deutsche bank brics metals & mining conference london… nov deutsche bank brics met… ·...

Hochschild Mining plc

Deutsche Bank BRICS Metals & Mining Conference London, 12 – 13 November 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

AgendaCompany overviewFinancial overviewOperational overviewAppendix

2

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)

• 4th largest primary silver producer (2006 11.6 moz Ag)

• Mid-sized gold producer (2006 196 koz Au)

• Significant emphasis on exploration

• Strong track record on corporate social responsibility

3

4

The 4th largest primary silverproducer…

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

268

261

246

196

168

135

Randgold

Meridian

Peter Hambro

Agnico Eagle

HochschildMining

Highland Gold

High River

Select companies 2006 production (koz Au) % of global

Randgold

Meridian

Peter Hambro

Agnico Eagle

Hochschild Mining

Highland Gold

High River

0.5%

0.3%

0.3%

0.3%

0.2%

0.2%

0.2%

Source: GFMS, Company filings

Significant production growth

0

15

30

45

2006 H107 H207E 2007E 2008E 2009E 2010E 2011E

Moz

Ag E

q.

23

11

~26

>50

Doubling production in the next 5 years

6

Focusing on the Americas

x

Resource delineation

Development projects

LegendMine

ArgentinaChileMexicoPeru

Exploration Offices

USA

Six operating mines in three countries & five exploration offices

x

San Felipe (70%)Resource delineation Polymetalic deposit Production 2009

Moris (70%)Open pit mine Gold doreSince Q307

Pallancata (60%)Underground mine Silver/gold conc.Since Q307

San José (51%)Underground mineGold/silver dore Since Q207

Arcata (100%)Underground mine Silver/gold conc. Since 1964

Ares (100%)Underground minGold/silver doreSince 1998

Selene (100%)Underground mineSilver/gold doreSince2003

x

x

7

Exploiting our niche — high grade underground mining

8

Alexia Vein Mariana Vein

Ramal 2 Vein

Macarena

• Proving up R&R more expensive than open pit

• Long reserve life of mine not economically rationale

• Industry average reserve life of 4 years1

• Arcata has had average mine life of 3 years since 1990 and has been in production for over 40 years

¹ Source: JPMorgan Research

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)

9

• 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

Extending reserve life

2.8

3.74.1

0

1

2

3

4

5

At IPO End 2006 Mid 2007

Ave

rage r

ese

rve life

Stated goal: 4 year reserve life + 4 year resource tail at all mines

10

Diversification

19%

12%

69%

Peru Argentina Mexico

Resources by country

11

Resources by commodity

58%27%

11%1%2%

Silver Gold Zinc Lead Copper

12

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


13

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.

14

Main actions to achieve 2007 & 2011 production targetsInvesting heavily for growth: ~$310 million capex (2006—2009)

Ares

Arcata

Selene

San José

Pallancata

San Felipe

2007: increased capacity by 16%

Action Capex US$m

2007: increased capacity by 20%2009: increasing capacity by 25%

2007: increased capacity by 100%

Q207: commenced production2008: increasing capacity by 100%

0.3

0.226

10

96

15Moris

38

20Q307: commenced production

Mid-07: entered feasibilityQ409: scheduled commencement

2

Q307: commenced production

~ 110

Capital spend2006

20072007/2008

2007

2006/2007

2007

2007/2008

2007

20072008/2009

1515

Stock price performance…

80

90

100

110

120

130

140

Nov-06 Dec-06 Jan-07 Feb-07 Mar-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-070

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

Volume Hochschild Gold Silver

100% un-hedged exposure to gold and silver

Rebased to 100 Volume (000s)

16

…relative to our peersIPO to date HOC: 350p – 474p 2007 to date HOC: 404p – 474p

Hochschild 35.4%

(34.2)%12.9%

50.8%

32.2%23.0%

19.9%

(20.8)%21.0%

29.5%

16.8%23.1%

43.8%

17.7%12.2%

9.9%9.1%

49.7%23.3%

18.5%

Source: Datastream, 6 November 2007

UK

peers

NA

peers

Co

mm

od

-it

ies

Ind

ices

Hochschild

Highland Gold

Peter Hambro

Apex Silver

Gold

Silver

FTSE 350 Mining

TSX

Randgold

FTSE 250

S&P 500

DJ Euro Stoxx

Hecla

Pan American

Coeur D’Alene

Meridian

17.3%

27.9%

24.5%16.5%

7.4%

10.8%

26.9%

12.3%19.6%

46.4%

10.6%7.0%

5.9%1.4%

48.7%48.2%

(27.2)%23.2%

14.3%

(22.4)%

Average

Average

Average

Average

Peter Hambro

Randgold

Hecla

Silver

Gold

TSX

FTSE 350 Mining

DJ Euro Stoxx

Highland Gold

S&P 500

FTSE 250

Apex Silver

Pan American

Coeur D’Alene

Meridian

Average

Average

Average

Average

17


18

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

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


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

20* June 2007

Production


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


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

Production


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

• 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

23


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

24


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

AresArcataSelene

San JoséPallancata

Moris

Gonzalito

Manantiales

La Flora Tres Chepas Gavilanes Ccello Punta

596,470 Has. 77,600 Has. 181,425 Has. 60,888.99 Has.

Patahuasi

San Luis del Cordero

New opportunities To Divest / Drop / JV

25

Exploration offices in Peru, Argentina, Mexico, Chile and the USA

26

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

26


27

El Gachi — Mexico (70%)

27


• 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

28

Azuca — Peru (100%)

28


• >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)

Delivering IPO commitments

• 100% hedge free

• Strong financial capacity– $310 milllion capex for operations

(2006 – 2009)– $500 – $750 million available for

acquisitions

• 100% long-term debt repaid

• Actively looking for acquisitions

• Dividends declared & paid

• Unit costs contained despite industry pressures

• 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

29

Finance

AgendaCompany overviewFinancials & valuationOperations & projectsAppendix

30

Corporate information

65%

25%

8% 2%UKUSCanadaRoW

31

Stock exchange listing London Stock Exchange

Ordinary shares in issue 307,350,266

Free float 29%

Institutional shareholders >3%

Blackrock

Stock information

Institutional ownership split

Trading statistics

Market cap US$2.26bn

3 mo. ADTV 529,178 shares

3 mo. ADTV $4.0m per day

52-wk high/low (p) 511 (7Nov07) / 299 (13Jun07)

Analyst coverage

70%

30%

Buy Hold Sell

Institution Tgt price Recommendation

Cazenove 423 Outperform

Goldman Sachs 423 Neutral

UBS 500 Buy

Citi 425 Buy

Canaccord Adams 450 Buy

HSBC 400 Neutral

JP Morgan 434 Overweight

32

33

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 BursteinCorporate Exploration Manager

Raymond Jannas Corporate Exploration Manager

Executive Directors & Management

Hochschild Mining plc

Deutsche Bank BRICS Metals & Mining Conference London, 12 – 13 November 2007

deutsche bank brics metals & mining conference london… nov deutsche bank brics met… ·...

Documents