Post on 28-Jul-2018
Hochschild Mining plc
RBC Capital Markets Silver ConferenceNew York & Toronto 11 & 12 December 2007
DisclaimerSome statements contained in this presentation or in documents referred to in it are or may be forward-looking statements. Actual results may differ from those expressed in such statements, depending on a variety of factors.Past performance of the Company or its shares cannot be relied on as a guide to future performance.Any forward-looking information contained in this presentation has been prepared on the basis of a number of assumptions which may prove to be incorrect, and accordingly, actual results may vary.This presentation does not constitute, or form part of or contain any invitation or offer to any person to underwrite, subscribe for, otherwise acquire, or dispose of any shares in Hochschild Mining plc or advise persons to do so in any jurisdiction, nor shall it, or any part of it, form the basis of or be relied on in any connection with or act as an inducement to enter into any contract or commitment therefore. No reliance may be placed for any purpose whatsoever on the information or opinions contained in this document or on its completeness and no liability whatsoever is accepted for any loss howsoever arising from any use of this document or its contents otherwise in connection therewith.This presentation has been prepared in compliance with English law and English courts will have exclusive jurisdiction over any disputes arising from or connected with this presentation.
1
Hochschild Mining — a snapshot• Over 40 years of underground precious metal mining &
exploration in the Americas
• 2006 IPO to fund growth strategy~115% over the next 5 years
• Listed on the London Stock Exchange (HOC LN)
• $300 million net cash as of 30 June 2007
• Low cash costs $3.92/oz Ag and $159/oz Au (co-product basis)
• 100% unhedged
• Significant emphasis on exploration
• Strong track record on corporate social responsibility
2
Corporate information
65%
25%
8% 2%UKUSCanadaRoW
3
Stock exchange listing LSE Main Board
Ordinary shares in issue 307,350,266
Free float 32%
Institutional shareholders >3% Blackrock
Stock information
Institutional ownership split
Trading statisticsMarket cap US$2.8bn
3 mo. ADTV 529,178 shares
3 mo. ADTV $4.0m per day
52-wk high/low (p) 511 (7Nov07) / 294 (31May07)
Share price performance
80
100
120
140
Nov-06 Jan-07 Mar-07 May-07 Jul-07 Sep-07 Nov-070
1,000
2,000
3,000
4,000
5,000Volume Hochschild Gold Silver
4
The 4th largest primary silver producer…
12
13
13
13
14
14
16
17
17
22
37
40
47
Hochschild
Pan American
Volcan
Goldcorp
Coeur d'Alene
Rio Tinto
Grupo Mexico
Buenaventura
Polymetal
Kazakhmys
BHP Billiton
KGHM Polska Miedz
Industrias Peñoles
No. Company 2006 production (moz Ag) % of global¹
1 Industrias Peñoles
2 KGHM Polska Miedz
3 BHP Billiton
4 Kazakhmys
5 Polymetal
6 Buenaventura
7 Grupo Mexico
8 Rio Tinto
9 Coeur d'Alene
10 Goldcorp
11 Volcan
12 Pan American
13 Hochschild
7%
6%
6%
3%
3%
3%
3%
2%
2%
2%
2%
2%
2%12
13
14
17
Hochschild
PanAmerican
Coeur
Polymetal
Pan American
Hochschild
Coeur
Polymetal
Primary silver producers
Source: Silver Institute, CRU ¹ World excluding China
5
…and a mid-sized producer of gold
400
314
268
261
256
246
196
168
135
Randgold
Yamana
Meridian
Peter Hambro
Polymetal
Agnico Eagle
Hochschild Mining
Highland Gold
High River
Select companies 2006 production (koz Au) % of global
Randgold
Yamana
Peter Hambro
Polymetal
Hochschild Mining
Highland Gold
High River
0.5%
0.3%
0.3%
0.3%
0.3%
0.2%
0.2%
Source: GFMS, Company filings
Agnico Eagle
Meridian
0.4%
0.2%
A roadmap for growth
0
15
30
45
'06 H1 H2 '07 '08 '09 '10 '11
Moz
Ag E
q.
23
11
~26
>50
… to double production by 2011
6
Investing…
Arcata expansion Q408 Increase capacity to 618 ktpa from 420 ktpaCapex ~$26 million
San José expansion Q308 Increase capacity to 530 ktpa from 265 ktpaCapex ~$40 million
San Felipe Complete feasibility 2008 Commence production late 2009 Capex ~$110 million
Exploration~$20 million per annum on greenfield exploration
Focusing on the Americas
x
Resource delineation
Development projects
LegendMine
Six operating mines in three countries & San Felipe in Mexico
x
San Felipe (70%) Resource delineation Polymetalic deposit Production 2009 M&I: 3.7 moz Ag / 119 kt Zn / 52 kt Pb
Moris (70%) Open pit Gold dore Since Q307 P&P: 99 koz Au / 0.3 moz Ag
Pallancata (60%) Underground Silver/gold concentrate Since Q307 P&P 11.6 moz Ag / 46 koz Au
San José (51%) Underground Gold/silver dore Since Q207 P&P 18.6 moz Ag / 298 koz Au
Arcata (100%) Underground Silver/gold concentrateSince 1964 ’06 prod: 4.7 moz Ag / 12 koz Au P&P 27.5 moz Ag / 71 koz Au
Ares (100%) Underground Gold/silver dore Since 1998 06’ prod: 156 koz Au / 2.7 moz Ag P&P 221 koz Au / 6.1 moz Ag
Selene (100%) Underground Silver /gold dore Since 2003 ‘06 prod: 28 koz Au / 4 moz Ag P&P 53 moz Au / 7.9 moz Ag
x
x
7
Arcata — a world class silver deposit
8
Alexia Vein Mariana Vein
Ramal 2 Vein
Macarena
• Commenced production in 1964– Since 1990 produced over
100 moz Ag & 390 koz Au– 2006 production: 4.7 moz Ag
& 12 koz Au• High grade silver resource
– M&I 29.8 moz Ag & 77 koz Au
– 586 g/t Ag & 1.5 g/t Au• Capacity expansion completed
ahead of schedule– 350 ktpa 420 ktpa in Q2
2007– Further expansion 618
ktpa in Q408• Significant mineralized potential
provides upside
Exploring the region
Quevar (JV)
Tignamar
Sierra Mojina (JV)
El Pocito (JV)
Calderón
El Pino (JV)
Generative
Prospect
Existing mining operations
Resource delineation
Feasibility completed
San Felipe
Target definition
Peñon Blanco
Moctezuma Pozos
El GachiAzuca
Paraíso Puesto Chacon
Claudia
Development projects
Ares Arcata Selene
San José Pallancata
Moris
Gonzalito
Manantiales
La Flora Tres Chepas Gavilanes Ccello Punta
596,470 Has. 77,600 Has. 181,425 Has. 60,889 Has.
Patahuasi
San Luis del Cordero
New opportunities To Divest / Drop / JV
9
Exploration offices in Peru, Argentina, Mexico, Chile and the USA
10
Responsibility towards employees, the environment and local communities
Health & safety Community• TECSUP (leading technical institute
in Peru)
• Self-sustaining programs
• Healthcare campaigns
• Schools
• Alpaca Genetic Improvement Program
• Community training programs focused on developing technical skills for future employment
• Ongoing negotiations with local communities for current & future development
Environmental• Environmental Management
System certified to ISO 14001 standards
• Reforestation program Ares Mining Unit• National Safety Contest:
— 2003 – National Prize— 2005 – Third Place
Arcata Mining Unit— 2004 – Second Place
• National Safety Contest:— 1998 – Second Place— 1999 – National Prize— 2000 – Second Place— 2005 – Second Place— Trophy “JOHN T.RYAN”— 2001 – Underground Mining — 2002 – Underground Mining
Selene Mining Unit• National Safety Contest:
— 2003 – Second Place— 2004 – National Prize— 2005 – National Prize— 2006 – Second Place
• Finalizing adoption of U.S. Department of Labor OSHAS 18001 standards
Sipán today
Sipán before
Delivering IPO commitments
• 100% hedge free
• Strong financial capacity
• 100% long-term debt repaid
• Actively looking for acquisitions
• Dividends declared & paid
• Capacity expansions completed in Ares and Arcata, and Selene on schedule
• San José, Moris and Pallancata in production on time
• San Felipe moved to feasibility stage
• Close to 26 moz Ag eq. in 2007
• On track to produce 50 moz Ag eq. in 2011
• Reserves increased by 15% in H107
• Resources increased by 9% in H107
• Avg. LOM up from 3.7 years to 4.1 years in H107
• Strong project pipeline
Operations
Explorations
11
Finance
Appendix
12
Financial highlights
$ million unless stated H107 H106 FY06
Revenue $121 $101 $211
Adjusted EBITDA1 $56 $56 $108
Adjusted EBITDA1 margin 46% 56% 51%
Earnings per share2 $0.10 $0.09 $0.19
Operating cash flow $21 $34 $126
Net cash position $300 ($78) $406
Financial strength to pursue our growth strategy
¹ Adjusted EBITDA is calculated as profit from continuing operations before exceptional items, net finance costs and income tax plus depreciation, amortization and exploration costs other than personnel and other expenses
2 Earnings per share using the weighted average number of shares outstanding for the period (2006: 243 million; 2005: 230 million). Current share outstanding 307 million.
13
Legacy hedges expired in June 2007
(20)%
(10)%
0%
10%
20%
30%
40%
50%
60%
Hochschild HighlandGold
Polymetal
Hochschild price performance vs. peers (2007 to date)
Commodities & indicesNA gold peers
NA silver peersUK peers
(20)%
(10)%
0%
10%
20%
30%
40%
50%
60%
Hochschild Hecla PanAmerican
CoeurD'Alene
ApexSilver
(20)%
(10)%
0%
10%
20%
30%
Hochschild GoldCorp Newmont Kinross
(20)%
(10)%
0%
10%
20%
30%
40%
50%
Hochschild Silver Gold FTSE 250 FTSE 350Mining
Hochs- child
Agnico Eagle
Gold Corp
Barrick New- mont
Yamana Gold
Kinross
Source: Datastream, 1 January 2007 to 19 November 200714
Peter Hambro
PolyusRand-gold
Comparable companies trading multiples
Share price
(local) Market
cap. ($m) EV ($m)
EBITDA 2007E
margin (%)
EV/EBITDA EV/EBIT P/E
YE Dec 2007E 2008E 2007E 2008E 2007E 2008E
Hochschild 428.3 2,698 2,430 51.9% 14.0x 8.5x 19.2x 13.0x 29.6x 23.7x
Highland Gold 135.0 539 635 32.8% 18.4x 11.7x 30.6x 21.3x n.a. 49.0x
Peter Hambro 1,318.0 2,193 2,309 49.8% 28.0x 12.0x 31.4x 13.2x 46.3x 21.3x
Randgold 1,802.0 2,561 2,499 39.5% 22.3x 19.4x 25.2x 22.7x 38.9x 37.8x
Average of UK peers 1,764 1,814 40.7% 22.9x 14.4x 29.1x 19.1x 42.6x 36.0x
North American peers
AgnicoEagle 47.8 6,616 6,131 55.0% 23.3x 21.3x 27.8x 25.7x 46.3x 40.5x
Barrick 38.3 33,797 34,712 41.6% 13.1x 10.8x 20.2x 14.2x 29.1x 21.9x
Goldcorp 30.1 21,604 22,297 50.9% 18.5x 16.8x 27.4x 25.5x 39.6x 38.2x
Coeur D'Alene 3.9 1,096 1,003 42.0% 10.5x 5.3x 13.6x 6.4x 15.6x 8.4x
Hecla Mining 11.1 1,341 1,160 36.9% 14.4x 14.4x 24.1x 22.3x 33.1x 28.4x
Kinross 16.6 10,014 10,390 39.1% 24.2x 14.5x 38.1x 20.8x 51.3x 32.8x
Newmont 48.6 22,430 24,696 35.6% 12.7x 9.5x 20.2x 14.3x 43.1x 26.3x
Pan American 31.4 2,438 2,299 44.0% 17.6x 11.4x 20.3x 16.0x 29.0x 19.1x
Average of North American peers 12,417 12,836 43.1% 16.8x 13.0x 24.0x 18.2x 35.9x 27.0x
South American peers
Buenaventura 157.4 7,201 7,000 53.5% 17.9x 17.8x 19.7x 19.8x 19.2x 17.2x
Peñoles 234.3 8,519 9,224 21.3% 10.7x 8.7x 12.9x 12.1x 21.8x 17.1x
Average of South American peers 7,860 8,112 37.4% 14.3x 13.3x 16.3x 16.0x 20.5x 17.2x
Source: Brokers’ consensus and Datastream as of 19 November 2007
15
Diversification
19%
12%
69%
Peru Argentina Mexico
Resources by country
16
Resources by commodity
58%27%
11%1%2%
Silver Gold Zinc Lead Copper
Growing our asset base
0
200
400
600
800
1,000
Dec-06 Jun-07
koz
Au
0
10
20
30
40
50
60
70
80
moz A
g
Gold (+5%)Silver (+23%)
As at 30 June 2007
Proven & Probable Reserve
Measured & Indicated Resources
Inferred
Silver (moz)
72.1
82.1
57.4
Gold (koz)
787.8
871.3
222.9
Zinc (kt)
17.1
Lead (kt)
8.2
Reserve growth (6 months)
17
• Maintain a highly motivated, technically proficient, well funded exploration team with a successful track record
• Focus on high grade, low cost deposits / targets
• Consistent & rigorous approach for measuring value creation of exploration through technical excellence
• Best international industry practices
Exploration philosophy & goals
18
Eduardo HochschildExecutive Chairman
Alberto BeeckExecutive Director, Strategy &
Corporate Development
Roberto DañinoDeputy Chairman & Executive
Director
Miguel AramburúChief Operating Officer
Jorge BenavidesChief Executive of Exploration
& Geology Officer
Ignacio RosadoChief Financial Officer
Javier DurandLegal Manager
Ignacio BustamenteGeneral Manager, Operations Peru
José Augusto PalmaSenior Adviser, Executive
Committee
Isac BursteinBusiness Development Manager
Raymond Jannas Corporate Exploration Manager
Executive Directors & Management
7.2
5.2
7.2
11.9
11.0
3.5
5.0
4.3
7.8
4.3
0
2
4
6
8
10
12
14
2003 2004 2005 2006 9 mo. 07
Au k
oz
0
2
4
6
8
10
Ag m
oz
Au (koz) Ag (Moz)
19
Arcata — Peru (100%)
0
1,000
2,000
3,000
4,000
Dec-03 Dec-04 Dec-05 Dec-06 Jun-07
Tonne (
kt)
0
2
4
6
8
10
LOM
Reserves Resources
• High grade silver resource – 586 g/t Ag & 1.5 g/t Au
• Capacity expansion completed ahead of schedule– 350 ktpa 420 ktpa in Q2 2007– Further expansion 618 ktpa in Q408
• Significant mineralized potential provides upside• 2007 Exploration budget: $4.5 million program to
expand R&R base in anticipation of expansion• Produces silver/gold concentrate
Production
19
Reserves & resources
184.7
193.2
198.5
155.5
108.1
2.6 2.7 2.9
2.7
1.8
0
40
80
120
160
200
2003 2004 2005 2006 9 mo. 07
Au k
oz
0
1
2
3
4
Ag m
oz
Au (koz) Ag (Moz)
Ares — Peru (100%)
0
200
400
600
800
1,000
1,200
Dec-03 Dec-04 Dec-05 Dec-06 Jun-07
Tonne (
kt)
0
1
2
3
4
LOM
Reserves Resources
• Mature high grade gold deposit– 7.67 g/t Au & 211 g/t Ag
• 2007 exploration budget: $1.5 million directed towards extensive exploration of surrounding areas
• Decreasing mine grade but maintaining mine life with increased capacity
• Capacity expansion completed on time and budget on Q1 2007 to 325 ktpa
• Produces gold/silver dore
20
Production
Reserves & resources
28.1
27.5
28.3
18.0
4.3
2.9
3.3
3.7
2.7
0.4
0
5
10
15
20
25
30
2003 2004 2005 2006 9 mo. 07
Au k
oz
0
1
2
3
4
Ag m
oz
Au (koz) Ag (Moz)
21
Selene — Peru (100%)
0
500
1,000
1,500
2,000
2,500
Dec-03 Dec-04 Dec-05 Dec-06 Jun-07
Tonne (
kt)
0
1
2
3
4
5
6
LOM
Reserves Resources
• Grades - 284 g/t Ag & 1.9 g/t Au• Continue to develop the Explorador vein• 2007 Exploration budget: $2.6 million focused on the
expansion of R&R in the Explorador, Tumiri and Sofia veins
• Expanding plant capacity on schedule– Q3 2007 700 ktpa
• Expansion to accommodate Pallancata ore• Produces silver/gold dore (processed at Ares plant)
Production
Reserves & resources
San José — Argentina (51%)• Mine installations and development completed
and operational
• Production commenced Q207
• 2007 Exploration budget: – HOC: $3.8 million– Minera Andes: $1.96 million– Program to expand resources in the Frea,
Kospi, Odin A&B Veins as well as test potential mineralization in other targets
• Jun 2007 R&R total (HOC 51%)– Reserves: 2.7 Mt @ 416 g/t Ag, 6.7 g/t Au– Resources*: 2.6 Mt @ 490 g/t Ag, 7.8 g/t Au– LOM (R&R): 10.3 years
• Q308 planned expansion to double capacity
• Produces silver/gold concentrate
• Successful entrance into a new country
• Successfully building relations with local communities
* Measured + indicated + inferred, includes reserves
22
23
Pallancata — Peru (60%)• Commenced production on schedule in Q307
• Underground development advancing according to plan
• Power line and road access to the Selene processing plant completed
• 2007 Exploration budget: $3.4 million HOC + $1.6 million IMC (JV partner) designed to expand reserves and resources in the Pallancata and Mariana veins
• Future exploration targets: The Mercedes, Virgen del Carmen and San Javier veins
• Jun 2007 R&R total (HOC 60%)– Reserves: 2.2 Mt @ 272 g/t Ag, 1.08 g/t Au– Resources*: 3.4 Mt @ 382 g/t Ag, 1.5 g/t Au– LOM (R&R): 16.5 years
• 2008 planned expansion to 350 ktpa
• Produces silver/gold concentrate (milled at Selene)
23
* Measured + indicated + inferred, includes reserves
24
Moris — Mexico (70%)• Commenced production on schedule in Q307 @
1 mtpa capacity open pit crush & heap leach operation
• 2007 exploration budget:– HOC: $0.8 million– EXMIN: $321,000– Program to explore La Nopalera, El Cajón
and South Crestón targets to increase resources and test district potential
• Jun 2007 R&R total ( Hoc 70%)– Reserves: 2.9 Mt @ 1.51 g/t Au– Resources*: 4.7 Mt @ 1.3 g/t Au– LOM (R&R): 2.8 years
• Produces dore
24
* Measured + indicated + inferred, includes reserves
25
San Felipe — Mexico (70%) • Mexico – 70% earn in JV
• Polymetalic deposit
• High grade resources: Total Jun 2007 (HOC 70%)– 2.3 Mt @ 7.34% Zn, 3.21% Pb, 0.42% Cu
and 71 g/t Ag*
• 18,627 meters drilled, more than the half of it in 2007 in the Ventana ore-body
• Significant upside in 7 other out-cropping targets
• Commence feasibility mid-2007
• Capacity 700 ktpa late 2009 to 1,080 ktpa by late 2010
25
* Measured + indicated + inferred, includes reserves
26
El Gachi — Mexico (70%)
26
* Measured + indicated + inferred, includes reserves
• El Gachi providing additional upside to San Felipe,
• 60 km from San Felipe
• 2.5 to 8.0 m “manto” identified in the property
• Historic (no JORC) resource of ±
100 K TM @ 400 – 500 gr Ag & 15 – 20 % Pb + Zn
• Significant upside potential
27
Azuca — Peru (100%)
27
* Measured + indicated + inferred, includes reserves
• >5 km of plus metre wide veins mapped
• Encouraging results from previous Hochschild drilling programs on the Azuca 1 and Minaspata veins (eg. 0.61m @ 5.06 g/t Au and 917 g/t Ag, and 1.45 m @ 10 g/t Au and 488 g/t Ag respectively)
• +5 g/t drill intercepts published by another exploration company on an adjacent property (part of same vein district)
Hochschild Mining plc
RBC Capital Markets Silver ConferenceNew York & Toronto 11 & 12 December 2007