Responsible development
in the Americas
Hochschild Mining PLC
Annual Report & Accounts 2022
2022 Highlights
5.27
ECO SCORE
2021: 5.29
1.37
LTIFR
2021: 1.26
US$175m
NET CASH/(DEBT)
2021: (US$86m)
US$18.9/oz Ag Eq
AISC
2021: $16.0/oz Ag Eq
US$249m
206,013oz
ADJUSTED EBITDA
2021: US$382m
US$0.01
ADJUSTED BASIC EPS
2021: US$0.14
ATTRIB. GOLD PRODUCTION
2021: 221,419oz
11.0m oz
ATTRIB. SILVER PRODUCTION
2021: 12.2m oz
Strategic Report
At a Glance
Key highlights
Delivering long-term growth
Market review
Chairman’s statement
Chief Executive Officer’s review
Business model
Our strategy
Key Performance Indicators
Operating review
Financial review
Stakeholder engagement
Sustainability report
Task force on climate-related
financial disclosures (TCFD)
Risk management
Viability statement
Governance
Board of Directors
Senior management
Directors’ Report
Corporate Governance Report
Supplementary information
Directors’ Remuneration Report
Statement of Directors’
responsibilities
Financial Statements
Independent Auditor’s Report
Consolidated income statement
Consolidated statement
of comprehensive income
Consolidated statement of
financial position
Consolidated statement of cash flows
Consolidated statement
of changes in equity
Notes to the consolidated
financial statements
Parent company statement
of financial position
Parent company statement
of cash flows
Parent company statement
of changes in equity
Notes to the parent company
financial statements
Further Information
Profit by operation
Reserves and resources
Shareholder information
Forward looking statements
2
4
6
10
14
18
22
24
26
28
36
45
50
68
76
84
86
88
89
91
108
112
132
133
141
141
142
143
144
145
193
194
195
196
206
207
210
211
Responsible development
in the Americas
Hochschild is focused on responsible development
at all our mines and projects across the Americas.
We always prioritise value creation for our every
stakeholder and a key part of the Company’s ethos
has been strong relationships with our communities
throughout the mining life cycle.
Furthermore, our cultural attributes reflect
our purpose and guide our day-to-day conduct,
providing the foundation of our culture and what
it means to work at Hochschild. The cornerstone
of our corporate purpose is our collective
sense of responsibility.
1 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information AT A GLANCE
Who we are and where we operate
We are a leading underground precious metals company,
focusing on the exploration, mining, processing and sale
of gold and silver in the Americas.
Where we operate
Mining operations
Hochschild operates three
underground epithermal deposits,
two of which are located in the
south-west of Peru and one in the
southern Argentinian province of
Santa Cruz.
Operation
Inmaculada (Peru)
Pallancata (Peru)
San Jose (Argentina)
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.
Advanced Project
Mara Rosa (Brazil)
Development Projects
Volcan (Chile)
Exploration Projects
Ares (Peru)
Arcata (Peru)
Azuca (Peru)
Crespo (Peru)
8
9
2
1
7
6
4
5
3
2 | Hochschild Mining PLC Annual Report & Accounts 2022
11.0m oz
206k oz
SILVER PRODUCTION IN 2022
GOLD PRODUCTION IN 2022
Peru
Brazil
Argentina
4,950 employees (incl. contractors)
1,383 employees (incl. contractors)
1,745 employees (incl. contractors)
$76.5m wages paid
$0.9m wages paid
$67.6m wages paid
$19.7m taxes and royalties
$21.2m local procurement spend
$0.7m taxes and royalties
$46.9m local procurement spend
$51.3m local procurement spend
3 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportGovernanceFinancial StatementsFurther Information KEY HIGHLIGHTS
Operational Highlights
Resources discovered in
2022 at the Royropata zone
close to the Pallancata mine
51m oz Ag Eq
Company silver production in 2022
11m oz Ag
7
YEARS
Inmaculada’s enviable
track record of
meeting market
guidance
237,289oz Au Eq
Inmaculada production in 2022
41%
Mara Rosa project
completion at the
end of 2022
4 | Hochschild Mining PLC Annual Report & Accounts 2022
Social & Environmental Highlights
$119.4m
Value of local goods and
services procured in Peru,
Argentina and Brazil
2022 ECO Score,
(out of 6)
5.27
Local mine
workforce as a
percentage of total
mine workforce
61%
Significant year-on-year reduction in
Accident Severity Rate, illustrating the
success of our Safety 2.0 Action Plan
Amount spent or donated
to benefit local
communities and
authorities
$7.0m
In our efforts to minimise our
environmental footprint, we have
reduced our potable water
consumption by 58% since 2015
5 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information DELIVERING LONG-TERM GROWTH
BROWNFIELD
Inmaculada:
A key Peruvian
mining asset
Hochschild is proud of its flagship mine in the
Ayacucho region of south-west Peru. We have
invested well over $1 billion in the asset over the
last decade and we believe it has the potential to
continue to generate value for all its stakeholders
for many decades to come.
6 | Hochschild Mining PLC Annual Report & Accounts 2022
H u a r m a p a t a
Pucupucu
L
i
n
e
a
n
i
e
n
t
o
4
Milacrop
Laura
Luz
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E
a N
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ulia
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gela N
n
A
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S h a k i r a
B e a t r i z
S a l v a d o r
K e y l a
a li a
h
T
Eduardo N
E
d
u
S h a k i r a E
i z E
r
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a
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o
Pit Juliana
F. San Salvador
l e r
M i
l
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a
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a
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F. Lit
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a li a 1
m
o
n
A
A n o m a l
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Ano m alia 6
F. E
d
u
a
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d
o
Inmaculada property area and veins
Veins
Potential
Resources
C
r
e
s
t
o
n
M
i
n
a
s
c
u
c
h
a
3m oz
AU EQ DISCOVERED SINCE 2015
In 2015, production commenced at Hochschild’s
largest underground mine to date.
Since that time the operation has built up a reputation
in the industry as a world-class, high-grade precious
metal mine with an enviable record of meeting its
annual forecasts. Several years of low-cost brownfield
exploration since 2018 have hugely expanded the
resource base and revealed a substantial epithermal
vein district which the Company believes will support
the operation for a further 20 years or more.
Almost 3,000 Peruvians are currently employed at
Inmaculada and given the inherently high-risk profile
of mining, we recognise that our people are our most
valuable asset. Ensuring employee safety is a key
measure for our corporate success and over the last
few years we have updated our safety training and
action plan for the operation with considerable
progress made and resulting in industry-leading
operational safety performance.
We are also justifiably proud of the work we do to
support the local communities surrounding the mine.
We have invested our resources to understand their
needs and expectations as well as of those of the
local government and have focused on areas such
as education, connectivity, health and nutrition, and
socio-economic development. We believe that
community and governmental collaboration can
ensure the Company’s social investment strategies
are implemented successfully and have
a long-lasting impact.
Guidance vs Actual (000 GEO*)
Budget
Actual performance
231
230
242
239
207
253
250
269
252
236
237
220
184
185
2016
2017
2018
2019
2020
2021
2022
*Gold equivalent ounces (GEO) with silver ounces converted using 72x ratio. 2020 target revised due to Covid-related stoppages.
7 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information
DELIVERING LONG-TERM GROWTH
PROJECT PIPELINE
Mara Rosa
Our newest development project
signals Hochschild’s first entry
into Brazil, a country which is
one of the biggest global players
in the mining sector.
8 | Hochschild Mining PLC Annual Report & Accounts 2022
Mara Rosa schedule
Earthworks
and Civil
Mining
Processing and
Infrastructure
2022
Q3
Q2
Earthworks-Plant
Q4
Q1
Q2
Q3
Q4
Q1
Q2
2023
2024
Civil Works Crushing
Civil Works Plant
Pre stripping
Stock pile 1-2-3
Dry Stacking
Processing Plant
Main Substation
In April 2022, we acquired Amarillo Gold and its
flagship Mara Rosa gold project in Brazil. Mara Rosa
is an open pit gold project located in the mining
friendly jurisdiction of Goiás State.
This brownfield project benefits from existing
infrastructure and in 2022, having received all the
requisite permits, we made excellent progress in
advancing construction with the completion rate
currently at over 70%. We are on track to deliver first
production in the first half of 2024 with output set to
be 100,000 ounces of gold in the first four years of
an initial 10-year mine life.
The purchase of this asset aligned with our core
strengths and long-term strategy of acquiring and
optimising development stage projects in the
Americas. It has significantly enhanced our project
pipeline and was the result of a long-term Company
review process of a wide range of growth opportunities.
Mara Rosa is an attractive low-cost project with
relatively near-term production and strong exploration
upside potential. We believe we are ideally placed to
take the project to production and generate strong
sustainable value for the Company.
The project has benefited from a complementary
ESG-led approach with strong local community and
government support and we have continued that
focus during 2022. Environmental controls to monitor
construction work have been executed and reported
to local authorities. In September 2022, the ‘Knowledge
Trail’ was inaugurated in the presence of local
authorities and the Hochschild Chief Operating
Officer. This consists of an open ecological area with
13 stations highlighting local culture, the environment,
education and project history and will be used as a
learning tool for local education.
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 surpassed 500,000 of
injury free working hours and 2022 Frequency and
Severity Indexes were zero.
Comm. / startup
First Gold Production
Location in Brazil
B R A Z I L
M A R A R O S A
B R A S I L I A
G O I A S S T A T E , B R A Z I L
M A R A R O S A
Serra Grande
(Anglo Gold)
Chapada
(Lundin Mining)
Pilar
(Pilar Gold)
We believe we are ideally
placed to take the project
to production and generate
strong sustainable value
for the Company.”
100k oz
TARGETE D OUTPUT FOR FIRST FOUR YEARS OF PRODUCTION
9 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information MARKET REVIEW
Working in changing markets
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.
Gold market summary
Demand
Demand
Supply
Supply
Jewellery
56%
Technology
8%
Investment
25%
Central banks
and other
institutions
11%
%
%
Mine production
76%
Recycled gold
24%
Jewellery 56%
Technology 8%
Investment 25%
Central banks & other inst. 11%
Mine production 76%
Recycled gold 24%
10 | Hochschild Mining PLC Annual Report & Accounts 2022
Gold and silver prices in 2022 (indexed)
115
110
105
100
95
90
85
80
75
Jan 22
Feb 22
Mar 22
Silver (NYM $/ozt) Continuous (SI00-USA)
Source: Nasdaq
Apr 22
May 22
Gold (NYM $/ozt) Continuous (GC00-USA)
Jun 22
Jul 22
Aug 22
Sep 22
Oct 22
Nov 22
Dec 22
Gold experienced a volatile year with
peaks and troughs dictated by reaction
to war in Ukraine and the resulting worries
over inflation causing the global central
bank’s subsequent raising of interest rates.
The price rose early in the year to over
US$2,000 an ounce but as interest rates
were increased from March onwards the
price fell some 20% to around US$1,650
by early November before finishing the
year with a rally to end the year flat at
US$1,826. The average for the year was
approximately $1,805.
Annual gold demand (excluding OTC)
in 2022 increased by 18% year-on-year,
hitting 4,741t – the highest annual total
since 2011. Boosted by a record fourth
quarter, demand for gold was propelled
by hefty central bank-buying and
persistently strong retail investment.
Annual central bank demand more than
doubled to 1,136t in 2022, up from 450t
the year before and to a new 55-year
record high. Purchases in Q4 2022 alone
reached 417t, bringing the total for the
second half of 2022 to more than 800t.
Investment demand (excluding OTC) in
2022 was up 10% on the previous year.
The increase was the result of two factors:
a notable slowdown in ETF outflows and
strong gold bar and coin demand. Gold
bars and coins continued to hold favour
with investors in several countries around
the world, which helped to offset weakness
in China. Total European gold bar and
coin investment for 2022 surpassed 300t,
aided by persistently robust German
demand. There was also significant growth
in the Middle East, where annual demand
increased by 42% year-on-year. Jewellery
demand softened slightly in 2022, down
3% at 2,086t. This weakness was largely
driven by the marked drop in Chinese
annual jewellery demand, down 15% as
consumer activity was curtailed by
ongoing Covid lockdowns for most of
the year. The gold price rally in Q4 also
contributed to the annual decline in
jewellery demand.
Total annual supply in 2022 continued
its gentle upwards trajectory, up by 2%
year-on-year to 4,755t and remaining
above pre-pandemic levels. In particular,
mine production increased to 3,612t
– a four-year high.
Possible drivers for gold in 2023
Inflation was a major concern in 2022
to global economies and is at levels not
seen since the 1970s. The consequent
interest rate increases across the globe
may increase the risk of recession.
Inflation may reverse and the demand
for gold could fall.
Gold investment demand and prices
should be expected to benefit from
concerns about inflation, government
spending, and related economic issues.
Any weakening of the US dollar and
the moderating pace of interest rate
hikes could have positive implications
for gold-backed ETF demand.
Jewellery consumption is expected
to remain resilient, bolstered by a
release of pent-up demand as China
re-opens but possibly dragged down
by the squeeze on consumer spending
if there is a more severe downturn.
Gold has a long precedent for
performing well in turbulent economic
times, highlighting its value as a
long-term strategic asset.
Source: World Gold Council, Metals Focus
11 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information MARKET REVIEW CONTINUED
Silver market summary
Demand
Demand
Supply
Supply
Industrial Uses 45%
Photography 2%
Jewellery 19%
Silverware 6%
Net physical
investment 27%
Net hedging
demand 0%
%
%
Mine production
82%
Recycling
18%
Industrial 45%
Photography 2%
Jewellery 19%
Silverware 6%
Net physical investment 27%
Net hedging demand 0%
Mine production 82%
Recycling 18%
12 | Hochschild Mining PLC Annual Report & Accounts 2022
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.
The silver price movements for the year
were similar to gold, rising early in the
year to almost $27 an ounce but as
interest rates were increased from March
onwards the price fell by 34% to around
$17.5 by early September before finishing
the year with a strong rally to end the year
up 3% at $24. The average for the year
was approximately $21.8 an ounce.
Silver demand is forecast to have reached
a record total in 2022, driven by new highs
for industrial demand, jewellery and
silverware offtake and physical investment.
The figure is expected to be 1.21 billion ounces
in 2022, up by 16% from 2021. Each key
segment of demand, except photography,
is set to post a new peak. Industrial demand
is on course to have grown to 539 million
ounces. Developments such as ongoing
vehicle electrification (despite sluggish
vehicle sales), growing adoption of 5G
technologies and government commitments
to green infrastructure will have industrial
demand overcome macro-economic
headwinds and weaker consumer electronics
demand. The global silver market is forecast
to record a second consecutive deficit in 2022
and at 194moz, this will be a multi-decade
high and four times the level seen in 2021.
Physical investment in 2022 is expected
to have jumped by 18% to 329moz, which
would also be a new record. Support has
come from investor fears of high inflation,
the Russia-Ukraine war, recessionary
concerns, mistrust in government, and
buying on price dips. The rise was boosted
further by a (near-doubling) of Indian
demand, a recovery from a slump last year,
with investors often taking advantage of
lower rupee prices.
ETF demand, in contrast, is forecast to
have seen the largest annual decline in
holdings totaling 110moz, due in part to
silver’s higher volatility than gold, which
has made it more vulnerable to profit-
taking. Institutional investors are expected
to retain a bearish stance as real yields are
likely to strengthen, encouraging further
distance from the white metal.
Possible drivers for silver in 2023
U.S. Fed could continue to lifting interest
rates, raising the opportunity cost for
precious metals and this, combined
with rising yields and ongoing dollar
strength, could continue to exert
pressure on silver prices.
Silver’s industrial nature could mean
that, as fear grow over a possible
recession, this will weigh on sentiment,
despite the extremely favourable
long-term fundamental backdrop.
Mined silver production is expected
to have risen by 1% year-on-year to
830mz. Output from Mexico will rise
most significantly as several major new
silver projects that have come online in
recent years continue to ramp-up to
full production rates. By-product silver
production from existing mines and new
projects in Chile will also have been a
major contributor to growth. Partially
offsetting these rises will be lower
output from major silver producers
such as Peru, China and Russia.
Silver, like gold, has a track record
for performing well in turbulent
economic times as an alternative
store-of-value to gold.
Source: Silver Institute, Metals Focus
13 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information CHAIRMAN’S STATEMENT
Another important
year for strategic
development
Eduardo Hochschild
Chairman
14 | Hochschild Mining PLC Annual Report & Accounts 2022
Dear shareholder
During the past year, our Company has been
directly and indirectly impacted by a range
of political, social and regulatory challenges.
However, the Board and I want to congratulate our
management team and all our colleagues on a highly
creditable operational performance and ensuring
that our steadfast commitment to the environment,
stakeholders and communities remains a firm and
an integral part of our corporate purpose. At the time
of writing, we are still waiting for the final decision
from the Peruvian Government on the Modification
of the Environmental Impact Assessment (“MEIA”)
for Inmaculada but I would particularly like to thank
the teams involved in four years of hard work. It has
proved to be an enormous undertaking, but I am sure
that, whatever the decision, Inmaculada will remain a
key part of Hochschild’s strategy for decades to come.
We continued with our focus on safety and are
delighted that, in 2022, our key performance indicators
highlighted a strong performance in this area with
both the accident frequency rate and accident severity
indices demonstrating the successful implementation
of our safety culture plan. As mentioned last year,
following a trial period, we launched the Seguscore
in 2022 which is being used to appraise the safety
performance of each mining unit based on, not only
using our traditional measures but also on the result
of internal and external safety audits.
Acknowledging the impact of our activities on the
environment, I am proud that through the “Green
Challenges” set for our operations, we were able to
reduce our water consumption to the lowest level
since 2015. This should not be considered a one-off
achievement but a reflection of an environmentally
conscious culture that has evolved since the adoption
of our internal measure, the ECO Score. Work is also
on track to establish later this year our 2030 interim
targets in order to achieve Net Zero by 2050.
We have continued with our valuable community
relations initiatives which, in line with the Company’s
approach, see resources dedicated to education,
health and nutrition, and sustainable development.
During the year, we facilitated the delivery of technical
skills training through the establishment of three
digital centres in communities in southern Peru as
part of our Future Connection programme which has
already benefited over 180 students. We also worked
in collaboration with the Peruvian Health Ministry in
our “Always Healthy” programme which ran campaigns
staffed by a multi-disciplinary team of medical
practitioners thereby extending the reach of
healthcare services. Our Community Relations team
has also continued with the various programmes we
have put in place to support local farmers in marketing
and selling their produce which, in certain cases, are
destined for international markets.
2022 was another important year for strategic
development. In April, we completed the acquisition
of Amarillo Gold with its Mara Rosa gold project in
Brazil, which is due to commence production in the
first half of 2024. Since then, we have made excellent
progress at the project with over 70% constructed
already and we are on schedule and in line with our
budget. We also delivered a Preliminary Economic
Assessment on our Snip project in British Columbia,
Canada which showed positive investment returns
at conservative gold prices. However, in line with
Hochschild’s capital allocation strategy where the focus
is on the Mara Rosa construction, we recently made
the decision to terminate the option on the project.
15 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information CHAIRMAN’S STATEMENT CONTINUED
We have continued with our valuable
community relations initiatives which, in line
with the Company’s approach, see resources
dedicated to education, health and nutrition,
and sustainable development.”
At the forthcoming AGM, Nicolas and Eileen Kamerick
will be stepping down from the Board. Nicolas will be
taking up the role of Corporate Development Manager
within the Company, reporting to the Director of
Technical Services. We look forward to continuing to
work with Nicolas in his new role. Eileen will be leaving
the Board after a tenure of over six years. I would like
to take this opportunity to express my gratitude to
Eileen for chairing the Audit Committee with the utmost
diligence and for her commitment to the Company.
On behalf of the Directors, we wish Eileen all the very
best for the future. Jill Gardiner has agreed to chair
the Audit Committee on an interim basis with Mike
Sylvestre also joining the committee.
Outlook
In 2022, precious metal prices experienced considerable
volatility. Gold rose to over $2,000/ounce in the first
quarter of the year as the Ukraine war started but then
fell steadily by 20% to just over $1,600 by November
as expectation of global interest rate rises became
the theme. A rebound in December left the metal flat
versus 2021 with silver rising by 3% during the year.
These increases have continued in the first quarter
of 2023 and consequently, we are confident that when
combined with our operational track record and
good cost control, we can maintain significant levels
of profitability and continued good cash flow. Strong
balance sheet discipline will be crucial as construction
at Mara Rosa continues towards its completion in
2024 and therefore the Board feels that it would be
imprudent to pay a final dividend for 2022 at this
stage but will reassess the potential for capital return
at the interim results in August.
I would like to express gratitude to all stakeholders
for their ongoing support in what has been a tough
period for the Company. I also want to emphasise
that we are clear-eyed in viewing the task ahead
of us. We will position the Company’s strategy in line
with the Peruvian government’s decision on the
Inmaculada’s MEIA extension and we hope that it will
provide renewed impetus. We look forward to a year
of opportunity and to maintaining the very highest
levels of safety, environmental stewardship, responsible
business practices and community support as we
work to deliver on our commitments to all stakeholders.
Eduardo Hochschild
Chairman
19 April 2023
Turning to our operations, the team had to contend
with substantial disruption during the year, including
a fire in the crushing area at San Jose, continued
Covid-related labour restrictions in Argentina and local
and national social disturbances in Peru. However, we
are proud that we were able to maintain a constructive
dialogue with our communities and once again able to
deliver a robust operating performance, only moderately
below our annual production target and in line on costs.
In addition, precious metal prices remained relatively
high, so our business continued to generate strong
cashflow, especially in the fourth quarter, and we
therefore are in a good position to deliver on our capital
commitments, including construction at Mara Rosa.
In 2022, the brownfield exploration team made a
significant discovery close to Pallancata, within the
Royropata zone. 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 50 million silver 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
likely necessity to place the mine on temporary care
and maintenance at some stage in 2023. At San Jose,
we have also been able to replace resources once again
whilst at Inmaculada, the team is planning a busy year
of drilling subject to the Inmaculada MEIA approval.
During the year, we saw changes in the composition
of the Board with the retirement of Graham Birch and
Dionisio Romero, who stepped down as Non-Executive
Directors at the 2022 AGM. In their place, we welcomed
Mike Sylvestre and Nicolas Hochschild.
16 | Hochschild Mining PLC Annual Report & Accounts 2022
17 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information CHIEF EXECUTIVE OFFICER’S REVIEW
We remain resolutely
committed to our
sustainability strategy
Ignacio Bustamante
Chief Executive Officer
18 | Hochschild Mining PLC Annual Report & Accounts 2022
I am proud that during 2022, we procured goods
and services worth almost $120m from locally based
suppliers. We consider this one of our key contributions
to the communities where we operate and are
committed to continuing.”
T he volatile political, economic and social
situation has continued to impact Peru in
recent months, and this has resulted in a tough
operating environment for Hochschild’s two mines.
However, the team’s response has once again been
something to be proud of. We remain confident that
the permitting process for Inmaculada’s MEIA will
conclude during Q2 2023 and believe the outcome
will be positive. We believe this world class deposit will
continue to underpin our Company for many decades
to come and are looking forward to reigniting the
successful exploration programme and continuing to
invest in the Ayacucho region and its communities.
However, in advance of the government’s decision,
the Company has been preparing for a number of
scenarios and the resulting financing requirements
going forward. These include planning in the event
of an outright MEIA denial and the resulting requirement
to resubmit the permit application as well as the
potential for additional short-to-medium term delays.
We have also recently taken advantage of precious
metal price strength to hedge a total of 29,250 ounces
of gold at a forward price of $2,047 per ounce in order
to realise a degree of cashflow certainty for the
remainder of the year. In addition, for 2024 we have
also hedged a further 27,600 ounces of gold for the
period between March and December at a forward
price of $2,100 per ounce. We believe that such
a strategy is appropriate whilst construction
at Mara Rosa is ongoing.
ESG
We remain resolutely committed to our sustainability
strategy, making consistent progress year-to-year in
serving our communities, protecting the environment,
promoting health and safety, supporting our people,
and ensuring responsible business practices. In line
with our decision to publish a standalone sustainability
report every other year, the Annual Report includes
a sustainability section that provides a detailed
account of the progress made in all these critical
fronts. I am proud to report that our progress in ESG
has been externally recognised by several ESG rating
agencies. I look forward to next year’s standalone
sustainability report where we will be able to further
highlight our leadership in ESG-related matters.
Operations
Hochschild’s output in 2022 continued our good
track record. Overall attributable production was
358,826 gold equivalent ounces (25.8 million silver
equivalent ounces) which was, as expected lower
than the 2021 figure of 390,496 gold equivalent
ounces (28.1 million silver equivalent ounces) mainly
due to scheduled grade reductions at Inmaculada
and Pallancata. This was produced at an all-in
sustaining cost of $1,364 per gold equivalent ounce
($18.9 per silver equivalent ounce) which was slightly
higher than 2021 reflecting the lower grades at both
the Peruvian assets but boosted by the implementation
of a cost optimisation plan to contend with inflationary
pressures and commodity price volatility.
Despite substantial community disruption in the
final quarter, the team at Inmaculada had another
commendable year producing 237,289 gold equivalent
ounces (2021: 252,337 ounces) at $1,058 per gold
equivalent ounce. At Pallancata, production in 2022
reflected a mining area that is almost depleted with
delivery of 3.2 million silver equivalent ounces (2021:
4.2 million ounces) at a cost of $32.4 per silver equivalent
ounce. In Argentina, there was more disruption at
San Jose from Covid as well as a fire in the mine’s
crushing area which temporarily affected operations
but, nevertheless, production was only marginally
below the 2021 figure at 11.0 million silver equivalent
ounces (2021: 11.3 million ounces), with costs at
$21.7 per silver equivalent ounce.
11.0m oz
SILVER PRODUCTION
206k oz
GOLD PRODUCTION
$249m
ADJUSTED EBITDA
19 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information CHIEF EXECUTIVE OFFICER’S REVIEW CONTINUED
Projects
We completed the purchase of Amarillo Gold in Brazil
on 1 April 2022 and have made strong progress at
the Mara Rosa project since taking control. We are
now over 70% of the way through the build with many
long lead-time items purchased and construction
of the plant and other site infrastructure well advanced.
We remain on track for first production at this low-cost
project in the first half of 2024 and have also been
drilling several prospective exploration targets in
the surrounding area which, in time, may provide the
long-term upside for the project.
Work at the Snip project in Canada progressed well
during the year and included metallurgy, processing
plant designs and resource model updates as well as
an additional drill campaign. This culminated in the
completion of a Preliminary Economic Assessment
at the end of the year which provided the basis for
potential next steps on the project. However, early
in April 2023, we decided to terminate the option on
the project due to the need to concentrate on other
capital allocation priorities, including expenditure
in Brazil and brownfield exploration at the mines.
Exploration
The brownfield programme for 2022 was focused
on Pallancata and San Jose and I am pleased to report
that our team have had another highly successful
campaign, replacing resources at San Jose, and
delivering a major discovery close to Pallancata.
The initial discovered resource from the new Royropata
zone to the west of existing operations was over 50
million silver equivalent ounces. We have already
commenced the permitting process and are excited
that, with strong exploration upside potential and
high-grade structures (848 grammes per tonne silver
equivalent) and widths averaging five metres,
the new zone can be the driver of Pallancata’s
medium-to-long-term future.
Financial position
Production has remained reliable and with the
existing strong price environment, the Company
is generating healthy cashflow. Cash and cash
equivalents of $143.8 million at the end of December
(2021: $386.8 million) reflected the net payment of
approximately C$135 million for Amarillo Gold and
expenditure of just over $21 million at the Snip project.
This has led to a net debt position of $175.1 million
(31 December 2021: $86.3 million net cash). In addition,
the Company closed a $200 million committed
medium-term debt facility with BBVA and Scotiabank
in December 2022. The loan has a maturity of five
years and two year of grace period, at a cost SOFR +
2.05%. The facility will be become available on receipt
of the Inmaculada MEIA approval.
Financial results
Total Group production was lower versus 2021 and,
combined with a 6% fall in the silver price received
and a flat year-on-year gold price, revenue decreased
by 9% to $735.6 million (2021: $811.4 million). All-in
sustaining costs were in line with guidance at $1,364
per gold equivalent ounce or $18.9 per silver equivalent
ounce (2021: $1,153 per ounce/$16.0 per ounce).
Adjusted EBITDA of $249.6 million (2021: $382.8 million)
mostly reflects reduced production levels and increased
cost of sales. Pre-exceptional earnings per share
of $0.01 (2021: $0.14 per share) includes the impact
of an increase in exploration expenses due to project
expenditure at Snip in Canada and a reduction in
income tax mainly due to the lower profitability. Post-
exceptional earnings per share was lower at $0.01
(2021: $0.15 earnings per share) and includes an
impairment of the investment in Aclara Resources
Inc. of $9.9 million, the reversal of impairment loss
in Pallancata of $15.5 million resulting from the
new resources discovered in Royropata, and the
impairment of the Azuca project’s evaluation and
exploration costs of $4.2 million. The net after-tax
effect of exceptional items is a loss of $1.9 million.
Outlook
We expect attributable production in 2023 of between
301,000–314,000 gold equivalent ounces (25.0 to 26.0
million silver equivalent ounces) assuming the silver
to gold ratio of 83:1 (the average ratio for 2022). This
will be driven by: 204,000–211,000 gold equivalent
ounces from Inmaculada; an attributable contribution
of 6.1 to 6.3 million silver equivalent ounces from
San Jose; and 2.0–2.9 million ounces from Pallancata.
All-in sustaining costs for operations are expected
at between $1,370 and $1,450 per gold equivalent
ounce ($16.5 to $17.5 per silver equivalent ounce).
This forecast reflects slightly lower output and
a rise in mine development costs at Inmaculada
in addition to a further reduced contribution
at Pallancata before its anticipated move to care
and maintenance later in 2023.
The achievement of the Inmaculada MEIA will be
a key milestone for our Company and we are looking
forward to the next twenty years and more from this
world class mine. Although 2023 has started with
more political and social volatility in Peru, we believe
that Hochschild’s longstanding focus on our ESG
initiatives will stand us in good stead to withstand
any future challenges. We remain excited by the
year ahead with our Brazil construction moving
ahead quickly and strong exploration potential
at all our existing deposits.
Ignacio Bustamante
Chief Executive Officer
19 April 2023
20 | Hochschild Mining PLC Annual Report & Accounts 2022
“ We believe that
Hochschild’s longstanding
focus on our ESG initiatives
will stand us in good stead
to withstand any future
challenges.”
Ignacio Bustamante
Chief Executive Officer
21 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information BUSINESS MODEL
Benefiting all our stakeholders
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.
Inputs
Our core activities
These inputs are key in consistently
achieving productive, safe and
environmentally sound operations.
Technical expertise is the key attribute
underpinning our business model.
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
in complex geological conditions
throughout the Americas.
Experience
We have steadily built an
enviable track record in
managing mines, developing
projects, identifying growth
options and utilising best
practice social environmental
and policies.
Discipline
We deploy capital in a disciplined
manner underpinned by our
longstanding 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.
ENVIRONMENT
Discover
Develop
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
greenfield and project development
strategy involves a significant
number of drilling campaigns at
premium precious metal prospects
across the Americas. These can be
executed in-house or in partnership
with a variety of reputable
exploration companies with
attached earn-in or joint venture
options if successful.
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 unrivalled 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.
COMMUNITY
22 | Hochschild Mining PLC Annual Report & Accounts 2022
Outputs
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.
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.
61%
LOCAL WORKFORCE
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.
55%
WORKFORCE
REPRESENTED BY
A TRADE UNION
$10m
INTERIM DIVIDEND
PAID IN 2022
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 which included
an 2022 interim dividend of $10 million despite the
significant disruption to our operations from the
Peruvian political situation and the delay to the
approval of the Inmaculada MEIA.
HEALTH & SAFETY
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.
SUSTAINABILITY
23 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information OUR STR ATEGY
Strategic development and growth
Our strategy focuses on four key paths to
secure low-cost growth.
Brownfield
Life-of-mine
increases
Improve quality of
resources
Spare capacity available
Greenfield
Project Pipeline
Strategic alliances
Portfolio
streamlined
Advancing Mara Rosa
project
Early/
development stage
Staking properties
Progressing drill-ready
projects
Optimising early-stage
projects
Further drilling
Control (Acquisition/JVs)
Geological upside
ROIC:12-15%
2022 activities
2022 activities
2022 activities
2022 activities
– Significant discovery
– All greenfield projects
– Completed acquisition
– Completed acquisition
close to exiting
Pallancata operations
– 51m of resources
discovered in the
Royropata zone
– Three years to
production due
to permitting
– Added 19.2m oz
resources at San Jose
now returned or on hold
– Drilling executed at
Speed Goat with next
steps dependent on
future greenfield budget
of Amarillo Gold
– Commenced Mara
Rosa construction
following receipt
of permits
– Continued drilling
at Snip and delivered
PEA on project
of Amarillo Gold
– Assessed additional
option agreements on
projects in Americas
2023 priorities
2023 priorities
2023 priorities
2023 priorities
– No existing greenfield
budget due to cost
savings drive
– Continue development
of Mara Rosa project
in Brazil
– Advance Volcan
– Further options/JVs
in Americas to be
considered subject
to budget
project opportunities
– Larger long-term
acquisitions also being
assessed with shares
– Overall budget to be
set subject to receipt
of Inmaculada MEIA
– Aim to add further
resources at all three
existing mines
– Focus on geology and
mapping of Eduardo
belt, Melissa and
Anomalia structures
at Inmaculada
– 8,000m drilling
for potential and
resources at San Jose
and Saavedra
Risks
Risks
Risks
Risks
– Political, legal
and regulatory
– Political, legal
and regulatory
– Political, legal
and regulatory
– Community relations
– Personnel: recruitment
– Community relations
– Personnel: recruitment
– Community relations
– Personnel: recruitment
and retention
and retention
and retention
– Political, legal
and regulatory
– Commodity prices
– Project development
24 | Hochschild Mining PLC Annual Report & Accounts 2022
25 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information KEY PERFORMANCE INDICATORS
Measuring our progress
Financial measures
Production
Revenue
Adjusted EBITDA
Basic earnings
per share
Total dividend
per share
31.2m oz
M oz Ag equivalent
$736m $249m $0.01
Pre-exceptional
¢2.0
US cents per share
22
21
20
19
18
31.2
33.6
24.9
40.0
41.0
22
21
20
19
18
736
811
622
756
704
22
21
20
19
18
0.01
249
383
271
268
343
22
21
20
19
18
0.06
0.09
0.05
0.14
22
21
20
19
18
2.0
2.0
4.3
4.0
3.92
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Links to strategy
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Links to remuneration
Yes
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Yes
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Yes
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Links to remuneration
No
Links to remuneration
No
Definition
Silver equivalent production
equals total attributable gold
production multiplied by a
gold/silver ratio for 2022 of
72x, 2019-2021 of 86x, 2018
of 81x, 2017 of 74x and added
to the total attributable
silver production.
Definition
Revenue presented in the
financial statements is
disclosed as net revenue
and is calculated as gross
revenue less commercial
discounts
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
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
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
Total silver equivalent
production decreased by
7% versus 2021 due to the
scheduled fall in production
from Pallancata and
Inmaculada
Performance
Total revenue decreased
by 9% versus 2021 due to the
scheduled fall in production
and increase in costs
Performance
Adjusted EBITDA decreased
by 33% versus 2021 due to the
decrease in revenue resulting
from the scheduled fall in
production and rise in cost
inflation across the industry
Performance
Pre-exceptional earnings
per share decreased to $0.01
due to the fall in Adjusted
EBITDA and from an increase
in exploration expenses due
to project expenditure at
Snip in Canada
Performance
Dividend per share
decreased by 53% due to
the Company’s decision not
to pay a final dividend
Outlook
Total silver equivalent
production is forecast to be
between 25.0 and 26.0 million
silver equivalent ounces in
2023 assuming a gold/silver
conversion ratio of 83x
Outlook
Total silver equivalent
production is forecast to be
between 25.0 and 26.0 million
silver equivalent ounces in
2023 assuming a gold/silver
conversion ratio of 83x
Outlook
Adjusted EBITDA result for
2023 will depend on precious
metal prices and cost and
expenses performance along
with the ability of the operations
to operate normally
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
Outlook
Dividend per share for 2023
will depend on the level of
profitability of the Company
and the available uses of
cash and is at the discretion
of the Board
Risks
Operational performance
Risks
Operational performance
and precious metal prices
Risks
Operational performance,
precious metal prices
and costs
Risks
Operational performance,
precious metal prices, costs,
levels of financial costs and
income, tax charge
Risks
Company profitability
26 | Hochschild Mining PLC Annual Report & Accounts 2022
Brownfield
Greenfield
Project
pipeline
Strategic
alliances
Financial measures
Non-financial measures
All-in sustaining
costs
Total silver cash
costs
LTIFR
Accident Severity
Index
Resource
base
$18.9oz
$/oz Ag equivalent
$12.6oz
$/oz Ag equivalent
1.37
93
1,542
M oz Ag equivalent
22
21
20
19
18
18.9
16.0
12.9
11.9
12.0
22
21
20
19
18
12.6
11.0
9.3
7.8
8.3
22
21
20
19
18
1.37
1.26
1.38
1.05
1.73
93
54
22
21
20
19
18
676
474
930
22
21
20
19
18
1,542
1,273
1,425
1,446
1,453
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Links to remuneration
Yes
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No
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Yes
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Yes
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Yes
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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 72:1
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
Definition
Calculated as total number
of accidents per million
labour hours
Definition
Calculated as total number
of days lost per million
labour hours
Definition
Total attributable silver
equivalent metal resources
as at 31 December 2022
Performance
All-in sustaining costs from
operations rose versus 2021
mainly as a result of the
scheduled decline in
production in 2022 and the
rise in unit costs
Performance
Total silver cash costs for the
Company increased by 15%
versus 2021 due to increases
in unit costs in Peru and
Argentina and some
decreases in grade in Peru
Performance
LTIFR increased by 9%
but remains low relative
to the industry
Performance
The Accident Severity index
decreased to 93 in 2022 due
to zero fatalities
Outlook
The all-in sustaining cost
from operations in 2023 is
expected to be between
$1,370 and $1,450 per gold
equivalent ounce (or $16.5
and $17.5 per silver
equivalent ounce)
Outlook
Cash costs performance in
2023 is expected to be
dependent on operational
performance, levels of local
cost inflation and levels of
local currency devaluation in
Argentina and Peru
Outlook
The Company remains
focused on its ‘Safety 2.0
Hochschild Safety
Transformation’ plan in
and introduced the safety
equivalent of the ECO Score
– the Seguscore
Outlook
The Company remains
focused on its ‘Safety
2.0 Hochschild Safety
Transformation’ plan in
and introduced the safety
equivalent of the ECO Score
– the Seguscore
Risks
Operational performance,
local cost inflation, increases
in brownfield exploration
investment
Risks
Operational performance
including dilution, grade
and tonnage control and
local inflation
Risks
Health and safety risks
Risks
Health and safety risks
Performance
Total attributable silver
equivalent metal resources
increased by 21% in 2022 due
to the addition of resources
from the Mara Rosa
acquisition as well as an
updated resource figure
from the Volcan project
Outlook
Resource increases in 2023
will depend on 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
Risks
Implementing and
maintaining the annual
exploration drilling
programme
27 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information OPER ATING REVIEW
Meeting our
2022 cost targets
2022 Highlights
13,596koz
TOTAL GROUP PRODUCTION OF SILVER
2021: 14,746koz
244.63koz
TOTAL GROUP PRODUCTION OF GOLD
2021: 262.39koz
13,536koz
TOTAL GROUP SILVER PRODUCTION SOLD
2021: 14,712koz
242.89koz
TOTAL GROUP GOLD PRODUCTION SOLD
2021: 260.71koz
Total 2022 Group production
Attributable 2022 Group production
Silver production
(koz)
Gold production
(koz)
Total silver
equivalent (koz)
Total gold
equivalent (koz)
Silver sold (koz)
Gold sold (koz)
Year ended
31 Dec 2022
Year ended
31 Dec 2021
13,596
14,746
244.63
262.39
31,209
33,638
433.46
13,536
242.89
467.19
14,712
260.71
Silver production
(koz)
Gold production
(koz)
Silver equivalent
(koz)
Gold equivalent
(koz)
Year ended
31 Dec 2022
Year ended
31 Dec 2021
11,003
12,174
206.01
221.42
25,835
28,116
358.83
390.50
Attributable production includes 100% of all production
from Inmaculada, Pallancata and 51% from San Jose.
Total production includes 100% of all production,
including production attributable to Hochschild’s
minority shareholder at San Jose.
Attributable 2023 production forecast split
Operation
Inmaculada
Pallancata
San Jose
Total
2023 AISC forecast split
Operation
Inmaculada
Pallancata
San Jose
Total from operations
Oz Au Eq
204,000-211,000
24,000-27,000
73,000-76,000
301,000-314,000
$/oz Au Eq
1,260-1,320
2,050-2,310
1,400-1,470
1,370-1,450
Moz Ag Eq
16.9-17.5
2.0-2.2
6.1-6.3
25.0-26.0
$/oz Ag Eq
15.2-15.9
24.7-27.8
17.0-17.7
16.5-17.5
Operations
Note: 2022 and 2021 equivalent figures
calculated using the previous Company
gold/silver ratio of 72x. All 2023 forecasts
assume the average gold/silver ratio for
2022 of 83x.
Production
In 2022, Hochschild delivered attributable
production of 358,826 gold equivalent
ounces or 25.8 million silver equivalent
ounces, moderately below the Company’s
2022 guidance due to the reduced
contribution at Pallancata resulting from
lower grades which could not be fully
offset by higher output at Inmaculada.
This was due to local community
disturbances in Q4 along with the wider
political and subsequent civil unrest in
Peru since December.
The overall attributable production
target for 2023 is 301,000-314,000 gold
equivalent ounces or 25.0-26.0 million
silver equivalent ounces.
Costs
All-in sustaining cost from operations
in 2022 was $1,364 per gold equivalent
ounce or $18.9 per silver equivalent ounce
(2021: $1,153 per gold equivalent ounce
or $16.0 per silver equivalent ounce),
higher than 2021 mainly as a result of:
expected lower average grades at
Inmaculada and Pallancata; higher costs
at Inmaculada and Pallancata resulting
from using a higher proportion of
conventional mining methods as well from
local inflation; and higher costs in San Jose
mainly due to local inflation and expenditure
related to the accessing incremental
resources. These were partially offset by
local currency devaluation in Argentina.
The all-in sustaining cost from operations
in 2023 is expected to be between $1,370
and $1,450 per gold equivalent ounce (or
$16.5 and $17.5 per silver equivalent ounce).
28 | Hochschild Mining PLC Annual Report & Accounts 2022
Where we operate
Operational sites
1 Pallancata
(Peru)
2
Inmaculada
(Peru)
3 San Jose
(Argentina)
1
2
3
29 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information OPER ATING REVIEW CONTINUED
1
Inmaculada
Peru
The 100% owned Inmaculada gold/silver
underground operation is located in the
Department of Ayacucho in southern Peru.
It commenced operations in June 2015.
Production
The Inmaculada mine
delivered gold equivalent
production of 237,289 ounces
(2021: 252,337 ounces), in
line with the upwards revised
forecast published in August
2022 and slightly reduced
versus 2021 owing to
budgeted lower grades.
Costs
All-in sustaining costs were
$1,058 per gold equivalent
ounce (2021: $917 per ounce)
with the increase versus 2021
due to scheduled lower grades
and higher production costs
resulting from the use of more
semi-mechanised mining
methods with a higher
extraction cost and from
inflation affecting mainly fuel,
reagents and supplies.
Inmaculada summary
Year ended
31 Dec 2022
Year ended
31 Dec 2021 % change
Ore production (tonnes)
1,329,177
1,349,892
Average silver grade (g/t)
Average gold grade (g/t)
Silver produced (koz)
Gold produced (koz)
Silver equivalent produced (koz)
Gold equivalent produced (koz)
Silver sold (koz)
Gold sold (koz)
Unit cost ($/t)
Total cash cost ($/oz Au co-product)
All-in sustaining cost ($/oz Au Eq)
156
3.81
5,936
154.85
17,085
237.29
5,918
154.93
118.7
693
1,058
174
4.05
6,236
165.73
18,168
252.34
6,216
165.86
99.2
557
917
(2)
(10)
(6)
(5)
(7)
(6)
(6)
(5)
(7)
18
24
15
30 | Hochschild Mining PLC Annual Report & Accounts 2022
2
Pallancata
Peru
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.
Production
Costs
In 2022, Pallancata produced
3.2 million silver equivalent
ounces (2021: 4.2 million ounces)
with the reduction versus
2021 and versus the revised
forecast (3.4–3.6 million
ounces) due to the effects of
lower-than-expected grades
in line with the current
declining production profile.
All-in sustaining costs were
$32.5 per silver equivalent
ounce (2021: $23.8 per ounce)
with the significant increase
year-on-year due to lower
grades, a higher proportion of
conventional mining resulting
in higher production costs
and local inflation.
Pallancata summary
Year ended
31 Dec 2022
Year ended
31 Dec 2021
%
change
Ore production (tonnes)
559,799
530,681
Average silver grade (g/t)
Average gold grade (g/t)
Silver produced (koz)
Gold produced (koz)
Silver equivalent produced (koz)
Gold equivalent produced (koz)
Silver sold (koz)
Gold sold (koz)
Unit cost ($/t)
Total cash cost ($/oz Ag co-product)
All-in sustaining cost ($/oz Ag Eq)
151
0.69
2,368
10.98
3,158
43.86
2,315
10.76
131.9
26.6
32.4
212
0.84
3,261
13.05
4,200
58.33
3,263
13.03
124.8
19.2
23.8
5
(29)
(18)
(27)
(16)
(25)
(25)
(29)
(17)
6
39
37
31 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information OPER ATING REVIEW CONTINUED
3
San Jose
Argentina
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.
Production
Costs
San Jose’s production in
2022 totalled 11.0 million
silver equivalent ounces
(2021: 11.3 million ounces)
with the decrease versus
2021 reflecting first quarter
Covid-related employee
absences and a fire in the
crushing area, both of which
temporarily affected
operations and explain the
reduction in tonnage. This
was partially offset by better-
than-budgeted grades.
All-in sustaining costs were
at $21.7 per silver equivalent
ounce (2021: $18.4 per ounce)
with the rise versus 2021 due
to local inflation affecting
production costs, higher
mine development capital
expenditure to access new
areas and lower production.
This was partially offset by
local currency devaluation.
San Jose summary
Ore production (tonnes)
Average silver grade (g/t)
Average gold grade (g/t)
Silver produced (koz)
Gold produced (koz)
Silver equivalent produced (koz)
Gold equivalent produced (koz)
Silver sold (koz)
Gold sold (koz)
Unit cost ($/t)
Total cash cost ($/oz Ag co-product)
All-in sustaining cost ($/oz Ag Eq)
Year ended
31 Dec 2022
Year ended
31 Dec 2021 % change
507,189
539,229
369
5.55
5,292
78.80
10,966
152.31
5,303
77.20
285.0
14.4
21.7
344
5.47
5,250
83.62
11,270
156.53
5,233
81.83
229.0
13.3
18.4
(6)
7
1
1
(6)
(3)
(3)
1
(6)
24
8
18
32 | Hochschild Mining PLC Annual Report & Accounts 2022
Health and safety
Hochschild’s health and safety corporate standards are
currently being implemented at the project, including the
introduction of the Company’s Seguscore safety indicator. The
project has recently surpassed one million injury-free working
hours and year-to-date Frequency and Severity Indexes are
currently at zero. Finally, Covid-19 prevention protocols are in
place with no positive cases recorded to date.
DEVELOPMENT PROJECT: SNIP
At the Snip project in British Columbia, Canada, exploration
recommenced during the first quarter of 2022, with
approximately 2,500m drilled from underground. Work also
began on the Preliminary Economic Assessment (PEA), which
was awarded to Ausenco Engineering Canada. This included
metallurgical test work, an evaluation of ARD potential in waste
samples, and a flowsheet trade-off study. In addition, a new two
year Environmental Baseline programme was approved and
data collection began.
On 1 March 2022, Hochschild issued an updated mineral
resource estimate. Indicated mineral resources more than
tripled to 840,000 ounces and inferred resources almost
doubled to 723,000 ounces (compared to the previous 2020
estimate) as a result of approximately 28,000m of drilling and
the application of Hochschild’s standard approach to resource
evaluation. Following on from that, approximately 10,300m was
drilled from underground in the second and third quarters.
Results received during Q3 had the following highlights:
Vein
208
212
213
214
219
228
230
Vein
215
219
219
231
240
Results (Twin hole)
UG22-279: 4.3m @ 125.7g/t Au & 13g/t Ag
UG22-290: 2.1m @ 8.4g/t Au & 2g/t Ag
UG22-278: 2.3m @ 11.5g/t Au & 19g/t Ag
UG22-284: 4.5m @ 48.4g/t Au & 18g/t Ag
UG22-290: 3.8m @ 9.5g/t Au & 2g/t Ag
UG22-290: 2.5m @ 6.5g/t Au & 4g/t Ag
UG22-284: 4.1m @ 11.0g/t Au & 3g/t Ag
Results (Infill hole)
UG22-317: 3.9m @ 33.4g/t Au & 3g/t Ag
UG22-330: 4.8m @ 45.1g/t Au & 14g/t Ag
UG22-332: 4.0m @ 12.8g/t Au & 2g/t Ag
UG22-300: 3.7m @ 9.2g/t Au & 8g/t Ag
UG22-334: 4.3m @ 31.7g/t Au & 9g/t Ag
A Communications and Engagement Agreement with the
Tahltan Central Government was signed at the beginning of
2022 with constructive discussions between the two parties
continuing throughout the remainder of the year which included
a project site visit by a leadership delegation in August.
ADVANCED PROJECT: MARA ROSA
On 22 March 2022, the Company announced that it had
received shareholder approval for the acquisition of Amarillo
Gold Inc. in Brazil with completion occurring on 1 April 2022.
On 10 August, the Company announced that the Goiás state’s
environmental authority, the State Secretariat for the Environment
and Sustainable Development (SEMAD), had granted the key
permit to enable the Company to start construction of the
processing plant. It also allowed all the required site infrastructure
for progressing the project’s critical paths.
The progressed subsequently progressed according to schedule
and budget with total project progress now standing at over 70%
and detailed engineering almost complete. The Company
continues to expect first production in H1 2024.
Earthworks
Site clearance for the processing plant and earthworks are at
an advanced stage (92% and 96% respectively) whilst the reservoir
is fully operational and already receiving pumped water from
the pit. All sites being prepared for the processing plant have
been finished on time, therefore allowing civil works to start
according to schedule.
Procurement
Currently purchase orders have been issued for 93% of the
project equipment. Deliveries are on schedule with key equipment
such as the crusher, conveyor belts, HDPE pipes, aluminium
cabling for transmission lines, hydrocyclones, agitators and
equipment for the wastewater treatment station already
received. Key material packages that are pending include pipes
and valves which are expected to be closed in the first quarter.
Processing plant
The civil works contractor is fully mobilised and work on the
plant site area is at 32% completion rate. The concrete base for
the grinding area is complete with walls and equipment columns
currently progressing and expected to be finished by the end of
February whilst deliveries for the tanks are due the same month.
Infrastructure
Construction of infrastructure for the main access route is
ongoing to allow delivery of materials and heavy equipment.
A preliminary drainage system that will guarantee access to
critical path areas was completed in Q4 whilst the main project
drainage system is 60% complete.
The power supply for the mine will be provided by the building
of a 67km, 138kv transmission line from the Porangatu substation
with work currently 45% advanced and expected to be
completed by June 2023.
Sustainability
Environmental controls to monitor construction work have
been implemented to ensure compliance with applicable permits.
In September, the ‘Knowledge Trail’ was inaugurated with the
presence of local authorities and the Hochschild COO. The trail
consists of an open ecological area with 13 stations highlighting
local history, culture, archaeological and environmental information,
and project history. The trail will be used as a learning tool by
local schools among other local stakeholders and to date almost
500 people have visited. Local supplier and labour training
programmes are continuing with over 80 local suppliers already
on standby.
33 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information OPER ATING REVIEW CONTINUED
At the end of the year, the PEA was completed by Ausenco.
Highlights are given below.
Mineral Resource Estimate (effective as of 20 June 2022)
Capital costs
The total initial capital cost is C$346.5 million and the LOM
sustaining cost is C$239.9 million. The initial capital costs are
summarised below:
Category
Indicated
Total indicated
Inferred
Total inferred
Domain
Tonnes
(000)
Au Grade
(g/t)
Twin Main
3,847
Twin West
Twin Main
Twin West
293
4,140
829
207
1,036
9.8
8.1
9.7
12.3
11.0
12.1
Total Au
metal
content
(000 oz)
1,217
76
1,293
329
73
402
Notes:
1 These mineral resources are not mineral reserves and do not have
demonstrated economic viability.
2 The independent qualified person MRE, as defined by National Instrument (NI)
43-101 guidelines, is Marc Jutras P.Eng., M.A.Sc., Principal, Mineral Resources at
Ginto Consulting Inc.
3 Follows CIM definitions (2014) for mineral resources.
4 Results are presented in-situ and undiluted and considered to have reasonable
prospects for economic extraction.
5 Reported for an underground scenario at a cut-off grade of 3.0 g/t.
6 The number of tonnes and ounces were rounded to the nearest thousand.
7 Estimates are in total for the property and have not been adjusted to reflect the
proportion attributable to Hochschild on the basis of its joint venture participation.
The update of the mineral resources of the project follows
a drilling campaign of 83 surface and underground holes carried
out in 2021 and 2022. The drill hole database is comprised of
3,507 historical drill holes and 415 holes drilled by Skeena from
2016 to 2021 and 69 holes drilled by Hochschild in 2022. The
historical holes were validated from a set of twin holes drilled
by Skeena in 2021 and Hochschild in 2022.
Mining
The Snip Project contemplates the underground exploitation of
the Mineral Resources of both Twin Main and Twin West deposit
at a planned rate of 1,350 to 1,500 tpd over an eight-year period.
Total mineralised material in the Life of Mine (LOM) is 3.7mt @
7.1 g/t Au, with an average gold production of 100 koz per year.
A pre-production period of two years, including rehabilitation and
dewatering of existing tunnels and the ramp-up period in year two,
will allow for the start of full production beginning in year three.
Processing
The process plant design is based on composite samples that
represent the underground mining plan. The circuit selected is
a gravity and whole ore leach process to produce gold dore bars.
The plant is designed for a through put of 1,350 tpd based on
availability of 92%. The metallurgical recovery is estimated at
96%. The process flowsheet consisted of: three-stage crushing
and ball mill grinding circuits; gravity and leach + carbon-in-leach
(L/CIL) circuits; desorption and carbon regeneration; electrowinning
and smelting; and cyanide destruction of tailings using
SO2/air process.
Initial capital costs
Description
Underground Mine
Process Plant
Tailings Storage Facility
Infrastructure
Total Direct Costs
Indirect costs
Contingency
Total
C$m
113.7
52.5
35.4
47.1
248.7
39.5
58.3
346.5
Project economics
The overall economics of the Project have been evaluated using
a gold price of US$1,700/oz, CAD/$US rate of 0.75 and a discount
rate of 5%. Snip’s valuation has been estimated at C$183 million
post-tax NPV, with an IRR of 17%. The payback period is expected
to be four years from the start of production.
Key project economics
Description
Au Payable
Processed Tonnes
Au Grade
After-tax valuation indicators
Undiscounted cash flow
NPV@5%
Payback period
IRR
Project Capital (initial)
AISC
Units
000oz
Mt
g/t
C$m
C$m
years
%
C$m
C$/oz Au
Value
797
3.65
7.08
373
183
4
17
347
1,081
Termination
Due to the need to focus capital elsewhere in Hochschild’s
portfolio, on 5 April 2023, the Company announced that it had
given notice to Skeena Resources Limited (‘Skeena’) to terminate
the option to earn-in a 60% interest in Snip. Termination of the
option became effective immediately and, as a result, Hochschild
has no liability to complete the Aggregate Expenditure Requirement.
In addition, Hochschild provided confirmation to Skeena that it
had satisfied the Minimum Annual Expenditure Requirement in
respect of the 12-month period that commenced on 14 October
2022. Accordingly, no cash payment is due from Hochschild to
Skeena under the terms of the option agreement.
DEVELOPMENT PROJECT: VOLCAN
In early 2022, the Company restructured its 100% ownership
of the Volcan project in Chile under a newly established Canadian
company, Tiernan Gold Corp.
During the year, work continued to advance the project.
This included updating the Mineral Resource Estimate as well
as developing an optimised mine and project development plan.
During the third quarter, the Company advanced several
trade-off studies aimed at creating additional project value.
34 | Hochschild Mining PLC Annual Report & Accounts 2022
The results of the engineering work were outlined in a new PEA
completed by Ausenco with highlights, as follows:
– open pit mining with 293 Mt of mineralised material mined
over a 14-year mine life;
– 451 Mt of waste mined during the life of mine (1.5:1 strip ratio);
– processing of mineralised material by three stages of crushing
followed by heap leaching and gold dore production;
– annual processing rate of 22 Mtpa producing an average of
350,000 oz per year of gold for the first five years and a life of
mine total of 3.82 million ounces of gold recovered;
– initial capital cost of $900 million and average all-in sustaining
costs of $1,002/oz; and
– after tax net present value (5% @ $1,800/oz gold) of $826 million
with IRR of 20.5%.
The Company is currently evaluating strategic alternatives
for Tiernan.
BROWNFIELD EXPLORATION:
PALLANCATA ROYROPATA RESOURCE
In the third quarter of the year, Hochschild announced a major
discovery west of current operations at Pallancata. The new area,
named Royropata, is part of the extended Royropata system.
An initial Inferred Mineral Resource Estimate for the Royropata
Zone to the west of the existing Pallancata mine was completed
in Q4. The Company estimates that the zone contains an
Inferred Mineral Resource of 1.88 million tonnes at an average
grade of 667 g/t Ag and 2.42 g/t Au containing 51.2 million silver
equivalent (Ag Eq) ounces at a combined Ag Eq grade of 848 g/t
(see table below).
The programme started in 2019 with two long drill holes, with
the second drill hole intercepting 37.6m of quartz vein without
economic values. In 2022, after a period of geologic interpretation
and 9,800m of drilling, a new vein system, including the Marco
West, (the main structure) Laura, Demian, Royropata 1, and
Royropata 2 veins was discovered (see maps below). The
Royropata system is a tabular sinistral strike-slip fault filled by
hydrothermal quartz with crustiform, coloform, banded, and
breccia textures. The vein strikes 80-90° and dips 60° to 75° to
the southeast, reaching 750m in length and 200m in depth.
The host rocks are dacitic tuffs andesitic tuffs and andesitic
flow. The contained minerals are mainly: pyrargyrite, proustite,
argentite, electrum and pearceite-polybasite at the precious
metal level. The principal gangue mineral is quartz and
carbonates and silicified tuff fragments with an argillic alteration.
The Marco vein remains open to the south-west for another 900m
according to the current geological interpretation.
Audited Royropata Inferred Mineral Resource Estimate
Ag Eq
(moz)
46.8
2.0
1.6
0.5
0.3
Vein
Tonnes (k)
Ag (g/t)
Au (g/t) Ag Eq (g/t)
Marco West
Laura
Royropata2
Demian
Royropata1
1,497
247
80
27
26
Total/Average
1,876
763
203
495
444
285
667
2.81
0.62
1.48
1.55
0.81
2.42
973
250
606
560
346
848
Notes::
1 Mineral Resources are 100% attributable to Hochschild.
2 Metal prices used for the Mineral Resources calculations: Au: US$1,800/oz,
Ag: US$24/oz.
3 Ag Eq = (Au x 75) + Ag.
4 Ag Eq Cut-off: 99 g/t Ag Eq.
5 Totals have been rounded to the appropriate number of significant figures.
2023 next steps
In 2023, the Company will develop the Mineral Resource
including infill drilling to convert the Inferred Minerals Resources
to Indicated and will also proceed with basic engineering as well
as the environmental permitting process, including baseline
studies. In addition, over the next few quarters, the brownfield
team will also target the upside potential in the Royropata zone,
including the extension of the Marco vein, the Royropata veins
and the Yanacochita and Bolsa structures according to ongoing
permitting progress. These veins are expected to add significant
additional resources.
EXPLORATION
Inmaculada
In the first half of the year, most of the drilling at Inmaculada was
potential drilling at the Huarmapata area and resource drilling in
the Josefa vein with the best results from Josefa which then
merited further drilling in the second half. In addition, there was
2,900m of infill drilling in the Juliana, Susana-Beatriz, Bety,
Barbara and Noelia structures. Much of the planned brownfield
exploration work including surface drilling work was curtailed
in 2022 by a lack of permits.
Vein
Josefa
Josefa Piso
Results (resource drilling)
IMM-22-139: 2.8m @ 1.9g/t Au & 43g/t Ag
IMM-22-172: 1.5m @ 6.1g/t Au & 186g/t Ag
IMM-22-171A: 1.6m @ 8.5g/t Au & 104g/t Ag
IMM-22-172: 0.8m @ 6.9g/t Au & 13g/t Ag
Cloty
IMM-22-172: 0.8m @ 3.9g/t Au & 90g/t Ag
San Jose
During the year, 18,150 of potential drilling was executed around
the mine area and in the Saavedra area in the Ayelen, Ayelen SE,
Maura and Maura East veins, among others, in addition to
2,800m of infill drilling in the Julia, Isabel, Odion, Molle and Perla
veins. The Company also started to explore the Ciclon project
(700m of drilling) further away in the Santa Cruz province.
Vein
Celina
Results (potential/resource drilling)
SJD-2451: 1.5m @ 6.0g/t Au & 236g/t Ag
SJD-2453: 1.2m @ 8.3g/t Au & 561g/t Ag
Celina Piso
SJD-2453: 1.1m @ 2.8g/t Au & 546g/t Ag
Jimena
SJD-2463: 5.2m @ 1.6g/t Au & 47g/t Ag
SJD-2465: 2.4m @ 2.8g/t Au & 48g/t Ag
SJD-2468: 4.1m @ 7.5g/t Au & 84g/t Ag
Agostina
SJD-2469: 5.4m @ 3.3g/t Au & 29g/t Ag
SJD-2471: 1.9m @ 1.6g/t Au & 68g/t Ag
SJM-594: 1.5m @ 6.9g/t Au & 648g/t Ag
Ayelen SE
SJD-2529: 2.4m @ 3.9g/t Au & 363g/t Ag
SJD-2531: 2.6m @ 10.0g/t Au & 1,321g/t Ag
SJD-2554: 1.1m @ 4.7g/t Au & 102g/t Ag
SJD-2556: 0.8m @ 5.5/t Au & 103g/t Ag
Maura
SJD-2563: 1.3m @ 6.3g/t Au & 109g/t Ag
SJD-2570: 1.0m @ 15.1g/t Au & 123g/t Ag
SJD-2572: 2.5m @ 4.0g/t Au & 216g/t Ag
Ciclon
DCE22-02: 2.9m @ 1.0g/t Au & 615g/t Ag
51.2
Olivia
SJM-609: 1.1m @ 3.0g/t Au & 357g/t Ag
In 2022 as a whole 19.3 million silver equivalent ounces have
been added to the San Jose resource base at a silver equivalent
grade of 983 grams per tonne.
35 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information FINANCIAL REVIEW
Eduardo Noriega
Chief Financial Officer
A resilient
financial performance
in 2022
$736m
REVENUE
$249m
ADJUSTED EBITDA
$0.01
EARNINGS PER SHARE
36 | Hochschild Mining PLC Annual Report & Accounts 2022
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,
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 to facilitate comparison with prior years.
Revenue
Gross revenue8
Gross revenue from continuing operations decreased by 10% to $751.3 million in 2022 (2021: $831.0 million) mainly due to the lower
production and average realised silver price. Output was mainly impacted by: lower expected grades in Pallancata and Inmaculada;
lower treated tonnage in San Jose due to Covid-related employee absences in Q1 and a fire in the crushing area which temporarily
affected operations; and lower treated tonnage in Inmaculada resulting from the local and national disruption in Peru in Q4. These
were partially offset by a slightly higher average realised gold price.
Gold
Gross revenue from gold in 2022 decreased to $435.1 million (2021: $464.3 million) due to the 7% decrease in gold sales resulting
from lower gold produced at all operations. This was partially offset by a 1% increase in the average realised gold price.
Silver
Gross revenue from silver decreased in 2022 to $315.5 million (2021: $366.2 million) mainly due to a 6% decrease in the average
realised silver price and lower silver production at Pallancata and Inmaculada due to lower tonnage treated and grades.
Gross average realised sales prices
The following table provides figures for average realised prices (before the deduction of commercial discounts) and ounces sold
for 2022 and 2021:
Average realised prices
Silver ounces sold (koz)
Avg. realised silver price ($/oz)
Gold ounces sold (koz)
Avg. realised gold price ($/oz)
Year ended
31 Dec 2022
Year ended
31 Dec 2021
13,536
23.3
242.89
1,791
14,712
24.9
260.71
1,781
4.0 million silver ounces of 2022 production were hedged at $26.86 per ounce, boosting the realised price. On 10 November 2021,
the Company hedged 3.3 million ounces of 2023 silver production at $25.00 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 2022, the Group recorded commercial discounts of $15.7 million (2021: $19.6 million) with the fall
explained by the decrease in production. The ratio of commercial discounts to gross revenue in 2022 was 2%, in line with 2021.
Net revenue
Net revenue was $735.6 million (2021: $811.4 million), comprising net gold revenue of $429.8 million (2021: $457.8 million) and net
silver revenue of $305.2 million (2021: $353.1 million). In 2022, gold accounted for 58% and silver 42% of the Company’s consolidated
net revenue (2021: gold 56% and silver 44%).
Reconciliation of gross revenue by mine to Group net revenue
$000
Silver revenue
Inmaculada
Pallancata
San Jose
Commercial discounts
Net silver revenue
Gold revenue
Inmaculada
Pallancata
San Jose
Commercial discounts
Net gold revenue
Other revenue
Net revenue
8 Includes revenue from services.
Year ended
31 Dec 2022
Year ended
31 Dec 2021
% change
137,033
62,986
115,477
(10,334)
305,162
276,895
19,459
138,782
(5,335)
429,801
680
735,643
156,675
82,727
126,790
(13,088)
353,104
296,160
22,989
145,187
(6,517)
457,819
464
811,387
(13)
(24)
(9)
(21)
(14)
(7)
(15)
(4)
(18)
(6)
47
(9)
37 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information FINANCIAL REVIEW CONTINUED
Cost of sales
Total cost of sales before exceptional items was $527.6 million in 2022 (2021: $487.8 million). The direct production cost excluding
depreciation was higher at $384.2 million (2021: $323.4 million) mainly due to inflation impacting fuel, reagents and supplies and the
use of a higher proportion of conventional mining methods. Depreciation in production cost decreased to $137.7 million (2021: $148.8 million)
due to lower extracted volumes across all operations. Fixed costs incurred during total or partial production stoppages in Argentina
and Peru were $8.0 million in 2022 (2021: $8.7 million).
$000
Direct production cost excluding depreciation
Depreciation in production cost
Other items and workers’ profit sharing
Fixed costs during operational stoppages and reduced capacity
Change in inventories
Cost of sales
Fixed costs during operational stoppages and reduced capacity
$000
Personnel
Third-party services
Supplies
Depreciation and amortisation
Others
Cost of sales
Year ended
31 Dec 2022
Year ended
31 Dec 2021
% change
384,183
137,747
3,321
8,023
(5,631)
527,643
323,418
148,842
6,512
8,680
320
487,772
19
(7)
(49)
(8)
(1,860)
8
Year ended
31 Dec 2022
Year ended
31 Dec 2021
% change
4,498
3,090
146
2
287
8,023
7,607
995
–
–
78
8,680
(41)
211
–
–
268
(8)
Unit cost per tonne
The Company reported unit cost per tonne at its operations of $158.7 per tonne in 2022, a 19% increase versus 2021 ($133.5 per tonne).
This was due to: higher costs at Inmaculada resulting from using more semi-mechanised mining methods with a higher extraction
cost; higher costs at Pallancata due to the use of more conventional mining methods; and higher costs in San Jose mainly due to
inflation and from expenditure related to the accessing and mining of incremental resources.
Unit cost per tonne by operation (including royalties)9
Operating unit ($/tonne)
Peru
Inmaculada
Pallancata
Argentina
San Jose
Total
Year ended
31 Dec 2022
Year ended
31 Dec 2021
% change
122.9
118.7
131.9
285.0
158.7
106.5
99.2
124.8
229.0
133.5
15
20
6
24
19
Cash costs
Cash costs include cost of sales, commercial deductions and selling expenses before exceptional items, less depreciation included
in cost of sales.
9 Unit cost per tonne is calculated by dividing mine and treatment production costs (excluding depreciation) by extracted and treated tonnage respectively.
38 | Hochschild Mining PLC Annual Report & Accounts 2022
Cash cost reconciliation10
Year ended 31 Dec 2022
$000 unless otherwise indicated
Group cash cost
(+) Cost of sales11
(-) Depreciation and amortisation in cost of sales
(+) Selling expenses
(+) Commercial deductions12
Gold
Silver
Revenue
Gold
Silver
Ounces sold
Gold
Silver
Group cash cost ($/oz)
Co product Au
Co product Ag
By product Au
By product Ag
Year ended 31 Dec 2021
$000 unless otherwise indicated
Group cash cost
(+) Cost of sales13
(-) Depreciation and amortisation in cost of sales
(+) Selling expenses
(+) Commercial deductions14
Gold
Silver
Revenue
Gold
Silver
Ounces sold
Gold
Silver
Group cash cost ($/oz)
Co product Au
Co product Ag
By product Au
By product Ag
Inmaculada
Pallancata
162,397
239,277
(80,633)
796
2,957
2,131
826
413,928
276,895
137,033
154.9
5,918
701
9.1
158
(19.7)
80,756
83,926
(8,671)
622
4,879
969
3,910
77,566
18,490
59,076
10.8
2,315
1,789
26.6
1,652
26.5
San Jose
170,585
193,840
(47,123)
12,614
11,254
4,630
6,624
243,469
134,416
109,053
77.2
5,303
1,220
14.4
711
6.0
Total
413,738
517,043
(136,427)
14,032
19,090
7,730
11,360
734,963
429,801
305,162
242.9
13,536
996
12.7
400
(1.8)
Inmaculada
Pallancata
San Jose
141,316
213,812
80,354
93,049
150,663
172,231
Total
372,333
479,092
(76,372)
(19,915)
(49,195)
(145,482)
616
3,260
2,164
1,096
452,835
296,160
156,675
165.9
6,216
557
7.9
(99)
(25.3)
620
6,600
1,034
5,566
99,116
21,955
77,161
13.0
3,263
1,366
19.2
(182)
17.6
14,195
13,432
5,717
7,715
258,972
139,704
119,268
81.8
5,233
993
13.3
289
1.0
15,431
23,292
8,915
14,377
810,923
457,819
353,104
260.7
14,712
806
11.0
19
(6.4)
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.
10 Cash costs are calculated to include cost of sales, commercial discounts and selling expenses items less depreciation included in cost of sales.
11 Does not include fixed costs during operational stoppages and reduced capacity of $8.0 million.
12 Includes commercial discounts (from the sales of concentrate) and commercial discounts from the sale of dore.
13 Does not include fixed costs during operational stoppages and reduced capacity of $8.7 million.
14 Includes commercial discounts (from the sales of concentrate) and commercial discounts from the sale of dore.
39 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information FINANCIAL REVIEW CONTINUED
All-in sustaining cost reconciliation15
All-in sustaining cash costs per silver equivalent ounce
Year ended 31 Dec 2022
$000 unless otherwise indicated
Inmaculada
Pallancata
(+) Direct production cost excluding depreciation
(+) Other items and workers’ profit sharing in cost of sales
(+) Operating and exploration capex for units16
(+) Brownfield exploration expenses
(+) Administrative expenses (excl depreciation)
(+) Royalties and special mining tax17
Sub-total
Au ounces produced
Ag ounces produced (000s)
Ounces produced (Ag Eq 000s oz)
Sub-total ($/oz Ag Eq)
(+) Commercial deductions
(+) Selling expenses
Sub-total
Au ounces sold
Ag ounces sold (000s)
Ounces sold (Ag Eq 000s oz)
Sub-total ($/oz Ag Eq)
All-in sustaining costs ($/oz Ag Eq)
All-in sustaining costs ($/oz Au Eq)
Year ended 31 Dec 2021
156,551
1,777
78,176
2,946
3,894
4,032
247,376
154,846
5,936
17,085
14.5
2,957
796
3,753
154,930
5,918
17,073
0.2
14.7
1,058
75,472
1,544
12,340
6,000
729
756
96,841
10,977
2,368
3,158
30.7
4,879
622
5,501
10,759
2,315
3,090
1.8
32.4
2,336
$000 unless otherwise indicated
Inmaculada
Pallancata
(+) Direct production cost excluding depreciation
(+) Other items and workers’ profit sharing in cost of sales
(+) Operating and exploration capex for units18
(+) Brownfield exploration expenses
(+) Administrative expenses (excl depreciation)
(+) Royalties and special mining tax19
Sub-total
Au ounces produced
Ag ounces produced (000s)
Ounces produced (Ag Eq 000s oz)
Sub-total ($/oz Ag Eq)
(+) Commercial deductions
(+) Selling expenses
Sub-total
Au ounces sold
Ag ounces sold (000s)
Ounces sold (Ag Eq 000s oz)
Sub-total ($/oz Ag Eq)
All-in sustaining costs ($/oz Ag Eq)
All-in sustaining costs ($/oz Au Eq)
134,110
3,489
76,512
3,276
4,909
5,190
227,486
165,730
6,236
18,168
12.5
3,260
616
3,876
165,857
6,216
18,158
0.2
12.7
917
66,859
3,023
14,526
5,993
1,075
1,136
92,612
13,045
3,261
4,200
22.1
6,600
620
7,220
13,027
3,263
4,201
1.7
23.8
1,711
San Jose
152,160
–
47,604
7,700
6,242
–
213,706
78,803
5,292
10,966
19.5
11,254
12,614
23,868
77,204
5,303
10,862
2.2
21.7
1,561
San Jose
122,449
–
41,325
9,654
6,104
–
179,532
83,615
5,250
11,270
15.9
13,432
14,195
27,627
81,831
5,233
11,124
2.5
18.4
1,325
Main
Operations
Corporate &
others
384,183
3,321
138,120
16,646
10,865
4,788
557,923
244,626
13,596
31,209
17.9
19,090
14,032
33,122
242,893
13,536
31,025
1.1
18.9
1,364
–
–
584
2,537
41,266
2,658
47,045
–
–
1.5
–
–
–
–
–
–
–
1.5
109
Main
Operations
Corporate &
others
323,418
6,512
132,363
18,923
12,088
6,326
499,630
262,390
14,746
33,638
14.9
23,292
15,431
38,723
260,715
14,712
33,483
1.2
16.0
1,153
–
–
1,735
3,658
38,783
5,916
50,092
–
–
1.4
–
–
–
–
–
–
–
1.5
105
Total
384,183
3,321
138,704
19,183
52,131
7,446
604,968
244,626
13,596
31,209
19.4
19,090
14,032
33,122
242,893
13,536
31,025
1.1
20.4
1,473
Total
323,418
6,512
134,098
22,581
50,871
12,242
549,722
262,390
14,746
33,638
16.3
23,292
15,431
38,723
260,714
14,712
33,483
1.2
17.5
1,258
Administrative expenses
Administrative expenses were higher at $54.2 million (2021: $51.9 million) mainly due to higher personnel expenses and travel expenses,
and administrative expenses related to the Mara Rosa project.
15 Calculated using a gold/silver ratio of 72:1.
16 Operating capex from San Jose does not include capitalised DD&A resulting from mine equipment utilised for mine developments.
17 Royalties arising from revised royalty tax schemes introduced in 2011 and included in income tax line.
18 Operating capex from San Jose does not include capitalised DD&A resulting from mine equipment utilised for mine developments.
19 Royalties arising from revised royalty tax schemes introduced in 2011 and included in income tax line.
40 | Hochschild Mining PLC Annual Report & Accounts 2022
Exploration expenses
In 2022, exploration expenses increased to $56.8 million (2021: $39.9 million) mainly due to the Snip project’s exploration expenses
of $20.8 million (2021: Nil), partially offset by lower exploration expenses across all mines of $3.9 million.
In addition, the Group capitalises part of its brownfield exploration, which mostly relates to costs incurred converting potential
resources to the Inferred or Measured and Indicated categories. In 2022, the Company capitalised $0.7 million relating to brownfield
exploration compared to $6.1 million in 2021, bringing the total investment in exploration for 2022 to $57.6 million (2021: $46.0 million).
Selling expenses
Selling expenses decreased to $14.0 million (2021: $15.4 million) mainly due to lower volumes sold in Argentina.
Other income/expenses
Other income before exceptional items was lower at $3.3 million (2021: $8.4 million) mainly due to decreased gains on the sale
of equipment of $3.0 million and $2.0 million of higher income on the recovery of provisions in 2021.
Other expenses before exceptional items were lower at $39.3 million (2021: $44.6 million) with the reduction mainly due to lower
increases in provision for mine closure of $17.8 million (2021: $22.1 million), lower expenses from a voluntary redundancy programme
in Argentina of $1.3 million (2021: $8.3 million). These were partially offset by: an increase in care and maintenance costs to $7.4 million
(H1 2021: $5.7 million); higher labour contingencies in Argentina of $3.1 million (2021: $0.8 million); increased provision for administrative
fines of $1.6 million (2021: $0.1 million), and the insurance deductible plus expenses not covered by insurance relating to the fire
in San Jose of $0.9 million.
Adjusted EBITDA
Adjusted EBITDA decreased by 35% to $249.6 million (2021: $382.8 million) mainly due to the decrease in revenue resulting from
lower gold and silver production, and the lower average realised silver price. In addition, there was an increase in production costs
mainly due to inflation, higher mine development capex and the use of a higher proportion of conventional mining methods.
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
Profit from continuing operations before exceptional items, net finance income/(cost), foreign exchange
loss and income tax
Depreciation and amortisation in cost of sales
Depreciation and amortisation in administrative expenses and other expenses
Exploration expenses
Personnel and other exploration related fixed expenses
Other non-cash income, net20
Adjusted EBITDA
Adjusted EBITDA margin
Year ended
31 Dec 2022
Year ended
31 Dec 2021
% change
45,190
136,427
2,135
56,826
(10,602)
19,629
249,605
34%
179,438
145,482
2,184
39,848
(7,099)
22,958
382,811
47%
(75)
(6)
(2)
43
49
(15)
(35)
(28)
Finance income
Finance income before exceptional items of $5.2 million increased from 2021 ($3.9 million) mainly due to higher interest on deposits
of $2.4 million (2021: $1.6 million).
20 Adjusted EBITDA has been presented before the effect of significant non-cash (income)/expenses related to changes in mine closure provisions which were $22.1 million in 2021
and $16.1 million in 2020, and the write-off of property, plant and equipment.
41 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information FINANCIAL REVIEW CONTINUED
Finance costs
Finance costs before exceptional items decreased from $32.1 million in 2021 to $21.8 million in 2022 principally due to: lower foreign
exchange transaction costs to acquire $5.2 million dollars in Argentina of $5.0 million (2021: $15.3 million); the capitalisation of $4.9 million
interest expenses that are directly attributable to the construction of Mara Rosa; and the cancelation of the Libor rate swap of the
refinanced $200 million medium-term loan of $3.8 million in 2021. These effects were partially offset by higher interest paid of $12.9 million
in 2022 (2021: $5.7 million) mainly due to an additional $100 million medium-term loan drawn down in December 2021 and higher
interest rates, and the fair value loss on financial investments of $2.1 million (2021: $0.8 million).
Foreign exchange (losses)/gains
The Group recognised a foreign exchange loss of $2.6 million (2021: $2.4 million loss) as a result of exposures in currencies other
than the functional currency.
Income tax
The Company’s pre-exceptional income tax charge was $17.6 million (2021: $81.3 million). The significant decrease in the charge
is mainly explained by lower profitability versus 2021.
The effective tax rate (pre-exceptional) for the period was 72.3% (2021: 54.7%), compared to the weighted average statutory income
tax rate of 35.6% (2021: 30.9%). The high effective tax rate in 2022 versus the average statutory rate is mainly explained by: the impact
of non-recognised tax losses in non-operating companies increasing the rate by 36.5%, Royalties and the Special Mining Tax which
increased the effective rate by 21.8%; partially offset by the effect of foreign exchange in Peru and Argentina decreasing the rate by 19.2%.
Exceptional items
Exceptional items in 2022 totalled a $1.9 million loss after tax (2021: $3.7 million loss after tax) related to: the impairment of the
investment in Aclara Resources Inc. of $9.9 million; the reversal of impairment loss in Pallancata of $15.5 million resulting from the
new resources discovered in the Royropata zone; and the impairment of the Azuca project’s evaluation and exploration costs of
$4.2 million.
The tax effect of these exceptional items was a $3.3 million tax loss (2021: $15.1 million tax gain). The net attributable loss of
exceptional items was $1.9 million.
Cash flow and balance sheet review
Cash flow
$000
Net cash generated from operating activities
Net cash used in investing activities
Cash flows generated/(used in) from financing activities
Foreign exchange adjustment
Year ended
31 Dec 2022
Year ended
31 Dec 2021
102,918
(337,580)
(6,588)
(1,695)
282,520
(183,434)
59,307
(3,487)
Change
(179,602)
(154,146)
(65,895)
1,792
Net increase in cash and cash equivalents during the year
(242,945)
154,906
(397,851)
Net cash generated from operating activities decreased from $282.5 million in 2021 to $102.9 million in 2022 mainly due to lower
Adjusted EBITDA of $249.6 million (2021: $382.8 million), and an increased working capital position.
Net cash used in investing activities increased from $183.4 million in 2021 to $337.6 million in 2022 mainly due to the acquisition cost
of Mara Rosa and subsequent capex of $193.2 million. This effect was partially offset by the purchase of Aclara shares for $20.0 million
in 2021, and lower foreign exchange transaction costs to acquire dollars in Argentina of $5.0 million (2021: $15.3 million).
Cash from financing activities decreased to an outflow of $6.6 million from an inflow of $59.3 million in 2021, primarily due to the
additional medium-term loan of $100.0 million drawn down in December 2021, partially offset by proceeds from Minera Santa Cruz
stock market promissory notes of $14.5 million, and lower dividends to non-controlling interest of $0.3 million (2021: $9.8 million).
42 | Hochschild Mining PLC Annual Report & Accounts 2022
Working capital
$000
Trade and other receivables
Inventories
Derivative financial assets/(liabilities)
Income tax payable, net
Trade and other payables
Provisions
Working capital
As at
31 December
2022
As at
31 December
2021
85,408
61,440
2,186
7,100
(144,102)
(24,177)
(12,145)
69,749
49,184
14,073
(22,322)
(133,482)
(32,058)
(54,856)
The Group’s working capital position increased by $42.7 million from $(54.9) million to $(12.1) million. The key drivers of the increase
were: higher income tax payable of $29.4 million; higher trade and other receivables of $15.7 million; and lower derivative financial
assets of $11.9 million.
Net (debt)/cash
$000 unless otherwise indicated
Cash and cash equivalents
Non-current borrowings
Current borrowings21
Net cash/(net debt)
As at
31 December
2022
As at
31 December
2021
143,844
(275,000)
(43,989)
(175,145)
386,789
(300,000)
(499)
86,290
The Group’s reported net debt position was $175.1 million as at 31 December 2022 (31 December 2021: net cash of $86.3 million).
The decrease is mainly explained by: the acquisition cost of Mara Rosa and subsequent construction capex of $193.2 million; the
Snip project’s exploration expenses of $19.6 million; and temporary changes in working capital.
Capital Expenditure
$000
Inmaculada
Pallancata
San Jose
Operations
Mara Rosa
Aclara
Other
Total
Year ended
31 Dec 2022
Year ended
31 Dec 2021
78,176
13,518
50,112
141,806
193,218
-
4,842
339,866
76,512
14,250
43,666
134,428
-
11,476
7,957
153,861
2022 capital expenditure of $339.9 million (2021: $153.9 million) mainly comprised the acquisition cost of Mara Rosa and subsequent
capex of $193.2 million and operational capex of $141.8 million (2021: $134.4 million). Operational capex was higher mainly due to
higher capex for development work at Pallancata to access newly economic resources which have further extended the mine life,
and higher mine development capital expenditure in San Jose.
21 Includes pre-shipment loans and short-term interest payables.
43 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information FINANCIAL REVIEW CONTINUED
44 | Hochschild Mining PLC Annual Report & Accounts 2022
STAKEHOLDER ENGAGEMENT
We are focused on driving long-term sustainable
performance for the benefit of our customers,
shareholders and wider stakeholders.
Our six key stakeholder groups
Section 172
On these pages, we describe our key stakeholders and summarise
the engagement that has been under taken 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 172(1) statement can be found
in the Corporate Governance Repor t on page 96.
Shareholders
Customers
Employees
Suppliers/Lenders
Social
Government/Regulators
45 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information STAKEHOLDER ENGAGEMENT CONTINUED
Why are they important to us?
Engagement activities
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
through various channels throughout
the year with the participation of the
CEO, CFO, members of the Board, the
Company Secretary and the Head of
Investor Relations.
Examples of shareholder engagement in
2022 include participation in sector-specific
conferences, discussions with proxy voting
agencies and with significant shareholders.
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.
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.
Employee engagement generally
takes many forms and includes the use
of surveys, presentations and Q&A
sessions with management. Our 2022
programme included:
– Group-wide meetings with the CEO
on the Company’s financial and
operational performance;
– online forums chaired by Tracey Kerr,
the Non-Executive Director designated
for Workforce Engagement (see page
65 for further details);
– breakfasts with the Chair and senior
managers as part of the induction of
new employees; and
– regular meetings with labour unions
to negotiate collective agreements and
discuss matters of interest.
We adopt a varied approach to engaging
with local communities including:
– direct interaction with local mayors and
residents;
– our Permanent Information Office
(which re-opened for in-person service
in 2021) and town hall meetings;
– community surveys;
– participation in formal roundtables with
the participation of regional authorities;
– collaborative activities, for example
environmental monitoring; and
– the implementation of local purchasing
and hiring protocols.
Shareholders
Employees
Social
46 | Hochschild Mining PLC Annual Report & Accounts 2022
Issues raised in 2022
Additional information
– Peruvian country-risk
– The acquisition of Mara Rosa, the Company’s
first Brazilian asset
– Impact of safety events on executive
remuneration
– Safety performance; and
– Board succession.
READ MORE
Corporate Governance Report
(Shareholder Engagement)
page 95
– Integration initiatives for the new operations
in Brazil and Canada and their contribution
to the Group’s strategic objectives
– Progress of the Group’s strategies on
Environmental, Social and Governance matters;
and
– The implementation of initiatives promoting
the Group’s safety and organisational culture
READ MORE
Sustainability Report (Our people)
page 63
Risk Management (Personnel risks)
page 80
– Environmental issues
– Local hiring and purchasing
– Provision of education to children and
others returning from cities
– Terms and conditions of existing
agreements with local stakeholders,
including access to new land
READ MORE
Sustainability Report (Environment
Management & Communities)
from page 54
Risk Management (Environmental risks)
page 82
Risk Management (Community relations)
page 83
47 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information STAKEHOLDER ENGAGEMENT CONTINUED
Why are they important to us?
Engagement activities
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.
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 are managed by the relevant
functional department such as IT,
Group Finance, etc.
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 geo-political developments.
In addition to usual relationship
management, Hochschild attended CESCO
Week in Chile for customer engagement.
48 | Hochschild Mining PLC Annual Report & Accounts 2022
Government/
Regulators
Suppliers/
Lenders
Customers
Issues raised in 2022
Additional information
– Permitting
– Social conflicts
– Health & Safety and environmental
performance and compliance
– Contribution to regional development such
as through local job creation and investment
in social programmes/infrastructure
– Discussions with representatives of the Tahltan
Central Government on Hochschild’s planned
activities at the Snip project
READ MORE
Risk Management
(Political, Legal & Regulatory risks)
page 81
– The maintenance of stocks of critical
consumables and spare parts to mitigate
supply chain risks
– Ongoing discussions with suppliers to anticipate
price variations due to inflation
– 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 79
– Increased logistics costs as a consequence
of the Russia-Ukraine conflict
– Shipping schedules and the availability of
containers due to ongoing challenges relating
to logistics
READ MORE
Risk Management
(Commercial Counterparty risk)
page 78
49 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information SUSTAINABILITY REPORT
Tracey Kerr
Chair, Sustainability Committee
Our commitment to
sustainability is not just
a business necessity,
but a moral obligation
to future generations
Since the Company’s inception, we have endeavoured to
maintain and reinforce our corporate values of respecting
the wellbeing of our employees, the environment and the
communities in which we operate.
$119.4m
LOCAL
PROCUREMENT
5.27
ECO
SCORE
33%
FEMALE BOARD
COMPOSITION
2nd
RANKING OUT
OF 16 MINING
COMPANIES
IN PERU
(2022 MERCO
RESPONSIBILIDAD ESG
RANKING)
50 | Hochschild Mining PLC Annual Report & Accounts 2022
Dear shareholder
In my capacity as the new Chair of the Sustainability
Committee, I am thrilled to share with you the
significant strides we have made delivering across
our many ESG initiatives during 2022. We’re
determined not to stand still however, and through
our Online Engagement Forum I have had the
pleasure of speaking personally with some of our
diverse and very talented people to understand what
more we can do to improve. We understand that our
decisions and actions taken today will shape the
world for years to come and the team and I are all
dedicated to being a leader in responsible mining.
I do hope you enjoy reading about our progress to
date and we warmly welcome any feedback.
Serving our Communities
We have forged strong partnerships with our local
communities and invested approximately $7.0 million
in 2022 to support education, connectivity, health
and nutrition, and socio-economic development
initiatives. Our efforts have benefited over 2,000
people in Peru who received free medical care, and
687 primary and secondary school students who
participated in skills development workshops.
Approximately 500 people also gained access to our
digital centres, where they received information and
communication technology training. Finally, we
procured goods and services worth $119.4 million
from local providers in Peru, Argentina and Brazil,
contributing to the growth of local economies.
Protecting the Environment
We launched our updated Environmental Management
System to monitor and improve our environmental
performance. Our sustainability efforts were externally
recognised through our CDP climate change impact
report, which I’m proud to say received a B rating –
an improvement on last year and higher than the
mining industry average. We also continue working
towards net zero emissions by 2050, and plan on
setting interim targets for 2030 in 2023, which will
serve as a stepping-stone to achieve our goal.
Promoting Health and Safety
We’re proud of our outstanding health and safety
record, with no fatal or serious accidents occurring
in the high-risk field of underground mining in 2022.
We also introduced an in-house integrated safety
performance indicator – Seguscore – to track and
improve vital safety metrics. We retained our DNV
Level 7 Occupational Health and Safety Management
System rating, reflecting our unwavering commitment
to upholding the highest safety standards.
Empowering our People
We offer equal opportunities to all our employees,
regardless of their race, gender, religion, ethnicity,
age, or any other personal characteristic. Our low
voluntary employee turnover rate of just 4% speaks
to our positive culture. Mining is a predominately
male industry, which historically has had challenges
regarding the sexual harassment of female workers.
During 2022, we continued assessing our Company
with ELSA – a comprehensive diagnostic and
intervention tool, which confirms a substantial
decrease in harassment cases compared with 2021.
Guaranteeing we are a Responsible Business
Hochschild continues to receive external recognition
for our responsible business practices. For the second
year running, we were honoured with the EMIN award
for Mining Excellence in the South Macro Region,
presented by the Peruvian National Society of Industries,
the Peruvian Mining Engineers Institute, and the
Arequipa Chamber of Commerce. Additionally, we
maintained our certification for Anti-Bribery from
‘Entrepreneurs for Integrity’ and achieved second
place among 16 mining companies in the 2022
MERCO Responsabilidad ESG ranking in Peru.
Moving forward, we will launch a new set of ESG KPIs
in 2023 that will help us monitor our progress across
all these topics. Our goal is to further enhance our
ESG practices by launching new projects that
promote socio-economic development in our local
communities, reduce our environmental footprint
through effective climate risk management, assess
additional High Potential Events (HPEs) to enhance
safety measures, and strengthen our grievance and
whistleblower mechanisms to ensure the wellbeing
and satisfaction of our employees. I look forward to
sharing our progress with you next year.
If you have any comments and feedback on our
sustainability activities or report, please reach
out to us at sustainability@hocplc.com.
Tracey Kerr
Chair, Sustainability Committee
51 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information SUSTAINABILITY REPORT CONTINUED
Our approach to sustainability
Our areas of focus
Ensuring
Health and
Safety
PAGE 61
Guaranteeing we are a
Responsible Business
PAGE 66
Empowering
our People
PAGE 63
Protecting the
Environment
PAGE 57
Serving our
Communities
PAGE 54
Hochschild’s approach to
sustainability
The aim behind our long-term business
strategy is to provide an attractive
investment proposition for our
shareholders, while also enhancing
value for all our stakeholders, including
our employees, customers, suppliers,
and local communities.
To ensure that both these objectives
are met, we have focused our efforts and
operational delivery on the areas where
we can have the biggest impact, supported
by our commitment to the United Nations
Sustainability Development Goals (UN
SDGs). We initially identified these areas
through a materiality assessment, which
we reviewed in 2021. In this latest review,
we determined 14 key environmental,
social and governance topics that are
vital to both our Company and its
Sustainability Strategy
stakeholders. The process involved
analysing external trends, conducting
a peer benchmarking exercise, engaging
with stakeholders both within and
outside the Company, and
comprehensively examining and
prioritising material topics.
We undertake a materiality assessment
every two years and plan to revisit
and refresh it in 2023.
Minimal
footprint
Maximise
innovation
Transparency
Robust
culture
Best
in class
52 | Hochschild Mining PLC Annual Report & Accounts 2022
Sustainability reporting
To provide our stakeholders with greater
transparency on the impact of climate
change on our business, we began
participating in CDP surveys and reporting
under the Task Force for Climate-related
Financial Disclosure (TCFD) framework in
2021. We were encouraged that our CDP
climate score for 2022 showed a marked
improvement from 2021. More information
on our scores can be found on the website.
For climate-specific disclosure, we have
published our 2022 report based on the
TCFD framework, which can be found
from page 68. Using these external
disclosure frameworks, we are committed
to providing our stakeholders with an
ongoing and transparent account of the
material topics and to outline the steps
we are continually taking to improve our
sustainability performance.
In addition, we publish a Sustainability
Report that conforms to the requirements
of the GRI Universal Standards every two
years, with the next one set to be published
in 2024. Our previous Sustainability Report,
published in 2022 can be found via our
website at:
https://www.hochschildmining.com/
sustainability/sustainability-reports-and-
policies/
Launching new ESG KPIs
After a comprehensive internal review,
our Board of Directors approved the
publication of new KPIs in May 2022,
against which the Company’s future
sustainability performance will be
measured. The ESG KPI dashboard can
be found on our website under Our
Reporting and Ratings at:
https://www.hochschildmining.com/
sustainability/sustainability-reports-and-
policies/
We will report our performance against
the chosen KPIs on an annual basis. In
addition, to track our ESG performance,
we will set clear and actionable KPI targets
for 2030. The list of tracked KPIs will be
supplemented as appropriate, as we
continue to monitor their significance.
Governance
Good corporate governance is key
to ensuring the effective and efficient
management of a company, promoting
transparency, accountability and trust
in the business and its operations, which
requires strong guidance and leadership.
Our Board of Directors holds the ultimate
accountability for creating policies on
sustainability, making sure that the Company
complies with both international and
national regulations, and for establishing
sustainability as a source of lasting
competitive advantage.
The Board has tasked the Sustainability
Committee, an official sub-committee,
with the responsibility of overseeing
sustainability matters, ensuring
2022 Meeting attendance
Members
Tracey Kerr, Non-Executive Director (Chair)*
Graham Birch, Non-Executive Director**
Ignacio Bustamante, Chief Executive Officer
Eileen Kamerick, Non-Executive Director
Michael Rawlinson, Non-Executive Director***
Mike Sylvestre, Non-Executive Director****
compliance and implementing systems
and practices effectively throughout
Hochschild to manage ESG-related risks
and opportunities.
Tracey Kerr chairs the Sustainability
Committee and has Board-level
responsibility for ESG issues. She is also
the Designated Non-Executive Director
for Workforce Engagement. The Vice
Presidents of Operations, Legal &
Corporate Affairs, and Human Resources
report to Tracey Kerr as Chair of the
Sustainability Committee.
Committee membership and attendance
at Committee meetings are detailed in the
table below:
Maximum
possible
attendance
Actual
attendance
Independent
Yes
Yes
No
Yes
Yes
Yes
3
2
4
4
1
2
3
2
4
3
1
2
* Tracey Kerr was appointed member of the Committee on 1 March 2022 and as Chair of the Committee on 26 May 2022.
** Graham Birch stepped down from the Committee on his retirement from the Board on 26 May 2022.
*** Michael Rawlinson stepped down from the Committee on 1 March 2022.
**** Mike Sylvestre joined the Committee on 26 May 2022.
The Committee conducted the following
key activities during 2022:
Policy & risk management
– Reviewing and approving the updated
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 Guaranteeing we are a
Responsible Business;
– Oversight of the ongoing rollout of the
Environment Culture Transformation
Plan as well as updates on the progress
of the Company’s Carbon Strategy; and
– Consideration of the issues raised by
employees in the roundtables hosted
by Tracey Kerr, Sustainability Committee
Chair (see page 65 for further details).
Corporate Environmental Policy;
– Benchmarking the risk assessment
of the Company’s Tailings Storage
Facilities (TSF) with reference to the
International Council on Mining and
Metals’ (ICMM) Global Standard on
Tailings Management; and
– 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 section for
inclusion in the 2021 Annual Report and
reviewing the standalone 2021
Sustainability Report;
– Providing oversight and updates on
external ESG-related disclosure initiatives,
for example the Company’s participation
in the Carbon Disclosure Project (CDP),
MSCI and Sustainalytics; and
– Selecting and adopting ESG-related
Key Performance Indicators (KPIs) in
alignment with the Company’s strategy.
53 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information
SUSTAINABILITY REPORT CONTINUED
Serving our
Communities
Highlights
61%
LOCAL MINE WORKFORCE VS TOTAL MINE
WORKFORCE* (2021: 58%)
$119.4m
LOCAL PROCUREMENT
IN PERU, ARGENTINA AND BRAZIL*
(2021: $94.7M IN PERU AND ARGENTINA)
$7.0m
SPENT OR DONATED TO BENEFIT LOCAL
COMMUNITIES AND LOCAL GOVERNMENTS
(2021: $6.8M)
Alignment to UN SDGs
At Hochschild, we are deeply committed to supporting
the local communities where we operate. Our aim is to make
a significant and positive impact on the development
of these communities. We have identified the following
material topics related to this pillar: Positively Impacting
Local Communities and Respecting Human Rights.
Our approach to serving
our communities
Our approach at Hochschild is to foster
strong partnerships with our local
communities, while respecting their
unique cultural heritage, practices and
social dynamics. Since transparent
communication is a high priority for us,
we keep our communities informed of any
relevant Company developments and
actively engage them in decision-making
processes that may impact them.
Our approach is guided by our
Community Relations Policy, which
outlines our commitment to building trust,
establishing open lines of communication,
and actively listening to and addressing
community concerns. We work with
government authorities to ensure our
social investment strategies are
implemented successfully and have
a long-lasting impact.
Key achievements 2022
– Digital inclusion: The Conexion Futuro
(‘Future Connection’) programme aims
to increase employability in the rural
areas surrounding our mining units in
Peru through technical skills training.
This initiative is especially intended for
communities with a large student
population, where digital centres are
established to provide them with
information and communication
technology (ICT) training. Over 180
students from six localities have already
benefited from the programme. These
centres are equipped with projectors,
wireless network systems and sound
systems, and access to them is always
free of charge. In 2022, one new digital
centre was established in Pausa and
two were upgraded in Pacapausa and
Cascara, communities in Peru. With
these new and improved centres, there
are a total of 10 centres built since
programme launch in 2020, which
connect 13 localities in Peru with stable
internet access.
Beneficiaries of the 6 Digital
Centres in Peru in 2022
Students attending technical
certification courses
ICT issues resolved
Total internet connections in
13 local communities in Peru
Average number of daily
connections
491
183
1,929
118,264
50
* 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: Goias).
54 | Hochschild Mining PLC Annual Report & Accounts 2022
– Education: Our educational programme
– Health and nutrition: The Siempre
– Economic development: Hochschild’s
Aprender para Triunfar (‘Learn to
Succeed’) not only provides academic
support to primary school students in
the areas of mathematical reasoning
and reading comprehension, but also
emphasises the development of
socio-emotional and entrepreneurial
skills for secondary school students.
In 2022, we conducted workshops with
over 450 secondary school students
and 181 primary school students,
trained 13 primary school teachers and
51 secondary school teachers as well as
facilitated eight parent-teacher meetings.
Ultimately, this programme benefited
675 students and 64 teachers.
To cater to the needs of the mining
industry specifically, we sponsor higher
education opportunities in technical
subjects relevant to this industry through
our Becas Futuro (‘Future Scholarship’)
programme. In 2022, 30 students were
enrolled in higher education programmes
and 64 received sponsorship for trade
certifications related to work at a plant,
mine, laboratory, among others.
Beneficiaries of the Aprender para
Triunfar programme in 2022
Secondary school students who
attended workshops
Primary school students who
attended workshops
Number of trained teachers
Number of parent-teacher
meetings
Beneficiaries of the Becas Futuro
programme in 2022
739
494
181
64
8
94
Sanos (‘Always Healthy’) programme
implemented in partnership with the
Peruvian Health Ministry addresses the
medical needs of local communities. As
part of this programme, we organised
five campaigns with multi-speciality
medical professionals to offer free
medical care to these communities,
reaching over 2,000 people.
Beneficiaries of the Siempre Sanos
programme in 2022
2022
Number of multi-speciality medical
campaigns
5
The Estimulación Temprana (‘Early
Stimulation’) programme supports new
parents with infant nutrition and
educates community members on
preventive care. In 2022, more than
2,000 people benefited from the
programme. Sixteen health promoters
– trained by us and from within the
communities – carried out almost 1,500
home visits to improve parents’
knowledge of early child development.
Furthermore, experts in specialised
nutrition and early stimulation carried
out 160 visits in local communities near
the Inmaculada mine. We are pleased to
report that there was a 51% reduction in
child anaemia cases in this area in 2022,
compared to the previous year.
Number of health promoters
16
Number of home visits carried out
1,459
Number of home visits carried out
by specialised nutrition and early
stimulation personnel
Reduction in child anaemia cases in
local communities near the
Inmaculada mine
160
51%
Impulso Productivo (‘Boosting
Productivity’) programme seeks
to strengthen local entrepreneurs’
business management skills and
improve their market access to three
food production-related areas: guinea
pigs, poultry and vegetables. As a part
of this programme, we were especially
successful in setting up a collection
centre for fruits and vegetables in San
Javier de Alpabamba. We worked with
134 agricultural producers, who sold
approximately $26,000 worth of guinea
pigs, chicken, vegetables and other local
produce in 2022 to our food service
provider and to the local market. We
are proud to announce that in August
2022 we won first place in the Proactivo
awards under the ‘Large Mining’
category for this programme.
A noteworthy part of this programme
involved providing support to members
of the Asociación de Productores
Agroindustriales de Paucar del Sara
Sara (Asapapssa) to help them in
certifying their avocados as organic.
Our support covered the cost of the
certification process, including the
pesticide analysis conducted by a
third-party company. Along with 19
other partners, our efforts allowed these
producers to export around 16 tonnes
of organic avocados to the European
market in 2022.
In a bid to further support the economic
development of our communities in
Peru, we began the Orgullo Pecuario
(‘Pride in our Livestock’) programme in
2016. In 2022, we provided 776 livestock
producers with personalised technical
assistance to improve the health of their
livestock. Moreover, we carried out
animal health campaign activities and
provided support for the management
of almost 140,000 camelids and cattle.
Beneficiaries of the Impulso
Productivo programme in 2022
134
Sales of guinea pigs, chickens and
fruits & vegetables
~$ 26,000
Beneficiaries of the Orgullo
Pecuario programme in 2022
776
55 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information SUSTAINABILITY REPORT CONTINUED
Hochschild is
committed to
upholding and
respecting human
rights within the
Company and
throughout our
value chain.”
Jose Augusto Palma
VP Legal and
Corporate Affairs
Hochschild made social investments of
approximately $7.0 million in 2022 towards
projects in the aforementioned four
strategic areas, in ad-hoc philanthropic
campaigns and in providing technical
assistance to municipalities. Of this
amount, $3.4 million was provided to the
Santa Cruz province in Argentina through
a publicly managed Trust Fund, ‘Proyecto
UNIRSE’, which finances diverse social
projects. We are delighted to report that
these investments have positively impacted
the lives of over 30,000 individuals.
Education
Health and nutrition
Socio-economic development
Philanthropic campaigns
Culture and Communication
Donations
Local governments support
$1,057,733
$580,150
$765,468
$247,276
$106,613
$445,000
$3,823,737
Respecting human rights
We have operationalised our commitment
to human rights in the policies and
procedures throughout our entire
business enterprise. Key examples of this
include updating our Whistleblowing
portal to allow the registration of human
rights violations/grievances and revising
all our contract templates to reflect our
commitment to the UN Universal
Declaration of Human Rights. Our Human
Rights Policy from 2020, which is aligned
with internationally recognised human
rights standards and frameworks,
remains in effect for all our contractors
and suppliers.
Material topics in serving
our communities
Positively impacting local communities
At Hochschild, our communities are one
of our most important stakeholders. We
established and implemented a Social
Engagement Strategy – which includes
our Community Relations Strategy – to
help broaden our impact beyond the
Company’s four walls. Our aim is to foster
a mutually beneficial relationship with 57
communities in our direct area of
influence – approximately 7,000 families.
To this end, we engage in a regular
dialogue with our community members
centred around four strategic themes:
education, connectivity, health and
nutrition and socio-economic development.
We gather detailed feedback through
focus groups, site visits and meetings with
authorities to understand our social
impact. Additionally, we have established
Permanent Information Offices near the
Inmaculada mine and in Pallancata to
serve as a central point of contact for
communities to ask questions or express
concerns about our mining operations.
We received 56 grievances and enquiries
in 2022 in Peru and Brazil, and responded
to all of them, with an average response
time of 14.7 days.
Number of engagements with local
communities in Peru
993
Response rate to grievances and
enquiries
100%
We strive to generate local employment
opportunities and aim to gradually
increase this over time. In 2022, local
employment, including people from
communities near our mining sites and
from the provinces where we operate in
Peru, Argentina and Brazil, accounted
for 61% of the total mine workforce.
56 | Hochschild Mining PLC Annual Report & Accounts 2022
Protecting the
Environment
Highlights
2022 ECO SCORE (VS TARGET OF 5.00)
5.27
58%
REDUCTION IN POTABLE WATER
CONSUMPTION COMPARED WITH 2015
(2021: 53% REDUCTION)
46%
DECREASE IN DOMESTIC SOLID WASTE
GENERATED COMPARED WITH 2015
(2021: 48% REDUCTION)
Alignment to UN SDGs
Hochschild is committed to acting with responsibility
towards the environment and to ensuring our business
processes are environmentally sound. We have identified
the following material topics related to this pillar: Climate
Change Resilience, Water Management, Innovation through
Technological Solutions, Safeguarding Biodiversity and
Natural Resources through effective Land Use, and
Responsible Management of Waste and Tailings.
Our approach to protecting
the environment
Our Environmental Policy guides all our
actions with the goal of minimising the
environmental impact of our mining and
metal production activities. These
measures include reducing water usage,
improving energy efficiency and increasing
the use of recycled waste among other
environmentally-conscious measures.
Key achievements 2022
– Environmental Management System
(EMS): To enhance our environmental
performance, we updated our
Environmental Management System
in 2022. The newly designed EMS was
introduced in January 2023, with an
internal announcement to mark its launch.
Our EMS outlines 15 key processes and is
aligned with ISO 14001:2015. Additionally,
we created an EMS handbook, which was
distributed to all our facilities. In 2023, we
will take further steps to implement and
reinforce our EMS practices by creating
specific environmental management
documentation for each of our mines.
For further details on the processes of
the EMS, please visit our website.
– Environmental Culture Transformation
Plan: Our Environmental Culture
Transformation Plan aims to foster and
embed an eco-friendly culture across our
business and operations. Key initiatives
include the Environmental Ambassadors
Programme and the Environmental
Processes Optimisation Programme.
• Environmental Ambassadors
Programme: In 2022, we formed the
second group of environmental
ambassadors for the mining units in
Peru and Argentina. Our 35 ambassadors
in Peru and 43 in Argentina were tasked
with promoting a fundamental Company
value: environmental responsibility in
everything Hochschild does. The
ambassadors were managed by the
environmental superintendent of the
relevant mining unit, who monitored
and evaluated their performance.
A training plan was established to
provide the ambassadors with all the
necessary resources required to
effectively communicate information
and instructions on environmental
issues. Their tasks included
participating in awareness-raising
and cultural transformation campaigns,
accompanying inspectors on monthly
environmental inspections, and
conducting field visits around the
mining units.
57 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information SUSTAINABILITY REPORT CONTINUED
• Environmental Processes
Optimisation Programme: We set
up this programme with the aim of
assessing environmental risks across
our operations and implementing the
most appropriate environmental
controls. To this end, we formed
interdisciplinary groups in each mine,
and presented them with specific
environmental problem statements.
In 2022, we focused on two challenges:
controlling dust on roads and improving
containment in tailings pipelines. At
the end of the year, teams presented
their final proposals with the potential
to be selected for implementation.
– ECO Score: A Hochschild innovation:
Hochschild developed an innovative
indicator – the ECO Score – to achieve
a best-in-class environmental footprint.
This tool enables us to measure our
environmental performance as a
single, easily understandable number.
The ECO score serves as a powerful
and innovative tool for managing
environmental issues, holding employees
accountable, and generating value for
all stakeholders.
Every year, we review the target range
for our ECO Score. Since 2021, this was
between 5 and 6, our toughest goal yet.
We were able to achieve excellent results
in 2022, obtaining 5.27 out of 6, and we
also achieved our best result yet for the
environmental culture compliance
indicator at 96.5% (compared with
a target of 95%).
Hochschild is dedicated
to reducing its greenhouse
gas emissions, as
addressing climate change
is of utmost importance
to the Company.”
David Vexler
Corporate Sustainability Director
To incentivise continuous improvement
within the Company, we set a higher
corporate target at 5.25 for 2023, and
we will work towards achieving the
highest possible score.
Additionally, we established more
stringent targets for water consumption
and domestic waste generation. The
target for water consumption was reduced
to 193 litres/person/day (previous target
of 250 litres/person/day) and the target
for domestic waste generation was also
lowered to 1 kilogram/person/day (previous
target of 1.5 kilograms/person/day) for
2023. More importantly, we improved
our Environmental Culture inspection
checklist criteria and assessment methods
by drawing on lessons learned from the
previous years. With the implementation
of the EMS, we will endeavour to find
and address any previously unidentified
environmental issues and incorporate
them as specific assessment criteria for
each mine.
The 2022 Eco Score results were
independently assured by EY Peru
following the International Standard on
Related Services (ISRS) 4400. Information
on the ECO Score and how it is
calculated can be found under:
https://www.hochschildmining.com/
sustainability/environment-and-climate-
change/
Material topics in protecting
the environment
Climate change resilience
At Hochschild, we recognise the urgency
of addressing climate change and are
determined to play our part by continuously
reducing our greenhouse gas (GHG)
emissions. Our aim is to reach net zero
GHG emissions by 2050. As part of our
reduction pathway towards that goal,
we will be setting interim targets for 2030.
These targets will require us to improve
our energy efficiency and increase our
reliance on renewable energy sources.
In 2022, we sourced 81% energy from
renewable sources.
Our mining operations in both Peru and
Argentina have a lower GHG emissions
intensity compared to other gold and
silver mines globally (1.81tCO2e/koz Ag eq;
0.13 tCO2e/oz Au eq). This is a result of our
underground mining operations having
lower emissions compared to open pit
mines, utilising low-carbon grid-based
electricity, and prioritising the use of
renewable energy when available. For
instance, we signed a new contract to
source renewable energy for the Ares
and Arcata mines in January 2022.
58 | Hochschild Mining PLC Annual Report & Accounts 2022
Greenhouse gas emissions
data1, 2 (tonnes of CO2e)
Emissions from combustion of fuel
and operation of facilities (tCO2e)
Emissions from total purchased
electricity (tCO2e)4
Emissions from purchased electricity
– non-renewable sources (tCO2e)5
Total Scope 1 & Scope 2
emissions (tCO2e)6
Emissions intensity, per thousand
ounces of total silver equivalent
produced (CO2e/k oz Ag)6,7
2022
20213
2020
2019
2018
2017
2016
2015
2014
43,196
46,339
40,647
39,341
38,939
47,265
46,033
46,892
73,244
68,116
58,133
41,254
82,833
85,084
94,249
91,893
78,163
69,933
13,389
12,820
6,591
n/a
n/a
n/a
n/a
n/a
n/a
111,312
104,472
81,901
122,174
124,023
141,514
137,926
125,055
143,178
3.57
3.11
2.64
2.60
3.16
3.27
3.70
5.08
2.76
n/a
Scope 3 emissions (tCO2e)
29,736
29,029
n/a
Energy consumption
476,691,426 465,027,594 366,955,382 446,288,131
From combustion of fuel (kWh)8
158,749,673 165,114,299 132,414,133 143,763,206
From purchased electricity (kWh) 317,941,753 299,913,295 234,541,249 302,524,925
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
1
Method used based on ISO 14064-1 Standard and GHG Protocol Corporate Accounting and Reporting Standard, using IPCC and Peruvian emission factors.
Gases included in the calculation of all three scopes: CO2, CH4, N2O.
2 Includes data for the whole year for Peru (former and current operating assets, Azuca, 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 1 and Scope 2 emissions and energy consumption represent
less than 0.01% of the Group’s reported totals
3 Restated following a review of underlying data and external verification of the emissions from Inmaculada, Pallancata, Selene and San José.
4 Location-based emissions. Total purchased electricity from both renewable and non-renewable sources.
5 Market-based emissions. Excludes electricity purchased from renewable sources, hydropower in Peru and wind power in Argentina.
6 Emissions (and intensity) reflect combustion of fuel and operation of facilities (Scope 1) and purchased electricity (Scope 2) – location-based emissions.
7 Total production includes 100% of all production, including that attributable to the joint venture partner at San Jose.
8 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 1.
Hochschild oversees and manages climate change-related risks at the highest governance levels through its Sustainability
Committee and the Audit Committee. In terms of environmental-related reporting, our climate change impact report for CDP
received a B rating, which was an improvement from our C rating in the previous year and higher than the average rating of C
for the mining industry. Our TCFD report details specific information on our approach to managing climate risks and opportunities,
including governance, strategy and risk management, which can be found on page 68.
Water management
Hochschild has established a strategy for responsible water management to make optimal use of water resources. In 2022, 84.3%
of all water used in processing plants was recycled, minimising intake of freshwater. At the Inmaculada mine, 78% of the water used
was reclaimed (2021: 75%), at the Selene mine, the figure was 99% (2021: 99%) and at the San Jose mine, it was 69% (2021: 77%).
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 closely monitor water discharge to the environment to ensure it complies with national regulations,
with around 2,000 parameters monitored annually.
In 2022, we continued reducing our water footprint at the Inmaculada mining site in line with the project implemented as part of
the Blue Certificate programme by the Peruvian Water Authority (ANA). The project, implemented in 2021, consisted in recirculating
treated water from the domestic water treatment plant to the processing plant. Our water savings in 2022 amounted to 61,062m3,
equivalent to a 17% reduction of the annual industrial freshwater consumption at the Inmaculada processing plant.
Water use in our operations* (m3)
Year
2020
2021
2022
Freshwater used in processing plants (m3)
454,527
589,904
651,066
*Inmaculada, Selene and San Jose mines.
In addition, we are proud to report that the potable water consumption rate in 2022 was the lowest to date, a result of the successful
implementation of several initiatives. These included installing electro-valves to improve water use and control, running a communication
campaign around the efficient use of water and maintaining high quality water pipelines.
Potable water consumption (l/person/day)
2022
171.21
2021
192.83
2020
230.67
2019
206.01
2018
224.78
2017
214.08
2016
293.71
2015
408.35
Innovation through technological solutions
Our dedication to innovation allows us to embrace new technologies and apply them to our business. In 2022, we launched an Innova
campaign with the goal of reducing our environmental impact by incorporating technology and innovation into our processes, proposed
by our workers. We received proposals via our innovative projects portal, which will be evaluated to determine which projects are
feasible for implementation.
59 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information SUSTAINABILITY REPORT CONTINUED
In 2022, Hochschild Mining’s Peruvian operator, Compañía Minera Ares, continued its
partnership with Profonanpe, a Peruvian trust fund for national parks and protected
areas, to preserve and conserve the Cotahuasi Landscape Reserve. Based on the
Reserve’s Master Plan, four strategic components were prioritised:
i) Structural management: Improving the Reserve signage to demarcate the
Reserve’s boundaries and to clearly identify tourist attractions.
ii) Response to natural disasters: Providing equipment (uniforms and tools) to the
fire brigade within the Reserve. Holding training courses on fire control techniques, fire
risks and hazards, personal safety among other topics for firefighters.
iii) Environmental education: Holding educational conventions on biodiversity
integrating the local schools and the general public.
iv) Sustainable economic activities: Supporting local entrepreneurship through the
‘Emprendedores por Cotahuasi’ programme. In 2022, 3 business proposals from
local communities received funding, benefiting 336 individuals.
Responsible management of waste and tailings
Hochschild recognises the damage that hazardous and non-hazardous waste can
cause if not managed correctly. To minimise risk, we have extensive Waste Management
Plans in place. As a results of these efforts, including the implementation of the ECO
Score, domestic waste generation has decreased by 45.9% since 2015.
Domestic waste generation (kg/person/day)
2022
1.05
2021
1.00
2020
1.18
2019
1.04
2018
1.13
2017
1.13
2016
1.33
2015
1.94
Hochschild has 11 tailings storage facilities in total, nine of which are downstream
with rock buttresses and two with central berms with impoundments on both sides.
Of these, four are currently operational – two in Peru and two in Argentina. To ensure
the stability of our operational tailings facilities, we conduct external audits every two
years. The latest audit took place in 2021 and concluded that all dams were stable,
with only minor maintenance-related observations. An action plan addressed these
issues in 2022. Our next audit is scheduled for later this year.
Hochschild provides induction and training on the policies regulating TSF
management for employees. We fully support the need for greater transparency in the
mining sector and therefore disclose comprehensive details on each of our TSFs and
their management. We published our updated Church of England report on TSFs,
based on the ICMM Global Industry Standard on Tailings Management under:
https://www.hochschildmining.com/sustainability/sustainability-reports-and-policies/.
An example of one such project came
from plant workers in the San Jose mine
in Argentina, who proposed an improvement
to the water recovery process. They
identified an opportunity to increase the
efficiency of the water recovery plant,
maximising water recovery and drastically
reducing the need for freshwater in the
processing plant. The project was
implemented in January 2021 and saved
an estimated 12,335 m3 of freshwater
within the first 12 months of operation.
The team received an award in recognition
for their innovative proposal.
We have also held talks on innovation
to inspire and encourage creativity
within our business, with topics such as
electrification of mining vehicles being
discussed. The talks reached an audience
of over 100 people.
Safeguarding biodiversity and natural
resources through effective land use
In recognition of Peru’s status as one of
the world’s most biodiverse countries, and
the proximity of our operations to national
protected areas, Hochschild has included
biodiversity as a priority in its revised
2022 Environmental Policy. Biodiversity
needs are included in the monitoring and
planning of activities and operations to
avoid any undue nature-related risks and
impacts. In the future, we intend to set
ambitious nature-positive targets.
To protect the ecology around our mining
units, a specialist consulting firm
conducts surveys of the ecosystems
surrounding our mining units twice a year,
in both the rainy and dry seasons. The
results of these surveys confirmed the
overall health of the ecosystem in 2022.
In order to protect biodiversity and to
increase awareness on this topic,
Hochschild developed a ‘Knowledge Trail’
in the municipality of Mara Rosa, with full
accessibility for people with special needs.
Open to the public since September 2022,
the Trail is an environmental and heritage
education project aimed at the
communities of Mara Rosa, Amaralina
and the neighbouring localities. The trail,
which spans approximately 400 metres,
features 13 activity stations showcasing
over 10 years of research on the Cerrado
biome ecoregion and local communities.
READ MORE
See hochschildmining.com for further
details on the Group’s TSFs
60 | Hochschild Mining PLC Annual Report & Accounts 2022
Ensuring
Health and Safety
93
SEVERITY INDEX
(2021: 676)
At Hochschild, we understand that our employees are
our most valuable resource, and with the high-risk nature
of mining, prioritising their safety is crucial to our operations
and overall success. We firmly believe that a healthy and
motivated workforce plays an important role in driving the
growth of our Company. Our material topic relating to
this pillar is: Occupational Health, Safety and Wellbeing.
Our approach to health and safety
Everyone at Hochschild has a responsibility
to work in the safest manner possible. The
Company recognises that a highly engaged
workforce, where individuals are proactively
looking out for their own and others’ safety,
is vital to managing safety and health risks.
Key achievements 2022
– Accidents: We are extremely pleased to
report that no fatal accidents occurred
in 2022, demonstrating a robust safety
performance despite the high risk
associated with underground mining.
– Safety 2.0: To embed a Company-wide
safety-first culture, we upgraded our
Safety Action Plan to Safety 2.0 in 2020
based on seven fundamental aspects.
These included providing technical
training, developing a feedback culture,
giving awards for standout behaviour
and linking compensation with safety
amongst others. As a part of this plan,
we officially launched the Seguscore
after a period of internal testing in
January 2022. The Seguscore is an
in-house integrated safety performance
indicator, which incorporates proactive
safety indicators such as internal
inspection results, as well as traditional
safety indicators such as frequency,
severity, and high potential events.
61 | Hochschild Mining PLC Annual Report & Accounts 2022
Highlights
0
WORK-RELATED
FATALITIES
(2021:2)
1.37
LTIFR
(2021: 1.26)
Alignment to UN SDGs
Strategic ReportFinancial StatementsGovernanceFurther Information SUSTAINABILITY REPORT CONTINUED
Hochschild obtained a Seguscore
of 9.7 out of 10 in 2022, based on a score
of 5 out of 5 under the traditional reactive
indicators, and a 4.7 out of 5 on the
proactive indicators. In 2023, we plan
to keep improving our Seguscore by
incorporating key lessons from the
previous year. Two main areas of focus
include encouraging active employee
leadership in safety and increasing the
role of health and safety leaders at our
mining units.
Another feature of Safety 2.0 is an
in-house tailored risk perception
programme we developed in 2021 to
improve our employees’ and contractors’
understanding of safety-related risks.
The programme focuses on six
parameters covering areas such as
fatigue, daily habits and time
management, all of which are presented
by internal instructors certified by us.
The training is conducted regularly to
ensure that all employees and
contractors have a chance to
participate and take an active role in
promoting safety. In 2022, two rounds
of the training were held with a 92%
attendance rate among mining
employees in Peru. The second round
particularly emphasised the lessons
learned from recent safety incidents
at Hochschild.
– Investigating and learning from safety
incidents: No significant safety-related
incidents occurred in 2022. Minor
incidents that occurred were
investigated in a timely manner and
appropriate measures were implemented.
We remained diligent in our commitment
to safety by continuing to assess the
potential occurrence of High Potential
Events (HPEs), which refer to events that
could result in serious injury or lost time.
When an HPE occurs, our CEO holds
a meeting to conduct a thorough
investigation and develop a corrective
action plan. During 2022, six HPEs
were evaluated.
To enhance road safety and provide
our drivers with greater control, all our
personnel transport buses are equipped
with integrated GPS as well as a speed
and fatigue control system. This system
collects data that is analysed through a
business intelligence dashboard, aimed
at predicting potential incidents. The
implementation of this system was
based on the lessons learned from a
safety incident that occurred in 2021.
– Wellbeing: To support the mental health
and wellbeing of our employees, we
promoted the Conversemos en familia
(‘Talk as a family’) programme in 2022 in
Peru. The programme consisted of nine
one-hour online sessions with 20 to 30
participants per session. The topics
covered included healthy eating,
internet risks, financial education and
breast cancer prevention. Based on the
positive feedback received, we intend to
continue these sessions in 2023 and will
be revising the themes of the talks to
keep them relevant and topical.
Material topic in health and safety
Occupational health, safety
and wellbeing
The health, safety and wellbeing of our
employees and contractors is integral
to our business. We adopt practical
measures to avoid workplace fatalities,
eliminate occupational health hazards
and support employee wellbeing.
To ensure a safe working environment, we
implement a systematic risk management
approach, supported by our Occupational
Health and Safety (OHS) Management
System. In H1 2022, the OHS System received
certification from DNV at Level 7 after an
external audit, which applies to all our
operating units. Additionally, internal cross-
audits were conducted by Hochschild-
trained Auditors in H2 2022, and all
findings were promptly addressed.
Hochschild offers a healthy
and secured workplace in
which our employees as
well as contractors can feel
safe and thrive.”
Eduardo Landin
Chief Operating Officer
Safety performance
Fatal accidents
4
3
2*
1
Lost Time Injury Frequency Rate (LTIFR)
Accident Severity Index
2.69
1,264
2.20
1.85
1.74
1.37
1.26
1.38
1.05
930
676
474
Nil
‘22
‘21
‘20
Nil
‘19
‘18
‘17
Nil
‘16
Nil
‘15
‘22
‘21
‘20
‘19
‘18
‘17
‘16
‘15
93
‘22
‘21
‘20
54
‘19
138
112
‘18
‘17
‘16
‘15
* 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.
62 | Hochschild Mining PLC Annual Report & Accounts 2022
Empowering
our People
Highlights
4%
VOLUNTARY
EMPLOYMENT
TURNOVER
(2021: 5%)
Our people are absolutely pivotal to the success of our
business. By creating a supportive work environment, we
can improve employee satisfaction and increase retention
rates. We identified the following material topics relating
to this pillar: Labour Relations, Diversity and Inclusion,
and Recruitment, Retention and Engagement.
9%
FEMALE WORKERS VS
TOTAL WORKFORCE
(2021: 9%)
33%
FEMALE REPRESENTATION
AT BOARD LEVEL
(2021: 33%)
Alignment to UN SDGs
Our approach to supporting our people
Underpinning the importance we place
on our people, we are committed to
providing a safe and healthy workplace,
an inclusive work environment, offering
competitive compensation and benefits,
implementing wellness initiatives,
investing in professional development
and promoting work-life balance.
Key achievements 2022
– Internships for women: We believe
diversity brings new and innovative ideas
that contribute to our overall business
success. Our focus on gender diversity
in a predominantly male industry is
reflected in the launch of our Mujeres
de Oro (‘Women of Gold’) internship
programme in 2020. This programme
offers rotations across eight different
departments (including safety,
community relations, and environment),
mentorship, training, and the potential
for a permanent career with Hochschild.
63 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information SUSTAINABILITY REPORT CONTINUED
In its first year, 10 women completed
the programme and were hired at the
Inmaculada mine. In 2022, 11 women
enrolled in the programme and are still
continuing their training.
We are honoured to have received the
‘Empresa Segura, Libre de Violencia y
Discriminación contra la Mujer’ (Safe
Company, Free of Violence and
Discrimination Against Women) Gold
award from the Ministry of Women and
Vulnerable Populations in Peru. This
recognition is given every two years
to companies that support non-
discrimination and non-violence
towards women.
– Anti-sexual harassment: Hochschild has
a strict policy of zero tolerance towards
any form of harassment, including sexual
harassment. To tackle this issue proactively,
we implemented ELSA, a comprehensive
diagnostic and intervention tool developed
by GenderLab. ELSA measures four key
indicators: tolerance, prevalence,
confidence and myths through the
means of an employee survey. Based on
the results of our initial survey in Peru in
2021, we launched an action plan that
included a communication campaign and
e-learning training on sexual harassment.
Our second ELSA survey in 2022 showed
a positive outcome, with increased
awareness of sexual harassment-related
issues and a decrease in people that
experienced some form of sexual
harassment from 51% to 8% in Peru
compared with 2021. We identified areas
for improvement, such as increasing
awareness of our Anti-Harassment
Policy and providing further training,
which we will continue to work on.
– Listening to our people: As part of the
Board’s efforts to gain a greater insight
into the views of its employees, we
launched the Online Employee Forum
hosted by Tracey Kerr as the designated
Board member for workforce engagement
(see opposite page).
Material topics in our people
Diversity and Inclusion
At Hochschild, diversity and inclusion are
deeply embedded in our corporate culture
and equal employment opportunities are
provided to all employees.
We are committed to providing equal
employment opportunities for all, regardless
of race, gender, religion, ethnicity, age or
any other distinguishing characteristic
or trait. Our Diversity and Inclusion Policy
outlines our commitment to promoting
diversity, including the education and
development of women in the workplace.
As of 2022, 33% of our Board of Directors
and 12% of senior management were
women, and we are striving to increase
this representation.
We firmly believe in the merits of a multi-
generation team, as can be seen in our
workforce with its varied age composition.
Younger and older employees working
together bring benefits such as mutual
learning, mentorship opportunities, and
the acquisition of new skills and
competencies.
Labour Relations
We recognise and uphold the principle
of freedom of association in accordance
with the laws and practices of the countries
in which we operate, fair compensation,
job security and professional development
opportunities. In 2022, approximately 55%
of our total workforce was represented by
a trade union or similar body. We did not
record any strikes or lockouts during 2022.
Recruitment, Retention and Engagement
We are committed to recruiting and
retaining a skilled workforce by creating
an attractive and innovative place to
work. In 2022, nearly 90% of our employees
were permanent full-time workers, with
a low voluntary turnover rate of 4%.
Additionally, we ranked second among
18 mining sector companies in Peru in the
Merco Empresas corporate reputation
ranking, and placed 23rd out of top 100
companies in Peru based on our talent
retention and attraction efforts.
People indicators
Gender diversity*
2022
2021
2020
2019
2018
2017
2016
Number of employees
Male
Female
Number of senior managers
Male
Female
Number of Board members
Male
Female
* As at 31 December 2022.
Age structure
<30
30-50
>50
3,282
316
3,347
3,155
3,024
3,894
3,849
3,859
316
275
218
245
235
222
44
6
6
3
43
2
6
3
41
1
7
2
37
1
7
1
37
1
7
1
36
1
7
1
35
1
8
1
Employees
Board
556
2,637
405
1
0
8
Contracts in 2022
Permanent employees
Fixed term contracts
Male
Female
Total
2,961
276
3,237
321
40
361
64 | Hochschild Mining PLC Annual Report & Accounts 2022
Online Employee Forum
Tracey Kerr hosted two sessions of the OEF which were also attended by the
Vice President of Human Resources and the Company Secretary. These events
provided an opportunity for Tracey to get to know colleagues across the
organisation, seek their views on a wide range of issues and host a Q&A session.
The inaugural OEF was held with colleagues from the Lima and Buenos Aires
offices and the second with colleagues from the new Mara Rosa project, in
Brazil. Participants represented different departments including Human
Resources, Sustainability, Finance and Project Management.
Feedback on areas
of strength:
– Wide-ranging opportunities within
Feedback on areas
to develop:
– Continued push for innovation.
the organisation.
– Opportunities to integrate
– Supportive working environment.
IT systems.
– Acknowledged the Company’s
– The continuation of the series
efforts to promote gender diversity.
of events organised around the
Company’s cultural attributes.
At the Mara Rosa OEF, Tracey took the opportunity to understand
views on perceptions of the success or otherwise of the transition
following the acquisition of the project in April 2022. Colleagues
expressed their satisfaction with the integration process and
valued their participation in Company-wide online events which
also provided simultaneous translation in Portuguese.
We are very excited to write the next
chapter for Hochschild in Brazil.”
Participant in Mara Rosa OEF
65 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information SUSTAINABILITY REPORT CONTINUED
Guaranteeing we are
a Responsible Business
Highlights
6 out of 9
DIRECTORS CONSIDERED
TO BE INDEPENDENT
We are dedicated to operating with responsibility and
implementing strong corporate governance systems
that drive positive economic, social and environmental
outcomes. We identified the following material topics
related to this pillar: Responsible Business Conduct and
Ethics, Advocacy for Positive Change and Responsible
Supply Chain Management.
RECOGNISED BY THE
EMIN AWARD FOR
MINING EXCELLENCE
RETAINED THE
ANTI-BRIBERY
CERTIFICATION FROM
THE ENTREPRENUERS
FOR INTEGRITY
Alignment to UN SDGs
– Recognition: We retained our previous
certification on anti-bribery from the
organisation Entrepreneurs for Integrity.
Although no audit was required in 2022,
we successfully passed an assessment
to re-confirm our eligibility and
implemented the latest standards to
maintain our certification. We are proud
to have once again received the EMIN
award (Mining Excellence of the South
Macro Region) from the Peruvian National
Society of Industries and the Arequipa
Chamber of Commerce in Peru.
Our approach to responsible business
We are unwavering in our commitment
to ethical business practices and are
dedicated to maintaining the highest
standards of honesty and integrity in all
our relationships and transactions. Our
approach to ethical business practices
goes beyond meeting legal and regulatory
obligations and involves fostering a
corporate culture aligned with shared values.
Key achievements 2022
– Policies: In 2022, we thoroughly revised
and 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.
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.”
Claudia Revilla
Environmental Officer
66 | Hochschild Mining PLC Annual Report & Accounts 2022
Material topics in Ensuring
we are a Responsible Business
Responsible business conduct and ethics
As a company committed to responsible
business practices, Hochschild is honoured
to have received external recognition for
our standards in governance.
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. Our Code of Conduct outlines
the ethical standards and values that
we expect of our employees to promote
responsible behaviour, establish
accountability and foster a positive
corporate culture. To ensure these standards
are upheld, during 2022 we reviewed the
Code, and distributed copies to all
employees in early 2023. In addition to the
Code of Conduct, our supplementary
policies cover topics such as anti-corruption,
anti-bribery and money laundering
prevention amongst others. Any violations
of the Code of Conduct are considered
serious misconduct and handled with
utmost urgency. The Company has a
long-established Whistleblowing Policy
and an online portal to provide employees
with a mechanism to raise concerns,
anonymously or otherwise. Hochschild
offers protection to all employees who file
a complaint or make enquiries regarding
the Code of Conduct, provided they act
in good faith. We have a policy of zero
tolerance towards retaliation.
Advocacy for positive change
We proactively collaborate with policy
makers, practitioners, and the civil society
to discuss, shape and approve new
initiatives that improve mining and
environmental regulations. To promote
ESG guidelines and practices in the
mining industry, we actively participate in
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 as well as
the Confederação Nacional da Indústria
(CNI) in Brazil.
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 our updated
Supplier Code of Conduct, which was
distributed in 2022. The Code outlines
adherence to specific standards related
to human rights, work practices, hiring
and purchasing, compliance with
regulations, ethical business practices
and the environment. Our Contracts
Policy, which outlines the rights and
responsibilities between us and our
suppliers, was also revised in 2022.
We prioritise ethical decision-making
throughout the entire metal production
process and promote the safe and
responsible manufacturing, usage,
recycling and disposal of metals.
67 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (TCFD)
FOR THE YEAR ENDED 31 DECEMBER 2022
Climate change is one of the greatest
challenges facing society. The mining
sector has a key role to play in helping the
world transition to net zero and Hochschild
Mining is committed to playing its part. Below
we have provided information consistent
with the TCFD’s recommendations and
recommended disclosures or cross-referred
to other parts of this Annual Report where
such information can be found.
Pillar 1 – Governance:
Disclose the organisation’s
governance around climate-related
risks and opportunities
Recommended Disclosure 1:
Describe the board’s oversight of
climate-related risks and opportunities
Hochschild Mining PLC’s (Hochschild or
the Company) Board of Directors engages
with senior management through quarterly
meetings of the Sustainability Committee
on strategic planning and risk management
and assesses if management is consistently
achieving sound operations. Sustainability
and ESG topics, including climate change
and climate risks, are becoming an
increasingly important aspect of
Hochschild’s operations and stakeholders.
Currently, there is no formal process in
place yet for the Board of Directors to
monitor and oversee progress against
Greenhouse Gas (GHG) emissions and
climate goals and targets. This governance
process will be established once the GHG
and climate related targets have been set,
and monitoring, governance and reporting
programs have been established. This
work is already in progress as evidenced
by the quantification and reporting of
GHG emissions, the development of a
carbon reduction strategy and the
completion of a Climate Risk Assessment
(CRA) on key physical assets owned and
managed by the Company.
Sustainability Committee
Since 2006, the Sustainability Committee
(previously known as the CSR Committee)
has been delegated authority from the
Board of Directors in overseeing the
implementation of systems dealing with,
amongst other things, environmental
matters as well as compliance with the
Company´s environmental commitments.
The Sustainability Committee consists of
four Independent Directors and the CEO.
Regular attendees are the COO and the
Vice Presidents of Legal and Corporate
Affairs, and Human Resources.
Given the scope of the Sustainability
Committee’s responsibilities (summarised
above), it will make the necessary
recommendations to the Board of
Directors in connection with matters such
as climate change and GHG emissions
that are material to Hochschild´s operations
and economics. The Sustainability
Committee also focuses on compliance
with national and international standards
to ensure that effective practices are in
place at each of Hochschild’s operations.
It is also responsible for reviewing
management’s investigation of incidents
or accidents that occur in order to assess
whether policy improvements and
additional procedures are required.
The quantification of climate related
financial risk implications is ongoing and
will progressively be completed, in line with
future CRAs. The Company will integrate
climate related financial risks and the
associated decision-making process into
the financial planning process once the
assessment quantifying the financial risks
is complete. The Company aims to start
reporting the financial risks in the next
2 years.
For details on the activities of the
Sustainability Committee in 2022, please
refer to page 53.
Recommended Disclosure 2:
Describe management’s role in
assessing and managing climate-
related risks and opportunities
Managing risk
The monitoring of climate-related risks
and opportunities ultimately resides with
the Management Risk Committee (the
MRC), which is responsible for implementing
Hochschild’s policy on risk management
and monitoring the effectiveness of controls
in support of Hochschild’s business
objectives. The MRC meets four times
a year and more frequently as required.
The MRC is comprised of the CEO, Vice
Presidents, Country General Managers
and the head of the Internal Audit
function. In preparation for the MRC
meetings, the Internal Audit head meets
with the Sustainability Director to review
climate risks and controls. See page 76
(Risk Management report) for
further information.
Environmental management
The Sustainability Director (previously
the Environmental Corporate Manager)
reports to the VP, Legal and Corporate
Affairs and to the CEO. The ESG team, led
by the Sustainability Director, collects and
reports on ESG data such as energy, GHG
emissions, water consumption, waste
generation, etc. and oversees the
development of corporate sustainability
disclosures and communications with
external stakeholders on Hochschild’s
ESG performance.
Pillar 2 – Strategy:
Disclose the actual and potential
impacts of climate-related risks and
opportunities on the organisation’s
businesses, strategy and financial
planning where such information
is material
Recommended Disclosure 3:
Describe the climate-related risks
and opportunities the organisation
has identified over the short, medium,
and long term
Hochschild is committed to assessing and
reducing its exposure to climate-related
financial risks. The Company has completed
a CRA for all existing operations, has
crafted a carbon neutral strategy that will
place the Company in a position to
achieve net zero operations by 2050 and
aims to set 2030 interim targets in 2023.
The Company is in the process of
evaluating how to track physical and
transition risks, as well as opportunities,
which could have a potential impact to
business. A detailed Transitional Risk
Assessment (TRA) will be conducted
during the next 2 years, including
prediction of market opportunities and
social and regulatory liabilities, allowing
Hochschild to start reporting on the
quantitative side of climate impacts. The
detailed TRA, in conjunction with the
completion of ongoing internal physical
risk assessments of existing and planned
assets, will be used to inform the
quantification of climate related financial
risks to the Company.
For the purposes of this TFCD disclosure,
a high-level assessment of risks and
opportunities deemed to be important
either by stakeholders or due to potential
impact or likelihood was derived by
considering risks and opportunities under
RCP 2.6 (low warming scenario) and is
presented below. The risks were
qualitatively assessed as short (1–3 years),
medium (3–5 years) and long-term (5+ years).
Hochschild is in the process of examining
these time horizons as they relate to the
Company, taking into consideration
operational processes and life of mine,
assets and infrastructure. By virtue of the
longer-term time horizon of the physical
risks of climate change, these are not
considered to be material for the operations
within the time horizon of the Company’s
current average operating life of mine.
68 | Hochschild Mining PLC Annual Report & Accounts 2022
A summary of the assessment of physical
risks, transitional risks and opportunities
arising from these risks are as follows:
Transitional risks – The initial review
identified the following transitional risks
which are not exhaustive but were deemed
to be important either by stakeholders
or due to potential impact or likelihood.
A qualitative assessment of the time
horizons for each of the risks have been
identified in brackets below:
– Current regulations (short-medium term)
– Many of Hochschild’s customers are
taking regulatory and/or voluntary
positions to reduce energy and GHG
emissions in their operations. Those
more mature organisations are now
requiring and pushing for GHG emission
reductions in the value chain. While
Hochschild is not yet exposed to these
requirements, it is understood that this
will happen, and as such, Hochschild has
committed investment and demonstrated
leadership in technology for future
growth in alignment with intersecting
global industry megatrends – including
electrification, software and more.
– Emerging regulations (medium term) –
Mining continues to be a highly regulated
industry where multiple permits are
required leading to increased delays
and costs. Changes in the 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.
Emerging carbon regulations will also
impact operational costs as renewable
portfolio standards, renewable fuel
requirements and carbon taxes will
directly and indirectly increase the cost
of fuels and energy sources.
Carbon targets, like those being
established in the UK (Net Zero by 2050),
Peru (reducing GHG emissions by 30%
by 2030), and Argentina (absolute,
economy-wide and unconditional goal
of limiting greenhouse gas emissions to
313 MtCO2e (excl. land use, land use
change and forestry by 2030) are likely
to directly increase future capital costs
as Hochschild integrates and adopts more
energy efficient and lower emissions
technologies in mining operations.
– Technology (long term) – Technological
advancements have the ability to impact
both operational competitiveness as
well as demand for Hochschild’s products.
For example, the increased adoption of
renewable energy technologies and
electric vehicles will likely play a role on
the path to achieving carbon neutrality
and increase the demand for Hochschild’s
metal products. However, operationally,
off-road vehicle and engine manufacturers
can be slow to adopt to low/no-carbon
products and as such, there is only a
handful of market players offering these
products. Much like the electric light
duty vehicle market, this is a short-term
transition that will be mitigated as more
manufacturers enter the market and
the market matures. Adopting these
technologies has the potential to hinder
Hochschild’s competitiveness in the
short term (i.e. increase costs and
reduce EBITDA) but would improve
Hochschild’s social licence to operate
and move the Company towards its
climate goals. Renewable energy
technologies and electric vehicles will
also likely require increased battery
demand for energy storage which is
also a risk in the short term as battery
storage is relatively new; over time, this
risk will dissipate.
Hochschild has recognised this risk and
as part of its strategy, actions include
improving processes on energy
conservation and transitioning to power
sourced from renewable energy.
– Legal (medium term) – If no action is
taken on climate change and GHG
emissions, Hochschild could be at risk to
climate-related legal action, reputational
issues (social licence to operate) and
investor risk which could materialise as
increased costs, longer permitting
delays, higher interest loans, or reduced
access to capital. Given what is
occurring in jurisdictions, like Canada
and the US, where lawsuits have been
filed against oil and gas companies for
climate-related impacts, the Company
anticipates that over the medium to
long term, should no action be taken to
reduce/eliminate its carbon footprint,
there could be a carbon legal-
related risk to Hochschild. Hochschild
has not experienced legal issues
regarding climate change-related issues.
Hochschild is keeping abreast of
regulatory changes such as carbon tax
undertaken by host governments where
it operates or have current project
developments. For example, while Peru
does not levy a tax on carbon, other
countries such as Argentina, Chile and
Canada impose carbon taxation, which
can directly impact the operational cost
of the business as well.
– Market (long term) – Hochschild is
currently monitoring the risk of
changing demand for its metal products
under a low-carbon economy. Under a 2
degree scenario, it is likely that there will
be an increase in the uptake of battery
powered vehicles and 5G networks
which increase the demand for silver.
For example, most internal combustion
cars use between 15g and 28g of silver,
whereas hybrid cars require between
18g to 34g, and electric vehicles
typically need upwards of 50g.
Bloomberg estimates that by 2040, 55%
of vehicles on the road will be electric
which means more demand for silver.
Gold demand could also play out well
under a 2 degree scenario as the metal
can be used in nanomaterial
technologies (e.g., enhance hydrogen
fuel cell performance and solar PV) that
can help facilitate the transition to a
low-carbon economy. In light of these
opportunities, Hochschild also sees a
downside of not managing their own
environmental and social footprint as
under a 2 degree scenario, Hochschild’s
customers and investors will expect
them to perform to higher standards as
part of their procurement and
investment criteria. This may result in
uncertainty in market signals and
increased cost of raw materials which
may impact the Company. Hochschild
continuously engages with their
customers to understand their
requirements and align with their goals.
Hochschild has also begun to mitigate
these risks by implementing a carbon
neutral strategy, completing a climate
risk assessment, and are continually
pushing internally to improve their ESG
performance and scorecard.
– Reputation (medium term) – Poor
performance with respect to managing
the risks and opportunities of climate
change could result in reputational
impairment. This could lead to public
and regulatory opposition to
69 | Hochschild Mining PLC Annual Report & Accounts 2022
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FOR THE YEAR ENDED 31 DECEMBER 2022 CONTINUED
Hochschild’s projects and/or operations
or lead to a potential increase in cost-
of-capital and perceived risk amongst
the investor community. For example,
Hochschild may suffer from reputational
risk and may be liable for losses arising
from environmental hazards associated
with its mining activities and production
methods. In Peru, protests relating to
mining projects have increased social
demands and expectations and have
led to wider social unrest. Communities
living in the areas surrounding
Hochschild’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. A number of actions were taken
during the year to maximise Hochschild’s
ability to work with partner communities
which included:
• increased efforts to collect and process
information and intelligence regarding
potential social conflicts;
• increased interaction with local
governments and other key stakeholders;
• continue to maximise local hiring and
local purchasing practices; and
• continue executing social programmes
with surrounding communities.
Investors are increasingly requiring
companies to demonstrate strong ESG
credentials especially regarding climate
change and requesting that companies
adequately demonstrate a commitment
to reducing CO2 emissions and mitigating
climate change risks to assets and
business operations into its long-term
business strategy.
– Physical risks (Acute and Chronic)
(short-long term)
A CRA was completed on five mine
properties – the Arcata Mine, Pallancata
Mine, Inmaculada Mine, Selene plant and
the San Jose Mine, considering the
physical medium- and long-term nature
of climate-related issues (2020s to 2050s)
under RCP 8.5 scenario (high warming).
The methodology deployed to assess
physical risk will be replicated every four
years for all assets to identify climate-
related physical risks to assets over their
operational lifespans and to develop
adaptive actions to reduce these risks.
The CRA identified several high and
medium risks to the infrastructure and
operations at the Hochschild mines in
Peru and Argentina. The high risks are to
be evaluated on a regular basis and risk
reduction measures used to reduce the
possible impacts to the mines’ operations.
Peru
Of the 34 identified risks at each of the
Peru mine sites under future climate
conditions, 5 or 15% of the risks were
rated as ‘high’, 11 (32%) were ranked a
‘medium’ risk and the remaining 18 (53%)
of the risks were classified as low risk.
– The highest risk was associated with
intense rainfall affecting the tailings
facilities/tailings dams at the mine sites.
The high risks are associated with the
potential failures of the tailings
containment facilities/dams, which
would most likely result in shutting down
the mine operations, thus having a
major impact on the Company’s overall
business operations.
• Intense rainfall resulting in rising water
levels upstream of the dam face would
increase the hydraulic loading on the
dam structure. If the loading is large
enough a failure may occur.
• Intense rainfall could erode parts of
the dam structure creating weak points
for failure.
• A series of intense rain/snow melt
events has the potential to raise the
levels of the tailings pond to the point
it might overtop the dam, resulting
in discharge to the environment.
Four additional infrastructure-climate
hazards interactions scored as high risks
were identified for each of the Peru mine
operations assessed:
– Transportation (road, site roads, mine
access roads, etc.) was found to be at
high risk due to intense rainfall events.
The amount of rainfall and resulting
runoff, often intensified by the local
topography and steep slopes, has the
potential to wash out the roads,
impacting access to the mine site and
local mine operations.
– The drinking water supply system was
found to be at high risk due to intense
rainfall. Runoff associated with intense
rainfall events could wash sediments/
other contaminants into the local lakes/
rivers that are used as a raw water source
for drinking water at the mine sites.
– The mine infrastructure, which includes
buildings as well as underground mine
operations, are at high risk to the
impacts of lightning/atmospheric
discharges. Lightning strikes at or near
the mines can create extreme voltage
surges which can damage electrical
mine equipment, resulting in disruptions
to the mine operations.
– Communications infrastructure
(e.g. towers) was found to be at high risk to
lightning strikes/atmospheric discharges.
Argentina
Of the 34 risks identified at the San Jose
mine under future climate conditions, four
or 12% of the risks were rated as ‘high’, 12
(35%) were ranked a ‘medium’ risk and the
remaining 18 (53%) of the risks were
classified as low risk.
– The highest risk score at the San Jose
mine under future climate was
associated with drought affecting the
process facilities at the mine sites.
Drought conditions could have a
significant impact on the Company’s
business objectives as a shortage of
water could negatively impact the
mines ore treatment processes.
High risks were also identified for
the following infrastructure-climate
hazards interactions:
– Processing facilities being impacted by
freezing days (found to be at high risk
under both current and future climate).
Interruption of the ore processes at the
mine due to freezing of pipes will have
a material effect on the mine’s and
Company’s operations.
– Drinking water supply impacted by
drought conditions.
– Communications infrastructure
impacted by lightning/atmospheric
discharge.
Tailings containment facilities/dams
under the effect of intense rainfall were
found to be at medium risk which was
lower than the risks at the Peru mines
due to the expected lower probability
of intense rainfall events under future
climate conditions. However, the high
severity rating, and similar consequences
described for the Peru mines, indicates
Hochschild should monitor the tailings
facilities/tailings dams for damages or
early warning signs of potential failure
after any intense rainfall event despite
the lower probability of occurrence.
70 | Hochschild Mining PLC Annual Report & Accounts 2022
Climate opportunities
– Increased revenues resulting from
increased demand for products and
services (long term) – The demand for
Company´s products may increase as
a consequence of regulatory or market
curtailments. For example, under a
2 degree scenario, there is likely to be
an increase in the uptake of battery
powered vehicles and 5G networks
which incorporate silver and gold in the
manufacture of their hardware
components. Bloomberg estimates that
by 2040, 55% of vehicles on the road will
be electric which means more demand
for silver. Gold will also play out well
under a 2 degree scenario as the metal
can be used in nanomaterial
technologies (e.g., enhance hydrogen
fuel cell performance and solar PV) that
can help facilitate the transition to a
low-carbon economy.
– Improved market capitalisation
(medium term) – Investors are
demanding that companies improve
their long-term sustainability/ESG
performance to reduce climatic and
climate-related risks while improving
shareholder value and social and
environmental wellbeing. Current
market and shareholder pressures with
regards to ‘sustainable investments’
and consideration of climate change in
investment could potentially impact
Hochschild´s share price over the
medium to long term simply on the basis
of the Company´s ESG rating. In
consequence, the Company is heavily
focused on improving their ESG
performance. This is evidenced by the
robust standalone 2021 Sustainability
Report, the ECO Score programme,
continuing efforts to strengthen the
Company’s environmental culture, and
carefully managing climate-related
risks and their impacts by the
completion of a climate change risk
assessment (2021) and the
implementation of a carbon strategy
(recently completed in 2022) to
continually reduce the GHG emissions.
– Fuel-switching/Energy saving
technologies (medium-long term) – The
Company´s carbon emissions primarily
result from electricity use in mining and
processing operations. Hochschild´s
operations have a favourable GHG
emissions intensity (1.81 tCO2e/ k oz Ag Eq
– market based / 0.13 tCO2e/ oz Au Eq
– market based) compared to other
gold and silver mines globally. This is
due to the underground nature of their
mining operations (which generally have
lower GHG emissions than larger open
pit mines) and a low-carbon, grid-based
electricity supply which is around 81%
sourced from hydro or wind power.
However, acknowledging the global
significance of climate change, the
Company is committed to taking the
necessary measures to continually
reduce their GHG footprint by
evaluating additional low-carbon
energy options and improving their
operational energy efficiency, which
also helps to deliver valuable cost
savings to the business. Hochschild is
currently implementing a carbon
strategy (recently completed in 2022) to
continually reduce their GHG emissions,
the Company has set a net zero target
for 2050 and in 2023 aims to establish
an interim target for 2030. As part of
this, the Company has signed a new
contract to source renewable energy
for the Ares and Arcata mines starting
in January 2022.
Taking into consideration the transition
risks, physical risks and opportunities
arising from these risks, Hochschild is
developing strategic initiatives to address
climate-related issues projected to arise
in the short, medium and long term
wholistically to balance short-term risks
and opportunities with long-term risks
and opportunities. Once climate-related
impacts on current and future
development that could have a material
financial impact on the organisation are
reviewed and assigned to a short-
medium- or long-term time horizon, they
will be mapped across time.
Short-term climate impacts may include
impacts imposed (by regulation) or
anticipated (through voluntary action) by
Hochschild’s customers. Over the medium
term, it is likely that climate-related
regulations will be expanded to cover
Hochschild’s activities directly. Making
investments in technology, infrastructure,
and business practices that may result in
short-term costs will not only allow
Hochschild to establish a position in the
market for low-carbon supply chain but
will also prepare Hochschild to meet the
demands of future direct regulation.
Studying long-term issues such as the
practicality of mine infrastructure
maintenance as well as closure and
remediation under more extreme weather
scenarios predicted for future climate will
also play a role in Hochschild’s short-term
decision-making.
The insight from the combination of the
physical and transitional risk assessment
under specific conditions at Hochschild´s
mines will be extrapolated to opportunities
for future Company developments.
Recommended Disclosure 4:
Describe the impact of climate-related
risks and opportunities on the
organisation’s businesses, strategy
and financial planning
Both physical and transitional risks are
impacting and will continue to impact
Hochschild’s operations, business,
strategy and financial planning (as noted
in the prior response). Many of the climate
risks identified are being addressed
through policy changes and new
monitoring programmes at mine sites to
track the impacts of climate on
operations and develop proactive policies
and operating procedures to minimise the
impacts to operations. For example,
climate-related risks such as prolonged
droughts have been identified in
Hochschild’s risk management tools and
have triggered precise plans and budget
allocations to implement the necessary
actions to minimise the risk. Dedicated
teams have been established, time
schedules set, both of which are
monitored to assure success.
Hochschild has completed a CRA and
a carbon strategy to put the Company
on a path towards net zero operations
by 2050, and aims to set 2030 interim
GHG targets in 2023.
GHG emissions are being proactively
reduced through the increased use of
renewable power. New mines (excluding
those in progress in 2022) will be assessed
to be electric where possible.
Hochschild conducted an initial review
of climate-related physical and potential
transitional risks in 2021 and will expand
the review of transitional risks of climate
change and the potential impacts on the
Company. Additional assessment on
quantifying financial risks implications
is ongoing and will be progressively
completed, in line with future CRAs. The
Company will integrate climate related
financial risks and the associated
decision-making process into the
financial planning process once the
assessment quantifying the financial risks
is complete. The Company aims to start
reporting the financial risks in the next
two years.
A specific five-year strategic objective,
approved by the Board of Directors in its
annual review during 2022, relates to the
Company’s ESG performance including
its progress, over that period, in managing
its impact on climate change. Progress
against this, and other strategic
objectives will be monitored by the Board
of Directors and, where appropriate, the
relevant Board Committee.
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Key Board decisions take into account the
impact on a wide range of stakeholders
as required by company law and, as a
result, reflect among other things, social
and environmental consequences.
Recommended Disclosure 5:
Describe the resilience of the organisation’s
strategy, taking into consideration different
climate-related scenarios, including a 2°C
or lower scenario
Climate modelling uses various greenhouse
gas (GHG) emissions scenarios, known as
Representative Concentration Pathways
(RCPs), to project future climate variables
under different concentrations and rates
of release of GHGs to the atmosphere, as
well as different global energy balances.
The 4 original RCPs which refer to the
concentrations in 2100 are: RCP2.6; RCP
4.5; RCP 6.0; and RCP 8.5. RCP 2.6 assumes
that global annual GHG emissions peak
between 2010-2020, with emissions
declining substantially thereafter, while
RCP 8.5, assumes that emissions continue
to rise throughout the 21st century.
Hochschild has assessed current and
future climate risks related to
infrastructure for select mines in Peru and
Argentina under RCP 8.5 and 2.6, as
defined by the Intergovernmental Panel
on Climate Change (IPCC) as follows:
• RCP 8.5 is being used to assess the
physical impacts that climate change
could have on Hochschild’s operations
and infrastructure. The time horizon
has been set between the 2020s and
the 2050s as this aligns with Hochschild’s
mines current and projected operational
lives and decommissioning phases.
• RCP 2.6 is being used as the <2°C
Scenario to align with the mid-century
goals of the Paris Agreement and is
being used to assess Hochschild’s
transition risk assessment which
evaluated possible market (electric
vehicles), regulatory (e.g., carbon
pricing), technology and renewable
energy risks/opportunities (e.g.,
increased adoption of renewables
resulting in improved ROI).
Climate adaptation and resilience measures
to minimize risks of climate change and
extreme weather were identified. The
Company will further assess impacts
through a full scenario analysis examining
physical and transitional risks.
Hochschild implements risk reduction
and adaptation measures to improve the
resilience of the mines exposed to the
impacts of climate change and associated
extreme weather events as needed,
taking into consideration site-specific
resilience and adaptation measures, and
will continue to do so based on the results
of future risk assessments. For instance,
Hochschild has taken water conservation
measures to address water scarcity, such
as enhancing water recovery at its San
Jose mine. Additional assessment on
quantifying financial risks implications is
ongoing and will be progressively
completed, in line with future climate risk
assessments. The Company aims to start
reporting the impact of climate-related
issues on financial performance and
financial position in the next two years.
Pillar 3 – Risk Management:
Disclose how the organisation
identifies, assesses and manages
climate-related risks
Recommended Disclosures:
– 6. Describe the organisation’s processes
for identifying and assessing climate-
related risk
– 7. Describe the organisation’s processes
for managing climate-related risks
– 8. Describe how processes for identifying,
assessing and managing climate-related
risks are integrated into the organisation’s
overall risk management
Risk management
Climate change risk has been identified
by the Company as one of the principal
risks facing the business. As such, this risk
and its mitigation actions are monitored
on an ongoing basis by the MRC and
Environmental Management and reported
to the Audit and Sustainability Committees
and the Board of Directors on a quarterly
basis. For details on Hochschild Mining’s
general approach to risk management
and mitigating actions taken in 2022, please
refer to page 76 (Risk Management report).
Environmental reporting regulations (current
and emerging) are monitored on an ongoing
basis by the environmental and legal
teams to incorporate into this analysis.
As part of the CRA, Hochschild utilised
a risk rating system to assess physical
climate change risks for each climate
hazard/event-infrastructure element
interaction. Each interaction is assigned
a consequence/severity of impact rating,
which is then multiplied by the probability
of the occurrence (return period) of the
climate hazard/event. The risk rating/risk
score is defined as the product of two
ratings as illustrated in the equation:
Risk Rating =
Probability of Climate Event Occurring
× Consequence or Severity of Impact
Probability Rating represents the
probability (likelihood) of occurrence of
a climate hazard or event above a selected
threshold. Probability is based on
Hochschild’s risk management system,
ranging from 1 (Low) to 3 (High).
– Consequence/Severity of Impact Rating
is a measure of the expected damage
and/or associated loss of service
associated with the infrastructure
component should the climate event
occur and interact with the
infrastructure. Consequence/Severity
scores are based on Hochschild’s risk
management system and range from
1 (Insignificant) to 5 (Very High).
– Using Consequence/Severity of Impact
scores of 1 to 5, and Probability ratings
of 1 to 3 produces a 3x5 risk matrix.
Risks scores were calculated under
current climate conditions to establish a
baseline, as well as for the future climate
(2050s (2040-2059)). Hochschild risk
manage system uses three risk
categories (Low, Medium, High) with
associated recommended actions.
Risks or losses from climate change or
other natural events are being continuously
monitored and reviewed as part of ongoing
operations. Where an unacceptable risk is
identified, asset level mitigation plans are
developed and are the responsibility of
local management.
72 | Hochschild Mining PLC Annual Report & Accounts 2022
– People – communicating the importance
of respecting and conserving the
environment to the Company´s
workforce and stakeholders.
– Technical – focusing on the continuous
improvement of Hochschild’s
environmental performance. During
2022, an Environmental Management
System (EMS) was developed and it
launched in January 2023.
– Technology and Innovation –
incorporating best practices and
utilising new technologies to reduce
Hochschild’s environmental footprint.
There is a committee that meets periodically
to oversee progress.
Hochschild has been reporting on Scope
1 and 2 GHG emissions since 2014, and
scopes 1, 2 and 3 since 2022. These are
calculated using a method based on ISO
14064-1 Standard and the GHG Protocol
Corporate Accounting and Reporting
Standard, using IPCC, Peruvian and
Argentinian emission factors.
GHG emission reduction targets are
proposed in the carbon strategy that will
put Hochschild on a path towards net
zero operations. In 2023, Hochschild aims
to finalise the 2030 interim target that will
be assumed by the Company in order to
achieve this goal and then will set a formal
process for the Board of Directors to
monitor and oversee progress against
these targets. These targets will require
the Company to continue calculating the
company’s GHG footprint, improve their
energy efficiency and increase the reliance
on renewable energy sources. In 2022,
Hochschild sourced 81% energy from
renewable sources.
Incorporation of metrics such as amount or
percentage of assets/activities vulnerable
to climate-related physical and transition
risks, percentage of revenue aligned with
climate-related opportunities, capital
investment deployed for climate-related
risks and opportunities will be assessed
upon completion of the detailed
transitional risk assessment.
Pillar 4 – Metrics & Targets:
Disclose the metrics and targets
used to assess and manage relevant
climate-related risks and
opportunities where such
information is material
Recommended Disclosures:
– 9. Disclose the metrics used by the
organisation to assess climate-related
risks and opportunities in line with its
strategy and risk management process
– 10. Describe the targets used by the
organisation to manage climate-related
risks and opportunities and
performance against targets
Hochschild crafted a remuneration
policy aligned with their business strategy.
One of the principal objectives of the
Remuneration Policy is to align management
incentives with the creation of shareholder
value. Hochschild 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. Once the GHG and climate
related targets have been set, they will be
assessed for their inclusion as part of
performance measures.
Non-financial performance indicators
related to climate metrics are included
in Hochschild’s individual employee
performance targets. To form a link between
the Company’s environmental performance
and risks, the ECO Score programme was
established in 2015, which brings together
the management/mitigation of environment
and climate change risks. The ECO Score
programme incorporates quantitative
and qualitative indicators directly related
to environmental management.
Performance against the annual ECO
Score objective determines the extent
of annual bonus payouts to eligible
employees, thereby aligning interests
to reduce Hochschild’s environmental
footprint. The results are shared across
Hochschild on a monthly basis.
The Sustainability Committee is charged
with making sure Hochschild, as a
company, is meeting Sustainability and
ESG targets. As part of the ECO Score,
Hochschild monitors water usage and
waste recycling.
In addition, many of Hochschild financial
KPIs reflect the financial impact of climate
change risks and opportunities such as
Revenue, AISC (operating and production
costs), EBITDA (overall profitability). Other
financial indicators reflect the impact of
such risks/opportunities such as asset
impairments, market valuation. Hochschild
will continue to explore metrics to quantify
climate-related financial risks
implications in their operations.
Targets and results
In 2022, Hochschild’s ECO Score was
5.27 out of 6, exceeding the stretch target
of 5.00. The 2022 results are independently
verified by EY Perú following the International
Standard on Related Services (ISRS) 4400.
For additional details on the ECO Score,
visit https://www.hochschildmining.com/
sustainability/environment-and-climate-
change/
Since 2015, the ECO Score has
improved by 59%, reflecting a significantly
higher level of environmental efficiency.
To incentivise continuous improvement,
Hochschild has set a target of 5.25 out
of 6 for 2023.
Due to the importance of water and
climate-related risks, Hochschild minimises
water consumption as much as possible
and has set a new target of 193 litres per
person per day of potable water for 2023.
Between 2015 and 2022, the Company has
reduced potable water consumption by 58%.
Freshwater used in processing plants is
also closely monitored, with the intention
to continue reducing its consumption over
time. In 2022, 84.3% of all water used in
processing plants was recycled, minimising
intake of freshwater. Improvements were
made at the Inmaculada mine, where 78%
of the water used was reclaimed in 2022,
compared to 75% in 2021. Another key
indicator that forms part of the ECO
Score is waste generation, with a new
target for 2023 of 1 kg per person per day
of domestic waste generation. Between
2015 and 2022, the Company has
reduced waste generation by 46%.
In 2020, an Environment Culture
Transformation Plan was launched to
further embed an environmentally conscious
culture across the Company and to
achieve the set long-term performance
goals. Three work streams were identified
to drive continuous improvement:
73 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (TCFD)
FOR THE YEAR ENDED 31 DECEMBER 2022 CONTINUED
Recommended Disclosure 11:
Disclose Scope 1, Scope 2, and, if
appropriate, Scope 3 greenhouse gas
(GHG) emissions, and the related risks
Please refer to the Environmental section
of the Sustainability Report on page 59
for details on the Company’s Scope 1,
Scope 2 and Scope 3 GHG emissions.
For the purposes of Listing Rule 9.8.6R (8),
we have concluded that, through this
report (and the parts cross-referred to
which are incorporated herein by
reference), the Company has complied
with the Listing Rules requirements with
regards to the TCFD Recommendations
and Recommended Disclosures with the
exception of the items detailed in the
following table. In addition, 2030 interim
targets are expected to be set during H1
2023 in order to achieve Net Zero by 2050.
TCFD Pillar /
Recommendation Status
Next steps
1
2
3
4
5
6
7
8
9
Partially
consistent
The governance process will be established once the GHG
and climate related targets have been set, and monitoring,
governance and reporting programs have been established.
Consistent
–
Partially
consistent
Partially
consistent
Partially
consistent
Consistent
Consistent
Consistent
Partially
consistent
A detailed Transitional Risk Assessment (TRA) will be
conducted during the next 2 years.
The quantification of climate related financial risk
implications is ongoing and will progressively be completed,
in line with future CRAs. The Company will integrate climate
related financial risks and the associated decision-making
process into the financial planning process once the
assessment quantifying the financial risks is complete. The
Company aims to start reporting the financial risks in the
next 2 years.
Hochschild will further assess impacts through a full scenario
analysis examining physical and transitional risks.
–
–
–
Hochschild will continue to explore metrics to quantify
climate-related financial risks implications in their operations.
In 2023, Hochschild aims to finalize the 2030 interim target
that will be assumed by the Company in order to achieve the
net zero by 2050 goal and then will set a formal process for
the Board of Directors to monitor and oversee progress
against these targets.
Once the GHG and climate related targets have been set,
they will be assessed for their inclusion as part of
performance measures.
10
11
Consistent
Consistent
–
–
74 | Hochschild Mining PLC Annual Report & Accounts 2022
75 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information 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.
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.
(ii) the removal of Covid-19 as a
significant risk in light of the full
vaccination status of the Company’s
employees in Peru and Argentina, and
the overall reducing trend in both the
number of cases and the likelihood of
severe illness. This notwithstanding, the
Company maintains close oversight of
the health of its employees and is
ready to re-implement enhanced
health protocols whenever necessary.
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, which also provides an outlook on the
risk for the current financial year.
Outlook
At the time of approval of this Annual
Report, Peru continues to suffer from
significant social unrest following the
detention of former President Castillo
and the appointment of President Dina
Boluarte. As discussed further below, this
has resulted in heightened levels of risks
related to:
– operational performance;
– business interruption/supply chain;
– exploration;
– political, legal and regulatory;
– labour relations; and
– community relations.
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.
2022 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 2021 Annual
Report in the following respects:
(i) the additions of:
a) Liquidity Risk given the potential
financial ramifications of a denial of,
or extended delays in obtaining, the
Inmaculada Modified Environmental
Impact Assessment
b) Project Development which,
as described later, reflects the
importance to the Group of the
mitigation of risks associated with
the construction of the Mara Rosa
mine in Brazil; and
Identify
Measure
Manage
Monitor
Report
76 | Hochschild Mining PLC Annual Report & Accounts 2022
Risk heat map
h
g
H
i
t
c
a
p
m
I
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.
1.
2.
Commodity price
Commercial counterparty
3. N Liquidity
4.
5.
6.
7.
8.
9.
Operational performance
Business interruption/supply chain
Information security and cybersecurity
Exploration and reserve and resource replacement
Personnel: recruitment and retention
Personnel: labour relations
15
11
7
3
4
8
6
5
12
1
10
2
13
9
14
10. N Project development
11.
Political, legal and regulatory
12 .
Health and safety
13.
14.
15.
Environment
Climate change
Community relations
Unchanged
Higher
Lower
N New
w
o
L
Low
2022 risk assessment
Probability
High
77 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information RISK MANAGEMENT CONTINUED
Change in risk profile vs 2021
Unchanged
Higher
Lower
N New
Financial risks
Risk
1
Commodity
price
See the Market
Review on pages
10 to 13 for further
details on how
commodity prices
performed in 2022
2
Commercial
counterparty
3
Liquidity
N
Impact
Mitigation
Commentary
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.
– 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
and forecast production.
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.
As previously reported, the Group hedged 4 million ounces of silver for
2022 at an average price of c.$27 per ounce to protect cash flows in Peru.
In addition, the Group has hedged 3.3 million ounces of silver for 2023 at
$25 per ounce. These hedges will ensure profitable production from
existing resources mainly at Pallancata.
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.
– A cross-disciplinary team, led by
the Vice-President of Legal and
Corporate Affairs and the
Corporate Director of
Sustainability comprising
specialist consultants and
advisers engage on a regular
basis with the relevant
governmental authorities to
support the official review
process of the Inmaculada MEIA
The availability of financing,
including a new US$200
Medium Term Loan
Committed Facility signed
in Q4 2022, is conditional on
the approval of the
Inmaculada MEIA which,
once secured, will see the
Inmaculada mine continue
in operation until 2043.
Denial of, or significant
delays in securing, the
Inmaculada MEIA, could
therefore have a material
adverse effect on the
Group’s business, financial
condition and results of
operations.
During the year, the Group undertook the following:
– Annual counterparty analysis: The Company’s annual review of
existing customers entails analysis of corporate governance, balance
sheet strength and other aspects of credit quality. Counterparty risk
is also mitigated through the requirement for advance payment of
90–98% of the value of the end-product sold. Where considered
necessary, parent guarantees are obtained.
– The Company implemented a banking solution that allowed us
to accelerate the receipt of revenue from concentrate sales while
transferring the risk to financing partners.
– Review of financial counterparties: The Group has implemented
policies to identifying 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.
As at the date of this report, the permitting process for Inmaculada’s
Second Modified Environment Impact Assessment (“MEIA”) continues
and the Company’s revised expectation is a decision by the Peruvian
government during Q2 2023. The Company believes that the outcome
of the permitting process will be positive.
In light of the continued delays in securing the Inmaculada MEIA,
management has implemented a number of cash optimisation
measures including:
– Reductions in administrative and other operating costs;
– Deferral of capital expenditure; and
– Hedging a proportion of 2023 production from Inmaculada.
A plan of contingency measures has also been prepared in
collaboration with the Company’s financial advisers in the event that
a denial of the Inmaculada MEIA or additional significant delays in its
approval were to occur. The principal lenders are informed of the
contingency measures and are supportive.
Operational risks
Risk
Impact
Mitigation
Commentary
4
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 and
safety of key mining components
such as tailing dams, waste rock
deposits and pipelines in close
liaison with relevant departments
ensuring that procurement,
construction and permitting are
undertaken appropriately.
In 2022 the Group’s production was 25.8m silver 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 36, the all-in sustaining
cost from operations was in line with guidance for the year, at $18.9 per
silver equivalent ounce (excluding exceptional items).
Outlook
Inmaculada MEIA
Failure to secure approval of the Inmaculada MEIA (see Liquidity
risk commentary above) would result in a suspension of operations
at Inmaculada during H2 2023 until a new MEIA is approved. The
specific date of suspension will depend on operational factors
that are being evaluated.
78 | Hochschild Mining PLC Annual Report & Accounts 2022
Risk
Impact
Mitigation
Commentary
5
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.
6
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.
– Insurance coverage to protect
against major risks.
In addition to maintaining insurance policies covering machinery
breakdown, mitigating actions include the following:
– Management reporting systems
to support appropriate levels of
inventory.
– Inspections every 18 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.
– 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 co-ordinated
response to unforeseen disruption.
Specifically with regards to supply chain risks, 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.
– Compliance with ISO 27001,
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 guaranteed
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 24x7 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 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; and
– our Information Security Management System (ISMS) is BSI certified.
We are currently in the process of transferring server backups to the
cloud.
7
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).
Reserves stated in
this Annual Report
are estimates.
– Engagement of independent
experts to undertake annual
audit of mineral reserve and
resource estimates.
– Adherence to the JORC Code
and guidelines therein.
General
The Group has an internal Permitting Committee led by two Vice
Presidents 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.
The Group undertakes greenfield exploration primarily through the
negotiation of earn-in/joint venture opportunities. The aim is for this to
provide the Group with a balanced portfolio of advanced and
early-stage opportunities in stable jurisdictions in the Americas.
Developments during the year
As described elsewhere in the Annual Report, social conditions in Peru
have continued to be tense with higher demands and social conflicts
involving mining projects. From an exploration perspective, this has led
to continued delays in securing permits from the communities,
impacting the Group’s exploration programme. The year therefore saw
a suspension of greenfield exploration in Peru which was subsequently
followed by a reduced programme of activity in light of the focus to
reduce costs.
Despite the above conditions, the Company increased its attributable
Reserve and Resource additions by 35% and 18% respectively.
Furthermore, 51.2 moz Ag Eq of inferred mineral resources were
identified in the Royropata Zone at Pallancata.
Further details on brownfield exploration are provided on page 35.
The Group has engaged P&E Consultants to undertake the annual audit
of mineral reserve and resource estimates.
See page 207 for further details.
79 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information RISK MANAGEMENT CONTINUED
Operational risks continued
Risk
Impact
Mitigation
Commentary
Inability to attract or retain
personnel through a shortage
of skilled personnel.
– 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 safety and environmental. 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.
8
Personnel:
recruitment
and retention
For further details
see the Directors’
Remuneration
Report on page 112
9
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.
– Monthly meetings with
mineworkers and unions to
ensure a complete
understanding of expectations
and to keep all parties updated
on the Group’s financial
performance.
10
Project
development
N
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.
Peru
The Group’s Peruvian operation generated sufficient taxable income
to give rise to an entitlement to statutory profit sharing for Peruvian
mineworkers.
In keeping with recent practice, as part of the salary increases agreed
with the Peruvian labour unions, the Company has approved an
additional bonus plan incorporating safety and productivity goals.
Enactment of new laws by Castillo’s Government empowers labour
unions and will result in higher wage expectations and potential labour
conflicts. 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 national authorities
and the Company maintains open and regular dialogue with them.
Mara Rosa (Brazil)
During the year, the Mara Rosa project team, supported by relevant
Group functions, has successfully:
– obtained all environmental permits;
– commenced construction of a 138 kv powerline for completion
in June 2023;
– ordered all construction equipment identified as having extended
leadtimes; and
– commenced ESG-related programmes under the oversight of the
recently recruited ESG Manager.
Snip (Canada)
Key developments in 2022 comprise the following:
– established dialogue with Tahltan First Nation on the Group’s plans
at the project;
– completion of a Preliminary Economic Assessment; and
– completed implementation of mitigating actions following risk
assessment taking into account physical risks and those associated
with the project’s remote location.
Further details on Mara Rosa are provided on pages 8, 9 and 33.
80 | Hochschild Mining PLC Annual Report & Accounts 2022
Macro-economic risks
Risk
Impact
Mitigation
Commentary
– 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.
11
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
permits for exploration or
operations, including
specifically Inmaculada’s
Second Modified
Environmental Impact
Assessment (MEIA) could
affect future production and
financial results of the Group.
Peru
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. With the exception of
the region of Puno, Boluarte’s government has been able to contain the
social unrest for now, but the risk of further social unrest remains high
given the government’s high disapproval and the fact that a very high
percentage of the population favours new general elections. However,
to date, there is no consensus in Congress to approve the constitutional
amendment required to hold general elections early.
General
Environmental permits
With regards to environmental permits for operating activities,
the permitting process for the Inmaculada MEIA continues and the
Company’s revised expectation is a decision by the Peruvian
government during Q2 2023. The Company believes that the outcome
of the permitting process will be positive. However, failure to secure
approval of the MEIA would result in a suspension of operations at
Inmaculada during H2 2023 until a new MEIA is approved. The specific
date of suspension will depend on operational factors that are being
evaluated.
The Company has commenced the environmental permitting process,
including baseline studies, to enable production from the Royropata
zone at Pallancata and to support the ongoing associated brownfield
activities.
Easement and other permits
Among the approvals and permits required to be obtained by the
Company in the ordinary course of business, the Company has been
granted an easement by the State over the land on which the key
mining components of the Inmaculada mine are located. The Company
is in the process of renewing this easement for an additional 10-year
period which is expected to be secured in H1 2023.
Argentina
President Fernandez’s administration has been very cautious active in
supporting and promoting the mining industry. Covid-19 as they see it as
one of the pillars for the future Argentine economy; however, two of the main
problems that affect the industry (the peso-dollar exchange rate and
certain populist measures the restrictions on imports) remain unresolved.
Very high levels of inflation and poverty, and the low level of international
reserves are three of the principal challenges faced by Argentina over
the past decade. These factors together with the continuous disputes
within the government coalition have negatively adversely impacted the
overall investment climate in Argentina including in the extractive
industry sector. President’s reputation as well as his chances of
re-election.
Brazil
Presidential elections were held in October 2022 and Lula da Silva was
elected President by a narrow majority. Lula is expected to govern
based on a centre-left political and economic platform. The Governor
of the State of Goias, where Mara Rosa is located, was re-elected for
another term.
2023 outlook
Peru
Given the lack of consensus in Congress regarding the amendment
required to hold general elections early, the possibility that Dina Boluarte
will continue until July 2026 cannot be discarded. However, because of
the political turmoil described above, the risk that violent protests will
resume remains high.
Argentina
President Fernandez’s administration is expected to continue cautiously
supporting mining activity; however, the above economic challenges will
continue to hinder the industry in the absence of significant policy
changes. The chances of implementation of such a policy during 2023,
an electoral year, are low.
From a political and social perspective, 2023 will be dominated by the
presidential elections. Primaries will take place in August and the
general election in October. The chances of the government coalition
being re-elected are highly influenced by: (i) performance of the
economy; (ii) the level of conflict within the government coalition and
how it is handled; and (iii) the ability of the opposition to field a leader
with sufficient political backing.
81 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information RISK MANAGEMENT CONTINUED
Risk
Impact
Mitigation
Commentary
Sustainability risks
Risk
Impact
Mitigation
Commentary
12
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.
13
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.
– 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 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.
The Group is pleased to report on its strong safety performance in
2022 with accident frequency at 1.37 and accident severity at 93 and
the attainment of its ongoing objective of Zero Fatalities.
Management continued with the implementation of ‘Safety 2.0’, an
action plan to reinforce a safety-first culture. The plan, which combines
technical and people-led approaches, comprises seven key attributes
covering training, effective communication, recognition and aligning
compensation with measurable safety performance.
In addition, during the year, a new internal safety indicator, the
Seguscore, was rolled out to better measure the Group’s safety
performance by 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 above, please refer to the safety section
of the Sustainability Report on pages 61 and 62.
In 2022, the Group performed strongly in its ECO Score (with a score of
5.27 out of 6 (2021: 5.29)), reflecting the following notable achievements:
– two operations achieving a perfect score of 6 out of 6
(Arcata and Sipan);
– the lowest water consumption since 2015 (171.2 l/person/day); and
– the highest level of environmental culture compliance since 2015
(using an internal scoring system).
In addition, during the year:
– our Environmental Policy was updated in February 2022 and now
includes specific provisions regarding climate change and protection
of biodiversity;
– completed the development of a tailor-made Environmental
Management System comprising of 15 key processes;
– the Environmental team continued with its efforts on reporting widely
on the Group’s environmental performance by participating in
numerous reporting initiatives; and
– there was continued progress with the implementation of the
Environmental Culture Transformation Plan (ECTP) which in 2022 saw
the training of 78 Environmental Ambassadors and the launch of
Company-wide courses held on climate change and mine closure.
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 of all such facilities and monitors their
stability on an ongoing basis.
For further details, please refer to the environmental section of the
Sustainability Report on pages 57 to 60.
82 | Hochschild Mining PLC Annual Report & Accounts 2022
Risk
Impact
Mitigation
Commentary
14
Climate
change
Read our
2022 TCFD Report
from page 68.
15
Community
relations
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.
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.
– Enhanced management
oversight and operating
protocols to:
–quantify and verify carbon
footprint, including Scope 3;
–maximise the 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 2022 include:
– Ares and Arcata switched entirely to renewable energy consumption;
– the completion of a climate change physical risk assessment;
– a commitment to achieve Net Zero by 2050;
– updated the Corporate Environmental Policy to identify and mitigate
climate change-related risks; 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; and
– participation in CDP information request (improved score from
C in 2021 to B in 2022).
The 2023 Action Plan includes, most notably setting interim Carbon
Neutral targets for 2030 to achieve Net Zero by 2050.
– 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. invasion or attacks of mining units and workers) has
increased, with numerous sites suffering from blockades. Conflicts in
other sectors could affect our supply of materials (e.g. transportation
services) and disrupt the change of shift of our workers.
The Inmaculada mine was attacked by members of a local community
at the end of October 2022 and severely damaged certain non-critical
installations. Members of another community also attempted to
violently invade the industrial area of the Inmaculada mine in order to
disrupt operations. Despite the presence of a pre-existing agreement
with both communities, numerous rounds of discussions have been
held and will continue.
As reported elsewhere in this report, the invasion of Inmaculada was
partially responsible for a short period of disruption to production.
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.
As described earlier (in relation to political, legal and regulatory risks),
given the impeachment of President Castillo in December 2022, political
and social risks have increased substantially as widespread protests have
seen supporters challenging the legitimacy of Dina Boluarte’s appointment
and her cabinet and demanding the reinstatement of Castillo.
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.
During the year:
– the Group spent or donated $7.0million to benefit local communities
and supported local community-run businesses;
– 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.
Further details can be found in the Sustainability Report from page 54.
83 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information VIABILITY STATEMENT
In accordance with provision 31 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 three years
(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 started by considering two
variations of a Base Case scenario, using
average analyst consensus prices for the
3-year period as of December 31, 2022
which are considered to be conservative
in light of prevailing prices. The variations
reflected two possible outcomes with
respect to the Inmaculada Modified
Environmental Impact Assessment
(“MEIA”), namely (a) the approval of the
MEIA prior to the date of approval of the
financial statements (“Scenario A”), and
(b) the rejection of the MEIA prior to the
date of approval of the financial
statements resulting in a three-year
suspension of operations at that mine
(“Scenario B” and the variations
collectively referred to as the “MEIA Base
Case Scenarios”).
While the Group remains optimistic that
the MEIA approval will be forthcoming, the
Board highlights that the material
uncertainties referred to in respect of the
Going Concern assessment in the event
of Scenario B may cast significant doubt
over the future viability of the Group (see
page 90).
Both of the MEIA Base Case Scenarios
were used to model situations which are
within reasonable contemplation taking
into account the principal risks to which
the Group is exposed (as set out in the
earlier part of this report).
Assumptions in Assessing Viability
In their assessment of the financial
impact of each of the above-referenced
scenarios, the Directors made the
following principal assumptions:
General Assumptions for both of the MEIA
Base Case Scenarios:
a) conservative prices of Au: $1,670/oz
and Ag: $20.2/oz (the ‘Assumed Prices’);
b) operational forecasts are largely
based on the 2023 approved budget,
adjusted to reflect the outcome in
relation to the MEIA; and
c) 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
becomes available, albeit after the
three-year time horizon.
Assumptions particular to Scenario A:
A1) debt repayments of the current
$300m Medium Term loan proceed
as planned; and
A2) the $200m new Medium Term facility
is fully drawn down, and repayments
proceed as planned.
Assumptions particular to Scenario B:
B1) debt repayments due under the
$300m Medium Term loan will be
renegotiated such that they commence
after the three-year period;
B2) the successful completion of an
equity financing from existing
shareholders; and
B3) corporate expenses are
significantly reduced,
(the actions ‘B1’ and ‘B2’ collectively
referred to as the ‘Refinancing Actions’)
In both of the MEIA Base Case Scenarios,
viability situations 1 through 5 below were
applied to the Inmaculada mine, which
currently represents the majority of the
Group’s cash generation in 2023. These
scenarios would have a significantly reduced
impact at the Group’s other operations.
Viability Situations Modelled
The following situations were analysed:
Situation 1: A community-led protest
blocks a principal road to/from the mine
A protest by a local community obstructs
the access road to Inmaculada for two
months. The impact analysis takes into
account the cost of negotiating a settlement
and other associated expenses.
Situation 2: A strike by mineworkers
A widespread mineworkers’ strike results
in a suspension of operations for one
month. The impact analysis takes into
account the cost of negotiating a settlement
and other associated expenses.
Situation 3: The occurrence of a material
safety accident
A severe safety occurrence takes place
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.
Situation 4: The occurrence of a material
environmental incident
A key part of Inmaculada’s plant
infrastructure is compromised which results
in a major spillage of contaminants. The
impact analysis assumes a suspension
of operations of one month and takes into
account the cost of repairs, remediation
and regulatory fines and other
associated expenses.
Situation 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.
Situation 6: There are capex overruns in
the construction of the Mara Rosa project
The capital expenditure required to
complete the construction of the Mara
Rosa project increases to 10% above the
project budget for 2023/2024.
Situation 7: 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 costs and
capital expenditure by 5% and would stop
development work at Royropata in 2024.
84 | Hochschild Mining PLC Annual Report & Accounts 2022
Directors’ Assessment of Viability
(i) Scenario A
In their assessment, the Directors
concluded that under Scenario A, upon
the occurrence of one of the viability
situations (since the occurrence of a
combination of two or more of the viability
situations taking place concurrently is
considered to be remote), the Company
would be viable.
Should prices fall further than the
Assumed Prices or the situations in reality
are more severe than those modelled or a
combination of situations occurs, the
Board would oversee the implementation
of mitigating actions which include:
i. Reducing administrative costs further
including through further headcount
reductions and the closure of non-
essential offices;
ii. Accelerating the placing of Pallancata
into care and maintenance;
iii. Hedging a higher proportion of
production for the remainder of 2023,
2024 and 2025;
iv. Undertaking a review of non-core
assets and projects for opportunities
to realise value; and
v. Considering various alternatives of
debt and equity financing,
(All collectively referred to as the ‘Indicative
Mitigating Actions’).
For examples of the mitigating actions
taken by the Board during the year under
review, please refer to the commentary in
the Risk Management section of this report.
Conclusion of Viability Assessment
under Scenario A
While it is always possible that
combinations of weak precious metal
prices and the occurrence of more than
one of the above referenced situations
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 viability
situation under Scenario A, using the
Assumed Prices and other factors
considered to be reasonable, and,
accordingly, can confirm that, taking into
account the impact of the Indicative
Mitigating Actions, they have a
reasonable expectation that the
Company will be able to continue in
operation and meet its obligations over
the next three years.
(ii) Scenario B
In light of discussions with the Group’s
principal lenders and its major shareholder,
the Group remains confident that, in the
event of Scenario B, the Refinancing
Actions would be successfully achieved.
However, as binding commitments cannot
be secured at this stage, the outcome is
uncertain and outside of the Group’s
control and hence, the Refinancing
Actions constitute material uncertainties.
In their assessment, the Directors
concluded that under Scenario B, upon
the occurrence of one of the viability
situations (since the occurrence of a
combination of two or more of the viability
situations taking place concurrently is
considered to be remote), the Company
would be viable subject to the successful
completion of the Refinancing Actions.
Should prices fall further than the
Assumed Prices or the situations in reality
are more severe than those modelled or
a combination of situations occurs, the
Board would oversee the implementation
of mitigating actions including the Indicative
Mitigating Actions (which, for the avoidance
of doubt, would be in addition to the
completion of the Refinancing Actions).
Conclusion of Viability Assessment
under Scenario B
Assuming the successful completion of
the Refinancing Actions, the Directors
have formed the opinion that:
(i) while it is always possible that
viability situations could threaten the
solvency and liquidity of the Company
over the Viability Period, such
combinations are considered to be
remote; and
(ii) having assessed the impact of each
viability situation under Scenario B
using the Assumed Prices and other
factors considered to be reasonable,
and taking into account the impact of
the Indicative Mitigating Actions, they
have a reasonable expectation that
the Company will be able to continue
in operation and meet its obligations
over the next three years.
Nevertheless, as previously highlighted,
the material uncertainties in respect
of the Refinancing Actions referred to
in the Going Concern assessment may
cast significant doubt over the future
of the Group.
Non-financial information regulation
Under sections 414CA and 414CB of
the Companies Act 2006, as amended by
The Companies, Partnerships and Groups
(Accounts and Non-Financial Reporting)
Regulations 2016, the Strategic Report
must contain a non-financial information
statement. This can be found in the
Supplementary Information section
on page 111.
The Strategic Report, as set out from pages
2 to 85, has been reviewed and approved
by the Board of Directors and signed on
its behalf by:
combinations of weak precious metal
prices and the occurrence of more
than one of the above referenced
Ignacio Bustamante
Chief Executive Officer
19 April 2023
85 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information BOARD OF DIRECTORS
Audit Committee
Nomination Committee
Remuneration Committee
Sustainability Committee
Chair
Eduardo Hochschild
Chairman
Ignacio Bustamante
Chief Executive Officer
Jorge Born Jr.
Independent
Non-Executive Director
Jill Gardiner
Independent
Non-Executive Director
Nicolas Hochschild†
Non-Independent
Non-Executive Director
Joined the Group in 1987 and
appointed Chairman in 2006.
Appointed to the Board
in 2010.
Appointed to the Board
in 2006.
Appointed to the Board
in August 2020.
Appointed to the Board
in May 2022.
†
Key skills and competencies
– Over 30 years’ involvement
Key skills and competencies
– Significant operational
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. (Chairman),
Aclara Resources Inc.
(Chairman)
Non-profit: UTEC (Chairman),
TECSUP, Museum of
Contemporary Art, Lima
(Chairman), Conferencia
Episcopal Peruana
Previous experience
Eduardo joined the Hochschild
Group in 1987 as Safety
Assistant at the Arcata unit,
becoming Head of the
Hochschild Mining Group
in 1998.
Eduardo is the Company’s
largest shareholder with a
c.38% interest.
experience
– Extensive knowledge
of financial and general
management
– Strong leadership skills
Current external
appointments
Commercial: Non-Executive
Director of Profuturo AFP,
Scotiabank Peru S.A.A. and
Aclara Resources Inc.
Previous experience
Ignacio previously served as
Chief Operating Officer and
General Manager of the
Group’s Peruvian operations.
Prior to that, Ignacio worked
for Zemex Corporation
between 2003 and 2007, first
as Chief Financial Officer and
Vice President of Business
Development, and later as
President. Between 1998 and
2003 Ignacio served as Chief
Financial Officer of Cementos
Pacasmayo S.A.A.
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:: Consult & Co.
(President and CEO)
Non-profit: Bunge and Born
Charitable Foundation
(President)
Previous experience
Jorge served as a Director
and Deputy Chairman of
international agribusiness
Bunge between 2001 and
2010. 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.
Key skills and competencies
– Longstanding career
Key skills and competencies
– Mergers and Acquisitions
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: Capital Power
Corporation (Chair)
Non-profit: ARC Foundation
Previous experience
Jill spent over 20 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.
Experience
Nicolas is a Mergers &
Acquisitions Associate, having
previously served as Senior
Analyst, at Forum Brands,
a New-York based venture
capital backed E-commerce
business acquirer. Nicolas
holds a B.Sc. in Mechanical
Engineering and an M.Sc. in
Management Science and
Engineering, both from
Stanford University.
† At the conclusion of the 2023 AGM, Nicolas Hochschild and Eileen Kamerick will step down from the Board. On that date, Jill Gardiner will assume
the Chair of the Audit Committee and Mike Sylvestre will become a member of the Audit Committee.
86 | Hochschild Mining PLC Annual Report & Accounts 2022
Gender of Directors
on the Board
Tenure of Independent
Non-Executive Directors
Eileen Kamerick†
Independent
Non-Executive Director
Tracey Kerr
Independent
Non-Executive Director
Michael Rawlinson
Senior Independent
Director
Mike Sylvestre
Independent
Non-Executive Director
Raj Bhasin
Company Secretary
Appointed to the Board
in November 2016.
Key skills and competencies
– Strong background in audit
and financial reporting
– Extensive experience on
listed company boards
– In-depth knowledge
of corporate
governance/ finance
Appointed to the Board in
December 2021. Designated
Non-Executive Director for
workforce engagement.
Key skills and competencies
– Extensive experience of
managing sustainability
in mining
– Geology, having overseen
global exploration activities
– UK listed company
governance
Appointed to the Board
in 2016 and as Senior
Independent Director
in January 2018.
Key skills and competencies
– Significant knowledge
of the mining sector
– Corporate finance,
strategy and M&A
– UK listed company
governance
Current external
appointments
Commercial: Non-Executive
Director of Associated
Banc-Corp., Legg Mason
Closed End Mutual Funds,
ACV Auctions Inc and
Valic Funds I
Non-profit: Alzheimer’s
Association
Previous experience
Eileen spent the majority of
her career in senior financial
roles and as CFO in the oil &
gas and mining sectors. She
has an MBA in Finance and
International Business and
the Directorship Certification
of the US National Association
of Corporate Directors (NACD).
Eileen is a Board Leadership
Fellow of the NACD.
Current external
appointments
Commercial: Non-Executive
Director of Weir Group PLC
and Jubilee Metals PLC
Previous experience
Tracey spent almost 10 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.
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
20 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 May 2022.
Joined the Group and
appointed Company
Secretary in 2007.
Key skills and competencies
Raj is a solicitor and
Chartered Secretary with
over 23 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.
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.
Previous experience
Mike spent eight years at
Kinross Gold Corp, most recently
as SVP, Operations until his
retirement in December 2022.
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.
87 | Hochschild Mining PLC Annual Report & Accounts 2022
0-3 years 3/6 3-6 years 0 6+ years 3/6 Male 6 Female 3Strategic ReportFinancial StatementsGovernanceFurther Information
SENIOR MANAGEMENT
Eduardo Noriega
Chief Financial Officer
Tom Elliott
Vice President,
North America
Experience
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.
Experience
Tom Elliott joined Hochschild Mining
in July 2021. Before that, he was Senior
Vice President – Investor Relations
and Corporate Development at
Kinross Gold Corporation. Prior to
that, he was Executive Director in
UBS Investment Bank’s Mining &
Metals team in London, England
and Toronto, Canada. He also
worked at Deutsche Bank Securities
in Mining & Metals Equity Research
and began his career in the mining
and metals industry in Vancouver,
Canada and Hamar, Norway. He
holds a B.Sc (Honours) in Chemistry
from Queen’s University and an MBA
from the University of Toronto.
Oscar Garcia
Vice President,
Brownfield Exploration
Experience
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 Landin
José Augusto Palma
Eduardo Villar
Chief Operating Officer
Vice President, Legal
& Corporate Affairs
Vice President,
Human Resources
Experience
Experience
José Augusto Palma has more than
12 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 and recently
concluded a two-year term 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.
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.
Experience
Eduardo Landin was appointed COO
of Hochschild Mining in March 2013.
Eduardo joined Hochschild 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.
88 | Hochschild Mining PLC Annual Report & Accounts 2022
Eduardo Noriega
Chief Financial Officer
Tom Elliott
Vice President,
North America
Experience
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.
Experience
Tom Elliott joined Hochschild Mining
in July 2021. Before that, he was Senior
Vice President – Investor Relations
and Corporate Development at
Kinross Gold Corporation. Prior to
that, he was Executive Director in
UBS Investment Bank’s Mining &
Metals team in London, England
and Toronto, Canada. He also
worked at Deutsche Bank Securities
in Mining & Metals Equity Research
and began his career in the mining
and metals industry in Vancouver,
Canada and Hamar, Norway. He
holds a B.Sc (Honours) in Chemistry
from Queen’s University and an MBA
from the University of Toronto.
Oscar Garcia
Vice President,
Brownfield Exploration
Experience
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.
DIRECTORS’ REPORT
The Directors present their report for
the year ended 31 December 2022.
Information in Directors’ Report
The Directors’ Report comprises the
Corporate Governance Report from pages
91 to 107, this Report on pages 89 and 90,
and the Supplementary Information on
pages 108 to 111. 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 50; and
– policy on financial risk management
in note 38 to the consolidated
financial statements.
For the purposes of compliance with
Disclosure Guidance and Transparency
Rules 4.1.5R(2) and 4.1.8R, 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 declared an interim
dividend totalling $10 million (1.95 US
cents per ordinary share) in respect of
the year ended 31 December 2022 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 86 and 87.
Other than Nicolas Hochschild and Mike
Sylvestre, who were appointed on 26 May
2022, all of the Directors were in office for
the duration of the year under review.
Graham Birch and Dionisio Romero Paoletti
resigned from the Board on 26 May 2022.
Other than Eileen Kamerick and Nicolas
Hochschild, who will be stepping down
from the Board at the conclusion of the
forthcoming Annual General Meeting
(‘AGM’), the Directors will be retiring and
seeking re-election (or, election in the case
of Mike Sylvestre) by shareholders at the
2023 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 256 of the Companies Act 2006.
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 $7.0 million to
benefit local communities (2021: $5.4 million).
Relationship Agreement
Pelham Investment Corporation (the
‘Major Shareholder’), Eduardo Hochschild
(who together with the Major 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 2006 and which
was amended and restated during 2014.
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 Major Shareholder are set out in the
Corporate Governance Report on page
97 and, with regard to the right to appoint
Directors to the Board, are set out on
page 98.
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 2006 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 2008, 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.
89 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information DIRECTORS’ REPORT CONTINUED
Going concern
After their thorough review of Group
liquidity and covenant forecasts under
the scenarios described in note 2(d) to the
consolidated financial statements, and
acknowledging the material uncertainties
associated with (i) the securing of the
Inmaculada MEIA and (ii) the Refinancing
Actions (as defined in that note), the
Directors have a reasonable expectation
that the Group and the Company have
adequate resources to continue in
operational existence for the period
to 31 May 2024 which is at least 12 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 2(d) to the consolidated
financial statements for full details of the
Directors’ assessment of going concern.
AGM
The 17th AGM of the Company will be held
at 9am on 9 June 2023. 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 www.hochschildmining.com
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.
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 132 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 90A of the Financial Services and
Markets Act 2000.
On behalf of the Board
Raj Bhasin
Company Secretary
19 April 2023
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 418(2) of the
Companies Act 2006.
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
90 | Hochschild Mining PLC Annual Report & Accounts 2022
CORPOR ATE GOVERNANCE REPORT
In a year which saw the Company’s entry into
Brazil and the social and political challenges faced
in Peru, a robust framework of governance and
effective leadership are crucial.”
Eduardo Hochschild
Chair
Dear Shareholder
I am pleased to present the Corporate Governance
Report for 2022.
In this section of the Annual Report, we report on
the Company’s compliance with the provisions of the
2018 edition of the UK Corporate Governance Code
(the ‘Code’) and the application of its principles.
In a year which saw the Company’s entry into Brazil
and subsequent commencement of construction
of a new operation, and the social and political
challenges faced in Peru, a robust framework of
governance and effective leadership are crucial.
Over the next few pages, we have described the
Board’s activities, its structure and how, through the
implementation of controls and processes, it is best
placed to discharge its oversight responsibilities.
Refreshing the Board
I am delighted that we were able to execute on our
Board Succession Plan and announce the appointment
of Mike Sylvestre to the Board as an Independent
Non-Executive Director. This was the result of an
externally-led search which was overseen by the
Nomination Committee and which sought to
supplement the Board skillset with that of an
experienced mine operator.
Listening to the Employee Voice
Stakeholder engagement has, quite correctly,
increased in importance on Board agendas and
arguably, the most critical stakeholder group at
Hochschild is its employees. Without their collective
effort and dedication, the Company would not be
able to deliver on its objectives of delivering
sustainable value. I am pleased therefore that we
were able to launch the Online Employee Forum
during 2022 hosted by Tracey Kerr, as the Board
member designated for workforce engagement.
The two sessions held in the second half of the year
provided not only an opportunity for the Board to
learn, first-hand, employees’ views on a wide range
of issues but also to gauge, particularly in the case
of our new colleagues in Brazil, how our corporate
values have been understood and received.
Further details can be found on page 96 and
in the Sustainability Report on page 65.
If you should have any queries arising from this
report, please do not hesitate to contact me at
Chairman@hocplc.com.
Eduardo Hochschild
Chair
91 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information CORPOR ATE GOVERNANCE REPORT CONTINUED
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’) (2018 edition) in respect of the
year ended 31 December 2022. 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 108 to 111.
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:
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 chairmanship to be in the best interests of the
Company. As described later in this report, there are checks and balances in place to ensure ongoing
objectivity and that Mr Hochschild does not exercise undue influence.
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.
Our governance structure
Board
Chair
Eduardo Hochschild
2 Non-Independent Directors 6 Independent Directors
Audit Committee1
Nomination Committee1
Exploration Working Group
Chair
Eileen Kamerick
Chair
Eduardo Hochschild
READ MORE
Page 101
READ MORE
Page 106
A working group consisting of
management and Non-Executive
Directors which reviews detailed reports
on, and progress against, brownfield
and greenfield exploration programmes.
Remuneration Committee1
Sustainability Committee1
Chair
Michael Rawlinson
Chair
Tracey Kerr
READ MORE
Page 112
READ MORE
Page 50
1
Terms of reference are available at www.hochschildmining.com
92 | Hochschild Mining PLC Annual Report & Accounts 2022
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.
2022 Board meetings
Nine Board meetings were held during the
year, of which four were scheduled meetings.
The ad-hoc meetings were convened to
consider, amongst other things:
– the transaction documentation relating
to the completion of the acquisition of
Amarillo Gold Corporation;
– the approval of revised delegated
banking authorities;
– updates on the social and political
situation in Peru (see pages 81 and 83
for further details);
– updates on the community-related
disruption at Inmaculada; and
– updates on the Inmaculada MEIA
approval process, scenario planning
and related matters.
Attendance at the scheduled Board
meetings convened during 2022 is
summarised in the table below:
Director
Attendance (Maximum)
In addition to the regular updates from across the business, the principal matters considered
by the Board during 2022 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.
Health and
safety
– Updates on the ongoing implementation of Safety 2.0, the second iteration of the
Company’s Safety Culture Transformation Plan (see page 61 for further details);
and
– The Company’s investigation into a bus accident suffered by a third-party
maintenance contractor while transporting its employees to the Inmaculada mine.
Financial
– The stress-tested scenarios and the underlying assumptions used in the going
concern and viability statements in support of he 2021 annual financial
statements and 2022 half-yearly financial statements;
– Considered recommendations of the Audit Committee to adopt the
2021 Annual Report and Accounts and the 2022 Half-Yearly Report;
– The rectification process in relation to certain historic dividends including
approval of the related shareholder documentation;
– The Group’s ongoing financial position;
– The 2021 final dividend and 2022 interim dividend;
– The terms of the £200 million Medium-Term Debt Facility; and
– The 2023 budget.
Strategy
– Strategic options to facilitate the Group’s growth including a re-evaluation
of the Volcan project;
– Business development projects, including the completion of the acquisition of
Amarillo Gold Corporation and, in particular, its Mara Rosa Advanced Project in Brazil†;
– Updates on the Group’s operational innovation projects; and
– The Group’s strategic plan†.
Business
performance
– Detailed updates on operational performance including progress on securing
key permits/regulatory approvals such as the Inmaculada MEIA;
Risk
– Unbudgeted strategic initiatives;
– Presentations on progress against the annual plans for:
– construction of the Mara Rosa mine;
– brownfield exploration;
– drilling at the Snip Project; and
– The actions being taken to improve gender diversity at management level
and generally within the Company.
– 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, Project Development risks were considered following their
entry on the Group Risk Register given the importance of the successful
commencement of production from the Mara Rosa mine to the Group’s
production profile; and
– Renewal of the Group’s Directors’ and Officers’ Liability Insurance.
Governance
– The appointments of Mike Sylvestre and Nicolas Hochschild as Non-Executive
Directors and their respective Committee memberships;
Mr E Hochschild
Mr G Birch*
Mr J Born
Mr I Bustamante
Ms J Gardiner
Mr N Hochschild**
Ms T Kerr
Ms E Kamerick
Mr M Rawlinson
Mr D Romero*
Mr M Sylvestre**
4 (4)
2 (2)
4 (4)
4 (4)
4 (4)
2 (2)
4 (4)
4 (4)
4 (4)
2 (2)
2 (2)
Sustainability
*
Mr G Birch and Mr D Romero retired from the Board
on 26 May 2022.
** Mr N Hochschild and Mr M Sylvestre were appointed
to the Board on 26 May 2022.
– Updates from the Company Secretary on governance developments including
relevant regulatory/legal findings with respect to the responsibilities of the
Company and the Directors;
– An update on the implementation of the 2021 Board evaluation recommendations;
– The process for the internal Board evaluation and the findings of the review; and
– The annual reviews of Directors’ conflicts of interest and independence of
Non-Executive Directors.
– Reviews of the social climate in Peru, Argentina and Chile and their potential
impact on the Group as well as the Company’s social engagement strategy.
With regards to Peru, this resulted in a number of ad-hoc Board meetings
following protests by local communities at the Inmaculada mine;
– 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.
– Progress with regards to the Group’s Carbon Strategy supporting Net Zero by 2050;
– Adoption of ESG-related KPIs;
– Review of the 2021 standalone Sustainability Report; and
– Feedback on employees’ views following the Online Employee Forums hosted
by Tracey Kerr.
Investors’
views
– Regular reports on investors’ views as part of the Group’s comprehensive
engagement schedule
(see section headed Shareholder engagement in 2022 for further details); and
– Feedback from investors and proxy agencies on 2022 AGM & EGM business.
† See page 96 on how wider stakeholders’ interests were considered in relation to these key Board decisions.
93 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information CORPOR ATE GOVERNANCE REPORT CONTINUED
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 represented.
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, update
meetings are diarised to take place
monthly which provide an opportunity for
both the Board and the CEO to consider
matters and developments between
scheduled meetings.
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
2010 and updated in 2022, which sets out
the standards and behaviours expected
from all levels within the Company as well
as our partners: 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 2019 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 below).
Our corporate values
Innovation
Inspiring others
Recognising talent
Demonstrating responsibility
Seeking efficiencies
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 four-pronged growth
strategy. See the Strategy section on page 24.
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. By way of example, during the year,
the CEO communicated with all employees on a number of matters including:
– the values and behaviours that emanate from Hochschild’s corporate purpose; and
– the importance of safe working practices and praising two workers who refused
to commence drilling activities as the relevant areas had not been subjected to
a sufficiently thorough risk assessment.
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, Seguscore (see page 61 for further details))
Environmental – ECO Score
Ethical practices/Integrity – Whistleblowing reports
(online and offline channels), internal audit reports
Innovation
Submissions of operational efficiency projects via the Innova platform
Inspiring others
and promoting
talent
Efficiency
Team and individual development plans, staff turnover/retention rates
Operational KPIs including AISC, Production and Brownfield Exploration
results, Financial KPIs including Adjusted EBITDA, Working Capital,
Cash Balance, Debt Covenant ratios
94 | Hochschild Mining PLC Annual Report & Accounts 2022
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 s172(1)
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.
The timing of our next working climate
survey is under review with a decision to
be taken in the second half of 2023. Action
plans to address key areas identified in
the last survey conducted in 2019 continue
to be implemented, tailored by each
department focusing 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.
Shareholders
Our approach
The Chairman, 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
share-holders with respect to the business
to be put to shareholder vote at
General Meetings.
Shareholder engagement in 2022
The following table summarises the shareholder engagement initiatives and events during the year:
Date
Event
January
(and April, July,
October)
Conference calls following each Quarterly Production Report
Continuation of shareholder engagement on proposed revised Remuneration Policy
February
BMO Global Metals & Mining Conference
2021 Annual Results presentation & UK Roadshow
March
May
EGM to approve the acquisition of Amarillo Gold Corporation
BoA Merrill Lynch Global Metals, Mining and Steel Conference
EGM to approve resolutions with respect to certain historic dividends
AGM
August
Publication of standalone 2021 Sustainability Report
H1 2022 Results presentation
September
Launch of new corporate website
H1 2022 Results UK Roadshow
Denver Gold Forum
An extensive Investor Relations schedule resulted in management holding approximately 100 investor meetings during the year.
The Company was pleased that a successful trial of the Investor Meet Company platform took place whereby over 80 individual
investors were able to attend virtually a live presentation from the CEO on the 2022 half-yearly results and submit questions;
an event which would otherwise have been attended exclusively by institutional investors.
In addition to the above, the Non-Executive Directors are available to meet shareholders on request. During the year, Tracey Kerr
and the Company Secretary held a virtual meeting at the request of an institutional investor to discuss a wide range of issues including
governance and ESG reporting, the actions arising from the investigation into the 2021 bus accident and executive remuneration.
95 | Hochschild Mining PLC Annual Report & Accounts 2022
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2022 AGM
Following the imposition of Covid-related
restrictions which prevented the holding
of a physical AGM in 2020 and 2021, the
Company was delighted to be able to host
an AGM in 2022 at which shareholders
were invited to participate.
All resolutions at the 2022 AGM were
passed with the support of at least 92%
of the votes cast.
Other stakeholders
On pages 45 to 49 of the Strategic Report,
we have identified our key stakeholder
groups, 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 172
duties’) to act in the way he or she considers,
in good faith, would most likely 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.
Below, we have summarised how the Board receives feedback from its key stakeholder groups:
Employees
Social
Government/Regulators
Suppliers/Lenders
Customers
Reported to the
Sustainability Committee,
which feeds back to
the Board.
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.
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.
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.
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
two online employee
forums (see page 65
for further details).
Impact on wider stakeholder group of key
decisions in 2022
In discharging their section 172 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 93 to
100. We set out below examples of how
the Directors had regard to the matters
set out in section 172(1)(a)-(f) when
discharging their section 172 duties on
certain decisions taken during the year.
(a) Annual Strategy Review
As it does each year, the Board carried
out a review of the Group’s strategy. The
discussion in 2022 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
include taking a leading role in promoting
good ESG practices as well as seeking to
become an employer of choice offering
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) Completion of the acquisition of
Amarillo Gold Corporation
In its decision to complete the acquisition of
Amarillo Gold, the Board took into account:
– shareholders’ concerns (a) on
the limited scope for growth from the
Company’s existing portfolio of
operating assets and its impact on
shareholder returns, and (b) on the
lack of geographic diversification;
– the interests of employees who would
benefit from the addition of a high-grade
asset into the Company’s portfolio;
– the interests of local stakeholders and
government who would benefit from the
generation of sustainable value at
Mara Rosa; and
– the neutral impact on existing customers.
96 | Hochschild Mining PLC Annual Report & Accounts 2022
Division of responsibilities
Board composition
Throughout the year, the Board comprised
the Chair, the Chief Executive Officer and
seven Non-Executive Directors, of whom
six are considered, by the Board, to be of
independent judgement and character.
At the conclusion of the 2022 AGM, Graham
Birch and Dionisio Romero Paoletti stepped
down from the Board as Independent
Non-Executive Director and Non-Executive
Director respectively. At that time, the
appointments of Mike Sylvestre and
Nicolas Hochschild in those respective
positions took effect.
As a result, at all times during the year,
the Board comprised a majority of
Independent Non-Executive Directors.
Nicolas Hochschild 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 89 of the Directors’ Report).
Chair and Chief Executive
The Board is led by the Chair, Eduardo
Hochschild, who controls Pelham Investment
Corporation (the ‘Significant Shareholder’),
the largest shareholder of the Company
with a c.38% holding.
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.
Ignacio Bustamante, as the Chief Executive
Officer, 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 Mr Hochschild 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 Mr 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 2014 following the implementation
of new rules governing such agreements
(the ‘2014 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 2014 Listing
Rules with regards to the Company’s
compliance with the independence
provisions which can be found in the
Directors’ Report on page 89.
Senior Independent Director
Michael Rawlinson is the Senior Independent
Director. Mr Rawlinson’s 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,
Mr 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. No such
meetings were requested during the year.
Non-Executive Directors
With the exception of Nicolas Hochschild
who has been nominated to the Board by
the Significant Shareholder, the Company’s
Non-Executive Directors hold, or 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 those Non-Executive
Directors deemed by the Directors to be
independent. As part of its assessment,
the Board took into account the
circumstances set out in Provision 10 of
the Code. In particular, the Board noted
the fact that Jorge Born has served on
the Board for over nine years. The Board
assessed, among other things, Jorge
Born’s individual approach and
contribution to Board discussions. It was
concluded that he demonstrated ongoing
objectivity which, at times, included
appropriate challenges of matters under
deliberation as well as of management.
Accordingly, the Board was of the opinion
that the above circumstances did not
interfere with Mr Born’s ability to act in the
best interests of the Company and is
therefore considered to be independent
for the purposes of the Code.
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.
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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.
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 106 and 107.
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 15% of the issued share
capital or voting rights of the Company.
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 86 and 87 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 30% or more in the
Company and (ii) the right to appoint one
Non-Executive Director for so long as it
has an interest of 15% or more in the
Company, and in each case to remove
any such Director(s) previously appointed.
The Significant Shareholder exercised
this right for the first time with the
appointment of Dionisio Romero Paoletti
who joined the Board on 1 January 2018
and who was replaced by Nicolas
Hochschild on 26 May 2022.
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.
98 | Hochschild Mining PLC Annual Report & Accounts 2022
Mike Sylvestre selection
and induction process
Selection: Search firm, London Search
Associates, engaged to compile a
long-list of candidates with the skills
and experience sought by the
Nomination Committee
The Nomination Committee compiles
a short-list of candidates
Interviews: Board Chair and
designated members of the
Nomination Committee
Conflicts of Interest*: Nomination
Committee considers and approves
any conflicts of interest and
recommends Mike Sylvestre’s
appointment to the Board
Provision of Key Documentation*:
On Governance, Directors’ & Officers’
Liability Insurance and other
information
The Board Perspective*:
Meets with Board members
The Operational Perspective*:
Meetings with the CEO, CFO, COO
and his direct reports
Briefings*: Vice Presidents,
Head of Investor Relations and
Company Secretary
Full Perspective: Attends, as a guest,
meetings of the Board Committees
and the Exploration Working Group
Note: As a nominee of the Significant Shareholder, the
induction process for Nicolas Hochschild comprised
the stages marked with an asterisk.
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 external
evaluation performed by Independent
Audit Limited in 2021, and (b) undertook
an internally facilitated evaluation.
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. 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.
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Implementation of 2021 Board evaluation
The table below sets out the key actions taken in 2022 in respect of the principal recommendations arising from the 2021 review.
Area of focus
Action
Update
Risk management
reporting
Reviewing risk management reporting and the findings
of internal audit.
Review and benchmarking of risk management
reporting processes ongoing.
External perspectives
Incorporating, in a more structured way, the views of
external stakeholders to enhance strategic planning.
Continuing the
momentum on ESG
matters
Considering wider use of ESG-related indicators for
performance monitoring, and supporting management’s
efforts in reporting on ESG matters.
People and culture
Enhancing the Board’s visibility of people issues and the
embedding of the target organisational culture.
Stakeholder perceptions reflected in annual strategic
review. This will be further developed for future
strategic planning discussions.
– ESG-related indicators approved and adopted
by the Board in May 2022
– The Group has significantly increased
participation in ESG-related reporting initiates
(see website for more details)
– Online Employee Forums launched which
were hosted by Tracey Kerr as the Designated
Non-Executive Director for Workforce Engagement
(see page 65 for further information)
– Site visits to be arranged when conditions
are conducive to provide greater visibility
of organisational culture
Board meeting
effectiveness
Reformatting Board material to enhance discussion
and optimising the holding of virtual meetings.
– Board material review ongoing with a view
to enhancing strategic discussions
– Arrangements for virtual meetings have
been revised to optimise participation and
meeting effectiveness
2022 Board evaluation
Process
The 2022 Board evaluation, undertaken in the latter part of the year, took the form of one-to-one interviews
led by Michael Rawlinson, the 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 2022 Board evaluation process include the following:
Area of focus
Action
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
Maximising Board input
on Strategic Reviews
Implementing practical suggestions on strategy planning and periodic updates on progress against
agreed objectives
Risk Reporting
Workings of the
Committees
Ongoing review to incorporate tolerance thresholds in risk reporting and detailed contingency scenario planning
Specific topics for further consideration identified for further discussion by the Remuneration and Nomination
Committees and the Exploration Working Group
100 | Hochschild Mining PLC Annual Report & Accounts 2022
AUDIT COMMITTEE REPORT
In addition to its customary reporting
and audit responsibilities, in 2022
the Audit Committee also considered
the accounting implications relating
to the Amarillo Gold acquisition.”
A crucial aspect of the Committee’s
role is to oversee the provision of services
by the external Auditor. During the year,
the Committee considered both internal
feedback from management on EY’s
performance during the full-year audit
and half-year review, as well as the
external reports from the Financial
Reporting Council on their audit quality
inspections of the large audit firms.
Eileen Kamerick
Committee Chair
Dear Shareholder
I am pleased to present the Audit
Committee report for the year ended
31 December 2022.
During the year, the Committee discharged
its oversight responsibilities over numerous
areas. Firstly, in relation to its customary
financial reporting duties which included
a review of management’s accounting
judgments and disclosures in the
preparation of the Annual Report where
the issues of impairments, going concern
and viability, and mine closure provisions
in particular were closely scrutinised. Please
refer to pages 103 and 104 for further
details on the specific issues considered.
In addition, the Committee considered
the accounting implications of the Amarillo
Gold (AG) acquisition, which was completed
in early April 2022. In advance of this, we
looked not only at the accounting in respect
of the acquisition, but also practical
aspects on how the finance function
of AG would be integrated into our
established processes.
2022 meeting attendance
Members
Independent
Eileen Kamerick, Non-Executive Director (Chair)
Michael Rawlinson, Non-Executive Director
Jill Gardiner, Non-Executive Director
Yes
Yes
Yes
Maximum
possible
attendance
Actual
attendance
4
4
4
4
4
4
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CORPOR ATE GOVERNANCE REPORT CONTINUED
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 is the chair of the Audit
Committee, a position that she held during
the year under review. 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.
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 2013 until his
retirement from that role in June 2017.
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).
Jill Gardiner was formerly an investment
banker at RBC Capital Markets with a
focus on certain commodity and energy
related industries. She has served on and
chaired numerous audit committees and
currently serves as Chair of TSX-listed
Capital Power Corporation and as an
ex-officio member of its Audit Committee.
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 86 and 87. 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 2021 Annual
Report and Accounts and the 2022
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 2021 annual audit
and the 2022 Half-Yearly Report.
Acquisition of Amarillo Gold –
The Committee considered various
aspects of the acquisition such as (i) the
accounting treatment for the acquisition,
(ii) the accounting-related workstreams
in the preparation of the shareholder
circular, and (iii) the integration of the
finance function.
102 | Hochschild Mining PLC Annual Report & Accounts 2022
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 76 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.
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. On three
occasions 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 resourcing of the function
which was increased following the
completion of the acquisition of Amarillo
Gold, and the scheduled work plan.
Internal control – Through the processes
described on page 105, the Audit Committee
reviewed the adequacy of the Group’s
internal control environment and risk
management systems.
Whistleblowing – In line with the 2018
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.
A key contributory factor to the success
of the Whistleblowing arrangements is the
level of its awareness and therefore, during
the year, the Committee was keen to ensure
that they were adequately publicised to
new colleagues in Brazil and Canada.
Fraud and bribery – The Audit Committee
continued to review and challenge the
actions taken by management to promote
ethical and transparent working practices.
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).
Governance – The Audit Committee
received updates from the Auditor and
the Company Secretary on regulatory
and other developments impacting the
Committee’s role.
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 2022 and circulated earlier this year
with all recipients required to confirm
receipt online and confirming their
agreement to its terms.
External audit –The Audit Committee
oversees the relationship with the external
Auditor. EY was first appointed by the
Company as Auditor in 2006 and, following
a tender process undertaken in Q1 2016,
was reappointed. The Audit Committee
evaluated the performance of EY in 2022
and concluded that it was appropriate to
recommend the re-appointment of EY as
external Auditor at the 2022 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. In addition, the
Committee considered the Audit Quality
Inspection results published by the Financial
Reporting Council, noting the ranking of
EY relative to its peers and sought
reassurances on the actions to be taken
by the firm in response to the areas of
development which had been identified.
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. Recommendations of
particular relevance to the Committee’s
work included further enhancements to
the reporting of risks.
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: www.hochschildmining.com/media/
g2nlhbdh/2022-uk-tax-strategy-final.pdf
Significant issues relating to the
2022 financial statements
As recommended by the Code, the
following is a summary of the significant
issues considered by the Committee in
relation to the 2022 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 assets.
Having concluded on the presence of
triggering factors, the Audit Committee
undertook the following reviews:
In relation to Inmaculada: In the absence
of any news with respect to the Inmaculada
MEIA, the Committee reviewed the weighted
average amount of impairment calculated
by management based on the probabilities
of the various outcomes and the resulting
impairments. The Audit Committee reflected
on the reports from management received
during the year under review, and the
latest update on the status of the MEIA;
In relation to Pallancata: The Committee
noted the asset’s new valuation based
on the new mineral resource discovered
in the Royropata zone and the resulting
impairment reversal;
103 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information CORPOR ATE GOVERNANCE REPORT CONTINUED
In relation to San Jose: The Committee
noted the factors implying that no change
be made to the asset’s book value.
In addition, the Committee considered
the valuations undertaken at the Group’s
exploration assets, namely Volcan, Crespo,
Azuca and its investment in Aclara, and
the factors highlighted by management
in support of their recommendations.
The Audit Committee considered:
– analyst consensus price forecasts
for silver and gold; and
– the underlying calculation of the
impairment review.
In conclusion, the Audit Committee
concurred with management that:
(i) an impairment reversal of $16 million
be recognised with respect to
Pallancata; and
(ii) an impairment of $4 million be
recognised with respect to Azuca.
(b) Going Concern assessment
& Viability Statement
The Directors must satisfy themselves
as to the Group’s ability to continue as
a going concern to 31 May 2024, being
a minimum of 12 months from the approval
of the financial statements. The Audit
Committee continued to support the Board
in this assessment by considering whether,
in adverse circumstances, the Company
has adequate liquid and financing
resources to meet its obligations as they
fall due. These adverse circumstances
were tested under two scenarios, namely
(a) the approval of the Inmaculada MEIA
as at the date of the financial statements,
and (b) the rejection of the Inmaculada
MEIA resulting in a suspension of operations
at the mine at the end of 2023.
Such potential adverse circumstances
included a four-week suspension across
all three mines and an increase in
community relations-related costs combined
with lower precious metal prices. In April
2023, the Audit Committee reviewed the
Group cash flow forecasts for the going
concern period under both scenarios
taking into account the Company’s
anticipated production profiles at each
mine, budgeted expenditure and the
sensitivity of the cash flow forecasts to
movements in precious metal prices. In
addition, the Audit Committee considered
the viability of the refinancing actions
that would be necessary under the MEIA
rejection scenario. Finally, the Committee
corroborated its assessment through
consideration of the processes undertaken
by the Auditor in its testing of management’s
going concern assessment and on the
reasonableness of assumptions therein
including with respect to the Inmaculada
MEIA and the impact of the mitigating actions
taken to date as well as those identified
by management for implementation.
In conclusion, the Committee was content
and recommended to the Board that the
Directors should continue to adopt the
going concern basis of accounting in
preparing the annual financial statements.
This remained the case even under a MEIA
rejection scenario in light of the support
signalled by the Company’s major
shareholder and its principal lenders with
respect to the requisite refinancing, while
acknowledging the presence of a material
uncertainty in connection therewith.
Please refer to the Directors’ Report
on page 90 for its confirmation to
shareholders on the appropriateness
of the going concern assumption.
The Audit Committee also considered
management’s analysis in support of the
longer-term viability statement which
covers a period of three years from the
date of these financial statements. Similar
to the Going concern review, the analysis
was carried out under both the Inmaculada
MEIA approval and rejection scenarios
which were then subject to stress testing
under seven viability scenarios taking into
account the principal risks faced by the
Group. Key assumptions under the
Inmaculada MEIA rejection scenario
were the successful completion of the
requisite refinancing and a significant
reduction in expenses.
The Audit Committee challenged the
assumptions made under both scenarios,
as well as the appropriateness of the
viability situations selected to stress-test
the Group’s viability.
In conclusion, while acknowledging
the presence of material uncertainties
in connection with the Inmaculada MEIA
and the requisite refinancing referred to
above, the Committee was satisfied and
recommended to the Board that the
Directors should approve and adopt
the Viability Statement.
Please refer to pages 84 and 85 for the
Viability Statement.
(c) 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;
– significant changes in estimates
and the basis and level of new costs; and
– the accounting for the changes
in the provisions.
The Audit Committee concluded
the provision to be 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 2019 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 ‘2020
NAS Policy’).
The 2020 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 2020 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 70% 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. Based on the non-audit
services for which the Company plans to
engage the Auditor in 2023, the Audit
Committee assessed whether it would
be more appropriate for another firm to
undertake the prospective work or for the
104 | Hochschild Mining PLC Annual Report & Accounts 2022
Auditor to request a waiver from the FRC
in relation to the cap on fees for non-audit
services stipulated by the Revised Ethical
Standard so that they may undertake the
work. Based on the nature of the planned
work, which the Audit Committee deems
would not have any bearing on EY’s
continued independence in their capacity
as the external Auditor, the Committee
considered the latter to be appropriate
and has therefore granted approval for
EY to undertake the non-audit services
in 2023. Subsequently, EY has requested
the necessary waiver from the FRC,
which has also been approved.
2022 Audit and non-audit fees
Please refer to note 33 to the consolidated
financial statements for details of the fees
paid to the external Auditor.
Safeguards
Additional safeguards to ensure Auditor
objectivity and independence include:
The process used by the Audit Committee to
assess the effectiveness of risk management
and internal control systems comprises:
– six-monthly reports to the Audit
– reports from the Head of the Internal
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 7.1 of the Statutory Audit Services
for Large Companies Market Investigation
(Mandatory Use of Competitive Tender
Processes and Audit Committee
Responsibilities) Order 2014 (the ‘Order’)
The Company confirms that it has complied
with the Order during the year under review.
Internal control and risk management
Whilst the Board has overall responsibility
for the Group’s system of internal control
including risk management and for
reviewing its effectiveness, responsibility
for the periodic review of the effectiveness
of these controls has been delegated to
the Audit Committee. Notwithstanding
this delegation of authority, the Board
continues to monitor the strategic risks
to which the Company is exposed in the
context of a risk appetite that is under
continuous review. Internal controls are
managed by the use of formal procedures
designed to highlight financial, operational,
environmental and social risks and
provide appropriate information to the
Board enabling it to protect effectively
the Company’s assets and, in turn,
maintain shareholder value.
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.
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 April 2023 meeting, the Audit
Committee reviewed the process
described above and is satisfied that, for
the year under review and the period from
1 January 2023 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 2014.
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.
105 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information CORPOR ATE GOVERNANCE REPORT CONTINUED
NOMINATION COMMITTEE REPORT
2022 saw a refreshing of the composition
of the Board thereby ensuring that we are
well equipped to navigate a successful course
in achieving our strategic goals.’’
Dear Shareholder
I am delighted to report that 2022 saw
the Committee proceed with a number of
matters within its scope of responsibilities,
primarily a refreshing of the Board
composition and succession planning
for the Board and the executive team.
Our search process in late 2021 culminated
in the appointment of Mike Sylvestre who
joined the Board having spent his entire
career working in the mining sector, firstly
with Vale and subsequently with Kinross.
The Board has long sought a member to
contribute to our ability to challenge and
support the Group’s operational efforts
and so we look forward to working with Mike.
A key tool used by the Board in identifying
suitable profiles for potential candidates
is the skills matrix which we are happy
to provide addition detail on in this
year’s report.
We also took the opportunity, during
the year, to review the composition of
our Board committees which has seen,
among other things, Tracey Kerr assume
the Chair of the Sustainability Committee.
Tracey’s extensive experience and
expertise in this area are already
making their mark.
Finally, we have continued to oversee
the Talent Review Plan, the name for our
Executive Succession Plan. This ensures
that the Committee is able to track the
development needs of our management
team as well as of their potential
successors whilst also seeking to progress
with other priorities such as a diverse
pipeline of executive talent.
Eduardo Hochschild
Committee Chair
2022 Meeting attendance
Members
Eduardo Hochschild, Committee Chair
Graham Birch, Non-Executive Director*
Jorge Born, Non-Executive Director
Jill Gardiner, Non-Executive Director
Nicolas Hochschild, Non-Executive Director**
Eileen Kamerick, Non-Executive Director
Tracey Kerr, Non-Executive Director*
Michael Rawlinson, Non-Executive Director
Dionisio Romero Paoletti, Non-Executive Director*
Mike Sylvestre, Non-Executive Director**
Independent
Maximum
possible
attendance
Actual
attendance
No
Yes
Yes
Yes
No
Yes
Yes
Yes
No
Yes
2
1
2
2
1
2
2
2
1
1
2
1
2
2
1
2
2
2
1
1
*
Graham Birch and Dionisio Romero Paoletti stepped down from the Committee on their retirement from
the Board on 26 May 2022.
** Nicolas Hochschild and Mike Sylvestre were appointed members of the Committee on joining the Board
on 26 May 2022.
106 | Hochschild Mining PLC Annual Report & Accounts 2022
Key roles and responsibilities:
– identify and nominate candidates
for Board approval;
Board skills matrix
1
– make recommendations to the Board
Eduardo Hochschild
on composition and balance;
Jorge Born
– 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
The members of the Committee are listed
opposite. Mike Sylvestre and Nicolas
Hochschild were appointed members of
the Committee following their appointments
to the Board on 26 May 2022, and Graham
Birch and Dionisio Romero Paoletti stepped
down from the Committee following their
retirement from the Board on that same date.
The Company Secretary acts as
Secretary to the Committee.
Activity during the year
The principal matters considered
by the Committee are outlined below.
Reporting
– the report of the Committee’s activities
for inclusion in the 2021 Annual Report.
Board/Committee composition
– the recommended appointment of Mike
Sylvestre following the recruitment and
selection process which took place in late
2021 (see ‘Appointments to the Board’
section below for further details).
– the recommended appointment of
Nicolas Hochschild as a Non-Executive
Director nominated by the Company’s
Significant Shareholder in place of
Dionisio Romero Paoletti; and
– various recommended changes to the
compositions of the Remuneration,
Sustainability and Nomination Committees
as a result of, among other things, the
above appointments and the retirements
from the Board at the 2022 AGM.
Succession planning
– Board succession plan
Taking into account the recommended
appointments of Mike Sylvestre and
Nicolas Hochschild, the Committee
considered the Board skills matrix which
maps the extent to which key strategic
skills are represented around the Board
table thereby identifying any skill gaps
that are present or could arise on the
anticipated retirements from the Board
(see image top right on the current skills
matrix for the Board).
4
x
x
5
x
x
x
x
6
x
x
x
x
x
7
x
x
x
x
x
2
x
x
x
3
x
x
x
x
8
9
10
x
x
x
x
x
12
x
11
x
x
x
x
x
Ignacio Bustamante
x
Jill Gardiner
Nicolas Hochschild
Eileen Kamerick
Tracey Kerr
Michael Rawlinson
Mike Sylvestre
x
x
1 – Operational Mining Experience, 2 – Geology, 3 – Experience of operating/overseeing Latam business, 4 – Peruvian
Government relations, 5 – Recent & relevant audit/financial experience, 6 – Corporate Finance, 7 – M&A Experience,
8 – UK corporate governance, 9 – Relations with UK institutional investors, 10 – New Technologies/Innovation,
11 – Experience of ESG/regional socio-political issues, 12 – Nominee of Pelham Investment Corporation
– Executive succession and
development plan
The Committee considered the 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 gender diversity on the
pipeline of talent coming through to
executive management level.
Conflicts of interest
Consideration of any existing or potential
conflicts of interest:
(i) prior to Tracey Kerr’s appointments to
the Boards of Jubilee Metals Group Plc
and The Weir Group PLC; and
(ii) prior to the recommended
appointments of Mike Sylvestre and
Nicolas Hochschild to the Board.
Evaluation
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.
Recruitment process
The recruitment process for Mike Sylvestre
overseen by the Nomination Committee
commenced in H2 2021 supported by
search firm London Search Associates.
The firm provided a long-list of potential
candidates with experience of ESG
matters and/or operational mining.
A short-list was drawn up and a sub-
committee of the Nomination Committee
carried out interviews in 2021 prior
to recommending Mike’s appointment
to the Board to take place during H1 2022.
Other than with respect to the above
recruitment process which resulted in the
appointments of Tracey Kerr and Mike
Sylvestre, 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
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
which will also reflect the Company’s
specific situation including that it is
headquartered in Peru with operating
assets located solely in South America.
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 64 for
further details of the diversity and inclusion
initiatives and the progress made by the
Company over the course of 2022.
107 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information 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 2006.
Share capital
Issued share capital
The Company’s issued share capital
comprises 513,875,563 ordinary shares
of 1 pence each (‘shares’). No shares
were issued during the year ended
31 December 2022.
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 May 2022 for
the repurchase of up to 51,387,556 shares
which represents 10% of the Company’s
issued share capital (‘the 2022 Authority’).
Whilst no purchases have been made by the
Company pursuant to the 2022 Authority, it
is intended that shareholder consent will
be sought on similar terms at this year’s
AGM when the 2022 Authority expires.
Additional share capital information
This section provides additional
information as at 31 December 2022.
(a) Structure of share capital
The Company has a single class of share
capital which is divided into ordinary
shares of 1 pence each, which are in
registered form.
Further information on the Company’s
share capital is provided in note 29 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 0.25% 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 48 hours (excluding
non-working days) before the meeting for
which the proxy is being appointed.
108 | Hochschild Mining PLC Annual Report & Accounts 2022
Substantial shareholdings
The Company has been notified of the interests detailed in the table below in the
Company’s shares in accordance with Chapter 5 of the Financial Conduct Authority’s
Disclosure Guidance and Transparency Rules.
As at 31 December 2021
Eduardo Hochschild1
BlackRock
Number of
ordinary
shares/voting
rights
Percentage of
issued share
capital
Nature of
holding
196,900,306
38.32%
Indirect
Below 5%
Below 5%
–
Majedie Asset Management Limited2
25,384,745
4.94%
Indirect
Van Eck Associates Corporation
15,465,722
3.01%
Direct
1 The shareholding of Mr Eduardo Hochschild is held through Pelham Investment Corporation.
2 The information disclosed is taken from the latest notification received by the Company from Majedie Asset
Management Limited in October 2018.
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; and
– 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) $300 million Credit Agreement
and $200 million Credit Agreement1
(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
1 The $200 million Loan facility, which was signed in Q4
2022, is only available for drawdown once approval has
been granted by the relevant governmental authorities
to the Inmaculada Modified Environmental Impact
Assessment (“MEIA”)
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 30% 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
20 September 2021; 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 50% of the Equity Interests
in the Borrowers. In the case of the $300
million Credit Agreement, the ‘Borrower’ is
Compania Minera Ares S.A.C. (‘Ares’) and,
in the case of the $200 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.
2014 Listing Rules
Following the implementation, in 2014,
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 90 days from the date of
the original vote but it must then be voted
on within a period of 30 days from the
end of the 90-day period. It may then
be passed by a simple majority of the
shareholders of the Company voting
as a single class.
109 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information SUPPLEMENTARY INFORMATION CONTINUED
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 30 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 30% 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 15% 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.
(1)
(2)
(4)
(5)
(6)
(7)
(8)
(9)
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.
Additional disclosures
Disclosure table pursuant to Listing Rule 9.8.4C R
For the purposes of LR 9.8.4C R, the information required to be disclosed by LR 9.8.4 R
can be found in the following parts of this Annual Report:
Section
Matter
Interest capitalised
Location
Note 16 to the
consolidated financial
statements
Publication of unaudited financial information
Not applicable
Details of specified long-term incentive scheme
Waiver of emoluments by a Director
Waiver of future emoluments by a Director
Non pre-emptive issues of equity for cash
Item (7) in relation to major subsidiary undertakings
Parent participation in a placing by a listed subsidiary
None
None
None
None
None
None
(10)(a)
Contract of significance in which a Director is interested
(10)(b)
Contract of significance with controlling shareholder
Directors’ Report (and
the related note 32(c) to
the consolidated
financial statements)
Directors’ Report (and
the related note 32(c) to
the consolidated
financial statements)
(11)
(12)
(13)
(14)
Provision of services by a controlling shareholder
Directors’ Report
Shareholder waivers of dividends
Directors’ Report
Shareholder waivers of future dividends
Directors’ Report
Agreement with controlling shareholder
Directors’ Report
110 | Hochschild Mining PLC Annual Report & Accounts 2022
Group non-financial information statement
The information below is produced to comply with sections 414CA and 414CB of the Companies Act 2006.
The information is incorporated by cross-reference.
Reporting requirement
Relevant policies
Further information
KPIs
Business model
Principal risks
Environmental matters
– Code of Conduct*
– Corporate Sustainability
Policy*
– Corporate Environmental
Policy
Employees
– Code of Conduct*
– Corporate Sustainability
Policy*
– Protocol for the Prevention
of Covid-19
– Corporate Health & Safety
Policy
Social matters
– Corporate Sustainability
Policy*
– Corporate Community
Relations Policy*
Human rights
– Corporate Sustainability
Policy*
– Corporate Human
Rights Policy*
– Diversity & Inclusion Policy*
– Sexual Harassment
Prevention Policy
– Code of Conduct*
– Anti-corruption and
Bribery Policy*
– Whistleblowing Policy*
Anti-corruption and Anti-
bribery matters
* Copies available from http://www.hochschildmining.com/en/responsibility
Business model (page 22)
– Risk Management & Viability
(page 76)
– Audit Committee report
(page 101)
Environment section of the
Sustainability Report (page 57)
The following sections of the
Sustainability Report:
Our People (page 63),
Health & Safety (page 61)
Community Relations section
of the Sustainability Report
(page 54)
Our People section of the
Sustainability Report (page 63)
Audit Committee report
(page 101)
– GHG emissions
– GHG intensity
– ECO Score
– Electricity consumption
– Water consumption
– Waste generation
– % workforce unionised
– Health consultations
– High Potential Events rate
– Fatalities
– Injury Frequency rate
– Accident Severity rate
– Community employment
– Community investment
– Services and goods
provided by suppliers
from communities
– Workforce by gender
111 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information DIRECTORS’ REMUNER ATION REPORT
As can be read more fully in the Sustainability
Report on page 50, we continued with the
implementation of our Safety Culture
Transformation Plan known as ‘Safety 2.0’
and introduced the safety equivalent of
the ECO Score – the Seguscore. This distils
a combination of lagging and leading safety
indicators and therefore provides an
all-encompassing indication of how successful
the Group has been in embedding a
safety-first working culture.
Later in this report we describe how the
Remuneration Committee has considered
the Company’s weak share price performance
in 2022 which has been significantly
impacted by concerns with regards to the
mining sector in general given global levels
of inflation and commodity price volatility,
uncertainty relating to the renewal of the
Inmaculada Modified Environmental
Impact Assessment (‘MEIA’) as well as the
socio-political developments in Peru and
their consequences for mining. Given the
uncertainty relating to the Inmaculada
MEIA, we have we have taken the decision
to defer outcomes calculated from the
2022 annual bonus scorecard until such
time as the Remuneration Committee
determines it to be appropriate. The deferral
will apply fully in respect of the CEO (our
only Executive Director) and, as to 75% for
all other eligible employees. Further, if we
consider it appropriate to do so, for example,
if the Inmaculada MEIA is not obtained
within an acceptable timescale, we will
reduce the calculated amounts to such
levels that reflect both 2022 performance
and the experience of our shareholders
and other stakeholders.
The Committee exercised what it regards
as normal commercial judgement in respect
of Directors’ remuneration throughout
the year (and in all cases in line with the
Company’s Directors’ Remuneration Policy)
including in relation to:
– setting performance metrics for normal
course annual bonuses and LTIPs in the
year; and
– confirming the outcome of performance
metrics for annual bonuses and LTIPs in
the year.
There were no other exercises of
judgement or discretion by the Committee
save as detailed in this report.
Operation of our Remuneration Policy
in 2023
Our intention is to continue to operate our
Remuneration Policy in 2023 in a way that
is closely aligned with how our policy was
applied in 2022.
Our 2023 annual bonus will again operate
using a scorecard that considers operational,
financial, strategic and ESG-related metrics
and that we believe promotes appropriate
balance, having both the capacity to reward
very good in-year performance and a range
of matters that will position the Company
well in the longer term. The safety underpin
introduced last year to the annual bonus
will continue to apply such that in the event
of a fatality during the year, we will operate
a discretionary override to reduce, to nil, the
element of the bonus that relates to safety.
We also intend to make further LTIP awards
using the same LTIP performance conditions
as for 2022 awards, which encompass
relative TSR, growth in measured and
indicated resources and consistent
operational and strategic performance.
During 2023, we will also be reviewing
the operation of our current Directors’
remuneration policy ahead of its anticipated
3-yearly renewal at our 2024 AGM. Within
this review we expect to consider alternatives
to the Consistency performance metric
within our current LTIP performance measures
and also how best to incorporate ESG-
related measures for new LTIP awards
from 2024 onwards.
Format of the report and matters
to be approved at our 2023 AGM
I would like to thank shareholders for their
support at the 2022 AGM for the resolution
to approve the 2021 Directors’ Remuneration
Report which was approved by 96.44% of
shareholders voting.
At the 2023 AGM, shareholders will be
asked to approve the 2022 Directors’
Remuneration Report; this will be the
normal annual advisory vote on the report.
I hope that you find this report to be
informative and that you, our shareholders
remain supportive of our approach to
executive pay at Hochschild and vote
in favour of the resolution.
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
Dear Shareholder
On behalf of the Board, I am pleased to
present the Directors’ Remuneration Report
for the year ending 31 December 2022 which
is split into two sections: this Annual Statement
and the Annual Report on Remuneration.
Pay and performance in 2022
As noted earlier in the Strategic Report
section of our Annual Report, 2022 was
a year of resilient performance against
a very difficult political and social backdrop.
The Remuneration Committee particularly
noted the following positive aspects of the
Company’s performance:
– a robust operational performance
in terms of production and AISC;
– the Amarillo acquisition and subsequent
progress with the construction of the
Mara Rosa mine;
– the focus on health and safety which
resulted in one of our strongest annual
performances as demonstrated by our
accident frequency and severity indices;
– a very encouraging environmental
performance with the ECO Score
illustrating the wide-ranging efforts to
minimising the Group’s footprint; and
– the addition of over 73m silver equivalent
ounces of inferred resources at Pallancata
and San Jose.
We also maintained our focus on wider
employee pay matters by reviewing the
alignment of elements of pay across the
organisation with our strategic objectives.
Our community relations initiatives
focussed in 2022 on education,
connectivity, health and nutrition,
and socio-economic development.
112 | Hochschild Mining PLC Annual Report & Accounts 2022
Annual Report on Remuneration
The following section provides details of how Hochschild’s approved 2021 Directors’ Remuneration Policy was implemented during
the financial year ending 31 December 2022, and how the Remuneration Committee intends to implement the Directors’ Remuneration
Policy in 2023. 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,
Eileen Kamerick (until 1 March 2022) and Tracey Kerr (from 1 March 2022). 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 at www.hochschildmining.com.
Members of senior management attend meetings at the invitation of the Committee. During the year, such members included
the Chairman, 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 four times during the year and attendance was as detailed below:
2022 Meeting attendance
Members
Michael Rawlinson, Non-Executive Director (Chair)
Jill Gardiner, Non-Executive Director
Tracey Kerr, Non-Executive Director
Former Member
Eileen Kamerick, Non-Executive Director
Independent
Yes
Yes
Yes
Yes
Maximum
possible
attendance
Actual
attendance
4
4
3
1
4
4
3
1
The Committee undertook the following items of business:
2021 Remuneration and reporting
– Reviewed and approved incentive outcomes for 2021 (2021 annual bonus and vesting of 2019 LTIP awards) including the
immediate implementation of a safety underpin such that a workplace fatality would result in the nil-vesting of the safety
component of the annual bonus;
– Considered and approved the 2021 Directors’ Remuneration Report;
2022 Remuneration
– Reviewed the CEO’s total remuneration, including salary for 2022 (which remained unchanged from the level set in 2016);
– Considered and approved the CEO’s 2022 objectives;
– Approved the opportunity/award level and performance targets for 2022 annual bonus and LTIP awards;
Policy and keeping informed
– Clarified the operation of the measured and indicated resource addition performance condition in the LTIP
(see page 120 for further information).
– Engaged with major shareholders and the leading proxy advisory services in advance of the 2022 AGM in response to voting
outcomes on the resolution to approve the Directors’ Remuneration Report at our 2021 AGM.
– Considered feedback from shareholders regarding the 2021 Directors’ Remuneration Report and action taken in relation
to 2020 incentive pay outcomes.
– Reviewed potential ESG-related key performance indicators for possible inclusion in the LTIP; and
– Considered market trends in executive remuneration and key themes for 2023.
113 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information DIRECTORS’ REMUNER ATION REPORT CONTINUED
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 2022, 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 2022 was independent and
objective.
FIT was appointed as the independent adviser to the Remuneration Committee following a competitive tender process in 2021.
The fees paid to FIT in respect of work carried out in 2022 were £40,031, 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 2021 Remuneration Policy at the 2021 AGM and of the advisory vote
on the 2021 Annual Report on Remuneration at our 2022 AGM:
For (including discretionary)
Against
Total votes cast (excluding withheld votes)
Votes withheld
2021 Remuneration
Policy
2021 Annual Report
on Remuneration
Total number
of votes
359,539,286
60,498,907
420,038,193
34,381
% of votes cast
85.60%
14.40%
Total number
of votes
384,113,210
14,168,466
398,281,676
108,528
% of votes cast
96.44%
3.56%
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. Commencing in the latter part of 2021 and in early 2022 we undertook an “open
‘engagement’ exercise with our shareholders and with leading proxy agencies in order to better understand their views
on remuneration at Hochschild.
Subsequent to the year-end, 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 2022, this primarily took the form of two roundtable
sessions hosted by Tracey Kerr as the Non-Executive Director designated for workforce engagement (and a member of the
Remuneration Committee), and a workshop to discuss the Group’s brand that reflects its cultural attributes. 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.
114 | Hochschild Mining PLC Annual Report & Accounts 2022
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, the only Executive Director,
for the year ended 31 December 2022 and the prior year:
Base salary1
Taxable benefits2
Total fixed
Single-year variable3
Multi-year variable4
Profit share5
Total variable
Compensation for Time Service (CTS)6
Tax refunds7
Total remuneration
All figures are rounded to the nearest $000
2022
(US$000)
2021
(US$000)
702
29
731
1,075
0
69
1,144
104
7
1,986
700
27
727
989
0
172
1,161
100
7
1,996
Notes for 2022 values:
1
Figures disclosed include certain statutory payments accounted for internally within base salary (‘Statutory Supplements’) including an additional day’s pay for Labour Day
as follows: 2022:$1,900; 2021:$300.
2 Taxable benefits include: company car (2022: $21k; 2021: $21k) and medical insurance.
3 Outcomes for performance during the year under the Annual Bonus Plan. See following sections for further details.
4 2022 Multi-year variable value is nil as the 2020 LTIP did not vest based on performance to 31 December 2022.
5 All-employee profit share mandated by Peruvian law.
6 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 1/24th. For 2022 CTS comprises: CTS on base salary ($58k) and on bonus ($46k) (difference due to rounding). 2021 CTS comprises: CTS on base salary ($58k)
and on bonus ($41k).
7 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 31 December 2022 and the prior year received
by each Non-Executive Director serving during the year:
Eduardo Hochschild1
Jorge Born Jr
Jill Gardiner
Nicolas Hochschild3
Eileen Kamerick
Tracey Kerr
Michael Rawlinson
Mike Sylvestre5
Former Directors
Dr Graham Birch6
Dionisio Romero7
Base fee
(US$000)
Additional fees
(US$000)
Taxable benefits
(US$000)
Total
(US$000)
2022
4002
2021
400
87
87
34
87
87
87
48
38
37
96
96
n/a
96
64
96
n/a
96
96
2022
2021
0
0
10
0
27
202
45
3
8
0
0
0
0
n/a
19
04
38
n/a
19
0
2022
601
2021
776
2022
1,001
2021
1,176
0
0
0
0
0
0
0
0
0
0
0
n/a
0
0
0
n/a
0
0
87
97
34
114
107
132
51
46
37
96
96
n/a
115
64
135
n/a
115
96
All figures are rounded to the nearest $000. 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:
1
Eduardo Hochschild was an Executive Director until 31 December 2014 and, as reported in the 2015 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.
2 Due to payroll processing errors in respect of 2022, overpayments to Eduardo Hochschild (c.US$7k) and Tracey Kerr (c.US$11k) occurred which will be addressed by adjusting
payments in the current financial year. The table reflects the intended amounts paid in respect of 2022.
3 Nicholas Hochschild was appointed to the Board on 26 May 2022.
4 Tracey Kerr was appointed to the Board on 10 December 2021.
5 Mike Sylvestre was appointed to the Board on 26 May 2022.
6 Dr Graham Birch stepped down from the Board on 26 May 2022.
7 Dionisio Romero Paoletti stepped down from the Board on 26 May 2022.
115 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information DIRECTORS’ REMUNER ATION REPORT CONTINUED
Salary and fees for the year ended 31 December 2022
Executive Director
The Committee reviewed the CEO’s salary in 2022 and determined that there would be no increase.
Executive Director
Ignacio Bustamante
Base salary from
1 March 2022 (US$000)
Base salary from
1 March 2021 (US$000)
700
700
% change
–
Base salary above excludes CTS. Ignacio Bustamante’s salary is 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 2022 and 2021 are set out in the table below. All Non-Executive Directors receive a base fee, and
additional fees are paid for acting as Chair of one of the Board Committees and as Senior Independent Director. No changes were
made to the base fees and the Committee Chair and Senior Independent Director fees in 2022. However, as reported in last year’s
report, following a review of fee levels in 2022 which recognised the increasing workload for Non-Executive Directors over a number
of years, committee membership fees for each of the Audit, Sustainability and Remuneration Committees of £5,000 per annum
were introduced from 1 March 2022.
Non-Executive Chairman’s fee
Non-Executive Director base fee
Additional fees
Senior Independent Director
Chair of the Audit Committee
Chair of the Remuneration Committee
Chair of the Sustainability Committee
Committee membership fee
(Audit; Remuneration; Sustainability)
Fee level from
1 March 2022 (US$000)
US$400,000
£70,000
Previous fee level
(US$000)
US$400,000
£70,000
£14,000
£14,000
£14,000
£14,000
£5,000
£14,000
£14,000
£14,000
£14,000
n/a
% change
–
–
–
–
–
–
n/a
Incentive outcomes for the year ended 31 December 2022 (audited)
Annual bonus in respect of 2022 performance
Objectives for the 2022 bonus were set by the Committee at the beginning of the year and assessment of performance during the
year was undertaken at the February 2023 Committee meeting.
Details of the 2022 bonus outcome for the CEO, including the specific performance metrics, weightings and performance against
each of the metrics, are provided in the table below:
Objective
KPI
Profitable production
and financial results
Production (Oz Ag Eq)
Adjusted EBITDA1
Targets
2022 Assessment
Target
weighting
15%
15%
Threshold
Target
Maximum
2021 result
Final bonus
score/
(Maximum)
24.9m
25.6m
26.3m
25.8m 9.64% (15%)
US$258m
US$276m
US$293m
US$281m 9.71% (15%)
AISC from operations with growth2
10% US$20.1/oz
US$19.6/oz
US$19.2/oz
US$18.7/oz
10% (10%)
Brownfield exploration Inferred resources (subject to permits
Strategic advancement
Safety and
environmental
awareness
available) (Oz Ag Eq)
Accident frequency rate (LTIFR)
Accident Severity Index
Social key milestones
ECO Score3
15%
15%
10%
5%
5%
Remco Assessment
Partial Vesting
12% (15%)
40m
3.00
540
50m
2.50
450
60m
2.00
300
73.2m
15% (15%)
1.37
93
10% (10%)
5% (5%)
4% (5%)
Remco Assessment
Partial Vesting
10%
4.55–4.74
4.75–4.99
>= 5.00
5.38
10% (10%)
Bonus payable (as a percentage of maximum opportunity)
85.35%
Notes:
1
Adjusted EBITDA is used for the annual bonus and is determined based on EBITDA adjusted primarily to neutralise price effects and other unbudgeted expenditure or unforeseen
circumstances. Such adjustments in 2022 included (a) costs associated with production lost due to national protests, (b) higher-than-budgeted provision for bonuses and Workers’
Profit Sharing, (c) higher than budgeted costs relating to growth projects such as the construction costs of the Mara Rosa mine, (b) costs relating to the and Snip project, (c), and
(d) unforeseen costs incurred as a result of addressing social unrest
2 All-in sustaining cost is adjusted to ensure comparability with the objective set at the beginning of the year and therefore disregards unbudgeted expenditure including
higher-than-budgeted provision for bonuses and Workers’ Profit Sharing
3 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)
116 | Hochschild Mining PLC Annual Report & Accounts 2022
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 2022 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
The Company’s strong operational performance with production marginally lower than guidance but with costs in line with forecasts
at the beginning of 2022. The Committee felt this to be creditable in the current operating environment particularly relative to
industry peers and despite short-term interruption of operations at Inmaculada during the height of local social unrest.
– Safety
The Company’s safety performance in 2022 was commendable as we achieved our long-term objective of Zero Fatalities and our
accident frequency and severity rates at 1.37 and 93 respectively which both exceeded the maximum performance levels set for
2022 and compare favourably against the historic five-year average as shown below. The Remuneration Committee considered
the fact that the accident frequency rate had increased by c.9% compared to 2021 but took into account the impact of local
social unrest which had resulted in longer shifts and, at times, a shortage of personnel, the increased safety risk profile associated
with both the works at Mara Rosa and the increased use of manual mining methods at Pallancata.
Safety KPI
LTIFR
Accident Severity Index
– ECO Score
5 year average (2017–2021)
1.624
680
The overall ECO Score for the year is 5.27 against a stretch target of 5.0. This internally designed award-winning measure
of environmental management reflects the following:
• our lowest water consumption since 2015 (1.712 l/person/day); and
• the highest level of compliance with the behaviours expected from our environmental culture plan since 2015
(using an internal scoring system).
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, comprising:
Snip Project (British Columbia, Canada)
• the successful completion of the drilling campaign and the Preliminary Economic Assessment.
Mara Rosa mine (Brazil)
• the achievement of several notable milestones including:
– securing the relevant environmental permit in August 2022;
– the completion of earthworks in Q4 2022; and
– the placing of orders for key equipment with long lead-times.
Volcan Project (Chile)
• completion of a project evaluation, identifying the optimal method of production for the deposit; and
• the completion of a Preliminary Economic Assessment in the process of being finalised with a view to evaluating strategic options
for the project
The Remuneration Committee’s consideration of performance against this objective also took into account the delay in the
renewal of the MEIA, although the Company remains confident that the outcome of the process will be positive.
117 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information DIRECTORS’ REMUNER ATION REPORT CONTINUED
– Social key milestones
• Implementation of a programme to improve infrastructure of water for human consumption and irrigation for communities
near Inmaculada and Pallancata;
• The various initiatives to promote diversity in the workforce such as training on identifying workplace sexual harassment
and providing operational experience to the participants of the “Women of Gold” programme; and
• Adoption of a commitment to become Net-Zero by 2050 and participation in programmes promoting climate-change reporting.
The Remuneration Committee’s consideration of performance against this objective also took into account that whilst
the Company’s operations were impacted by social unrest in 2022, relative to other businesses’ operations, the impacts
for Hochschild were well managed and were considered to be reflective of the management’s pro-active approach
towards maintaining constructive relations with our local communities.
The Committee also took into account the experience of the Group’s stakeholders during the year, noting:
– the external contributory factors to the Company’s share price performance in 2022 which included:
• softer investor sentiment on mining in general as a result of concerns on cost inflation and the volatility of commodity prices; and
• the heightened geo-political risk in Peru which, as described in the Risk Management report on page 83, saw increased levels
of social unrest with protestors targeting mining companies which culminated in a national crisis following the impeachment
of President Castillo;
– 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 the communities and other local stakeholders; and
– the continued strong performance in environmental management and number of reporting initiatives undertaken in 2022
reinforcing the Group’s commitment to transparency.
For further details see the Sustainability Report on page 50.
In assessing the appropriate bonus outcome, the Remuneration Committee:
(i) balanced the shareholder experience against the commendable achievements in terms of operating performance, ESG and
strategic advancement which were not reflected in the Company’s share price and all against a backdrop of headwinds from
global economic pressures and the social and political situation in Peru; and
(ii) considered the lapsing, in full, of the 2020 LTIP award.
The Committee accordingly decided that no further adjustment be made to the formulaic outcome of the bonus scorecard.
In conclusion the Committee agreed that the CEO be awarded a bonus of 85.35% of the maximum opportunity, which equates
to c.154% of salary, and the total proportion of variable pay in respect of 2022..
Deferral
Notwithstanding the attainment of the performance metrics detailed above, as described in the Committee Chair’s letter
introducing this report, substantial proportions of the outcomes calculated from the 2022 annual bonus scorecard are being
deferred until such time as the Committee determines it is appropriate to release any amounts. The deferral is to apply fully with
respect to the CEO, and as to 75% of the bonus for the remaining eligible employee population. The Committee will take into
account the overall financial situation of the Company and the timescale for attaining the MEIA in 2023 in making any
determination to release the deferred 2022 annual bonus amounts.
The 2022 annual bonus amounts deferred are initially deferred as cash. The deferred bonus is contingent on continued employment
until the time that such bonus is paid. Once the Remuneration Committee has made a decision to release the bonus, any amount
which the policy requires to be deferred in shares for the CEO will be further deferred in shares.
Recognising the Committee’s obligations under paragraph 37 of the UK Corporate Governance Code, an additional term relating
to the deferral of amounts in respect of the 2022 annual bonus will be that the Committee may withhold some or all of the calculated
amounts if it considers that to be appropriate. In forming such a view, the Committee will consider whether events have occurred
in the period from the commencement of FY2022 until the point of determination of release which have a sufficiently significant
impact on the reputation of the Company (in the Committee’s absolute determination) to justify the withholding of amounts – this
is expected to include consideration of the overall financial situation of the Company and the timescale for attaining the MEIA in 2023.
118 | Hochschild Mining PLC Annual Report & Accounts 2022
2020 LTIP vesting
On 19 February 2020, Ignacio Bustamante was granted an award under the LTIP with a face value of US$1,400,000.
Vesting was dependent on three-year relative TSR performance against both a tailored peer group (70% of the total award)
and the constituents of the FTSE 350 Mining Index (30% of the total award). There was no retesting of performance.
Further details of the performance conditions are shown in the table below.
Performance measure
Relative TSR1 performance vs. tailored peer group2
Weighting
70%
Performance targets
Upper quintile (80th percentile): full vesting
Upper tercile (67th percentile): 75% vesting
Median (50th percentile): 25% vesting
Straight-line vesting between these points
Relative TSR performance vs constituents of the
FTSE 350 Mining Index3
30%
Median TSR +10% p.a.: full vesting
Median TSR: 25% vesting
Straight-line vesting between these points
Notes:
1 TSR is calculated in common currency.
2 The 2020 LTIP peer group, at the time of measurement of the award, comprised: Agnico-Eagle Mines, Alamos Gold, AngloGold Ashanti, Barrick Gold, Centamin Egypt, 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, Pan American Silver, Polymetal, and Silver Standard Resources.
3 As at the start of the performance period.
The Remuneration Committee considered the TSR performance required by the performance conditions and concluded that
the Company’s TSR over the performance period between 1 January 2020 and 31 December 2022 ranked below median for the
tailored peer group and also underperformed the median of the constituents of the FTSE 350 Mining and Precious Metals Index.
Accordingly, the award will lapse in full.
119 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information DIRECTORS’ REMUNER ATION REPORT CONTINUED
Scheme interests awarded in 2022 (audited)
On 23 February 2022, Ignacio Bustamante was granted a cash-settled award under the LTIP with a face value of $1,400,000.
Vesting is dependent on performance conditions measured from 1 January 2022 to 31 December 2024, with 50% of the award
based on TSR performance against a tailored peer group and 50% based on internal KPIs as summarised in the table below.
Awards vest on the third anniversary of the date of grant, subject to continued employment, and are subject to potential malus
if, before vesting, the Committee determines either that (i) the overall underlying business performance of the Company is not
satisfactory, (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 material misstatement, material failure of risk management, action or omission resulting in serious reputational
damage. Due to legal difficulties arising from its enforcement in Peru, the Remuneration Committee is unable to operate clawback
and hence the Group’s malus policy was clarified as referred to above.
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
Ignacio Bustamante
23 February 2022
Performance period
1 January 2022 to 31
December 2024
Performance measure
Weighting
Performance targets
Face value of
award at grant
Award value for
threshold performance
$1,400,000
$350,000
TSR
Relative TSR1 performance
vs. tailored peer group2
50%
Internal KPIs
Measured & Indicated Resources
(M&IR) per share3 – absolute %
growth over three-year
performance period 2022-2024
25%
Consistency Performance
Condition
25%
Upper quintile (80th percentile): full vesting
Upper tercile (67th percentile): 75% vesting
Median (50th percentile): 25% vesting
Straight-line vesting between these points
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 3 years
Average bonus scorecard outcome 2022-2024 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:
1 TSR is calculated on the basis of common currency.
2 The 2022 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, Endeavour Silver Corp, Eldorado Gold Corp, First Majestic Silver Corp, Fortuna Silver Mines, Fresnillo, Gold Fields, Hecla Mining, IAMGOLD, Kinross Gold, Kirkland Lake,
Newmont Mining, OceanaGold Corp, Pan American Silver, Petropavlovsk, Polymetal and SSR Mining.
3 M&IR per share has been clarified to credit additions only in the three-year period to the Company’s M&IR. The additional M&IR will be divided by the Company’s issued share
capital to produce M&IR per share. This clarification to the calculation method, which is also applied to the 2021 LTIP awards, is necessary and considered to be in shareholders’ best
interests; the original description of the metric would have technically deducted extracted resources from added resources. This metric is intended to reward the addition of new
resources that are capable of producing additional returns for shareholders and was not intended to deduct actual extraction in the three-year period..
Exit payments made in the year (audited)
No exit payments were made to Directors in the year.
Payments to past Directors (audited)
No payments were made to past Directors in the year.
Implementation of Remuneration Policy for 2022
A summary of how the 2021 Remuneration Policy will be applied for the year ended 31 December 2023 is provided below.
Salary
The Committee reviewed the CEO’s salary and has determined that it will remain unchanged at $700,000 (excluding CTS).
Annual bonus
The maximum annual bonus opportunity for the CEO for the 2023 financial year will be 180% of salary. The bonus payment will
be subject to performance against broadly the same measures as those used in 2022. Further disclosure of measures and targets,
where not commercially sensitive, will be provided in next year’s Annual Report on Remuneration.
120 | Hochschild Mining PLC Annual Report & Accounts 2022
As in 2021 and 2022, 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, in line with the approach taken with respect to the 2021 and 2022 bonus, 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 150% of salary will be paid in shares and deferred for two years.
LTIP
The Committee will make awards in 2023 at levels up to 200% of base salary. Vesting will be based on the same performance
conditions as those set for the 2021 and 2022 LTIP awards.
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 (50% weighting: same median to upper quintile range as for 2022 awards);
– Measured & Indicated Resources (‘M&IR’) per share (25% weighting: growth over three-year performance period 2023-2025,
reflecting the same absolute growth targets as for 2021 and 2022 awards);
– Consistency Performance Condition (25% weighting: measured as for 2021 and 2022 LTIP awards).
Malus provisions will apply to LTIP awards granted in 2023 in line with the Remuneration Policy.
Non-Executive fees
No changes are proposed for the fees for Non-Executive Directors in 2023.
Annual percentage change in Directors’ remuneration
The tables below show the percentage change in Board Directors’ remuneration between 2020 and 2022 compared with the percentage
change in remuneration for all other employees. As mentioned earlier in the report, the only relevant change in 2022 was the introduction
of fees for Non-Executive Directors on the basis of membership of the board committees (see page 116 for further details).
2022
Executive Directors
Non-Executive Directors
Average all employees4
2021
Executive Directors
Non-Executive Directors
Average all employees7
Ignacio Bustamante
Eduardo Hochschild
Dr Graham Birch4
Jorge Born Jr
Jill Gardiner
Nicolas Hochschild5
Eileen Kamerick
Tracey Kerr6
Michael Rawlinson
Dionisio Romero Paoletti4
Mike Sylvestre5
Ignacio Bustamante
Eduardo Hochschild
Dr Graham Birch8
Jorge Born Jr
Jill Gardiner
Eileen Kamerick
Tracey Kerr
Michael Rawlinson
Dionisio Romero Paoletti
Base salary1/
Non-Executive fees1a
Taxable benefits2
Single-year variable3
% change
0%
0%
-60%
-9.3%
1%
n/a
-1%
1,867%
-2.2%
-61.5%
n/a
7.0%
7.4%
-9.6%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
-1.5%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
14%
Base salary1/
Non-Executive fees1a
Taxable benefits2
Single-year variable3
% change
0%
0%
3.4%
0%
0%
0%
0%
0%
0%
6.2%
–10%
17%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
5.7%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
0.8%
121 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information DIRECTORS’ REMUNER ATION REPORT CONTINUED
2020
Executive Directors
Non-Executive Directors
Average all employees7
Ignacio Bustamante
Eduardo Hochschild
Dr Graham Birch
Jorge Born Jr
Jill Gardiner
Eileen Kamerick
Michael Rawlinson
Dionisio Romero Paoletti
Base salary1/
Non-Executive fees1a
0%
0%
0%
0%
n/a
0%
0%
0%
5.8%
% change
Taxable benefits2
Single-year variable3
4.5%
–5.3%
2%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
3.8%
Notes:
1 Base salary only (i.e. excluding Statutory Supplements – see footnote 1 to table on single figure of total remuneration for Executive Directors on page 115).
1a Note that Non-Executive 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 in 2022 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 1 March 2022. Where ‘0%’ is stated, this means that there was no change in the relevant fee as denominated.
2 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 2 to table on single figure of total remuneration for Executive Directors on page 115).
3 Single-year variable comprises (a) bonus (calculated with reference to base salary only, i.e. before CTS and tax rebates) and (b) 2022 statutory profit-share.
4 Year-on-year % reductions reflect the fact that Dr Graham Birch and Dionisio Romero Paoletti retired from the Board on 26 May 2022.
5 Nicolas Hochschild and Mike Sylvestre were appointed to the Board on 26 May 2022.
6 Year-on-year % increase reflects the fact that Tracey Kerr was appointed to the Board on 10 December 2021.
7 ‘All employees’ comprise full-time salaried employees in Peru.
8 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 1 November 2021.
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 31 December 2021 to the financial year ended 31 December 2022.
Distribution to shareholders (US$000)1
Employee remuneration (US$000)
2022
10,000
2021
22,000
% change
-55%
2022
167,500
2021
161,170
% change
3.9%
Notes:
1 Comprises all cash dividends paid in respect of each year.
The Directors are not recommending the payment of a final dividend for the year ended 31 December 2022.
122 | Hochschild Mining PLC Annual Report & Accounts 2022
Pay for performance
The following graph shows the TSR for the Company compared to the FTSE 350 Precious Metals and Mining Index and FTSE 250
Index, assuming £100 was invested on 31 December 2012. The Board considers that the FTSE 350 Precious Metals and Mining
Index is an appropriate published index as it reflects the sector that Hochschild operates in, and the FTSE 250 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 10 years.
The table below details the CEO’s single figure remuneration and actual variable pay outcomes over the same period.
Historical TSR performance
Growth in the value of a hypothetical £100 holding over the 10 years to 31 December 2022
300
250
200
150
100
50
0
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Hochschild Mining PLC
FTSE250
FTSE 350 Precious Metals and Mining Index
CEO
CEO single figure
of remuneration ($000)
Annual bonus outcome
(% of maximum)
LTI vesting outcome
(% of maximum)
Ignacio
Bustamante
2013
999
2014
924
2015
1,328
2016
3,474
2017
4,519
2018
4,174
2019
3,665
2020
1,933
2021
1,996
2022
1,986
81%
67%
67%
83%
83%
90%
95%
90%
78.5%
85.35%
0%
0%
0%
0%
(ELTIP)
90%
(LTIP)
86%
(ELTIP)
100%
(LTIP)
43%
(ELTIP)
100%
(LTIP)
34%
(ELTIP)
0%
(LTIP)
0%
(LTIP)
0%
(LTIP)
0%
(LTIP)
Notes:
1 Outcomes for performance during the year under the Annual Bonus Plan. See section headed ‘Annual bonus in respect of 2022 Performance’ for further details.
123 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information DIRECTORS’ REMUNER ATION REPORT CONTINUED
Directors’ interests (audited)
The interests of the Directors and their families in the ordinary shares of the Company as at 31 December 2022 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 250% of base salary (the ‘Shareholding Requirement’).
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. The Shareholding Requirement will apply for the first year post-termination with respect to vested LTIP
awards granted from 2021 which will reduce thereafter by 50% with respect to the second year.
Shares held
Owned outright
or vested at 31
Dec 2021 (or date
of appointment
if later)
Owned outright
or vested at 31
Dec 2022 (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?
1,214,115
1,214,115
0
0
0
250%
147%1
No
196,900,306
196,900,306
0
0
02
0
0
0
02
0
0
0
0
0
0
0
33,750
55,169
33,7503
55,1693
Ignacio Bustamante
Eduardo Hochschild
Jorge Born Jr
Jill Gardiner
Nicolas Hochschild
Eileen Kamerick
Tracey Kerr
Michael Rawlinson
Mike Sylvestre
Former Directors
Dr Graham Birch
Dionisio Romero Paoletti
Notes:
1 Using the Company’s closing share price and GBP/USD exchange rate as at 30 December 2022 (being the last trading day of the year) of £0.7025 and £1:$1.21 respectively.
2 As at 26 May 2022, being the date on which Nicolas Hochschild and Mike Sylvestre were appointed to the Board.
3 As at 26 May 2022, being the date on which Dr Graham Birch and Dionisio Romero Paoletti retired from the Board.
There have been no changes to Directors’ shareholdings since 31 December 2022.
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.
Ignacio
Bustamante
2021 LTIP
2022 LTIP
Date
of grant
Share price
at grant
Exercise price
at grant
27.05.21
23.02.22
n/a
n/a
n/a
n/a
Number of
shares
awarded
Face value
at grant1
Performance
period
n/a
n/a
$1.4m
$1.4m
01.01.21 – 31.12.23
01.01.22 – 31.12.24
Vesting
date
27.05.24
23.02.25
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 and retained by Ignacio Bustamante, who was the only Executive Director in office during
2022, in respect of his external directorships.
Name of company
Profuturo AFP
Scotiabank Peru SAA
Signed on behalf of the Board
Michael Rawlinson
Chair of the Remuneration Committee
19 April 2023
Fee received
US$42,000
US$60,000
124 | Hochschild Mining PLC Annual Report & Accounts 2022
Appendix – Directors’ Remuneration Policy (unaudited)
This Appendix sets out the main aspects of the Directors’ Remuneration Policy as approved by the Company’s shareholders at
the 2021 Annual General Meeting (‘AGM’) on 27 May 2021 with the exception of the table on the Non-Executive Directors’ Letters
of Appointment which has been updated to reflect changes in the composition of the Board. This section is provided for information
and does not form part of the Directors’ Remuneration Report which will be voted on by shareholders at the Company’s 2023 AGM.
The full 2021 Directors’ Remuneration Policy can be found in the 2020 Annual Report and Accounts available on the Company’s
website at www.hochschildmining.com
The Policy applies to Directors’ remuneration at the Company for a period of up to three years from the 2021 AGM, unless amended
by the Company’s shareholders at a general meeting.
Introduction to the Policy
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 retains discretion to make non-significant changes to the Policy
without going back to shareholders.
The Committee is satisfied the principles 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
multiple mechanisms through which to expose senior executive pay to inadequate risk management
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.
125 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information DIRECTORS’ REMUNER ATION REPORT CONTINUED
Policy Table
The table below provides a summary of each element of the Remuneration Policy for Executive Directors.
Element: Base salary
Objective and link to strategy: To support recruitment and retention
Operation
Opportunity
Salary is reviewed annually, usually in March, or following
a significant change in responsibilities.
To avoid setting expectations, there is no prescribed
maximum salary.
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.
Executive Directors receive Compensation for Time Services
(‘CTS’) and profit share, both of which are provided for by
Peruvian law, as well as certain allowances which may
include medical insurance, the use of a car and driver,
and personal security.
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 a Director has not
received an increase for a number of years), the Committee has
discretion to make appropriate adjustments to salary levels.
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 1/24th.
For the profit share, an amount equal to 8% 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.
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).
Performance
metrics
None
None
126 | Hochschild Mining PLC Annual Report & Accounts 2022
Element: Annual bonus
Objective and link to strategy: To achieve alignment with the Group’s strategy 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.
The maximum
annual bonus
opportunity is
180% of salary.
Performance is determined by the Committee by reference
to Group financial measures as well as the achievement of
personal/strategic objectives. The personal/strategic objectives
are typically weighted no higher than 30% of maximum.
Bonus payments of up to 150% of salary are delivered in cash;
any bonus earned above 150% of salary is deferred in Hochschild
shares, under the Deferred Bonus Plan, for two years.
Deferred bonus is subject to malus, i.e. forfeiture or reduction,
in circumstances such as material misstatement, reputational
damage, gross misconduct and material breach of an
individual’s employment contract.
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.
For ‘threshold’
and ‘target’ levels
of performance,
the bonus earned
is up to 30% and
50% of maximum,
respectively.
The Committee retains discretion to vary 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 on the occurrence of an adverse
event that is attributable (directly or indirectly) to an act or
failure to act by the executive. Such events include those related
to health and safety, the environment or community relations.
Other trigger events include 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.
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 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 cash, 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
200% of salary
(267% of salary
in exceptional
circumstances
relating to the
recruitment of an
Executive Director).
Threshold
performance will
result in vesting of
25% 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.
In addition to the above elements of remuneration, the Committee may consider it appropriate to grant an award under a different
structure, but within the limits sets out in the Policy Table, in order to facilitate the recruitment of an individual, exercising the
discretion available under Listing Rule 9.4.2R.
Shareholding requirements
Executive Directors are required to acquire and retain a beneficial shareholding in the Company equal to at least 250% of base
salary whilst in employment. Directors’ shareholdings are reviewed to ensure compliance with the requirements. A post-employment
shareholding requirement will apply to equity-based awards granted after the effective date of the 2021 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, with
the required shareholding level reduced to 50% of the in-post shareholding requirement after 12 months.
127 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information DIRECTORS’ REMUNER ATION REPORT CONTINUED
Notes to the Policy Table
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
outperformance of sector peers, and is transparent, visible and motivational to executives.
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 no more or less difficult to satisfy than originally intended. 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, 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. The Committee will also review the
appropriateness of the performance conditions prior to each LTIP grant and reserves the discretion to set different targets for
future awards without consulting with shareholders.
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 CEO. 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 CEO. Opportunities and specific performance conditions vary by organisational level with business area-specific metrics
incorporated where appropriate.
All Peruvian employees participate in the statutory profit share scheme whereby an amount equal to 8% 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.
Selected senior employees participate in the LTIP and are required to invest 50% of the vested cash award (on a tax net basis)
in the Company’s shares and hold these shares for a further two years. These shares will count towards their target shareholding
(expressed as a percentage of salary, which will be set depending on seniority).
128 | Hochschild Mining PLC Annual Report & Accounts 2022
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 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 above-average salary increases 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. 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. 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 9.4.2R, if appropriate, in relation to such buy-out awards.
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.
Service contracts
Executive Director
Ignacio Bustamante
Date of service contract
1 April 2007
Executive Director service contracts, including arrangements for early termination, are carefully considered by the Committee.
Ignacio Bustamante was appointed a Director of the Company with effect from 1 April 2010 and is employed under a contract
of employment with Compañia Minera Ares S.A.C. (Ares) dated 1 April 2007. The contract is subject to Peruvian law and, as such,
has no fixed term and may be terminated (i) by the executive on 30 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 1.5 times the monthly base salary for each year of service completed, up to a maximum of 12 months’
base salary. In addition to these provisions and to reflect Peruvian market practice, the Committee has discretion to award Ignacio
Bustamante up to an additional 12 months’ base salary on termination (other than for the prescribed reasons outlined above).
The prevailing circumstances will be taken into consideration at the time of termination.
129 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information DIRECTORS’ REMUNER ATION REPORT CONTINUED
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 determined 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 serving
during the year 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
Eduardo Hochschild
Jorge Born Jr.
Jill Gardiner
Nicolas Hochschild
Eileen Kamerick
Tracey Kerr
Michael Rawlinson
Mike Sylvestre
Letter of appointment dated
Anticipated expiry of present term of
appointment (subject to annual re-election)
30 January 2015
16 October 2006
17 July 2020
22 February 2022
9 September 2016
4 December 2021
18 December 2015
22 February 2022
1 January 2025
16 October 2024
1 August 2023
9 June 2023*
9 June 2023*
10 December 2024
1 January 2025
27 May 2025
* being the date of the 2023 AGM at the conclusion of which Nicolas Hochschild and Eileen Kamerick will be stepping down from the Board.
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 1 January 2015, 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
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 1 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 as Senior Independent Director.
Fee levels are reviewed by reference to
FTSE-listed companies of similar size and
complexity. Time commitment, level of
involvement required and responsibility are
taken into account when reviewing fee levels.
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 £3 million p.a.
Performance
metrics
None
In recruiting a new Non-Executive Director, the Committee will use the Policy as set out in the table above. A base fee would be
payable for Board membership, with additional fees payable for those acting as Chair of the Company’s Board Committees and
as Senior Independent Director, as appropriate.
130 | Hochschild Mining PLC Annual Report & Accounts 2022
Leaver and change-of-control provisions
The table below summarises how the awards under the annual bonus and LTIP are typically treated in specific circumstances, with
the final treatment remaining subject to the Committee’s discretion. 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
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.
The Committee has discretion to determine whether deferral would be applied.
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.
Any other reason
No bonus is paid.
LTIP
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,
unless the Committee determines otherwise.
Death
Change of control and company/business
sale
Any outstanding awards will be pro-rated for time and performance,
unless the Committee determines otherwise.
Any outstanding awards will be pro-rated for time and performance,
unless the Committee determines otherwise. On a change of control,
Hochschild awards may alternatively be exchanged for new equivalent
awards in the acquirer, where appropriate.
Normal payment
date, although the
Committee has
discretion to
accelerate
On date of event
Not applicable
Normal vesting
date, although the
Committee has
discretion to
accelerate
On date of event
On date of event
Any other reason
Awards lapse.
Not applicable
Deferred Bonus Plan (‘DBP’)
Death, ill health, disability, redundancy,
injury, retirement with agreement of the
Director, or any other reasons the Committee
may determine in its absolute discretion
Change of control and
company/business sale
Any outstanding awards would typically be pro-rated for time.
On date of event
Any outstanding awards would typically be pro-rated for time.
On a change of control, Hochschild awards may alternatively be exchanged for new
quivalent 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.
131 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information 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 8
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 2006.
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.
132 | Hochschild Mining PLC Annual Report & Accounts 2022
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 31 December 2022 and of
the Group’s profit 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 have been properly
prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
– the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
We have audited the financial statements of Hochschild Mining
PLC (the ‘Parent Company’) and its subsidiaries (the ‘Group’)
for the year ended 31 December 2022 which comprise:
Group
Parent Company
Consolidated statement
of financial position as at
31 December 2022
Statement of financial position
as at 31 December 2022
Consolidated income statement
for the year then ended
Statement of changes in equity
for the year then ended
Statement of cash flows for
the year then ended
Related notes 1 to 14 to the
financial statements including
a summary of significant
accounting policies
Consolidated statement
of comprehensive income
for the year then ended
Consolidated statement
of changes in equity for
the year then ended
Consolidated statement
of cash flows for the year
then ended
Related notes 1 to 39 to
the consolidated financial
statements, including a
summary of significant
accounting policies
The financial reporting framework that has been applied in
their preparation is applicable law and UK adopted international
accounting standards.
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
Material uncertainties related to going concern
We draw attention to note 2 in the financial statements, which
highlights the following events and conditions which may cast
significant doubt on the Group and Parent Company’s ability
to continue as going concern:
– The group being able to obtain approval of the modified
Environmental Impact Assessment (‘MEIA’) for Inmaculada
mine as expected by end of May 2023.
– Should the Group be unable to obtain approval of the MEIA
for Inmaculada, the Group being able to successfully restructure
their existing $300 medium-term loan and raise equity from
the shareholders. Specifically, the Group may need to
successfully negotiate extending the principal amortisation
of the loan from the banks and successfully proceed the equity
financing that is affordable for the Group through the going
concern period to 31 May 2024.
As stated in note 2, these events or conditions, along with the
other matters as set forth in note 2, indicate that material
uncertainties exist that may cast significant doubt on the Group
and Parent Company’s ability to continue as a going concern.
Our opinion is not modified in respect of this matter.
133 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information INDEPENDENT AUDITOR’S REPORT CONTINUED
– Performed direct inquiries of the Group’s senior banking
representatives to corroborate management assertions
around the restructuring plan; to understand the approvals
that will be required; and to understand the key risks to the
execution of the restructuring. We challenged the likelihood
that a restructuring could be achieved;
– Considered 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;
– Obtained bank confirmations covering 99.9% of the Group’s
cash and cash equivalents as at 31 December 2022. We also
obtained bank statements to validate the Group’s cash and
cash equivalents as of 31st January 2023 to 31st March 2023.
– With regards to the Parent Company financial statements,
reviewing the letter of support received from Compañía
Minera Ares (‘CMA’) and assessing the ability of CMA to
provide financial support to the Parent Company during the
going concern period, through our test of CMA’s future
cashflows included within the Group’s going concern model.
– Considered whether management’s disclosures in the Annual
Report and Accounts were appropriate, including those in
relation to the material uncertainties in respect of the going
concern conclusion, through consideration of the relevant
disclosure standards and our understanding of the process
of renewal of permit for Inmaculada, securing equity raise
and restructure of existing borrowings.
– We reviewed 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.
Going concern has also been determined to be a key audit matter.
In auditing the financial statements, notwithstanding the
material uncertainties described above, 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:
– Confirmed our understanding of the directors’ going concern
assessment process and the key factors and assumptions that
were considered in their assessment;
– Obtained the director’s going concern assessment, including
cash flow forecast and covenant calculations for the going
concern period which covers 13 months from the audit report
date to 31st May 2024. 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;
– Audited 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;
– Understood the operation of management’s model, checked
the clerical accuracy of management’s modelling, and
recalculated management’s forecasts of their compliance with
borrowing covenants throughout the assessment period under
management’s scenarios.
– Verified 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.
– Checked 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 test;
– Challenged the adequacy of the going concern assessment
period until 31 May 2024, considering whether any events or
conditions foreseeable after the period indicated a longer
review period would be appropriate.
– Performed direct inquiries of the Group’s legal counsel to
understand the status and expected outcome of the
Company’s efforts to obtain the MEIA’s approval and critically
examined the implication on the Group’s ability to continue
as going concern;
– Assessed the directors’ ability to secure equity raise from
shareholders. We:
– Understood the status and expected outcome of the
directors’ efforts to secure the equity raise and critically
examined the implication on the Group’s ability to continue
as a going concern;
– Performed direct inquiries of the Group’s largest shareholder
to corroborate management’s assertions around the equity
raise plan; to understand their commitment; and to understand
the key risks to the execution of the equity raise. We challenged
the likelihood that an equity raise could be achieved
– Assessed the directors’ ability to restructure the Group’s
Borrowings. We engaged our Capital and Debt Advisory
Specialists to support us in this evaluation. We:
– Understood the status and expected outcome of the directors’
efforts to restructure the Group’s Borrowings and critically
examined the implication on the Group’s ability to continue
as a going concern;
134 | Hochschild Mining PLC Annual Report & Accounts 2022
Based on the results of our audit procedures, we consider
management’s going concern assessment process to be
appropriate. We observed that the directors’ going concern
assessment, including cash flow forecasts, assumes the Group
to successfully obtain approval on Inmaculada’s MEIA or
successfully execute the Refinancing Actions, defined as
restructuring of the existing $300m medium term loan and
securing equity financing that is affordable for the Group
through the going concern period to 31 May 2024, in the event
that Inmaculada’s MEIA has been denied. While progress has
been made by the directors in their efforts to renew
Inmaculada’s permit and on the Refinancing Actions, material
uncertainties exist in the eventual outcome of Authorities’
decision on MEIA and Refinancing Actions as described in
note 2 to the financial statements. On the basis of insights we
gained from the market consensus outlook for production and
commodity prices and historic market lows, the likelihood of the
factors identified in the “Remote case” materialising are remote.
However, it is important to recognise that their cash flow
forecasts reflect continuous production of Inmaculada’s mine
and financing cash flows from newly negotiated medium term
committed loan contingent on the outcome of MEIA and Denial
Scenario cash flow forecasts reflects the Refinancing Actions,
which are significant assumptions made by the directors and
the source of material uncertainties.
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; and
– the directors’ identification in the financial statements of the
material uncertainties related to the entity’s ability to continue
as a going concern over a period of 13 months from when the
financial statements are authorised for issue.
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 or Parent Company’s ability to continue as
a going concern.
We draw attention to the viability statement in the Annual
Report on page 84, which indicates that an assumption to the
statement of viability is that the Group successfully obtains
approval on Inmaculada’s MEIA or successfully executes the
Refinancing Actions. The directors consider that the material
uncertainties referred to in respect of going concern may cast
significant doubt over the future viability of the Group and
Parent Company should these events not complete. Our opinion
is not modified in respect of this matter.
Overview of our audit approach
Audit scope
– We performed an audit of the complete financial
information of three components, and audit
procedures on specific balances for a further three
components and for the remaining 13 components
we performed other audit procedures.
– The components where we performed full or specific
audit procedures accounted for 97% of Adjusted
EBITDA, 100% of Revenue and 98% of Total Assets.
Key audit
matters
We identified the following key audit matters 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:
– Recoverability of the carrying value of the Group’s
mining assets and associates
– Accounting for Amarillo Gold acquisition
Although going concern was considered to represent
a key audit matter, detail on our audit procedures and key
observations are summarised in the ‘Material uncertainty
related to going concern’ section of our report as
opposed to the key audit matters table below.
Materiality Overall Group materiality of US$5.1m which represents
2% of the Group’s Adjusted EBITDA.
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 19 reporting components of the Group, we selected six
components covering entities within the UK, Peru Argentina 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 three components (“full scope
components”) which were selected based on their size or risk
characteristics. For the remaining three 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 97% (2021: 99%) of the Group’s
Adjusted EBITDA (on an absolute basis), 100% (2021: 100%) of
the Group’s Revenue and 98% (2021: 98%) of the Group’s Total
Assets. For the current year, the three full scope components
contributed 97% (2021: 99%) of the Group’s Adjusted EBITDA
(on an absolute basis), 100% (2021: 100%) of the Group’s Revenue
and 76% (2021: 76%) of the Group’s Total Assets. The three
specific scope components contributed 22% (2021: 22%) of the
Group’s Total Assets. The audit scope of these specific scope
components may not have included testing of all significant
accounts of the component but will have contributed to the
coverage of significant accounts tested for the Group.
135 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information INDEPENDENT AUDITOR’S REPORT CONTINUED
The remaining 13 components together represent 3% of the
Group’s Adjusted EBITDA (on an absolute basis) (2021: less than
1%), 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.
The charts below illustrate the coverage obtained from the
work performed by our audit teams.
Adjusted EBITDA %
Revenue %
Total assets %
Full scope
components 97%
Other procedures 3%
Full scope
components 100%
Full scope
components 76%
Specific scope
components 22%
Other procedures 2%
Changes from the prior year
Our audit scope remains largely consistent with 2021, with the
only changes being the addition of Amarillo Mineração do Brasil
Ltda as a specific scope entity and the removal of REE UNO SpA
as a specific scope entity, due to demerger of Aclara in
December 2021.
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 three full scope
components, audit procedures were performed on two of these
by component audit teams, and directly by the primary audit
team on the remaining one. For the three 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. 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 their 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 68 to 74 in the Task Force for
Climate related Financial Disclosures (TCFD) report and on
page 83 in the principal risks and uncertainties. All of 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 2 to the Consolidated Financial Statements
and the TCFD report on pages 68 to 74 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 2 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 in response to climate change and have shared their
ambition to achieve net zero emissions by 2050. However, until
this strategy and associated climate-related targets are
established, they are unable to determine the full future
economic impact on their 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.
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.
136 | Hochschild Mining PLC Annual Report & Accounts 2022
Key observations
communicated to the
Audit Committee
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
of c.US$4.2m and c.$9.9m
for Azuca and Aclara
respectively to be
reasonable.
We also deem the reversal
of impairment of $15.1m
in property, plant and
equipment and $0.4 in
evaluation and exploration
assets, in respect of the
Pallancata CGU, to be
appropriate. Furthermore,
we are satisfied that the
carrying values of the
Inmaculada, San Jose, Mara
Rosa, Volcan and Crespo
CGUs do not require
impairment nor reversal
of impairment as at
31 December 2022.
For Inmaculada, based on
the managements’
probability weighted fair
value calculation we deem
there to be no impairment
given that the associated
risk of MEIA denial is below
the ‘break even’ probability
of 25.36%.
We concluded that the
related disclosures in the
Group financial statements,
including the significant
judgement that permits will
be obtained as required, are
appropriate.
Risk
Our response to the risk
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 31 December 2022.
– We challenged the validity of the indicators identified by
management, with a focus on the following key assumptions:
• We compared and assessed management’s prices to analysts’
consensus forecasts for gold and silver as at 31 December 2022.
• We obtained relevant support of management’s position on market
interest rates and other macro-economic factors.
• We reviewed the economic performance of the CGUs during the year,
discussed with management and reviewed the approved mine plans
and/or budgets.
• For exploration projects we obtained 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.
• We obtained relevant support about expected renewal/extension
of mining permits.
– We obtained the recoverable value model from management for
the Group’s CGUs, E&Es and Investment in Associate. We performed
the following procedures:
• We assessed the appropriateness of the methodology applied
in preparing each model.
• We 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.
• We involved our valuation specialists to assist us in challenging
and assessing the appropriateness of the discount rate used in
the calculation.
• 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.
• We reviewed, by reference to the FRC’s guidance,
the appropriateness, sufficiency, and clarity of the
impairment-related disclosures.
– With regards to the delay to the MEIA approval for the
Inmaculada CGU we have performed the following:
• We have assessed management’s models for both the base case
(assuming imminent MEIA approval) and worst case scenario
(assuming MEIA denial and resultant delay to production until 2026).
• We have re-performed managements’ probability weighted fair
value calculation using different cash flow scenarios under the
expected cash flow approach.
• Based on our discussions with the company’s principal lenders,
EY Peru audit partner and Group Legal counsel, we have critically
assessed management’s probability position and sought contra-
evidence to gain comfort overt the reasonability of this risk factor.
The above audit procedures over this risk area, covering 100%
of the amount at risk, were performed by the Group audit team.
Recoverability of the carrying value of the
Group’s mining assets
Refer to the Audit Committee Report;
Accounting policies (page 147); and Notes
16,17 and 18 of the Consolidated Financial
Statements (pages 169 to 173)
At 31 December 2022 the carrying values
of the Group’s mining assets were:
– Property, plant and equipment:
US$926.9m (2021: US$738.1m);
– Evaluation and exploration assets:
US$122.9m (2021: US$123.3m); and
– Intangible assets: US$19.3m
(2021: US$18.1m)
– Investments in associates: US$33.2m
(2021: US$43.6m)
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 whether 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 (projected to
start production in January 2024);
– Advanced exploration projects: Amarillo,
Volcan, Azuca and Crespo; and
– Investment in Associate: Aclara
Given that there is a shortfall in terms of the
Group’s recoverable value compared to the
carrying amount of it’s assets (c.$109mn
variance), we have deemed this to be an
indicator of impairment for the Group’s
entire asset base.
From our enquiries of management, we
also understand that Hochschild is currently
awaiting the approval of the Modified
Environmental Impact Assessment (“MEIA”)
for the Inmaculada mine from the Peruvian
Authorities. We understand that, as at the
time of this report, the approval of the
MEIA is still outstanding.
The Volcan CGU includes an intangible asset
with an indefinite useful life and therefore is
tested for impairment at least annually.
Thus, an impairment test was carried out
for the Group’s assets. Please see section
Key Observations for our findings.
As disclosed in Note 16 to the consolidated
financial statements,
– Indicators of a reversal of impairment
were identified in 2022 with respect to
the Pallancata CGU (totalling $15.6mn),
management estimated the recoverable
amount of the asset and recognised an
impairment reversal of $15.1m in property,
plant and equipment and $0.4 in
evaluation and exploration assets;
– An impairment of $4.2m in evaluation and
exploration assets was recognised in the
Azuca Asset, and;
– An impairment of $9.9m in investment
in associates, Aclara.
The risk relating to recoverability of the
carrying value of mining assets has increased
in comparison to the prior year.
137 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information INDEPENDENT AUDITOR’S REPORT CONTINUED
Risk
Our response to the risk
Accounting for Amarillo Gold acquisition
Our approach consisted of the following procedures:
Refer to the Audit Committee Report;
Accounting policies (page 148); and Note 4
to the Consolidated Financial Statements
(page 161)
On 1 April 2022 the Group acquired all of
the issued and outstanding shares of Amarillo
for USD128.3m.
Accounting for acquisitions under IFRS can
be complex and require 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
acquired; and
whether deferred tax should be provided
on any adjustments.
– We reviewed and challenged management’s assessment of this
acquisition, including the appropriateness of its classification as
an asset acquisition together with the supporting documentation
to ensure that the accounting is in accordance with IFRS and the
Group accounting policies.
– We reviewed the optional concentration test performed by
management to further supports its classification as an asset
acquisition.
– We reviewed and challenged the fair value assigned to the assets
and liabilities acquired in order to ensure they are reasonable. For the
assets and liabilities in which management have deemed the fair
value to be equal to book value, we have agreed the amounts to
supporting schedules for the purpose of our interim review. We have
further challenged whether the judgement that the book values
are equal to the fair value.
– We engaged our tax specialists to review management’s assessment
of the tax implications of the transaction.
– We obtained evidence of the payments made for the acquisition; and
We ensured that the relevant disclosures are in conformity with IFRS.
Key observations
communicated to the
Audit Committee
Based on the procedures
performed, we consider the
judgments and assumptions
made by management to
be reasonable.
Our evaluation of the
classification of the
acquisition and the fair
value of assets and liabilities
was satisfactory.
We concluded that
the accounting for the
acquisition of Amarillo
Gold Corporation to be in
accordance with IFRS, and
that all required disclosures
have been included in the
Consolidated financial
statements.
In the current year, our auditor’s report included a key audit
matter in relation to Accounting for Amarillo Gold acquisition.
The mine rehabilitation provisions was considered to be a Key
Audit Matter in 2021 due to the significant audit effort required
around high level of judgment and estimation in assessing the
method, timing and quantum of the cash flows required to
rehabilitate mines, where a risk that the provision is not appropriately
valued were identified. We consider that the mine rehabilitation
provision is primarily based on the budget approved by the
respective environmental authorities and our main audit procedure
is to compare the approved budget with the provision recorded
as per the books. This issue does not have a significant effect on
the allocation of resources in the audit. Therefore we no longer
consider it in our audit report as a key audit matter.
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 and accounting for Amarillo
Gold acquisition, where there are a number of significant
judgements and estimates involved 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 materiality for the Group to be US$5.1m
(2021: US$7.6m), which is 2% (2021: 2%) of the Group’s Adjusted
EBITDA. 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 US5.4m
(2021: US$11.2m), which is 1% (2021: 1%) 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.
.
Starting basis
Adjustments
Materiality
– Profit from operations before
exceptional items, net of foreign
exchange loss and income tax
(US$38.6m)
– Add: Depreciation and amortisation
in cost of sales and in administrative
expenses (US$138.8m)
– Add: Exploration expenses other than
personnel and other exploration
related fixed expenses (U$46.1m)
– Deduct: Other non-cash expenses
(US$21.87m)
– US$255.4m Adjusted EBITDA
– Materiality of US5.1m
(2% of materiality basis)
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 75% (2021: 75%) of our planning
materiality, namely US$5.1m (2021: US$5.7m). 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.
138 | Hochschild Mining PLC Annual Report & Accounts 2022
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$2.0m to US$3.9m
(2021: US$2.7m to US$5.7m).
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$260k
(2021: US$380k), which is set at 5% 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.
Other information
The other information comprises the information included in the
Annual Report set out on pages 1 to 132, 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 2006
In our opinion, the part of the Directors’ Remuneration report
to be audited has been properly prepared in accordance with
the Companies Act 2006.
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 2006 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.
Whilst drawing attention to the impact of the matters disclosed
in the material uncertainties related to going concern section,
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 90 and Note
2(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 84 and 85;
– 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 page 90 and
Note 2(d) of the Consolidated Financial Statements;
– Directors’ statement on fair, balanced and understandable
set out on page 90;
– Board’s confirmation that it has carried out a robust assessment
of the emerging and principal risks set out on page 105;
– The section of the Annual Report that describes the review
of effectiveness of risk management and internal control
systems set out on page 105; and;
– The section describing the work of the audit committee
set out on pages 101 to 105.
Responsibilities of Directors
As explained more fully in the directors’ responsibilities
statement set out on page 132, 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.
139 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information INDEPENDENT AUDITOR’S REPORT CONTINUED
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.
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 2006, 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 and Argentina).
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.
– In 2021, it was identified that certain dividend distributions
paid by the Company in previous years were not in accordance
with The Companies Act 2006, due to the Company’s lack
of sufficient distributable reserves at the relevant times.
We reviewed the steps that the Company, along with its legal
advisors, had taken to take to remediate the issue. We reviewed
the minutes of the special resolution passed at the Extraordinary
General Meeting of shareholders where the Company
capitalised the Company’s merger reserve by applying its
balance to the issuance of bonus shares. We also reviewed
the High court approval for the cancellation of bonus shares
issued and reduction of share premium and nominal value
of the ordinary shares. In addition, we ensured that related
disclosures in the financial statements were appropriate.
– 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 to understand what areas were susceptible
to fraud. We also considered performance targets and their
propensity to influence management to manage 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 16 October 2006 to
audit the financial statements for the year ending 31 December
2006 and subsequent financial periods. Following a competitive
tender process, we were reappointed as auditor of the Company
for the period ending 31 December 2016 and subsequent
financial periods.
The period of total uninterrupted engagement including
previous renewals and reappointments is 17 years, covering
the years ending 31 December 2006 to 31 December 2022.
– 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 3 of Part 16 of the Companies Act
2006. 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
20 April 2023
140 | Hochschild Mining PLC Annual Report & Accounts 2022
Consolidated income statement
For the year ended 31 December 2022
Revenue
Cost of sales
Gross profit
Administrative expenses
Exploration expenses
Selling expenses
Other income
Other expenses
(Impairment)/reversal of impairment and write-off of
non-current assets, net
Profit/(loss) before net finance income/(cost), foreign
exchange loss and income tax
Share of loss of an associate
Finance income
Finance costs
Foreign exchange loss, net
Profit/(loss) from before income tax
Income tax (expense)/benefit
Profit/(loss) for the year
Attributable to:
Equity shareholders of the Parent
Non-controlling interests
FINANCIAL STATEMENTS
Year ended 31 December 2022
Exceptional
Before
items
exceptional
(note 11)
items
US$000
US$000
Total
US$000
Notes
Year ended 31 December 2021
Exceptional
items
(note 11)
US$000
Before
exceptional
items
US$000
Total
US$000
5
6
7
8
9
12
12
19
13
13
735,643
(527,643)
208,000
(54,158)
(56,826)
(14,032)
3,340
(39,302)
–
–
–
–
–
–
–
–
735,643
811,387
–
811,387
(527,643)
(487,772)
(22,511)
(510,283)
208,000
323,615
(22,511)
301,104
(54,158)
(56,826)
(14,032)
3,340
(51,905)
(39,848)
(15,431)
–
–
–
(51,905)
(39,848)
(15,431)
8,435
37,461
45,896
(39,302)
(44,565)
(1,503)
(46,068)
(1,832)
11,363
9,531
(863)
(24,846)
(25,709)
45,190
11,363
56,553
179,438
(11,399)
168,039
(1,677)
(9,923)
(11,600)
5,211
(21,776)
(2,622)
24,326
(169)
3,946
–
–
–
5,211
(21,776)
(32,061)
(2,622)
(2,424)
–
–
–
–
(169)
3,946
(32,061)
(2,424)
1,440
25,766
148,730
(11,399)
137,331
14
(17,581)
(3,353)
(20,934)
(81,280)
15,055
(66,225)
6,745
(1,913)
4,832
67,450
3,656
71,106
4,874
1,871
6,745
0.01
0.01
(1,913)
–
(1,913)
–
–
2,961
1,871
4,832
0.01
0.01
69,567
7,367
76,934
(2,117)
(3,711)
(5,828)
67,450
3,656
71,106
0.14
0.13
0.01
0.01
0.15
0.14
Basic earnings/(loss) per ordinary share for the year
(expressed in US dollars per share)
Diluted earnings/(loss) per ordinary share for the year
(expressed in US dollars per share)
15
15
Consolidated statement of comprehensive income
For the year ended 31 December 2022
Profit for the year
Other comprehensive income that might be reclassified to profit or loss in subsequent periods, net of tax:
Net (loss)/gain on cash flow hedges
Deferred tax benefit/(charge) on cash flow hedges
Exchange differences on translating foreign operations
Cumulative exchange differences gain transferred to the income statement on disposal of foreign operations
Share of other comprehensive income/(loss) of an associate
Other comprehensive income that will not be reclassified to profit or loss in subsequent periods, net of tax:
Net (loss)/gain on equity instruments at fair value through other comprehensive income (‘OCI’)
Other comprehensive (loss)/income for the year, net of tax
Total comprehensive (loss)/income for the year
Total comprehensive (loss)/income attributable to:
Equity shareholders of the Parent
Non-controlling interests
Year ended 31 December
2021
US$000
2022
US$000
Notes
4,832
71,106
38(a), 38(g)
(16,929)
25,028
30
4
19
20
4,994
(7,383)
(12,739)
(21,282)
–
9,995
1,283
(9)
(23,391)
6,349
(152)
(152)
(23,543)
(18,711)
261
261
6,610
77,716
(20,582)
83,544
1,871
(5,828)
(18,711)
77,716
141 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information FINANCIAL STATEMENTS CONTINUED
Consolidated statement of financial position
As at 31 December 2022
ASSETS
Non-current assets
Property, plant and equipment
Evaluation and exploration assets
Intangible assets
Investment in an associate
Financial assets at fair value through OCI
Financial assets at fair value through profit and loss
Trade and other receivables
Derivative financial assets
Deferred income tax assets
Current assets
Inventories
Trade and other receivables
Derivative financial assets
Income tax receivable
Cash and cash equivalents
Total assets
EQUITY AND LIABILITIES
Capital and reserves attributable to shareholders of the Parent
Equity share capital
Share premium
Other reserves
Retained earnings
Non-controlling interests
Total equity
Non-current liabilities
Trade and other payables
Borrowings
Provisions
Deferred income tax liabilities
Current liabilities
Trade and other payables
Borrowings
Provisions
Income tax payable
Total liabilities
Total equity and liabilities
As at
31 December
2022
US$000
As at
31 December
2021
US$000
Notes
16
17
18
19
20
21
22
38(a)
30
23
22
38(a)
14
24
29
29
25
27
28
30
25
27
28
14
926,913
123,462
19,328
33,242
509
1,015
6,498
–
4,213
738,119
123,304
18,094
43,559
661
3,155
2,470
5,042
484
1,115,180
934,888
61,440
85,408
2,186
9,226
143,844
302,104
49,184
69,749
14,073
32
386,789
519,827
1,417,284
1,454,715
9,061
–
226,506
438,041
(238,800)
(217,657)
886,980
657,241
65,475
722,716
1,623
275,000
123,506
80,045
480,174
248,664
695,554
63,890
759,444
2,815
300,000
116,835
87,228
506,878
144,102
133,482
43,989
24,177
2,126
214,394
694,568
499
32,058
22,354
188,393
695,271
1,417,284
1,454,715
These financial statements were approved by the Board of Directors on 19 April 2023 and signed on its behalf by:
Ignacio Bustamante
Chief Executive Officer
19 April 2023
142 | Hochschild Mining PLC Annual Report & Accounts 2022
Consolidated statement of cash flows
For the year ended 31 December 2022
Cash flows from operating activities
Cash generated from operations
Interest received
Interest paid
Payment of mine closure costs
Income tax, special mining tax and mining royalty paid1
Net cash generated from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Purchase of evaluation and exploration assets
Purchase of intangibles
Purchase of financial assets at fair value through OCI
Purchase of investment in associate
Purchase of financial assets at fair value through profit and loss
Purchase of Argentinian bonds
Proceeds from sale of Argentinian bonds
Proceeds from sale of financial assets at fair value through OCI
Proceeds from sale of financial assets at fair value though profit and loss
Proceeds from sale of property, plant and equipment
Cash and cash equivalent of demerged entity
Net cash used in investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Payment of lease liabilities
Dividends paid to non-controlling interests
Dividends paid
Cash flows (used in)/generated from financing activities
Net (decrease)/increase in cash and cash equivalents during the year
Exchange difference
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
1 Taxes paid have been offset with value added tax (VAT) credits of US$nil (2021: US$3,478,000).
Year ended 31 December
2022
US$000
2021
US$000
Notes
34
144,271
319,588
2,409
(12,962)
(10,409)
(20,391)
102,918
(210,372)
(122,988)
(353)
–
–
–
(10,204)
5,248
–
–
1,089
–
1,938
(5,720)
(9,083)
(22,021)
284,702
(130,965)
(21,398)
(7)
(19,995)
(3,308)
(33,469)
18,133
9
4,726
3,393
(553)
(337,580)
(183,434)
28,911
(11,557)
(1,639)
(286)
(22,017)
(6,588)
105,954
(14,793)
(2,182)
(9,832)
(22,022)
57,125
(241,250)
158,393
(1,695)
386,789
143,844
(3,487)
231,883
386,789
27
28
17
20
21
13
13
20
21
4
27
27
26
31
31
24
143 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information Balance at
1 January 2021
Other
comprehensive
income/
(expense)
Profit for the
year
Total
comprehensive
income/
(expense) for
the year
Sale of financial
assets at fair
value through
OCI
Dividends
In specie
dividends
Dividends to
non-
controlling
interests
Share-based
payments
Forfeiture of
share options
Balance at 31
December 2021
Other
comprehensive
income/
(expense)
Profit for the
year
Total
comprehensive
income/
(expense) for
the year
20
31
31
29(c)
29(c)
Dividends
31
Dividends paid
to non-
controlling
interests
Issuance of
deferred bonus
shares
Cancelation of
deferred bonus
shares
Cancelation of
share premium
account
Nominal value
reduction
–
–
–
–
–
31
29 303,268
29 (303,268)
29
– (438,041)
–
–
–
–
–
–
–
–
–
–
–
29 (217,445)
Share-based
payments
Forfeiture of
share options
29(c)
29(c)
Balance at 31
December 2022
–
–
9,061
FINANCIAL STATEMENTS CONTINUED
Consolidated statement of changes in equity
For the year ended 31 December 2022
Equity
share
capital
US$000
Share
premium
US$000
Notes
Fair value
reserve of
financial
assets at
fair value
through
OCI
US$000
Share of
other com-
prehensive
loss of an
associate
US$000
Cumulative
translation
adjustment
US$000
Unrealised
gain/
(loss) on
hedges
US$000
Share-
based
payment
reserve
US$000
Merger
reserve
US$000
Dividends
expired
US$000
Total
other
reserves
US$000
Retained
earnings
US$000
Capital and
reserves
attributable
to
shareholders
of the Parent
US$000
Non-
controlling
interests
US$000
Total
equity
US$000
Other reserves
226,506 438,041
(205)
–
99
(13,876)
(4,169) (210,046)
2,533 (225,664) 287,652
726,535
79,550 806,085
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
261
–
(9)
–
261
(9)
18
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(11,287)
17,645
–
–
(11,287)
17,645
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6,610
–
6,610
–
6,610
–
76,934
76,934
(5,828)
71,106
6,610
76,934
83,544
(5,828)
77,716
18
(18)
–
–
–
– (22,022)
(22,022)
– (22,022)
– (94,945)
(94,945)
– (94,945)
–
–
(9,832)
(9,832)
–
–
2,442
2,442
2,442
(1,063)
(1,063)
1,063
–
–
–
2,442
–
226,506 438,041
74
(9)
99
(25,163)
13,476 (210,046)
3,912 (217,657) 248,664
695,554
63,890 759,444
(152)
1,283
–
–
(152)
1,283
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(12,739)
(11,935)
–
–
(12,739)
(11,935)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(23,543)
–
(23,543)
– (23,543)
–
2,961
2,961
1,871
4,832
(23,543)
2,961
(20,582)
1,871 (18,711)
–
(22,017)
(22,017)
–
(22,017)
–
–
– (303,268)
– 303,268
– 438,041
– 217,445
–
–
–
–
–
(286)
(286)
–
–
–
–
–
–
–
–
–
–
4,286
–
4,286
4,286
–
4,286
(1,886)
(1,886)
1,886
–
(78)
1,274
99
(37,902)
1,541 (210,046)
6,312 (238,800) 886,980
657,241
65,475 722,716
144 | Hochschild Mining PLC Annual Report & Accounts 2022
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022
1 Corporate information
Hochschild Mining PLC (hereinafter “the Company”) is a public limited company incorporated on 11 April 2006 under the
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 38.32% 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.
The Group’s principal business is the mining, processing and sale of silver and gold. The Group has two operating mines (Pallancata
and Inmaculada) located in southern Peru and one operating mine (San Jose) located in Argentina. The Group also has a portfolio
of projects located across Peru, Argentina, Mexico, 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 19 April 2023.
The Group´s subsidiaries are as follows:
Company
Principal activity
Country of incorporation
Hochschild Mining (Argentina) Corporation S.A.1
Holding company
MH Argentina S.A.2
Exploration office
Argentina
Argentina
Minera Santa Cruz S.A.1 and 10
Production of gold and silver
Argentina
Minera Hochschild Chile S.C.M. 3
Exploration
Andina Minerals Chile SpA (formerly Andina
Minerals Chile Ltd.) 3
Southwest Minerals (Yunnan) Inc. 4
Exploration
Exploration
Chile
Chile
China
Hochschild Mining Holdings Limited5
Holding company
England and Wales
Hochschild Mining Ares (UK) Limited5
Administrative office
England and Wales
Southwest Mining Inc. 4
Southwest Minerals Inc. 4
Minera Hochschild Mexico, S.A. de C.V. 6
Hochschild Mining (Peru) S.A. 4
Compañía Minera Ares S.A.C. 4
Compañía Minera Arcata S.A. 4
Exploration
Exploration
Exploration
Holding company
Production of gold and silver
Production of gold and silver
Empresa de Transmisión Aymaraes S.A.C. 4
Power transmission
Minera Antay S.A.C. 4
Hochschild Mining (US) Inc. 7
Hochschild Mining Canada Corp8
Hochschild Mining Brazil Holdings Corp. (formerly
1334940 BC)8
Tiernan Gold Corp. 8
Exploration
Holding company
Exploration
Holding company
Holding company
Amarillo Mineracao do Brasil Ltda. 9
Exploration
Mauritius
Mauritius
Mexico
Peru
Peru
Peru
Peru
Peru
USA
Canada
Canada
Canada
Brazil
Equity interest at 31 December
2021
%
2022
%
100
100
51
100
100
100
100
100
100
100
100
100
100
99.1
100
100
100
100
100
100
100
100
100
51
100
100
100
100
100
100
100
100
100
100
99.1
100
100
100
100
100
0
0
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 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 2022 and 2021 is as follows:
145 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
1 Corporate information continued
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
As at 31 December
2022
US$000
159,703
99,997
(67,710)
(61,230)
(130,760)
15,473
243,469
(50,967)
652
(4,364)
7,761
3,811
18,085
(47,197)
18,643
2021
US$000
157,629
89,923
(68,667)
(51,354)
(127,531)
25,942
258,972
(52,069)
1,558
(3,196)
(13,550)
(11,891)
62,614
(43,667)
(30,900)
(Loss)/profit attributable to non-controlling interests in the consolidated income statement, non-controlling interest in the consolidated statement of financial position,
and dividends declared to non-controlling interests in the consolidated statement of changes in equity are solely related to Minera Santa Cruz.
2 Significant accounting policies
(a) Basis of preparation
The consolidated financial statements of the Group have
been prepared in accordance with UK adopted International
Accounting Standards.
The basis of preparation and accounting policies used
in preparing the consolidated financial statements for the
years ended 31 December 2022 and 2021 are set out below.
The consolidated financial statements have been prepared
on a historical cost basis except for the revaluation of certain
financial instruments that are measured at fair value at the end
of each reporting period, as explained below. These accounting
policies have been consistently applied, except for the effects
of the adoption of new and amended accounting standard.
The financial statements are presented in US dollars (US$) and
all monetary amounts are rounded to the nearest thousand
($000) 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 31 December 2021.
Other amendments and interpretations apply for the first time
in 2022, 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.
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 1 January
2023 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.
– 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.
146 | Hochschild Mining PLC Annual Report & Accounts 2022
– Recoverable values of mining assets – notes 2(k), 16, 17 and 18
Critical judgements:
– Income tax – notes 2(t), 2(u), 14, 30 and 36(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 30).
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 36(a)). The final resolution of these transactions
may give rise to material adjustments to the income statement
and/or cashflow 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 l awfully 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.
– 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.
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.
The Group uses two approaches to estimate the fair value less
costs of disposal, 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 31 December
2022, the impairment reviews for the Group´s operating assets
were performed using a traditional approach, with the exception
of Inmaculada where the Group used an expected cash flow
approach. To determine the fair value less costs of disposal of
exploration assets the Group uses the value-in-situ methodology.
This methodology applies a realisable ‘enterprise value’ to
unprocessed mineral resources per ounce of resources.
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 28(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
2021, the mine closure law for the province of Santa Cruz in
Argentina was published, establishing a period of 180 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 Argentinean´s new law, subject to further
review once regulation is published.
– Valuation of financial instruments – note 38
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 38).
– Non market performance conditions on LTIP 2021 and
LTIP 2022– note 29(c)
There are two parts to the performance conditions attached
to LTIP awards: 50% is subject to the Company’s TSR ranking
relative to a tailored peer group of mining companies, 50% is
subject to internal KPIs split equally between: (i) 3-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 2021, 2022 and 2023, regarding LTIP 2021, and 2022, 2023
and 2024, regarding LTIP 2022, calculated as the simple mean
of the three scorecard outcomes.
147 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
2 Significant accounting policies continued
– 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-19, 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 berecognised as exceptional expenses, consideration
has been made as to whether they meet the criteria as set
out in the Group´s accounting policy (note 2(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 ceased to be incurred at the end of 2020 or
early 2021, 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 cost up to December 2021.
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 2022 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(b).
In identifying a business combination (note 2(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 1 April 2022
the Group acquired the control of the Amarillo Gold Group
(note 4(b)). 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.
(c) Basis of consolidation
The consolidated financial statements set out the
Group’s financial position, performance and cash flows
as at 31 December 2022 and 31 December 2021 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);
148 | Hochschild Mining PLC Annual Report & Accounts 2022
– 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
The Group’s business activities, its future development and the
factors likely to affect its performance and position are set out
in the 2022 Annual Report’s Strategic Report. The financial position
of the Group, its cash flows, liquidity position and borrowings are
described in the Financial Review on pages 42 to 43 and discussion
of the Group’s viability on the occurrence of certain scenarios is
provided in the Viability Statement in the 2022 Annual Report. In
addition, note 38 to the financial statements includes the Group’s
objectives, policies and processes for managing its capital; its
financial risk management objectives; details of its financial
instruments; and its exposure to credit risk and liquidity risk.
The Directors have also considered any additional risks to
liquidity posed by the polarised political climate in Peru resulting
in a heightened level of risk of social conflict with some local
communities seeking to take advantage of the situation and
increasing their economic demands. As a result, social conflicts
have increased with numerous mining companies facing invasions
at their mine sites and road blockades which have disrupted
operations. The impeachment of President Castillo in December
2022 exacerbated these fragile social conditions with widespread
protests challenging the legitimacy of Dina Boluarte’s appointment.
A key element of the Group’s sustainability strategy is active
engagement with local communities to build sustainable relations
such that the risk of disruption to operating activities is mitigated
and there is continuous production from the Inmaculada and
Pallancata mines based in Peru. Details of specific initiatives
pursued during the year can be found in the 2022 Annual Report’s
Sustainability Report. In the year-to date, there has been no loss
of production as a result of community-led action.
The Directors’ going concern assessment is supported by future
cash flow forecasts. As stated earlier, the Company awaits the
decision from the Peruvian authorities with regards to the modified
Environmental Impact Assessment (‘MEIA’ ) for Inmaculada for
which a decision is expected in H1 2023. The Company is optimistic
that such approval will be forthcoming. On the assumption of the
MEIA being approved, the Directors have reviewed Group liquidity,
including cash resources and borrowings (refer to note 27 on details
of the US$300 million medium-term loan) and related covenant
forecasts to assess whether the Group is able to continue in
operation for the period to 31 May 2024 (the ‘Going Concern
Period’) which is a period of at least 12 months from the date
of these financial statements.
In line with their usual practice, the Directors considered the impact
of a number of potential downside scenarios on the Group’s future
cash flows and liquidity position and debt covenant compliance.
The scenarios were further reviewed under varying precious metal
price assumptions. Within these scenarios, given the current
social climate in Peru, consideration was also given to the
potential impact of operational disruption and cost increases.
149 | Hochschild Mining PLC Annual Report & Accounts 2022
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2 Significant accounting policies continued
More specifically, the scenarios reviewed by the Directors
included a base case (the ‘Base Scenario’), reflecting (among
other things), approval of the MEIA, budgeted production for
2023, life-of-mine plans for Inmaculada, Pallancata and San Jose,
and precious metal prices of $1,714/oz for gold and $20.4/oz for
silver, being the average analysts’ consensus in December 2022
(the ‘Assumed Prices’) for the next 13 months. The forecast
financing cashflows assumed that the newly negotiated US$200
million medium-term committed loan will be available for use,
following approval of the MEIA.
The Directors also considered ‘Downside’ and ‘Remote’ cases
which took into account a combination of circumstances. The
former assumes a four-week suspension of all operations and
community relations-related cost increases. The latter assumes
the cumulative impact of the Downside Case and precious metal
prices which are 10% lower than the Assumed Prices and a 5%
reduction in costs to offset a low-price environment. Those prices
would be significantly below current spot prices. After taking the
financial benefits of the newly negotiated $200m committed loan
into account, all scenarios indicate that the Group has sufficient
liquidity and is covenant compliant for 13 months from the date
of its report.
Whilst the Group remains optimistic that the MEIA approval will
be forthcoming, the decision of the authorities has not yet been
made and so the outcome is uncertain and outside of the Group’s
control. The Directors therefore also considered a MEIA denial
case (the ‘Denial Scenario’), reflecting that production from
Inmaculada will stop at the end of the year until a revised MEIA
is approved. This is not expected to be for more than 3 years.
As the Group’s flagship operation, the suspension of Inmaculada
would have a material impact on revenues leading to insufficient
liquidity to support the Group’s operation. Therefore, as a contingency
measure, the Company has adopted mitigation plans to preserve
cash including reducing administrative costs including through
headcount reductions, hedging a higher proportion of production
from Inmaculada for the remainder of 2023 and from Mara Rosa
in 2024 and deferring capital expenditure.
As part of the Denial Scenario, the Directors have made
2 significant assumptions to optimise cash and in forming an
assessment on the Group’s ability to continue as going concern:
i. A restructuring of the existing $300 million Medium Term Loan
deferring repayments until Inmaculada resumes operations;
and
ii. The successful completion of a $50 million equity financing
with existing shareholders (collectively ‘Refinancing Actions’).
The principal lenders are informed of these measures and
are supportive.
The Directors reviewed the cash flow forecasts and liquidity
position as well as debt covenant compliance after executing
the Refinancing Actions within the Denial Scenario. Consistent
with the Base Scenario, the Directors considered the impact of
a number of potential downside scenarios to the Denial Scenario
on the Group’s future cash flows and liquidity position as well as
debt covenant compliance. The scenarios were further reviewed
under lower precious metal price assumptions. Within these
scenarios, given the current social climate in Peru, consideration
was also given to the potential impact of operational disruption.
The Denial Scenario was also analysed under different sets of
assumptions which included a base case reflecting (among other
things), budgeted production for 2023 adjusted for the suspension
of Inmaculada, life-of-mine plans for Inmaculada, Pallancata and
San Jose, significantly reduced corporate expenses and precious
metal prices at the Assumed Prices for the next 13 months. The
forecast financing cashflows assumed that the Refinancing Actions
would be successfully completed such that the Group would
continue through the going concern period to 31 May 2024.
The Directors also considered ‘Downside’ and ‘Remote’ versions
of the Denial Scenario which modelled the impact of a combination
of circumstances, after taking into account the financial benefits
of the Refinancing Actions. The former assumes a four-week
suspension of all operations and the latter assumes the cumulative
impact of the Downside Case and precious metal prices which
are 10% lower than the Assumed Prices and a 5% reduction in
costs to offset a low-price environment. Those prices would be
significantly below current spot prices. All scenarios indicate that
the Group is covenant compliant and remains liquid for 13 months
from the date of approval of the annual financial statements.
Having held discussions with its major shareholder and
management having held discussions with its lenders, the
Directors have a reasonable expectation that the potential
Refinancing Actions would proceed successfully, although
there can be no certainty of that outcome.
Accordingly, the securing of the MEIA and the Refinancing Actions
under the Denial Scenario each represent a material uncertainty
that may cast significant doubt on the Group’s ability to continue
as a going concern to 31 May 2024.
After consideration of these material uncertainties, and on
the assumption that the Group is able to secure approval of the
Inmaculada MEIA or, where it cannot, the Group is able to
successfully complete the Refinancing Actions, 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.
(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.
150 | Hochschild Mining PLC Annual Report & Accounts 2022
(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:
Buildings
Plant and equipment
Vehicles
Years
3 to 33
5 to 10
5
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$1,000,000 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.
(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 2012 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.
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2 Significant accounting policies continued
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 18(2)).
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.
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 cash-generating unit to which
the asset belongs.
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 Group uses two approaches
to estimate the fair value less costs of disposal, 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 31 December 2022, the impairment reviews for
the Group´s operating assets were performed using a traditional
approach, with the exception of Inmaculada where the Group
used an expected cash flow approach. To determine the fair
value less costs of disposal of exploration assets the Group uses
the value-in-situ methodology. This methodology applies a
realisable ‘enterprise value’ to unprocessed mineral resources
per ounce of resources.
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 2 and level 3
inputs. The FVLCD of the producing and developing stage mine
assets is determined using a discounted cash flow model (note
16) and for the advanced exploration projects is determined
using a discounted cash flow model or a comparative valuation
analysis methodology (notes 17 and 18(2)), to estimate the
amount that would be paid by a willing third party in an arm’s
length transaction.
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.
(k) Impairment of non-financial assets
Assets that have an indefinite useful life are not subject to
amortisation and are tested annually for impairment.
(l) Inventories
Inventories are valued at the lower of cost or net realisable value.
Cost is determined using the weighted average method.
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 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.
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.
152 | Hochschild Mining PLC Annual Report & Accounts 2022
(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.
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 10).
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.
(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 9. 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 2(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 28). 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 8% of
taxable income in each year. This amount is charged to the
income statement within personnel expenses (note 10) 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.
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2 Significant accounting policies continued
(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 15 to 120 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 32)
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.
(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 36).
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 36).
(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.
154 | Hochschild Mining PLC Annual Report & Accounts 2022
(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 36(a) for specific tax contingencies.
(v) Leases
Right-of-use assets (note 26)
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.
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 twelve 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$5,000). 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.
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, 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 (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.
– 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 32 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.
155 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
2 Significant accounting policies continued
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, or
– 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.
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.
Derivative financial instruments and hedge accounting
In 2021, the Group signed silver forward agreements. The silver
forward is being used to hedge the exposure to changes in the
cashflows of the silver commodity prices. Consequently, the
Group has opted to apply hedge accounting under the
requirements of IFRS 9 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.
156 | Hochschild Mining PLC Annual Report & Accounts 2022
– 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.
(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 38(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 categorization (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.
157 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
3 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).
– 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$000
San Jose
US$000
Pallancata
US$000
Exploration
US$000
Other1
US$000
Adjustment
and
eliminations
US$000
Total
US$000
413,899
243,958
78,429
–
–
–
413,899
243,958
78,429
29
(489)
(863)
413,928
243,469
77,566
–
–
–
–
–
680
9,872
736,966
(9,872)
–
10,552
(9,872)
736,966
–
–
(1,323)
10,552
(9,872)
735,643
163,509
31,512
(8,789)
(57,798)
8,323
385
137,142
Year ended 31 December 2022
Revenue from external customers
Inter-segment revenue
Total revenue from customers
Provisional pricing adjustment
Total revenue
Segment profit/(loss)
Others2
Profit from continuing operations before income tax
Other segment information
Depreciation3
Amortisation
(111,376)
25,766
(142,486)
(970)
9,531
339,866
103,804
–
–
–
–
–
– 1,069,703
– 1,173,507
–
243,777
– 1,417,284
(78,553)
(50,243)
(9,046)
(380)
(4,264)
(86)
(724)
–
39
(199)
Reversal of impairment/(impairment) and write-off
of assets, net
(1)
–
15,476
(5,346)
(598)
Assets
Capital expenditure
Current assets
Other non-current assets
Total segment assets
Not reportable assets4
Total assets
78,176
50,112
13,518
196,792
1,268
19,872
62,796
16,965
–
4,171
508,768
159,617
21,345
337,654
42,319
528,640
222,413
38,310
337,654
46,490
–
–
–
–
243,777
528,640
222,413
38,310
337,654
290,267
‘Other’ revenue relates to revenues earned by Empresa de Transmisión Aymaraes S.A.C.
1
2 Comprised of administrative expenses of US$54,158,000, other income of US$3,340,000, other expenses of US$39,302,000, write-off of assets (net) of US$1,832,000, reversal
of impairment of non-current assets net of US$11,363,000, share of losses of an associate of US$11,600,000, finance income of US$5,211,000, finance expense of US$21,776,000,
and foreign exchange loss of US$2,622,000.
3 Includes depreciation capitalised in the Crespo project (US$284,000), San Jose unit (US$2,508,000), Mara Rosa project (US$39,000), products in process (-US$403,000)
and recognised against the mine rehabilitation provision (US$970,000).
4 Not reportable assets are comprised of financial assets at fair value through OCI of US$509,000, financial assets at fair value through profit and loss of US$1,015,000, other
receivables of US$49,542,000, income tax receivable of US$9,226,000, deferred income tax asset of US$4,213,000, investment in associates US$33,242,000, derivative financial
assets of US$2,186,000 and cash and cash equivalents of US$143,844,000.
158 | Hochschild Mining PLC Annual Report & Accounts 2022
Year ended 31 December 2021
Revenue from external customers
Inter-segment revenue
Total revenue from customers
Provisional pricing adjustment
Total revenue
Segment profit/(loss)
Others2
Profit from continuing operations before income tax
Other segment information
Depreciation3
Amortisation
Impairment and write-off of assets, net
Assets
Capital expenditure
Current assets
Other non-current assets
Total segment assets
Not reportable assets4
Total assets
Inmaculada
US$000
San Jose
US$000
Pallancata
US$000
Exploration
US$000
Other1
US$000
Adjustment
and
eliminations
US$000
Total
US$000
452,849
260,879
103,809
–
–
–
452,849
260,879
103,809
(14)
(1,907)
(4,693)
452,835
258,972
99,116
–
–
–
–
–
464
9,225
9,689
–
–
818,001
(9,225)
–
(9,225)
818,001
–
(6,614)
9,689
(9,225)
811,387
226,727
52,614
343
(40,520)
7,345
(684)
245,825
(75,524)
(51,217)
(22,618)
(108)
(326)
(852)
(354)
–
(24,940)
(396)
(107)
–
(5,795)
(51)
(89)
76,512
43,666
14,250
15,896
3,537
20,182
43,473
515,943
157,749
9,072
3,241
–
155,702
536,125
201,222
12,313
155,702
4,230
46,882
51,112
–
–
–
–
498,241
(108,494)
137,331
(155,550)
(1,118)
(25,709)
153,861
76,957
879,517
956,474
498,241
–
–
–
–
–
–
–
536,125
201,222
12,313
155,702
549,353
– 1,454,715
‘Other’ revenue relates to revenues earned by Empresa de Transmisión Aymaraes S.A.C.
1
2 Comprised of administrative expenses of US$51,905,000, other income of US$45,896,000, other expenses of US$46,068,000, write-off of assets (net) of US$863,000, impairment
of non-current assets of US$24,846,000, share of losses of an associate of US$169,000, finance income of US$3,946,000, finance expense of US$32,061,000, and foreign exchange
loss of US$2,424,000.
3 Includes depreciation capitalised in the Crespo project (US$430,000), San Jose unit (US$2,341,000), products in process (US$509,000) and recognised against the mine
rehabilitation provision (US$1,978,000).
4 Not reportable assets are comprised of financial assets at fair value through OCI of US$661,000, financial assets at fair value through profit and loss of US$3,155,000, other
receivables of US$44,446,000, income tax receivable of US$32,000, deferred income tax asset of US$484,000, investment in associates US$43,559,000, derivative financial
assets of US$19,115,000 and cash and cash equivalents of US$386,789,000.
159 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
3 Segment reporting continued
(b) Geographical information
The revenue for the period based on the country in which the customer is located is as follows:
External customer
Switzerland
Canada
South Korea
Germany
Japan
Chile
United Kingdom
Bulgaria
USA
China
Peru
Total
Inter-segment
Peru
Total
Year ended 31 December
2022
US$000
2021
US$000
350,898
143,216
126,321
51,033
14,490
(88)
20,428
27,481
1,167
697
735,643
9,872
745,515
360,838
213,350
135,162
47,014
26,151
13,184
7,982
4,703
–
–
3,003
811,387
9,225
820,612
In the periods set out below, certain customers accounted for greater than 10% of the Group’s total revenues as detailed in the
following table:
Argor Heraus
LS MnM (formerly LS Nikko)
Asahi Refining Canada
MKS Switzerland S.A.
Year ended 31 December 2022
Year ended 31 December 2021
US$000
% Revenue
Segment
US$000
% Revenue
Segment
195,148
126,321
135,563
155,750
Inmaculada
and San Jose
Pallancata
and San Jose
27%
17%
18% Inmaculada
21% Inmaculada
208,037
135,162
198,254
152,801
Inmaculada
and San Jose
Pallancata
and San Jose
Inmaculada
Inmaculada
26%
17%
24%
19%
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:
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
Derivative financial instruments
Total non-current assets
As at 31 December
2022
US$000
668,353
184,811
159,617
56,867
55
2021
US$000
665,839
–
157,750
55,922
6
1,069,703
879,517
509
1,015
33,242
6,498
4,213
–
661
3,155
43,559
2,470
484
5,042
1,115,180
934,888
160 | Hochschild Mining PLC Annual Report & Accounts 2022
4 Acquisitions and disposals
(a) Demerger of Aclara Resources Inc. (‘Aclara’)
Hochschild Mining Holdings Ltd (‘HM Holdings’), a wholly owned subsidary of the Group, had interests over a Chilean company
named REE UNO SpA. This entity holds the project Aclara (formerly named Biolantanidos), which is located in the south of Chile,
and is currently focused on the development of the Penco module, which will aim to produce a rare earth concentrate through
a processing plant that will be fed by clays from nearby deposits.
The Group separated the Aclara project from its other businesses dedicated to the extraction and production of gold and silver.
For this purpose, a new company named Aclara Resources Inc. located in Canada (hereinafter, ‘Aclara’) was incorporated by the
Group. The investment held in REE UNO SpA was then transferred to Aclara.
A distribution of 70,606,502 Aclara Shares, representing 80% of the Aclara Shares, was made to the holders of ordinary shares
of the Group by way of a dividend in specie (the “Demerger Dividend”). The approval of the Group’s shareholders in respect of the
Demerger Dividend was granted at the Extraordinary General Meeting held on 5 November 2021. The Demerger Dividend was
effected on 10 December 2021, shortly before the Aclara Initial Public Offering (‘IPO’) was completed later that day.
Once the Aclara IPO was completed, Aclara became an independent company listed on the Toronto Stock Exchange.
The ratio of Demerged Aclara Shares to the number of ordinary shares in the Group was 70,606,502 to 513,875,563. Therefore,
the shareholders who were entitled to receive the Demerger Dividend received 0.1374 Aclara Shares for each ordinary share in the
Group. The value of the Demerger Dividend was C$120,031,053 (equivalent to US$94,945,000) in aggregate based on the offering
price of C$1.70 per Aclara Share (the Offering Price).
HM Holdings retained 20% of the Aclara Shares. The investment was recorded at initial recognition at fair value, based on the
Offering Price.
The fair value of the Demerger Dividend at the date of the demerger and retained investment is therefore a level 1 fair value measurement.
Immediately following the Demerger Dividend and pursuant to the subscription agreement with Aclara dated 2 December 2021,
HM Holdings purchased 14,870,397 Aclara Shares at the Offering Price for aggregate gross proceeds to Aclara of C$25,279,675
(equivalent to US$19,996,000).
The consolidated effect in the financial statements of the Group as at 31 December 2021 was an exceptional gain of US$37,461,000
presented within other income.
Details of the net gain on demerger of Aclara as at 31 December 2021 are shown below:
Property, plant and equipment
Evaluation and exploration assets
Other non-current assets
Current assets
Current liabilities
Aclara net assets and liabilities demerged1
Net cash and cash equivalents demerged
Net cash outflow from demerger of Aclara
In specie dividends relating to Aclara demerger
Retained financial investments in associate
Net assets demerged
Reclassification of foreign currency translation reserve
Gain on demerger of Aclara
1 Considered in the exploration segment of the Group.
US$000
507
70,311
2,668
1,210
(3,465)
71,231
(553)
(553)
94,945
23,742
(71,231)
(9,995)
37,461
On completion of the demerger, the Group retained an 20% interest in Aclara through the Aclara Resources Inc. investment Company.
An investment in associates of US$23,742,000 was recognised on the Group’s consolidated balance sheet as at 31 December 2021
in respect of this interest.
161 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
4 Acquisitions and disposals continued
(b) Acquisition of Amarillo Gold Group (‘Amarillo’)
On 1 April 2022, the Group acquired a 100% interest in Amarillo Gold Corporation (Amarillo) flagship Mara Rosa (‘Mara Rosa’)
project located in Goiás State, Brazil, which includes the construction stage Posse gold project as well as certain early-stage and
pre resource stage exploration targets. Posse has a positive definitive feasibility study that shows it can be built into a profitable
operation with low costs and a strong financial return. Mara Rosa also shows the potential for discovering additional near-surface
deposits that will extend Posse’s mine life beyond its initial ten years. Considering the significant experience in developing precious
metal deposits in the Americas, the Group is ideally placed to take Posse to its next stage and generate strong sustainable value
for the company and the project’s stakeholders.
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 3, 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$154,429,478 (US$123,420,039), and transaction costs amounted to
US$4,830,000. In addition, a 2 per cent 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 1 April 2022, being the date on which the Group obtained control.
The fair value of assets acquired and liabilities assumed as at 1 April 2022 comprise the following:
Cash and cash equivalents
Other receivables
Intangibles (note 18)
Evaluation and exploration assets (note 17)
Property, plant and equipment (note 16)
Deferred income tax asset
Income tax receivable
Total assets
Accounts payable and other liabilities
Total liabilities
Net assets acquired
Consideration for the acquisition of Amarillo Gold Canada shares
Transaction costs
Total consideration
Cash paid
Less cash acquired with the subsidiary
Net cash flow on acquisition
US$000
4,246
968
21
107,362
15,078
3,775
36
131,486
(3,236)
(3,236)
128,250
123,420
4,830
128,250
128,250
(4,246)
124,004
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 1: Identify assets and liabilities acquired, adjusting them to the Group´s accounting policies and presentation;
Step 2: Determine the purchase consideration; and
Step 3: 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.
162 | Hochschild Mining PLC Annual Report & Accounts 2022
5 Revenue
Year ended 31 December 2022
Revenue from customers
Goods sold
US$000
Gold (from dore bars)
337,847
Silver (from dore bars)
183,381
Shipping
services
US$000
915
696
Total
US$000
338,762
184,077
Provisional
pricing
US$000
Total
US$000
Goods sold
US$000
(11)
338,751
353,258
57
184,134
207,022
Year ended 31 December 2021
Revenue from customers
Shipping
services
US$000
914
804
Total
US$000
354,172
207,826
Provisional
pricing
US$000
40
(52)
Total
US$000
354,212
207,774
Gold (from
concentrates)
Silver (from
concentrates)
Services
Total
89,991
2,687
92,678
(1,628)
91,050
100,233
2,462
102,695
912
103,607
117,534
3,235
120,769
259
121,028
150,140
2,704
152,844
(7,514)
145,330
680
–
680
–
680
464
–
464
–
464
729,433
7,533
736,966
(1,323)
735,643
811,117
6,884
818,001
(6,614)
811,387
6 Cost of sales before exceptional items
Included in cost of sales are:
Depreciation and amortisation in cost of sales1
Personnel expenses (note 10)2
Mining royalty (note 37)
Change in products in process and finished goods
Fixed costs at the operations during stoppages, reduced capacity and excess absenteeism3
Year ended 31 December
2022
US$000
136,427
121,203
6,307
(5,631)
8,023
2021
US$000
145,482
101,682
7,171
320
8,680
1 The depreciation and amortisation in production cost is US$137,747,000 (2021: US$148,842,000).
2 Includes workers profit sharing of US$3,321,000 (2021: US$6,512,000) and excludes personnel expenses of US$4,498,000 (2021: US$7,607,000) included within unallocated fixed cost
at the operations (see below).
3 Corresponds to the unallocated fixed cost accumulated as a result of excess absenteeism and idle capacity. These costs mainly include personnel expenses of US$4,498,000
(2021: US$7,607,000), third party services of US$3,090,000 (2021: US$995,000), supplies of US$146,000 (2021: US$nil), depreciation and amortisation of US$2,000 (2021: US$nil) and
other costs of US$287,000 (2021: US$78,000).
7 Administrative expenses
Personnel expenses (note 10)
Professional fees1
Donations
Lease rentals
Third-party services
Communications
Indirect taxes
Depreciation and amortisation
Depreciation of rights of use
Technology and systems
Security
Other2
Total
Year ended 31 December
2022
US$000
30,478
2021
US$000
29,832
9,206
445
1,218
630
479
2,077
1,844
184
1,391
821
5,385
8,710
587
1,301
302
473
2,057
1,823
226
1,207
956
4,431
54,158
51,905
1
Corresponds to audit fees of US$1,813,000 (2021. US$1,373,000), legal fees of US$1,733,000 (2021: US$2,019,000), tax and advisory fees of US$3,954,000 (2021: US$3,373,000), and other
professional fees of US$1,706,000 (2021: US$1,945,000).
2 Predominantly relates to advertising costs of US$376,000 (2021: US$372,000), insurance fees of US$888,000 (2021: US$837,000), repair and maintenance of US$489,000 (2021:
US$326,000), supplies costs of US$237,000 (2021: US$102,000), tax penalties of -US$660,000 (2021: US$1,476,000), travel expenses of US$822,000 (2021: US$105,000) and personnel
transportation of US$165,000 (2021: US$108,000).
163 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
8 Exploration expenses
Mine site exploration1
Arcata
Ares
Inmaculada
Pallancata
San Jose
Prospects2
Peru
USA
Chile
Canada4
Brazil
Generative3
Peru
USA
Mexico
Brazil
Chile
Personnel (note 10)
Others
Depreciation right-of-use assets
Total
Year ended 31 December
2022
US$000
2021
US$000
877
366
2,946
6,000
7,700
17,889
772
4,337
(77)
19,632
1
24,665
783
97
313
2,301
–
3,494
7,535
3,067
176
2,189
628
3,276
5,993
9,653
21,739
2,677
3,731
(53)
51
–
6,406
3,263
11
861
–
177
4,312
6,368
731
292
56,826
39,848
1 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.
2 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.
3 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.
4 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$26,318,000 in 2022 (2021: US$12,163,000).
9 Selling expenses
Personnel expenses (note 10)
Warehouse services
Taxes1
Other2
Total
Year ended 31 December
2022
US$000
482
1,328
10,344
1,878
14,032
2021
US$000
304
1,392
11,765
1,970
15,431
1 Corresponds to the export duties in Argentina.
2 Mainly corresponds to insurance expenses of US$337,000 (2021: US$309,000), other professional fees of US$460,000 (2021: US$561,000), analysis services of US$516,000
(2021: US$564,000), and consumption of supplies of US$221,000 (US$212,000).
10 Personnel expenses
Salaries and wages
Workers’ profit sharing (note 28)
Other legal contributions
Statutory holiday payments
Long-Term Incentive Plan
Termination benefits
Other1
Total1
1 Mainly includes training expenses of US$1,219,000 (2021: US$1,061,000).
2 Includes exceptional personnel expenses amounting to US$nil (2021: US$2,745,000) (refer to note 11(1)).
164 | Hochschild Mining PLC Annual Report & Accounts 2022
Year ended 31 December
2022
US$000
121,999
4,733
27,866
7,413
3,002
5,468
1,568
2021
US$000
109,769
11,018
23,792
7,237
1,783
6,470
1,101
172,049
161,170
10 Personnel expenses continued
Personnel expenses are distributed as follows:
Cost of sales1
Administrative expenses
Exploration expenses
Selling expenses
Other expenses2
Capitalised as property, plant and equipment
Total
Year ended 31 December
2022
US$000
125,701
30,478
7,535
482
5,802
2,051
2021
US$000
111,613
29,832
6,368
304
11,579
1,474
172,049
161,170
1 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$4,498,000.
Exceptional personnel expenses included in cost of sales amount to US$nil (2021: US$2,324,000).
2 Exceptional personnel expenses included in other expenses amount to US$nil (2021: US$421,000).
The average numbers of employees for 2022 and 2021 were as follows:
Peru
Argentina
Chile
Brazil
Canada
United Kingdom
Total
Year ended 31 December
2022
2,177
1,407
4
88
13
11
2021
2,057
1,478
42
–
–
10
3,700
3,587
11 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.
Cost of sales
Incremental costs due to Covid-19 pandemic1
Total
Other income
Demerger of Aclara (note 4(a))
Total
Other expenses
Incremental costs due to Covid-19 pandemic1
Total
Share of loss on an associate
Impairment of Aclara Resources Inc.2
Total
(Impairment)/impairment reversal of non-financial assets, net
Impairment of non-financial assets3
Reversal of impairment of non-financial assets4
Total
Income tax (charge)/benefit5
Total
Year ended
31 December
2022
US$000
Year ended
31 December
2021
US$000
–
–
–
–
–
–
(9,923)
(9,923)
(4,199)
15,562
11,363
(3,353)
(3,353)
(22,511)
(22,511)
37,461
37,461
(1,503)
(1,503)
–
–
(24,846)
–
(24,846)
15,055
15,055
165 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
11 Exceptional items continued
The exceptional items for the years ended 31 December 2022 and 2021 correspond to:
Third-party services
Personnel expenses (note 10)
Consumption of medical supplies
Cleaning and food services
Depreciation and amortisation
Others
Total
Year ended 31 December
2022
2021
Cost of sales
US$000
Other expenses
US$000
Cost of sales
US$000
Other expenses
US$000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
16,032
2,324
1,327
2,728
37
63
873
421
120
24
29
36
22,511
1,503
These costs were incurred in respect of the implementation of the necessary protocols including incremental third party services mainly related to accommodation whilst
testing all workers for active Covid-19 cases prior to travelling to mine units, medical tests and additional transportation costs to facilitate social distancing.
1
Incremental production costs incurred in the operating mine units to manage the Covid-19 pandemic have been presented within costs of sales and costs incurred by mine
units in care and maintenance and those related to corporate activities have been presented within other expenses:
2 Corresponds to the impairment charge of US$9,923,000 based on the updated valuation of the investment in Aclara Resources Inc. as at 31 December 2022 (refer to note 19).
3 Corresponds to the impairment related to the Azuca project of US$4,199,000 (2021: corresponds to the impairment related to the Pallancata mine Unit of US$24,846,000)
(refer to notes 16 and 17).
4 Reversals of impairment related to the Pallancata mine unit (refer to notes 16 and 17).
5 The current tax credit generated by the incremental costs arising from the Covid-19 pandemic of US$nil (2021: US$7,725,000) and the deferred tax credit generated by the
impairment of the Azuca project of US$1,238,000 (2021: US$nil), net of the deferred tax charge generated by the reversal of the impairment of the Pallancata mine unit of
US$4,591,000 (2021: deferred tax credit of US$7,330,000).
12 Other income and other expenses before exceptional items
Other income
Gain on sale of property, plant and equipment
Logistic services
Income on recovery of expenses
Recovery of provision of obsolescence of supplies (note 23)
Recovery of previously written off account receivable
Other1
Total
Other expenses
Increase in provision for mine closure (note 28(1))
Provision of obsolescence of supplies (note 23)
Care and maintenance expenses of Ares mine unit
Write off of value added tax
Corporate social responsibility contribution in Argentina2
Care and maintenance expenses of Arcata mine unit
Voluntary retirement plan in Argentina3
Damage Inmaculada machine belt
Depreciation right-of-use assets
Contingency4
Other5
Total
Year ended
31 December
2022
Before
exceptional
items
US$000
Year ended
31 December
2021
Before
exceptional
items
US$000
294
218
337
–
546
1,945
3,340
3,342
7
418
2,338
–
2,330
8,435
(17,797)
(22,095)
(422)
(3,291)
(159)
(3,360)
(4,207)
(1,329)
(1,321)
(105)
(3,098)
(4,213)
(39,302)
(559)
(2,903)
(188)
(3,911)
(2,772)
(8,263)
–
(135)
(794)
(2,945)
(44,565)
Mainly corresponds to the gain on sale of supplies of US$480,000 (2021: gain recognised for the Mosquito project of US$400,000).
1
2 Relates to a contribution in Argentina to the Santa Cruz province calculated as a proportion of sales.
3 Related to payments made and the provision recognised under voluntary retirement plan in Minera Santa Cruz.
4 Mainly related to contingencies in Minera Santa Cruz related to new labor lawsuits.
5 Mainly corresponds to the expenses due to concessions of US$nil (2021: US$179,000), loss on sale of supplies of US$nil (2021: US$2,027,000), insurance of Minera Santa Cruz
of US$941,000 (2021: US$nil), termination benefits in Pallancata mine unit of US$987,000 (2021: US$nil).
166 | Hochschild Mining PLC Annual Report & Accounts 2022
13 Finance income and finance costs
Finance income
Interest on deposits and liquidity funds1
Interest on loans to related parties
Interest income
Unwind of discount on mine rehabilitation (note 28)
Other
Total
Finance costs
Interest on secured bank loans (note 27)
Other interest
Interest expense
Fair value loss on interest rate swap reclassified from equity (note 38 (e))
Loss on discount of other receivables2
Loss from changes in the fair value of financial instruments3
Other
Total
Year ended
31 December
2022
US$000
Year ended
31 December
2021
US$000
2,553
–
2,553
1,931
727
5,211
(10,360)
(1,551)
(11,911)
–
(779)
(7,096)
(1,990)
(21,776)
1,815
11
1,826
2,038
82
3,946
(5,951)
(1,332)
(7,283)
(5,521)
(632)
(16,170)
(2,455)
(32,061)
1
Interest on deposits and liquidity funds of US$1,838,000 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.
2 Mainly related to the effect of the discount of tax credits in Argentina and Peru.
3 Represents the fair value change of US$2,140,000 on the C3 Metals Inc shares (note 21) (2021: fair value change of US$834,000 on the AGSC and C3 Metals Inc shares) and
the foreign exchange transaction costs of US$4,956,000 (2021: US$15,336,000) to acquire US$5,248,000 dollars through the sale of bonds in Argentina (2021: US$18,133,000).
14 Income tax expense
Year ended 31 December 2022
Before
exceptional
items
US$000
Exceptional
items
US$000
Total
US$000
Year ended 31 December 2021
Before
exceptional
items
US$000
Exceptional
items
US$000
Total
US$000
Current corporate income tax
Corporate income tax charge
Prior year adjustment in Minera Santa Cruz
Withholding tax
Deferred taxation
Origination and reversal of temporary differences (note 30)
Prior year adjustment in Amarillo
Effect of change in income tax rates1
Corporate income tax
Current mining royalties
Mining royalty charge (note 37)
Special mining tax charge (note 37)
Total current mining royalties
18,253
(2,353)
276
16,176
(5,376)
(664)
–
(6,040)
10,136
4,787
2,658
7,445
–
–
–
18,253
(2,353)
276
53,965
(7,725)
46,240
689
–
689
16,176
54,654
(7,725)
46,929
3,353
(2,023)
26,885
(7,330)
19,555
–
–
(664)
–
(12,501)
–
(12,501)
3,353
3,353
(2,687)
13,489
14,384
69,038
(7,330)
7,054
(15,055)
53,983
–
–
–
4,787
2,658
7,445
6,326
5,916
12,242
–
–
–
6,326
5,916
12,242
Total taxation charge/(credit) in the income statement
17,581
3,353
20,934
81,280
(15,055)
66,225
1
On 16 June 2021, the Argentinian government published the Law 27630 that establishes taxable net income brackets: up to 5Mm pesos is 0%, more than 5Mm up to 50Mm pesos is
30%, and more than 50Mm pesos is 35%. with effect from 1 January 2021. The UK Government increased the rate of Corporation Tax to 25% on profits over £250,000 from April 2023.
There is no impact on the deferred tax calculation of the Group arising from the change in the Corporation Tax in the UK.
The weighted average statutory income tax rate was 39.2% for 2022 and 27.7% for 2021. 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.
There were tax charges in relation to the cash flow hedge losses (2021: gains) recognised in equity during the year ended 31 December
2022 of US$4,994,000 (2021: US$7,383,000).
167 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
14 Income tax expense continued
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 31 December
Profit from operations before income tax
At average statutory income tax rate of 39.2% (2021: 27.7%)
Expenses not deductible for tax purposes
Change in statutory income tax rate
Non-taxable income resulted from Aclara demerger
Deferred tax recognised on special investment regime1
Movement in unrecognised deferred tax2
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 74.5% (2021: 34.1%) before foreign exchange
effect and withholding tax
Special mining tax and mining royalty3
Corporate income tax and mining royalties at average effective income tax rate of 103.4% (2021: 43.0%)
Foreign exchange rate effect4
Corporate income tax and mining royalties at average effective income tax rate of 80.2% (2021: 47.7%)
before withholding tax
Withholding tax
Total taxation charge in the income statement at average effective tax rate 81.2% (2021: 48.2%) from operations
2022
US$000
25,766
10,088
2,239
–
–
(2,412)
14,047
(2,196)
(2,353)
(664)
446
19,195
7,445
26,640
(5,982)
20,658
276
20,934
2021
US$000
137,331
37,996
5,482
12,501
(7,118)
(3,561)
2,922
(3,611)
–
–
2,176
46,787
12,242
59,029
6,507
65,536
689
66,225
1
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.
2 Includes the income tax charge on mine closure provision of US$282,000 (2021: -US$1,325,000), the tax charge related to the Inmaculada mine unit depreciation of US$787,000
(2021: US$1,090,000), and the effect of not recognised tax losses of US$10,811,000 (2021: US$3,157,000).
3 Corresponds to the impact of a mining royalty and special mining tax in Peru (note 37).
4 The foreign exchange effect is composed of US$2,847,000 profit (2021: US$934,000 profit) from Argentina and a profit of US$1,816,000 (2021: US$7,441,000 loss) from Peru and a profit
of US$1,315,000 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 2022 is the devaluation of the Argentinian pesos (2021: Peruvian soles).
The amounts after offset, as presented on the face of the statement of financial position, are as follows:
Current corporate income tax assets1
Current corporate income tax liabilities and mining royalties2
Total
As at 31 December
2022
US$000
9,226
(2,126)
7,100
2021
US$000
32
(22,354)
(22,322)
1
Mainly corresponds to the tax credit of Compañia Minera Ares of US$5,643,000, Minera Santa Cruz of US$3,124,000 and Empresa de Transmisión Aymaraes S.A.C. of US$422,000
(2021: Mainly corresponds to the tax credit of Minera Hochschild Mexico of US$24,000)
2 Mainly corresponds to the mining royalties payables of Compañia Minera Ares of US$2,079,000 (2021: Mainly corresponds to the mining royalties payables of Compañia Minera
Ares of US$2,223,000 and the current corporate income tax liability of Compañia Minera Ares of US$15,634,000, Minera Santa Cruz of US$3,556,000 and Empresa de Transmisión
Aymaraes S.A.C. of US$872,000).
.
15 Basic and diluted earnings per share
Earnings per share (‘EPS’) is calculated by dividing profit for the year attributable to equity shareholders of the Parent by the
weighted average number of ordinary shares issued during the year.
The Company has dilutive potential ordinary shares.
As at 31 December 2022 and 2021, EPS has been calculated as follows:
Basic earnings per share
Before exceptional items (US$)
Exceptional items (US$)
Total for the year (US$)
Diluted earnings per share
Before exceptional items (US$)
Exceptional items (US$)
Total for the year (US$)
168 | Hochschild Mining PLC Annual Report & Accounts 2022
As at 31 December
2022
2021
0.01
–
0.01
0.01
–
0.01
0.14
0.01
0.15
0.13
0.01
0.14
15 Basic and diluted earnings per share continued
Profit before exceptional items and attributable to equity holders of the Parent is derived as follows:
Profit attributable to equity holders of the Parent (US$000)
Exceptional items after tax – attributable to equity holders of the Parent (US$000)
Profit before exceptional items attributable to equity holders of the Parent (US$000)
Profit before exceptional items attributable to equity holders of the Parent for the purpose of diluted earnings
per share (US$000)
The following reflects the share data used in the basic and diluted earnings per share computations:
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)
16 Property, plant and equipment
As at 31 December
2022
2,961
1,913
4,874
4,874
2021
76,934
(7,367)
69,567
69,567
As at 31 December
2022
513,876
8,387
522,263
2021
513,876
5,689
519,565
Mining
properties and
development
costs1
US$000
1 and 4
Land
and
buildings
US$000
Plant and
equipment
US$000
1 and 2 Vehicles5
US$000
Mine
closure
asset
US$000
Construction
in progress
and capital
4 and 7
advances4
US$000
Total
US$000
Year ended 31 December 2022
Cost
At 1 January 2022
Additions
Change in discount rate (note 28(1))
Change in mine closure estimate
(note 28(1))
Disposals
Write-offs8
Acquisition of assets (note 4(b))
Foreign exchange effect
Transfers and other movements3
Initial recognition
At 31 December 2022
Accumulated depreciation
and impairment
At 1 January 2022
Depreciation for the year
Disposals
Write-offs8
Impairment/(reversal of impairment) net
Foreign exchange effect
Transfers and other movements3
At 31 December 2022
Net book amount at 31 December 2022
1,605,319
555,532
635,076
11,997
106,382
11,841
2,926,147
113,127
1,211
19,815
–
–
–
(1,524)
–
3,670
102,615
–
–
–
–
(10)
2,849
(293)
4,493
–
–
–
(1,143)
(9,805)
108
(13)
7,060
–
–
–
–
(198)
–
37
(4)
470
–
–
67,294
201,447
(13,490)
7,554
–
–
–
–
–
–
–
(1)
(122)
12,084
(1,725)
(13,490)
7,554
(1,342)
(11,461)
15,078
1,635
(12,517)
102,121
4,414
–
4,414
1,823,207
563,782
651,098
12,302
104,860
76,854
3,232,103
1,300,392
93,518
–
(376)
(9,942)
–
8
377,712
20,005
421,067
26,053
–
(10)
(262)
–
86
(350)
(9,243)
(3,774)
(10)
(23)
1,383,600
439,607
397,531
166,251
433,720
217,378
6,713
1,760
(197)
–
(838)
–
22
7,460
4,842
80,901
1,150
–
–
(329)
–
–
1,243
2,188,028
–
–
–
–
–
(86)
142,486
(547)
(9,629)
(15,145)
(10)
7
81,722
23,138
1,157
2,305,190
75,697
926,913
1
Within mining properties and development costs and plant and equipment there are US$29,259,000 and US$6,741,000 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.
2 Within plant and equipment, costs of US$394,746,000 are subject to depreciation on a unit of production basis in line with accounting policy on note 2(f) for which the accumulated
depreciation is US$255,508,000 and depreciation charge for the year is US$11,622,000.
3 Transfers and other movements include US$102,119,000 that was transferred from evaluation and exploration assets (Mara Rosa of US$101,897,000 and San José of US$222,000)
(note 17) as they are related to convert resources in to reserves.
4 There were borrowing costs capitalised in property, plant and equipment amounting to US$1,974,000
5 Vehicles include US$2,900,000 of right of use assets (note 26).
6 Recognition of the mine closure provision of the Mara Rosa project located in Brazil.
7 Within construction in progress and capital advances there are capital advances amounting to US$33,466,000, mainly related to Mara Rosa project of US$31,889,000.
8 Corresponds to the write-off of property, plant and equipment as long as they will no longer be used in the Group due to obsolescence.
169 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
16 Property, plant and equipment continued
Mining
properties and
development
costs1
US$000
Land and
buildings
US$000
Plant and
equipment
US$000
1 and 2 Vehicles5
US$000
Mine
closure
asset
US$000
Construction
in progress
and capital
advances4
US$000
and 6
Total
US$000
Year ended 31 December 2021
Cost
At 1 January 2021
Additions
Change in discount rate (note 28(1))
Change in mine closure estimate (note 28(1))
Disposals
Write-offs
Demerger Aclara (note 4)
Foreign exchange effect
1,514,704
530,784
612,620
89,551
735
16,373
–
–
–
–
–
–
–
–
–
–
(201)
(21)
–
–
(1,430)
(7,529)
(432)
(158)
Transfers and other movements3
1,064
24,235
15,632
At 31 December 2021
Accumulated depreciation
and impairment
At 1 January 2021
Depreciation for the year
Disposals
Write-offs
Demerger Aclara (note 4)
Foreign exchange effect
Impairment
Transfers and other movements3
At 31 December 2021
Net book amount at 31 December 2021
1,605,319
555,532
635,076
1,188,404
352,088
396,155
95,308
24,188
–
–
–
–
–
–
–
–
16,643
37
1,300,392
304,927
1,506
(70)
377,712
177,820
29,080
(1,392)
(6,676)
(126)
(126)
4,575
(423)
421,067
214,009
10,654
6,095
–
–
(5,654)
(419)
–
–
1,321
11,997
8,754
2,593
(5,515)
(409)
–
–
1,201
89
6,713
5,284
107,740
33,320
2,809,822
–
19,709
132,463
(2,344)
986
–
–
–
–
–
–
–
–
–
–
–
(41,188)
(2,344)
986
(7,084)
(7,948)
(633)
(179)
1,064
106,382
11,841
2,926,147
75,919
4,381
–
–
–
–
601
–
80,901
25,481
839
2,022,159
–
–
–
–
–
–
404
155,550
(6,907)
(7,085)
(126)
(126)
24,526
37
1,243
2,188,028
10,598
738,119
1
Within mining properties and development costs and plant and equipment there are US$28,947,000 and US$6,742,000 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.
2 Within plant and equipment, costs of US$391,152,000 are subject to depreciation on a unit of production basis in line with accounting policy on note 2(f) for which the accumulated
depreciation is US$248,187,000 and depreciation charge for the year is US$15,377,000.
3 Transfers and other movements include US$1,027,000 that was transferred from evaluation and exploration assets (note 17), as they are related to convert resources in to reserves.
4 There were borrowing costs capitalised in property, plant and equipment amounting to US$37,000.
5 Vehicles include US$3,258,000 of right of use assets (note 26).
6 Within construction in progress and capital advances there are capital advances amounting to US$1,064,000.
The delay on the government decision on Inmaculada MEIA constitutes a trigger for impairment as at 31 December 2022.
The company used an expected cash flow approach, assigning probabilities to the following possible scenarios regarding the
government decision on Inmaculada´s MEIA: (i) MEIA is approved, (ii) MEIA is denied, reapplication is needed and consequently
Inmaculada is placed in care and maintenance by end of 2023, resuming operations in H2 2026. Management considers scenario
(i) as the most likely one, and scenario (ii) to have a probability of less than 25% of occurrence. The valuation test performed over
Inmaculada CGU, using a probability weighted approach, resulted in no impairment. If the probability of occurrence of scenario
(ii) was higher than 25%, an impairment charge would be required for Inmaculada.
The recoverable value of the Inmaculada CGU was determined using a fair value less costs of disposal (FVLCD) methodology.
FVLCD was determined using a combination of level 2 and level 3 inputs, which result in fair value measurements categorised in its
entirety as level 3 in the fair value hierarchy, to construct a discounted cash flow model to estimate the amount that would be paid
by a willing third party in an arm’s length transaction.
Real prices US$ per oz.
Gold
Silver
Discount rate (post-tax)
31 December 2022 (US$000)
Current carrying value of CGU, net of deferred tax
2023
1,716
20.3
2024
1,711
20.7
2025
1,603
19.6
2026
1,545
20.6
2027
1,466
23.3
2028-2038
1,561
20.8
Inmaculada
5.2%
Inmaculada
443,447
170 | Hochschild Mining PLC Annual Report & Accounts 2022
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 cash generating units to exceed its recoverable amount.
A change in any of the key assumptions would have the following impact:
Gold and silver prices (decrease by 10%)
Gold and silver prices (increase by 10%)
Production costs (increase by 10%)
Production costs (decrease by 10%)
Production volume (decrease by 10%)
Production volume (increase by 10%)
Post tax discount rate (increase by 3%)
Post tax discount rate (decrease by 3%)
Capital expenditure (increase by 10%)
Capital expenditure (decrease by 10%)
Inmaculada
San Jose
(175,112)
171,794
(96,669)
94,693
(53,746)
54,557
(49,831)
49,831
(73,298)
(78,936)
73,099
(69,003)
91,717
78,941
(7,749)
8,793
(35,584)
(11,608)
35,582
11,608
As at 31 December 2022, 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 51.2 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 31 December 2021.
The valuation test performed over the Pallancata GCU resulted in a reversal of impairment recognised as at December 31, 2022
of US$15,145,000 in property, plant and equipment, and US$417,000 in evaluation and exploration assets).
The recoverable value of the Pallancata CGU was determined using a fair value less costs of disposal (FVLCD) methodology. FVLCD
was determined using a combination of level 2 and level 3 inputs, which result in fair value measurements categorised in its entirety
as level 3 in the fair value hierarchy, to construct a discounted cash flow model to estimate the amount that would be paid by a
willing third party in an arm’s length transaction.
Real prices US$ per oz.
Gold
Silver
Discount rate (post-tax)
31 December 2022 (US$000)
Current carrying value of CGU, net of deferred tax
2026
1,545
20.6
2027
1,466
23.3
2028
1,561
20.8
Pallancata
5.1%
Pallancata
21,345
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.
2021
As at 31 December 2021, management determined that there was a trigger of impairment in the Pallancata mine unit due to lower
grades production and the need of an increase of capital expenditure to access new low grade areas and extend the life of mine
by one year to 2023.
The impairment test performed over the Pallancata CGU resulted in an impairment charge recognised as at 31 December 2021 amounting
to US$24,846,000 (US$24,526,000 in property, plant and equipment, and US$320,000 in evaluation and exploration assets).
No indicators of impairment or reversal of impairment were identified in the other CGUs, which includes other exploration projects.
The recoverable value of the Pallancata CGU was determined using a fair value less costs of disposal (FVLCD) methodology. FVLCD
was determined using a combination of level 2 and level 3 inputs, which result in fair value measurements categorised in its entirety
as level 3 in the fair value hierarchy, to construct a discounted cash flow model to estimate the amount that would be paid by
a willing third party in an arm’s length transaction.
The key assumptions on which management has based its determination of FVLCD and the associated recoverable
values calculated are gold and silver prices, future capital requirements, production costs, reserves and resources volumes
(reflected in the production volume), and the discount rate.
Real prices US$ per oz.
Gold
Silver
Discount rate (post-tax)
31 December 2021 (US$000)
Current carrying value of CGU, net of deferred tax
2022
1,764
23.5
2023
1,669
22.3
Pallancata
3.3%
Pallancata
3,241
171 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
17 Evaluation and exploration assets
Azuca
US$000
Crespo
US$000
Mara Rosa
US$000
Aclara
(formerly
Biolantanidos)
US$000
Volcan
US$000
Others
US$000
Total
US$000
Cost
Balance at 1 January 2021
Additions
Demerger (note 4(a))
Disposals
Foreign exchange effect
Transfers to property plant and equipment
(note 16)
Balance at 31 December 2021
Additions
Acquisition (note 4b)
Foreign exchange effect
Transfers to property plant and equipment
(note 16)
Transfer to intangibles
83,264
580
28,926
2,421
–
–
–
–
–
–
–
–
83,844
506
31,347
1,086
–
–
–
–
–
–
–
–
Balance at 31 December 2022
84,350
32,433
Accumulated impairment
Balance at 1 January 2021
Impairment
Foreign exchange effect
Transfers to property, plant and
equipment (note 16)
Balance at 31 December 2021
Impairment/(reversal of impairment) net
Foreign exchange effect
Transfers to property, plant and
equipment (note 16)
Balance at 31 December 2022
Net book value as at 31 December 2021
Net book value as at 31 December 2022
45,876
9,878
–
–
–
45,876
4,199
–
50,075
37,968
34,275
–
–
–
9,878
–
–
9,878
21,469
22,555
–
–
–
–
–
–
–
11,733
107,362
(14,492)
(101,897)
(1,927)
779
–
–
–
–
–
–
–
–
–
779
68,804
11,349
(70,311)
(122)
(9,720)
96,520
953
–
–
(16,222)
19,983
6,095
–
–
–
297,497
21,398
(70,311)
(122)
(25,942)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1,064)
(1,064)
81,251
1,607
–
(992)
25,014
694
–
–
221,456
15,626
107,362
(15,484)
–
–
(230)
(102,127)
–
(1,927)
81,866
25,478
224,906
44,381
5,241
105,376
–
(7,507)
–
36,874
–
(482)
36,392
44,377
45,474
320
–
(37)
5,524
(417)
–
(8)
320
(7,507)
(37)
98,152
3,782
(482)
(8)
5,099
20,517
20,379
101,444
123,304
123,462
At 31 December 2022, the Group has recorded an reversal of impairment with respect to evaluation and exploration assets of
the Pallancata mine unit of US$417,000 and an impairment of the Azuca project of US$4,199,000 (2021: impairment with respect
to evaluation and exploration assets of the Pallancata mine unit of US$320,000). The calculation of the recoverable values of the
Pallancata mine unit is detailed in note 16.
There were borrowing costs capitalised in evaluation and exploration assets of US$1,087,000 (2021: US$nil).
172 | Hochschild Mining PLC Annual Report & Accounts 2022
18 Intangible assets
Cost
Balance at 1 January 2021
Foreign exchange effect
Disposals
Balance at 31 December 2021
Foreign exchange effect
Additions
Transfers
Balance at 31 December 2022
Accumulated amortisation and impairment
Balance at 1 January 2021
Amortisation for the year4
Disposals
Foreign exchange effect
Balance at 31 December 2021
Amortisation for the year4
Transfers
Foreign exchange effect
Balance at 31 December 2022
Net book value as at 31 December 2021
Net book value as at 31 December 2022
Transmission
line1
US$000
Water
permits2
US$000
Software
licences
US$000
Legal rights3
US$000
Total
US$000
22,157
–
–
26,583
(4,499)
–
1,906
8,580
–
(17)
–
–
59,226
(4,499)
(17)
22,157
22,084
1,889
8,580
54,710
–
–
–
(289)
–
–
–
353
6
22,157
21,795
2,248
16,708
843
–
–
17,551
719
–
–
18,270
4,606
3,887
12,686
1,890
–
–
(2,147)
10,539
–
–
(137)
10,402
11,545
11,393
8
(17)
–
1,881
164
1
–
2,046
8
202
71
–
1,927
10,578
6,378
267
–
–
6,645
87
–
–
6,732
1,935
3,846
(218)
353
1,933
56,778
37,662
1,118
(17)
(2,147)
36,616
970
1
(137)
37,450
18,094
19,328
1
The transmission line is amortised using the units of production method. At 31 December 2022 the remaining amortisation period is approximately 7 years (2021: 7 years) in line with
the life of the mine.
2 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) (2021: to determine the fair value less
costs of disposal of the Volcan cash-generating unit, which includes the water permits held by the Group, the Group used the value-in-situ methodology. This methodology applies
a realisable ‘enterprise value’ to unprocessed mineral resources which was US$7.15 per gold equivalent ounce of resources at 31 December 2021. The risk adjusted enterprise value
figure has been determined using a combination of level 2 (enterprise values and gold prices) and level 3 inputs (unprocessed mineral resources and risk factor) which result
in a fair value measurement categorised in its entirety as level 3 in the fair value hierarchy, to estimate the amount that would be paid by a willing third party in an arm’s length
transaction, taking into account the water restrictions imposed by the Chilean government).
3 Legal rights correspond to expenditures required to give the Group the right to use a property for the surface exploration work, development and production. At 31 December 2022
the remaining amortisation period is from 2 to 14 years (2021: 1.5 to 11.5 years).
4 The amortisation for the period is included in cost of sales and administrative expenses in the income statement.
The carrying amount of the Volcan CGU, which includes the water permits, is reviewed annually to determine whether it is in excess
of its recoverable amount. No impairments were recognised in 2022 and 2021. The estimated recoverable amount is not materially
different than its carrying value.
Key assumptions value per in-situ
Risk adjusted value per in-situ (gold equivalent ounce) US$
US$000
Current carrying value Volcan CGU
2021
7.15
2021
55,922
2022
56,867
The estimated recoverable amount is not materially different from its carrying value.
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 exceed its recoverable amount.
A change in the value in situ assumption could cause an impairment loss or reversal of impairment to be recognised as follows:
Approximate (impairment)/reversal of impairment resulting from the following changes (US$000)
Value per in-situ ounce (20% decrease)
Value per in-situ ounce (20% increase)
Risk factor (increase by 5%)
Risk factor (decrease by 5%)
2021
(13,661)
13,661
(5,254)
5,254
173 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
19 Investment in an associate
The Group retains a 20.0% 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 10 December 2021, HM Holdings retained 20% of Aclara shares. The investment was
recorded at initial recognition at fair value, based on the IPO’s offering price, and is accounted for using the equity method in the
consolidated financial statements.
The fair value of Aclara shares as at 31 December 2022 amounted to US$7,679,000 (31 December 2021: US$37,080,000).
The following table summarises the financial information of the Group’s investment in Aclara Resources Inc:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Equity
Group’s share in equity (20%)
Fair value adjustment allocated to the evaluation and exploration assets on initial recognition1
Impairment2
Group’s carrying amount of the investment 20%
Summarised consolidated statement of profit and loss
Revenue
Administrative expenses
Exploration expenses
Finance income
Finance cost
Foreign exchange loss
Loss from operations for the period
Loss from operation for the period (2021: from incorporation)
Group’s share of loss for the period
Other comprehensive profit/(loss) 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 period
Total comprehensive profit/(loss) (2021: from incorporation)
Group’s share of comprehensive profit/(loss) for the period
As at
31 December
2022
US$000
As at
31 December
2021
US$000
67,291
90,271
(3,674)
(1)
91,320
68,126
(3,185)
–
153,887
156,261
30,777
12,388
(9,923)
33,242
–
(5,261)
(3,642)
648
(18)
(111)
(8,384)
(8,384)
(1,677)
6,417
6,417
6,417
1,283
31,252
12,307
–
43,559
–
(324)
(510)
–
(17)
(479)
(1,330)
(847)
(169)
(4,526)
(4,526)
(46)
(9)
1
This represents the 20% of the fair value adjustment, estimated by the Group, to Aclara’s exploration and evaluation assets on initial recognition, representing US$61,940,000
(2021:US$61,535,000).
2. This represents the 20% share in the total impairment, estimated by the Group, of Aclara´s exploration and evaluation assets of US$49,615,000 (2021:nil).
The movement of investment in associate is as follows:
Beginning balance
Initial recognition
Impairment
Share of loss for the period
Share of comprehensive profit/(loss) for the period
Ending balance
Year ended 31 December
2022
US$000
43,559
2021
US$000
–
–
43,737
(9,923)
(1,677)
1,283
33,242
–
(169)
(9)
43,559
At the moment of the acquisition of the associate the loss of the period was US$483,000 and the comprehensive loss for the period
was US$4,480,000.
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’ (now planned to be filed by Q2 2023), 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 36, the Group has
performed a valuation on Aclara, and determined an impairment charge of US$9,923,000.
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 2021, forecast
prices, a discount rate of 8.5%, and a 2-year delay in the first production date due to the withdrawal of the application for the EIA.
174 | Hochschild Mining PLC Annual Report & Accounts 2022
Sensitivity analysis
An increase of 1% in the discount rate and a delay of 1 additional year in the first production date would have the following impact
in the Group´s investment in Aclara:
Discount rate (increase by 1%)
Delay in first production date (1 additional year)
US$000
(2,549)
(3,682)
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 31 December 2022, after recognising the changes in the Group’s share of net assets of the
associate and the impairment charge is US$33,242,000 (31 December 2021: US$43,559,000).
No dividends were received from the associate during 2022 and 2021.
The associate had no contingent liabilities or capital commitments as at 31 December 2022 and 31 December 2021.
20 Financial assets at fair value through OCI
Beginning balance
Acquisitions1
Fair value change recorded in OCI
Disposals2
Ending balance
Year ended 31 December
2022
US$000
2021
US$000
661
–
(152)
–
509
402
7
261
(9)
661
1 Corresponds to the purchase of 47,625 shares of Austral Gold (US$7,000).
2 Corresponds to the sale of 51,857 shares of Revelo Resources Corp. with a fair value at the date of sale of US$9,000 generating a loss on disposal of US$18,000 that was recycled
to retained earnings.
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 31 December 2022 and 31 December 2021 is as follows:
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
US$000
2022
2021
6
1
160
342
509
–
509
12
3
312
334
661
–
661
Fair value of the listed shares is determined by reference to published price quotations in an active market and they are categorised
as level 1. The fair value of non-listed equity investments is determined based on financial information available of the companies
and they are categorised as level 3.
21 Financial assets at fair value through profit and loss
Beginning balance
Acquisitions1
Fair value change recorded in profit and loss (note 13(2))
Disposals2
Ending balance
Year ended 31 December
2022
US$000
3,155
–
(2,140)
–
1,015
2021
US$000
5,407
3,308
(834)
(4,726)
3,155
Corresponds to 25,001,540 shares of C3 Metals Inc. received in payment of the sale of the Jasperoide property in Peru.
1
2 During 2021 the Group sold 1,687,401 shares of AGSC, classified as financial assets at fair value through profit and loss, with a fair value at the date of the sale of US$4,726,000,
generating a loss on disposal of US$681,000 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 31 December 2022 and 31 December 2021 is as follows:
Listed equity investments:
C3 Metals Inc.
US$000
2022
2021
1,015
1,015
3,155
3,155
Fair value of the listed shares is determined by reference to published price quotations in an active market and they are
categorised as level 1.
175 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
22 Trade and other receivables
Trade receivables1
Advances to suppliers
Duties recoverable from exports of Minera Santa Cruz2
Receivables from related parties (note 32(a))
Loans to employees
Interest receivable
Receivable from Kaupthing, Singer and Friedlander Bank3
Tax claims
Other4
Assets classified as receivables
Prepaid expenses
Value Added Tax (VAT)5
Total
2022
Non-current
US$000
–
–
224
–
502
–
–
130
1,520
2,376
764
3,358
6,498
As at 31 December
Current
US$000
41,031
2,242
–
774
215
238
–
6,442
11,294
62,236
4,309
18,863
85,408
2021
Non-current
US$000
–
–
184
–
531
–
–
47
1,493
2,255
174
41
2,470
Current
US$000
26,496
5,119
–
224
257
95
3
2,103
5,963
40,260
6,047
23,442
69,749
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$1,333,000 (2021: US$1,277,000).
1
2 Relates to export benefits through the Patagonian Port and silver refunds in Minera Santa Cruz, discounted over 18 months (2021: 18 and 24 months) at a rate of 26.58% (2021: 15.55%)
for dollars denominated amounts and 68.50% (2021: 40.17%) for Argentinian pesos. The loss on the unwinding of the discount is recognised within finance expense (2021: finance expense).
3 Net of a provision for impairment of receivables of US$176,000 (2021: US$197,000).
4 Mainly corresponds to account receivables from contractors for the sale of supplies of US$2,311,000 (2021: US$2,164,000), loan to third parties of US$772,000 (2021: US$790,000),
and claim receivable of US$1,242,000 (2021: US$1,165,000), net of a provision for impairment of receivables of US$1,004,000 (2021: US$947,000).
5 Primarily relates to US$12,672,000 (2021: US$17,053,000) 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$4,875,000 (2021: US$5,570,000), and Amarillo Mineracao
do Brasil of US$3,360,000 (2021: US$nil). The VAT is valued at its recoverable amount.
Movements in the provision for impairment of receivables:
At 1 January 2021
Write-off
Foreign exchange effect
At 31 December 2021
Change for the year
Foreign exchange effect
At 31 December 2022
Individually
impaired
US$000
7,111
(4,476)
(214)
2,421
35
57
(2,513)
As at 31 December 2022 and 2021, none of the financial assets classified as receivables (net of impairment) were past due.
23 Inventories
Finished goods valued at cost
Products in process valued at cost
Products in process accrual
Supplies and spare parts
Provision for obsolescence of supplies
Total
As at 31 December
2022
US$000
446
8,952
7,272
47,358
64,028
(2,588)
61,440
2021
US$000
220
3,547
7,534
41,021
52,322
(3,138)
49,184
Finished goods include concentrate. Products in process include stockpile and concentrate (2021: stockpile).
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 31 December 2022 and 2021 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 (2021: stockpile).
As part of the Group’s short-term financing policies, it acquires pre-shipment loans which are guaranteed by the sales contracts.
176 | Hochschild Mining PLC Annual Report & Accounts 2022
The Group has contracts as at 31 December 2022 of US$2,161,000 (2021: US$nil) (refer to note 27).
The amount of expense recognised in profit and loss related to the consumption of inventory of supplies, spare parts and raw
materials is US$118,520,000 (2021: US$109,191,000).
Movements in the provision for obsolescence comprise an increase in the provision of US$422,000 (2021: US$559,000) and the
reversal of US$nil related to supplies and spare parts, that had been provided for (2021: US$2,338,000).
24 Cash and cash equivalents
Cash in hand
Current demand deposit accounts1
Time deposits2
Cash and cash equivalents considered for the statement of cash flows (note 2(y))
Relates to bank accounts which are freely available and bear interest.
1
2 These deposits have an average maturity of 18 days (2021: average of 18 days).
As at 31 December
2022
US$000
922
53,697
89,225
143,844
2021
US$000
1,065
86,058
299,666
386,789
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$200,000,000 of undrawn medium-term
debt facility that will become available on receipt of the Inmaculada MEIA approval.
25 Trade and other payables
Trade payables1
Salaries and wages payable2
Dividends payable
Taxes and contributions
Guarantee deposits3
Mining royalties (note 37)
Accounts payable to related parties (note 32(a))
Lease liabilities (note 26)
Other4
Total
2022
Non-current
US$000
–
–
–
–
–
–
–
1,239
384
1,623
As at 31 December
Current
US$000
88,817
28,755
32
10,287
8,623
1,211
622
1,637
4,118
2021
Non-current
US$000
–
–
–
1
–
–
–
2,814
–
Current
US$000
78,695
30,850
31
9,607
5,773
1,505
284
1,597
5,140
144,102
2,815
133,482
1 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.
2 Salaries and wages payable relates to remuneration payable. At 31 December 2022, there were Board members remuneration payable of US$72,000 (2021: US$170,000) and no
long-term incentive plan payable (2021: US$nil).
3 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.
4 Mainly due to the accrual of the 6 days of production from 26 to 31 December 2022.
The fair value of trade and other payables approximate their book values.
26 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 twelve 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 16 and the other leases that the
Group has not capitalised:
Depreciation expense for right-of-use assets
Interest expense on lease liabilities
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
As at 31 December
2022
US$000
(1,112)
(104)
(1,679)
(1,355)
(7,643)
(11,893)
2021
US$000
(1,969)
(42)
(2,751)
(1,031)
(5,643)
(11,436)
The Group had total cash outflows for leases of US$12,316,000 in 2022 (2021: US$11,606,000). There were additions to right-of-use
assets and lease liabilities during the year of US$nil (2021: US$6,046,000). The future cash outflows relating to leases that have not
yet commenced are US$2,950,000 (2021: US$ US$4,587,000).
177 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
26 Leases continued
The movement in IFRS 16 lease liabilities in the year is as follows:
Lease liabilities
Less: current balance
Non-current balance
27 Borrowings
As at
1 January
2022
US$000
4,411
(1,597)
2,814
Additions
US$000
Repayments
US$000
Interest expense
US$000
–
(1,639)
104
As at
31 December
2022
US$000
2,876
(1,637)
1,239
As at 31 December
2022
2021
Effective
interest rate
Non-current
US$000
Current
US$000
Effective
interest rate
Non-current
US$000
Current
US$000
Secured bank loans (a)
Pre-shipment loans in Minera Santa Cruz (note 23)
Mid-term Bank loans
Other loans (b)
47.25% and
48.00%
–
7.74%
275,000
Stock market promissory note in Minera Santa Cruz
Total
–
–
275,000
2,161
27,328
14,500
43,989
–
–
2.17%
300,000
–
–
300,000
–
499
–
499
(a) Secured bank loans:
Medium-term bank loans:
In December 2019, 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$200,000,000 medium term loan was payable on
equal quarterly instalments from the second anniversary of the loan with an interest rate of Libor three months plus 1.15% payable
quarterly until maturity on 13 December 2024. In September 2021, the Group negotiated with the same counterpart a US$200,000,0000
loan to replace the original loan, plus an additional US$100,000,000 optional loan. US$200,000,000 was withdrawn on 21 September
2021, and the optional US$100,000,000 loan was withdrawn on 1 December 2021. The maturity was extended until September 2026,
and the interest rate increased to 3-month USD Libor plus a spread of 1.65%. A structuring fee of US$900,000 was paid to the lender
and additional US$193,000 was incurred as transaction costs. In addition, a commitment fee of US$120,000 was paid for the period
that the optional US$100,000,000 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.
The Group has US$200,000,000 of undrawn medium-term debt facility that will become available on receipt of the Inmaculada
MEIA approval.
(b) Other loans:
Stock market promissory note:
From August to November 2022 Minera Santa Cruz signed 15 stock market promissory notes with Max Capital, a finance advisory
company located in Argentina, amounting to US$15,500,000. The expiration date of the notes is from December 2022 to November
2023. During the year 2022 the Group repaid US$1,000,000. The balance as at 31 December 2022 is US$14,500,000.
(c) Capitalised borrowing costs:
Interest expense of US$4,899,000 that is directly attributable to the construction of Mara Rosa (US$4,786,000) and Compañía
Minera Ares S.A.C. (US$113,000) has been capitalised and is included in property, plant and equipment within construction in
progress and capital advances (US$1,140,000) and mining property and development costs (US$1,804,000), and exploration and
evaluation assets (US$1,955,000).
The carrying value including accrued interests payable as at 31 December 2022 is US$302,328,000. The maturity of non-current
borrowings is as follows:
Between 1 and 2 years
Between 2 and 5 years
Over 5 years
Total
As at 31 December
2022
US$000
100,000
175,000
–
2021
US$000
25,000
275,000
–
275,000
300,000
The carrying amount of the pre-shipment loans approximates their fair value. The carrying amount and fair value of the mid-term
loan are as follows:
Secured bank loans
Total
Carrying amount
as at 31 December
Fair value
as at 31 December
2022
US$000
302,328
302,328
2021
US$000
300,499
300,499
2022
US$000
283,677
283,677
2021
US$000
296,122
296,122
178 | Hochschild Mining PLC Annual Report & Accounts 2022
The movement in borrowings during the year is as follows:
Current
Bank loans
Stock market promissory note
Accrued interest
Non-current
Bank loans
28 Provisions
At 1 January 2021
Additions
Accretion (note 13)
Change in discount rate
Change in estimates
Foreign exchange effect
Utilisation
Payments
At 31 December 2021
Less: current portion
Non-current portion
At 1 January 2022
Additions
Accretion (note 13)
Change in discount rate
Change in estimates
Foreign exchange effect
Utilisation
Payments
At 31 December 2022
Less: current portion
Non-current portion
As at
1 January
2022
US$000
–
–
499
499
300,000
300,000
Provision
for mine
closure1
US$000
126,397
–
(2,038)
(1,627)
22,364
–
(1,978)
(9,083)
134,035
(19,670)
114,365
134,035
–
(1,931)
(17,849)
34,124
–
(970)
(10,409)
137,000
(17,668)
119,332
Additions
US$000
Repayments
US$000
Reclassifications
US$000
As at
31 December
2022
US$000
13,411
15,500
10,360
39,271
–
–
Long-Term
Incentive
Plan2
US$000
1,126
(659)
–
–
–
–
–
–
467
–
467
467
(467)
–
–
–
–
–
–
–
–
–
(10,557)
(1,000)
(12,962)
(24,519)
23,839
–
4,899
28,738
26,693
14,500
2,796
43,989
–
–
(25,000)
(25,000)
275,000
275,000
Workers’ profit
sharing
US$000
Contingencies3
US$000
5,389
11,018
–
–
–
(525)
–
(4,990)
10,892
(10,892)
–
10,892
4,733
–
–
–
322
–
(11,000)
4,947
(4,947)
–
1,625
2,164
–
–
–
(290)
–
–
3,499
(1,496)
2,003
3,499
1,813
–
–
–
434
–
(10)
5,736
(1,562)
4,174
Total
US$000
134,537
12,523
(2,038)
(1,627)
22,364
(815)
(1,978)
(14,073)
148,893
(32,058)
116,835
148,893
6,079
(1,931)
(17,849)
34,124
756
(970)
(21,419)
147,683
(24,177)
123,506
1
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 31 December 2022 and 2021 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. The discount rate used was 0.95%
(2021: -2.09%). Expected cash flows will be over a period from one to 21 years (2021: over a period from one to 17 years).
Based on the internal and external reviews of mine rehabilitation estimates, the provision for mine closure increased by US$34,124,000 due to increase in the Ares mine unit of
US$10,509,000, the Arcata mine unit of US$1,671,000, the San Jose mine unit of US$7,901,000, the Matarani unit of US$19,000, the Azuca project of US$1,000, the Crespo project
of US$5,000, the Pallancata mine unit of US$58,000 and the Sipan mine unit of US$12,858,000, net of the decrease in the Selene mine unit of US$2,882,000 and the Inmaculada
mine unit of US$430,000, and the initial recognition of the Mara Rosa project of USS$4,414,000 (2021: increase by US$22,364,000 due to increase in the Selene mine unit of
US$14,032,000, the Sipan mine unit of US$3,103,000, the Arcata mine unit of US$2,620,000, the Ares mine unit of US$1,623,000, the Inmaculada mine unit of US$369,000 and the
San José mine unit of US$640,000, net of the decrease of the Matarani unit of US$2,000, the Azuca project of US$9,000, the Crespo project of US$9,000 and the Pallancata
mine unit of US$3,000).
A net charge of US$17,797,000 related to changes in estimates (US$22,156,000) and discount rates (-US$4,359,000) for mines already closed were recognised directly in the
income statement (2021: net charge of US$22,095,000 related to changes in estimates (US$21,378,000) and discount rates (US$717,000) for mines already closed were recognised
directly in the income statement).
A net credit of US$5,936,000 related to changes in estimates (US$7,554,000) and discount rates (-US$13,490,000) 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 (2021: net credit of US$1,358,000 related to changes in estimates (US$986,000) and discount
rates (US$2,344,000) 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 2021 (US$2,038,000) to 2022 (US$1,931,000) is explained because the Group is closer to the budget execution periods and the discount rates
used for 2021 were more negatives than those of 2022.
A change in any of the following key assumptions used to determine the provision would have the following impact:
Closure costs (increase by 10%) increase of provision
Discount rate (increase by 0.5%) (decrease of provision)
US$000
13,700
(8,137)
179 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
28 Provisions continued
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 2021), Sipan will be the subject of ongoing treatment until 2030 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.
2 Corresponds to the provision related to awards granted under the Long-Term Incentive Plan (‘LTIP’) to designated personnel of the Group. Includes the 2020 awards, granted
in February 2020, payable in February 2023, as 50% in cash (refer to note 29(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:
70% is subject to the Company’s TSR ranking relative to a tailored peer group of mining companies, and 30% is subject to the Company’s TSR ranking relative to the constituents
of the FTSE 350 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$467,000 (2021: US$659,000 net decrease) have been recorded as administrative expenses -US$442,000
(2021: -US$630,000) and exploration expenses -US$25,000 (2021: -US$29,000). The final result of the benefit was nil.
3 Mainly corresponds to contingencies in Minera Santa Cruz due to new labour lawsuits.
The following tables list the inputs to the Monte Carlo model used for the LTIPs as at 31 December 2021:
For the period ended
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Expected life (years)
Weighted average share price (pence £)
LTIP 2020
31 December
2021
US$000
2.37
3.70
0.02
1
179.61
The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the awards and is
indicative of future trends, which may not necessarily be the actual outcome. The outcome of the LTIP 2020 as at 31 December
2022 was US$nil.
29 Equity
(a) Share capital and share premium
Issued share capital
The issued share capital of the Company as at 31 December 2022 is as follows:
Class of shares
Ordinary shares (1 pence per share)
The issued share capital of the Company as at 31 December 2021 is as follows:
Class of shares
Ordinary shares (25 pence per share)
Issued
Number
Amount
513,875,563
£5,138,756
Issued
Number
Amount
513,875,563
£128,468,891
At 31 December 2022 and 2021, all issued shares with a par value of 1 pence and 25 pence each respectively were fully paid
(2022: weighted average of US$0.018 per share, 2021: weighted average of US$0.441 per share).
The movement in share capital of the Company from 1 January 2021 to 31 December 2022 is as follows:
Shares issued as at 1 January 2021
Shares issued as at 31 December 2021
Deferred bonus shares issued on 20 June 2022
Cancelation of deferred bonus shares on 22 June 2022
Cancelation of share premium account on 24 June 2022
Reduction of nominal value to 1 pence on 24 June 2022
Shares issued as at 31 December 2022
Number of
ordinary
shares
513,875,563
513,875,563
513,875,563
Share
capital
US$000
226,506
226,506
303,268
(513,875,563)
(303,268)
Share
premium
US$000
438,041
438,041
–
–
–
–
513,875,563
–
(438,041)
(217,445)
9,061
–
–
Following the passing of certain special resolutions at an Extraordinary General Meeting of shareholders held on 26th May 2022,
the Company capitalised the Company’s distributable merger reserve, within retained earnings, by applying its balance to the
issuance of 513,875,563 bonus shares with a nominal value of US$0.59 each (the ‘Bonus Shares’).
Subsequently, the Company obtained, on 21 June 2022, 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;
(b) the reduction of the Company’s share premium account to nil and crediting the corresponding amount to the Company’s
retained earnings reserve; and
(c) the reduction in the nominal value of the Ordinary Shares from 25 pence per Ordinary Share to 1 pence per Ordinary Share,
(both (b) and (c) 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 24 June 2022.
180 | Hochschild Mining PLC Annual Report & Accounts 2022
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 2(o)).
The movement in treasury shares are as follows:
– On 30 March 2020, the Group purchased 182,941 shares for a total consideration of £234,000 (equivalent to US$292,000).
– On 30 March 2020, 182,941 Treasury shares with a value of US$292,000 (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 31 December 2022 and 31 December 2021 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 9, 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.
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 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 11 February 2019 the Group approved the grant of 2019 LTIP awards, on 19 February 2020 the Group approved the grant of 2020
LTIP awards, on 26 May 2021 the Group approved the grant of 2021 LTIP awards and on 23 February 2022 the Group approved the grant
of 2022 LTIP awards. The 2019 and 2020 awards give a right to receive a cash payment equivalent to the 50% of the prize (cash-settled
transaction) (refer to note 28(2)), and the other 50% will be used to acquire shares of the Company (equity-settled transaction).
The vesting of the 2021 LTIP and 2022 LTIP awards are subject to the following performance conditions: 50% on Hochschild’s
3-year total shareholder return (‘TSR’) and 50% on Internal Key Performance Indicators (KPIs) measured during the same period.
The performance period will be from 1 January 2021 to 31 December 2023 and 1 January 2022 to 31 December 2024 respectively.
The award will vest in May 2024 and in February 2025 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 2019 LTIP, 2020 LTIP, 2021 LTIP and 2022 LTIP:
Dividend yield (%)
Expected volatility (%)
Risk–free interest rate (%)
Expected life (years)
LTIP 2022
LTIP 2021
LTIP 2020
LTIP 2019
5.73
3.97
4.13
2.3
2.37
3.71
0.23
2
0.87
3.19
0.51
2.5
1.46
2.90
0.42
2.4
Weighted average share price (pence £)
141.46
221.99
179.61
161.37
The 50% subject to internal KPIs is split equally between:
i) 3-year growth of the Company´s Measured and Indicated Resources (MIR) per share (excluding Volcan), The 3-year MIR growth was
projected using a normal distribution based on historical data, and factoring in the additional growth expected from acquisitions, and
ii) average outcome of the annual bonus scorecard in respect of 2021, 2022 and 2023 for 2021 LTIP, and 2022, 2023 and 2024 for
2022 LTIP calculated as the simple mean of the three scorecard outcomes.
Probabilities assigned to each possible outcome, based on historical data and management judgement.
181 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
29 Equity continued
The remaining contract life is nil years (2021: 0.1 years), 0.1 years (2021: 1.1 years), 1.4 years (2021: 2.4 years) and 2.2 years for the
2019 LTIP, 2020 LTIP, 2021 LTIP and 2022 LTIP respectively.
The movement in other reserves is as follows:
Balance at 1 January 2021
Expense recognised in the period
Forfeiture of share options
Balance at 31 December 2021
Expense recognised in the period
Forfeiture of share options
Balance at 31 December 2022
LTIP
2018
US$000
920
143
(1,063)
–
–
–
–
LTIP
2019
US$000
1,175
623
–
1,798
88
(1,886)
–
LTIP
2020
US$000
LTIP
2021
US$000
LTIP
2022
US$000
438
509
–
947
509
–
1,456
–
1,167
–
1,167
1,478
–
2,645
–
–
–
–
1,395
–
1,395
No shares vested during the period (2021: nil).
(ii) 2022 bonus of employees
The Group agreed to partially pay the 2022 bonus by an issuance of shares. The total amount that will be paid in shares is US$816,000.
30 Deferred income tax
The changes in the net deferred income tax assets/(liabilities) are as follows:
Beginning of the year
Income statement credit/(charge) (note 14)
Equity credit/(charge)
Deferred tax recognised for payment
End of the year
As at 31 December
2022
US$000
(86,744)
2,687
8,167
58
2021
US$000
(72,307)
(7,054)
(7,383)
–
(75,832)
(86,744)
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:
Deferred income tax liabilities
At 1 January 2021
Income statement charge/(credit)
At 31 December 2021
Income statement charge
Equity credit
At 31 December 2022
Deferred income tax assets
At 1 January 2021
Income statement (charge)/credit
Equity charge
At 31 December 2021
Income statement credit/(charge)
Equity credit
At 31 December 2022
Differences
in cost
of PP&E
US$000
Mine
development
US$000
Provisional
pricing
adjustment
US$000
39,521
6,108
45,629
1,281
362
47,272
84,952
(67)
84,885
4,630
–
89,515
696
(752)
(56)
359
–
303
Others
US$000
Total
US$000
3,647
(495)
3,152
1,627
–
128,816
4,794
133,610
7,897
362
4,779
141,869
Differences
in cost
of PP&E
US$000
Provision
for mine
closure
US$000
Mine
development
US$000
Tax losses
US$000
Others1
US$000
Total
US$000
20,130
(7,333)
–
12,797
1,747
–
25,384
5,082
–
30,466
1,048
–
14,544
31,514
474
(109)
–
365
(1,021)
1,377
721
–
–
–
–
2,483
1,855
4,338
10,521
100
(7,383)
3,238
5,780
5,902
14,920
56,509
(2,260)
(7,383)
46,866
10,037
9,134
66,037
1
Credit/(charge) in the year mainly related to silver forward of US$645,000 (2021: silver forward of US$5,634,000), statutory holiday provision of US$1,157,000 (2021: US$1,121,000) and
long term incentive plan of US$1,512,000 (2021: US$746,000).
182 | Hochschild Mining PLC Annual Report & Accounts 2022
The amounts after offset, as presented on the face of the statement of financial position, are as follows:
Deferred income tax assets
Deferred income tax liabilities
Total
Unrecognised tax losses expire in the following years:
Recognised
Expire after four years
Unrecognised
Expire after four years
Total
Other unrecognised deferred income tax assets comprise (gross amounts):
Provision for mine closure1
As at 31 December
2022
US$000
4,213
(80,045)
(75,832)
2021
US$000
484
(87,228)
(86,744)
As at 31 December
2022
US$000
2021
US$000
12,759
12,759
191,051
191,051
203,810
–
–
167,273
167,273
167,273
As at 31 December
2022
US$000
8,191
2021
US$000
7,887
1 This relates to provision for mine closure expenditure which is expected to be incurred in periods in which taxable profits are not expected to be available to offset the expenditure.
Unrecognised deferred tax liability on retained earnings
At 31 December 2022 and 2021, there was no recognised deferred tax liability for taxes that would be payable on the unremitted
earnings of certain of the Group’s subsidiaries as the intention is that these amounts are permanently reinvested.
31 Dividends
Dividends paid and proposed during the year
Equity dividends on ordinary shares:
Final dividend for 2021: 2.335 US cents per share (2020: 2.335 US cents per share)
Interim dividend for 2022: 1.95 US cents per share (2021: 1.95 US cents per share)
Total dividends paid in cash
Dividends in specie paid with Aclara shares (note 4(a))
Total dividends paid on ordinary shares
Proposed dividends on ordinary shares:
Final dividend for 2022: nil US cents per share (2021: 2.335 US cents per share)
Dividends declared to non-controlling interests: 0.002 US$ per share (2021: 0.058 US$ per share)
Total dividends declared to non-controlling interests
2022
US$000
2021
US$000
11,998
10,019
22,017
–
12,002
10,020
22,022
94,945
22,017
116,967
–
11,998
286
286
9,832
9,832
Dividends paid in 2022 to non-controlling interests amounted to US$286,000 (2021: US$9,832,000).
In August 2021, the Board became aware of an issue concerning technical compliance with the Companies Act 2006 in relation
to the 2017 final dividend, the 2018 interim and final dividends, the 2019 interim dividend, and the 2020 interim and final dividends
(the ‘Relevant Dividends’). In particular, the Relevant Dividends were paid to shareholders when the Company did not have
adequate distributable reserves.
Significant corrective transactions (namely, a capital reduction and dividend distribution by the Company’s wholly-owned
subsidiary, Hochschild Mining Holdings Limited) were implemented by the Company in September 2021, shortly after discovery
of the issue. Had these internal corporate transactions been implemented prior to the payment of the 2017 final dividend,
adequate distributable reserves would have been available to the Company.
As previously reported, the Board put resolutions to shareholders at a General Meeting to i) complete the rectification of this
past issue and ii) increase further, to the extent practicable, the level of Distributable Reserves available to the Company.
Dividends per share
The interim dividend paid in September 2022 was US$10,019,000 (1.95 US cents per share). There is no proposed final dividend
in respect of the year ending 31 December 2022.
183 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
32 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 31 December 2022 and 2021.
The related parties are companies owned or controlled by the main shareholder of the Parent company or associates.
Current related party balances
Cementos Pacasmayo S.A.A.1
Tecsup2
Universidad UTEC2
REE UNO SpA3
Aclara Resources Inc3
Aclara Resources Peru S.A.C.3
Total
Accounts receivable
as at 31 December
Accounts payable
as at 31 December
2022
US$000
2021
US$000
2022
US$000
2021
US$000
733
–
–
30
9
2
774
217
1
–
6
–
–
224
249
352
5
–
–
16
622
152
115
5
–
12
–
284
1
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.
2 Peruvian not-for-profit educational institutions controlled by Eduardo Hochschild.
3 Associated companies of the Aclara Group (refer to notes 4(a) and 19).
As at 31 December 2022 and 2021, 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:
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)
Long Term Incentive Plans
Total compensation paid to key management personnel
Total compensation paid to key management personnel
Year ended 31 December
2022
US$000
2021
US$000
(376)
(418)
494
248
(403)
(292)
729
–
Year ended 31 December
2022
US$000
7,121
1,174
8,295
2021
US$000
7,509
776
8,285
This amount includes the remuneration paid to the Directors of the Parent Company of the Group of US$4,228,000 (2021: US$3,967,000).
(c) Related party transaction
Participation of Pelham Investment Corporation in the IPO of Aclara
As announced by the Company on 3rd December 2021, Pelham Investment Corporation (‘Pelham’), a company controlled by the
Chairman, Eduardo Hochschild, entered into a subscription agreement with Aclara on 2 December 2021 pursuant to which Pelham
agreed to purchase, on a prospectus exempt basis in Canada, 22,791,399 Aclara shares at a price of C$1.70 per share (the ‘Offering
Price’). In addition, Pelham subscribed for 9,855,660 Aclara shares at the Offering Price as part of the IPO. These share acquisitions,
which are in addition to the Aclara shares acquired by Pelham as part of the demerger dividend, constitute a smaller related party
transaction for the purposes of the UK Listing Rules. Accordingly, as also announced, the Company obtained a written confirmation
from a sponsor that the terms of the smaller related party transaction were fair and reasonable as far as the shareholders of the
Company are concerned.
184 | Hochschild Mining PLC Annual Report & Accounts 2022
33 Auditor’s remuneration
The auditor’s remuneration for services provided to the Group during the years ended 31 December 2022 and 2021 is as follows:
Audit fees pursuant to legislation1
Audit-related assurance services
Other assurance services2
Total
Amounts paid to Ernst & Young in
the year ended 31 December
2022
US$000
1,181
95
–
1,276
2021
US$000
1,206
130
176
1,512
1 The total fee includes statutory audit fee of US$416,000 in respect of local statutory audits of subsidiaries (2021: US$417,000).
2 Includes US$164,000 for assurance services (including comfort letters) in relation to the spin-off of Aclara and US$12,000 for assurance services over the Group’s environmental ECO score.
In 2022 and 2021, all fees are included in administrative expenses.
34 Notes to the statement of cash flows
Reconciliation of loss for the year to net cash generated from operating activities
Profit for the year
Adjustments to reconcile Group loss to net cash inflows from operating activities
Depreciation (note 3(a))
Amortisation of intangibles (note 18)
Write-off of assets (note 16)
Provision of doubtful receivable
Impairment /(reversal of impairment) of assets (note 11)
Gain on demerger of Aclara (note 4 (a))
Loss from changes in the fair value of financial assets at fair value through profit and loss (note 21)
Share of post-tax losses of associates
Gain on sale of property, plant and equipment
Provision and recovery for obsolescence of supplies (note 12 and 23)
Increase of provision for mine closure (note 12)
Finance income (note 13)
Finance costs (note 13)
Income tax expense (note 14)
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
As at 31 December
2022
US$000
2021
US$000
4,832
71,106
139,088
150,292
970
1,832
35
(11,363)
2,140
11,600
(294)
422
17,797
(5,211)
21,776
20,934
12,507
(52,972)
(5)
4,956
(13,081)
(6,632)
(5,060)
144,271
1,118
863
–
24,846
(37,461)
834
169
(3,342)
(1,779)
22,095
(3,946)
32,061
66,225
7,742
(13,734)
(3,501)
15,336
(4,534)
(9,542)
4,740
319,588
35 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:
Commitment for the subsequent twelve months
More than one year
As at 31 December
2022
US$000
–
4,747
2021
US$000
12,583
66,218
185 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
35 Commitments continued
(b) Capital commitments
Peru
Argentina
Brazil
For the year ended 31 December
2021
US$000
2022
US$000
1,563
3,687
13,412
18,662
24,946
13,812
–
38,758
36 Contingencies
As at 31 December 2022 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 31 December 2022, the
Group had exposures totalling US$20,713,000 (2021: US$20,622,000).
When the Tax authority challenges the deductibility of certain expenses the Group reassess 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 28(1)).
37 Mining royalties
Peru
In accordance with Peruvian legislation, owners of mining concessions must pay a mining royalty for the exploitation of metallic and
non metallic resources. Mining royalties have been calculated with rates ranging from 1% to 3% of the value of mineral concentrate
or equivalent sold, based on quoted market prices.
In October 2011 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 2% to 8.4%, of the quarterly operating profit.
b) Modification of the mining royalty calculation, which consists of applying a progressive scale of rates ranging from 1% to 12%,
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 12 “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 4% to 13.12% of quarterly operating profit.
As at 31 December 2022, the amount payable as under the new mining royalty and the SMT amounted to US$1,234,000
(2021: US$1,341,000) and US$845,000 (2021: US$882,000) 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$4,787,000
(2021: US$6,326,000) of new mining royalty and US$2,658,000 (2021: US$5,916,000) of SMT, both classified as income tax.
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 3% of the pit-head value.
As at 31 December 2022, the amount payable as mining royalties amounted to US$1,211,000 (2021: US$1,505,000). The amount
recorded in the income statement as cost of sales was US$6,307,000 (2021: US$7,171,000).
186 | Hochschild Mining PLC Annual Report & Accounts 2022
38 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 forward
On 8 February 2021, the Group signed agreements with JP Morgan to hedge the sale of 4,000,000 ounces of silver at US$27.10
per ounce for 2021 and a further 4,000,000 ounces of silver at US$26.86 per ounce for 2022.
On 10 November 2021, the Group signed agreements with JP Morgan to hedge the sale of 3,300,000 ounces of silver at US$25.0
per ounce for 2023.
The silver forwards are being used to hedge exposure to changes in cashflows from 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 9, 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 1:1 for the hedging relationships as the underlying risk of the silver 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 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 9 and that the hedging strategy is highly effective.
The fair values of the silver forwards were calculated using a discounted cash flow model applying a combination of level 1
(USD quoted market commodity prices) and level 2 inputs. The models used to value the commodity forward contracts are
standard models, that calculate the present value of the fixed-legs (the fixed silver leg) and compare them with the present value
of the expected cash flows of the flowing legs (the London metal exchange ‘LME’ silver fixing). In the case of the commodity forward
contracts, the models use the LME 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 2 in the fair value hierarchy. The fair values
of the silver forwards as at 31 December 2022 and 31 December 2021 are as follows:
31 December 2022
Current assets
Non-current assets
The effect recorded is as follows:
Income statement – revenue
Equity – Unrealised gain on hedges
31 December 2021
Current assets
Non-current assets
The effect recorded is as follows:
Income statement – revenue
Equity – Unrealised gain on hedges
US$000
2,186
–
2,186
US$000
20,428
16,929
US$000
5,042
14,073
19,115
US$000
7,982
19,115
The sensitivity to a reasonable movement in the commodity prices, with all other variables held constant, determined as a +/-10%
change in prices -US$5,475,000/ US$9,848,000 effect on OCI.
187 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
38 Financial risk management continued
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 5). The sensitivity of the fair value to an immediate 10% favourable or adverse change in the price
of gold and silver (assuming all other variables remain constant), is as follows:
Year
2022
2021
Increase/
decrease in
price of
ounces of:
Gold +/-10%
Silver+/-10%
Gold +/-10%
Silver+/-10%
Effect on
profit
before tax
US$000
+/-165
+/-138
+/-95
+/-757
(b) Foreign currency risk
The Group produces silver and gold which are typically priced in US dollars. A proportion of the Group’s costs are incurred in
Peruvian nuevos soles, Argentinian pesos, Brazilian reais, sterling pounds, Canadian dollars, Chilean pesos, and Mexican pesos.
Accordingly, the Group’s financial results may be affected by exchange rate fluctuations between the US dollar and the local
currency. The long-term relationship between commodity prices and currencies in the countries in which the Group operates
provides a certain degree of natural protection. The Group does not use derivative instruments to manage its foreign currency risks.
The following table demonstrates the sensitivity of financial assets and liabilities, at the reporting date, denominated in their
respective currencies, to a reasonably possible change in the US dollar exchange rate, with all other variables held constant,
of the Group’s profit before tax and the Group’s equity.
Year
2022
Pounds sterling
Argentinian pesos
Mexican pesos
Peruvian nuevos soles
Reais
Canadian dollars
Chilean pesos
2021
Pounds sterling
Argentinian pesos
Mexican pesos
Peruvian nuevos soles
Canadian dollars
Chilean pesos
Increase/
decrease in
US$/other
currencies’
rate
+/-10%
+/-10%
+/-10%
+/-10%
+/-10%
+/-10%
+/-10%
+/-10%
+/-10%
+/-10%
+/-10%
+/-10%
+/-10%
Effect
on profit
before tax
US$000
-/+155
-/+3,775
+/-1,821
-/+15,326
-/+7,230
-/+461
+/-763
-/+248
-/+3,084
+/-1,879
-/+3,663
-/+270
-/+82
Effect
on equity
US$000
–
–
–
–
–
+/-17
–
–
–
–
–
+/-32
–
(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 non compliance, 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 31 December 2022 and 31 December 2021:
Summary commercial partners
Trade receivables
As at
31 December
2022
US$000
% collected
as at
20 April 2023
As at
31 December
2021
US$000
% collected
as at
21 February
2022
42,364
73%
27,773
74%
188 | Hochschild Mining PLC Annual Report & Accounts 2022
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 rating1
A+
A
A-
A2
AA2
Aa3
Baa1
BB-
BBB+
BBB
BBB-
Caa1
NA
Total
As at
31 December
2022
US$000
As at
31 December
2021
US$000
55,847
1,066
2,436
42,091
8
8,000
109
10,505
60
5,210
4,419
1
60,000
–
142,740
–
–
–
–
–
171,328
–
–
–
14,092
143,844
12,721
386,789
1 Represents the long-term credit rating as at 3 January 2023 (2021: 3 January 2022).
As at 31 December 2022, the credit rating of the counterparty of the silver forward hedges is A- (31 December 2021 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 22, 24 and 38(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 31 December 2022 the sensitivity to reasonable movements in the share price of financial assets at fair value through OCI of +/-
25% with all other variables held constant is +/-US$127,000 (2021: +/-US$165,000) recognised in equity. The sensitivity to reasonable
movements in the share price of financial assets at fair value through profit and loss of +/- 25% with all other variables held constant
is +/-US$254,000 (2021: +/-US$789,000) recognised in the consolidated statement of profit and loss.
(e) Fair value hierarchy
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either
directly or indirectly.
Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable
market data.
189 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
38 Financial risk management continued
As at 31 December 2022 and 2021, the Group held the following financial instruments measured at fair value:
Assets measured at fair value
Equity shares (notes 20 and 21)
Trade receivables (note 22)
Derivative financial assets
Assets measured at fair value
Equity shares (notes 20 and 21)
Trade receivables (note 22)
Derivative financial assets
31 December
2022
US$000
1,524
42,364
2,186
31 December
2021
US$000
3,816
27,773
19,115
Level 1
US$000
1,524
Level 1
US$000
3,816
Level 2
US$000
Level 3
US$000
42,364
2,186
Level 2
US$000
Level 3
US$000
27,773
19,115
During the period ending 31 December 2022 and 2021, there were no transfers between these levels.
The reconciliation of the financial instruments categorised as level 3 is as follows:
Balance at 1 January 2021
Net change in trade receivables from goods sold
Changes in fair value of price adjustments (note 5)
Realised price adjustments during the year
Balance at 31 December 2021
Net change in trade receivables from goods sold
Changes in fair value of price adjustments (note 5)
Realised price adjustments during the year
Balance at 31 December 2022
Trade
receivables/
price
adjustments
US$000
45,353
(12,969)
(6,614)
2,003
27,773
8,063
(1,323)
7,851
42,364
The impact of the hedging instrument and hedge item on the statement of financial position is, as follows:
Silver
ounces
Average
price
US$/ounce
Line item
in the
statement of
financial
position
Carrying
amount of
hedging
instrument
US$000
Change in fair
value of hedging
instrument used
for measuring
ineffectiveness
for the period
US$000
Change in fair
value of hedged
item used for
measuring
ineffectiveness
for the period
US$000
2022
Silver forward contracts
3.3 million
25.00
2021
Silver forward contracts
7.5 million
26.03
Derivative
financial
asset
Derivative
financial
asset
2,186
1,541
1,541
19,115
13,476
13,476
The hedging gain recognised in OCI before tax on silver 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.
Impact of hedging on equity
Set out below is the reconciliation of each component of equity and the analysis of other comprehensive income:
Balance at 1 January 2021
Reclassification adjustments for items included in the income statement on realisation:
Transfer to silver sales (revenue)
Transfer to finance costs
Revaluation arising on the year
Movement in deferred tax
Balance at 31 December 2021
Reclassification adjustments for items included in the income statement on realisation:
Transfer to silver sales (revenue)
Revaluation arising on the year
Movement in deferred tax
Balance at 31 December 2022
Interest rate
swap
US$000
(4,169)
–
5,521
392
(1,744)
–
–
–
–
–
Silver
forward
US$000
–
(7,982)
–
27,097
(5,639)
13,476
Total
US$000
(4,169)
(7,982)
5,521
27,489
(7,383)
13,476
(20,428)
(20,428)
3,499
4,994
1,541
3,499
4,994
1,541
190 | Hochschild Mining PLC Annual Report & Accounts 2022
(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.
At 31 December 2022
Trade and other payables
Borrowings
Total
At 31 December 2021
Trade and other payables
Borrowings
Total
Less than
1 year
US$000
125,192
61,133
186,325
118,110
5,644
123,754
Between
1 and
2 years
US$000
1,623
116,729
118,352
1,637
30,597
32,234
Between
2 and
5 years
US$000
–
193,885
193,885
1,177
285,387
286,564
Over
5 years
US$000
–
–
–
–
–
–
Total
US$000
126,815
371,747
498,562
120,924
321,628
442,552
1 The interest rate swap settles the difference between the fixed and floating interest rate on a net basis on a quarterly basis.
(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.
Fixed rate
Assets
Liabilities
Floating rate
Liabilities
Fixed rate
Assets
Floating rate
Liabilities
Within
1 year
US$000
89,225
(16,661)
As at 31 December 2022
Between
1 and
2 years
US$000
Between
2 and
5 years
US$000
Over
5 years
US$000
–
–
–
–
–
–
–
(27,328)
(100,00)
(175,000)
As at 31 December 2021
Between
1 and
2 years
US$000
Between
2 and
5 years
US$000
Over
5 years
US$000
Within
1 year
US$000
299,666
–
–
(499)
(25,000)
(275,000)
–
–
Total
US$000
89,225
(16,661)
(302,328)
Total
US$000
299,666
300,499
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 +/-20bps change in interest rates has a -/+US$600,000 effect on profit before tax
(2021: -/+US$600,000). The Group is exposed to fluctuations in market interest rates.
This assumes that the amount remains unchanged from that in place at 31 December 2022 and 2021 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.
191 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
38 Financial risk management continued
Derivative financial liabilities – Interest rate swap
On 14 February 2020, the Group and JP Morgan Chase Bank, N.A. entered into an interest rate swap with a notional amount equal
to the principal of the medium-term loan whereby the Group paid a fixed rate of at 2.534% and received interest at a variable rate
equal to Libor+1.15% on the notional amount from 17 March 2020 to 17 December 2024. The interest rate swap was used to hedge
the exposure to changes in the cashflows of the Group’s variable rate medium-term loan. In accordance with IFRS 9, this derivative
instrument was categorised as a cash flow hedge at the inception of the hedging relationship, and on an ongoing basis, the Group
assessed whether a hedging relationship meets the hedge effectiveness requirements. At a minimum, an entity shall perform the
ongoing assessment at each reporting date or upon a significant change in the circumstances affecting the hedge effectiveness
requirements, whichever comes first. The assessment relates to expectations about hedge effectiveness and is therefore only
forward-looking.
The Group has established a ratio of 1:1 for the hedging relationship as the underlying risk of the interest rate swap is identical to
the hedged risk component. The hedging instrument and the hedged item have values move in the opposite direction due to the
same risk and, therefore, that there is an economic relationship between the hedged item and the instrument coverage as the terms
of the interest rate swap match the terms of the fixed rate loan (i.e., notional amount, maturity and payment dates). That said, it
is observed that the effectiveness tests comply with the requirements of IFRS 9 and conclude that the hedging strategy is highly
effective. There is no ineffectiveness recognised in profit or loss.
The fair value of the interest rate swap was calculated using a discounted cash flow model applying a combination of level 1
(USD swap curve and USD zero yield curve) and level 2 inputs. This approach results in the fair value measurement categorised
in its entirety as level 2 in the fair value hierarchy.
The Group repaid the interest rate swap on 21 September 2021 paying US$3,774,000. The Group do not have any interest rate
swap in 2022.
The effect recorded was as follows:
Income statement – Finance costs
Equity – Cash flow hedge reserve
US$000
5,521
5,913
(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 27 and 29).
In 2022 the Group received proceeds from borrowings of US$28,911,000 (2021: US$105,954,000) whilst US$11,557,000 (2021:
US$14,793,000) was repaid. In addition, in 2022 the Group closed a US$200,000,000 medium term committed debt facility with
Scotiabank and BBVA. The facility is available and subject to obtaining Inmaculada’s MEIA
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.
39 Subsequent events
(a) Hedges
In April 2023, the Group entered into the following hedges to increase cash flow certainty for the rest of the year and during the
construction of Mara Rosa and its first year of production:
– 29,250 ounces of 2023 gold production at $2,047 per ounce; and
– 27,600 ounces of 2024 gold production at $2,100.
(b) Termination of Snip Option
On 4 April 2023, the Company terminated the option to earn-in a 60% interest in the Snip project. Termination of the option became
effective immediately and, as a result, the Company has no liability to complete the Aggregate Expenditure Requirement.
In addition, the Company provided confirmation to Skeena that it had satisfied the Minimum Annual Expenditure Requirement
in respect of the 12-month period that commenced on 14 October 2022. Accordingly, no cash payment is due under the terms
of the option agreement.
192 | Hochschild Mining PLC Annual Report & Accounts 2022
PARENT COMPANY FINANCIAL STATEMENTS
Parent company statement of financial position
As at 31 December 2022
ASSETS
Non-current assets
Investments in subsidiaries
Current assets
Other receivables
Cash and cash equivalents
Total assets
EQUITY AND LIABILITIES
Equity share capital
Share premium
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
As at 31 December
2022
US$000
2021
US$000
Notes
5
6
7
8
8
9
10
9
587,083
587,083
1,138,762
1,138,762
10,629
662
11,291
598,374
9,061
–
6,312
529,486
544,859
2,073
–
2,073
51,442
51,442
53,515
5,211
528
5,739
1,144,501
226,506
458,267
3,912
435,136
1,123,821
1,837
37
1,874
18,806
18,806
20,680
598,374
1,144,501
The loss of the Company after tax amounted to US$559,481,000 (2021: loss of US$576,381,000).
The financial statements were approved by the Board of Directors on 19 April 2023 and signed on its behalf by:
Ignacio Bustamante
Chief Executive Officer
19 April 2023
193 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information PARENT COMPANY FINANCIAL STATEMENTS CONTINUED
Parent company statement of cash flows
For the year ended 31 December 2022
Reconciliation of loss for the year to net cash used in operating activities
Loss for the year
Adjustments to reconcile Company profit to net cash outflows from operating activities
Impairment on investment in subsidiary
Share-based payments
Finance income
Finance costs
Income tax
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
Cash flows generated from financing activities
Net increase/(decrease) in cash and cash equivalents during the year
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Year ended 31 December
2022
US$000
2021
US$000
Notes
(559,481)
(576,381)
5
13
10
12
11(a)
7
551,679
4,286
(507)
13
–
(5,418)
(1,396)
(37)
(10,861)
12
(10,849)
–
–
(22,017)
33,000
10,983
134
528
662
966,933
2,442
(397,380)
13
2
(2,637)
824
(44)
(6,228)
1
(6,227)
29
29
(22,022)
28,000
5,978
(220)
748
528
194 | Hochschild Mining PLC Annual Report & Accounts 2022
Parent company statement of changes in equity
For the year ended 31 December 2022
Balance at 1 January 2021
Other comprehensive income
Loss for the year
Total comprehensive profit for the year
Forfeiture of share options
Dividends
Dividends in specie
Share- based payments
Balance at 31 December 2021
Other comprehensive income
Loss for the year
Total comprehensive profit for the year
Forfeiture of share options
Issuance of deferred bonus shares
Cancelation of deferred bonus shares
Cancelation of share premium account
Nominal value reduction
Dividends
Share- based payments
Balance at 31 December 2022
Equity
share
capital
US$000
Share
premium
US$000
Notes
Other reserves
Share-
based
payment
reserve
US$000
Total other
reserves
US$000
Retained
earnings
US$000
Total equity
US$000
226,506
458,267
2,533
2,533
1,127,421 1,814,727
–
–
–
–
–
–
–
–
–
–
–
–
–
–
226,506
458,267
–
–
–
–
–
–
303,268
(303,268)
(217,445)
(458,267)
8(c)
12
12
8(c)
8(c)
8(a)
8(a)
8(a)
8(a)
12
8(c)
–
–
–
–
–
–
–
–
(576,381)
(576,381)
(576,381)
(576,381)
(1,063)
(1,063)
1,063
–
–
–
2,442
3,912
–
–
–
–
–
2,442
3,912
–
–
–
(22,022)
(22,022)
(94,945)
(94,945)
–
2,442
435,136 1,123,821
–
–
(559,481)
(559,481)
(559,481)
(559,481)
(1,886)
(1,886)
136
(1,750)
(303,268)
303,268
458,267
217,445
–
–
–
–
(22,017)
(22,017)
–
4,286
529,486
544,859
9,061
–
4,286
6,312
4,286
6,312
195 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
1 Corporate information
Hochschild Mining PLC (hereinafter ‘the Company’) is a public
limited company incorporated on 11 April 2006 under the
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 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 2 November 2006.
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 38.32% and it is held through Pelham Investment Corporation,
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.
2 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 ($000) 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 Limited (“HM Holdings), indicating that it will not
request a repayment of the interest free loan of US$45,000,000
for the period to 30 May 2024.
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 30 May 2024.
Considering the support available from the subsidiaries
described above and other matters, the Directors have a
reasonable expectation that the Company has adequate
resources to continue in operation until 30 May 2024, being a
period of at least twelve months from the date of these financial
statements. The other matters considered include 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 31 December 2022 and 31 December 2021.
As permitted by section 408 of the Companies Act 2006, 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 31 December 2021. 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
50% 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.
196 | Hochschild Mining PLC Annual Report & Accounts 2022
(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 9. 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. 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.
(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.
197 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS CONTINUED
2 Significant accounting policies continued
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.
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.
(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 (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.
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
effective interest rate (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 cashflows required under a debt instrument, and
the net present value of the net contractual cashflows 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 cashflows. 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.
198 | Hochschild Mining PLC Annual Report & Accounts 2022
3 Profit and loss account
The Company made a loss attributable to equity shareholders of US$559,481,000 (2021: loss of US$576,381,000).
4 Property, plant and equipment
At 31 December 2022 and 2021 the Company has property, plant and equipment with cost of equipment of US$265,000 which is
fully depreciated.
There were no additions during 2021 and 2022.
5 Investments in subsidiaries
Year ended 31 December 2021
Cost
At 1 January 2021
Additions
Disposals
At 31 December 2021
Accumulated impairment
At 1 January 2021
Impairment
At 31 December 2021
Net book value at 31 December 2021
Year ended 31 December 2022
Cost
At 1 January 2022
At 31 December 2022
Accumulated impairment
At 1 January 2022
Impairment
At 31 December 2022
Net book value at 31 December 2022
Total
US$000
2,337,482
95,160
(93,684)
2,338,958
233,263
966,933
1,200,196
1,138,762
2,338,958
2,338,958
1,200,196
551,679
1,751,875
587,083
HM Holdings had interests over a Chilean company named REE UNO SpA. This entity holds the project Aclara (formerly named
Biolantanidos), which is located in the south of Chile, and is currently focused on the development of the Penco module, which will
aim to produce a rare earth concentrate through a processing plant that will be fed by clays from nearby deposits.
In 2021 the Hochschild Group separated the Aclara project from their other businesses dedicated to the extraction and production
of gold and silver. For this purpose, a new company named Aclara Resources Inc. located in Canada (hereinafter, ‘Aclara’) was
incorporated by HM Holdings. The investment held in REE UNO SpA was then transferred to Aclara.
A distribution of 70,606,502 Aclara shares, representing 80% of the Aclara shares, was made to the Company by HM Holdings on 3
December 2021 by way of a dividend in specie. The value of the dividend received was C$120,031,053 in aggregate (equivalent to
US$93,684,000 at that date). The dividend distribution was recognised by the Company at fair value, based on the offering price of
C$1.70 per Aclara Share (the Offering Price).
On 10 December 2021, a distribution of the Aclara shares held by the Company was made to the holders of ordinary shares of the
Company by way of a dividend in specie (the “Demerger Dividend”), The approval of the Group’s shareholders in respect of the
Demerger Dividend was granted at the Extraordinary General Meeting held on 5 November 2021. The Aclara Inicial Public Offering
(“IPO”) was completed later that day. Once the Aclara IPO was completed, Aclara became an independent company listed on the
Toronto Stock Exchange.
The ratio of Demerged Aclara Shares to the number of ordinary shares in the Company was 70,606,502 to 513,875,563. Therefore,
the shareholders who were entitled to receive the Demerger Dividend received 0.1374 Aclara shares for each ordinary share in the
Group. The value of the Demerger Dividend is C$120,031,053 (equivalent to US$94,945,000) in aggregate based on the Offering
Price.
The fair value of the dividends received and paid is therefore a level 1 fair value measurement.
The Company tested its investment in subsidiary for impairment in light of decreases in the Company’s publicly listed share price.
As a result of this test, the Company recognised an impairment of the investment in HM Holdings of US$551,679,000 (2021:
US$966,933,000).
199 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS CONTINUED
5 Investments in subsidiaries continued
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 31 December 2022 translated from
Pounds Sterling into U.S. Dollars using the year-end exchange rate (both Level 1 inputs), to which a control premium was added based
on recent market transactions (a Level 2 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 3 in the fair value hierarchy. A Level 1 input refers to
quoted prices in active markets, while a Level 2 input corresponds to other information that can be observed directly or indirectly.
A positive/ adverse change of 10% of the market capitalisation would result in an additional decrease/increase to the impairment
recognised by US$54,326,000 (2021: additional decrease/increase to the impairment recognised by US$112,810,000 ). A change in
the control premium would have the following impact over the impairment recognised in 2022 and 2021 as follows:
Control premium (increase by 5%)
Control premium (decrease by 5%)
The breakdown of the investments in subsidiaries is as follows:
As at
31 December
2022
US$000
As at
31 December
2021
US$000
(21,730)
21,730
(45,124)
45,124
Name
As at 31 December 2022
Equity interest
%
Country of
incorporation
Carrying value
US$000
As at 31 December 2021
Equity interest
%
Country of
incorporation
Hochschild Mining Holdings Ltd
England and Wales
100%
587,083
England and Wales
100%
Total
587,083
Carrying value
US$000
1,138,762
1,138,762
The list of indirectly held subsidiaries of the Company is presented in note 1 (Corporate information) of the notes to the consolidated
financial statements.
During 2021 the Company recorded a capital contribution of $1,476,000 related to the financial guarantee granted over some
borrowings entered into by Minera Ares, one of its indirectly held subsidiaries (note 9).
6 Other receivables
Amounts receivable from subsidiaries (note 11)
Prepayments
Receivable from Kaupthing, Singer and Friedlander1
Other receivable
Total
Less current balance
1 Net of the impairment of receivable of US$176,000 (2021: US$197,000).
The fair values of other receivables approximate their book values.
Movements in the provision for impairment of receivables:
At 1 January 2021
Provided during the year
At 31 December 2021
Provided during the year
At 31 December 2022
Year ended 31 December
2022
US$000
6,636
3,992
–
1
10,629
(10,629)
2021
US$000
4,640
567
3
1
5,211
(5,211)
Total
US$000
201
(4)
197
(21)
176
As at 31 December 2022 and 2021, none of the financial assets classified as receivables (net of impairment) were past due.
200 | Hochschild Mining PLC Annual Report & Accounts 2022
7 Cash and cash equivalents
Bank current account1
Time deposits2
Cash and cash equivalents considered for the cash flow statement
1 Relates to bank accounts which are freely available and bear interest.
2 These deposits have an average maturity of nil days (2021: nil days).
8 Equity
(a) Share capital and share premium
Issued share capital
The issued share capital of the Company as at 31 December 2022 is as follows:
Class of shares
Ordinary shares
The issued share capital of the Company as at 31 December 2021 is as follows:
Class of shares
Ordinary shares
Year ended 31 December
2022
US$000
2021
US$000
397
265
662
319
209
528
Issued
Number
Amount
513,875,563
£5,138,756
Issued
Number
Amount
513,875,563 £128,468,891
At 31 December 2022 and 2021, all issued shares with a par value of 1 pence and 25 pence each respectively were fully paid
(2022: weighted average of US$0.018 per share, 2021: weighted average of US$0.441 per share).
The movement in share capital of the Company from 1 January 2021 to 31 December 2022 is as follows:
Shares issued as at 1 January 2021
Shares issued as at 31 December 2021
Deferred bonus shares issued on 20 June 2022
Cancelation of deferred bonus shares on 22 June 2022
Cancelation of share premium account on 24 June 2022
Reduction of nominal value to 1 pence on 24 June 2022
Shares issued as at 31 December 2022
Number of
ordinary shares
Share capital
US$000
Share premium
US$000
513,875,563
513,875,563
513,875,563
226,506
226,506
303,268
(513,875,563)
(303,268)
438,041
438,041
–
–
–
–
513,875,563
–
(438,041)
(217,445)
9,061
–
–
Following the passing of certain special resolutions at an Extraordinary General Meeting of shareholders held on 26th May 2022,
the Company capitalised the Company’s merger reserve by applying its balance to the issuance of 513,875,563 bonus shares with a
nominal value of US$0.59 each (the “Bonus Shares”).
Subsequently, the Company obtained, on 21 June 2022, the approval of the High Courts of Justice of England and Wales
(the Companies Court (Ch D) of the Business and Property Courts) to:
1. the cancellation of the Bonus Shares with the sum arising on the cancellation being credited to the Company’s retained earnings
reserve;
2. the reduction of the Company’s share premium account to nil and crediting the corresponding amount to the Company’s
retained earnings reserve; and
3. the reduction in the nominal value of the Ordinary Shares from 25 pence per Ordinary Share to 1 pence per Ordinary Share,
(both (2) and (3) 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.
At 31 December 2022 the balance of Treasury shares is nil (31 December 2021: nil)..
201 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS CONTINUED
8 Equity continued
(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 29(c) to the consolidated financial statements for details of the share-based payment reserve at 31 December 2022
and 2021.
(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.
During the period ended 31 December 2021, US$966,933,000 was realised as a result of the impairment of the investment in
subsidiary recorded in the period (note 5). As at 31 December 2021 US$198,398,000 of the merger reserve remained within retained
earnings, which balance was unrealised and not available for distribution. As at 31 December 2022 the balance of the merger
reserve was capitalised. The movement of the merger reserve is as follows:
As at 1 January 2021
Impairment of investment in subsidiary (note 5)
As at 31 December 2021
Capitalisation of merger reserve
As at 31 December 2022
9 Trade and other payables
Trade payables
Payables to subsidiaries (note 11 (a))
Remuneration payable
Taxes and contributions
Financial guarantees1
Others
Total
US$000
1,165,331
(966,933)
198,398
(198,398)
–
Current
US$000
1,922
15,930
251
177
495
31
18,806
2022
Non-current
US$000
–
731
–
–
1,342
–
2,073
As at 31 December
Current
US$000
928
49,579
270
170
495
–
51,442
2021
Non-current
US$000
–
–
–
–
1,837
–
1,837
1
The Company provided financial guarantee to the banks loan entered into by its subsidiary Minera Ares. The financial guarantee was recognised at its fair value at initial
recognition of US$2,948,000 (US$1,472,000 recognised in 2019 and additional US$1,476,000 recognised in 2021). This fair value was determined through the use of certain level 3
estimates, the most significant of which being the estimated rate of interest Minera Ares 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.
10 Provisions
Beginning balance
(Decrease)/increase in provision, net
At 31 December
Less: current portion
Non-current portion
As at 31 December
2022
US$000
2021
US$000
37
(37)
–
–
–
81
(44)
37
–
37
Corresponds to the provision related to awards granted under the Long-Term Incentive Plan (‘LTIP’) to designated personnel of the
Company. Includes the following benefits:(i) 2020 awards, granted in February 2020, payable in February 2023, as 50% in cash, with
a result of US$nil (ii) 2019 awards, granted in July 2019, payable in February 2022, as 50% 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 2 of note 28 to the consolidated financial statements
for details of the LTIP awards and assumptions used for the valuation as at 31 December 2022 and 2021.
202 | Hochschild Mining PLC Annual Report & Accounts 2022
11 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 31 December 2022 and
31 December 2021.
Subsidiaries
Compañía Minera Ares S.A.C.1
Hochschild Mining Holdings Ltd2
Other subsidiaries
Total
As at 31 December 2022
As at 31 December 2021
Accounts
receivable
US$000
Accounts
payable
US$000
Accounts
receivable
US$000
Accounts
payable
US$000
5,123
–
1,513
6,636
5,286
45,000
24
50,310
3,413
–
1,227
4,640
3,906
12,000
24
15,930
1
The account receivable mainly relates to the LTIP 2022, LTIP 2021, LTIP 2020 and LTIP 2019 (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 2022 amounts to US$649,000 (2021: US$361,000). The
Company provided certain financial guarantees on behalf of Minera Ares (note 9).
2 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$45,000,000 (2021: US$28,000,000). A dividend of US$303,385,000 was received in September 2021 offsetting against amounts payable to HM Holdings (refer to note 13).
In February 2023, the Company received a support letter from HM Holdings indicating that it will not request a repayment of the interest free loan of US$45,000,000 for the period
to 30 May 2024.
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$1,140,000
(2021: US$1,149,000).
12 Dividends paid and proposed
Dividends paid and proposed during the year
Equity dividends on ordinary shares:
Final dividend for 2021: 2.335 US cents per share (2020: 2.335 US cents per share)
Interim dividend for 2022: 1.95 US cents per share (2021: 1.95 US cents per share)
Total dividends paid in cash
Dividends in specie paid with Aclara shares (note 5)
Total dividends paid on ordinary shares
Proposed dividends on ordinary shares:
2022
US$000
2021
US$000
11,998
10,019
22,017
–
12,002
10,020
22,022
94,945
22,017
116,967
Final dividend for 2022: nil US cents per share (2021: 2.335 US cents per share)
–
12,000
In August 2021, the Board became aware of an issue concerning technical compliance with the Companies Act 2006 in relation to
the 2017 final dividend, the 2018 interim and final dividends, the 2019 interim dividend, and the 2020 interim and final dividends (the
“Relevant Dividends”). In particular, the Relevant Dividends were paid to shareholders when the Company did not have adequate
distributable reserves.
Significant corrective transactions (namely, a capital reduction and dividend distribution by HM Holdings) were implemented by the
Company in September 2021, shortly after discovery of the issue. Had these internal corporate transactions been implemented
prior to the payment of the 2017 final dividend, adequate distributable reserves would have been available to the Company.
As previously reported, the Board intends to put resolutions to shareholders at a General Meeting to i) complete the rectification of
this past issue and ii) increase further, to the extent practicable, the level of Distributable Reserves available to the Company.
Dividends per share
The interim dividend paid in September 2022 was US$10,019,000 (1.95 US cents per share). There is no proposed final dividend in
respect of the year ending 31 December 2022.
203 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS CONTINUED
13 Finance income
Dividends received from Hochschild Mining Holdings Ltd
Other dividends
Interests on deposits
Income from guarantee
Total
Dividends received
2022
US$000
–
–
12
495
507
2021
US$000
397,069
29
1
310
397,409
During 2021 HM Holdings declared total dividends amounting to US$397,069,000 as follows:
– On 28 September 2021, a dividend of US$303,385,000 which was offset against amounts payable to HM Holdings for the same amount.
– On 3 December 2021, a dividend in specie with fair value of US$93,684,000 was received, representing 70,606,502 shares in Aclara
(refer to note 5).
14 Financial risk management
The Company is exposed to a variety of risks and uncertainties which may have an impact on the achievement of financial and
economic objectives. These risks include strategic, operational and financial risk and are further categorised into risk areas to
facilitate risk assessment. The Company is not exposed to significant sources of commodity price, equity or interest rate risk.
(a) Foreign currency risk
Due to the operations of the Company, it has cash and cash equivalents and trade payables denominated in pounds sterling.
Accordingly, the financial results of the Company may be affected by exchange rate fluctuations. The Company does not use
derivative instruments to manage its foreign currency risks. The following table demonstrates the sensitivity of financial assets and
liabilities, at the reporting date denominated in their respective currencies, to a reasonably possible change in the US dollar
exchange rate, with all other variables held constant, of the Company’s profit before tax and the Company’s equity.
Year
2022
Pounds sterling
2021
Pounds sterling
Increase/
decrease in
US$/other
currencies rate
Effect
on profit
before tax
US$000
Effect
on equity
US$000
+/-10%
-/+40
+/-10%
-/+49
–
–
(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 6.
204 | Hochschild Mining PLC Annual Report & Accounts 2022
(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$662,000 (2021: US$528,000) and the financial support provided by Minera Ares
(see note 2(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:
At 31 December 2022
Trade and other payables
At 31 December 2021
Trade and other payables
Less than
1 year
US$000
51,509
18,134
Between
1 and
2 years
US$000
Between
2 and
5 years
US$000
Over
5 years
US$000
–
–
–
–
–
–
Total
US$000
51,509
18,134
The table below analyses the maximum amounts payable under financial guarantees provided to Minera Ares (note 9), considering
that if the guarantees were to be called, the guaranteed amounts would be due immediately:
At 31 December 2022
Financial guarantees1
At 31 December 2021
Financial guarantees1
Less than
1 year
US$000
Between
1 and
2 years
US$000
Between
2 and
5 years
US$000
Over
5 years
US$000
Total
US$000
300,000,000
300,000,000
–
–
–
–
–
–
300,000,000
300,000,000
1 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 8 and 9).
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.
205 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information PROFIT BY OPER ATION 1 (SEGMENT REPORT RECONCILIATION) AS AT 31 DECEMBER 2022
Group (US$000)
Revenue
Cost of sales (pre consolidation)
Consolidation adjustment
Cost of sales (post consolidation)
Production cost excluding depreciation
Depreciation in production cost
Workers’ profit sharing
Other items
Change in inventories
Gross profit
Administrative expenses
Exploration expenses
Selling expenses
Other income/(expenses)
Operating profit before impairment
Reversal impairment/(impairment) and
write-off of non-current assets, net
Share of post-tax losses from associate
Finance income
Finance costs
Foreign exchange loss
Inmaculada
San Jose
Pallancata
413,928
243,469
(249,623)
(199,343)
6,732
(242,891)
(156,551)
(79,760)
(1,777)
(2,525)
(2,278)
164,305
–
–
(796)
–
(243)
(199,586)
(152,160)
(48,484)
–
(5,003)
6,061
44,126
–
–
(12,614)
–
77,566
(85,733)
567
(85,166)
(75,472)
(9,503)
(1,544)
(495)
1,848
(8,167)
–
–
(622)
–
Consolidation
adjustment
and others
680
7,056
(7,056)
–
–
–
–
–
–
7,736
(54,158)
(56,826)
–
(35,962)
163,509
31,512
(8,789)
(139,210)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
9,531
(11,600)
5,211
(21,776)
(2,622)
Profit/(loss) from operations before income tax
163,509
31,512
(8,789)
(160,466)
Income tax expense
–
–
–
(20,934)
Profit/(loss) for the year from operations
163,509
31,512
(8,789)
(181,400)
1 On a post-exceptional basis.
Total/HOC
735,643
(527,643)
–
(527,643)
(384,183)
(137,747)
(3,321)
(8,023)
5,631
208,000
(54,158)
(56,826)
(14,032)
(35,962)
47,022
9,531
(11,600)
5,211
(21,776)
(2,622)
25,766
(20,934)
4,832
206 | Hochschild Mining PLC Annual Report & Accounts 2022
RESERVES AND RESOURCES
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 2012 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 pages 207 to 209 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 31 December 2022, 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$1,800 per ounce and Ag Price: US$24.0 per ounce.
Attributable metal reserves as at 31 December 2022
Reserve category
OPERATIONS1
Inmaculada
Proved
Probable
Total
Pallancata
Proved
Probable
Total
San Jose
Proved
Probable
Total
Mara Rosa
Proved
Probable
Total
GRAND TOTAL
Proved
Probable
TOTAL
Proved and
probable
(t)
1,150,208
4,061,192
5,211,400
260,868
83,149
344,017
261,412
218,141
479,553
11,791,000
12,014,000
23,805,000
13,463,488
16,376,482
29,839,970
Ag
(g/t)
Au
(g/t)
Ag
(moz)
Au
(koz)
Ag Eq
(moz)
178
149
155
236
199
227
337
346
341
–
–
–
26
43
35
4.1
3.5
3.6
1.1
1.2
1.1
5.9
6.9
6.4
1.2
1.2
1.2
1.5
1.8
1.7
6.6
19.4
26.0
2.0
0.5
2.5
2.8
2.4
5.3
–
–
–
11.4
22.4
33.8
152.2
456.6
608.8
9.0
3.2
12.1
50.0
48.2
98.2
455.8
446.2
902.0
666.9
954.3
1,621.2
18.0
53.7
71.7
2.7
0.8
3.4
6.6
6.0
12.6
34.2
33.5
67.6
61.4
94.0
155.4
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.
1 Operations were audited by P&E Consulting.
207 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information
RESERVES AND RESOURCES CONTINUED
Attributable metal resources as at 31 December 20221,2
Resource category
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
Tonnes (t)
Ag (g/t)
Au (g/t)
Ag Eq (g/t)
Ag (moz)
Au (koz)
Ag Eq (moz)
1,942,000
5,651,000
7,593,000
11,272,000
1,409,000
706,000
2,115,000
3,702,000
701,760
467,160
1,168,920
1,051,110
13,600,000
18,700,000
32,300,000
100,000
5,211,000
17,298,000
22,509,000
775,000
191,000
6,859,000
7,050,000
6,946,000
123,979,000
339,274,000
463,253,000
75,018,000
834,000
1,304,000
2,138,000
3,533,000
147,867,760
390,259,160
538,126,920
102,397,110
184
158
164
96
296
238
277
452
483
386
444
404
–
–
–
–
47
38
40
46
244
187
188
170
–
–
–
–
438
411
421
371
12
9
10
56
4.39
3.79
3.94
2.49
1.36
1.11
1.27
1.70
8.07
6.66
7.50
5.99
1.20
1.10
1.10
0.52
0.47
0.40
0.42
0.57
0.77
0.77
0.77
0.89
0.700
0.643
0.658
0.516
1.35
1.36
1.35
1.26
0.83
0.71
0.74
0.88
514
442
460
283
398
321
372
579
1,088
885
1,007
854
90
83
83
39
82
68
71
88
302
244
246
237
53
48
49
39
539
512
523
465
74
63
66
122
11.5
28.6
40.1
34.9
13.4
5.4
18.8
53.8
10.9
5.8
16.7
13.7
–
–
–
–
7.9
20.9
28.8
1.1
1.5
41.2
42.7
37.9
–
–
–
–
11.7
17.2
29.0
42.1
57.0
119.2
176.1
183.4
274.2
688.2
962.3
902.2
61.5
25.1
86.6
202.7
182.0
100.0
282.0
202.5
510.0
640.0
1,150.0
1.7
78.6
222.5
301.0
14.2
4.7
168.8
173.5
199.5
2,792.0
7,013.0
9,804.0
1,246.0
36.1
56.9
93.0
142.6
3,939.1
8,914.4
32.1
80.2
112.3
102.5
18.0
7.3
25.3
69.0
24.6
13.3
37.9
28.8
38.3
48.0
86.3
0.1
13.8
37.6
51.4
2.2
1.9
53.8
55.7
52.9
209.4
526.0
735.3
93.5
14.4
21.5
35.9
52.8
352.4
787.7
12,852.5
1,140.1
2,911.4
401.8
1 Prices used for resources calculation: Au: $1,800/oz and Ag: $24.0/oz and Ag/Au ratio of 75x.
2 Tables represents 100 % of the Mineral Resource. Resources are inclusive of Reserves.
208 | Hochschild Mining PLC Annual Report & Accounts 2022
Change in attributable reserves and resources
Ag equivalent content (million ounces)
Category
Inmaculada
Pallancata
San Jose
Mara Rosa
Crespo
Azuca
Volcan
Arcata
Total
Resource
Reserve
Resource
Reserve
Resource
Reserve
Resource
Reserve
Resource
Reserve
Resource
Reserve
Resource
Reserve
Resource
Reserve
Resource
Reserve
Percentage
attributable
December
2022
December
2021
Att.1
December
2022
Att.1
Net
difference
% change
100%
235.4
214.8
100%
51%
100%
100%
100%
100%
100%
87.0
45.2
9.2
64.9
18.8
–
–
53.6
–
108.6
–
716.2
–
88.7
–
71.7
94.3
3.4
66.7
12.6
86.4
67.6
53.6
–
108.6
–
828.8
–
88.7
–
(20.6)
(15.3)
49.0
(5.7)
1.8
(6.2)
86.4
67.6
–
–
–
–
(8.7%)
(17.6%)
108.4%
(62.6%)
2.8%
(33.0%)
–
–
–
–
–
–
112.6
15.7%
–
–
–
–
–
–
1,312.6
1,541.9
115.0
155.4
229.3
40.4
17.5%
35.1%
1 Attributable reserves and resources based on the Group’s percentage ownership of its joint venture projects.
209 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information
SHAREHOLDER INFORMATION
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, 10th Floor, Central Square, 29 Wellington Street, Leeds LS1 4DL.
By email
Email: shareholderenquiries@linkgroup.co.uk
By telephone
Telephone: (+44 (0)) 371 664 0300
(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 9am – 5:30pm, Monday to Friday excluding public holidays in England and Wales).
17 Cavendish Square
London
W1G 0PH
United Kingdom
210 | Hochschild Mining PLC Annual Report & Accounts 2022
FORWARD LOOKING STATEMENTS
This Annual Report contains certain forward looking statements, including such statements within the meaning of Section 27A of
the US Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, 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.
211 | Hochschild Mining PLC Annual Report & Accounts 2022
Strategic ReportFinancial StatementsGovernanceFurther Information Notes
212 | Hochschild Mining PLC Annual Report & Accounts 2022
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Hochschild Mining PLC
17 Cavendish Square
London W1G 0PH
United Kingdom
+44 (0) 203 709 3260
info@hocplc.com
www.hochschildmining.com