Hochschild Mining : Half Year Results 2022

17 August 2022

Hochschild Mining PLC

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Interim Results

Six months ended 30 June 2022

PRODUCTION AND COSTS ON TRACK WITH FULL YEAR GUIDANCE UNCHANGED

STRONG PROGRESS AT KEY GROWTH PROJECTS

Financial Highlights

• Revenue of $347.8 million (H1 2021: $394.8 million)1
• Adjusted EBITDA of $130.5 million (H1 2021: $198.5 million)2
• Profit before income tax (pre-exceptional) of $15.3 million (H1 2021: $97.8 million)
• Profit before income tax (post-exceptional) of $5.4 million (H1 2021: $83.8 million)
• Basic earnings per share (pre-exceptional) of $0.01 (H1 2021: $0.08)
• Basic loss per share (post-exceptional) of $(0.01) (H1 2021: $0.07)
• Cash and cash equivalent balance of $204.3 million as at 30 June 2022 (31 December 2021: $386.8 million) following completion of the Amarillo acquisition on 1 April
• Net debt of $109.3 million as at 30 June 2022 (31 December 2021: net cash of $86.3 million)
• Interim dividend of 1.95 cents per share totalling $10.0 million (H1 2021: 1.95 cents per share totalling $10.0 million)

Operational Highlights3

• All-insustaining costs (AISC) from operations of $1,371 per gold equivalent ounce (H1 2021: $1,055) or $19.0 per silver
  equivalent ounce (H1 2021: $14.7)4, in line with guidance
• H1 2022 attributable production of 166,708 gold equivalent ounces or 12.0 million silver equivalent ounces (H1 2021: 188,509 gold equivalent ounces or 13.6 million silver equivalent ounces)

Project & Exploration Highlights

• Mara Rosa project in Brazil is advancing on schedule - total project progress to date is 9% with a key environmental authorisation announced on 10 August and first production on track for H1 2024
• Drilling commenced at Snip with encouraging results, pre-feasibility study to be completed by end of 2022
• Brownfield programme conducted in the surrounding areas of all three mines

1. Pallancata medium-term drill programme delivering positive results - continuing to test short-term targets o Exploration commenced at Ciclon project in Santa Cruz, Argentina

2022 outlook

• On track to deliver overall 2022 production target of 360,000-375,000 gold equivalent ounces or 26.0-27.0 million silver equivalent ounces
• 2022 AISC on track to meet guidance of $1,330 - $1,370 per gold equivalent ounce or $18.5-$19.0 per silver equivalent ounce

ESG highlights

• 2021 Sustainability Report recently published
• Lost Time Injury Frequency Rate of 1.28 (FY 2021: 1.26)5
• Accident Severity Index of 72 (FY 2021: 676)6
• Water consumption of 175lt/person/day (FY 2021: 193lt/person/day)
• Domestic waste generation of 1.01 kg/person/day (FY 2021: 1.00kg/person/day)
• ECO score of 5.35 out of 6 (FY 2021: 5.29)7

1Revenue presented in the financial statements is disclosed as net revenue and is calculated as gross revenue less commercial discounts plus services revenue 2Please see the Financial Review on page 14 for a definition of Adjusted EBITDA

3All equivalent figures calculated using the Company's 2022 average gold/silver ratio of 72:1.

4All-in sustaining cost per (AISC) silver equivalent ounce: Calculated before exceptional items and includes production cost excluding depreciation, other items and workers profit sharing in cost of sales, administrative expenses (excl. depreciation), brownfield exploration, operating and exploration capex and royalties and special mining tax (presented with income tax) divided by silver or gold equivalent ounces produced, plus commercial deductions and selling expenses divided by silver or gold equivalent ounces sold using a gold/silver ratio of 72:1. Excludes non-recurrentCOVID-19 expenses of $2.4 million in H1 2022..

5Calculated as total number of accidents per million labour hours.

6Calculated as total number of days lost per million labour hours.

7The ECO Score is an internally designed Key Performance Indicator measuring environmental performance in one number and encompassing numerous fronts including management of waste water, outcome of regulatory inspections and sound environmental practices relating to water consumption and the recycling of materials.

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$000 unless stated	Six months to	Six months to	% change
30 June 2022	30 June 2021
Attributable silver production (koz)	5,065	5,922	(14)
Attributable gold production (koz)	96	106	(9)
Revenue	347,781	394,750	(12)
Adjusted EBITDA	130,525	198,504	(34)
Profit/(loss) from continuing operations (pre-exceptional)	9,503	38,065	(75)
Profit/(loss) from continuing operations (post-exceptional)	(420)	28,594	(101)
Basic earnings/(loss) per share (pre-exceptional) $	0.01	0.08	(88)
Basic earnings/(loss) per share (post-exceptional) $	(0.01)	0.07	(114)

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A live conference call and audio webcast will be held at 2.00pm (London time) on Wednesday 17 August 2022 for analysts and investors. For a live webcast of the presentation please click on the link below:

https://stream.brrmedia.co.uk/broadcast/62cf10ef287bf548a3b8d1d2

Conference call dial in details:

UK: [phone]

UK Toll Free: 0800 279 6877

US/Canada Toll Free: 800-289-0720

Pin: 8806529

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Investor Meets Company presentation

Hochschild will provide a live presentation relating to the Interim Results via the Investor Meet Company platform today at 4.00PM (BST).

The presentation is open to all existing and potential shareholders. Questions can be submitted via the Investor Meet Company platform at any time during the live presentation.

Investors can sign up to Investor Meets Company for free and add to meet Hochschild Mining PLC via the following link. Investors who already follow the Company on the Investor Meet Company platform will automatically be invited.

https://www.investormeetcompany.com/hochschild-mining-plc/register-investor

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Enquiries:
Hochschild Mining PLC
Charles Gordon	[phone]
Head of Investor Relations
Hudson Sandler
Charlie Jack	[phone]
Public Relations

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Non-IFRS Financial Performance Measures

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

About Hochschild Mining PLC:

Hochschild Mining PLC is a leading precious metals company listed on the London Stock Exchange (HOCM.L / HOC LN) and crosstrades on the OTCQX Best Market in the U.S. (HCHDF), with a primary focus on the exploration, mining, processing and sale of silver and gold. Hochschild has over fifty years' experience in the mining of precious metal epithermal vein deposits and currently operates three underground epithermal vein mines, two located in southern Peru and one in southern Argentina. Hochschild also owns the Mara Rosa Advanced Project in Brazil as well as numerous long-term projects throughout the Americas

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IGNACIO BUSTAMANTE, CHIEF EXECUTIVE OFFICER SAID:

In the first half of 2022, we have once again seen a period of global turmoil which has significantly impacted both commodity markets and the local political and economic environments in which Hochschild operates. The response from our teams has been highly commendable and we remain well positioned to meet all our 2022 priorities. These include delivering on our production and cost targets, investment in our Mara Rosa project in Brazil and meeting our ESG commitments which are focused on the wellbeing of our employees, the environment and the communities in our areas of influence.

Following the Russian invasion of Ukraine in late February, all commodities rose strongly in response to expected supply deficits or as stores of value with gold passing $2,000 per ounce in early March. But since then, with inflation increasing substantially and the resulting steep interest rate rises likely to lead to dollar strength and global recession, we have seen a major pullback in our underlying commodities with gold and silver prices falling substantially from their recent peaks. This volatile market environment has presented challenges for our business but we can look forward to a busy second half with opportunities for value accretive investment in exploration and project development across our portfolio.

ESG

We have made further good progress on our ESG performance in the first-half. On the subject of safety, the implementation of the second iteration of our Safety Culture Transformation Plan, was extended to our new locations in Brazil and Canada whilst, in Peru, we commenced a risk perception training programme focussing on the subject of workplace accidents. I am happy to report that our historically low safety KPIs (as at 30th June) are indicative of the success of this and other safety- related initiatives.

The Company has also had a busy six months with regards to environmental management. As at 30 June, we have achieved an excellent ECO score of 5.35 out of 6 (FY 2022 Target: 5.0), with two of our operations achieving a perfect score to date. In addition, we have made considerable progress on our environmental culture transformation programme. This seeks to embed an environmentally conscious culture across all areas of our business. Meanwhile, we continue to work to achieve a positive impact in the local communities surrounding our operations involving collaboration with full respect for local customs and social dynamics. Our efforts have been focussed on: local employment; procurement of local goods and services; investments in education, connectivity, health and nutrition and socio-economic development; and supporting local governments.

Following the publication of a Global Industry Standard on Tailings Management by the International Council on Mining and Metals last year, we commenced a review of the governance of our Tailings Storage Facilities ("TSFs"). This led to the adoption, by the Board, of a Tailings Management Policy which has initiated several workstreams including the allocation of responsibilities for internal and external oversight of our TSFs. Finally, I am delighted that following the appointment of our first Sustainability Director, we continue to progress with our reporting on overall ESG matters with the recent publication of our 2021 Sustainability Report. Our next key milestone will be the publication of our roadmap to achieving Net Zero by 2050.

Operations

Hochschild's production in the first half was in line with our expectations. This was achieved despite more disruption at San Jose from Covid as well as a fire in the mine's crushing area which temporarily affected operations but did not impact our full- year production forecasts. Attributable production was 166,708 gold equivalent ounces (12.0 million silver equivalent ounces), which was lower than the first half of 2021 due to declining grades at Pallancata, scheduled lower grades at Inmaculada, and the stoppages at San Jose. This was delivered at an all-in sustaining cost ("AISC") of $1,371 per gold equivalent ounce ($19.0 per silver equivalent ounce). Inmaculada had another solid half with production of 111,766 gold equivalent ounces (H1 2021: 117,975 ounces) and AISC in line with expectations at $1,015 per gold equivalent ounce (H1 2021: $890 per ounce). Although costs are in line with guidance, the Company has started a cost optimisation plan to contend with inflationary pressures and commodity price volatility.

Pallancata's current mining area is almost depleted, and grades have been declining for several quarters with the result that the Company has updated the mine plan for 2022 and is considering all geological options with regards to the mine's future. Output reflected the declining grades and was 1.6 million silver equivalent ounces (H1 2021: 2.5 million ounces) with the mine's AISC unsurprisingly higher at $33.1 per silver equivalent ounce (H1 2021: $18.0 per ounce). In Argentina, the above-mentioned Covid and operational issues led to production of 4.7 million silver equivalent ounces in the first half (H1 2021: 5.0 million ounces) and also affected AISC which were at $22.9 per silver equivalent ounce (H1 2021: $16.9 per ounce).

Projects

The Hochschild project pipeline has been transformed in the last year with the purchase of Amarillo Gold in Brazil, which we completed on 1 April, and the commencement of earning-in 60% of Skeena Resource's interest in the Snip Gold project in British Columbia, Canada. Both projects deliver the prospect of near to medium-term growth and are expected to be highly value accretive additions to our portfolio with strong geological upside.

At the Mara Rosa project in the state of Goias in Brazil, we have made strong progress in the second quarter since taking control. We are now at 9% total completion with many long lead-time items already purchased and site preparation well advanced. A key remaining permit has recently been granted which will enable the team to start construction of the processing plant and other site infrastructure. We remain on track for first production at this low-cost project in the first half of 2024 and will provide regular progress updates over the next few quarters.

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The first half was also one of solid progress at the Snip project. Work on a pre-feasibility study began and included metallurgical work, processing plant designs and resource model updates. A drill campaign also commenced and has already delivered some encouraging intercepts with assay results expected through to the end of the year when we expect to complete the overall study.

Exploration

Our brownfield exploration programme started in the first half in the surrounding areas of all three of our mines. We have seen a good set of drilling results at Pallancata which, although outside the current permitted area, could represent the medium- term future for the mine. We will also continue to test our short-term targets close to the current mining operations for the remainder of the year. At San Jose, exploration also continued in the area surrounding the mine but in addition we began drilling the Ciclon project which is further away from the San Jose district and is one of a number of greenfield projects we control in the wider Santa Cruz province. Finally, at Inmaculada, we have decided to slow the brownfield exploration programme given that the resources added in the last few years have taken the mine-life to well over ten years and it is currently a strategic priority to allocate cash for capital expenditure requirements at our Mara Rosa advanced project.

Financial results

Both silver and gold production were lower, as guided, versus H1 2021 and consequently, when combined with a 10% fall in the average silver price achieved (partially offset by a 6% rise in the average gold price achieved), revenue decreased by 12% to $347.8 million (H1 2021: $394.8 million). AISC was $1,371 per gold equivalent ounce (H1 2021: $1,055 per ounce) with the rise reflecting the scheduled decreased production at Inmaculada and Pallancata, and the stoppages at San Jose. Adjusted EBITDA of $130.5 million (H1 2021: $198.5 million) mostly reflects the decreased production levels and increased costs whilst pre- exceptional earnings per share were $0.01 (H1 2021: $0.08 per share). Post-exceptional earnings per share were also lower at ($0.01) (H1 2021: $0.07), and include an impairment of $9.9 million in the investment in Aclara Resources Inc.

Financial position

Our balance sheet remains in a good position to fund our future capital requirements following the completion of the Amarillo Gold acquisition on 1 April 2022 ($123.4 million), with cash and cash equivalents of $204.3 million at the end of June (31 December 2021: $386.8 million) and net debt of $109.3 million (31 December 2021: net cash $86.3 million).

Outlook

Political, social and economic risks in Latin America as a whole remain elevated. Consequently, we are closely monitoring any new legislative, regulatory and local initiatives which could impact our exploration and operational activities. Nonetheless, we look forward to the second half which will feature further investment in our exciting Mara Rosa project as well as a pre- feasibility study at the Snip project. In addition, in Peru we can expect the completion of the modified Environmental Impact Study for Inmaculada and further brownfield exploration at Pallancata which aims to secure the medium-term future of the mine whilst we assess the short-term geological viability of the current mining area.

In such a complex world, our strategic direction remains firm, and we are sticking to our purpose - responsible and innovative mining committed to a better world. I am grateful to all our stakeholders for their continued support. The past year has shown our ability to operate through challenging times and we are confident that Hochschild has the experience and expertise to deliver on our ambitious strategic initiatives going forward. The Board is pleased to declare an interim dividend of 1.95 cents per share ($10.0 million).

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