
,
,
(,)
(,)
,
Accrued interest
–
,
(,)
,
,
Provisions
Provision
for mine
closure
US$
Long-Term
Incentive
Plan
US$
Workers
profit sharing
US$
Contingencies
US$
Total
US$
At January
,
,
,
,
Additions
–
()
,
,
,
Accretion (note )
(,)
–
–
–
(,)
Change in discount rate
(,)
–
–
–
(,)
Change in estimates
,
–
–
–
,
Foreign exchange effect
–
–
Utilisation
()
–
–
–
()
Payments
(,)
–
(,)
()
(,)
At December
,
–
,
,
,
Less: current portion
(,)
–
(,)
(,)
(,)
Non-current portion
,
–
–
,
,
At January
,
–
,
,
,
Additions
–
–
,
,
,
Accretion (note )
,
–
–
–
,
Change in discount rate
(,)
–
–
–
(,)
Change in estimates
,
–
–
–
,
Foreign exchange effect
–
–
()
()
Transfers to assets held for sale (note )
()
–
–
–
()
Utilisation
(,)
–
–
–
(,)
Payments
(,)
–
(,)
()
(,)
At December
,
–
,
,
,
Less: current portion
(,)
–
(,)
(,)
(,)
Non-current portion
,
–
–
,
,
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 inflation as at December and 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, technological changes,
regulatory changes, cost increases, changes in discount rates. Those uncertainties may result in future actual expenditure differing from the amounts currently provided. The
discount rate used was .% (: .%). Expected cash flows will be over a period from one to years (: over a period from one to years).
Based on the internal and external reviews of mine rehabilitation estimates, the provision for mine closure increased by US$,, due to increase in the Ares mine unit of
US$,,, the Matarani unit of US$,, the Azuca project of US$,, the Pallancata mine unit of US$,,, the Selene mine unit of US$,,, the Mara Rosa
project of USS$,,, the Inmaculada mine unit of US$,, and the Sipan mine unit of US$,, net of the decrease in the Arcata mine unit of US$,, the San
Jose mine unit of US$,, and the Crespo project of US$, (: increase by US$,, due to increase in the Ares mine unit of US$,,, the Arcata mine
unit of US$,,, the San Jose mine unit of US$,,, the Matarani unit of US$,, the Azuca project of US$,, the Crespo project of US$,, the Pallancata
mine unit of US$, and the Sipan mine unit of US$,,, net of the decrease in the Selene mine unit of US$,, and the Inmaculada mine unit of US$,,
and the initial recognition of the Mara Rosa project of USS$,,).
Hochschild Mining PLC
Annual Report & Accounts
00
A net charge of US$,, related to changes in estimates (US$,,) and discount rates (-US$,,) for mines already closed were recognised directly in the
income statement (: net charge of US$,, related to changes in estimates (US$,,) and discount rates (-US$,,) for mines already closed were
recognised directly in the income statement).
A net charge of US$,, related to changes in estimates (US$,,) and discount rates (-US$,,) for mines, projects and units that are not already
closed were recognised directly in the property, plant and equipment in the statement of financial position (: net credit of US$,, related to changes in estimates
(US$,,) and discount rates (-US$,,) for mines, projects and units that are not already closed were recognised directly in the property, plant and equipment in
the statement of financial position).
Utilisation for the year corresponds to depreciation of certain assets which are used as part of mine rehabilitation. This has been recognised against the mine rehabilitation provision.
The decrease in the accretion from (US$,,) to (US$,,) is explained because the Group is closer to the budget execution periods and the discount
rates used for were lower than those of .
A change in any of the following key assumptions used to determine the provision would have the following impact:
As at 1 December 0
US$
Closure costs (increase by %) increase of provision
,
Discount rate (increase by .%) (decrease of provision)
(,)
As at 1 December 0:
US$
Closure costs (increase by %) increase of provision
,
Discount rate (increase by .%) (decrease of provision)
(,)
An element of mine closure planning can be water management which relates to the treatment of contact water. The cost of this water processing could continue for a number
of years after closure activities have been completed and is therefore, potentially, exposed to long-term climate change. Mine planning for Hochschild’s operating assets takes
into account mine-closure activities. In the case of the now-closed Sipan mine, due to the specific characteristics of the closed mine components, contact water treatment is
ongoing. According to our most recent approved Mine Closure Plan (July ), Sipan will be the subject of ongoing treatment until or until baseline water quality conditions
have been met. As at the date of approval of these financial statements, the impact of climate change on Sipan’s mine closure planning is not expected to be material.
Corresponds to the provision related to awards granted under the Long-Term Incentive Plan (LTIP) to designated personnel of the Group. Includes the awards, granted
in February , payable in February , as % in cash (refer to note (c)). Only employees who remain in the Group’s employment on the vesting date will be entitled to
vested awards, subject to exceptions approved by the Remuneration Committee of the Board. There are two parts to the performance conditions attached to LTIP awards: %
is subject to the Company’s TSR ranking relative to a tailored peer group of mining companies, and % is subject to the Company’s TSR ranking relative to the constituents
of the FTSE mining index. The liability for the LTIP paid in cash 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. The net decrease to the provision of US$Nil (: US$, net decrease) have been recorded as administrative expenses -US$Nil (: -US$,) and
exploration expenses -US$Nil (: -US$,). The final result of the benefit was Nil.
The following tables list the inputs to the last Monte Carlo model used for the LTIPs as at December :
For the period ended
LTIP
December
US$
Dividend yield (%)
.
Expected volatility (%)
.
Risk-free interest rate (%)
.
Expected life (years)
Weighted average share price (pence £)
.
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. The outcome of the LTIP as at December was US$Nil.
The non-current balance of US$,, corresponds to labour lawsuits in Minera Santa Cruz that the Group expect to solve in a period higher than one year. Current
contingencies mainly represents the balance of Ares of US$,,. The main contingency in Ares is related to the OEFA, and the Group is expecting to solve the claims
between June and October .
Hochschild Mining PLC
Annual Report & Accounts
01
Strategic Report
01—99
Governance
100—149
Financial Statements
150—
Further Information
227—231
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
Equity
(a) Share capital and share premium
Issued share capital
The issued share capital of the Company as at December is as follows:
Class of shares
Issued
Number
Amount
Ordinary shares ( pence per share)
,,
£,,
The issued share capital of the Company as at December is as follows:
Class of shares
Issued
Number
Amount
Ordinary shares ( pence per share)
,,
£,,
At December and , all issued shares with a par value of pence were fully paid (: weighted average of US$.
per share, : weighted average of US$. per share).
The movement in share capital of the Company from January to December is as follows:
Number of
ordinary
shares
Share capital
US$
Share
premium
US$
Shares issued as at January
,,
,
,
Deferred bonus shares issued on June
,,
,
–
Cancellation of deferred bonus shares on June
(,,)
(,)
–
Cancellation of share premium account on June
–
–
(,)
Reduction of nominal value to pence on June
–
(,)
–
Shares issued as at December
51,85,5
,01
–
Issuance of shares for bonus payment on May
,
–
Shares issued as at December
51,58,
,08
–
Following the passing of certain special resolutions at an Extraordinary General Meeting of shareholders held on May , the
Company capitalised the Company’s distributable merger reserve, within retained earnings, by applying its balance to the issuance
of ,, bonus shares with a nominal value of US$. each (the “Bonus Shares”).
Subsequently, the Company obtained, on June , the approval of the High Courts of Justice of England and Wales (the
Companies Court (Ch D) of the Business and Property Courts) to:
(a)
the cancellation of the Bonus Shares with the sum arising on the cancellation being credited to the Company’s retained
earnings reserve;
the reduction of the Company’s share premium account to Nil and crediting the corresponding amount to the Company’s
retained earnings reserve; and
(b)
the reduction in the nominal value of the ordinary shares from pence per ordinary share to pence per ordinary share,
(both (ii) and (iii) above collectively referred to as “the Reductions”).
The Reductions were effective on registration of the relevant court order by the Registrar of Companies, which took place on
June .
Rights attached to ordinary shares
At general meetings of the Company, on a show of hands and on a poll, every member who is present in person or subject to the
below, by proxy, has one vote for every share of which they are the holder/proxy. However, in the case of a vote on a show of hands
where a proxy has been appointed by more than one member, the proxy has one vote for and one vote against if the proxy has been
instructed by one or more members to vote for the resolution and by one or more members to vote against the resolution.
(b) Treasury shares
Treasury shares represent the cost of Hochschild Mining PLC shares purchased in the market and held by the trustee of the
Hochschild Mining Employee Share Trust to satisfy the award of conditional shares under the Group’s Enhanced Long-Term
Incentive Plan granted to the CEO (note (o)).
The movement in treasury shares are as follows:
– On March , the Group purchased , shares for a total consideration of £, (equivalent to US$,)
– On March , , Treasury shares with a value of US$, (being the cost incurred to acquire the shares) were
transferred to the CEO of the Group with respect to the Enhanced Long-Term Incentive Plan
At December and December the balance of treasury shares is Nil
(c)
Other reserves
Fair value reserve of financial assets at fair value through OCI
In accordance with IFRS , the Group made the decision to classify its investments in listed and unlisted companies as financial
assets at fair value through OCI. The increase/decrease in the fair value, net of the related deferred tax liability, is taken directly to this
account where it will remain until disposal, when the cumulative unrealised gains and losses are recycled through retained earnings.
Cumulative translation adjustment
The cumulative translation adjustment account is used to record exchange differences arising from the translation of the financial
statements of subsidiaries with a functional currency different to the reporting currency of the Group.
Hochschild Mining PLC
Annual Report & Accounts
0
Merger reserve
The merger reserve represents the difference between the value of the net assets of the Cayman Holding Companies (Ardsley,
Garrison, Larchmont and Hochschild Mining (Peru)) acquired under the Share Exchange Agreement and the nominal value of the
shares issued in consideration of such acquisition. In addition a merger reserve was generated by certain share placing
transactions made by the Group after the IPO. The merger reserve available for distribution is disclosed within retained earnings.
Cash flow hedges
Changes in the fair value of derivatives designated as cash flow hedges, which are held to hedge the exposure to variability in cash
flows of the hedged items, are recognised in other components of equity until changes in the fair value of the hedged item are
recognised in profit or loss. The Group uses cash flow hedges for hedging the exposure to variability in gold and silver prices.
Share-based payment reserve
The share-based payment reserve is used to recognise the value of equity-settled share-based payment transactions provided to
employees, as a part of their remuneration.
(i) Long-Term Incentive Plan (LTIP)
On February the Group approved the grant of LTIP awards, on May the Group approved the grant of LTIP
awards, on February the Group approved the grant of LTIP awards and on April the Group approved the grant
of LTIP awards. The awards give a right to receive a cash payment equivalent to the % of the amount (cash-settled
transaction) (refer to note ()), and the other % will be used to acquire shares of the Company (equity-settled transaction).
The vesting of the LTIP, LTIP and LTIP awards are subject to the following performance conditions: % on
Hochschild’s three-year total shareholder return (TSR) and % on Internal Key Performance Indicators (KPIs) measured during the
same period. The performance period will be from January to December , January to December , and
January to December respectively. The awards will vest in May , in February and April respectively.
The whole of any vested LTIP award will be deferred in the Company shares for two years. The award will lapse if the beneficiary
ceases to be an employee of the Group other than as a good leaver or on death.
Further details on the design of the LTIP award are included in the Directors’ Remuneration Report.
The fair value of the option based on the TSR was determined using the Monte Carlo model. The following tables list the inputs to the
Monte Carlo model used for the LTIP, LTIP, LTIP and LTIP:
LTIP
LTIP
LTIP
LTIP
Dividend yield (%)
.8
.
.
.
Expected volatility (%)
.8
.
.
.
Risk-free interest rate (%)
.
.
.
.
Expected life (years)
.
.
.
Weighted average share price (pence £)
.0
.
.
.
The % subject to internal KPIs is split equally between:
i)
Three-year growth of the Company’s Measured and Indicated Resources (MIR) per share (excluding Volcan), the three-year MIR
growth was projected using a normal distribution based on historical data, and factoring in the additional growth expected from
acquisitions
ii)
average outcome of the annual bonus scorecard in respect of , and for LTIP, , and for
LTIP, and , and for LTIP calculated as the simple mean of the three scorecard outcomes. Probabilities
assigned to each possible outcome, based on historical data and management judgement
The remaining contract life is Nil years (: . years), . years (: . years), . years (: . years) and . years for the
LTIP, LTIP, LTIP and LTIP respectively.
The movement in other reserves is as follows:
LTIP
US$
LTIP
US$
LTIP
US$
LTIP
US$
LTIP
US$
Balance at January
,
,
–
–
Expense recognised in the period
,
,
–
Forfeiture of share options
(,)
–
–
–
–
Balance at December
–
,
,
,
–
Expense recognised in the period
–
,
,
Forfeiture of share options
–
(,)
–
–
–
Balance at December
–
–
,
,
,
No shares vested during the period (: Nil).
(ii)
2022 bonus of employees
The Group agreed to partially pay the bonus by an issuance of shares. The total amount that was paid in shares was with a
value of US$,.
Hochschild Mining PLC
Annual Report & Accounts
0
Strategic Report
01—99
Governance
100—149
Financial Statements
150—
Further Information
227—231
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
Deferred income tax
The net deferred income tax assets/(liabilities) are as follows:
As at December
US$
US$
Beginning of the year
(,)
(,)
Income statement benefit/(expense) (note )
,
,
Equity credit/(charge)
,
,
Deferred tax recognised for payment
–
Deferred tax recognised in assets held for sale
(,)
–
End of the year
(,)
(,)
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$
Mine
development
US$
Provisional
pricing
adjustment
US$
Others
US$
Total
US$
Deferred income tax liabilities
At January
,
,
()
,
,
Income statement expense
,
,
,
,
Equity charge
–
–
–
At December
,
,
,
,
Income statement (expense)/benefit
()
(,)
()
,
(,)
Recognised in assets held for sale
()
(,)
–
–
(,)
At December
,
,
–
,
,
Differences
in cost
of PP&E
US$
Provision
for mine
closure
US$
Mine
development
US$
Tax losses
US$
Others
US$
Total
US$
Deferred income tax assets
At January
1,
0,
5
–
,8
,8
Income statement benefit/(expense)
,
,
(,)
,
,
,
Equity credit
–
–
,
,
,
,
At December
1,5
1,51
1
,8
1,0
,0
Income statement benefit/(expense)
,
,
(,)
,
(,)
()
Recognised in assets held for sale
(,)
–
–
–
–
(,)
Equity credit
–
–
–
–
,
,
At December
1,
,
(8,0)
,0
1,5
,15
Credit/(charge) in the year mainly related to silver forward of US$,, (: silver forward of US$,), statutory holiday provision of US$, (: US$,,)
and Long-Term Incentive Plan of US$,, (: US$,,).
The amounts after offset, as presented on the face of the statement of financial position, are as follows:
As at December
US$
US$
Deferred income tax assets
,
Deferred income tax liabilities
(,)
(,)
Total
(,)
(,)
Hochschild Mining PLC
Annual Report & Accounts
0
Unrecognised tax losses expire in the following years:
As at December
US$
US$
Recognised
Expire after four years
,
,
,
,
Unrecognised
Expire in one year
–
Expire in two years
,
Expire in three years
,
Expire in four years
,
Expire after four years
,
,
,
,
Total
,
,
Other unrecognised deferred income tax assets comprise (gross amounts):
As at December
US$
US$
Provision for mine closure
,
,
This relates to provision for mine closure expenditure which is expected to be incurred in periods in which taxable profits are not expected to be available to offset the expenditure.
Unrecognised deferred tax liability on retained earnings
At December and , there was no recognised deferred tax liability 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.
Dividends
US$
US$
Dividends paid and proposed during the year
Equity dividends on ordinary shares:
Final dividend for : Nil US cents per share (: . US cents per share)
–
,
Interim dividend for : Nil US cents per share (: . US cents per share)
–
,
Total dividends paid in cash
–
,
Total dividends paid on ordinary shares
–
,
Proposed dividends on ordinary shares:
Final dividend for : Nil US cents per share (: Nil US cents per share)
–
–
Dividends declared to non-controlling interests: . US$ per share (: . US$ per share)
Total dividends declared to non-controlling interests
Dividends paid in to non-controlling interests amounted to US$, (: US$,).
Dividends per share
There was no interim dividend paid during . There is no proposed final dividend in respect of the year ending December .
Hochschild Mining PLC
Annual Report & Accounts
05
Strategic Report
01—99
Governance
100—149
Financial Statements
150—
Further Information
227—231
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
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 December and . The
related parties are companies owned or controlled by the main shareholder of the Parent company or associates.
Accounts receivable
as at December
Accounts payable
as at December
US$
US$
US$
US$
Current related party balances
Cementos Pacasmayo S.A.A.
Tecsup
–
–
Universidad UTEC
–
–
–
REE UNO SpA
–
–
Aclara Resources Inc
–
–
Aclara Resources Peru S.A.C.
–
–
Total
The account receivable relates to reimbursement of expenses paid by the Group on behalf of Cementos Pacasmayo S.A.A, an entity controlled by Eduardo Hochschild. The
account payable relates to the payment of rentals.
Peruvian not-for-profit educational institutions controlled by Eduardo Hochschild.
Associated companies of the Aclara Group (refer to note ).
As at December and , 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
US$
US$
Expenses
Expense recognised for the rental paid to Cementos Pacasmayo S.A.A.
()
()
Expense technical services from Tecsup
()
()
Income from reimbursement of expenses of Cementos Pacasmayo S.A.A.
Income from administrative services to REE UNO SpA
Transactions between the Group and these companies are at an arm’s length basis.
(b)
Compensation of key management personnel of the Group
Compensation of key management personnel (including Directors)
Year ended December
US$
US$
Short-term employee benefits
,
,
Long-Term Incentive Plans
,
,
Total compensation paid to key management personnel
,
,
This amount includes the remuneration paid to the Directors of the Parent Company of the Group of US$,, (:
US$,,).
Auditor’s remuneration
The auditor’s remuneration for services provided to the Group during the years ended December and is as follows:
Amounts paid to
Ernst & Young
in the year ended
December
US$
US$
Audit fees pursuant to legislation
,
,
Audit-related assurance services
Total
,
,
The total fee includes statutory audit fee of US$, in respect of local statutory audits of subsidiaries (: US$,).
In and , all fees are included in administrative expenses.
Hochschild Mining PLC
Annual Report & Accounts
0
Notes to the statement of cash flows
As at December
US$
US$
Reconciliation of loss for the year to net cash generated from operating activities
(Loss)/profit for the year
(,)
,
Adjustments to reconcile Group loss to net cash inflows from operating activities
Depreciation (note (a))
,
,
Amortisation of intangibles (note )
Write-off of assets (note )
,
,
Provision of doubtful receivable
Impairment/(reversal of impairment) of assets (note )
,
(,)
Gain on demerger of Aclara
Loss from changes in the fair value of financial assets at fair value through profit and loss (note )
,
Share of post-tax losses of associates and impairment (note )
,
,
Gain on sale of property, plant and equipment (note )
()
()
Provision and recovery for obsolescence of supplies (note and )
,
Increase of provision for mine closure (note )
,
,
Finance income (note )
(,)
(,)
Finance costs (note )
,
,
Income tax expense (note )
,
,
Other
(,)
,
Increase/(decrease) of cash flows from operations due to changes in assets and liabilities
Trade and other receivables
(,)
(,)
Income tax receivable
,
()
Other financial assets and liabilities
(,)
,
Inventories
(,)
(,)
Trade and other payables
,
(,)
Provisions
(,)
(,)
Cash generated from operations
,
,
Hochschild Mining PLC
Annual Report & Accounts
0
Strategic Report
01—99
Governance
100—149
Financial Statements
150—
Further Information
227—231
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
Commitments
(a)
Mining rights purchase options
During the ordinary course of business, the Group enters into agreements to carry out exploration under concessions held by third
parties. Generally, under the terms of these agreements, the Group has the option to acquire the concession or invest in the entity
holding the concession. In order to exercise these options the Group must satisfy certain financial and other obligations during the
term of the agreement. The options lapse in the event that the Group does not meet its financial obligations. At any point in time, the
Group may cancel the agreements without penalty, except where specified below. These agreements are not under non-
cancellable/irrevocable clauses.
The Group continually reviews its requirements under the agreements and determines, on an annual basis, whether to proceed with
its financial commitment. Based on management’s current intention regarding these projects, the commitments at the statement
of financial position date are as follows:
As at December
US$
US$
Commitment for the subsequent months
–
–
More than one year
–
,
(b) Capital commitments
For the year ended
December
US$
US$
Peru
,
,
Argentina
,
,
Brazil
,
,
,
,
Contingencies
As at December the Group is subject to various claims which arise in the ordinary course of business. No provision has been
made in the financial statements and none of these claims are currently expected to result in any material loss to the Group.
(a) Taxation
Fiscal periods remain open to review by the tax authorities for four years in Peru, five years in Argentina and Mexico, ten years in
Brazil and three years in Chile, preceding the year of review. During this time the authorities have the right to raise additional tax
assessments including penalties and interest. Under certain circumstances, reviews may cover longer periods.
Because a number of fiscal periods remain open to review by the tax authorities, coupled with the complexity of the Group and the
transactions undertaken by it, there remains a risk that significant additional tax liabilities may arise. As at December , the
Group had exposures totalling US$,, (: US$,,).
When the Tax authority challenges the deductibility of certain expenses the Group reassesses the case internally and externally,
with the support of a third party professional to determine the probability of success and, depending on the result, makes the
decision whether or not to continue with the claim. Notwithstanding this risk, the Directors believe that management’s interpretation
of the relevant legislation and assessment of taxation is appropriate and that it is probable that the Group’s tax and customs
positions will be sustained in the event of a challenge by the tax authorities. Consequently, the Directors consider that no tax liability
is required to be recognised in respect of these claims or risks.
(b) Guarantees
The Group is required to provide guarantees in Peru in respect of environmental restoration and decommissioning obligations. The
Group has provided for the estimated cost of these activities (see note ()).
Mining royalties
Peru
In accordance with Peruvian legislation, owners of mining concessions must pay a mining royalty for the exploitation of metallic and
nonmetallic resources. Mining royalties have been calculated with rates ranging from % to % of the value of mineral concentrate
or equivalent sold, based on quoted market prices.
In October 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 % to .%, of the quarterly operating profit.
b)
Modification of the mining royalty calculation, which consists of applying a progressive scale of rates ranging from % to %,
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 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 % to .% of quarterly operating profit.
As at December , the amount payable as under the new mining royalty and the SMT amounted to US$,, (:
US$,,) and US$,, (: US$,) respectively. The new mining royalty and SMT are reported as “Income tax
payable” in the Statement of Financial Position. The amount recorded in the income statement was US$,, (:
US$,,) of new mining royalty and US$,, (: US$,,) of SMT, both classified as income tax.
Hochschild Mining PLC
Annual Report & Accounts
08
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 applicable to dore and concentrate is % of the pit-head value. As at
December , the amount payable as mining royalties amounted to US$,, (: US$,,). The amount recorded
in the income statement as cost of sales was US$,, (: US$,,).
Financial risk management
The Group is exposed to a variety of risks and uncertainties which may have a financial impact on the Group and which also impact
the achievement of social, economic and environmental objectives. These risks include strategic, commercial, operational and
financial risks and are further categorised into risk areas to facilitate consolidated risk reporting across the Group.
The Group has made significant developments in the management of the Group’s risk environment which seeks to identify and,
where appropriate, implement the controls to mitigate the impact of the Group’s significant risks. This effort is supported by a Risk
Committee with the participation of the CEO, the Vice Presidents, and the head of the internal audit function. The Risk Committee is
responsible for implementing the Group’s policy on risk management and internal control in support of the Company’s business
objectives, and monitoring the effectiveness of risk management within the organisation.
(a)
Commodity price risk
Silver and gold prices have a material impact on the Group’s results of operations. Prices are significantly affected by changes in
global economic conditions and related industry cycles. Generally, producers of silver and gold are unable to influence prices
directly; therefore, the Group’s profitability is ensured through the control of its cost base and the efficiency of its operations.
The Group’s policy is generally to remain hedge-free. However, management continuously monitors silver and gold prices and
reserves the right to take the necessary action, where appropriate and within Board approved parameters, to mitigate the impact
of this risk.
Derivative financial assets – Silver and gold forwards
On February , the Group signed agreements with JP Morgan to hedge the sale of ,, ounces of silver at US$. per
ounce for and a further ,, ounces of silver at US$. per ounce for .
On November , the Group signed agreements with JP Morgan to hedge the sale of ,, ounces of silver at US$. per
ounce for .
On April , the Group signed agreements with Citibank to hedge the sale of , ounces of gold at US$, per ounce for .
On April , the Group signed agreements with JP Morgan to hedge the sale of , ounces of gold at US$, per ounce
for .
On June , the Group signed agreements with Citibank to hedge the sale of , ounces of gold (, ounces per year)
at US$,., US$,. and US$,. per ounce in , and respectively.
On December , the Group signed a gold collar agreement with JP Morgan of ,. ounces of gold at strike put of
US$, and strike call of US$, per ounce for .
The gold and silver forwards are being used to hedge exposure to changes in cash flows from gold and silver commodity prices.
There is an economic relationship between the hedged item and the hedging instruments due to a common underlying. In
accordance with IFRS , the derivative instruments are categorised as cash flow hedges at the inception of the hedging relationship
and, on an ongoing basis, the Group assesses whether a hedging relationship meets the hedge effectiveness requirements. The
Group has established a hedge ratio of : for the hedging relationships as the underlying risk of the silver and gold forwards is
identical to the hedged risk components. To test the hedge effectiveness, the Group uses the hypothetical derivative method and
compares the changes in the fair value of the gold and silver forwards against the changes in fair value of the hedged item
attributable to the hedged risk. That said, it is observed that the effectiveness tests comply with the requirements of IFRS and that
the hedging strategy is highly effective.
The fair values of the gold and silver forwards were calculated using a discounted cash flow model applying a combination of level
(USD quoted market commodity prices) and level inputs. The models used to value the commodity forward contracts are
standard models that calculate the present value of the fixed-legs (the fixed gold and silver leg) and compare them with the present
value of the expected cash flows of the flowing legs (the London metal exchange “LME” gold and silver fixing). In the case of the
commodity forward contracts, the models use the LME AU and AG forward curve and the US LIBOR swap curve for discounting.
This approach results in the fair value measurement categorised in its entirety as level in the fair value hierarchy. The fair values of
the silver forwards as at December and December are as follows:
December
US$
Current assets
Current liabilities
(,)
Non-current liabilities
(,)
(,)
The effect recorded is as follows:
US$
Income statement – revenue
,
Income statement – finance income
Equity – Unrealised loss on hedges
,
Hochschild Mining PLC
Annual Report & Accounts
0
Strategic Report
01—99
Governance
100—149
Financial Statements
150—
Further Information
227—231
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
Financial risk management
continued
December
US$
Current assets
,
Non-current assets
–
,
The effect recorded is as follows:
US$
Income statement – revenue
,
Equity – Unrealised loss on hedges
,
The sensitivity of the fair value of the current hedges outstanding at December to a reasonable movement in the
commodity prices, with all other variables held constant, determined as a +/-% change in prices -US$,,/US$,,
effect on OCI.
The Group has price adjustments arising from the sale of concentrate and dore which were provisionally priced at the time the
sale was recorded (refer to note ). The sensitivity of the fair value to an immediate % favourable or adverse change in the price of
gold and silver (assuming all other variables remain constant), is as follows:
Year
Increase/
decrease in price of
ounces of:
Effect on
profit before tax
US$
Gold +/-%
Silver+/-%
+/-
+/-
Gold +/-%
Silver+/-%
+/-
+/-
(b)
Foreign currency risk
The Group produces silver and gold which are typically priced in US dollars. A proportion of the Group’s costs are incurred in
Peruvian nuevos soles, Argentinian pesos, Brazilian reais, sterling pounds, Canadian dollars, Chilean pesos, and Mexican pesos.
Accordingly, the Group’s financial results may be affected by exchange rate fluctuations between the US dollar and the local
currency. The long-term relationship between commodity prices and currencies in the countries in which the Group operates
provides a certain degree of natural protection. The Group does not use derivative instruments to manage its foreign currency risks.
The following table demonstrates the sensitivity of financial assets and liabilities, at the reporting date, denominated in their
respective currencies, to a reasonably possible change in the US dollar exchange rate, with all other variables held constant, of the
Group’s profit before tax and the Group’s equity.
Year
Increase/
decrease in US$/other
currencies’
rate
Effect
on profit
before tax
US$
Effect
on equity
US$
Pounds sterling
+/-%
-/+
–
Argentinian pesos
+/-%
-/+,
–
Mexican pesos
+/-%
+/-,
–
Peruvian nuevos soles
+/-%
-/+,
–
Reais
+/-%
-/+,
–
Canadian dollars
+/-%
-/+
+/-
Chilean pesos
+/-%
+/-
–
Pounds sterling
+/-%
-/+
–
Argentinian pesos
+/-%
-/+,
–
Mexican pesos
+/-%
+/-,
–
Peruvian nuevos soles
+/-%
-/+,
–
Reais
+/-%
-/+,
–
Canadian dollars
+/-%
-/+
+/-
Chilean pesos
+/-%
+/-
–
Hochschild Mining PLC
Annual Report & Accounts
10
(c)
Credit risk
Credit risk arises from debtors’ inability to make payment of their obligations to the Group as they become due (without taking into
account the fair value of any guarantee or pledged assets). The Group is primarily exposed to credit risk as a result of commercial
activities and noncompliance, by counterparties, in transactions in cash which are primarily limited to cash balances deposited in
banks and accounts receivable at the statement of financial position date.
Counterparty credit exposure based on commercial activities, including trade and other receivables, embedded derivatives, hedge
instruments and cash balances in banks as at December and December :
Summary commercial partners
As at
December
US$
% collected as
at March
US$
As at
December
US$
% collected
as at April
US$
Trade receivables
,
%
,
%
Other receivables include advances to suppliers and receivables from contractors for the sale of supplies. There is no credit risk on
these amounts as the Group can withhold the balances that it owes the suppliers or contractors for their services.
Cash and cash equivalents – Credit/rating
As at
December
US$
As at
December
US$
A+
,
,
A
–
,
A-
,
,
A
,
,
AA
–
Aa
–
,
Baa
–
BB-
–
,
BBB+
–
BBB
–
,
BBB-
,
,
Caa
–
NA
,
,
Total
,
,
Represents the long-term credit rating as at January (: January ).
As at December , the credit rating of the counterparty of the gold forward hedges is A- and A+ ( December is A-).
To manage the credit risk associated with commercial activities, the Group took the following steps:
– Active use of prepayment/advance clauses in sales contracts
– Delaying delivery of title and/or requiring advance payments to reduce exposure timeframe (potential delay in sales recognition)
– Maintaining as diversified a portfolio of clients as possible
To manage credit risk associated with cash balances deposited in banks, the Group took the following steps:
– Increasing banking relationships with large, established and well-capitalised institutions in order to secure access to credit and to
diversify credit risk
– Limiting exposure to financial counterparties according to Board approved limits
– Investing cash in short-term, highly liquid and low risk instruments (term deposits mainly)
– Increase the utilisation of UK bank accounts
Receivable balances are monitored on an ongoing basis and the result of the Group’s exposure to bad debts is recognised in the
consolidated income statement. The maximum exposure is the carrying amount as disclosed in notes , and (e).
The Group’s risk assessment procedures includes customer analysis and reviewing financial counterparties. For further details refer
to the Commentary section of the Commercial Counterparty risk in the Risk management and Viability Report.
(d)
Equity risk on financial instruments
The Group acquires financial instruments in connection with strategic alliances with third parties. The Group constantly monitors
the fair value of these instruments in order to decide whether or not it is convenient to dispose of these investments. The disposal
decision is also based on management’s intention to continue with the strategic alliance, the tax implications and changes in the
share price of the investee.
At December the sensitivity to reasonable movements in the share price of financial assets at fair value through OCI of +/-
% with all other variables held constant is +/-US$, (: +/-US$,) recognised in equity. The sensitivity to reasonable
movements in the share price of financial assets at fair value through profit and loss of +/- % with all other variables held constant
is +/-US$Nil (: +/-US$,) recognised in the consolidated statement of profit and loss.
Hochschild Mining PLC
Annual Report & Accounts
11
Strategic Report
01—99
Governance
100—149
Financial Statements
150—
Further Information
227—231
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
Financial risk management
continued
(e)
Fair value hierarchy
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
Level : quoted (unadjusted) prices in active markets for identical assets or liabilities.
Level : other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly
or indirectly.
Level : techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable
market data.
As at December and , the Group held the following financial instruments measured at fair value:
December
US$
Level
US$
Level
US$
Level
US$
Assets and liabilities measured at fair value
Equity shares (notes and )
Trade receivables (note )
,
,
Derivative financial assets
Derivative financial liabilities
(,)
(,)
December
US$
Level
US$
Level
US$
Level
US$
Assets measured at fair value
Equity shares (notes and )
,
,
Trade receivables (note )
,
,
Derivative financial assets
,
,
During the period ending December and , there were no transfers between these levels.
The reconciliation of the financial instruments categorised as level is as follows:
Trade receivables/
price adjustments
US$
Balance at January
,
Net change in trade receivables from goods sold
,
Changes in fair value of price adjustments (note )
(,)
Realised price adjustments during the year
,
Balance at December
,
Net change in trade receivables from goods sold
(,)
Changes in fair value of price adjustments (note )
,
Realised price adjustments during the year
(,)
Balance at December
,
The impact of the hedging instrument and hedge item on the statement of financial position is as follows:
ounces
Average
price US$/
ounce
Line item in the
statement of
financial position
Carrying amount of
hedging instrument
US$
Change in fair value
of hedging instrument
used for measuring
ineffectiveness for the
period
US$
Change in fair value
of hedged item
used for measuring
ineffectiveness for the
period
US$
Gold forward contracts
,. From ,
to ,
Derivative financial
assets and liabilities
(,)
(,)
(,)
Silver forward contracts
. million
.
Derivative financial asset
,
,
,
The hedging gain recognised in OCI before tax on silver and gold forward hedges is equal to the change in fair value of the hedged
item attributable to the hedged risk used for measuring effectiveness. There is no ineffectiveness recognised in profit or loss.
Hochschild Mining PLC
Annual Report & Accounts
1
Impact of hedging on equity
Set out below is the reconciliation of each component of equity and the analysis of other comprehensive income:
Gold
forward
US$
Silver forward
US$
Total
US$
Balance at January
,
,
Reclassification adjustments for items included in the income statement on realisation:
Transfer to sales (revenue)
–
(,)
(,)
Revaluation arising on the year
–
,
,
Movement in deferred tax
–
,
,
Balance at December
–
,
,
Reclassification adjustments for items included in the income statement on realisation:
Transfer to sales (revenue)
(,)
(,)
(,)
Revaluation arising on the year
(,)
,
(,)
Movement in deferred tax
,
,
Balance at December
(,)
–
(,)
(f)
Liquidity risk
Liquidity risk arises from the Group’s inability to obtain the funds it requires to comply with its commitments, including the inability to sell
a financial asset quickly enough and at a price close to its fair value. Management constantly monitors the Group’s level of short- and
medium-term liquidity, and their access to credit lines, in order to ensure appropriate financing is available for its operations.
The table below categorises the undiscounted cash flows of Group’s financial liabilities into relevant maturity groupings based on
the remaining period as at the statement of financial position to the contractual maturity date. Interest cash flows have been
calculated using the spot rate at year-end.
Less than
year
US$
Between
and
years
US$
Between
and
years
US$
Over
years
US$
Total
US$
At December
Trade and other payables
,
,
–
–
,
Derivative financial liabilities
,
,
–
–
,
Borrowings
,
,
,
–
,
Total
,
,
,
–
,
At December
Trade and other payables
,
,
–
–
,
Borrowings
,
,
,
–
,
Total
,
,
,
–
,
(g)
Interest rate risk
The Group has financial assets and liabilities which are exposed to interest rate risk. Changes in interest rates primarily impact
loans and borrowings by changing either their fair value (fixed rate debt) or their future cash flows (variable rate debt). The Group
does not have a formal policy of determining how much of its exposure should be at fixed or at variable rates. However, at the time
of taking new loans or borrowings, management applies its judgement to decide whether it believes that a fixed or variable rate
borrowing would be more favourable to the Group over the expected period until maturity.
As at December
Within
year
US$
Between
and
years
US$
Between
and
years
US$
Over
years
US$
Total
US$
Fixed rate
Assets
,18
–
–
–
,18
Liabilities
(5,80)
–
–
–
(5,80)
Floating rate
Liabilities
(10,08)
(10,001)
(11,8)
–
(1,08)
Hochschild Mining PLC
Annual Report & Accounts
1
Strategic Report
01—99
Governance
100—149
Financial Statements
150—
Further Information
227—231
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
Financial risk management
continued
As at December
Within
year
US$
Between
and
years
US$
Between
and
years
US$
Over
years
US$
Total
US$
Fixed rate
Assets
,
–
–
–
,
Liabilities
(,)
–
–
–
(,)
Floating rate
Liabilities
(,)
(,)
(,)
–
(,)
Interest on financial instruments classified as floating rate is re-priced at intervals of less than one year. Interest on financial
instruments classified as fixed rate is fixed until the maturity of the instrument. The other financial instruments of the Group that
are not included in the above tables are non-interest bearing and are therefore not subject to interest rate risk.
The sensitivity to a reasonable movement in the interest rate, with all other variables held constant, of the financial instruments with
a floating rate, determined as a +/-bps change in interest rates has a -/+US$, effect on profit before tax (:
-/+US$,). The Group is exposed to fluctuations in market interest rates.
This assumes that the amount remains unchanged from that in place at December and and that the change in
interest rates is effective from the beginning of the year. In reality, the floating rate will fluctuate over the year and interest rates
will change accordingly.
(h)
Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to
provide returns for shareholders, benefits for other stakeholders, and to maintain an optimal capital structure to reduce the cost of
capital. Management considers as part of its capital, the financial sources of funding from shareholders and third parties (notes
and ).
In the Group received proceeds from borrowings of US$,, (: US$,,) whilst US$,, (:
US$,,) was repaid. In the Group closed a US$,, medium-term committed debt facility with Scotiabank and
BBVA and used US$,, in .
Management also retains the right to fund operations (fully owned and with joint venture partners) with a mix of equity and joint
venture partners’ debt.
Subsequent events
(a) Hedges
In February , the Group hedged , ounces of gold production at strike put of $, per ounce and a strike call of
$, per ounce to increase cash flow certainty for the repayment of the medium-term facilities.
(b) Loan facility
In February the Group drew down an additional US$,, and in March an additional US$,,, from the
US$,, medium-term debt facility signed in with the Bank of Nova Scotia and BBVA Securities Inc.
(c)
Option to acquire Monte Do Carmo project, Brazil
The Group, through its wholly-owned subsidiary Amarillo Mineração do Brasil Ltda. has entered into an option agreement and
certain ancillary agreements with Cerrado Gold Inc. pursuant to which Cerrado has granted Amarillo Mineração the option to
acquire a % interest in Cerrado’s Monte Do Carmo project located in the mining-friendly state of Tocantins, Brazil.
In consideration for entering into the option, Amarillo Mineração has agreed to advance to Cerrado an amount equal to $ million
by way of % interest-bearing secured loan and has committed to incur a minimum of $ million in exploration expenditures at the
project during a .-month period ending on March .
At any time during the Option Period, Amarillo Mineração may, at its sole discretion, elect to exercise the option to acquire a %
interest in the project by deemed repayment of the secured loan, and by making further cash payments to Cerrado totalling $
million in the aggregate, in multiple instalments over the next three years.
Further details can be found in the separate press release ( March ) on the Company’s website at hochschildmining.com.
Hochschild Mining PLC
Annual Report & Accounts
1
Parent company statement of financial position
For the year ended December
Notes
As at December
US$
US$
ASSETS
Non-current assets
Investments in subsidiaries
,
,
Other receivables
,
–
,
,
Current assets
Other receivables
,
,
Cash and cash equivalents
,
,
Total assets
,
,
EQUITY AND LIABILITIES
Equity share capital
,
,
Other reserves
,
,
Retained earnings
,
,
Total equity
,
,
Non-current liabilities
Trade and other payables
,
,
Provisions
–
–
,
,
Current liabilities
Trade and other payables
,
,
,
,
Total liabilities
,
,
Total equity and liabilities
,
,
The profit of the Company after tax amounted to US$,, (: loss of US$,,).
The financial statements were approved by the Board of Directors on March and signed on its behalf by:
Eduardo Landin
Chief Executive Officer
March
PARENT COMPANY FINANCIAL STATEMENTS
Strategic Report
01—99
Governance
100—149
Financial Statements
150—
Further Information
227—231
Hochschild Mining PLC
Annual Report & Accounts
15
PARENT COMPANY FINANCIAL STATEMENTS
CONTINUED
Parent company statement of cash flows
For the year ended December
Notes
Year ended December
US$
US$
Reconciliation of loss for the year to net cash used in operating activities
Profit/(loss) for the year
,
(,)
Adjustments to reconcile Company profit/(loss) to net cash outflows from operating activities
(Reversal)/impairment on investment in subsidiary
(,)
,
Write-off of prepayments
,
–
Share-based payments
,
Finance income
()
()
Finance costs
Others
()
–
Decrease of cash flows from operations due to changes in assets and liabilities
Other receivables
(,)
Trade and other payables
,
(,)
Provision for Long-Term Incentive Plan
–
()
Cash used in operating activities
(,)
(,)
Interest received
Net cash used in operating activities
(,)
(,)
Cash flows from investing activities
Dividends collected
–
–
Net cash generated from investing activities
–
–
Cash flows from financing activities
Dividends paid
–
(,)
Loans from subsidiaries
(a)
,
,
Cash flows generated from financing activities
,
,
Net increase/(decrease) in cash and cash equivalents during the year
()
Foreign exchange effect
–
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Hochschild Mining PLC
Annual Report & Accounts
1
Parent company statement of changes in equity
For the year ended December
Other reserves
Notes
Equity share
capital
US$
Share
premium
US$
Share-based
payment
reserve
US$
Total other
reserves
US$
Retained
earnings
US$
Total equity
US$
Balance at January
,
,
,
,
,
,,
Other comprehensive income
–
–
–
–
–
–
Loss for the year
–
–
–
–
(,)
(,)
Total comprehensive profit for the year
–
–
–
–
(,)
(,)
Forfeiture of share options
(c)
(,)
(,)
(,)
Issuance of deferred bonus shares
(a)
,
(,)
–
Cancellation of deferred bonus shares
(a)
(,)
,
–
Cancellation of share premium account
(a)
(,)
,
–
Nominal value reduction
(a)
(,)
,
–
Dividends
(,)
(,)
Share-based payments
(c)
,
,
–
,
Balance at December
,
–
,
,
,
,
Other comprehensive income
–
–
–
–
–
–
Profit for the year
–
–
–
–
,
,
Total comprehensive profit for the year
–
–
–
–
,
,
Forfeiture of share options
(c)
(,)
(,)
(,)
Exercise of share options
()
()
–
Share-based payments
(c)
,
,
–
,
Balance at December
,
–
,
,
,
,
Strategic Report
01—99
Governance
100—149
Financial Statements
150—
Further Information
227—231
Hochschild Mining PLC
Annual Report & Accounts
1
Corporate information
Hochschild Mining plc (hereinafter “the Company”) is a public
limited company incorporated on April under the
Companies Act as a Limited Company and registered in
England and Wales with registered number .
The Company’s registered office is located at Cavendish
Square, London WG PH, United Kingdom. The Company was
incorporated to serve as a holding company to be listed on the
London Stock Exchange. The Company acquired its interest in
a group of companies to constitute the Hochschild Mining Group
(“the Group”) pursuant to a share exchange agreement (“Share
Exchange Agreement”) dated November .
The ultimate controlling party of the Company is Mr Eduardo
Hochschild whose beneficial interest in the Company and its
subsidiaries (together “the Group” or “Hochschild Mining
Group”) is .% and it is held through Pelham Investment
Corporation, a Cayman Islands company.
On November , the Company’s shares were admitted to
the Official List of the UKLA (United Kingdom Listing Authority)
and to trading on the London Stock Exchange.
Significant accounting policies
(a)
Basis of preparation
The Company’s financial statements have been prepared in
accordance with UK adopted International Accounting
Standards. The Company applies the same Group policies,
unless there is an exception in its financial statements.
The financial statements of the Company have been
prepared on a historical cost basis. The financial statements
are presented in US dollars (US$) and all monetary amounts
are rounded to the nearest thousand ($) except when
otherwise indicated.
(b) Going concern
The financial position of the Company is set out in the
Statement of Financial Position. The Company has received a
support letter from its wholly owned subsidiary, Hochschild
Mining Holdings Ltd (“HM Holdings”), indicating that it will not
request a repayment of the interest free loan of US$,,
for the period to March .
The ability for the Company to continue as a going concern
is dependent on Compañía Minera Ares S.A.C. (“Minera Ares”),
another wholly owned subsidiary of the Company providing
additional funding to the extent that the operating inflows of
the Company are insufficient to meet future cash requirements.
The Company has obtained a letter of support from Minera
Ares indicating that the financial support will continue until
March .
Considering the support available from the subsidiaries
described above, the Directors have a reasonable expectation
that the Company has adequate resources to meet continue in
operation until March , being a period of at least
months from the date of these financial statements. These
considerations included the impact of Covid pandemic on the
wider Hochschild Group and the Hochschild Group’s Directors’
assessment of going concern. Accordingly, the financial
statements have been prepared on the going concern basis.
(c)
Exemptions
The Company’s financial statements are included in the
Hochschild Mining Group consolidated financial statements
for the years ended December and December .
As permitted by section of the Companies Act , the
Company has not presented its own profit and loss account.
(d)
Changes in accounting policy and disclosures
The accounting policies adopted in the preparation of the
financial statements are consistent with those applied in the
preparation of the Company financial statement for the year
ended December . Amendments to standards and
interpretations which came into force during the year did not
have a significant impact on the financial statements.
(e)
Investments in subsidiaries
Subsidiaries are entities over which the Company controls
operating and financial policies, generally by owning more than
% of voting rights. Investments in subsidiaries are recognised
at acquisition cost less any provision for impairment. The
Company assesses investments for impairment whenever
events or changes in circumstances indicate that the carrying
value of an investment may not be recoverable. If any such
indication of impairment exists, the Company makes an
estimate of its recoverable amount. Where the carrying
amount of an investment exceeds its recoverable amount, the
investment is considered impaired and is written down to its
recoverable amount. If, in subsequent periods, the amount of
the impairment loss decreases and the decrease can be related
objectively to an event occurring after the impairment was
recognised, the previously recognised impairment loss is
reversed. Any subsequent reversal of an impairment loss is
recognised in the profit and loss account, to the extent that the
carrying value of the asset does not exceed its amortised cost
at the reversal date.
(f)
Dividends receivable
Dividends are recognised when the Company’s right to receive
payments is established. Dividends received are recorded in the
income statement.
Dividends distributions of non-cash assets are recognised at
fair value.
(g)
Judgements in applying accounting policies and key
sources of estimation uncertainty
Certain amounts included in the financial statements involve the
use of judgement and/or estimation. These judgements and
estimates are based on management’s best knowledge of the
relevant facts and circumstances, having regard to prior
experience, but actual results may differ from the amounts
included in the financial statements. Information about such
judgements and estimation is contained in the accounting
policies and/or the notes to the financial statements.
Significant estimates:
–
Impairment in subsidiaries – notes 2(e) and 5
Estimates are required to be made by management in
determining the recoverable value of the investments in
subsidiaries. The Company tested its investment in subsidiary
determining the recoverable value using a fair value less cost
of disposal, that was determined with reference to the market
capitalisation of the Company, to which a control premium is
applied. Judgement is involved in determining the control
premium rate to be paid by market participants in an arm’s
length transaction.
Critical judgements:
–
Income tax – note 2(n)
The Company analyses the possibility of generation of profit
and determined the recognition of deferred tax. No deferred tax
asset is being recognised by the Company as it does not expect
to generate any profit to settle the temporary difference.
–
Financial guarantee – note 2(p)
The Company estimates the fair value of the financial
guarantee contract as the difference between the net present
value of the contractual cash flows required under a debt
instrument, and the net present value of the net contractual
cash flows that would have been required without the
guarantee. The present value is calculated using a risk-free
interest rate.
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
Hochschild Mining PLC
Annual Report & Accounts
18
(h) Other receivables
Other receivables are initially recognised at fair value less
provision made for impairment of these receivables. Non-
current receivables are stated at amortised cost. A provision for
impairment of trade receivables is established using the
expected credit loss impairment model according IFRS . The
amount of the provision is the difference between the carrying
amount and the recoverable amount and this difference is
recognised in the income statement.
(i)
Currency translation
The functional currency of the Company is the US dollar and is
determined by the currency of the primary economic
environment in which its subsidiaries operates and therefore
drives their ability to pay dividends.
Transactions denominated in currencies other than the
functional currency of the Company are initially recorded in the
functional currency using the exchange rate ruling at the date of
the transaction. Monetary assets and liabilities denominated in
foreign currencies are remeasured at the rate of exchange
ruling at the statement of financial position date. Exchange
gains and losses on settlement of foreign currency transactions
which are translated at the rate prevailing at the date of the
transactions, or on the translation of monetary assets and
liabilities which are translated at period-end exchange rates, are
taken to the income statement. Nonmonetary assets and
liabilities denominated in foreign currencies that are stated at
historical cost are translated to the functional currency at the
foreign exchange rate prevailing at the date of the transaction.
(j)
Cash and cash equivalents
Cash and cash equivalents are carried in the statement of
financial position at cost. For the purposes of the statement of
financial position, cash and cash equivalents comprise cash in
hand and deposits held with banks that are readily convertible
into known amounts of cash within three months or less and
which are subject to insignificant risk of changes in value. For
the purposes of the cash flow statement, cash and cash
equivalents as defined above are shown net of outstanding
bank overdrafts.
(k) Share capital
Ordinary shares are classified as equity. Any excess above the
par value of shares received upon issuance of those shares is
classified as share premium. In the case the excess above par
value is available for distribution, it is classified as merger
reserve and then transferred to retained earnings.
(l)
Share-based payments
Cash-settled transactions
The fair value of cash-settled share plans is recognised as a
liability over the vesting period of the awards. Movements in that
liability between reporting dates are recognised as personnel
expenses. The fair value of the awards is taken to be the market
value of the shares at the date of award adjusted by a factor for
anticipated relative TSR performance. Fair values are
subsequently remeasured at each reporting date to reflect the
number of awards expected to vest based on the current and
anticipated TSR performance.
Equity-settled transactions
The cost of equity-settled transactions is determined by the fair
value at the date when the grant is made using an appropriate
valuation model and is recognised, together with a
corresponding increase in other reserves in equity, over the
period in which the performance and/or service conditions are
fulfilled. The cumulative expense recognised for equity-settled
transactions at each reporting date until the vesting date
reflects the extent to which the vesting period has expired and
the Company’s best estimate of the number of equity
instruments that vest. The income statement expense for a
period represents the movement in cumulative expense
recognised as at the beginning and end of that period and is
recognised in personnel expenses.
Service and non-market performance conditions are not taken
into account when determining the grant date fair value of
awards, but the likelihood of the conditions being met is
assessed as part of the Company’s best estimate of the
number of equity instruments that will ultimately vest. Market
performance conditions are reflected within the grant date fair
value. Any other conditions attached to an award, but without
an associated service requirement, are considered to be
non-vesting conditions. Non-vesting conditions are reflected in
the fair value of an award and lead to an immediate expensing
of an award unless there are also service and/or performance
conditions. No expense is recognised for awards that do not
ultimately vest because non-market performance and/or
service conditions have not been met. Where awards include
a market or non-vesting condition, the transactions are treated
as vested irrespective of whether the market or non-vesting
condition is satisfied, provided that all other performance and/or
service conditions are satisfied. When the terms of an equity-
settled award are modified, the minimum expense recognised
is the grant date fair value of the unmodified award, provided
the original vesting terms of the award are met. An additional
expense, measured as at the date of modification, is recognised
for any modification that increases the total fair value of the
share-based payment transaction, or is otherwise beneficial to
the employee. Where an award is cancelled by the entity or by
the counterparty, any remaining element of the fair value of the
award is expensed immediately through profit or loss.
(m) Finance income and costs
Finance income and costs mainly comprise interest income on
funds invested, interest expense on borrowings and foreign
exchange gains and losses. Interest income and costs are
recognised as they accrue, taking into account the effective
yield on the asset and liability, respectively.
(n) Income tax
Income tax for the year comprises current and deferred tax.
Income tax is recognised in the income statement except to the
extent that it relates to items charged or credited directly to
equity, in which case it is recognised in equity.
Current tax expense is the expected tax payable on the taxable
income for the year, using tax rates enacted at the statement of
financial position date, and any adjustment to tax payable in
respect of previous years.
Deferred tax is provided using the balance sheet liability
method, providing for temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes with the
following exemptions:
– Where the temporary difference arises from the initial
recognition of goodwill or of an asset or liability in a
transaction that is not a business combination that at the time
of the transaction affects neither accounting nor taxable
profit or loss
– In respect of taxable temporary differences associated with
investments in subsidiaries, associates and joint ventures,
where the timing of the reversal of the temporary differences
can be controlled and it is probable that the temporary
differences will not reverse in the foreseeable future
Deferred tax assets and liabilities are measured at the tax rates
that are expected to apply to the period when the asset is
realised or the liability is settled based on the tax rates (and tax
laws) that have been enacted or substantively enacted at the
statement of financial position date.
A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against
which the asset can be utilised. Deferred tax assets are reduced
to the extent that it is no longer probable that the related tax
benefit will be realised.
Strategic Report
01—99
Governance
100—149
Financial Statements
150—
Further Information
227—231
Hochschild Mining PLC
Annual Report & Accounts
1
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
CONTINUED
Significant accounting policies
continued
(o)
Financial instruments
A financial instrument is any contract that gives rise to a
financial asset of one entity and a financial liability or equity
instrument of another entity.
Financial assets
Initial recognition and measurement
Financial assets are classified, at initial recognition, as
subsequently measured at amortised cost, fair value through
other comprehensive income (OCI), and fair value through profit
or loss.
The classification of financial assets at initial recognition
depends on the financial asset’s contractual cash flow
characteristics and the Company’s business model for
managing them.
The Company’s business model for managing financial assets
refers to how it manages its financial assets in order to generate
cash flows. The business model determines whether cash flows
will result from collecting contractual cash flows, selling the
financial assets, or both.
Subsequent measurement
The Company measures financial assets at amortised cost
(debt instruments) if both of the following conditions are met:
– The financial asset is held within a business model with the
objective to hold financial assets in order to collect contractual
cash flows, and
– The contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments of
principal and interest on the principal amount outstanding
Financial assets at amortised cost are subsequently measured
using the effective interest rate (EIR) method and are subject to
impairment. Gains and losses are recognised in profit or loss
when the asset is derecognised, modified or impaired.
The Company’s financial assets at amortised cost includes
trade receivables.
Derecognition
A financial asset (or, where applicable, a part of a financial asset
or part of a group of similar financial assets) is primarily
derecognised (i.e., removed from the Company’s consolidated
statement of financial position) when:
– The rights to receive cash flows from the asset have expired, or
– The Company has transferred its rights to receive cash flows
from the asset or has assumed an obligation to pay the
received cash flows in full without material delay to a third
party under a “pass-through” arrangement; and either (a) the
Company has transferred substantially all the risks and
rewards of the asset, or (b) the Company has neither
transferred nor retained substantially all the risks and rewards
of the asset, but has transferred control of the asset
Impairment of financial assets
The Company recognises an allowance for expected credit losses
(ECLs) for all debt instruments not held at fair value through profit
or loss. ECLs are based on the difference between the contractual
cash flows due in accordance with the contract and all the cash
flows that the Company expects to receive, discounted at an
approximation of the original effective interest rate.
For other receivables, the Company applies a simplified
approach in calculating ECLs. Therefore, the Company does not
track changes in credit risk, but instead recognises a loss
allowance based on lifetime ECLs at each reporting date.
Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as
financial liabilities at fair value through profit or loss, loans and
borrowings, payables, or as derivatives designated as hedging
instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value and, in
the case of loans and borrowings and payables, net of directly
attributable transaction costs.
The Company’s financial liabilities include trade and other
payables, loans and borrowings including bank overdrafts, and
financial guarantee liabilities.
Subsequent measurement
After initial recognition, interest-bearing loans and borrowings
are subsequently measured at amortised cost using the EIR
method. Gains and losses are recognised in profit or loss when
the liabilities are derecognised as well as through the EIR
amortisation process.
Amortised cost is calculated by taking into account any
discount or premium on acquisition and fees or costs that are an
integral part of the EIR. The EIR amortisation is included as
finance costs in the statement of profit or loss.
This category generally applies to interest-bearing loans
and borrowings.
Derecognition
A financial liability is derecognised when the obligation under the
liability is discharged or cancelled or expires. When an existing
financial liability is replaced by another from the same lender on
substantially different terms, or the terms of an existing liability
are substantially modified, such an exchange or modification is
treated as the derecognition of the original liability and the
recognition of a new liability. The difference in the respective
carrying amounts is recognised in the statement of profit or loss.
(p) Financial guarantees
Financial guarantees are initially recognised in the financial
statements at fair value at the time the guarantee is issued. The
Company estimates the fair value of the financial guarantee
contract as the difference between the net present value of the
contractual cash flows required under a debt instrument, and
the net present value of the net contractual cash flows that
would have been required without the guarantee. The present
value is calculated using a risk-free interest rate.
Subsequent to initial recognition, the Company’s liability under
each guarantee is measured at the higher of the amount initially
recognised less cumulative amortisation recognised in profit
and loss, and the amount of ECL. Financial guarantee ECL
reflect the cash shortfalls adjusted by the risks that are specific
to the cash flows. If the ECL exceeds the initially recognised
guarantee amount less cumulative amortisation the difference
is taken to profit and loss.
A financial guarantee liability is derecognised when the liability
underlying the guarantee is discharged or cancelled or expires, or
if the guarantee is withdrawn or cancelled. The carrying amount of
the financial guarantee is taken to the statement of profit or loss.
(q) Dividend distribution
Dividend distribution to the Company’s shareholders is
recognised as a liability in the Company’s financial statements
in the period in which the dividends are approved by the
Company’s shareholders.
The Company measures a liability to distribute non-cash
assets as a dividend to its owners at the fair value of the assets
to be distributed.
Profit and loss account
The Company made a profit attributable to equity shareholders
of US$,, (: loss of US$,,).
Property, plant and equipment
At December and the Company has property,
plant and equipment with cost of equipment of US$,
which is fully depreciated.
There were no additions during and .
Hochschild Mining PLC
Annual Report & Accounts
0
Investments in subsidiaries
Total
US$
Year ended December
Cost
At January
,,
At December
,,
Accumulated impairment
At January
,,
Impairment
,
At December
,,
Net book value at December
,
Year ended December
Cost
At January
,,
Additions
At December
,,
Accumulated impairment
At January
,,
Reversal of impairment
(,)
At December
,,
Net book value at December
,
The Company tested its investment in subsidiary for impairment in light of increases (: decreases) in the Company’s publicly
listed share price. As a result of this test, the Company recognised a reversal of impairment of the investment in HM Holdings of
US$,, (: impairment of US$,,).
The recoverable value of the investment in HM Holdings was determined using a fair value less costs of disposal. The fair value less
costs of disposal was determined with reference to the market capitalisation of the Company at December translated from
pounds sterling into US dollars using the year-end exchange rate (both Level inputs), to which a control premium was added based
on recent market transactions (a Level input), and subsequently adjusted for the assets and liabilities held directly by the Company,
which result in fair value measurements categorised in its entirety as Level in the fair value hierarchy. A Level input refers to quoted
prices in active markets, while a Level input corresponds to other information that can be observed directly or indirectly.
A positive/adverse change of % of the market capitalisation would result in an additional increase/decrease to the reversal of the
impairment recognised by US$,, (: additional decrease/increase to the impairment recognised by US$,,). A
change in the control premium would have the following impact over the reversal of impairment/impairment recognised in and
respectively as follows:
As at
December
US$
As at
December
US$
Control premium (increase by %)
,
(,)
Control premium (decrease by %)
(,)
,
The breakdown of the investments in subsidiaries is as follows:
Name
As at December
As at December
Country of
incorporation
Equity
interest %
Carrying
value US$
Country of
incorporation
Equity
interest %
Carrying
value US$
Hochschild Mining Holdings Ltd
England and Wales
%
,
England and Wales
%
,
Total
,
,
The list of indirectly held subsidiaries of the Company is presented in note (Corporate information) of the notes to the consolidated
financial statements.
During the Company recorded a capital contribution of $, related to the financial guarantee granted over some
borrowings entered into by Amarillo Mineração do Brasil Ltd. (“Amarillo”), one of its indirectly held subsidiaries (note ).
Strategic Report
01—99
Governance
100—149
Financial Statements
150—
Further Information
227—231
Hochschild Mining PLC
Annual Report & Accounts
1
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
CONTINUED
Other receivables
Year ended December
US$
US$
Amounts receivable from subsidiaries (note )
,
,
Prepayments
,
Receivable from Kaupthing, Singer and Friedlander
–
–
Other receivable
Total
,
,
Less current balance
(,)
(,)
Non-current balance
,
–
In , mainly related to the transaction costs incurred for the acquisition of Amarillo of US$,, (refer to note (a) of the Consolidated Financial Statements) written-off
in and recognised in other expenses.
Net of the impairment of receivable of US$, (: US$,).
The fair values of other receivables approximate their book values.
Movements in the provision for impairment of receivables:
Total
US$
At January
Provided during the year
()
At December
Provided during the year
At December
As at December and , none of the financial assets classified as receivables (net of impairment) were past due.
Cash and cash equivalents
Year ended December
US$
US$
Bank current account
Time deposits
Cash and cash equivalents considered for the cash flow statement
Relates to bank accounts which are freely available and bear interest.
These deposits have an average maturity of Nil days (: Nil days).
Equity
(a)
Share capital and share premium
Issued share capital
The issued share capital of the Company as at December is as follows:
Issued
Class of shares
Number
Amount
Ordinary shares
,,
£,,
The issued share capital of the Company as at December is as follows:
Issued
Class of shares
Number
Amount
Ordinary shares
,,
£,,
At December and , all issued shares with a par value of pence each were fully paid (: weighted average of
US$. per share, : weighted average of US$. per share).
Hochschild Mining PLC
Annual Report & Accounts
The movement in share capital of the Company from January to December is as follows:
Number of
ordinary
shares
Share capital
US$
Share
premium
US$
Shares issued as at January
,,
,
,
Deferred bonus shares issued on June
,,
,
–
Cancellation of deferred bonus shares on June
(,,)
(,)
–
Cancellation of share premium account on June
–
–
(,)
Reduction of nominal value to pence on June
–
(,)
–
Shares issued as at December
,,
,
–
Issuance of shares for bonus payment on May
,
–
Shares issued as at December
,,
,
–
Following the passing of certain special resolutions at an Extraordinary General Meeting of shareholders held on May , the
Company capitalised the Company’s merger reserve by applying its balance to the issuance of ,, bonus shares with a
nominal value of US$. each (the “Bonus Shares”).
Subsequently, the Company obtained, on June , the approval of the High Courts of Justice of England and Wales (the
Companies Court (Ch D) of the Business and Property Courts) to:
.
the cancellation of the Bonus Shares with the sum arising on the cancellation being credited to the Company’s retained
earnings reserve;
.
the reduction of the Company’s share premium account to Nil and crediting the corresponding amount to the Company’s
retained earnings reserve;
.
the reduction in the nominal value of the ordinary shares from pence per ordinary share to pence per ordinary share; and
.
(both (ii) and (iii) above collectively referred to as “the Reductions”).
Rights attached to ordinary shares
At general meetings of the Company, on a show of hands and on a poll, every member who is present in person or subject to the
below by proxy, has one vote for every share of which they are the holder/proxy. However, in the case of a vote on a show of hands
where a proxy has been appointed by more than one member, the proxy has one vote for and one vote against if the proxy has been
instructed by one or more members to vote for the resolution and by one or more members to vote against the resolution.
(b) Treasury shares
Treasury shares represent the cost of Hochschild Mining PLC shares purchased in the market and held by the trustee of the
Hochschild Mining Employee Share Trust to satisfy the award of conditional shares under the Group’s Enhanced Long-Term
Incentive Plan granted to the CEO (note (o) of consolidated financial statements).
The movement in treasury shares are as follows:
– On March , the Company purchased , shares for a total consideration of £, (equivalent to US$,)
– On March , , Treasury shares with a value of US$, (being the cost incurred to acquire the shares) were
transferred to the CEO of the Group with respect to the Enhanced Long-Term Incentive Plan
At December and December the balance of treasury shares is Nil
(c)
Other reserves
Share-based payment reserve
Share-based payment reserve is used to recognise the value of equity-settled share-based payment transactions provided to
employees, as a part of their remuneration.
Refer to note (c) to the consolidated financial statements for details of the share-based payment reserve at December
and .
(d) Retained earnings
Merger reserve
The merger reserve represents the difference between the value of the net assets of the Cayman Holding Companies (Ardsley,
Garrison, Larchmont and Hochschild Mining (Peru)) acquired under the Share Exchange Agreement and the nominal value of the
shares issued in consideration of such acquisition. In addition a merger reserve was generated by certain share placing
transactions made by the Company after the IPO. The merger reserve available for distribution is disclosed within retained
earnings.
As at December the balance of the merger reserve was capitalised. The movement of the merger reserve is as follows:
US$
As at January
,
Capitalisation of merger reserve
(,)
As at December
–
Strategic Report
01—99
Governance
100—149
Financial Statements
150—
Further Information
227—231
Hochschild Mining PLC
Annual Report & Accounts
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
CONTINUED
Trade and other payables
As at December
Non-current
US$
Current
US$
Non-current
US$
Current
US$
Trade payables
–
,
–
Payables to subsidiaries (note (a))
,
,
Remuneration payable
–
–
Taxes and contributions
–
–
Financial guarantees
,
,
Others
–
–
–
Total
,
,
,
,
The Company provided financial guarantee to the banks loan entered into by its subsidiary Minera Ares and Amarillo. The financial guarantee was recognised at its fair value
at initial recognition of US$,, (US$,, recognised in , additional US$,, recognised in and US$, recognised in ). This fair value was
determined through the use of certain level estimates, the most significant of which being the estimated rate of interest Minera Ares and Amarillo would have been charged
were it not for the guarantee provided by the Company.
Trade payables mainly relate to the purchase of third party services. These payables do not accrue interest and no guarantees
have been granted in relation to these payables. The fair value of trade and other payables approximate their book values.
Provisions
As at December
US$
US$
Beginning balance
–
(Decrease)/increase in provision, net
–
()
At December
–
–
Less: current portion
–
–
Non-current portion
–
–
Corresponds to the provision related to awards granted under the Long-Term Incentive Plan (LTIP) to designated personnel of the
Company. Includes the following benefit: (i) awards, granted in February , payable in February , as % in cash, with
a result of US$Nil. Only employees who remain in the Group’s employment on the vesting date will be entitled to vested awards,
subject to exceptions approved by the Remuneration Committee of the Board. Refer to footnote of note to the consolidated
financial statements for details of the LTIP awards and assumptions used for the valuation as at December and .
Related-party balances and transactions
(a)
Related-party accounts receivable and payable
The Company had the following related-party balances and transactions during the years ended December and
December .
As at December
As at December
Accounts
receivable
US$
Accounts
payable
US$
Accounts
receivable
US$
Accounts
payable
US$
Subsidiaries
Compañía Minera Ares S.A.C.
,
,
,
,
Hochschild Mining Holdings Ltd
–
,
–
,
Minera Santa Cruz S.A.
,
Other subsidiaries
Total
,
,
,
,
The account receivable mainly relates to the LTIP , LTIP , LTIP , and LTIP (paid in shares that are going to be paid by Hochschild Mining PLC in shares
on behalf of Minera Ares). The account payable mainly relates to the services performed by Minera Ares to the Company, which during amounts to US$, (:
US$,). The Company provided certain financial guarantees on behalf of Minera Ares (note ).
Relates to loans receivable by and payable to HM Holdings. The loan payable is repayable on demand and is free of interest. During the year the Company received cash
proceeds from loans of US$,, (: US$,,).
In March , the Company received a support letter from HM Holdings indicating that it will not request a repayment of the interest free loan of US$,, for the period
to March .
The account receivable mainly relates to the LTIP , LTIP , LTIP , and LTIP (paid in shares that are going to be paid by Hochschild Mining PLC in shares on
behalf of Minera Santa Cruz). The account payable mainly relates to the services performed by Minera Santa Cruz to the Company, which during amounts to US$Nil
(: US$Nil).
The fair values of the receivables and payables approximate their book values. Transactions between the Company and these
companies are on an arm’s length basis.
(b)
Compensation of key management personnel of the Company
Key management personnel include the Directors who receive remuneration. The amount of this remuneration totals US$,,
(: US$,,).
Hochschild Mining PLC
Annual Report & Accounts
Dividends paid and proposed
US$
US$
Dividends paid and proposed during the year
Equity dividends on ordinary shares:
Final dividend for : Nil US cents per share (: . US cents per share)
–
,
Interim dividend for : Nil US cents per share (: . US cents per share)
–
,
Total dividends paid in cash
–
,
Total dividends paid on ordinary shares
–
,
Proposed dividends on ordinary shares:
Final dividend for : Nil US cents per share (: Nil US cents per share)
–
–
Dividends per share
There was no interim dividend paid during . There is no proposed final dividend in respect of the year ending December .
Finance income
US$
US$
Interests on deposits
Income from guarantee
Total
Financial risk management
The Company is exposed to a variety of risks and uncertainties which may have an impact on the achievement of financial and
economic objectives. These risks include strategic, operational and financial risk and are further categorised into risk areas to
facilitate risk assessment. The Company is not exposed to significant sources of commodity price, equity or interest rate risk.
(a)
Foreign currency risk
Due to the operations of the Company, it has cash and cash equivalents and trade payables denominated in pounds sterling.
Accordingly, the financial results of the Company may be affected by exchange rate fluctuations. The Company does not use
derivative instruments to manage its foreign currency risks. The following table demonstrates the sensitivity of financial assets and
liabilities, at the reporting date denominated in their respective currencies, to a reasonably possible change in the US dollar
exchange rate, with all other variables held constant, of the Company’s profit before tax and the Company’s equity.
Year
Increase/
decrease in
US$/other
currencies
rate
Effect
on profit
before tax
US$
Effect
on equity
US$
Pound sterling
+/-%
-/+
–
Pound sterling
+/-%
-/+
–
(b) Credit risk
The Company is primarily exposed to credit risk in transactions in cash which are primarily limited to cash balances deposited in
banks and accounts receivable at the statement of financial position date. The Company has evaluated and introduced efforts to
try to mitigate credit risk exposure.
To manage credit risk associated with cash balances deposited in banks, the Company is:
– increasing banking relationships with large, established and well-capitalised institutions in order to secure access to credit and
to diversify credit risk;
– investing cash in short-term, highly liquid and low risk instruments (term deposits);
– maintaining excess cash abroad in hard currency.
Credit risk concentrations exist when changes in economic, industrial or geographic factors take place, affecting in the same
manner the Company’s counterparties whose added risk exposure is significant to the Company’s total credit exposure. Receivable
balances are monitored on an ongoing basis with the result that the Company’s exposure to bad debts is not significant. The
maximum exposure is the carrying amount as disclosed in note .
Strategic Report
01—99
Governance
100—149
Financial Statements
150—
Further Information
227—231
Hochschild Mining PLC
Annual Report & Accounts
5
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
CONTINUED
Financial risk management
continued
(c)
Liquidity risk
Liquidity risk arises from the Company’s inability to obtain the funds it requires to comply with its commitments. Management
constantly monitors the Company’s level of short- and medium-term liquidity in order to ensure appropriate financing is available
for its operations.
The Company is funded by HM Holdings through loans in order to meet its obligations. Liquidity is supported by the balance of cash
and cash equivalent held by the Company of US$, (: US$,) and the financial support provided by Minera Ares
(see note (b)). The Company also serves as principal funding conduit for the Group’s capital raising activities such as
equity issuances.
The table below analyses the Company’s financial liabilities into relevant maturity groupings based on the remaining period to the
contractual maturity date:
Less than
year
US$
Between
and
years
US$
Between
and
years
US$
Over
years
US$
Total
US$
At December
Trade and other payables
,
–
–
–
,
At December
Trade and other payables
,
–
–
–
,
The table below analyses the maximum amounts payable under financial guarantees provided to Minera Ares (note ), considering
that if the guarantees were to be called, the guaranteed amounts would be due immediately:
Less than
year
US$
Between
and
years
US$
Between
and
years
US$
Over
years
US$
Total
US$
At December
Financial guarantees
,,
,,
At December
Financial guarantees
,,
–
–
– ,,
Not including any accumulated interest that may be payable at the call date.
(d)
Capital risk management
The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order
to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the
cost of capital. Management considers as part of its capital the financial sources of funding from shareholders and third parties
(notes and ). In order to ensure an appropriate return for shareholders’ capital invested in the Company, management monitors
capital thoroughly and evaluates all material projects and potential acquisitions before submission to the Board for ultimate
approval, where applicable.
Hochschild Mining PLC
Annual Report & Accounts
Group (US$)
Inmaculada
San Jose
Pallancata
Consolidation
adjustment
and others
Total/HOC
Revenue
,
,1
5,0
55
,1
Cost of sales (pre consolidation)
(,)
(,)
(,)
,
(,)
Consolidation adjustment
,
()
(,)
–
Cost of sales (post consolidation)
(,88)
(18,)
(,50)
–
(508,1)
Production cost excluding depreciation
(,)
(,)
(,)
–
(,)
Depreciation in production cost
(,)
(,)
(,)
–
(,)
Workers profit sharing
(,)
–
()
–
(,)
Other items
(,)
()
()
–
(,)
Change in inventories
,
,
(,)
–
,
Gross profit
15,1
,08
(1,0)
,5
185,50
Administrative expenses
–
–
–
(,)
(,)
Exploration expenses
–
–
–
(,)
(,)
Selling expenses
()
(,)
()
–
(,)
Other income/(expenses)
–
–
–
(,)
(,)
Operating profit before impairment
15,08
0,0
(1,8)
(8,15)
5,8
Impairment and write-off of non-current assets, net
–
–
–
(,)
(,)
Share of post-tax losses from associate
–
–
–
(,)
(,)
Finance income
–
–
–
,
,
Finance costs
–
–
–
(,)
(,)
Foreign exchange loss
–
–
–
(,)
(,)
Profit/(loss) from operations before income tax
15,08
0,0
(1,8)
(0,55)
(,81)
Income tax expense
–
–
–
(,)
(,)
Profit/(loss) for the year from operations
15,08
0,0
(1,8)
(,0)
(0,0)
On a post-exceptional basis.
PROFIT BY OPERATION
1
(Segment report reconciliation) as at December
Strategic Report
01—99
Governance
100—149
Financial Statements
150—226
Further Information
—1
Hochschild Mining PLC
Annual Report & Accounts
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 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 to were prepared by or under the supervision of Competent Persons (as defined in
the JORC Code). Competent Persons are required to have sufficient relevant experience and understanding of the style of
mineralisation, types of deposits and mining methods in the area of activity for which they are qualified as a Competent Person
under the JORC Code. The Competent Person must sign off their respective estimates of the original mineral resource and ore
reserve statements for the various operations and consent to the inclusion of that information in this report, as well as the form and
context in which it appears.
Hochschild Mining PLC employs its own Competent Person who has audited all the estimates set out in this report. Hochschild
Mining Group companies are subject to a comprehensive programme of audits which aim to provide assurance in respect of ore
reserve and mineral resource estimates. These audits are conducted by Competent Persons provided by independent consultants.
The frequency and depth of an audit depends on the risks and/or uncertainties associated with that particular ore reserve and
mineral resource, the overall value thereof and the time that has lapsed since the previous independent third party audit.
The JORC Code requires the use of reasonable economic assumptions. These include long-term commodity price forecasts (which,
in the Group’s case, are prepared by ex-house specialists largely using estimates of future supply and demand and long-term
economic outlooks).
Ore reserve estimates are dynamic and are influenced by changing economic conditions, technical issues, environmental
regulations and any other relevant new information and therefore these can vary from year-to-year. Mineral resource estimates can
also change and tend to be influenced mostly by new information pertaining to the understanding of the deposit and secondly the
conversion to ore reserves.
The estimates of ore reserves and mineral resources are shown as at December , 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$, per ounce and Ag Price: US$. per ounce.
ATTRIBUTABLE METAL RESERVES AS AT 1 DECEMBER 0
Reserve category
Proved and
probable
(t)
Ag
(g/t)
Au
(g/t)
Ag
(moz)
Au
(koz)
Ag Eq
(moz)
OPERATIONS
Inmaculada
Proved
,,
.
.
.
.
Probable
,,
.
.
.
.
Total
,0,0
15
.
0.5
.
5.
San Jose
Proved
,
.
.
.
.
Probable
,
.
.
.
.
Total
5,88
5.
5.1
.
1.1
Mara Rosa
Proved
,,
–
.
–
.
.
Probable
,,
–
.
–
.
.
Total
,805,000
–
1.
–
0.0
.
GRAND TOTAL
Proved
,,
.
.
.
.
Probable
,,
.
.
.
.
TOTAL
,0,
1.
5.
1,8.0
1.
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.
RESERVES AND RESOURCES
Hochschild Mining PLC
Annual Report & Accounts
8
ATTRIBUTABLE METAL RESOURCES AS AT 1 DECEMBER 0
1,
Resource category
Tonnes
(t)
Ag
(g/t)
Au
(g/t)
Ag Eq
(g/t)
Ag
(moz)
Au
(koz)
Ag Eq
(moz)
OPERATIONS
Inmaculada
Measured
,,
.
.
.
.
Indicated
,,
.
.
.
.
Total
,,
.
.
.
.
Inferred
,,
.
.
.
.
Pallancata
Measured
,,
.
.
.
.
Indicated
,
.
.
.
.
Total
,,
.
.
.
.
Inferred
,,
.
.
.
.
San Jose
Measured
,
.
,
.
.
.
Indicated
,
.
.
.
.
Total
,,
.
.
.
.
Inferred
,
.
.
.
.
Mara Rosa
Measured
,,
–
.
–
.
.
Indicated
,,
–
.
–
.
.
Total
,,
–
.
–
,.
.
Inferred
,
–
.
–
.
.
GROWTH PROJECTS
Crespo
Measured
,,
.
.
.
.
Indicated
,,
.
.
.
.
Total
,,
.
.
.
.
Inferred
,
.
.
.
.
Azuca
Measured
,
.
.
.
.
Indicated
,,
.
.
.
.
Total
,,
.
.
.
.
Inferred
,,
.
.
.
.
Volcan
Measured
,,
–
.
–
,.
.
Indicated
,,
–
.
–
,.
.
Total
,,
–
.
–
,.
.
Inferred
,,
–
.
–
,.
.
Arcata
Measured
,
.
.
.
.
Indicated
,,
.
.
.
.
Total
,,
.
.
.
.
Inferred
,,
.
.
.
.
GRAND TOTAL
Measured
,,
.
.
,.
.
Indicated
,,
.
.
,.
.
Total
,,
.
.
,.
,.
Inferred
,,
.
.
,.
.
Prices used for resources calculation: Au: $,/oz and Ag: $./oz and Ag/Au ratio of x.
Tables represents % of the Mineral Resource. Resources are inclusive of Reserves.
Strategic Report
01—99
Governance
100—149
Financial Statements
150—226
Further Information
—1
Hochschild Mining PLC
Annual Report & Accounts
CHANGE IN ATTRIBUTABLE RESERVES AND RESOURCES
Ag equivalent content (million ounces)
Category
Percentage
attributable
December
December
Att.
December
Att.
Net
difference
% change
Inmaculada
Resource
%
.
.
(.)
(.%)
Reserve
.
.
(.)
(.%)
Pallancata
Resource
%
.
.
(.)
(.%)
Reserve
.
–
(.)
(.%)
San Jose
Resource
%
.
.
(.)
(.%)
Reserve
.
.
(.)
(.%)
Mara Rosa
Resource
%
.
.
–
–
Reserve
.
.
–
–
Crespo
Resource
%
.
.
–
–
Reserve
–
–
–
–
Azuca
Resource
%
.
.
–
–
Reserve
–
–
–
–
Volcan
Resource
%
.
.
–
–
Reserve
–
–
–
–
Arcata
Resource
%
.
.
–
–
Reserve
–
–
–
–
Total
Resource
,.
,.
(.)
(.%)
Reserve
.
.
(.)
(.%)
Attributable reserves and resources based on the Group’s percentage ownership of its joint venture projects.
RESERVES AND RESOURCES
CONTINUED
Hochschild Mining PLC
Annual Report & Accounts
0
Company website
Hochschild Mining PLC Interim and Annual Reports and results announcements are available via the internet on our website at
www.hochschildmining.com. Shareholders can also access the latest information about the Company and press announcements as
they are released, together with details of future events and how to obtain further information.
Registrars
The Registrars can be contacted as follows for information about the AGM, shareholdings, dividends and to report changes in
personal details:
By post
Link Group,
th Floor, Central Square,
Wellington Street,
Leeds LS DL.
By email
Email: shareholderenquiries@linkgroup.co.uk
By telephone
Telephone: (+ ())
(Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the
applicable international rate. Lines are open between am – :pm, Monday to Friday excluding public holidays in England and Wales).
Gloucester Place
London
WU HR
United Kingdom
SHAREHOLDER INFORMATION
Strategic Report
01—99
Governance
100—149
Financial Statements
150—226
Further Information
—1
Hochschild Mining PLC
Annual Report & Accounts
1
FORWARD LOOKING STATEMENTS
This Annual Report contains certain forward looking statements, including such statements within the meaning of Section A of
the US Securities Act of , as amended, and Section E of the Securities Exchange Act of , 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 Annual Report.
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 Annual Report. Nothing in this Annual
Report should be construed as a profit forecast.
Hochschild Mining PLC
Annual Report & Accounts
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