Focused on the
core business
Hochschild Mining PLC
Annual Report & Accounts 2023
HOCHSCHILD MINING PLC
About us
Hochschild Mining PLC is a leading precious metals
company listed on the London Stock Exchange with
a primary focus on the exploration, mining, processing
and sale of silver and gold. Hochschild has 60 years of
experience in the mining of precious metal epithermal
vein deposits and currently operates two underground
epithermal vein mines, one located in southern Peru and
one in southern Argentina as well as the Mara Rosa open
pit mine in Brazil. It also has numerous long-term projects
throughout the Americas.
Strategic Report
01–
99
Features
2
• A focus on the core
4
• A bright future
8
At a glance
10
Market review
Chair’s statement
16
Chief executive officer Q & A 18
Chief executive officer’s
statement
22
Senior leadership team
24
Our business model
26
28
Our strategy
Key Performance Indicators 30
33
Operating review
40
Financial review
48
Stakeholder engagement
Sustainability report
52
Climate-related Financial
Disclosures
Risk Management
Viability Statement
76
90
97
Governance
100–
149
Financial Statements
150–
226
100
102
Board of directors
Directors’ Report
Corporate Governance
Report
Directors’ Remuneration
Report
123
Supplementary Information 145
Statement of Directors’
responsibilities
104
149
Focused on the
core business
Hochschild is focused on responsible
development at all our core mines
and projects across the Americas.
We always prioritise value creation for
every stakeholder and a key part of
the Company’s ethos has been strong
relationships with our communities
throughout the mining life cycle.
Profit by operation
Reserves and resources
Shareholder information
227
228
231
Further Information
227–
231
1
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
150
157
157
158
159
160
161
215
216
217
218
Strategic Report 1—99Governance 100—149Financial Statements 150—226Further Information 227—231Hochschild Mining PLC Annual Report & Accounts 2023 FEATURE
A focus on the core
Long-term
commitment
to Peru
Modified
environmental
permit approved
for 20 years
In August 2023, the Peruvian
government approved Inmaculada’s
Modified Environmental Impact
Assessment. With this welcome step,
the Company is now in an excellent
position to optimise the mine and
unlock its impressive geological
potential, complete construction
of our new Mara Rosa operation
in Brazil and advance the new
Royropata discovery at Pallancata.
The permitting teams worked for
four years on the project with the
result that Inmaculada will remain a
key part of Hochschild’s portfolio for
many years to come. The extension
reaffirms our commitment to our
stakeholders in the Ayacucho region
and its communities as well as to
Peru overall.
READ MORE
Operating review
page 34
2
Our flagship operation
Located in the Ayacucho region in
southern Peru, we have been operating
the Inmaculada underground operation
for almost nine years and there are
significant areas still to be explored.
Production over the next few years is expected to be around
200,000 gold equivalent ounces per annum whilst costs are
forecast to peak in 2024 before falling thereafter. The permit
approval allows access to high grade resources as well as a
large land package covering some 262 hectares and a new
brownfield programme has recently started with the aim of
increasing the resource quantity and quality. We are currently
targeting zones to the north of the deposit’s original Angela
vein along the so-called Eduardo belt.
204k
AU EQ PRODUCTION IN 2023
1.1mt
TOTAL ANNUAL THROUGHPUT
4.1g/t
AVERAGE GOLD GRADE
177g/t
AVERAGE SILVER GRADE
Government
support for mining
The current Peruvian
government has made mining
investment a priority and, over
the last year, pursued a series
of initiatives to actively promote
the Peruvian mining industry.
This has included: high-level
government delegations being
sent to key mining conferences;
strengthening of the
government’s “Delivery Unit”
in the Ministry of Economy
& Finance to guide project
permitting; and approval of
critical permits for key mining
projects such as Zafranal (Teck
Resources), Inmaculada and
Toromocho (Chinalco).
ESG projects
Further initiatives have also
been launched to streamline
the country’s overall permitting
process such as:
– Prime Minister-led
commission launched
to facilitate investment
projects in key sectors,
including mining
– Single permitting platform
established for mining permits
– Simplification of
environmental permitting
and the process of
indigenous prior consultation
for exploration projects
Environment
To fully embed our
Environmental Culture
Transformation Programme
into our everyday operations,
we invite employees, across
all levels, to be part of our
Environmental Ambassador
Programme. Our ambassadors
serve as catalysts,
accelerating the impact of
the transformation process.
Education
The “Aprender para Triunfar”
programme provides
academic and entrepreneurial
support to primary and
secondary school students,
parents and teachers. Since
2012, over 300 students have
benefited each year from this
educational programme.
Employment
We have worked to strengthen
our social engagement
strategy and find meaningful
ways of supporting our local
communities. In Peru, for
example, this included
increasing local employment
and procurement, supporting
local governments with public
infrastructure, and positively
engaging local communities
through educational, health
and digital connectivity
programmes.
Health
Our Ccalaccapcha medical
campaign was held in Q4 2023
and provided the population of
the Ccalaccapcha community
and surrounding areas with
comprehensive care. The Cora
Cora Health Network and the
Pausa Micro-Network along
with our Inmaculada mine
team, provided a total of 21
specialists for the campaign as
well as equipment and supplies.
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Strategic Report 1—99Governance 100—149Financial Statements 150—226Further Information 227—231Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023 FEATURE
A bright future
Mara Rosa
project
completion
Mara Rosa is an open pit gold project
located in the mining friendly jurisdiction
of Goiás State in Brazil. The brownfield
project benefits from existing
infrastructure and attractive costs.
In 2023, we made excellent progress in advancing construction
of the new mine to completion so that in Q1 2024, we were able
to deliver first gold pour and are on track to meet our production
forecast for the year of between 83,000 and 93,000 ounces
of gold.
The purchase of this asset aligned with our core strengths
and long-term strategy of acquiring and optimising
development stage projects in the Americas and was the result
of a long-term Company review process of a wide range of
growth opportunities. The addition of Mara Rosa increased our
reserves by 75%, is expected to increase our overall production
by 34% and, with its forecast low operating costs, is also
expected to reduce Hochschild’s group all-in-sustaining cost.
The project has benefited from a complementary ESG-led
approach with strong local community and government support
and we have continued that focus during 2023. In August,
Hochschild announced a partnership with Solatio Energia
(a photovoltaic sector specialist) to implement a solar energy
project that will supply renewable energy for 100% of the Mara
Rosa Project’s operations. All production from the new solar
plant will be fed into the National Interconnected System (SIN),
offsetting the total volume of energy consumed by the
operations in Mara Rosa. Construction work on the new solar
plant began in October 2023, and production is scheduled to
begin in January 2025.
Hochschild´s health and safety corporate standards have
also been being implemented, including the introduction of
the Company’s “Seguscore” safety indicator. The project has
completed approximately five million hours without loss time
accident. Frequency and severity indices for 2023 were 0.54
and 2, respectively, both better than our corporate goals.
READ MORE
Operating review
page 38
Attractive
long-life asset
Aligned with our core strengths
and long-term strategy
A mid-sized project in a mining
friendly jurisdiction which has
economic stability, excellent
local infrastructure and a
wealth of experienced local
talent as well as a friendly
community who recognise
the project benefits.
Exploration
Hochschild is initiating a
near-mine exploration
programme which is aiming to
add another 1 million ounces
of gold resources by 2030.
During 2024, we are expecting
to drill three targets including
the Posse, Martinho and
Caxias shear zones.
G O I A S S T A T E , B R A Z I L
G O I A S S T A T E , B R A Z I L
M A R A R O S A
M A R A R O S A
Serra Grande
Serra Grande
(Anglo Gold)
(Anglo Gold)
Chapada
Chapada
(Lundin Mining)
(Lundin Mining)
Pilar
Pilar
(Pilar Gold)
(Pilar Gold)
B R A Z I L
B R A Z I L
M A R A R O S A
M A R A R O S A
B R A S I L I A
B R A S I L I A
82-
105koz Au
23.8mt
ANNUAL PRODUCTION
P&P RESERVES
Complementary
ESG-led approach
Strong local community
engagement
The Knowledge Trail is an
environmental and heritage
education project developed
by Hochschild and aimed at
the communities of Mara Rosa,
Amaralina and the region. The
project is dedicated to Science,
Culture and Education, with
the aims of disseminating
scientific knowledge, raising
environmental awareness
and valuing the region’s
cultural heritage.
Government support
Mining is permitted and
regulated at the state level
and the project has received
strong levels of support from
all key departments of the
Goiás State. All permits have
been granted on time and this
government approach is key
to the ability of the Company
to bring the project in on time
and on budget.
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5
Strategic Report 1—99Governance 100—149Financial Statements 150—226Further Information 227—231Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023 FEATURE
A bright future
An asset
renewed
READ MORE
Operating review
page 36
Significant exploration potential
Royropata zone
W
2.4m @10.5g/t Au; 3217g/t Ag
23.7m @1.7g/t Au; 512g/t Ag
E
8.8m @0.6g/t Au; 147g/t Ag
1.8m @2.3g/t Au; 430g/t Ag
2.5m @2.1g/t Au; 215g/t Ag
17.6m @8.5g/t Au; 2520g/t Ag
3.7m @0.8g/t Au; 251g/t Ag
1.7m @2.6g/t Au; 405g/t Ag
OPEN
a
hit
c
o
c
a
n
a
Y
5.2m @0.2g/t Au; 15g/t Ag
4.0m @0.8g/t Au; 336g/t Ag
1.9m @0.5g/t Au; 230g/t Ag
1.0m @18g/t Au; 1702g/t Ag
0.9m @1.7g/t Au; 618g/t Ag
Marco W
900m
Marco W
700m
Anticlavo
500m
Pablo
800m
Anticlavo
500m
Yurika
600m
Intercepted drill
Economic Area
Vein
Andesitic flow
Andesitic tuff
Dacitic tuff
Agglomerate
Ash tuff
Project metrics
Estimated production start
Average annual production
Initial capex
Average AISC (per AuEq oz)
Pre-tax IRR
2027
100koz AuEq
$55-65m
$1,000-1,100
45-55%
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 700,000 gold
equivalent ounces with significant exploration upside. We are
confident that this new zone will be the future of mining in the
area in the medium to long term, despite the recent necessity
to place Pallancata on temporary care and maintenance.
The area is located in the Ayacucho region in southern Peru,
in Hochschild and we believe that the Modified Environmental
Impact Statement process should be less complex than the
Inmaculada permit. The existing Peruvian government has
been promoting the mining industry and has targeted the
streamlining of the permitting process across the industry. In
addition, the Royropata zone has a much-reduced scope than
the one covering Inmaculada and Hochschild has implemented
a number of initiatives to aid the process still further. These
include: the appointment of an overall steering committee to
manage the process; the selection of a single company for
the engineering and environmental work; and continued
independent peer group review to ensure quality control.
The existing discovery of 700,000 ounces is expected to
continue to grow with the Company targeting a doubling of
resources of similar quality. The key metrics for the existing
resources are detailed on this page, to the right.
Resources
3,162
TONNES
1.9
AU GRAMS PER TONNE
515
AG GRAMS PER TONNE
700
AU KOZ
5
AVERAGE WIDTH (METRES)
6
7
Strategic Report 1—99Governance 100—149Financial Statements 150—226Further Information 227—231Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023 AT A GLANCE
Responsible mining
in Latin America
8
4
1
7
6
Where we operate
Mining operations
Hochschild operates two
underground epithermal
deposits, one of which is
located in the southwest of
Peru and one in the southern
Argentinian province of
Santa Cruz. It also operates
a recently commissioned
open-pit mine in the Goiás
State in Brazil.
Operations
Inmaculada (Peru)
San Jose (Argentina)
Mara Rosa (Brazil)
5
2
3
Project pipeline
Hochschild currently has a
number of projects in Peru
and Chile. These include an
Advanced Project, former
operations that still have
strong geological potential
through to our early stage
opportunities and regional
targets close to our
current mines.
Development Projects
Royropata (Peru)
Volcan (Chile)
Exploration Projects
Ares (Peru)
Arcata (Peru)
8 Azuca (Peru)
Who we are
Our purpose
We are a leading underground precious
metals company, focusing on the
exploration, mining, processing and
sale of gold and silver in the Americas.
Responsible and innovative mining
committed to a better world.
Our values
— Innovation
— Inspiring others
— Recognising talent
— Seeking efficiencies
— Demonstrating responsibility
Our business in numbers
Our commitment to sustainability
Peru
3,982 employees (incl. contractors)
$75.8m wages paid
$5.8m taxes and royalties
$51.4m local procurement spend
Argentina
1,761 employees (incl. contractors)
$71.1m wages paid
$Nil taxes and royalties
$45.4m local procurement spend
Brazil
2,382 employees (incl. contractors)
$3.2m wages paid
$Nil taxes and royalties
$59.2m local procurement spend
SILVER PRODUCTION IN 2023
9.5m oz
186k oz
GOLD PRODUCTION IN 2023
READ MORE
Operating review
page 33
READ MORE
Sustainability report
page 52
Our commitment to sustainability
underlies how we operate as a business;
it shapes our culture and how we work
in our teams day-to-day. It shapes our
relationships with our communities,
sub-contractors and local governments,
and it underpins how we interact with the
environment and the physical landscape
in which we operate.
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Strategic Report 1—99Governance 100—149Financial Statements 150—226Further Information 227—231Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023 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 and silver prices in 2023 (indexed)
115
110
105
100
95
90
85
80
Jan 23
Feb 23
Mar 23
Apr 23
May 23
Jun 23
Jul 23
Aug 23
Sep 23
Oct 23
Nov 23
Dec 23
Silver (NYM $/ozt) Continuous (SI00-USA)
Gold (NYM $/ozt) Continuous (GC00-USA)
Source: Nasdaq
10
READ MORE
Our strategy
page 28
READ MORE
Operating review
page 33
Silver
The silver price ended 2023
at US$24.1/oz which was flat
on the 2022 closing price.
The average 2023 silver
price of US$23.5 /oz –
was 8% higher than 2022.
$24.1/oz
+8%
2023 YEAR-END PRICE
AVERAGE PRICE VERSUS 2022
Gold
The gold price ended 2023 at
US$2,072/oz – a record high
year-end close – generating
an annual return of 13%.
The average 2023 gold
price of US$1,955 /oz –
also a record – was 8%
higher than 2022.
$2,072/oz
+8%
2023 YEAR-END PRICE
AVERAGE PRICE VERSUS 2022
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Strategic Report 1—99Governance 100—149Financial Statements 150—226Further Information 227—231Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023 MARKET REVIEW
CONTINUED
Gold experienced a strong year with its performance
controlled by the ongoing reaction to war in Ukraine
and latterly in the Middle East and the ebb and flow
of US interest rate expectations, the US economy
and therefore its impact on the US dollar.
Summary
Average 2023 price
$1,955/oz
Gold is a precious metal bought
by people across the world
for different reasons, often
influenced by socio-cultural
factors, market conditions,
and macro-economic drivers
in their country.
Demand
Central banks
23%
Investment
21%
Supply
Recycled
gold
Mine
production
Jewellery
49%
Technology
7%
26%
74%
The price rose early in the year to a high of around $1,950
an ounce but as interest rates reduced, expectations were
tempered by strong US data in February, the price fell to just
over $1,800. However, with worries over the health of US banks,
the price rallied in April to a level of over $2,000 per ounce
before falling sharply in September and early October due to
the acceleration of US retail inflation, which raised the odds
for another rate hike. The price then rallied to all-time highs in
December as geopolitical risk increased due to the war in the
Middle East as well as rising expectations of US interest rate
cuts in 2024. The gold price ended the year close to highs at
$2,072 with the 2023 average at approximately $1,955, an 8%
rise on 2022.
Annual gold demand of 4,448t was 5% below a very strong 2022.
Inclusive of significant OTC and stock flows (398t), total gold
demand in 2023 was the highest on record at 4,899t. Central
bank buying was strongly maintained during the year with
annual net purchases of 1,037t almost matching the 2022
record, falling just 45t short. Global gold ETFs saw a third
consecutive annual outflow, losing 244t although the pace of
outflows slowed markedly into year-end, but October’s hefty
outflows dominated the Q4 picture.
Annual bar and coin investment saw a mild contraction (-3% y/y)
as divergent trends in key Western and Eastern markets offset
one another. On the other hand, annual jewellery consumption
held steady at 2,093t, even in the very high gold price
environment with China’s recovery supporting the robust global
total. Finally, despite a Q4 recovery in electronics, the annual
volume of gold used in technology fell below 300t for the first
recorded time.
Full-year global investment demand (the sum of bars, coins
and ETFs) was the lowest since 2014. Gold ETFs contributed
to much of the decline, as global outflows continued. However,
thanks to a positive gold price performance, global assets under
management in these products grew by 6% in US dollar terms.
Bar and coin investment moderated as a sharp decline in
Europe (largely due to rising interest rates and the cost-of-living
crisis) outweighed strong growth in China and Turkey.
Total supply in 2023 increased by 3%, the second successive
year of modest increases. Annual production of 3,644t was
the highest since 2018 as major production disruptions were
generally absent. Higher gold prices prompted a 9% gain in
recycling, to 1,237t. Early estimates suggest a small increase
in outstanding producer hedge books (e.g. Hochschild) but the
large amount of positions due to maturing in Q4 2023 mean
there is lower than usual confidence about the end-of-year
position for the gold mining industry.
Possible drivers for gold in 2024
Total investment is likely to be higher in 2024 but, much of this
demand could come from the less visible OTC segment. Early
weakness in gold ETFs could see a turnaround by mid-year,
aided by anticipated rate cuts and continued geopolitical risk.
Bar and coin demand is likely to stay healthy and in line with
the 10-year average, as Chinese and Indian demand strength
offsets European weakness.
Central banks are expected to keep buying, in excess of the
pre-2022 annual average of around 500t. They almost matched
their 2022 total last year and the expectation is for another solid
year of buying, albeit lower than 2023.
Jewellery demand may struggle to remain high, as economic
slowdowns and high gold prices start to bite whilst technology
demand is expected to benefit from strong positive guidance
on semiconductors and from AI fever.
Total supply is expected to rise with planned expansions/
higher grades taking primary production to new highs. Global
economic resilience should help contain volumes although many
economies are set to slow further.
Source: World Gold Council, Metals Focus
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MARKET REVIEW
CONTINUED
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.
Summary
Average 2023 price
$23.5/oz
Silver is known for its lustrous
appearance, malleability,
and conductivity and has
been prized for centuries
in jewellery, currency, and
industrial applications. With a
rich history tied to wealth and
craftsmanship, silver plays
a vital role in various sectors,
from technology to medicine.
Demand
Net physical
investment
23%
Jewellery &
Silverware
20%
Photography
2%
18%
Supply
Recycled
silver
Mine
production
Industrial uses
55%
82%
Possible drivers for silver in 2024
Global silver demand is forecast to reach 1.2 billion ounces in 2024,
the second-highest level recorded. With stronger industrial offtake
the principal catalyst.
US interest rate cuts appear less likely in the very short term so
investment in precious metals could be under pressure. This should
change in the second half of the year, the economic backdrop is
expected to turn more favourable to silver investment when the
US Fed may begin cutting rates.
Global silver demand is expected to rise 1%, pushed higher by the
continued strength of industrial end-uses and a recovery in jewellery
and silverware demand.
Total global silver supply is forecast to grow by 3% in 2024 to an
eight-year high of 1.02 billion ounces, entirely led by a recovery
in mined output although this growth is reliant on undisrupted
operations at the major mines as well as commissioning at
Polymetal’s Prognoz silver mine in Russia, the start-up of Gold Field’s
Salares Norte gold mine in Chile, and the continued ramp-up of
operations at Coeur’s Rochester expansion project in the US.
Source: Silver Institute, Metals Focus
This might account for the silver price movements in 2023 being
highly volatile, trading between just over $20 per ounce in March
but jumping by some 30% to $26 by early May as worries over
the US banks caused both silver (and gold) to recover strongly.
Moving with gold throughout the remainder of the year, the silver
rise fell in October on worries over the war in the Middle East
before recovering by the end of December to be virtually flat
on the year. The average for the year was approximately
$23.5 per ounce.
Overall, despite weaker demand and a slight drop in total supply,
the global silver market is forecast to see another sizeable physical
deficit in 2023, marking the third consecutive year of an annual
deficit. At 140 million ounces, this will be 45% lower than 2022’s
all-time high, but this is still elevated by historical standards.
Industrial demand in 2023 is expected to be a new annual high.
Key drivers in this growth are being driven by a strong green
economy, including investment in photovoltaics (PV), power
grids and 5G networks, as well as increased use of automotive
electronics and supporting infrastructure. Improvements in PV
were particularly noticeable as the increase in cell production
exceeded silver thrifting, which helped drive electronics and
electrical demand higher.
Silver jewellery and silverware demand have fallen by 22% and
47%, respectively, to 182m oz and 39m oz in 2023. Losses are led
by India, where full-year demand is expected to have normalised
after a surge in 2022. Excluding India, global jewellery demand is
expected to have edged slightly higher in 2023, while silverware
will fall by 12%.
Physical investment in 2023 is projected to have fallen by
21% to a three-year low of 263m oz. While most markets have
seen weaker volumes, losses have been concentrated in India
and Germany. US investment has also turned lower, but only
modestly, thanks to buoyant safe-haven demand following the
regional banking crisis. The resilience of the US market helps
explain why the global total has stayed historically high.
Like gold, silver ETFs are forecast to have recorded net outflows
for the second year in a row. As was the case in 2022, the bulk of
year-to-date redemptions reflect continued monetary tightening
and its consequential boost to yields, especially in real terms.
However, the decline in holdings in 2023 is expected to be lower
at 40m oz in 2023, roughly a third of 2022’s record outflows.
In 2023, global mined silver production is expected to have fallen
by 2% year-on-year to 820m oz, driven by lower output from
operations in Mexico and Peru (e.g. Pallancata). Even so, overall
production from primary silver mines will still rise this year, driven
by the expected ramp-up at the Juanicipio mine. Silver output
from lead/zinc mines will also increase as Udokan in Russia comes
on-stream.
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CHAIR’S STATEMENT
Another important year
for strategic development
Eduardo Hochschild
Company Chair
I am proud and humbled by the
efforts of management and all
across the business for achieving
our best safety performance in
the Company’s history.
2023 has proved to be a momentous year for Hochschild Mining.
We are proud of the significant progress we have made in the
execution of our strategy which has included securing
Inmaculada’s Modified Environmental Impact Assessment
(MEIA) in August and the recent completion of our first mine
in Brazil. I am also delighted with the appointment of Eduardo
Landin as our new CEO and believe we will be able to count on
his experience and leadership qualities. We believe that the
Company has reached an inflection point, with strong
momentum in the business. Furthermore, this is supported by
our ongoing drive to ensure our people feel safe, empowered
and respected thereby creating a work environment where
everyone can be at their best.
On the subject of making people feel safe, I am proud and
humbled by the efforts of management and all across the
business for achieving our best safety performance in the
Company’s history. Our key performance indicators objectively
demonstrate that our safety initiatives – all implemented as
part of our Safety Culture Transformation Plan, are successfully
embedding a safety-first culture. We cannot use this as a
reason to be complacent, and so we will continue to work on
maintaining our focus on achieving our strategic goals without
compromising the safety of our people.
The Company’s commitment to managing its environmental
impact has also been clearly evident during 2023. I am pleased
to report that, during the year, Hochschild became the first
mining company in Peru to secure a green loan. This innovative
form of financing sees interest costs adjusted according to
the Company’s environmental performance on three ESG
indicators: safety frequency index, fresh water consumption and
waste disposal. It is therefore particularly gratifying to note that
the Company’s overall ECO Score for 2023 was the highest since
its implementation in 2015 reflecting, most notably, our highest
level of efficiency in terms of water consumption and waste
production. The year also saw the setting of our 2030 ambitions
in the area of ESG (Environmental, Social and Governance) and
which, with respect to our greenhouse gas emissions, will see us
on our way to achieving Net Zero by 2050.
In acknowledgement of our social licence to operate, our
community programmes during the year focused on digital
inclusion, health and nutrition, education and the promotion
of socio-economic development. Examples of the education
programmes organised by Hochschild include the delivery of
technical skills’ training through the digital centres established as
part of the Future Connection initiative. In addition, we have held
healthcare campaigns in conjunction with local authorities in
remote communities close to the Inmaculada mine, as well as
providing healthcare services as part of our “Always Healthy”
programme. In seeking to promote socio-economic development,
the Company has taken a varied approach, from contracting
with local vegetable producers for catering supplies for the
Inmaculada mine and providing training on creating digital
content for female entrepreneurs in Perito Moreno, the town close
to our San Jose operation. Further details on these programmes
can be found in our Annual Report.
Strategically, Brazil has become an important jurisdiction for us
with an attractive mix of economic stability, strong government
support for mining, excellent infrastructure and a very
experienced local talent pool. We recently achieved first gold
pour at our new Mara Rosa mine which has been constructed
on schedule and on budget, a rarity in the industry. We are very
proud of the entire team in Goiás and are confident that the
ramp-up period will progress smoothly. The mine will produce
between 83,000 to 93,000 ounces of low-cost gold this year
and we can look forward to increasing production and
reducing costs in the next few years.
Our entry into Brazil is also yielding further business
development opportunities. We recently announced that we
have secured an option to acquire 100% of Cerrado Gold’s
Monte Do Carmo gold project in the state of Tocantins. This
low-cost opportunity will build on the template established at
Mara Rosa and, if exercised, provide the Company with a further
leg of growth at a compelling cost profile in a mining-friendly
jurisdiction. We plan to explore its geological potential, confirm
the operational assumptions of the project and advance the
permitting process. We will invest a limited sum before making
a final acquisition decision in the next 12 months.
The brownfield team’s exploration plans for 2023 were affected
by the permitting delays at Inmaculada and consequently
started later in the year in Peru. We have already had some
encouraging drill results at high grade areas of Inmaculada but
there is still work to be done there as well as at San Jose. We will
update on the overall results during 2024. At Pallancata, work
on the MEIA required for our exciting Royropata discovery was
started during the year and has made good progress and we
have also applied for the requisite exploration permit to drill for
additional resources for the deposit. We expect this area to start
yielding new low-cost production in 2027.
Our operational team had to respond to a degree of disruption
during 2023 including local and national social disturbances
in Peru at the start of the year and subsequently the ongoing
impact from delays to the Inmaculada MEIA, which impacted
exploration and mine development work. However, we are proud
of the overall performance of all our teams during the remainder
of the year and we were therefore able to meet our revised
production and cost targets. In addition, with another year of
strong precious metal prices, the business generated strong
cash flow and was able to comfortably finance our capital
commitments at Mara Rosa whilst maintaining a robust
balance sheet position.
During the year, we saw changes in the composition of the Board
with Eileen Kamerick and Nicolas Hochschild stepping down as
Non-Executive Directors at the 2023 AGM and, as part of our
Board succession plan, I am pleased that Joanna Pearson
joined the Board on 1 October 2023. Given her extensive
experience in public company reporting, Joanna will assume
the Chair of the Audit Committee at the conclusion of this year’s
AGM. I would like to thank Jill Gardiner for chairing the Audit
Committee so diligently during this interim period.
$694m
REVENUE
2022: $736m
$274m
ADJUSTED EBITDA
2022: US$249m
Finally, I would like to take the opportunity to thank Ignacio
Bustamante, who stepped down from the Board after having
ensured a smooth succession to Eduardo Landin following his
appointment in August. Ignacio has been with the Company
for over 30 years and 13 years of that as CEO and we are very
grateful to him for his strong leadership, and we wish him all the
best for the future.
Outlook
In 2023, precious metal prices continued to experience volatility
albeit within a fairly tight range. Gold fell to almost $1,800 per
ounce in the first quarter of the year as unexpectedly strong
US economic data propelled both yields and the US dollar
higher. However, it then rebounded quickly and although there
was another fall in September due to stronger US interest rate
expectations, the price ended the year close to record highs of
$2,100 per ounce. 2024 has so far continued the price strength,
so we remain confident that when combined with the new
low-cost ounces set to be delivered from Mara Rosa in the
first half onwards, we will continue to generate good cash flow.
At this time, our financial targets include the reduction of our
existing debt levels in the medium term and for this reason,
we have continued to take advantage of the gold price strength
and executed a number of hedges for the next few years at
Inmaculada and Mara Rosa. In addition, with that in mind, the
Board has decided that it would be inappropriate to restore
the final dividend at this stage but will reassess the potential
for capital return at the interim results in August.
Let me end by thanking the new leadership team and the
several thousand Hochschild employees, contractors and
partners who delivered for our Company and its stakeholders
during the year.
Eduardo Hochschild
Chair
12 March 2024
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Hochschild has been operating for
over 100 years, has a proven track
record and the potential to deliver
considerable growth and value for
all of our stakeholders.
Eduardo Landin
Chief Executive Officer
Biography
Eduardo Landin became
CEO of Hochschild Mining
PLC in August 2023.
READ MORE
Board of Directors
page 100
Q — Why did the opportunity to become CEO at Hochschild
excite you?
A. The strength of the underlying business speaks for itself.
Hochschild has been operating for over 100 years, has a proven
track record and the potential to deliver considerable growth
and value for all of our stakeholders. We have an exciting
operating, exploration and development asset portfolio, and a
clear roadmap to growing production and reducing costs while
supplementing our business with additional resources from our
existing projects. The business is primed for growth and, having
worked at Hochschild for over 17 years, I can see clearly how we
can deliver on this growth opportunity and unlock significant
shareholder value. This, combined with my confidence in my
ability to lead the Company through this next phase of growth,
underpins my excitement at taking on the role.
Q — You have recently laid out an evolved strategy for the
Company. What gives you confidence Hochschild can deliver it?
A. Our growth strategy is incredibly simple: it revolves around
reducing our cost base while increasing our annual production
rates. We held a Capital Markets Day in November 2023,
illustrating how we will deliver this year-on-year into the medium
term. At the same time, we will continue our extensive brownfield
development programme, with this being a clear growth driver
as we continue to explore the land surrounding our existing
assets, with a disciplined approach to capital deployment and
delivering a best-in-class ESG performance.
I am confident that the strategy we set out was compelling and
will result in delivering considerable value for all of our internal
and external stakeholders. This is absolutely the right approach
for driving our growth.
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CONTINUED
The Company is incredibly
experienced at bringing
development projects into
production, including the
construction of five mines
since our IPO in 2006.”
My confidence is supported by the fact that we have
an incredibly experienced, talented, and motivated team,
all of whom have spent a considerable amount of time at the
Company and in the industry. I have been at the Company for
over 18 years whilst our CFO Eduardo Noriega has been here
for 17 years. We will leverage this expertise to execute our
strategy effectively. The Company is incredibly experienced at
bringing development projects into production, including the
construction of five mines since our IPO in 2006. We also have
a proven track record of resource replacement. I have full faith
in their capabilities.
Ultimately, it is our people and culture that will underpin the
delivery of this strategy.
Q — Brownfield development is core to the Company’s
growth plans. What should investors have their eyes on?
A. Brownfield development is absolutely the right internal
growth driver for us. It represents a highly effective means of
adding low-cost ounces and increasing the life of our projects,
particularly at our epithermal deposits where the formal mine
life is typically shorter.
Q — South America has given miners their fair share of
turbulence recently. How do you look at the landscape in the
countries where Hochschild operates?
A. We acknowledge the geopolitical and regulatory challenges
faced in South America, not only by Hochschild but a number
of others in recent years.
However, I have to report that we are currently not facing any
operating difficulties in any of our regions of focus.
We continue to enjoy operating in Brazil under the economic
stability provided by the Lula government, with the state of
Goiás in particular, being incredibly mining-friendly.
As reported at the Capital Markets Day, we are finding Peru
significantly easier to operate in the last year, with the
government actively promoting the mining sector in the last
year and with the social backdrop improving.
Our long-standing presence in these critical regions has given
us a nuanced understanding of local geology, regulatory
frameworks, and community dynamics, providing us with
a significant competitive edge and point of differentiation.
At Inmaculada, we have successfully added 2.4 million gold
equivalent ounces through drilling since production began in
2015, with the potential for an additional 2.5 million ounces yet to
be discovered. Inmaculada includes a large land package that
the team is continuing to explore, and we are confident there will
be a number of significant discoveries here based on experience
and the work carried out to date.
Royropata, a brownfield discovery in close proximity to
our Pallancata mine, is anticipated to become a low-cost,
100,000-ounce-per-year mine in the medium term, with
commissioning expected to be in 2027. Royropata will utilise
the existing infrastructure at Pallancata, lowering the capex
associated with this project and reinforcing my confidence
in its delivery.
We are also engaged in an exploration programme at Mara
Rosa, our new mine in Goiás, Brazil, and look forward to updating
shareholders on this in the near future.
We acknowledge the geopolitical
and regulatory challenges faced
in South America, not only by
Hochschild but a number of
others in recent years.”
Q — Mara Rosa has all the hallmarks of being a great
acquisition, but creating value through M&A in the precious
sector is notoriously difficult; how will you approach it?
A. I am delighted by the progress made at Mara Rosa, which
is an excellent asset that we are proud to have brought into
production. The project is progressing according to plan, being
on time and on budget, and provides the opportunity to increase
production and reserves at an attractive cost. Mara Rosa also
boasts promising brownfield exploration prospects, which we
continue to explore in pursuit of future growth.
We have also established clear parameters for assessing future
M&A opportunities. We are specifically interested in profitable
pre-production assets where our construction, operational and
brownfield exploration strengths differentiate us from other
potential buyers and leave us well-placed to progress the
project. For example we recently made steps to potentially add,
in the medium term, another low-cost project in Brazil to our
pipeline. The option agreement we have executed with Cerrado
Gold for their Monte Do Carmo project in Tocantins state
delivers an opportunity in a mining-friendly jurisdiction and
will add significant increase in reserves with strong exploration
upside. The transaction structure is also to our advantage
by limiting the upfront consideration to secure an advanced
development project.
Q — The sector continues to battle cost inflation. What gives
you confidence that Hochschild can manage it?
A. Rising costs are a significant issue across the sector, although
I’m confident that Hochschild will be able to execute our strategy
to reduce our all-in sustaining costs by 20% by 2026.
We are implementing a stringent cost reduction project at
Inmaculada, optimising the asset’s operating expenditure while
simultaneously boosting productivity through integrating new
technologies and enhancing our supply chain management
processes to ensure robustness and efficiency.
The construction of Mara Rosa in a new jurisdiction, on time and
on budget, demonstrates the strong track record the Company
has in cost and capex management.
Q — What Company ESG achievements have made you proud,
and where are your priorities?
A. ESG is fundamental to our purpose and is a fundamental
component of the growth strategy I delivered at the Capital
Markets Day. We are committed to minimising our environmental
impact, and have set a number of ambitious goals to this end.
These ambitious targets include a 30% reduction in Scopes 1
and 2 emissions by 2030 and achieving net-zero greenhouse gas
emissions by 2050. Equally important is our dedication to creating
a positive impact on the local communities where we operate and
fostering strong community relationships. We prioritise local
employment, with 59% of our total workforce hired locally.
In 2023, we achieved our ongoing target of zero fatalities
and the lowest Lost Time Injury Frequency Rate (LTIFR) in the
Company’s recent history at 0.99. The team is incredibly proud
of this achievement, at a rate that is considerably below the
local and industry average.
Moving forward, our priorities include further enhancing
workplace safety, reducing our environmental footprint,
fostering inclusive growth and development in our communities,
and upholding our commitment to ethical business practices
and social responsibility.
We aim to be recognised
as a trusted partner for
local people, driving value
for all stakeholders.”
Q — How do you define success for Hochschild in the next three
to five years?
A. Ultimately, success will be measured by our ability to deliver
on the strategic targets we have outlined to the market. This
includes achieving growth in production while simultaneously
responsibly reducing costs.
This also includes delivering growth via brownfield
exploration projects and value accretive M&A, both of which
I have set our clear parameters regarding and we are pursuing
these to drive growth.
Equally important is our dedication to developing the local
communities in which we operate. We aim to be recognised
as a trusted partner for local people, driving value for all
stakeholders. This means actively engaging with
communities, fostering economic development, and
promoting social well-being.
With an experienced and motivated team, an exciting asset
portfolio, and a commitment to excellence, we are well-
positioned to realise these goals while generating meaningful
shareholder value.
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An exciting future for
growth in the Americas
Eduardo Landin
Chief Executive Officer
Our commitment to being a
responsible mining company
is unqualified, and so I am very
proud of the breadth of progress
made during the year in the
different key areas of ESG focus.
I was honoured to be appointed as CEO of Hochschild Mining
PLC in August 2023 and believe that a relationship with our
stakeholders should be based on trust and a thorough
appreciation of our key strengths. We are dedicated to
transparency and responsible business practices. Our core
competencies drive success and our leadership team has
recently outlined a renewed strategy based around brownfield
exploration, operational efficiency and disciplined capital
allocation which we believe will deliver profitable growth from
our key Latin American mining jurisdictions. This is supported
by a focus on consistent ESG performance and the capacity
to continually learn from experience.
The first eight months of 2023 were challenging for Hochschild
as we reached the final stages of securing Inmaculada’s MEIA.
The delay in securing the approval unfortunately impacted our
operational and exploration strategy in the short term and will
have a knock-on effect for 2024. However, with the approval
secured, the Company is now in a strong position to optimise
the Inmaculada mine and unlock its impressive geological
potential. The approval also reaffirms our commitment to our
stakeholders in the Ayacucho region and its communities as
well as to Peru overall.
We have also recently completed construction at Mara Rosa
in Brazil and are now in the ramp-up phase, a testament to our
proven development expertise. I am also excited by the potential
at the new Royropata deposit which we believe will add
significant additional growth to the Company in the next
few years.
ESG
Our commitment to being a responsible mining company is
unqualified, and so I am very proud of the breadth of progress
made during the year in the key areas of ESG focus. It gives me
great pleasure that we have brought our corporate culture of
social responsibility to our new operation in Brazil. Examples of
this include the Knowledge Trail at Mara Rosa which was given
the Sustainable Goiás Award by the Goiás State Environment
and Sustainable Development Department and our partnership
to implement a solar energy project that, in time, will see the
Mara Rosa operation supplied entirely by renewable energy.
Finally, I would like to echo the Chair’s comments on the
Company’s robust overall performances in the areas of
safety and environmental performance.
Operations
Hochschild’s output in 2023, although revised by the MEIA delay
at Inmaculada, continued our strong track record of meeting
annual guidance. Overall attributable production was 300,749
gold equivalent ounces (25.0 million silver equivalent ounces)
which was only slightly lower than the original 2023 budgeted
figure of between 301,000 and 314,000 gold equivalent ounce
range. This was produced at an all-in sustaining cost of
$1,454 per gold equivalent ounce ($17.5 per silver equivalent
ounce) which was, as expected, slightly higher than 2022
reflecting the lower grades at the declining Pallancata mine
and lower production at San Jose in Argentina. Pallancata was
9.5m oz
SILVER PRODUCTION
2022: 11.0m oz
186k oz
GOLD PRODUCTION
2022: 206k oz
placed on temporary care and maintenance during the fourth
quarter, and this will remain until we secure the permits to mine
the new large, high-quality resources discovered in the
Pallancata area at Royropata.
Despite a degree of disruption from the local and national
protests in late 2022 and early 2023, in addition to the delays to
the MEIA approval, the team at Inmaculada had another strong
year producing 203,849 gold equivalent ounces (2022: 226,363
ounces) at $1,287 per gold equivalent ounce. At Pallancata,
production in 2023 reflected a mining area that was almost
depleted with output at 2.4 million silver equivalent ounces (2022:
3.3 million ounces) at a cost of $25.3 per silver equivalent ounce.
In Argentina, the San Jose mine was impacted by lower resource
grades but nevertheless production was only 6% below the 2022
figure at 11.1 million silver equivalent ounces (2022: 11.8 million
ounces) with costs at $18.9 per silver equivalent ounce. These
costs are expected to moderate in the next few months following
the recent devaluation of the currency in Argentina.
Projects
At the Mara Rosa project in the state of Goiás in Brazil, we have
made excellent progress during the year and are proud to have
recently achieved first gold pour at the new operation, having
completed construction on time and within budget. We are
currently in the ramp-up phase and expect to reach full
production in June. The mine remains on track to produce
between 83,000 and 93,000 ounces in 2024 at a low all-in
sustaining cost of between $1,090 and $1,120 per ounce of gold.
I am also excited that our business development team has
recently made steps to potentially add, in the medium term,
another low-cost project in Brazil to our pipeline. The option
agreement we have executed with Cerrado Gold for their Monte
Do Carmo project in Tocantins state delivers an opportunity to
build on our emerging Brazilian platform by adding a significant
increase in reserves with strong exploration upside in a mining-
friendly jurisdiction. The transaction structure limits the upfront
consideration to secure an advanced development project.
Exploration
As mentioned by our Chair above, the brownfield programme
for 2023 was also affected by the MEIA delay and only started
towards the end of the year at Inmaculada and San Jose. Plans
for 2024 include adding high grade resources close to the
mining area at Inmaculada at the Angela North East and nearby
vein structures. At San Jose we will continue with our aim to
increase the life-of-mine and there will also be directional and
infill drilling at Pallancata and additional brownfield work close
to Mara Rosa.
Financial position
With production remaining robust and a healthy price
environment, the Company generated good cash flow with the
result that liquidity remains strong. Cash and cash equivalents
of $89.1 million at the end of December (2022: $143.8 million)
reflect capital expenditure of $121 million at Mara Rosa during
2023. This, along with the draw-down of $60 million from the
$200 million medium-term loan facility, has led to a net debt
position of $257.9 million at 31 December 2023 (31 December
2022: $175.1 million).
Financial results
Total Group production was 10% lower than 2022 and, although
this was partially offset by a 10% rise in the gold price received
and a 1% rise in the silver price, revenue decreased by 6% to
$693.7 million (2022: $735.4 million). All-in sustaining costs were
in line with revised guidance at $1,454 per gold equivalent ounce
or $17.5 per silver equivalent ounce (2022: $1,448 per gold
equivalent ounce or $17.4 per silver equivalent ounce). Adjusted
EBITDA of $274.4 million (2022: $249.6 million) increased by 10%
versus 2022 reflecting the price rises and a recent devaluation
of the currency in Argentina. Pre-exceptional earnings per share
of $0.02 (2022: $0.01 per share) includes the impact of a decrease
in gross profit due to lower gold and silver production, lower
exploration expenses mainly due to termination of the option
over Snip project and an increase in income tax mainly due to
the higher profitability and currency devaluation in Argentina
impacting the deferred income tax. Post-exceptional loss per
share was $0.10 (2020: $0.01 earnings per share) and includes:
the impairment losses at the Azuca and Crespo projects of
$63.3 million and the San Jose mining unit of $17.4 million; the
restructuring charges in Pallancata of $9.0 million resulting from
placing the operation in care & maintenance; and the impairment
of the investment in Aclara Resources Inc. of $7.2 million. The net
after-tax effect of exceptional items is a loss of $69.5 million.
Outlook
We expect attributable production in 2024 of between
343,000-360,000 gold equivalent ounces. This will be driven
by: 200,000-205,000 gold equivalent ounces from Inmaculada;
an attributable contribution of 60,000-62,000 gold equivalent
ounces from San Jose; and first production from the new
Mara Rosa mine of between 83,000 and 93,000 ounces. All-in
sustaining costs for operations are expected at between $1,510
and $1,550 per gold equivalent ounce. This forecast reflects
$45 million of capital expenditure at Inmaculada which were
previously deferred due to the MEIA delay which mostly consists
of the expansion of the tailings dam and the construction of a
reverse osmosis plant.
A project capex budget of $10 million has been assigned to
complete the Mara Rosa project in the first few months of the
year, whilst the budget for brownfield exploration has recently
been set at approximately $33 million.
The construction of Mara Rosa and the approval of the
Inmaculada MEIA have been key milestones for Hochschild
during the year. Having been in the role of CEO for over six
months, I believe we have a compelling investment case based
around the next 20 years of our Inmaculada flagship mine,
near-term growth from Brazil and Peru and a focus on capital
discipline which includes debt repayment, replenishing our
project pipeline and capital return. 2024 has started with a
much calmer social situation in Peru and we welcome the
government’s initiatives to promote mining in Peru worldwide.
A consistent execution of our strategy gives me great confidence
in our ability to generate long-term value for our shareholders,
partners and stakeholders. In my first Full Year reporting as CEO,
I want to be clear: I believe Hochschild is a great company, and
we will constantly aim to ensure we become a great investment
in a responsible manner.
Eduardo Landin
Chief Executive Officer
12 March 2024
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A highly skilled and
experienced team
Eduardo Noriega
Chief Financial Officer
Eduardo Noriega was
appointed Chief Financial
Officer of Hochschild Mining
on 10 December 2021 having
joined the Company in March
2007. Eduardo previously
served as Head of Group
Finance with responsibility
for financial planning and
controls, treasury, corporate
finance, tax and accounting.
Prior to joining Hochschild,
Eduardo worked in various
finance roles for Dell Inc.,
Union de Cervecerías Peruana
Backus & Johnston and Del
Mar Fishing Company.
Eduardo is a graduate in
Business Administration from
Universidad del Pacifico and
holds an MBA from the
University of Texas.
Eduardo Landin
Chief Executive Officer
Eduardo Landin was
appointed CEO on 26 August
2023. Eduardo previously
served as Hochschild’s COO
for over 10 years.
He joined the Group in January
2008 as General Manager of
the Company’s operations in
Argentina. In 2011 he became
General Manager of Projects
with direct responsibility over
the development of the
Inmaculada and Crespo
Advanced Projects.
Before joining Hochschild,
Eduardo held the position
of Corporate Development
Manager at Cementos
Pacasmayo and, prior to that,
he worked in the Peruvian
Ministry of Energy and Mines.
Eduardo began his career at
Repsol S.A. where he worked
for over 10 years in England,
Spain and Peru. Eduardo is
a Chartered Mechanical
Engineer and holds a B.Eng
(Honours) in Mechanical
Engineering from Imperial
College, London and an
Executive MBA from the
Universidad de Piura, Peru.
He is a Fellow of the Institution
of Mechanical Engineers.
Rodrigo Nunes
Chief Operating Officer
Rodrigo Nunes was appointed
Chief Operating Officer of
Hochschild Mining in August
2023 having joined the
Company in 2021 as
Corporate Director, Technical
Services & Projects, covering
the Company’s operations,
development projects and
M&A efforts globally. Prior
to that, he was Vice President
of Mining for Optimize Group,
a consulting engineering
company based in Toronto.
Rodrigo also held key technical
and leadership roles in global
mining companies including
Yamana Gold, Vale and
ArcelorMittal. He holds a
Mining Engineering degree
from the Universidade Federal
de Minas Gerais, an MBA,
Project Management degree
from the Fundação Getulio
Vargas and a Master of
Science, Mining and Mineral
Engineering degree from the
Universidade de São Paulo.
Oscar Garcia
Vice President,
Brownfield Exploration
Oscar Garcia was promoted
to the position of VP,
Brownfield Exploration on
1 January 2019 having joined
Hochschild Mining in 2007
as an Ore Control geologist.
He has previously worked
at Hochschild as Corporate
Manager for Underground
Geology, Ore Control and
Brownfield Exploration. Prior
to Hochschild Mining, Oscar
worked as a geologist at
Barrick Gold, Lonrho Mining
Group and Compañia Minera
Aguilar. Oscar qualified as a
geologist at the Universidad
Nacional de Cordoba in 1981.
Eduardo Villar
Vice President,
Human Resources
Eduardo Villar has been with
the Group since 1996. Prior
to his current position, he
served as Human Resources
Manager, Deputy HR Manager
and Legal Counsel. Eduardo
holds a law degree from the
Universidad de Lima and an
MBA from the Universidad
Peruana de Ciencias
Aplicadas. In addition,
Eduardo has postgraduate
qualifications in Business from
IESE Business School and
Harvard Business School and
in Human Resources from
London Business School and
the University of Michigan.
José Augusto Palma
Vice President, Legal
& Corporate Affairs
José Augusto Palma has more
than 14 years of professional
experience in the mining sector
and has served in various
positions in Hochschild.
José has also been very
active in the mining industry
association has served as
President of the Mining Sector
in the Mining, Electricity and
Petroleum Industry Association
of Peru. Before joining
Hochschild, José had a
successful career in private
practice in the United States,
where he was a partner at the
law firm of Swidler Berlin, and
later worked at the World Bank.
José also served two years
in the Government of Peru.
He holds law degrees from
Georgetown University and the
Universidad Iberoamericana
in Mexico.
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Strategic Report 1—99Governance 100—149Financial Statements 150—226Further Information 227—231Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023 OUR BUSINESS MODEL
Creating sustainable value
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
Our strategic pillars:
Brownfield
Operational
Efficiency
ESG
Disciplined Capital
Allocation
N M E N T
HEALTH & S
A
F
E
T
Y
O
V I R
E N
Market
C
O
M
M
U
NITY
Y
B I L IT
A
T A I N
S U S
Responsibility
We are focused on: operating
a safe workplace to enable our
employees to thrive; seeking
to generate social value within
our surrounding communities;
and minimising our
environmental impact.
Governance
We maintain high standards
of controls and processes
to protect and enhance
stakeholder interests.
Expertise
We have specific expertise
in mining a variety of deposit
types including underground
and open pit deposits in complex
geological conditions throughout
the Americas.
Experience
We have steadily built an
enviable track record in
managing mines, developing
projects, identifying growth
options, dealing with permitting
processes, and utilising best
practice social environmental
and policies.
Discipline
We deploy capital in a disciplined
manner underpinned by
our long-standing financial
relationships and a focus on
value accretive opportunities.
Innovation
We are dedicated to the
development of more efficient
business practices through the
adoption of new technologies.
26
1. Discover
We have strong expertise in discovering and
developing long-term geological districts.
Our highly experienced exploration team
believes that there is strong potential across
all our properties to continue to generate
strong returns from the Company’s existing
resource base. Furthermore, our business
development team are always seeking to
identify profitable pre-production assets
where our construction, operational and
brownfield exploration capabilities
differentiate us from other potential buyers.
2. Develop
We are able to progress our projects
efficiently in a short space of time and the
ability to operate in remote locations and
high altitudes remains a core competitive
advantage. We have extensive knowledge
of the key mining jurisdictions throughout
the Americas and believe our experience
in managing all project requirements
including permitting, local community and
government support, places us in a strong
position with regards to the execution of
precious metal opportunities whether open
pit or underground.
3. Extract
We have developed an extensive in-house
knowledge base of the challenges inherent
in a range of different ore bodies, varying
metals as well as in a variety of environments
throughout our regions. This has resulted in
us consistently meeting annual operational
targets, implementing significant cost
efficiency programmes and replacing and
adding to our resource base. In addition,
our growing commitment to innovation is
allowing us to incorporate key technological
advances and apply them to our business.
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.
59%
WORKFORCE FROM LOCAL
COMMUNITIES
Employees
The success of our business model helps us to provide
personal development, competitive compensation
and proper working conditions. We aim to empower
our employees with learning opportunities and
new challenges in a positive, healthy and safe work
environment. In addition, there is an ongoing
recognition that all should have opportunities to
contribute and develop their capabilities through
volunteer work as well as direct initiatives.
66%
WORKFORCE TRAINED IN 2023
Shareholders
We are committed to our aims of profitable and safe
operations, a strong local and international reputation
and stability. We believe that if we can deliver
sustainable low-cost growth and consequently
generate solid free cash flow, we can use that to repay
all our stakeholders. Since the middle of 2016 we have
paid out $126 million in equity dividends. Due to the
significant disruption to our operations from the
2022/2023 Peruvian political situation and the delay to
the approval of the Inmaculada Modified Environment
Assessment in 2023, we halted dividend payments but
following the completion of Mara Rosa, our Board will
address the potential for capital return in August 2024.
$126m
DIVIDENDS PAID SINCE 2016
27
Strategic Report 1—99Governance 100—149Financial Statements 150—226Further Information 227—231Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023
OUR STR ATEGY
A renewed strategy for
continued delivery and growth
READ MORE
Key Performance
Indicators
page 30
READ MORE
Risk
Management
page 90
READ MORE
Sustainability
Report
page 52
Strategic pillars
Key priorities
2023 activities
2024 priorities
Key metrics
Risks
Sustainability strategy
Brownfield
Generating long-term
value
Extending life-of-mine
Focused on mineable
resources
– Inmaculada brownfield
programme start delayed
due to permitting delays
– Encouraging first
economics for Royropata
deposit at Pallancata
– MEIA process for Royropata
started incorporating
lessons learnt from
Inmaculada
– $33million budget set for
brownfield exploration
– Aim to add further
resources at all three
existing mines
– Focus on drilling Eduardo
belt at Inmaculada and
adding resources at
San Jose and Mara Rosa
Operational
efficiency
Lean philosophy
Process optimisation
Proven development
record
On Time On Budget
– Mara Rosa set to be
completed on time
and on budget
– Costs set to fall in
2025-2026
– Complete final capital
expenditure on Mara Rosa
– Take further advantage of
devaluation in Argentina
– Explore potential for further
cost efficiencies
ESG
Driving responsibility
& respect
World-class safety
performance
– 5.76/6 in ECO Score:
– Continue record of zero
best performance since
inception
work related fatalities in last
few years
– Very low Lost Time Injury
Frequency Rate of 0.99
2030 ESG KPIs in place
– Very low Accident Severity
Net Zero by 2050
ambition
Index of 37
– 59% of total workforce
is local
– Continue Mara Rosa
record of 4 million hours
accident free
– Focused on long-term
positive social, economic
& environmental results
to further Sustainable
Development Goals
+3.5moz
AU EQ: TOTAL RESOURCES DISCOVERED SINCE 2006
– Political, legal and regulatory
– Community relations
– Personnel: recruitment and retention
To ensure that our purpose is
achieved, we have established
a 2030 ambition across our five
strategic pillars:
AISC:
REDUCTION OF APPROXIMATELY
21%
BY 2026
– Political, legal and regulatory
– Community relations
– Personnel: recruitment and retention
0.99
LTIFR IN 2023
– Political, legal and regulatory
– Community relations
– Personnel: recruitment and retention
Serving our communities
We have worked to strengthen our
social engagement strategy and find
meaningful ways of supporting our
local communities.
Protecting the environment
Our 2030 ambition is to reduce our
GHG scope 1+2 emissions by 30%
vs 2021. This will require the use of
renewable electricity and transitioning
towards more efficient vehicles.
Ensuring health & safety
The safety of our people is an integral
measure of our corporate success
and remains our highest priority.
Empowering our people
Driving gender diversity in our own
workforce remains a key challenge
in this industry and a top priority
for Hochschild.
A responsible business
Acting honestly and ethically
is central to our business.
Disciplined capital
allocation
Funding organic growth
Debt repayment
Capital return
Value accretive M&A
– Drew down $60 million
from new $200 million
medium-term loan
– Brownfield exploration –
focused on securing cash
flow at non-core properties
– Completed project
– Debt repayment –
expenditure on Mara Rosa
project
disciplined debt levels
to drive further growth
$15m
COST OF OPTION SECURED ON MONTE DO CARMO
PROJECT IN BRAZIL
– Political, legal and regulatory
– Commodity prices
UN SDGs
– Evaluate shareholder
returns as earnings and
cash flows strengthen
– M&A – clear parameters
to evaluate opportunities
– Acquired option on Monte
Do Carma project in Brazil
(Q1 2024)
READ MORE
Sustainability Report
page 52
28
29
Strategic Report 1—99Governance 100—149Financial Statements 150—226Further Information 227—231Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023 KEY PERFORMANCE INDICATORS
Measuring our
performance
FINANCIAL MEASURES
PRODUCTION
30.4
M oz Ag equivalent
23
22
21
20
19
REVENUE
693
$m
23
22
21
20
19
30.4
33.9
33.6
24.9
40.0
693
736
811
622
756
Links to strategy:
Links to remuneration:
Yes (Page 123)
Risks:
Operational performance.
Definition
Total silver equivalent production
equals total gold production
multiplied by a gold/silver ratio
for 2023 & 2022 of 83x, 2019-2021
of 86x and added to the total
attributable silver production.
Performance
Total silver equivalent production
decreased by 10% versus 2022 due
to the scheduled fall in production
from Pallancata and San Jose and
the disruption to Inmaculada from
the permit delay.
Outlook
Total silver equivalent production
is forecast to be between 33.0
and 35.0 million silver equivalent
ounces in 2024 assuming a gold/
silver conversion ratio of 83x.
Links to strategy:
Links to remuneration:
Yes (Page 123)
Definition
Revenue presented in the financial
statements is disclosed as net
revenue and is calculated as gross
revenue less commercial discounts.
Performance
Total revenue decreased by 6%
versus 2022 due to the scheduled
fall in production.
Risks:
Operational performance
and commodity price.
Outlook
Total silver equivalent production
is forecast to be between 33.0
and 35.0 million silver equivalent
ounces in 2024 assuming a gold/
silver conversion ratio of 83x.
ADJUSTED EBITDA
Links to strategy:
274
$m
23
22
21
20
19
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.
274
255
383
271
343
BASIC EARNINGS PER SHARE
Links to strategy:
Links to remuneration:
Yes (Page 123)
Risks:
Operational performance and
commodity price.
Performance
Adjusted EBITDA increased by 7%
versus 2022 due to the impact of
the devaluation of the Argentinian
peso and a strong performance
from Inmaculada.
Outlook
Adjusted EBITDA result for 2024
will depend on precious metal
prices and cost and expenses
performance along with the
ability of the operations to
operate normally.
Links to remuneration:
No
Risks:
Operational performance and
commodity price.
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.
0.02
0.01
0.14
0.06
0.09
Performance
Pre-exceptional earnings per share
remained flat at $0.02 due to the
rise in Adjusted EBITDA being
offset by the impact of an FX loss.
Outlook
Pre-exceptional earnings per
share will depend on EBITDA
performance and the effective
tax rate which may be impacted
if local currencies including the
Peruvian sol and Argentinian peso
continue to depreciate.
0.02
$ pre-exceptional
23
22
21
20
19
30
Strategic pillars:
Brownfield
2
3
4
Operational efficiency
ESG
Disciplined capital allocation
READ MORE
Risk Management Report
page 90
DIVIDEND PER SHARE
Links to strategy:
0.0
US cents per share
23
22
21
20
19
0.0
2.0
4.3
4.0
2.0
Links to remuneration:
No
Risks:
Operational performance.
Definition
The per-share (using the weighted
average number of shares
outstanding for the period)
dividend paid to equity
shareholders of the Company
as recommended by the Board.
Performance
The Board decided not to pay an
interim or final dividend for 2023.
Outlook
Dividend per share for 2024 will
depend on the level of profitability
of the Company and the available
uses of cash and is at the
discretion of the Board.
ALL-IN SUSTAINING COSTS
Links to strategy:
Links to remuneration:
Yes (Page 123)
Risks:
Operational performance.
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 83:1.
17.5
17.4
16.0
12.9
11.9
Performance
All-in sustaining costs from
operations were flat versus 2022
mainly as a result of the scheduled
decline in production in 2023 being
offset by capex deferrals due to
the delays to the Inmaculada
permit.
Outlook
The all-in sustaining cost from
operations in 2024 is expected to
be between $1,510 and $1,550 per
gold equivalent ounce (or $18.2 and
$18.7 per silver equivalent ounce).
TOTAL SILVER CASH COSTS
Links to strategy:
Links to remuneration:
No
Risks:
Operational performance.
17.5
$/oz Ag equivalent
23
22
21
20
19
12.8
$/oz Ag equivalent
23
22
21
20
19
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.
12.8
12.6
11.0
9.3
7.8
Performance
Total silver cash costs for the
Company increased by 2% versus
2022 due to increases in unit
costs in Peru but offset mostly
by a significant fall in unit costs
in Argentina.
Outlook
Cash costs performance in 2024
is expected to be dependent on
operational performance, levels
of local cost inflation and levels of
local currency devaluation in
Argentina and Peru.
31
Strategic Report 1—99Governance 100—149Financial Statements 150—226Further Information 227—231Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023
KEY PERFORMANCE INDICATORS
CONTINUED
Strategic pillars:
Brownfield
2
3
4
Operational efficiency
ESG
Disciplined capital allocation
READ MORE
Risk Management Report
page 90
N0N-FINANCIAL MEASURES
LTIFR
0.99
23
22
21
20
19
0.99
1.37
1.26
1.38
1.05
Links to strategy:
Links to remuneration:
Yes (Page 123)
Risks:
Health and safety risks.
Definition
Calculated as total number of
accidents per million labour hours.
Performance
LTIFR reduced by 28% to a
record low.
Outlook
The Company remains focused on
its “Safety 2.0 Hochschild Safety
Transformation” plan and
introduced the safety equivalent
of the ECO Score – the Seguscore.
ACCIDENT SEVERITY INDEX
Links to strategy:
Links to remuneration:
Yes (Page 123)
Risks:
Health and safety risks.
Definition
Calculated as total number of days
lost per million labour hours.
Performance
The Accident Severity index
decreased to 37 in 2023 due to
zero fatalities and an excellent
safety performance overall.
Outlook
The Company remains focused on
its “Safety 2.0 Hochschild Safety
Transformation” plan and
introduced the safety equivalent
of the ECO Score – the Seguscore.
RESOURCE BASE
Links to strategy:
Links to remuneration:
Yes (Page 123)
Definition
Total attributable silver
equivalent metal resources
as at 31 December 2023.
1,506
1,542
1,273
1,425
1,446
Performance
Total attributable silver equivalent
metal resources decreased by
a moderate 2% due to the 2024
brownfield programme beginning
late resulting from the Inmaculada
permit delays as well as a
reduction in resources at
Inmaculada due to production.
Risks:
Exploration and revenue and
resource replacement, political,
legal and regulatory and
community relations.
Outlook
Resource increases in 2024 will
depend on the ability to achieve
permits in Peru and the level
of ongoing success in finding
potential resources and the
ability to turn these resources
into the inferred and measured
and indicated categories
through drilling.
37
23
22
21
20
19
37
93
676
474
54
1,506
M oz Ag equivalent
23
22
21
20
19
32
Operating
review
TOTAL GROUP
PRODUCTION OF SILVER
2022: 13,596koz
TOTAL GROUP
PRODUCTION OF GOLD
2022:: 244.63koz
TOTAL GROUP SILVER
PRODUCTION SOLD
2022: 13,536koz
TOTAL GROUP GOLD
PRODUCTION SOLD
2022: 242.89koz
11,683koz
225.77koz
11,547koz
221.40koz
5
Total 2023 Group production
Attributable 2023 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 2023
Year ended
31 Dec 2022
11,683
225.77
30,423
366.54
11,547
221.40
13,596
244.63
33,900
408.43
13,536
242.89
Silver production (koz)
Gold production (koz)
Silver equivalent (koz)
Gold equivalent (koz)
Year ended
31 Dec 2023
Year ended
31 Dec 2022
9,517
186.09
24,962
300.75
11,003
206.01
28,102
338.57
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 2024 production forecast split
2024 AISC forecast split
Operation
Inmaculada
Pallancata
San Jose
Total
Oz Au Eq
Moz Ag Eq
Operation
200,000-205,000
16.6-17.0
Inmaculada
83,000-93,000
60,000-62,000
6.9-7.7
5.0-5.2
Pallancata
San Jose
343,000-360,000
28.5-29.9
Total from operations
$/oz Au Eq
1,610-1,640
1,090-1,120
1,670-1,730
1,510-1,550
$/oz Ag Eq
19.4-19.8
13.1-13.5
20.1-20.8
18.2-18.7
OPERATIONS
Note: 2023 and 2022 equivalent figures calculated assume
the average gold/silver ratio for 2022 and 2023 of 83x.
Production
In 2023, Hochschild delivered attributable production of 300,749
gold equivalent ounces or 25.0 million silver equivalent ounces,
in line with the upper end of the Company’s revised guidance.
Higher production from Inmaculada and Pallancata was
partially offset by lower production in San Jose.
The overall attributable production target for 2024 is
343,000-360,000 gold equivalent ounces or 28.5-29.9 million
silver equivalent ounces.
Costs
All-in sustaining cost from operations in 2023 was $1,454 per
gold equivalent ounce or $17.5 per silver equivalent ounce (2022:
$1,448 per gold equivalent ounce or $17.4 per silver equivalent
ounce), lower than revised guidance, but as anticipated, slightly
higher than 2022 mainly as a result of: lower production in
Inmaculada due to lower tonnage resulting from the MEIA delay;
higher production costs due to a higher proportion of semi-
mechanised mining methods; and higher mine development
capex executed once the MEIA was approved in August. These
effects were partially offset by lower costs at Pallancata as a
result of lower capex and exploration expenses and lower costs
in San Jose in line with the devaluation of the Argentinian peso.
The all-in sustaining cost from operations in 2024 is expected to
be between $1,510 and $1,550 per gold equivalent ounce (or
$18.2 and $18.7 per silver equivalent ounce).
33
Strategic Report 1—99Governance 100—149Financial Statements 150—226Further Information 227—231Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023
OPER ATING REVIEW
CONTINUED
Mining
operation:
Inmaculada
The 100% owned Inmaculada gold/silver
underground operation is located in the
Department of Ayacucho in southern Peru.
It commenced operations in June 2015.
Location:
Peru
2023 gold
equivalent
production:
204koz
34
Costs
All-in sustaining cost was
$1,287 per gold equivalent
ounce (2022: $1,109 per
ounce) with the increase
versus 2022 explained by
lower tonnage resulting from
MEIA approval delay and by
higher production costs due
to the use of more semi-
mechanised mining methods.
33
67
Inmaculada
Production
The Inmaculada mine delivered
gold equivalent production of
203,849 ounces (2022: 226,363
ounces), higher than the
revised forecast published in
August 2023 and, as expected,
lower than that in 2022 mainly
due to delayed MEIA approval
impacting tonnage treated,
and due to community road
blockages during Q1 2023.
These effects were partially
offset by higher grades.
Gold and silver production (%)
Gold
Silver
$1,287
ALL-IN SUSTAINING COST ($/OZ AU EQ)
2022: 1,058
$142.3
UNIT COST ($/T)
2022: 118.7
Inmaculada summary
Year ended
31 Dec 2023
Year ended
31 Dec 2022 % change
Ore production (tonnes)
1,137,109
1,329,177
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)
177
4.09
5,515
137.40
16,919
203.85
5,488
136.66
142.3
803
1,287
156
3.81
5,936
154.85
18,788
226.36
5,918
154.93
118.7
701
1,109
(14)
13
7
(7)
(11)
(10)
(10)
(7)
(12)
20
15
16
35
Strategic Report 1—99Governance 100—149Financial Statements 150—226Further Information 227—231Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023
OPER ATING REVIEW
CONTINUED
Mining
operation:
Location:
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.
2023 gold
equivalent
production:
28koz
Mining
operation:
Location:
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.
2023 gold
equivalent
production:
134koz
Production
In 2023, Pallancata produced
2.4 million silver equivalent
ounces (2022: 3.3 million
ounces), higher than the
revised guidance, and as
anticipated, lower than 2022
mainly due to lower tonnage,
as a result of being placed on
care and maintenance in
November 2023.
Costs
All-in sustaining cost was
$25.3 per silver equivalent
ounce, lower than the revised
guidance and significantly
lower year-on-year (2022:
$31.3 per ounce) due to
lower exploration expenses,
operating capex and lower
production costs.
Gold and silver production (%)
Gold
Silver
26
74
Pallancata summary
Year ended
31 Dec 2023
Year ended
31 Dec 2022 % change
Ore production (tonnes)
414,044
559,799
Average silver grade (g/t)
Average gold grade (g/t)
Silver produced (koz)
Gold produced (koz)
Silver equivalent produced (koz)
Gold equivalent produced (koz)
Silver sold (koz)
Gold sold (koz)
Unit cost ($/t)
Total cash cost ($/oz Ag co-product)
All-in sustaining cost ($/oz Ag Eq)
155
0.64
1,746
7.39
2,359
28.43
1,785
7.52
122.9
24.0
25.3
151
0.69
2,368
10.98
3,279
39.50
2,315
10.76
131.9
26.6
31.3
(26)
3
(7)
(26)
(33)
(28)
(28)
(23)
(30)
(7)
(10)
(19)
Pallancata
36
San Jose
Production
San Jose’s production in
2023 totalled 11.1 million
silver equivalent ounces
(2022: 11.8 million ounces)
with the decrease versus 2022
reflecting lower grades. This
effect was partially offset by
higher tonnage.
Costs
Gold and silver production (%)
Gold
Silver
All-in sustaining costs were
at $18.9 per silver equivalent
ounce (2022: $20.1 per ounce)
with the reduction versus 2022
mainly due to the devaluation
of the peso although this was
partially offset by lower grades.
San Jose summary
Ore production (tonnes)
Average silver grade (g/t)
Average gold grade (g/t)
Silver produced (koz)
Gold produced (koz)
Silver equivalent produced (koz)
Gold equivalent produced (koz)
Silver sold (koz)
Gold sold (koz)
Unit cost ($/t)
Total cash cost ($/oz Ag co-product)
All-in sustaining cost ($/oz Ag Eq)
60
40
Year ended
31 Dec 2023
Year ended
31 Dec 2022
% change
563,013
507,189
270
5.03
4,422
80.99
11,144
134.26
4,274
77.23
264.0
15.9
18.9
369
5.55
5,292
78.80
11,833
142.57
5,303
77.20
285.0
14.4
20.1
11
(27)
(9)
(16)
3
(6)
(6)
(19)
–
(11)
10
(6)
37
Strategic Report 1—99Governance 100—149Financial Statements 150—226Further Information 227—231Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023
OPER ATING REVIEW
CONTINUED
ADVANCED
PROJECT
Location:
Mara Rosa
Brazil
Mara
Rosa
Mine and pre-stripping
Total pre-stripping volume was 2,091 kt of which there is
approximately 136.5 kt to guarantee availability of mineral for
the ramp-up and operation. Waste dumps and ore stockpiles
are completed and in operation.
Processing plant
The crushing and screening areas were commissioned during
Q4 whilst commissioning began of the thickener and ball mill.
Full project commissioning and the beginning of the project’s
ramp-up is expected during the first quarter.
The Mara Rosa project is progressing on schedule and budget
with total project progress at 99.8% as of the end of February.
On 20 February 2024, the team at the mine achieved the first
gold pour with commercial production expected in June.
Infrastructure
Construction of the dry stack was completed in December 2023
and the Pequi water reservoir is fully operational and filled to
95% capacity with the water required for 2024 operations.
Health and safety
Proactive corporate safety indicators are being monitored to
ensure optimal working conditions for all personnel and the
project has completed approximately five million hours without
a loss time accident. Frequency and severity indices for 2023
were 0.54 and 2, respectively, both better than corporate goals.
Procurement
Main plant reagents and materials, including cyanide, balls for
the mills, lime and activated carbon have been purchased and
deliveries are on track to be in time for the start of operations.
The administrative buildings are fully operational including
offices, cafeteria, first aid and nursery areas.
Permitting and sustainability
The project received the Operating Licence from the
environmental agency of Goiás SEMAD in February 2024.
The Company organised three festivities to celebrate Children’s
Day in Mara Rosa and Amaralina with over 3,100 participants and
on 2 November, a meeting with the local communities from both
towns was held with the objective of updating them on project
progress and strengthening local relationships and dialogue.
DEVELOPMENT PROJECT: VOLCAN
On 10 August 2023, Hochschild issued an update on the
Volcan Gold Project (“Volcan”) which detailed a number of key
milestones that have been achieved at the 100%-owned project
(the “Project”) located in the Maricunga Region of Chile:
– Created a new Canadian Company, Tiernan Gold Corp
(“Tiernan”), as a subsidiary of Hochschild Mine Holdings UK
– Restructured the Project to be owned by Tiernan
– Completed an updated Mineral Resource Estimate to
Canadian NI 43-101 standards, which outlined:
• 463.3 Mt of Measured and Indicated Resources at 0.66 g/t gold
for 9.8 million ounces of gold contained
• 75.0 Mt of Inferred Resources at 0.516 g/t gold for an additional
1.2 million ounces of gold contained
– Completed a positive Preliminary Economic Assessment to
Canadian NI 43-101 standards, which highlighted:
• 22mtpa open-pit, heap leach operation with a 14-year
mine life
• Average of 332,000 ounces per year of gold production for first
10 years of operations with 3.8 million ounces produced over
the estimated mine life
• Initial capital cost of $900 million, with life-of-mine sustaining
capital an additional $276 million
• Cash costs of $921/oz and all-in sustaining costs of $1,002/oz,
life of mine
• NPV (5%) = $826 million and IRR = 21% at $1,800/oz gold price,
after-tax
– Executed an agreement for a $15 million financing with the
sale of a new 1.5% NSR royalty on the Project to Franco-
Nevada
– Engaged Canaccord Genuity to evaluate strategic
alternatives for Tiernan
Further details can be found in the separate press
release (14 August 2023) on the Company’s website
at hochschildmining.com
BROWNFIELD EXPLORATION
The brownfield programme for 2023 was delayed until the
approval of the Inmaculada MEIA in August.
Inmaculada
In Q4 2023, the Company performed 900m of potential drilling,
intercepting two new structures, Nicolas and Andrea, which will
be further investigated in 2024.
Vein
Nicolas
Andrea
Saly
Results (potential drilling)
IMS23-207: 1.8m @ 27.0g/t Au & 5,768g/t Ag
IMS23-207: 3.3m @ 19.4g/t Au & 79g/t Ag
IMS23-207: 2.2m @ 3.2g/t Au & 90g/t Ag
San Jose
At San Jose, the brownfield team carried out 906m of potential
drilling and 4,420m of resource drilling in the Suspiro, Sigmoid
Molle, Guadaluoe veins with the key vein expected to be the
Suspira quartz sulphide vein which has high silver grades.
Vein
Suspira
Results (potential/resource drilling)
SJD-2737: 1.2m @ 17.4g/t Au & 2,477g/t Ag
Tensiona EW
SJM-647: 1.0m @ 7.7g/t Au & 938g/t Ag
RML861V
Sig Molle
RML861w
SJD-2728: 1.1m @ 6.9g/t Au & 615g/t Ag
SJM-647: 2.8m @ 5.7g/t Au & 656g/t Ag
SJD-2731: 1.3m @ 5.5g/t Au & 8g/t Ag
The plan for the first quarter of 2024 is to perform 1,500m of
potential drilling at San Jose in the Telken North and Cerro
Saavedra areas.
38
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Strategic Report 1—99Governance 100—149Financial Statements 150—226Further Information 227—231Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023
FINANCIAL REVIEW
Disciplined capital allocation
to maximise value creation
Revenue
Gross revenue1
Gross revenue decreased by 5% to $710.6 million in 2023 (2022:
$751.3 million) due to lower silver and gold production. Output
was mainly impacted by the delay in the approval of the MEIA
at Inmaculada, scheduled lower production at Inmaculada and
Pallancata, and lower grades in San Jose. This was partially
offset by higher average realised gold and silver prices.
Gold
Gross revenue from gold in 2023 increased to $437.0 million
(2022: $435.1 million) due to the 10% increase in the average
realised gold price partially offset by lower gold produced at
Inmaculada and Pallancata.
Silver
Gross revenue from silver decreased in 2023 to $273.0 million
(2022: $315.5 million) mainly due to lower silver produced across
all operations; partially offset by the 1% increase in the average
realised silver price.
$694m
$274m
REVENUE
2022: $736m
ADJUSTED EBITDA
2022: $249m
$0.02
EARNINGS PER SHARE
2022: $0.01
$258m
NET DEBT
2022: $175m
1
Includes revenue from services. Gross revenue is the net revenue plus
commercial discounts.
Eduardo Noriega
Chief Financial Officer
The reporting currency of Hochschild Mining PLC is US dollars.
In discussions of financial performance, the Group removes the
effect of exceptional items, unless otherwise indicated, and in
the income statement results are shown both pre and post such
exceptional items. Exceptional items are those items, which due
to their nature or the expected infrequency of the events giving
rise to them, are disclosed separately on the face of the income
statement to enable a better understanding of the financial
performance of the Group and to facilitate comparison with
prior years.
40
Gross average realised sales prices
The following table provides figures for average realised prices (before the deduction of commercial discounts) and ounces sold for
2023 and 2022:
Average realised prices
Silver ounces sold (koz)
Avg. realised silver price ($/oz)
Gold ounces sold (koz)
Avg. realised gold price ($/oz)
Year ended
31 Dec 2023
Year ended
31 Dec 2022
11,547
23.6
221.40
1,974
13,536
23.3
242.89
1,791
29,250 gold ounces of 2023 production were hedged at $2,047 per ounce and 3.3 million silver ounces of 2023 production were
hedged at $25 per ounce, boosting the realised price. On 12 April 2023, the Company hedged 27,600 ounces of 2024 gold
production at $2,100 per ounce, on 19 June 2023 the Company hedged 150,000 ounces of 2025, 2026 and 2027 gold production
(50,000 per year) at $2,117, $2,167 and $2,206 per ounce respectively, and on 14 December 2023 the Company hedged 100,000
ounces of 2024 gold production using gold collars with a strike put of $2,000 per ounce and a strike call of $2,252 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 2023, the Group recorded commercial discounts of $16.9 million (2022: $15.7 million).
The ratio of commercial discounts to gross revenue in 2023 was 2%, in line with 2022.
Net revenue
Net revenue was $693.7 million (2022: $735.6 million), comprising net gold revenue of $429.9 million (2022: $429.8 million) and net
silver revenue of $263.3 million (2022: $305.2 million). In 2023, gold accounted for 62% and silver 38% of the Company’s consolidated
net revenue (2022: gold 58% and silver 42%).
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
Year ended
31 Dec 2023
Year ended
31 Dec 2022
% change
129,456
43,380
100,212
(9,779)
263,269
267,188
14,985
154,832
(7,123)
429,882
565
693,716
137,033
62,986
115,477
(10,334)
305,162
276,895
19,459
138,782
(5,335)
429,801
680
735,643
(6)
(31)
(13)
(5)
(14)
(4)
(23)
12
34
–
(17)
(6)
41
Strategic Report 1—99Governance 100—149Financial Statements 150—226Further Information 227—231Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023 FINANCIAL REVIEW
CONTINUED
Cost of sales
Total cost of sales was $508.2 million in 2023 (2022: $527.6 million). The direct production cost excluding depreciation was lower at
$363.0 million (2022: $384.2 million) mainly due to lower production in Inmaculada and Pallancata, partially offset by a scheduled
higher proportion of conventional mining methods across all mining units. Depreciation in production cost increased to
$144.8 million (2022: $137.7 million) mainly due to higher future capex depreciation in Pallancata (Royropata) and the impact on
depreciation of the reversal in impairment loss at Pallancata of $15.5 million as at 31 December 2022, partially offset by lower
depreciation in Inmaculada due to lower production. Fixed costs incurred during total or partial production stoppages were
$3.0 million in 2023 (2022: $8.0 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 2023
Year ended
31 Dec 2022
% change
362,980
144,812
1,862
3,314
(4,754)
508,214
384,183
137,747
3,321
8,023
(5,631)
527,643
(5)
5
(44)
(59)
(16)
(4)
Year ended
31 Dec 2023
Year ended
31 Dec 2022
% change
3,032
865
34
–
(617)
3,314
4,498
3,090
146
2
287
8,023
(33)
(72)
(77)
–
(315)
(59)
Unit cost per tonne
The Company reported unit cost per tonne at its operations of $171.1 per tonne in 2023, an 8% increase versus 2022 ($158.7 per
tonne) resulting from lower treated tonnage in Inmaculada and Pallancata, and a scheduled higher proportion of conventional
mining methods across all mining units.
Unit cost per tonne by operation (including royalties)2
Operating unit ($/tonne)
Peru
Inmaculada
Pallancata
Argentina
San Jose
Total
Year ended
31 Dec 2023
Year ended
31 Dec 2022
% change
137.0
142.3
122.9
264.0
171.1
122.9
118.7
131.9
285.0
158.7
11
20
(7)
(7)
8
Cash costs
Cash costs include cost of sales, commercial deductions and selling expenses before exceptional items, less depreciation included
in cost of sales.
Cash cost reconciliation3
Year ended 31 Dec 2023
$000 unless otherwise indicated
(+) Cost of sales4
(-) Depreciation and amortisation in cost of sales
(+) Selling expenses
(+) Commercial deductions5
Gold
Silver
Group cash cost
Gold
Silver
Revenue
Ounces sold
Gold
Silver
Group cash cost ($/oz)
Co product Au
Co product Ag
By product Au
By product Ag
Year ended 31 Dec 2022
$000 unless otherwise indicated
(+) Cost of sales6
(-) Depreciation and amortisation in cost of sales
(+) Selling expenses
(+) Commercial deductions7
Gold
Silver
Group cash cost
Gold
Silver
Revenue
Ounces sold
Gold
Silver
Group cash cost ($/oz)
Co product Au
Co product Ag
By product Au
By product Ag
Inmaculada
Pallancata
San Jose
234,627
(75,306)
533
3,057
2,079
978
162,911
267,188
129,456
396,644
136.7
5,488
803
9.7
238
(19.4)
72,118
(18,964)
461
4,319
891
3,428
57,934
14,094
39,952
54,046
7.5
1,785
2,010
24.0
1,936
24.1
197,399
(48,901)
13,868
12,923
6,440
6,483
175,289
148,600
93,861
242,461
77.2
4,274
1,391
15.9
970
4.8
Total
504,144
(143,171)
14,862
20,299
9,410
10,889
396,134
429,882
263,269
693,151
221.4
11,547
1,110
13.0
551
(3.7)
Inmaculada
Pallancata
239,277
(80,633)
796
2,957
2,131
826
162,397
276,895
137,033
413,928
154.9
5,918
701
9.1
158
(19.7)
83,926
(8,671)
622
4,879
969
3,910
80,756
18,490
59,076
77,566
10.8
2,315
1,789
26.6
1,652
26.5
San Jose
193,840
Total
517,043
(47,123)
(136,427)
12,614
11,254
4,630
6,624
170,585
134,416
109,053
243,469
77.2
5,303
1,220
14.4
711
6.0
14,032
19,090
7,730
11,360
413,738
429,801
305,162
734,963
242.9
13,536
996
12.7
400
(1.8)
2 Unit cost per tonne is calculated by dividing mine and treatment production costs (excluding depreciation) by extracted and treated tonnage respectively.
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.
3 Cash costs are calculated to include cost of sales, commercial discounts and selling expenses items less depreciation included in cost of sales.
4 Does not include Fixed costs during operational stoppages and reduced capacity of $3.0 million (2022: $8 million).
Includes commercial discounts (from the sales of concentrate) and commercial discounts from the sale of dore.
5
6 Does not include Fixed costs during operational stoppages and reduced capacity of $3.0 million (2022: $8 million)
Includes commercial discounts (from the sales of concentrate) and commercial discounts from the sale of dore.
7
42
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Strategic Report 1—99Governance 100—149Financial Statements 150—226Further Information 227—231Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023 FINANCIAL REVIEW
CONTINUED
All-in sustaining cost reconciliation8
All-in sustaining cash costs per silver equivalent ounce
Year ended 31 Dec 2023
$000 unless otherwise indicated
Inmaculada
Pallancata
(+) Direct production cost excluding depreciation
(+) Other items and workers profit sharing in cost of sales
(+) Operating and exploration capex for units9
(+) Brownfield exploration expenses
(+) Administrative expenses (excl depreciation)
(+) Royalties and special mining tax10
Sub-total
Au ounces produced
Ag ounces produced (000s)
Ounces produced (Ag Eq 000s oz)
All-in sustaining costs per ounce produced ($/oz Ag Eq)
(+) Commercial deductions
(+) Other items11
(+) Selling expenses
Sub-total
Au ounces sold
Ag ounces sold (000s)
Ounces sold (Ag Eq 000s oz)
Sub-total ($/oz Ag Eq)
All-in sustaining costs per ounce sold ($/oz Ag Eq)
All-in sustaining costs per ounce sold ($/oz Au Eq)
Year ended 31 Dec 2022
162,570
1,373
86,031
1,371
3,498
3,978
258,821
137,399
5,515
16,919
15.3
3,057
–
533
3,590
136,661
5,488
16,831
0.2
15.5
1,287
49,940
489
2,458
1,070
491
542
7,390
1,746
2,359
23.3
4,319
–
461
4,780
7,516
1,785
2,409
2.0
25.3
2,099
$000 unless otherwise indicated
Inmaculada
Pallancata
(+) Direct production cost excluding depreciation
(+) Other items and workers profit sharing in cost of sales
(+) Operating and exploration capex for units12
(+) Brownfield exploration expenses
(+) Administrative expenses (excl depreciation)
(+) Royalties and special mining tax13
Sub-total
Au ounces produced
Ag ounces produced (000s)
Ounces produced (Ag Eq 000s oz)
All-in sustaining costs per ounce produced ($/oz Ag Eq)
(+) Commercial deductions
(+) Selling expenses
Sub-total
Au ounces sold
Ag ounces sold (000s)
Ounces sold (Ag Eq 000s oz)
Sub-total ($/oz Ag Eq)
All-in sustaining costs per ounce sold ($/oz Ag Eq)
All-in sustaining costs per ounce sold ($/oz Au Eq)
156,551
1,777
78,176
2,946
3,893
4,032
247,375
154,846
5,936
18,788
13.2
2,957
796
3,753
154,930
5,918
18,777
0.2
13.4
1,109
75,472
1,544
12,340
6,000
730
756
96,842
10,977
2,368
3,279
29.5
4,879
622
5,501
10,759
2,315
3,208
1.7
31.1
2,594
54,990
204,970
Administrative expenses
Administrative expenses were lower at $47.2 million (2022: $54.2 million) mainly due to lower bonus provision and professional fees.
Exploration expenses
In 2023, exploration expenses decreased to $21.3 million (2022: $56.8 million) mainly due to lower exploration expenses at the
Snip project of $2.2 million due to the termination of the option (2022: $19.6 million), lower exploration expenses at Pallancata of
$1.1 million (2022: $6.0 million), lower personnel expenses of $5.5 million (2022: $10.6 million), lower prospects expenditure in USA
of $0.1 million (2022: $4.3 million), and lower exploration expenses at Inmaculada of $1.4 million (2022: $2.9 million).
In 2022, the Group capitalised $0.7 million of its brownfield exploration, which mostly relates to costs incurred converting potential
resources to the Inferred or Measured and Indicated categories (2023: $Nil).
Selling expenses
Selling expenses increased slightly to $14.9 million (2022: $14.0 million) mainly due to higher gold prices.
Other income/expenses
Other income before exceptional items was higher at $30.3 million (2022: $3.3 million) principally due to: the impact of currency
devaluation in Argentina resulting from the Argentinian Government export programme to settle a portion of San Jose exports
at the blue chip exchange rate during the last quarter of 2023 of $21.2 million, the collection of a British Columbia tax credit of
$3.2 million from the Snip project in 2023, and the insurance reimbursement received in 2023 in connection with damage to
Inmaculada’s machine belt in 2022 of $2.6 million.
Other expenses before exceptional items were higher at $47.6 million (2022: $39.3 million) mainly due to mine closure provision
increases of $28.4 million (2022: $17.8 million).
Adjusted EBITDA
Adjusted EBITDA increased by 10% to $274.4 million (2022: $249.6 million) mainly due to the rise in metal prices, and the impact of
local currency devaluation of the currency in Argentina. These were partially offset by the impact of lower gold and silver production.
Adjusted EBITDA is calculated as profit from continuing operations before exceptional items, net finance costs, foreign exchange
losses and income tax plus non-cash items (depreciation and amortisation and changes in mine closure provisions) and exploration
expenses other than personnel and other exploration related fixed expenses.
$000 unless otherwise indicated
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, net14
Adjusted EBITDA
Adjusted EBITDA margin
Year ended
31 Dec 2023
Year ended
31 Dec 2022
% change
82,128
143,171
2,075
21,297
(5,397)
31,096
274,370
39%
45,190
136,427
2,135
56,826
(10,602)
19,629
249,605
34%
82
5
(3)
(63)
(49)
58
10
15
Finance income
Finance income before exceptional items of $7.5 million increased from 2022 ($5.2 million) mainly due to higher interest on deposits
of $4.6 million (2022: $2.4 million).
Main
Operations
Corporate &
others
362,980
1,862
129,323
10,674
9,422
4,520
518,781
225,774
11,683
30,422
17.1
20,299
(21,164)
14,862
13,997
221,404
11,547
29,924
0.5
17.5
1,454
–
–
57
3,171
36,507
2,278
42,013
–
–
–
1.4
–
–
–
–
–
–
–
–
1.4
115
Main
Operations
Corporate &
others
384,183
3,321
138,120
16,646
10,865
4,788
557,923
244,625
13,596
33,900
16.5
19,090
14,032
33,122
242,893
13,536
33,696
1.0
17.4
1,448
–
–
584
2,537
41,265
2,658
47,044
–
–
–
1.4
–
–
–
–
–
–
–
1.4
115
Total
362,980
1,862
129,380
13,845
45,929
6,798
560,794
225,774
11,683
30,422
18.4
20,299
(21,164)
14,862
13,997
221,404
11,547
29,924
0.5
18.9
1,569
Total
384,183
3,321
138,704
19,183
52,130
7,446
604,967
244,625
13,596
33,900
17.8
19,090
14,032
33,122
242,893
13,536
33,696
1.0
18.8
1,563
San Jose
150,470
–
40,834
8,233
5,433
–
80,985
4,422
11,144
18.4
12,923
(21,164)
13,868
5,627
77,227
4,274
10,684
0.5
18.9
1,570
San Jose
152,160
–
47,604
7,700
6,242
–
213,706
78,802
5,292
11,833
18.1
11,254
12,614
23,868
77,204
5,303
11,711
2.0
20.1
1,668
8 Calculated using a gold/silver ratio of 83:1.
9 Operating capex from San Jose does not include capitalised DD&A resulting from mine equipment utilised for mine developments.
10 Royalties arising from revised royalty tax schemes introduced in 2011 and included in income tax line.
11 Includes the impact of devaluation of the Argentine peso resulting from the Argentinian Government export programme to settle a portion of San Jose exports at
the blue chip exchange rate during the last quarter of 2023 of $21.2 million.
12 Operating capex from San Jose does not include capitalised DD&A resulting from mine equipment utilised for mine developments.
13 Royalties arising from revised royalty tax schemes introduced in 2011 and included in income tax line.
14 Adjusted EBITDA has been presented before the effect of significant non-cash (income)/expenses related to changes in mine closure provisions which were
$30.8 million in 2023 and $17.8 million in 2022, and the write-off of property, plant and equipment.
44
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Strategic Report 1—99Governance 100—149Financial Statements 150—226Further Information 227—231Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023 FINANCIAL REVIEW
CONTINUED
Finance costs
Finance costs before exceptional items decreased from $21.8 million in 2022 to $18.2 million in 2023 principally due to: the
capitalisation of interest expenses of $19.4 million that are directly attributable to the construction of Mara Rosa (2022: $4.9 million);
lower foreign exchange transaction costs in Argentina of $1.3 million (2022: $5.0 million); a loss on the sale of C3 Metals Inc. shares of
$0.3 million in 2023 (2022: recorded a loss on the fair value of C3 Metals Inc. shares of $2.1 million). These effects were partially offset
by higher interest expense on loans before capitalisation at $28.9 million (2022: $15.3 million) mainly due to higher interest rates and
an additional $60 million medium-term debt facility drawn down in August 2023, and the loss on the unwinding of discount of the
mine closure provision of $1.7 million (2022: gain of $1.9 million).
Foreign exchange (losses)/gains
The Group recognised a foreign exchange loss of $15.6 million (2022: $2.6 million) mainly due to the impact of the Argentinian local
currency devaluation on monetary assets of $15.5 million.
Income tax
The Company’s pre-exceptional income tax charge was $44.0 million (2022: $17.6 million). The increase in the charge is mainly
explained by higher profitability versus 2022.
The effective tax rate (pre-exceptional) for the period was 82.2% (2022: 72.3%), compared to the weighted average statutory income
tax rate of 31.8% (2022: 35.6%). The higher effective tax rate in 2023 versus the average statutory rate is mainly explained by: the
effect of foreign exchange in Argentina and Brazil increasing the rate by 18.7%, the additions to the mine closure provision
increasing the rate by 10.8%, non-deductible expenses increasing the rate by 9.9%, Royalties and the Special Mining Tax which
increased the effective rate by 8.9%, and the impact of non-recognised tax losses in non-operating companies increasing the rate
by 1.5%.
Exceptional items
Exceptional items in 2023 totalled a $69.5 million loss after tax (2022: $1.9 million loss after tax) related to impairment losses at the
Azuca and Crespo projects of $63.3 million and the San Jose mining unit of $17.4 million; the restructuring charges in Pallancata of
$9.0 million resulting from placing the operation in care & maintenance; and the impairment of the investment in Aclara Resources
Inc. of $7.2 million.
The tax effect of these exceptional items was a $27.4 million tax gain (2022: $3.3 million tax loss). The net attributable loss of
exceptional items was $64.0 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
Net increase in cash and cash equivalents during the year
Year ended
31 Dec 2023
Year ended
31 Dec 2022
178,761
(245,506)
22,769
(10,742)
(54,718)
102,918
(337,580)
(6,588)
(1,695)
(242,945)
Change
90,843
77,074
29,357
(9,047)
188,227
Net cash generated from operating activities increased from $102.9 million in 2022 to $178.8 million in 2023 mainly due to higher
Adjusted EBITDA of $274.4 million (2022: $249.6 million), working capital changes, lower exploration expenses and lower taxes paid.
Net cash used in investing activities decreased from $337.6 million in 2022 to $245.5 million in 2023 mainly due to the consideration
paid for the acquisition of Amarillo Gold on 1 April 2022 of $123.4 million, partially offset by higher construction capex in Mara Rosa
of $121.1 million (2022: $67.7 million).
Cash from financing activities increased to an inflow of $22.8 million from an outflow of $6.6 million in 2022, primarily due to the
draw-down of $60 million from the $200 million medium-term loan facility (2022: proceeds from Minera Santa Cruz stock market
promissory notes of $14.5 million) and no dividends paid in 2023 (2022: $22.0 million); partially offset by the $25 million repayment
of the $300 million medium-term loan facility, and the $10.2 million repayment of Minera Santa Cruz stock market promissory notes.
Working capital
$000
Trade and other receivables
Inventories
Derivative financial assets/(liabilities)
Income tax receivable, net
Trade and other payables
Provisions
Working capital
As at
31 December
2023
As at
31 December
2022
80,456
68,261
(344)
1,734
85,408
61,440
2,186
7,100
(135,839)
(144,102)
(26,741)
(12,473)
(24,177)
(12,145)
The Group’s working capital position decreased by $0.4 million from $(12.1) million to $(12.5) million. The key drivers of the decrease
were: lower income tax receivable, net of $5.4 million; lower trade and other receivables of $5.0 million; partially offset by lower trade
and other payables of $8.3 million.
Net (debt)/cash
$000 unless otherwise indicated
Cash and cash equivalents
Non-current borrowings
Current borrowings15
Net cash/(net debt)
As at
31 December
2023
As at
31 December
2022
89,126
(234,999)
(112,064)
(257,937)
143,844
(275,000)
(43,989)
(175,145)
The Group’s reported net debt position was $257.9 million as at 31 December 2023 (31 December 2022: $175.1 million). The increase
is mainly explained by: capital expenditure of $121.1 million at Mara Rosa (2022: $67.7 million), partially offset by cash generated by
the business. Borrowings increased mainly due to the draw-down of $60 million from the $200 million medium-term loan facility, net
of the $25 million repayment of the $300 million medium-term loan facility.
Capital expenditure
$000
Inmaculada
Pallancata
San Jose
Operations
Mara Rosa16
Aclara
Other
Total
Year ended
31 Dec 2023
Year ended
31 Dec 2022
86,031
6,428
47,682
140,141
145,804
–
2,447
288,392
78,176
13,518
50,112
141,806
193,218
–
4,842
339,866
2023 capital expenditure decreased from $339.9 million in 2022 to $288.4 million in 2023 mainly due to the capex acquired in
the acquisition of Amarillo Gold on 1 April 2022 of $122.5 million, partially offset by higher construction capex in Mara Rosa of
$121.1 million (2022: $67.7 million), and higher capitalised interest expenses that are directly attributable to the construction
of Mara Rosa of $18.7 million (2022: $3.0 million).
46
47
15 Includes pre-shipment loans and short term interest payables.
16 2023 includes $3.5 million increase due to foreign exchange effect, and construction aggregates project of $2.5million.
Strategic Report 1—99Governance 100—149Financial Statements 150—226Further Information 227—231Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023
STAKEHOLDER ENGAGEMENT
Engaging with
our stakeholders
We are focused on driving long-term sustainable
performance for the benefit of our customers,
shareholders and wider stakeholders.
Our six key stakeholder groups
Customers
Shareholders
Suppliers/
Lenders
Employees
Government/
Regulators
Social
Section 172
On these pages, we
describe our key
stakeholders and
summarise the engagement
that has been undertaken
across the business. How
the Board develops an
understanding of the
interests of stakeholders,
and how it considers
stakeholders’ interests in its
principal decisions and the
section 172(1) statement can
be found in the Corporate
Governance Report on
page 104.
Stakeholder group
Engagement activities
Issues raised in 2023
Additional info
Shareholders
Our shareholders are
investors and owners of
the business. We seek to
establish and maintain
constructive relations with
all shareholders through
open dialogue and an
ongoing programme
of engagement.
Employees
We acknowledge that our
success relies greatly on
our people. We seek to
attract, retain and develop
our people through
competitive remuneration,
a positive and safe working
environment and equal
opportunities for all.
We interact with our shareholders and
seek a better understanding of their
expectations through various channels
during the year with the participation of
the CEO, CFO, members of the Board,
the Company Secretary and the Head of
Investor Relations. These channels take
different forms and include participation
at sector-specific conferences, discussions
with proxy agencies as well as direct
meetings with significant shareholders.
During 2023, our regular calendar was
supplemented by:
– A Capital Markets event which
provided an opportunity for the new
management team to give an update on
the Company’s latest developments and
to discuss Hochschild’s growth strategy
– An open engagement with our largest
shareholders during the third quarter,
led by the Senior Independent Director
and Chair of the Sustainability
Committee, on executive remuneration
and governance matters
Employee engagement generally
takes many forms and includes the use
of surveys, presentations and Q&A
sessions with management. Our 2023
programme included:
– The continued use of the Brilla HOC
platform to acknowledge the
achievements of our people
– A Strategic Alignment workshop led
by the CEO, Eduardo Landin, with the
senior managers across the operations
in Peru, Argentina and Brazil
– The continuation of the online
forums chaired by Tracey Kerr, the
Non-Executive Director designated
for Workforce Engagement
– Regular meetings with labour unions
to negotiate collective agreements
and discuss matters of interest
READ MORE
Corporate Governance
Report (Shareholder
Engagement)
page 109
– Updates on the
Inmaculada MEIA
– Progress with the
construction of the
Mara Rosa mine
– Changes in the executive
management team
– Social and political situation
in Peru
– Macro-economic and
political developments
in Argentina
– LTIP performance conditions
(including the use of
ESG-related conditions)
– Chair succession
– The Group’s new strategic
READ MORE
Sustainability Report
(Our people)
page 71
Risk Management
(Personnel risks)
pages 93 and 94
direction following the
change in CEO
– Progress of the Group’s
strategies on Environmental,
Social and Governance
matters
– The form and nature of
corporate communications
received in Argentina
– Enhancements to mine-site
facilities
48
49
Strategic Report 1—99Governance 100—149Financial Statements 150—226Further Information 227—231Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023 STAKEHOLDER ENGAGEMENT
CONTINUED
Stakeholder group
Engagement activities
Issues raised in 2023
Additional info
Stakeholder group
Engagement activities
Issues raised in 2023
Additional info
We adopt a varied approach to engaging
with local communities including:
– Environmental issues
READ MORE
– Local hiring and purchasing
Social
We recognise our social
commitments to (a)
produce the smallest
environmental footprint
possible and (b)
understand the needs and
expectations of our local
communities. Through
close collaboration we
implement social
investment programmes
in our areas of focus.
Government/
Regulators
It is our aim to maintain a
constructive relationship
and open dialogue
with the various
governmental authorities
we interact with in each
of the countries where
we operate.
– Direct interaction with local mayors
– Provision of scholarships for
and residents
– Our Permanent Information Office at
Pallancata and Inmaculada and town
hall meetings
– Community surveys
– Participation in formal roundtables
with the participation of community
representatives and national authorities
– Collaborative activities, for example
environmental monitoring
– The implementation of local purchasing
and hiring protocols
primary, secondary and
technical education
– Support for cultural activities
– Terms and conditions of
existing agreements with
local stakeholders, including
access to new land
– Infrastructure projects,
such as primary care
medical facilities
The Vice President of Corporate Affairs
oversees regular interaction with relevant
authorities and regulators, both at a
Company level but also through the
National Mining Association. Various
teams also regularly interact with public
officials and regulators as part of their
operational functions.
The equivalent role in our Argentinian
joint venture is undertaken by the General
Manager and General Counsel. We also
play an active role through the National
Mining Association.
In Brazil, the General Manager and
General Counsel lead engagement
activities with governmental authorities.
– Permitting
– Health & Safety and
environmental performance
and compliance
– Climate Change reporting
– Contribution to regional
development such as
through local job creation
and investment in social
programmes/infrastructure
– Employment related
matters, including minor
claims for overtime pay filed
by employees of contractors
in Brazil
Sustainability
Report (Environment
Management
& Communities)
from page 58
Risk Management
(Environmental risks)
page 95
Risk Management
(Community relations)
page 96
READ MORE
Risk Management
(Political, Legal &
Regulatory risks)
page 94
The General Managers of our Peruvian,
Argentinian and Brazilian operations
maintain ongoing dialogue with suppliers
to the mine sites. Other suppliers,
including lenders, are managed by the
relevant functional department such as
IT, Group Finance, etc.
READ MORE
Risk Management
(Business Interruption/
Supply Chain risks)
page 92
– The maintenance of stocks
of critical consumables
and spare parts to mitigate
supply chain risks
– Ongoing discussions with
suppliers due to inflationary
pressures
– With regards to its lenders,
the Group maintains an
open dialogue with its
relationship contacts on
relevant developments
including operational, social
and political issues and their
impact on the business
Our sales and logistics teams oversee a
relationship of co-operation and constant
dialogue. During the year, the Company
sought to establish new commercial
relationships to mitigate the risk of a
concentrated customer base and its
vulnerability to geopolitical developments.
In addition to usual relationship
management, Hochschild attended
LME Week in London and CESCO Week
in Chile for customer engagement.
– Continued increase in the
READ MORE
cost of logistics due to global
factors; and
– Shipping schedules and the
availability of containers
due to ongoing challenges
relating to logistics.
Risk Management
(Commercial
Counterparty risk)
page 92
Suppliers/
Lenders
As a key influence on how
we operate our business,
we seek a relationship
of mutual benefit while
requiring high standards
of conduct.
Customers
Due to the nature of what
we produce, Hochschild
has relatively few
customers. As a result,
successful relations with
our customers are of
critical importance to
our business.
50
51
Strategic Report 1—99Governance 100—149Financial Statements 150—226Further Information 227—231Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023 SUSTAINABILITY REPORT
Tracey Kerr
Chair, Sustainability
Committee
Dear shareholder
Our purpose at Hochschild is to create long-term positive
social, economic and environmental results. Sustainability
is fundamental to this purpose.
Our commitment to sustainability underlies how we operate
as a business; it shapes our culture and how we work in our
day-to-day. It shapes our relationships with our communities,
contractors and local governments, and it underpins how we
interact with the environment and the physical landscape in
which we operate.
In the next few sections of this report, I am pleased to share
the sustainability-related milestones that we have been
working towards in 2023 and highlight our newly-launched
sustainability ambitions for 2030.
The 2030 sustainability ambitions were established across
five strategic pillars: Serving our Communities; Protecting
the Environment; Promoting Health & Safety; Empowering our
People; and Being a Responsible Business. Progress against
these areas is measured through a set of core ESG Key
Performance Indicators (KPIs) and ambitions that have been
developed, reviewed and approved by the Board in August of
this year. It has been encouraging to see our regional teams
across Peru, Argentina and Brazil working together through
multiple workshops to establish these long-term goals. Our
year-to-year performance against these will drive a more
informed view of our progress against our material topics
and deliver greater transparency for our stakeholders.
This year I am proud to report that Hochschild became the
first mining company in Peru to receive a green loan. This
loan is a significant milestone for us and demonstrates our
commitment to being a responsible and innovative mining
company. The loan carries an interest rate which can be
adjusted based on our performance in two distinct areas:
our environmental performance, as measured by the ECO Score,
and our safety performance as tracked by the Lost Time Injury
Frequency Rate (LTIFR) indicator.
We achieved our strongest collective ECO Score result this
year since its implementation in 2015; our results exceeded
this year’s target range, the most ambitious to date. Since 2015,
we have reduced our potable water consumption by 60% and
our domestic waste per person by 52%. On the strength of our
ECO Score performance, Hochschild was recognised this year,
alongside other world-class companies, in the Sustainability
Leadership category by the Business Intelligence Group.
Beyond our KPI monitoring, we have worked to strengthen our
environmental culture across our business and operations. This
includes launching an updated Environmental Management
System (EMS), reviewing and restructuring our Environmental
Culture Transformation Plan and investing in our own
environmental ambassadors.
Climate change and biodiversity remain top priorities for
our business. Achieving net zero using today’s technologies
will foremost require the procurement of green electricity,
operational changes in existing mines, and close collaboration
with our contractors through procurement tools. Our approach
is driven by our interim ambition to decrease our greenhouse
gas (GHG) Scope 1 & 2 emissions by 30% by 2030. In 2025, we
will quantify the financial impact of climate on our business and
undertake a detailed low-carbon transition assessment to refine
our climate-related strategy and strengthen our CFD-aligned
reporting. We have continued our focus on monitoring
biodiversity levels in our areas of direct influence and continue
to raise awareness of the biodiversity in our local communities.
An example of this has been our Knowledge Trail in Mara Rosa,
Brazil, which we opened in 2022, and for which we have been
formally recognised through the Sustainable Goiás Award,
presented by the Goiás State Environment and Sustainable
Development Department. We look forward to developing our
biodiversity strategy in 2025 to set our nature-positive ambition.
The safety of our people is an integral measure of our corporate
success and remains our highest priority. In 2023, we achieved
the best results in our recorded company history across our
three main safety indicators. This historic progress is a strong
testament to the dedication of our teams who are using
innovation and technology to continually improve the safety
of our operations.
Since I joined Hochschild in 2022, I have witnessed the
consistent strengthening of our business’ safety culture;
I am proud to see this result in real change over the last two
years, particularly in maintaining a zero rate of fatal incidents
at our sites.
We have worked to strengthen our social engagement
strategy and find meaningful ways of supporting our local
communities. In Peru, for example, this included increasing
local employment and procurement, supporting local
governments with public infrastructure, and positively
engaging local communities through educational, health
and digital connectivity programmes.
Driving gender diversity in our own workforce remains a key
challenge in this industry and a top priority for Hochschild. Our
2023 mentorship and training programmes have built on our
2022 progress and I am particularly pleased to report that, this
year, we have increased the proportion of women in leadership
roles in the Company to 18%, up from 15% in 2022. Additionally,
Hochschild hired nine women who completed our “Women of
Gold” programme in 2023. This is a good example of how we
can drive long-term and meaningful opportunities for women
in mining. These women, who are trained professionals in
metallurgy, mine, maintenance and geology, now have the
opportunity to pursue a career with Hochschild at our
Inmaculada mine.
In the coming 3-5 years, our strategic focus will be guided
and informed by the progress against our ESG KPIs within our
2030 ambition areas. We look forward to reviewing next year
the individual plans to meet these annual KPI ambitions and
also to developing our next standalone sustainability report,
which will detail our 2024 progress.
Responsibility is at the
core of our corporate
values and sustainability
ambition
Since the Company’s inception, we have endeavoured to
maintain and reinforce our corporate values of respecting
the well-being of our employees, the environment and the
communities in which we operate.
$156m
VALUE OF GOODS AND SERVICES
PROCURED FROM LOCAL PROVIDERS
$8.2m
INVESTED IN LOCAL
COMMUNITIES
2022: $119.4m
18%
2022: $6.89m
4th
WOMEN IN LEADERSHIP ROLES
2022: 15%
2023 MERCO TALENTO RANKING (OUT
OF 17 MINING COMPANIES IN PERU)
2022: 2ND PLACE OUT OF 16 COMPANIES
5.76
ECO SCORE
(VS TARGET OF 5.25-6)
2022: 5.27
52
53
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CONTINUED
Hochschild’s approach to sustainability
The aim behind our long-term business strategy is to provide
an attractive investment proposition for our shareholders
whilst also enhancing value for our customers, employees,
suppliers, and local communities. To ensure that both of these
objectives are met, we focus our efforts and operational
delivery on the areas where we can have the biggest impact,
supported by our commitment to the United Nations
Sustainable Development Goals (UN SDGs).
We work with an external agency periodically to undertake a
sustainability materiality assessment refresh. This enables us
to identify and report on the sustainability topics that may
pose a) financial or reputational risks or opportunities to our
business and b) positive or negative contributions to society
and the environment. Our sustainability focus areas provide
an overview of how our material topics feed into our broader
sustainability activities. In 2024/2025 we plan to undertake a
refresh of our 2021/2022 materiality assessment. This two to
three-year refresh timeframe ensures that our material topics
reflect changes in our business and in the wider external
environment, including regulatory developments.
Best
in class
Minimal
footprint
Robust
culture
Sustainability
Strategy
Maximise
innovation
Transparency
O u r a reas of focus
Ensuring
Health and
Safety
PAGE 69
Being a Responsible
Business
PAGE 74
Empowering
our People
PAGE 71
Protecting the
Environment
PAGE 62
Serving our
Communities
PAGE 58
54
Robust sustainability governance is
paramount to our long-term success
and resilience as a business. I am proud to
say that Hochschild has made significant
strides this year in developing a
comprehensive set of 2030 ambition areas
which will serve as our guiding compass
towards a more sustainable future. These
ambition areas not only measure our
environmental impact but also underline
our commitment to social responsibility,
ethical governance and transparent
reporting practices. By fostering
accountability at all levels and promoting
transparency in our decision-making
processes, we are laying a solid foundation
for our long-term sustainable growth.”
Eduardo Landin, CEO
Governance
Our Board of Directors holds the ultimate accountability for
creating policies on sustainability, ensuring that the Company
complies with both international and national regulations,
and establishing sustainability as a source of lasting
competitive advantage.
The Sustainability Committee, an official sub-committee of
the Board, consists of the CEO and two Independent Directors
and is tasked with overseeing sustainability matters. Regular
attendees are the COO and the Vice Presidents of Legal &
Corporate Affairs, and of Human Resources. The role of the
Sustainability Committee is to oversee and to make all
necessary recommendations to the Board in connection
with ESG issues as they affect the Company’s operations. For
example, the ESG KPI ambitions for 2030 were recommended
by management and were presented to the Sustainability
Committee for review and consideration. After adequate review
and discussion with management, the Sustainability Committee
then took these ambitions to the Board for approval.
The Sustainability Committee also focuses on compliance with
national and international standards to ensure that effective
systems of standards, procedures and practices are in place
at each of the Company’s operations. The Committee is also
responsible for reviewing Management’s investigation of
incidents or accidents that occur in order to assess whether
policy improvements are required. As part of its policy and risk
management activities, the Committee approved an updated
Environmental Policy last year which includes specific provisions
regarding climate change and biodiversity protection. For
further detail on how Hochschild manages climate-related risks,
please see our CFD report on page 76.
Tracey Kerr chairs the Sustainability Committee and has
Board-level responsibility for ESG matters. She is also the
Designated Non-Executive Director for Workforce Engagement.
The COO and Vice Presidents of Legal & Corporate Affairs,
and Human Resources report to Tracey Kerr as Chair of the
Sustainability Committee.
Committee membership and attendance at Committee
meetings held during the year are detailed in the table below:
Maximum
possible
attendance
Actual
attendance
Independent
2023 Meeting attendance
Members
Tracey Kerr,
Non-Executive Director (Chair)
Ignacio Bustamante,
Chief Executive Officer*
Eileen Kamerick,
Non-Executive Director**
Eduardo Landin,
Chief Executive Officer*
Mike Sylvestre,
Non-Executive Director
Yes
No
Yes
No
Yes
4
3
2
1
4
*
On 26 August 2023, Ignacio Bustamante stepped down from the Committee
following his resignation as CEO and was succeeded by Eduardo Landin.
** Eileen Kamerick stepped down from Committee on retiring from the Board on
9 June 2023.
4
3
2
1
4
55
Strategic Report 1—99Governance 100—149Financial Statements 150—226Further Information 227—231Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023 SUSTAINABILITY REPORT
CONTINUED
The Committee conducted the following key activities
during 2023:
Core areas of focus
– Monitoring the execution of the annual plan in key areas:
Serving our communities, Protecting the environment,
Ensuring health and safety, Empowering our people,
and, in conjunction with the Audit Committee, Being
a responsible business
– Oversight of the ongoing Environment Culture Transformation
Plan, Safety Culture Transformation Plan, and the Social
Culture Transformation Plan which seeks to enhance the
Company’s social engagement strategy
– Received regular updates on the redundancy process at
Pallancata which was placed on care and maintenance
towards the end of 2023
Policy & risk management
– Reviewing key sustainability-related risks faced by the
Company and evaluating the adequacy of the mitigation
measures put in place
CDP Climate
CDP Water
FTSE4Good (/5)
Sustainalytics
2023
2022
B
B-
3.6
B
B-
2.4
Medium risk
(28.6)
High risk
(37.2)
BB
36
B
41
Reporting & monitoring
– Approving the Sustainability Report and TCFD Report for
MSCI
S&P (/100)
inclusion in the 2022 Annual Report
– Receiving updates on external ESG-related disclosure
initiatives, for example, the Company’s participation in the
Carbon Disclosure Project (CDP), MSCI and Sustainalytics
– Considering and proposing to the Board, for adoption, the
2030 ambitions for the ESG related KPIs in alignment with
the Company’s overall strategy
For climate-specific disclosure, we developed our 2023 report
based on the CFD framework, which can be found from page 76.
Using these external disclosure frameworks, we are committed
to providing our stakeholders with an ongoing and transparent
account of our material topics and to outlining the steps we are
continually taking to improve our sustainability performance.
We periodically publish a standalone Sustainability Report
which covers, in detail, the sustainability activities and
performance of Hochschild. Our latest standalone report
was published in 2022 and was prepared in accordance with
the “Core” option of the Global Reporting Initiative Standards.
It can be found via our homepage:
https://www.hochschildmining.com/sustainability/
sustainability-reports-and-policies/
Our next standalone Sustainability Report will be published
in 2025.
Sustainability reporting
We are encouraged that our external sustainability ratings have
improved in maturity against the FTSE4Good, Sustainalytics
and MSCI benchmarks.
In terms of environmental-related reporting, our 2023 Climate
report for CDP received a B rating, which is higher than the
average rating of C for the metallic mineral mining industry.
Our overall S&P score for 2023 (36) shows that Hochschild
continues to perform at a higher maturity level than the current
average (28) across the following three dimensions: Governance
& Economic, Environmental, and Social.
Developing our 2030 ambition
After a comprehensive internal review, the Board of Directors
approved, in August 2023, Hochschild’s ambition for 2030.
This ambition takes into account the most recent materiality
assessment, which identified areas of importance for
Hochschild to both internal and external stakeholders.
These ambition areas are supported by a robust selection
of KPIs that will be measured against the 2021 baseline year.
Performance against these KPIs will be reported on an
annual basis.
The selected KPIs are as follows:
SERVING OUR COMMUNITIES
Local workforce vs total workforce (%)
Local procurement vs total procurement (%)
Social investment vs revenue (%)
PROTECTING THE ENVIRONMENT
2030
Ambition
60%
20%
0.90%
2030
Ambition
-30%
0.22%
80%
0.90
174
GHG scope 1+2 emissions (%)
Freshwater utilised per ore processed (m3/ tonne
Recycled waste vs waste generated (%)
Domestic waste landfilled (kg/person/day)
Potable water consumption (l/person/day)
PROMOTING HEALTH, SAFETY AND WELL-BEING AT WORK
2030
Ambition
0
1.2
270
2030
Ambition
11%
20%
40%
<5%
2030
Ambition
>50%
6 years
Fatal accidents
Lost time injury frequency (LTFR)1
Lost time injury severity rate (LTISR)2
EMPOWERING OUR PEOPLE
Women in workforce (%)
Women in leadership roles (%)
Women in Board seats (%)
Voluntary turnover (%)
BEING A RESPONSIBLE BUSINESS
Board members considered by investors to be independent
(%) (excl. Chair)
Average tenure of Non-Executive Directors (excl. Chair)
1 Calculated as total number of accidents per million labour hours.
2 Calculated as total number of days lost per million labour hours.
These KPIs can also be found on our website:
https://www.hochschildmining.com/sustainability/
sustainability-reports-and-policies/
The Company will monitor the continued relevance of the
selected KPIs and will be supplemented as appropriate, for
example, by the revision of key climate change related targets
on completion of Hochschild’s Climate Strategy that sets an
ambition to achieve Net Zero by 2050.
During 2024, specific plans, including technical and financial
considerations to achieve the 2030 goal for each KPI, will be
developed. Yearly performance will be published on our website
and in our Sustainability and/or Annual Reports.
Our interim 2030 ambition provides us
with a framework for measuring and
managing our impacts in a transparent and
robust way. These are the areas which are
most material to our business and where
we can have the most impact on the
environment and society.”
David Vexler, Corporate Sustainability Director
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Serving our
Communities
Supporting the social and economic development of our local
communities is a core commitment at Hochschild. Within this
strategic pillar, we have identified the following material topics
related to this pillar: Positively Impacting Local Communities
and Respecting Human Rights.
Our approach to serving our communities
Our social engagement strategy is focused on generating
positive impact. We do this through fostering strong
partnerships with local communities and through developing a
range of programmes, based on the needs of our communities.
These partnerships respect the unique cultural heritage,
practices and social dynamics of these communities. We
also keep our communities informed of any relevant company
developments that may affect them and actively engage them
to address their questions and concerns. Our programmes cover
a breadth of development areas, from the provision of medical
support and digital facilities to the coaching of female
entrepreneurs and the technical training of mining students.
To ensure that our programmes address the specific needs
and expectations of our communities, we invest resources to
understand what these needs are and maintain open and
transparent dialogue in our engagement.
Our approach to generating positive impact is guided by our
Community Relations Policy, which emphasises our dedication
to building trust and listening to community concerns. We also
consider how our operations may impact the local community,
either directly or indirectly; this consideration is formally
included within our application for environmental permits, under
the Free Prior Informed Consent (FPIC) process. We also work
with government authorities to ensure our social investment
strategies are successfully implemented. As an example, this
year we developed a multi-year Interinstitutional Agreement
with the Municipality of La Unión in Peru for the benefit of the
local population.
We are pleased to report that, this year, local workers
represented 59% of our total workforce. This figure includes both
Hochschild’s direct employees and permanent contractors in
our mining sites in Peru and Argentina. This is an encouraging
improvement from 53% in the previous year, against a 2030
ambition of 60%.
Highlights
59%
LOCAL MINE WORKFORCE* VS TOTAL MINE
WORKFORCE IN PERU AND ARGENTINA
(2022: 53%)
$156m
LOCAL PROCUREMENT*
IN PERU, ARGENTINA AND BRAZIL
(2022: $119.4m)
$8.2m
SPENT OR DONATED TO BENEFIT LOCAL
COMMUNITIES AND LOCAL GOVERNMENTS IN
PERU, AND ARGENTINA
(2022: $6.89m)
Alignment to UN SDGs
*
Local refers to people working at the mines or
businesses that belong to the regions where the
Company operates (Peru: Apurimac, Arequipa,
Ayacucho and Cajamarca; Argentina: Santa Cruz;
Brazil: Goiás).
58
Our local communities are, and will always
be, one of Hochschild’s most important
stakeholders. From supporting health, to
driving entrepreneurship, we are proud to
see the value we bring. Our long-standing
programmes have resulted into higher levels
of digital inclusion, stronger economic
networks and real career opportunities
for underrepresented workers.”
Amalia Ruiz, Community Relations Manager – Peru
Progress against our ambition
Local workforce vs total workforce (%)
51%
2021
Baseline
2022
53%
2023
59%
2030
Ambition
60%
Local procurement vs total
procurement (%)
12%
15%
17%
20%
Social investment vs revenue (%)
0.84% 0.94% 1.18%
0.90%
Key achievements 2023
– Digital inclusion: In 2023, we continued to provide training
to employees and community members to drive wider digital
inclusion. This includes addressing digital skill gaps within our
own workforce through the training of 24 senior individuals
in ICT (Information and Communication Technology) skills.
The “Conexión Futuro” (Future Connection) programme aims
to increase employability in the rural areas surrounding our
mines in Peru through technical skills training. Access to digital
centres is provided, free of charge, in communities where there
is typically a large student population. This year, over 600
community members benefited from digital centres across
the localities of Oyolo, Pacapausa, Ccalaccapcha and Aniso,
an increase from the number of beneficiaries in 2022 (491).
Equipped with projectors, wireless network systems and sound
systems, these centres offer digital training and have provided
students and teachers with ICT support since 2020.
Beneficiaries of the 4* Digital Centres in Peru in 2023
Students attending technical certification courses
ICT issues resolved
614
170**
2,203***
* Number of digital centres in December 2023.
** Includes 75 female students.
*** Includes 710 interactions with women.
– Education: Through a range of different initiatives, we provide
academic support, career guidance and socio-emotional
and entrepreneurial skills for our local pupils and students.
We aim to promote local employment in the mining industry,
focusing on supporting individuals from communities near
our operations.
To cater to the needs of the mining industry, we sponsor
higher education scholarships in technical subjects relevant
to this industry through our “Quri Yachay” (Golden knowledge
in Quechua) scholarship programme. The mining training
programme is led by Cetemin, a Peruvian educational
institution that offers technical programmes related to mining.
The young individuals, who live in communities surrounding
our Inmaculada mine, receive training to enhance their
employability in the mining industry and thus improve their
quality of life and that of their families. The technical courses
cover a range of topics related to plant, mine, laboratory
and infrastructure requirements. Initiated 10 years ago, this
programme has so far provided technical training to over
400 students (female and male). We are delighted to say
that approximately 95% of these alumni students are now
employed by Hochschild. In 2023, a new cohort of 64 students
successfully graduated from their programme for mine
drilling assistants.
Additional 2023 educational initiatives in Peru include a
Vocational Guidance Fair for secondary school students in
the 3rd, 4th and 5th grades, and “Fun Summer Workshops”.
We also continued our educational programme “Aprender
Para Triunfar” (Learn to Succeed), detailed below.
The Learn to Succeed programme provides academic and
entrepreneurial support to primary and secondary school
students, parents and teachers. Since 2012, over 300 students
have benefited each year from this educational programme.
In 2023, we engaged with students, teachers and parents from
seven communities in areas of our direct influence, through
workshops aimed at educational and psychological
development. As an example, our “Soft Skills” workshops
focused on enhancing life skills recommended by the United
Nations (UN), including social, emotional and cognitive skills.
Our “Life Project” sessions, meanwhile, helped 4th and 5th
year secondary students gain clarity on planning their future
career paths. Through the whole suite of workshops, which
also included “Vocational Guidance”, “Psychological Support”,
“Entrepreneurship Promotion”, “Parent Schools” and “Teacher
Training”, we benefited over 700 students and over 50
teachers. As a result, we have seen significant progress made
in reading, writing and mathematics amongst primary pupils.
Guidance shared during 25 observation and feedback
sessions has also helped to improve teachers’ pedagogical
skills, enabling them to progress in innovative and
comprehensive teaching practices. We have also seen
stronger collaboration between teachers and learning
specialists through our complementary inter-school activities.
Beneficiaries of the Aprender Para Triunfar programme in 2023
Number of parent-teacher meetings
Number of teacher observation and feedback sessions
Number of trained teachers
Number of workshops
* Primary level: 8; Secondary level: 50.
** Primary level: 187; Secondary level: 596.
411
7
25
58*
783**
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– Health and nutrition: Through our Ccalaccapcha medical
campaign held in October, we provided the population of
the Ccalaccapcha community and surrounding areas with
comprehensive care. The Cora Cora Health Network and the
Pausa Micro-Network, both part of the Ministry of Health
(MINSA) in Peru, along with our Inmaculada mine team,
provided a total of 21 specialists for the campaign as well as
equipment and supplies. In collaboration with these health
networks, we provided comprehensive care for the entire
population covering different specialties. This included
informing and educating individuals in the risks of various
diseases, their causes, and their side effects on physical,
psychological, and social health.
– As a result of this campaign, which includes educational
sessions on prevention, promotion, and recovery measures,
the community members have strengthened their knowledge,
behaviours, and attitudes towards their own health. The
campaign has also worked to detect the main diseases
affecting the paediatric and adult populations and invested
in care related to different medical specialities to help improve
the general health status of the locality.
Specialists provided
Attendees during 3 days of care
21
800
The “Siempre Sanos” (Always Healthy) programme addresses
the medical needs of local communities. This programme
offers free medical care, supports new parents with infant
nutrition and educates community members on preventative
care. We continued with this programme in 2023, with more
than 500 beneficiaries from the area of influence of the
Inmaculada mine. Experts in specialised nutrition and early
stimulation carried out 350 visits in local communities near
Inmaculada. We also organised a campaign with multi-
speciality medical professionals to improve the communities’
knowledge of healthcare.
Beneficiaries of the Siempre Sanos programme in 2023
Number of multi-speciality medical campaigns
Number of home visits carried out by specialised nutrition and
early stimulation personnel
512
1
350
– Socio-economic development: Hochschild continues to
support the local economies of its communities in Peru and
Argentina. In 2023, this ranged from implementing a training
programme for alpaca breeders, and standardising product
quality through external laboratory tests at the collection
centre for the “Red del Valle Huanca Huanca” productive
network, to the following activities detailed below.
– Procuring from local food suppliers: To ensure that we support
our local producers in a meaningful way, we have reactivated
the supply of locally grown vegetables to Sodexo, our food
services supplier at our Inmaculada mine. The sale of these
vegetables, such as squash and carrots, provides the
beneficiary producer families with greater marketing
opportunities, thus helping to promote the wider economic
development of our local communities.
– Empowering female entrepreneurs: In October, Hochschild
conducted a training session on “Creating Digital Content
for Female Entrepreneurs” in the locality of Perito Moreno, in
Argentina. Facilitated by an external consultant, the six-hour
session was attended by 14 female entrepreneurs and
provided training on a range of topics, from clothes sales and
art to sports-related activities. By equipping business owners
with tools to develop and grow their projects, the initiative not
only fosters community engagement but also upholds our
commitment to contribute to the town’s growth. The exclusive
training was organised by the Human Resources and
Community Relations departments of our San Jose mine.
– Strawberry cultivation: In collaboration with Instituto
Nacional de Tecnología Agropecuaria (INTA) and the
Provincial Agricultural Council, Hochschild facilitated a
productive strawberry cultivation project in Argentina’s Perito
Moreno region. The project aimed to optimise agricultural
processes through the financing and provision of machinery.
The mechanisation initiative streamlined bed preparation,
irrigation tape placement, and soil covering into a singular
operation, boosting efficiency and yield per hectare.
Over 10 local families in Perito
Moreno participated in the
initiative, receiving necessary
materials and strawberry
seedlings. Both INTA and the
Provincial Agricultural Council
supervised the project and
operating equipment whilst
also offering cultivation
guidance. This initiative
not only supports local
communities but also aligns
with Hochschild’s commitment
to fostering productive projects
in key mining site regions.
– Technical capabilities: Hochschild’s “Impulso Productivo”
(Boosting Productivity) programme continued in 2023,
strengthening the technical capabilities at the individual
and/or organisational level of all agricultural producers in the
breeding of large and small animals and the cultivation of
crops. The ongoing programme is framed within sustainable
production in communities located near the Inmaculada mine,
with a focus on food security and sustainable market access.
Business networks are developed to increase networking and
create bonds of trust among producers identified as potential
suppliers. Alongside developing investment plans, the
programme provides continuous training and technical
assistance, develops pilot actions and drives the successful
management and direction of business units. This year, a key
objective has been to generate sustainable products and
proposals by maintaining the operation of the primary
processing centre in Santa Rosa de Cascara, and the fruit
and vegetable collection centre in San Javier de Alpabamba.
Sales of guinea pigs, chickens and fruits & vegetables
Assistance sessions provided for livestock
Assistance sessions provided for crops
$72,857
1,058
550
Material topics in serving our communities
Positively impacting local communities
At Hochschild we are proud to run a range of short- and
long-term initiatives in our local communities. These initiatives
are focused around our strategic areas: connectivity, education,
health and nutrition, and socio-economic development. Where
possible, we collaborate with our local governments to maximise
the impact and reach of our initiatives and broader social
investment strategies.
We engage in a regular dialogue with our community members
and gather detailed feedback through focus groups, site visits
and meetings with authorities to understand the needs and
expectations of our social impact on our communities.
Additionally, we have established Permanent Information
Offices in communities near the Inmaculada and Pallancata
mines, and in Perito Moreno for the San Jose mine. These
offices serve as a central point of contact for communities to
ask questions or express concerns about our mining operations.
In 2023, we received 93 grievances and inquiries and responded
to 90, with the last three underway.
Hochschild made social investments of approximately $8.2 million in
2023 towards projects in Peru and Argentina, the aforementioned
strategic areas, in ad-hoc philanthropic campaigns and in
providing technical assistance to municipalities.
Education
Health and nutrition
Socio-economic development
Philanthropic campaigns
Culture and communication
Donations
Local governments support
$897,001
$491,837
$1,332,311
$244,009
$379,812
$1,077,266
$3,752,810
Respecting human rights
Hochschild is committed to upholding and respecting human
rights within the Company and throughout our value chain.
Our Human Rights Policy is aligned with the Universal
Declaration of Human Rights, the United Nations Guiding
Principles, the UN Global Compact and the International
Labour Organisation’s (ILO) core conventions. The policy
provides a framework of guidelines that sets out how our
contractors and suppliers must conduct their activities. In 2024,
we plan to update this policy to include explicit reference of
human trafficking, freedom of association and the right to
collective bargaining, in line with our existing Code of Conduct.
In 2024 we will begin developing a new due diligence approach
to strengthen our existing Human Rights processes. In addition,
we undertake a periodical review and update of our
Whistleblowing portal to allow the registration of human rights
violations/grievances (see “Being a responsible business”).
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Protecting the
Environment
At Hochschild, we are committed to producing metals with the lowest
possible environmental footprint. We monitor our environmental impact
through the following material topics: Climate Change Resilience, Water
Management, Safeguarding Biodiversity and Natural Resources through
effective Land Use, and Responsible Management of Waste and Tailings.
Highlights
5.76
2023 ECO SCORE (VS TARGET OF 5.25-6)
2022: 5.27
60%
REDUCTION IN POTABLE WATER CONSUMPTION
COMPARED WITH 2015
2022: 58%
52%
DECREASE IN DOMESTIC SOLID WASTE GENERATED
COMPARED WITH 2015
2022: 46%
Alignment to UN SDGs
Our approach to protecting the environment
Our Environmental Policy guides all of our actions with the goal
of minimising the environmental impact of our mining and metal
production activities. The Company has clear and defined roles
and responsibilities for implementing our environmental
management policy. The Policy measures include reducing
water usage, improving energy efficiency, and increasing the
use of recycled waste among other environmentally conscious
measures. In 2025 we will develop our biodiversity strategy,
allowing Hochschild to meet the business’ medium- and
long-term nature-related objectives through clear and
appropriate targets.
In 2023, we reduced our potable water consumption by 4.9%, in
comparison to 2022 levels, and exceeded our 2030 ambition for
the second consecutive year. We have also continued to reduce
levels of domestic waste sent to landfill, achieving a reduction of
11.7% in 2023 in comparison with 2022. The reduction in GHG
emissions reflects the changes in the operations, and in 2024
we expect an increase once Mara Rosa is incorporated into
this indicator.
Progress against our ambition
GHG scope 1+2 emissions (%)
Freshwater utilised per ore
processed (m3/ tonnes)
Recycled waste (%)
Domestic waste landfilled
(kg/person/day)
Potable water consumption
(l/person/day)
2021
Baseline
0%
0.24
73%
2022
-0.7%
0.27
68%
2030
Ambition
-30%
0.22
80%
2023
-5.1
0.27
63%
1.00
1.05
0.93
0.90
193
171
162.83
174
Key achievements 2023
– Environmental Management System: In January 2023, we
launched our updated Environmental Management System
(EMS) to further strengthen our environmentally-conscious
culture across our business and operations. Our EMS is ISO
14001 aligned, and builds upon the wealth of knowledge and
professional experience of our personnel, resulting in a
tailor-made system that works best for the Company.
The main environmental standards and procedures were
developed and published in the EMS portal on the Hochschild
intranet. In 2023, the implementation of the EMS in our mines
focused on the following Processes: environmental leadership,
risk assessments, and field controls.
In 2024, we will roll out further training on EMS to reinforce
our workforce’s understanding of each Process; we will also
perform an internal audit (led by our own specialists) to
measure the effectiveness of our first year of implementation
and identify opportunities for improvement. Additionally, we
continue to conduct “managerial” or “corporate” inspections
at all sites.
– Environmental Culture Transformation Plan (ECTP): In 2023,
we reviewed and restructured the ECTP in line with our
updated EMS Processes and Company attributes. The graphic
below shows how our ECTP and EMS align, alongside key
activities in 2023 for each segment.
Environmental Culture Transformation Plan (ECTP) structure
s
e
i
t
i
v
i
t
c
a
3
2
0
2
LEADERSHIP — EMS Process 1
We prepared the ECO HOC podcast (to be launched in
early 2024) for leadership. The podcast will help reinforce
the concepts of Hochschild’s Environmental Policy.
We also prepared a pocket handbook for leaders with
the Environmental Policy, 15 EMS Processes, and
incident reporting.
RESPONSIBILITY — EMS Process 4
We organised activities in each country to promote an
environmental culture among workers and their families
(see country-specific activities in this section for Brazil,
Argentina and Peru).
TRAINING — EMS Process 7
We prepared training material to be distributed across
Peru, Argentina and Brazil, that is aligned with the EMS
and country-specific regulations.
COMMUNICATION — EMS Process 7
We continued working with our Environmental Ambassadors
(see overleaf for more information).
INNOVATION — EMS Processes 9 & 14
We participated in a family workshop and launched an
internal monthly publication to improve visibility in the
Company regarding the work of the Environmental team.
s
e
i
t
i
v
i
t
c
a
3
2
0
2
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– Environmental Ambassadors Programme: To fully embed
our ECTP into our everyday operations, we invite employees,
across all levels, to be part of our Environmental Ambassador
Programme. Our ambassadors serve as catalysts,
accelerating the impact of the transformation process.
In 2023, our ambassadors:
• led and advocated actions in operations related to the ECTP;
• acted as guardians of best environmental practices;
• proposed new initiatives aligned with environmental care;
• participated in environmental calendar activities, training
sessions, and field visits;
• shared knowledge, such as guidance for shift handovers in
their areas;
• led housekeeping campaigns in their areas of work;
• collaborated with the environmental team on planned
inspections of their areas and other internal inspections;
• documented visits and activities through photos and videos.
– ECO Score – Hochschild’s internal performance monitoring tool:
The ECO score is a scoring framework that allows Hochschild to
quantify the business’ environmental performance within a
single metric, expressing environmental management in a way
that is easily understood. The collective annual score includes
indicators on environmental culture, incidents, environmental
audits, water quality, water use and waste generation. The ECO
score serves as a powerful and innovative tool for managing
environmental issues, holding employees accountable, and
generating value for our stakeholders. The 2023 ECO Score
results will undergo independent verification by Ernst & Young
(EY) Peru, following the International Standard on Assurance
Engagements (ISAE) 3000.
In 2023, we increased our ECO score target range from 5-6, to
5.25–6. Compared to an environmental efficiency score of 5.27
in 2022, we improved our score to 5.76 in 2023, pushing
Hochschild closer to the higher band of our target range.
We are pleased to report that, since 2015, we have improved
our environmental efficiency score by 74%.
Reducing our impact on the planet
is at the core of Hochschild’s culture
and values. To further strengthen this
environmentally-conscious culture,
we have updated our Environmental
Management System (EMS). We are also
pleased to have exceeded our ECO Score
target this year and look forward to
developing our biodiversity strategy
in the short-medium term.”
Claudia Revilla, Environmental Officer
This year, we have continued our Interinstitutional Alliance
Cooperation partnership with Landscape Reserve Sub Cuenca
del Cotahuasi, for the third consecutive year. Funding was used
for environmental education, participative management, and
sustainable economic activities. This included holding the third
edition of the “Emprendedores por Cotahuasi” (Entrepreneurs
for Cotahuasi) programme, which supports local entrepreneurs,
supporting 526 beneficiaries across three winning projects.
Material topics in protecting the environment
Climate change resilience
Our 2030 ambition is to reduce our GHG Scope 1+2 emissions
by 30% against a 2021 baseline. Our aim is to reach net-zero
GHG emissions by 2050. Achieving our interim 2030 ambition
will require the use of renewable electricity and transition towards
more efficient vehicles with lower GHG emissions. In 2023, we
sourced 79% of energy from renewable sources. As shown by
the Mara Rosa Green Energy Project case study below, the
production of renewable energy will also play an increasing role
in enabling Hochschild to reduce its Scope 1&2 GHG emissions.
Mara Rosa Green Energy Project
In 2023, Hochschild announced a partnership with Solatio
Energia (a photovoltaic sector specialist) to implement a solar
energy project that will supply 100% of the energy required by
Mara Rosa’s operations from renewable energy sources. The
solar project involves constructing a photovoltaic plant in the
municipality of Jaboticatubas, in the metropolitan region of
Belo Horizonte (MG).
All production from the new solar plant will be fed into the
National Interconnected System (SIN), offsetting the total
volume of energy consumed by the operations in Mara Rosa.
Construction work on the new solar plant began in October
2023, and production is scheduled to begin in Q1 2025. With a
capacity of 124.6 MW of energy, the solar plant will guarantee
that the amount of energy produced will meet 100% of the
energy demand throughout the mine’s useful life, initially
planned for 10 years.
Our 2030 ambition will also require operational changes in
existing mines and operations (including process changes, asset
upgrades and the use of future technological advancements)
alongside the use of offsets or neutralisation projects to
eliminate residual GHG emissions.
Our mining operations in both Peru and Argentina have a lower
GHG emissions intensity compared to other gold and silver
mines globally (1.85 tCO2e/koz Ag eq; 0.15 tCO2e/oz Au eq).
This is due to the underground nature of our mining operations,
which having lower emissions compared to open pit mines, using
low-carbon grid-based electricity, and prioritising the use of
renewable energy when available.
Our annual GHG footprint calculations are shown below. From 2024 onwards, Brazil will be included in these calculations following
the commencement of operations at Mara Rosa.
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)6,7
Scope 3 emissions (tCO2e)
2023
20223
2021
2020
2019
2018
2017
2016
2015
2014
42,475
45,374
46,339
40,647
39,341
38,939
47,265
46,033
46,892
73,244
65,542
68,116
58,133
41,254
82,833
85,084
94,249
91,893
78,163
69,933
13,691
13,389
12,820
6,591
n/a
n/a
n/a
n/a
n/a
n/a
108,017
113,490
104,472
81,901
122,174 124,023 141,514 137,926 125,055 143,178
3.55
25,872
3.64
29,734
3.11
24,8213
2.76
n/a
2.64
n/a
Energy consumption
435,824,161 477,278,230 465,027,594 366,955,382 446,288,131
From combustion of fuel (kWh)8
144,796,179 159,336,476 165,114,299 132,414,133 143,763,206
From purchased electricity (kWh)
291,027,982 317,941,753 299,913,295 234,541,249 302,524,925
2.60
3.16
3.27
3.70
5.08
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
2
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.
Includes data for the whole year for Peru (former and current operating assets, warehouses and office locations), Argentina (San Jose and Buenos Aires office) and London office.
The Group’s UK operations consist of a single office with an occupancy of three. Its total Scope 1 and Scope 2 emissions and energy consumption represent less than 0.01% of the
Group’s reported totals.
Restated following a review of underlying data and external verification of the emissions from Inmaculada, Pallancata, Selene and San Jose.
3
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.
Risks relating to climate change are managed at the highest governance levels through our Sustainability Committee, Risk
Committee and the Audit Committee. Our CFD-aligned report, (see pages 76 to 89) details specific information on our approach to
managing climate risks and opportunities, including governance, strategy, metrics and targets, and risk management. In 2025, the
business will conduct an assessment of financial and transition risks relating to climate change.
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Mine closure: Following a mine closure, the future use of the land
is a fundamental consideration in our operations, as well as in the
rehabilitation of the intervened areas. In line with this objective,
the areas must be restored to a safe and stable physical
condition in accordance with the surrounding landscape. In terms
of managerial responsibility for land closure and rehabilitation,
Hochschild has a specific department (and a Closure Manager)
that is responsible for the execution and fulfilment of the closing
commitments of our mines and exploration projects. As part of
this process, we make financial provisions to cover closure and
rehabilitation. The closure provision is assessed annually both
internally and externally by specialised auditors. Third party
experts are typically contracted every three years to incorporate
changes in scope, cost estimates and the life of mine. The
resulting reports inform closure plan approvals by the authorities.
We report on environmental and social closure activities for all
of our operational and closed mining units according to
applicable regulations.
In 2023 we continued work on the closure of the Ares mine TSF.
This work includes the dewatering of the TSF, via a state-of-the-
art water treatment plant with a reverse osmosis system that
ensures compliance with Peruvian Maximum Permissible limits;
it also includes increasing the area of tailings covered with inert
material and raincoat.
Responsible management of waste and tailings
Our ECO Score includes an indicator for monitoring effluent
quality, which reflects any non-compliances with national
standards in all of our discharges to the environment and
prevents any toxic emissions. As a result, we are pleased to
report that we achieved our target of 0 non-compliances with
national standards for water discharge to the environment.
Hochschild has no significant air emissions and air quality is
periodically monitored at all mining sites to ensure compliance
with environmental quality standards. In 2023, Hochschild
recorded one minor environmental incident at our Inmaculada
mine. This incident did not impact the soil due to the timely
response and clean-up measures.
We also have extensive Waste Management Plans in place
to ensure each specific waste stream is managed in the best
manner possible. We strive to minimise the waste that ends up in
landfills and we prioritise recycling/reuse opportunities. In 2023,
our composting and domestic waste reuse efforts increased
and now San Jose and Inmaculada are testing this onsite
at a small scale. As a result of these efforts, including the
implementation of the ECO Score, domestic waste generation
has decreased by 52% since 2015.
Water management
Hochschild’s strategy for responsible water management is
designed to make optimal use of water resources. In 2023, 84.3%
of all water used in processing plants was reused, maintaining
our 2022 level of water reuse and helping Hochschild to minimise
intake of freshwater. At the Inmaculada mine, 80% of the water
used was reclaimed (2022: 78%), at the Selene mine, the figure
was 99% (2022: 99%) and at the San Jose mine, it was 73%
(2022: 69%). It is noteworthy that the Inmaculada mine operates
in an area with high water stress, and the Selene mine operates
in an area with medium-high water stress.
We have continued to reduce our water footprint at the
Inmaculada mine in line with the project implemented as part of
the Blue Certificate programme by the Peruvian Water Authority
(ANA). The Blue Certificate requires companies to assess their
water use, implement reduction plans, and engage with local
communities in a shared value programme. Our water savings
in 2023 from this project amounted to 83,477 m3 at the
Inmaculada processing plant (2022: 61,062 m3).
We have also continued to reduce our potable water
consumption year-on-year, from 171.2 m3 in 2022 to 162.83 m3
in 2023. This amounts to a 60% reduction in potable water
consumption since 2015. Potable water consumption rate
in 2023 was the lowest to date.
We closely monitor water discharge to the environment to
ensure it complies with national regulations, with around 2,000
parameters monitored annually. In 2023 we had 0 incidents of
non-compliance with national standards.
Safeguarding biodiversity and natural resources through
effective land use
While Hochschild will never operate inside a protected area,
several of our sites are located inside or near the buffer zone of
the Landscape Reserve Sub Cuenca del Cotahuasi, a legally-
recognised national protected area in the Arequipa region in
Peru. We conduct flora and fauna programmes in areas of direct
influence of our mines and we annually monitor biodiversity
levels at all sites. Our objective is to mitigate the environmental
footprint of our operations, with the aim of returning the
environment to a state similar to that which existed before
our intervention. We also invest resources into developing
environmental education, environmental and social awareness,
and appreciation of local cultural heritage (see Knowledge Trail
case study).
To minimise the effect of our operations on the surrounding
area, we implement specific measures, including compensation
programmes; to avoid significant environmental or landscape
impacts from mine operation and closure.
In 2023, we received approval for two compensation plans that
will allow Hochschild to maintain and increase the ecological
equivalence at our Inmaculada mine (see Inmaculada
compensation case study). Compensation has also been
embedded into the design of the Mara Rosa mine development
and, as such, has been a key consideration since the beginning
of the construction process (see Terra Ronca biodiversity
case study).
Freshwater use (m3)
Year
2020
2021
2022
2023
Freshwater used in process plants
454,527
589,904
651,066
578,919
Potable water use (litres/person/day)
2023
162.83
2022
171.2
2021
192.83
2020
230.67
2019
206.01
2018
224.78
2017
214.08
2016
293.71
2015
408.35
Knowledge Trail – Environmental and heritage education
project, Brazil
The Knowledge Trail is an environmental and heritage
education project developed by Hochschild in the town of Mara
Rosa in Goiás. The project is dedicated to Science, Culture and
Education, with the aims of disseminating scientific knowledge,
raising environmental awareness and valuing the region’s
cultural heritage. In recognition of this, the Knowledge Trail was
awarded 1st place in the 2023 edition of the Sustainable Goiás
Award, in the Innovation, Science and Education category, by
SEMAD (State Secretariat for the Environment). The
Sustainable Goiás Award aims to recognise and reward
sustainable actions carried out in the State of Goiás. SEMAD
received 91 entries for the award, from which it selected three
finalists in six categories and awarded the best project in each
group: (i) Public Servant; (ii) Public Policy; (iii) Press; (iv) Rural
and Business Activity; (v) Innovation, Science and Education;
and (vi) Third Sector.
Terra Ronca biodiversity, forest preservation
and compensation, Brazil
“The Terra Ronca State Park” (PETeR) is home to one of the
most important speleological complexes in South America. In
2021, the Goiás State launched a campaign to recognise this
park as a World Natural Heritage Site by the United Nations
Educational, Scientific and Cultural Organization (UNESCO).
To fulfil the legal obligation for forest compensation, resulting
from the removal of vegetation for the construction of the Mara
Rosa Project, Hochschild proposed the donation of an area
within this conservation unit. After a two-year consultation
process, Hochschild received approval by the SEMAD to
acquire and donate to the State of Goiás, 705 hectares of land.
481 hectares of the land donated by Hochschild is planned for
Forestry Compensation, for the removal of native species
protected by law in Permanent Preservation Areas (APP). 223
hectares remain available for compensation and the relocation
of legal reserves (registered and proposed). As a result, this
area can be preserved successfully as an important
Conservation Unity for the Cerrado’s biodiversity.
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Domestic waste generation (kg/person/day)
2023
0.93
2022
1.05
2021
1.00
2020
1.18
2019
1.04
2018
1.13
2017
1.13
2016
1.33
2015
1.94
Generation of waste by type (tonnes)
Domestic waste
Recyclable waste
Scrap metal
Recyclable
hazardous waste
Non-recyclable
hazardous waste
Electronic waste
2023
1,520
777
2022
2021
1,832
1,808
956
792
1,593
1,180
1,250
2020
1,565
599
977
2019
2018
1,547
2,100
642
706
1,288
1,528
181
193
198
147
231
304
1,182
1,157
1,136
9
8
12
610
9
748
11
807
8
Commercialisation/Repurposing of waste (tonnes)
2023
2022
2021
2020
2019
2018
Sold/repurposed
waste
3,330
3,630
3,769
2,201
3,870
2,924
All waste rock and tailings generated as part of mining and
processing are managed in accordance with our environmental
permits, and have purpose-made engineered facilities for each
waste type at all mines.
Hochschild has 11 TSFs in total, nine of which are downstream
with rock buttresses and two with central berms with
impoundments on both sides. Of these, four were operational for
the majority of 2023 – two in Peru and two in Argentina. By the
end of 2023, one of these tailings storage facilities was no longer
operational due to the planned suspension of the Pallancata
mine in Peru. In 2023, external audits were conducted on all TSFs
in Peru. An internal audit was conducted in Argentina.
Ensuring Health
and Safety
Employee safety is a key measure of our corporate success. The high-risk
nature of the mining process means that this topic must be prioritised to
protect our people and the overall success of our operations. We strongly
believe that a healthy, satisfied and motivated workforce plays a crucial
role in driving the growth of our Company. Our material topic relating to
this pillar is: Occupational health, safety and well-being.
We fully support the need for greater transparency in the mining
sector and we disclose comprehensive details on each of our
TSFs and their management. Our most recent Church of
England report on TSFs, published in 2022, is provided below;
this is based on the ICMM Global Industry Standard on
Tailings Management.
www.hochschildmining.com/media/wt5bs313/
church-of-england-info-request-v090622.pdf
Highlights
0
WORK-RELATED FATALITIES
2022: 0
37
LOST TIME INJURY
SEVERITY RATE
2022: 93
0.99
LTIFR
2022: 1.37
Alignment to UN SDGs
Our approach to ensuring health and safety
Everyone at Hochschild is responsible to conduct their work
in the safest way possible. We are currently the only mining
company to hold Det Norske Veritas (DNV) ISRS level 7 and we
are committed to upholding these high safety standards. The
Company recognises that an informed and attentive workforce,
where individuals are engaged with health and safety in a way
that looks out for themselves and others, is vital to managing
safety and health risks.
We are extremely pleased to report that Hochschild is on track
to achieve the business’ 2030 ambition and that Hochschild
recorded no fatal accidents in 2023. This marks the second
year in a row that we have achieved this critical result. Equally
encouraging are the 2023 results for our two major safety
indicators: the Lost Time Frequency Rate (LTFR) and the Lost
Time Injury Severity Rate (LTISR); our 2023 results in these
indicators are the best in Hochschild’s history.
Progress against our ambition
Fatal accidents
Lost time injury frequency rate (LTFR)
Lost time injury severity rate (LTISR)
2021
Baseline
2022
2023
2030
Ambition
2
1.26
676
0
1.37
93
0
0.99
37
0
1.2
270
Key achievements in 2023
– Safety Initiatives: The Seguscore, launched in 2022, is an
in-house integrated safety performance indicator that
incorporates proactive or “leading” safety indicators such
as the measurement of leadership presence, behavioural
observations, planned task observations and random mini
audits, as well as reactive or “lagging” safety indicators such
as lost time injury frequency rate (LTIFR), lost time injury
severity rate (LTISR), and High Potential Events (HPEs) i.e.
events that may result in severe injury or lost time injuries.
In 2023, the Seguscore was reframed by Hochschild as a
qualitative tool. Following a review of the scoring approach and
process, Hochschild determined, for instance, that leadership
presence cannot be measured only by field inspections.
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In this case, the new scoring approach requires that deviations
detected during field inspections must be resolved within a set
time period, according to the level of risk that they present.
This approach provides our supervisors with valuable site-
specific information, allowing them to demonstrate their
presence in the field, the number of deviations, and, more
importantly, how fast we are closing those gaps so that the
safety conditions are promptly improved to avoid the
occurrence of safety events.
– Investigating and learning from safety incidents: All Incidents
were investigated promptly and appropriate response
measures were implemented. We remain committed to health
and safety by continuing to promote the improvement of all
activities and assess the potential occurrence of HPEs. In the
event of an HPE occurring, our CEO leads a meeting with the
COO and all the Operational Unit Managers to review the
internal investigation. In this meeting, the root causes are
discussed, and control actions are reinforced at the corporate
level to share the lessons learned with the entire organisation.
During 2023, six HPEs were evaluated. Hochschild continues
to work to reduce this number of HPEs to zero through a range
of initiatives:
• We improved the fatigue control system installed in all our
buses and 4x4 pickup trucks in Peru to enhance road safety in
the transportation of personnel between cities and mine sites.
This system collects data analysed through a business
intelligence dashboard to predict potential incidents
• Our Peruvian and Argentinian operations implemented a
smartwatch/wristband for all personnel (company and
contractors) who operate heavy machinery. This smartwatch/
wristband monitors sleep time to prevent fatigue at work which
can increase the risk of incidents
– Well-being: To support the mental health and well-being of
our employees, we continued the “Conversemos en familia”
(Talk as a family) programme that was launched in 2022 in
Peru. In conjunction with the ECTP, a family workshop was
held in Arequipa, Peru. This included conversations on
parenting topics and interactive activities for the adults and
children in attendance; the aim was to help communication
with the parents, and provide a healthy environment for the
children to thrive.
Material topic in ensuring health and safety
Occupational health, safety and well-being
Hochschild offers a safe, healthy and secure workplace in which
our direct employees, as well as our contractors, can feel safe
and thrive. We adopt practical measures to avoid workplace
fatalities, eliminate occupational health hazards and support
employee well-being.
To ensure a safe working environment, we implement a
systematic risk management approach, supported by our
Occupational Health and Safety (OHS) Management System.
In 2023, we carried out internal audits which were conducted
by internal Hochschild-trained auditors. Our OHS Management
System applies to all sites, Hochschild employees and contractors.
Safety performance
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
1.38
1.26
0.99
1.05
930
676
474
Nil
‘23
Nil
‘22
‘21
‘20
Nil
‘19 ‘18
Nil
‘16
Nil
‘15
‘17
‘23
‘22
‘21
‘20
‘19 ‘18
‘17
‘16
‘15
37
‘23
93
‘22
‘21
‘20
138
112
54
‘19 ‘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.
Empowering
our People
Our people drive the success of our business and the positive impact we
have on the planet and society. By creating a working environment that
is supportive and empowering, we can improve employee satisfaction,
provide better and more equal employee opportunities and increase
retention rates. We identified the following material topics relating to this
pillar: Labour Relations, Diversity and Inclusion, Recruitment, Retention
and Engagement and Innovation through Technological Solutions.
Our approach to supporting our people
The importance that we place on our people is underpinned by
the commitments laid out in our Corporate Diversity & Inclusion
Policy, including respecting human rights and promoting diversity
and inclusion as part of our corporate purpose. We strive to
provide a safe and healthy workplace environment that, above
all, promotes a healthy work-life balance and demonstrates
inclusion. As part of this commitment, we invest in wellness
initiatives and professional development for our employees,
and offer competitive compensation and benefits.
Progress against our ambition
Women in workforce (%)
Women in leadership roles* (%)
Women in Board seats (%)
Voluntary turnover (%)
2021
Baseline
9%
15%
33%
5.0%
2022
9%
15%
33%
3.9%
2030
Ambition
11%
20%
40%
<5%
2023
10%
18%
38%
4.5%
* Leadership roles include senior, middle and junior management.
Highlights
4.5%
VOLUNTARY EMPLOYMENT TURNOVER
2022: 4%
9.6%
WOMEN IN THE WORKFORCE
2022: 9%
18%
WOMEN IN LEADERSHIP ROLES
2022: 15%
Alignment to UN SDGs
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Key achievements in 2023
– Internships for Women: We strongly believe that diversity helps
promote new and innovative ideas that can contribute to our
overall business success. Our continued focus on gender
diversity, in a male-dominant industry, is reflected in our
“Mujeres de Oro” (Women of Gold) internship programme.
This programme offers young women professionals rotations
across eight different departments at the Inmaculada mine,
such as plant, mine, safety, community relations, and
environment. The programme also offers mentorship, training,
and the potential for a permanent career with Hochschild. In
2023, Hochschild hired nine out of ten women who started the
programme in 2022 and finished in 2023.
– Increasing gender diversity at Hochschild: This year,
Hochschild has successfully increased the representation
of women at multiple levels of the organisation. We have
increased the percentage of women in our entire workforce
from 9% to 9.6%. Similarly, the percentage of women in
leadership roles has risen from 15% to 18%. As a result, we are
proud that we are moving closer to our 2030 gender diversity
ambition. As a mining company, we recognise the challenges
faced by our industry to build female representation. These
incremental improvements are reflective of the important
progress that is needed. We will continue, each year, to
promote the participation, education, training, development
and leadership of women within our organisation.
– Anti-sexual harassment: In 2023 we carried out the third
annual ELSA survey, a comprehensive diagnostic and
intervention tool that helps companies respond preventatively
to sexual harassment in the workplace. Our findings help
Hochschild to identify existing gaps and other opportunities
for improvement.
The survey found that:
• 69% of employees know and have read the Anti-Harassment
Policy
• 88% have received training on the subject
• 70% were aware of the investigation process for complaints
Our employees are the lifeblood of our
organisation. We are proud to be externally
recognised for our talent retention and
attraction efforts which provide our valued
employees with the opportunities and
culture to develop as professionals and
reach their full potential. Through this
environment, we aim to build female
representation at all levels at Hochschild,
with the broader aim of advancing
improvements in gender diversity across
the mining sector more widely.”
Cristina Arbe, Manager of Attraction,
Communication and Culture
72
Innovation through technological solutions
We strive to promote innovation in all aspects of our business
to increase productivity, improve worker safety and reduce our
impact on the environment. Our ongoing Innova platform allows
Hochschild to receive initiatives from every level of the Company.
Launched in 2022, the objective of the tool is to incorporate
technology and innovation into our processes, proposed by our
workers. Anyone, at any time, can use the platform to upload
their disruptive, applied, or incremental initiatives so that they
can be evaluated and implemented in a timely way.
Our Innova platform
Step 1: Submission
Submit an idea that could help the business solve a
current problem or make a difference for our Company.
Step 2: Evaluation
An expert from the site of the proposed idea will review and
then distribute the idea to a wider network of specialists for
evaluation. Here, different evaluation methods are used,
including scoring card scores, voting and evaluation forms.
Experts are selected according to their organisational
structure and subject matter expertise.
Step 3: Implementation
If the idea is successful, the Innova tool will assemble a project
team to implement the idea.
Step 4: Reward
The potential monetary gain for the business, from a
successfully implemented idea, is calculated. Subsequently,
a proportional prize is awarded to the project team.
In 2023, we developed two Innova Campaigns on the following
topics:
– ChatGPT and Artificial Intelligence for efficiency at Hochschild
– Conversemos en familia, for the families who participated
in the family workshop in October, as part of the ECTP
– Eight projects were implemented this year, having been
proposed between 2021-2023. A further four projects have
passed the Evaluation stage and are expected to be
implemented in 2024
73
Material topics in empowering our people
Diversity and inclusion
At Hochschild, diversity, inclusion and a safe work environment
that promotes equal opportunities for all are fundamental to the
sustainability of our Company and to our corporate purpose.
We are committed to respecting human rights and promoting
diversity and inclusion. As such, we reject any acts of
discrimination that are based on race, gender, religion, ethnicity,
age or any other distinguishing characteristic or trait. Our
Diversity and Inclusion Policy outlines our commitment to
promoting equal opportunities for all, including the participation,
education and empowerment of women in the workplace.
Gender diversity
2023 2022 2021 2020 2019 2018 2017 2016
Number of
employees
Men
Women
Number of senior
managers
Men
Women
Number of Board
members
Men
Women
2,921 3,282 3,347 3,155 3,024 3,894 3,849 3,859
311
316 316 275 218 245 235 222
38
5
5
3
44
6
43
2
41
1
37
1
37
1
36
1
35
1
6
3
6
3
7
2
7
1
7
1
7
1
8
1
Age structure
Employees
Board
<30
30-50
>50
510
2,374
348
0
1
7
Labour relations
We recognise and respect the right to freedom of association
and collective bargaining, in accordance with the laws and
regulations of the countries in which we operate. Underpinning
our relations with our workforce are principles and practices
related to fair compensation, job security and professional
development opportunities. In 2023, approximately 74% of our
total workforce was represented by a trade union or similar
body. We recorded 0 strikes or lockouts during 2023.
Recruitment, retention and engagement
We are committed to attracting and retaining a skilled
workforce by creating a workplace that is engaging, innovative
and defined by our corporate purpose and values. In 2023,
nearly 94% of our employees were permanent full-time workers,
with a low voluntary turnover rate of 4.5%. In the 2023, Merco
Talento ranking, Hochschild was ranked 4th among 17 mining
sector companies in Peru and placed 36th out of the top 100
companies in Peru based on our talent retention and attraction
efforts. The ranking promotes the improvement of human
capital management within organisations, providing them with
various metrics and evaluation elements that contribute to a
better understanding of the aspirations of the individuals
working within them.
Contracts in 2023
Permanent contracts
Fixed term contracts
Men
Women
Total
2,755
274
3,029
166
37
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Being a Responsible
Business
Acting honestly and ethically is central to our business. We are resolute
in our dedication to ethical business practices and are committed
to maintaining the highest level of responsibility in our operations,
relationships, and transactions. Within this governance pillar, we have
identified the following topics as material for our business: Responsible
Business Conduct and Ethics, Advocacy for Positive Change and
Responsible Supply Chain Management.
Highlights
63%
DIRECTORS CONSIDERED TO BE INDEPENDENT
(2022: 66%)
Alignment to UN SDGs
Our approach to responsible business
Our approach to acting responsibly is guided by our robust
corporate governance framework of policies, procedures,
and systems. This framework holds the business to account in
driving positive economic, social and environmental outcomes.
It goes beyond minimum compliance with legal and regulatory
requirements and involves advancing a corporate culture that
is aligned with our shared values: Innovation, Inspiring
others, Recognising talent, Seeking efficiencies, and
Demonstrating responsibility.
Operating as a responsible business
underpins Hochschild’s ability to have
a positive impact on sustainability
issues whilst simultaneously delivering
value for our stakeholders. Achieving
our 2030 sustainability ambition
requires maintaining the highest levels
of ethical standards, both in our own
operations and in our supply chain, whilst
ensuring robust corporate governance
systems are in place.”
Raj Bhasin, Company Secretary
Key achievements in 2023
– Policies: We updated our Prevention and Criminal Compliance
Manual and Interaction with Public Officials Policy. Our
operations in Peru and Argentina underwent evaluations for
corruption risks in accordance with the Compliance Manual.
– Recognition: Although no external anti-bribery audit was
required in 2023, we successfully passed an assessment to
re-confirm our eligibility to undergo an external audit in 2024,
to recertify our previous certification in anti-bribery from the
organisation Entrepreneurs for Integrity. In the meantime,
we have continued to implement the latest anti-bribery
standards to maintain our certification ahead of our
assessment next year.
Material topics in ensuring we are a responsible business
Responsible business conduct and ethics
Hochschild is committed to upholding the highest ethical
standards in our operations and supply chain. Our Board is
responsible for ensuring that our Company values are reflected
in our behaviour. To embody this, we have established a Code
of Conduct, along with supporting policies, that apply to all
individuals acting on behalf of the Company. In early 2023 we
distributed an updated version, with a more robust
Environmental section.
Our Code of Conduct is distributed to all employees and
outlines the ethical standards and values that we expect of
our employees to promote responsible behaviour, establish
accountability, and foster a positive corporate culture. In
addition to the Code of Conduct, our supplementary policies
cover topics such as anti-corruption, anti-bribery, and money
laundering prevention among others. Any violations of the Code
of Conduct are considered serious misconduct and handled
with the utmost urgency.
The Company has a long-established Whistleblowing Policy and
an online portal, available 24/7, to provide any person working
with or at Hochschild, with a means of raising concerns,
anonymously or otherwise. The Company values all genuine
reports received through this portal as they contribute to
upholding the high ethical standards established by the Group.
We have a policy of zero tolerance towards retaliation; for this
reason, we are committed to maintaining strict confidentiality
regarding genuine complaints received and the identity of those
filing them. The Group encourages those submitting a report to
provide their name as it enables Hochschild to collect further
details that could assist with the investigation. In 2023, we
received 60 reports through this system, all of which have
been addressed.
Created in 2023 and estimated to launch early in 2024, the
Internal Legal and Compliance Portal will provide all employees
centralised and immediate access to all documents and
initiatives related to business conduct and ethics. This establishes
the availability of resources that support compliance with the
Company’s rules, policies and documents.
The Compliance Integrity Programme was implemented in 2023
in Brazil. The goal is to prevent and detect breaches of law and
regulations. This reinforces Hochschild’s commitment to
integrity, and upholds the Company’s reputation. The
programme involved: high leadership support, risk identification
and mapping, creation of policies and a Code of Conduct,
trainings, internal controls, whistleblowing, and more.
This year, the HOC Compliance Podcast was created and
launched in Brazil. It provides employees with accessible content
related to themes of compliance. Complementary to the Code of
Conduct, this will support employee awareness and adherence
to the Company’s processes and procedures. The podcast
initiative will also be replicated in Peru and Argentina.
The launch of online compliance training provides employees
with access to an intuitive and clear format of Compliance and
Legal training. In animated format, this content was designed to
be engaging and allow easy assimilation of information. Starting
with the topic of Conflicts of Interest in Brazil, this training
implements standardised learning that underpins compliance
with laws and the Company’s internal rules.
Advocacy for positive change
We actively engage with policymakers, professionals, and civil
society to collectively discuss, shape and approve new initiatives
aimed at enhancing regulations in mining and environmental
sectors. In demonstration of our commitment to promoting ESG
guidelines and practices within the mining industry, we play an
active role in various industry associations and professional
forums such as the Sociedad de Minería and Petróleo y Energía
(SNMPE) in Peru, Cámara Argentina de Empresarios Mineros
(CAEM) in Argentina, the Confederação Nacional da Indústria
(CNI) in Brazil. We also participate in the Instituto Brasileiro de
Mineração (IBRAM), a key institution within Brazil’s mining
industry that promotes responsible mining practices, influences
policy decisions, fosters innovation, and facilitates collaboration
among various stakeholders in Brazil’s mining industry.
Responsible supply chain management
We place great importance on ensuring that we are part of
a value chain that protects human rights, safeguards the
environment, and promotes sustainable outcomes. For this
reason, our suppliers are required to comply with the specific
standards outlined in our updated Supplier Code of Conduct.
In Brazil, preventative due diligence of strategic suppliers and
monitoring of 100% of the entities with which Hochschild has a
commercial relationship within the country ensures that we only
contract with entities who share our corporate values.
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FOR THE YEAR ENDED 31 DECEMBER 2023
Introduction
The most recent Intergovernmental
Panel on Climate Change (IPCC)
Assessment Report identifies
that human activities (primarily
associated with the combustion
of fossil fuels) have unequivocally
caused global warming. We
recognise that climate change
is one of the greatest challenges
facing humanity and that it could
significantly change the physical,
social and economic environment
in which we operate.
At Hochschild we understand
the significant role that we,
and the mining industry in
general, have to play in
supporting the global
transition to a net-zero
world. We are committed
to responsibly managing
our impact on the climate
as well as the potential
impacts of climate change
on our business.
This is reflected in the actions
which we have undertaken
in recent years including
our ambition to reduce our
Scope 1 and 2 Greenhouse
Gas (GHG) emissions by
30% by 2030, against our
2021 baseline, as well as our
commitment to achieve a
net-zero emissions profile
by 2050.
Task Force on Climate-Related Financial Disclosures (TCFD) requirements
Outlined below is a summary of how we are managing our impact on climate change, and climate change’s impacts on
our business in alignment with the TCFD recommendations. These cover four “areas”, including: Governance, Strategy, Risk
Management and Metrics & Targets. Hochschild also falls within scope of the climate-related reporting requirements of the UK
Financial Conduct Authority (FCA) which also require us to disclose, on a comply or explain basis, against the recommendations
of the TCFD (as outlined in the table at the end of this report).
The global transition to a low-carbon
economy marks a shift in the materials
required to develop and manufacture
technologies that are essential for
reducing future greenhouse gas
emissions and tackling climate change.
The transition to a low-carbon economy will require an increase
in the use of low-carbon technologies such as Solar PV and
Electric Vehicles (EV). These green technologies will require
significant quantities of precious metals, including gold and
silver, in order to be manufactured – which could lead to an
increase in demand for the gold and silver that Hochschild
produces. The graphs to the right illustrate future projected
increases in global capacity for solar PV and mineral demand
for EVs, under a range of climate scenarios.
This presents Hochschild with a unique opportunity to support
the transition to a low-carbon economy and to assist in the
global adoption of low-carbon technologies.
Capacity for Solar PV (GW) under the State Policies,
Announced Pledges and Net-Zero by 2050 scenario (IEA, 2023)
20,000
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
)
W
G
(
V
P
r
a
o
s
l
r
o
f
y
t
i
c
a
p
a
C
2022
2025
2030
2035
2040
2045
2050
Stated Policies Scenario
Net Zero Emissions by 2050 Scenario
Announced Pledges Scenario
Mineral demand for EV (kt) under the State Policies,
Announced Pledges and Net-Zero by 2050 scenario (IEA, 2023)1
)
t
k
(
V
E
r
o
f
d
n
a
m
e
d
l
a
r
e
n
M
i
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
2022
2025
2030
2035
2040
2045
2050
Stated Policies Scenario
Net Zero Emissions by 2050 Scenario
Announced Pledges Scenario
1
Please note that the IEA data for total mineral demand for EV does not include silver
(but instead it includes other minerals such as copper, graphite, nickel, etc.). However
the data point has been selected as an indicator to represent the likely demand for
silver in the future.
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CLIMATE-RELATED FINANCIAL DISCLOSURES
FOR THE YEAR ENDED 31 DECEMBER 2023
Governance of climate-related issues
Board of Directors
At Hochschild, we recognise that clear governance
structures are essential to ensure that climate-related risks
and opportunities are managed responsibly and effectively.
As sustainability has become increasingly important to
Hochschild’s stakeholders, sustainability and topics relating to
ESG (environmental, social and governance) have been further
integrated into our operations and governance structures.
At the highest level, our Board of Directors has overall
accountability and oversight of the management of policies
and initiatives related to sustainability and climate change.
This includes the consideration of climate-related risks and
opportunities which could, ultimately, impact several aspects of
the Group’s financial statements such as production costs, capital
expenditure and closure costs as well as influence the Group’s
approach to strategic planning and risk management. Each of
our Board members brings experience from their respective
careers and, collectively, the Board has previous experience in
managing sustainability in mining and responsibility for climate
change and water management which is utilised to assess the
suitability of our operations in the face of climate change.
Our Board of Directors’ involvement in sustainability issues is
facilitated through quarterly interactions with the Sustainability
and Audit Committees, both of which are responsible for
reporting climate-related issues to the Board. At these meetings,
key sustainability topics are presented, including risks associated
with climate, water management and other environmental risks,
as well as annual progress against the Company’s ESG ambitions.
Presently, there is no additional process for the Board of Directors
to supervise development against GHG emissions and other
climate-related targets. However, in 2024 we plan to introduce a
formal process following the formation of necessary action plans
for our 2030 ambitions. Progress in this area has already been
made through the completion of a Climate Risk Assessment
(CRA), the quantification and reporting of GHG emissions and
the initial development of a carbon reduction strategy.
Sustainability Committee
The role of directly overseeing sustainability systems and
policies at Hochschild has been delegated to the Sustainability
Committee since 2006. Led by the Committee Chair who is an
independent Director, the Committee comprises the CEO and
one other independent Director. The COO and the Vice
Presidents of Legal and Corporate Affairs, and Human
Resources are regular attendees. Although the Committee has a
wide scope of responsibilities, the discussion and management
of climate-related issues are a scheduled agenda item during
every quarterly meeting. One of the Sustainability Committee’s
key roles during these quarterly meetings is to provide
recommendations to the Board of Directors on topics relating
to climate change and GHG emissions that are material to
Hochschild’s operations and business plans.
Managing climate-related risks
Our climate-related risk and opportunity monitoring process
is led by the Risk Committee which is made up of the CEO, Vice
Presidents, Country General Managers, and the head of the
Internal Audit function. The Risk Committee is primarily responsible
for executing the risk management process at Hochschild and
monitoring the impact and effectiveness of controls to support
Hochschild’s business objectives. The Committee meets in the
lead up to the quarterly Board meetings and approves the latest
version of the risk register for consideration by (a) the Group’s
Audit Committee, which has oversight of risk management on
behalf of the Board, and (b) the Board, in its consideration of the
principal and emerging risks faced by the business. In addition,
sustainability risks and mitigation plans of such risks are
monitored by the Sustainability Committee.
The Committee also manages the processes around ESG-related
risks and opportunities, oversees Hochschild’s compliance with
relevant national and international standards and reviews the
policies and procedures in place for investigating relevant
incidents. The yearly ECO Score targets are also reviewed and
presented to the Board for approval. Details on the Sustainability
Committee’s activities in 2023 are available on page 55.
Alongside the Sustainability Committee, special working groups
are established in response to specific climate-related events.
For example, the El Niño phenomenon triggered the formation
of a taskforce in August 2023 that included the Safety Manager,
Logistics Manager, Peruvian General Manager and the Head of
Internal Audit. This group is responsible for monitoring and
managing the business risks that might emerge by working to
understand the situation alongside government authorities,
implementing weather monitoring systems and providing
support to the mines that could be potentially impacted.
Environmental management
The Sustainability Director has responsibility over the ESG team
and reports to the Vice President of Legal and Corporate Affairs.
The ESG team monitors Hochschild’s ESG performance through
data gathering on the Company’s ESG metrics, including GHG
emissions, energy usage, water consumption, and waste
generation. The reporting, disclosure, and communication of
Hochschild’s progress within these ESG areas to both internal
and external stakeholders are also managed by the ESG team.
At Hochschild we have a Remuneration Policy in place to
incentivise a reduction in our environmental impact, the details
of which are available in the “Metrics and Targets” section on
page 86.
Our Governance Structure
Board
Chair
(Non-Independent)
2 Non-Independent
Directors
5 Independent
Directors
Sustainability
Committee
Chair (Independent),
CEO and
Audit
Committee
Chair (Independent)
and
Remuneration
Committee
Chair (Independent)
and
1 Independent
Director
3 Independent
Directors
3 Independent
Directors
Exploration Working
Group
Risk
Committee
Chair (CEO)
and Senior Management
Vice Presidents,
Country General Managers,
Head of Internal Audit
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FOR THE YEAR ENDED 31 DECEMBER 2023
Climate-related risks, opportunities, and strategies
Our approach to assessing physical and transition
climate-related risks and opportunities
At Hochschild, we understand the importance of fully
considering how climate change could impact our business.
As a result, we have already undertaken an assessment focusing
on how climate change could impact our current and future
exposure to physical risks and transition risks and opportunities.
The focus of the physical CRA was to identify the climate-
related risks posed by extreme weather under current and
future projected climatic conditions, across five of our mining
facilities (with four of these sites being located in Peru and one
being located in Argentina).
Here at Hochschild, climate-related risks and opportunities are
integrated into our business-wide Enterprise Risk Management
framework. As with other business risks, each identified physical
climate-related risk was assigned a consequence of impact
rating, that represented the potential damage and/or associated
loss of service, and a probability/likelihood rating that
represented the likelihood of a climate hazard/event occurring.
Based on these consequence and probability ratings, a 3x5 risk
matrix, shown in the table to the right, is used to map each risk
under baseline and future projected climatic conditions (2050).
This produces an overall risk rating that is classified as a Low,
Medium, or High Risk. Once risk ratings were assigned, the
potential impact of each risk was also qualitatively assessed,
and next steps were recommended to further manage each
risk. We have also undertaken an initial review of the exposure
of our business to climate-related risks and opportunities
associated with the transition to a low-carbon economy.
As a part of this review, transition risks and opportunities
were assessed in alignment with the risk and opportunity
categories outlined by the TCFD (including: current regulations,
emerging regulations, technology, legal, market, reputation).
The initial review identified risks or opportunities classified as
important to stakeholders, or anticipated to have a high impact
or likelihood. A qualitative assessment of the potential time
horizons associated with each identified risk/opportunity was
also identified. As outlined below, the results of our high-level
transition risk and opportunity review have been utilised to
understand which key transition risks and opportunities are
most likely to materialise in the short to medium term, and if
we require, or already have, appropriate actions in place to
mitigate/capitalise on these impacts.
To ensure that physical and transition risks are appropriately
considered, significant and emerging climate-related risks
faced by our business have been integrated and mapped onto
our mining units existing risk matrices and are consistently
reviewed during our quarterly Risk Committee and Board
meetings in the process described above. This ensures that we
are consistently monitoring and managing climate-related risks
and incorporating them into our financial strategy and budget
allocations. For example, mine planning at Hochschild takes into
account weather-related factors, indicating how climate change
has been, and continues to be, reflected in the Group’s financial
statements, including with respect to 2023.
Risk evaluation matrix
Risk classifications and recommended actions matrix
Risk
Category
Risk
Score
Hochschild Mining PLC
Recommended Actions
Low
Risk
Medium
Risk
1-4
5-8
Routine procedures are required
to address risks
Requires management to
assign responsibilities
High
Risk
9-15
Requires Management/
Top Management attention
Very High
High
Moderate
Low
f
o
e
c
n
e
u
q
e
s
n
o
C
)
S
(
g
n
i
t
a
R
t
c
a
p
m
I
Insignificant
5
4
3
2
1
5
4
3
2
1
1
10
8
6
4
2
2
15
12
9
6
3
3
Low
Medium
High
Probability/Likelihood
Rating (P)
Over the course of 2024 and 2025, we will undertake a more
detailed analysis of the physical and transition risks and
opportunities, across our three countries of operation, related to
our business. This will include the use of updated physical and
transition scenario data (i.e. those from the IPCC and IEA) and
the assessment of assets which have been acquired/started
operating since the undertaking of our assessment.
The time horizons that we use:
Within our transition assessment, risks and opportunities were
assessed across three timeframes covering the short term (0 to
1 years), medium term (1 to 5 years) and long term (5 to 15
years). These time horizons were selected due to their relevance
to the operational lifetime of the mining facilities that we have in
operation. However, within future transition risk assessments we
aim to extend the long-term time horizons that we consider – to
ensure that our assessments fully align with the operational
lifetimes of our mining facilities.
Within our physical CRA, we took a different approach and
assessed physical risks and opportunities across two key time
horizons – representing the baseline (1991-2010) and future
climate by 2050 (2040-2059). Although the time horizons used
within our physical CRA cover the operational lifetime of our
mining facilities, we aim to include interim time horizons (e.g.
2030) within future assessments (as these are deemed more
relevant to our operations).
Following the completion of these preliminary assessments, we
intend to continue to develop the maturity of our physical and
transition CRA over the course of 2024 and 2025. This will include:
– The development of a 2030 ambition action plan
– The undertaking of a more detailed transition CRA to better
understand the resilience of our business model and strategy
to climate change (including the consideration of additional
climate scenarios, time horizons and newly acquired/newly
operational assets)
– Using the results of the CRA to inform the quantification of
climate-related financial risks and opportunities in relation
to our business
The scenarios that we use:
In order to assess how physical risks and transition risks and
opportunities could impact our business in the future, our
physical and transition assessments utilised climate scenario
data. For the physical CRA, we utilised the IPCC’s Representative
Concentration Pathway 8.5 (RCP 8.5). RCP 8.5 represents a
high-emissions scenario – resulting in a potential warming of
more than 4°C relative to the preindustrial period (1850-1900)
by the end of the 21st Century. This scenario was selected to
ensure we are considering how the most extreme physical
impacts of climate change could affect our business.
For the transition risk and opportunity assessment, we
utilised the International Energy Agency’s (IEA) Environmental
Technology Perspective 2DS (2DS) equivalent scenario. The IEA
2DS scenario represents a low-emissions scenario that limits
global temperature increases at 2°C relative to the preindustrial
period (1850-1900) by the end of the 21st Century. This scenario
was selected to help us understand the potential risks and
opportunities our business may be faced with if the goal of the
Paris Agreement (to keep global temperature increases as a
result of climate change below 2°C) is achieved.
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CLIMATE-RELATED FINANCIAL DISCLOSURES
FOR THE YEAR ENDED 31 DECEMBER 2023
The physical risk profile of our operations in Argentina and Peru
The physical CRA conducted for the San Jose Mine in Argentina
and the Arcata, Pallancata, Selene and Inmaculada mines in Peru
considered seven climate hazards. This assessment concluded
that, by 2050 under the RCP8.5 scenario, 12% of the 35 identified
risks at the Argentina site are rated as “high” according to their
risk matrix, 35% as “medium”, and the remaining 53% as “low” risk.
Similar risk score outcomes were produced for the Peru sites where
15% of the risks were rated as “high”, 32% as “medium”, and the
remaining 53% as a “low” risk.
The results of this assessment are summarised in the table below.
The hazards, and the resulting risks for each of the site groups, are
described alongside any mitigation measures or policies for the
capitalisation of opportunities. Meanwhile, the traffic light symbols
described below display the maximum risk score categories for
each hazard at each of the site groups.
Low risk
Medium risk
High risk
Of the hazards considered, extreme heat and snowfall each
produced low risk scores across all sites and, as such, have not
been included within the following risk summary table. It should
be noted that, as an underground mining company, our current
operating assets (Inmaculada and San Jose) have shorter active
lives than traditional open-pit mines. Therefore, the longer-term
nature of the physical risks associated with climate change may
mean that the financial impacts of climate change on our assets
may be reduced.
Hazard
Freezing Days
Maximum Risk Score
(by 2050 under the RCP8.5 scenario)
Argentina
Peru
Intense Rainfall Flooding
Drought
Lightning/Atmospheric
Discharge
High Winds
Description
All sites:
– Extreme cold presents a risk due to its potential impact on the processing facilities.
Cold temperatures could cause pipes to freeze, interrupting ore processing, and have
a material impact on the mines and their operations, potentially reducing revenues.
This has been identified as a high risk for the Argentina sites.
– This hazard could also impact other infrastructure on-site, such as mine access
routes, administration and operations buildings, and the drinking water supply.
Risk/Opportunity Response
– Increased stocking of critical materials.
– Maintenance of all water-related infrastructure.
– Continuous weather tracking.
– Undertaking future CRAs using multiple scenarios to
further improve project design.
All sites:
– Extreme rainfall flooding poses a risk primarily through the impact that it could have
on the tailings facilities. Heavy rains in the local area or further upstream could lead to
rising water levels at the tailings dam, increasing the hydraulic load on the dam and
potentially leading to structural failure. Rainfall could also directly erode the dam,
creating weak points in its structure and increase the likelihood of failure, increasing
capital expenditure. Finally, a series of intense rainfall or snow events could increase
the levels in the tailings pond and lead to overtopping which could release waste into
the local environment. This is the highest risk facing the Peru sites and, although it is
considered a moderate risk for Argentina, it has a high severity score.
– Other mine infrastructure face a lower risk, such as buildings, access routes,
processing facilities, and the drinking water supply, but could also be impacted by
extreme rainfall flooding.
Peru sites only:
– The transportation networks that the mines rely on, including the mine access routes
and local roads, face a high risk from extreme rainfall flooding. Roads could be
washed out by heavy rainfall and the resulting, a risk that could be intensified by the
steep slopes of the local topography. This could impact the accessibility of sites and
local mine operations.
– Other mine infrastructure, such as buildings, processing facilities, and the ore or waste
rock piles could also be impacted by extreme rainfall flooding but are less exposed.
All sites:
– Water stress and drought conditions are a risk due to the impact that a limited water
supply could have on the processing facilities and the ore treatment processes. This
could impact our business objectives, and potentially reduce revenues. The potential
impact of drought on processing facilities is the highest risk facing the Argentina site.
Argentina site only:
– Water shortages pose a high risk to the drinking water supply at the mine site.
All sites:
– Lightning and atmospheric discharge is considered a risk as it could damage
communications infrastructure at the mine site, disrupting operations and reducing
revenues. This has been identified as a high risk for both the Argentina and Peru sites.
– The hazard could also impact other site areas that are considered to be at a low risk
level. Electrical equipment across the mine site could be damaged by voltage surges,
disrupting the mine operations. Lightning also represents a health and safety risk to
site personnel.
– Lightning poses a risk to other mine infrastructure including buildings, processing
plants, electrical transmission infrastructure, and the drinking water supply.
– Continuous weather tracking.
– Continuous monitoring of the freeboard in the
Company’s Tailings Storage Facilities (TSFs).
– Internal and external audits are conducted on a regular
basis to ensure the stability of our operational tailings
facilities. For example, in 2023, an external audit was
conducted on all TSFs in Peru, and an internal audit for
TSFs in Argentina.
– Once TSFs complete their operational life, these are
closed in accordance with permits.
– Maintenance of all water-related infrastructure.
– Monitor roads to identify areas of high erosion/
washouts.
– Increased stocking of critical materials.
– Reusing water within our processing plants.
For example, in 2024, water reuse was 84.3%.
– Implementing water reduction measures. For example,
Inmaculada uses treatment domestic wastewater to
reduce freshwater used within its processing plant.
– Reducing potable water consumption, encouraged
through our ECO Score.
– Established water reduction ambitions for 2030:
– Reduce freshwater consumption in processing plants
to 0.22 m3/tonne of ore processed.
– Reduce Potable water consumption to 174 l/person/day.
– Continuous weather tracking.
– Undertaking future CRAs using multiple scenarios to
further improve project design.
All sites:
– High winds are projected to be a risk for mine infrastructure including buildings,
electrical transmission networks, and communications towers. Damage could
increase operational expenditure for repairs.
– Continuous weather tracking.
– Undertaking future CRAs using multiple scenarios to
further improve project design.
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CLIMATE-RELATED FINANCIAL DISCLOSURES
FOR THE YEAR ENDED 31 DECEMBER 2023
Our transition risk profile
In comparison to the physical risk assessment where we have
assigned maximum risk scores for each climate hazard, our initial
transition risk assessment provides a qualitative overview of our
potential transition risks utilising the International Energy Agency’s
(IEA) Environmental Technology Perspective 2DS (2DS) equivalent
scenario, and considering the relevance to our business’ time
horizons, as indicated below.
Short term
Medium term
Long term
The risks identified align with the risk categories outlined by
the TCFD (including: current regulations, emerging regulations,
technology, legal, market and reputation). Currently, of the risks
identified, we are unable to distinguish to what extent each risk
may impact our business, however we aim to further develop our
understanding of our transition risks through a more detailed
scenario analysis in 2025.
Opportunities associated with the transition
to a low-carbon economy
Similarly to transition risks, we have undertaken a qualitative
overview of our transition opportunities utilising the International
Energy Agency’s (IEA) Environmental Technology Perspective 2DS
(2DS) equivalent scenario, and considering the relevance to our
business’ time horizons, as indicated below.
Short term
Medium term
Long term
While not an exhaustive list, the opportunities identified in this initial
assessment are in alignment with the risk categories outlined by
the TCFD. In our future transition assessment we therefore aim to
increase coverage of our potential transition opportunities, as well
as our understanding of the extent to which these opportunities
could materialise.
Category
Current
regulations
Emerging
regulations
Technology
Legal
Market
Reputation
84
Time Horizon
Description
Risk Response
– Our customers and shareholders are taking regulatory and/or
voluntary positions to reduce energy and GHG emissions associated
with operations.
– The most mature organisations are expecting value chain GHG
emission reductions.
– While we are not yet exposed to specific
requirements, we have set 2030 ambitions to
reduce our Scope 1 and 2 emissions.
– Committed investment in technology
e.g., electrification of vehicles.
– Failure to meet regulatory and/or voluntary positions could lead to
additional operating costs being incurred or reputational damage.
– Mining is already a highly regulated industry whereby multiple
– We have calculated a high-level financial
permits can lead to increased delays and costs. Changes in the legal,
tax and regulatory landscape could result in restrictions or
suspensions to operations which could lead to further delays and
costs for our business.
– Emerging carbon regulations may impact our operational costs as
renewable portfolio standards, renewable fuel requirements and
carbon taxes could increase fuel and energy costs.
– To meet carbon targets, capital costs are likely to increase as more
energy efficient and lower emission technologies are integrated into
our operations.
impact figure for potential carbon prices using
our 2022 market-based GHG emissions and
a price range of 40-140$/tonne to understand
the potential impacts of carbon prices on our
business.
– Technology advancements could impact our operational
– Actions include improving processes on energy
Category
Market
Market
competitiveness. As the market for off-road vehicle and engine
manufacturers matures, slow adaptation of these options can pose a
potential short-term risk to our competitiveness (particularly if
competitors are able to adopt low/no-carbon vehicles at a higher
pace), and therefore, to our revenues.
– The demand for our products could also change in light of technology
advancement (e.g., increased adoption of renewable energy and EVs).
However, given the regulatory trends to assist with the low-carbon
transition, this could be an opportunity for the Company (as detailed
in the opportunities table below).
conservation and transitioning to power
sourced from renewable energy.
Technology
Time Horizon
Description
Opportunity Response
– Demand for our products may increase as a result of regulatory or
– Undertake a more detailed transition CRA to
market curtailments.
– It is anticipated that there will be an increase in the uptake of battery
powered vehicles and 5G networks which incorporate silver and gold
within hardware components – e.g., Bloomberg estimates that 55% of
vehicles will be electric vehicles by 2040.
– Gold is also used in nanomaterial technologies such as solar PV which
are likely to be used to facilitate the transition to a low-carbon economy.
– While this could have positive impacts on our business growth
and revenues, we need to undertake a further assessment of this
opportunity to fully understand the potential changes in scale,
and integrate this into our strategic planning.
– It is the expectation of investors that companies will work to manage
climate-related risks and opportunities, while improving shareholder
value, and social and environmental performance. This presents an
opportunity for the Company to improve its ESG rating.
– We are therefore already taking actions to embed this within our
business strategy, as detailed in the risk response column.
further understand the potential impact of this
opportunity.
– We quantify our environmental performance
through the ECO Score.
– We produced a standalone 2021 sustainability
report.
– We undertook a CRA in 2021.
– We are developing the action plan to achieve
our 2030 GHG emissions reduction ambition.
– In order to continue reducing our emissions, we recognise the potential
to capitalise on alternate fuels/energy saving technology to reduce our
GHG emissions and improve our operational energy efficiency
– We are therefore already taking actions to embed this within our
business strategy, as detailed in the risk response column
– We are implementing a carbon strategy to
reduce GHG emissions
– Set a Net Zero by 2050 target
– Established a 30% reduction in Scope 1&2
(market-based) emissions by 2030
– Signed a renewable energy contract for our Ares
and Arcata mines which started in January 2022
– At Hochschild, we recognise the risks of not embedding climate
– While we have not experienced any climate-
change into our strategy – including climate-related legal action,
reputational issues and investor risk which could increase costs, result
in further permitting delays, higher interest loans or reduced access
to capital.
– We are currently monitoring the risk of changing demand for our
metal products under a low-carbon economy.
– The changing demand for the Company’s metal products could pose
a risk if not carefully managed. In a low-carbon economy customers
and investors are likely to demand higher ESG performance as part of
procurement (customers) and investment (investors) criteria which, if
not met, could lead to reputational damage and reduced revenues.
related legal issues so far, we anticipate in the
medium-long term that legal carbon risks may
be prevalent for companies that are not
reducing their carbon footprint. As an action, we
actively monitor regulatory changes occurring
within the jurisdictions where we operate, or
have current project developments.
– We have undertaken a high-level transition CRA
to try to understand what our silver and gold
demand may look like under a 2°C scenario.
– We continuously engage with our customers
and investors to understand their requirements
and align with their goals, and have begun
implementing our Net Zero by 2050 strategy
and completing a CRA.
– Poor performance in managing climate-related risks and
– Increased efforts to collect and process
opportunities could lead to public and regulatory opposition to our
projects and operations, leading to a potential increase cost of capital
and perceived risk amongst investors.
information and intelligence regarding potential
social conflicts.
– Increased interaction with local government
and key stakeholders.
– Continue to maximise local hiring and local
purchasing practices.
– Continue executing social programmes with
surrounding communities.
The resilience of our strategy:
While our physical risk assessment has identified risks across
both our Argentinian and Peruvian mines, we consider that
our business strategy is somewhat resilient to these risks. For
example, our expected Life of Mine (LOM), which is amended
from time to time as more resources at the mine are identified,
is typically no more than 15 years and most physical climate
risks are expected to materialise over longer-term time horizons
(within the regions where we operate). Additionally, for those
hazards that pose a higher risk to our mines (e.g. flooding)
mitigation measures have been implemented including
continuous monitoring of the freeboard in the Company’s
TSFs, weather tracking and maintenance of water-related
infrastructure, which, in turn, has decreased our exposure and
increased our resilience to climate-related risks. This approach
will be reviewed if the Group’s average LOM changes significantly.
We also anticipate that our business will be resilient to transition
risks. While carbon pricing is anticipated to be a more material
risk to our business in the short term, we have set Scope 1 and
2 emission reduction targets by 2030 and are increasing our
energy efficiency and renewable energy procurement which
has the ability to increase our resilience to this risk.
To deepen our resilience, we are seeking to undertake further
physical and transition risk assessments to improve our
understanding of the potential climate-related risks that we
may be exposed to, as well as the available and implementable
resilience measures that these might demand. This would
include, where relevant, financially quantifying potentially
material climate-related risks – which will allow us to review and
amend our strategy and management of each of these risks.
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CLIMATE-RELATED FINANCIAL DISCLOSURES
FOR THE YEAR ENDED 31 DECEMBER 2023
Our climate-related metrics and targets
At Hochschild, we are committed to being the leading global
mining company in environmental excellence and recognise the
importance of monitoring and measuring our progress against key
metrics and targets relating to GHG emissions, water, and waste.
ECO Score
We have developed an ECO Score internally to quantify our
environmental performance and to help monitor and measure
progress against our targets. It is calculated by tracking
performance at both the individual mining site and Group level,
using a range of metrics and Key Performance Indicators (KPIs)
which assess compliance with discharge limits, zero-tolerance of
environmental accidents, regulatory findings and environmental
management relating to water consumption and waste
generation. Progress against each of the KPIs within the ECO
Score is weighted to provide an overview of performance
against each target.
While the ECO Score incorporates multiple indicators to
measure its environmental performance, this section focuses
primarily on the waste and water components as relevant
metrics and targets associated with the climate-related risks
and opportunities which were identified in our previously
completed CRA (e.g., water stress and drought for physical risk
and reputation for transition risk).
The ECO Score facilitates the establishment of positive
relationships with employees and stakeholders and significantly
reduces risks for the Company through our remuneration
incentive. We have established an annual Individual Performance
Objectives plan which is aligned to our Corporate Objectives
relating to production, profitability, and occupational safety.
Performance against the annual ECO Score objective determines
the extent of the annual bonus payouts to eligible employees,
incentivising a reduction in our environmental footprint.
Our model for monitoring and measuring progress
against key metrics and targets
Annual Plan
The components of the ECO Score
Environmental Monitoring
- Deviation in effluent quality from the maximum
permissible limits
Environmental Incidents
- Number of environmental incidents
Environmental Audits
- Number of “Observations” from inspections
at mining units
Environmental Management
- Water consumption per worker
- Waste generation per worker
- Percentage of marketable waste
- Environmental culture (compliance inspections)
What
How
Results
Attitudes
Objectives
Competencies
Corporate and individual
By levels
Vice Presidents
General Managers
Corporate Managers
Superintendents/Chiefs
Annual Bonus
Employees
86
Since the development of our ECO Score in 2015, results have
improved by 74%, which is reflective of our increasing level of
engagement with environmental initiatives. In 2023, our ECO
Score was 5.76 out of 6 and, our best result to date. The 2023
results will undergo independent verification by EY Perú against
the International Standard on Assurance Engagements (ISAE)
3000. As we acquired a new mine in 2023, we aim to use this year
to understand the potential impacts of the new mine on our ECO
Score, which may lead to review and changes to our targets to
ensure continued progress in our metrics and targets.
The Company’s ECO Score
5.76
OUT OF 6
The following sections present further details relating to the
waste and water aspects of the ECO Score.
Water
At Hochschild, we understand the importance of managing our
water resources in the regions where we operate. This is due to the
water-intensive nature of our operations and the potential risk from
drought our sites face as identified in our physical risk assessment.
As a result, we use multiple metrics to monitor our consumption of
water resources and have set targets to reduce our on-site potable
water consumption and freshwater consumption in operations.
Between 2015 and 2023, a reduction in potable water consumption
(litres per person per day) of 60% has been achieved, with 2023
representing our lowest recorded potable water consumption at
163 litres per person per day. As our 2023 score already exceeded
our 2030 target of 174 litres per person per day, we will review this
target following the integration of the new mine into our 2024 ECO
Score results to identify if this target can be stretched further.
In addition to monitoring our potable water consumption, we are
also working towards increasing the recirculation of water in our
processing plants to reduce freshwater intake. While freshwater
use and water recycling are not formally incorporated into the
ECO Score, we recognise the importance of monitoring this part
of our operations as a significant proportion of our water
requirements for our operations is met through recycled water,
and if insufficient recycled water is available, freshwater is
utilised. In 2023, 0.27 m3 of freshwater was used per tonne of ore
processed and it is our intention to reduce freshwater
consumption to 0.22 m3/tonne by 2030. To minimise the intake of
freshwater, we utilise recycled water in our processing plants. In
2023, 84.3% of all water used in processing plants was recycled,
maintaining the level reached in 2022.
Waste
We also understand the multiple benefits to reducing our waste
generation, including conserving resources and reducing GHG
emissions, and therefore monitor our waste generation and
recycling rates using various metrics and targets. Between 2015
and 2022, the Company has reduced landfilled domestic waste by
52%, with a decrease in waste generated per person per day from
1.94 kg to 0.93 kg. To further reduce our waste generation, the
Company has set a 2030 target for waste generated to be 0.90 kg
per person per day. Simultaneously we seek to increase the
percentage of waste that is recycled to 80% by 2030, compared to
63% in 2023.
The Company’s potable water consumption
(litres per person per year) and 2030 target
The Company’s waste generation
(kg per person per day) and 2030 target
450
408
300
294
150
0
214
225
206
231
193
171
163
2030
Ambition:
<174 l/
person/
day
2.0
1.94
1.5
1.0
0.5
0
1.33
1.13
1.13
1.18
1.04
1.00
1.05
0.93
2015
2016
2017
2018
2019
2020 2021
2022
2023
2015
2016
2017
2018
2019
2020 2021
2022
2023
2030
Ambition:
<0.9 kg/
person/
day
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CLIMATE-RELATED FINANCIAL DISCLOSURES
FOR THE YEAR ENDED 31 DECEMBER 2023
Introduction to GHG Emissions and net-zero commitments
At Hochschild, we have been reporting our Scope 1 and 2
emissions since 2014 and our Scope 3 emissions (Category
3: Fuel and energy-related activities, Category 4: Upstream
transportation and distribution, Category 6: Business Travel) since
2022. For a full breakdown of Scope 1, 2 and 3 emissions for 2023,
please refer to the Environmental section of the Sustainability
Report on page 52. Emissions are calculated on a yearly basis in
alignment with the ISO 14064-1 Standard and the GHG Protocol
Corporate Accounting and Reporting Standard.
We have committed to become Net Zero by 2050 across both our
operations and value chain. In 2023 we have also set an ambition
to reduce our Scope 1 and 2 (market-based) emissions by 30% by
2030, compared to our 2021 baseline.
30% reduction
by 2030
Net Zero
by 2050
Scope 1 Scope 2
Scope 1 Scope 2 Scope 3
To achieve our target of Net Zero by 2050 across the value chain
we understand the need to work closely with our suppliers in order
to implement a Scope 3 emission reduction strategy thereafter.
However, a Carbon Roadmap focusing on Scope 1 and 2 GHG
emission reductions has been developed which has allowed our
business to understand some of the activities/investments that
may be required to reach this target including, but not limited to:
– Utilising low-carbon grid-based electricity, and prioritising the
use of renewable energy when available (already ongoing)
– Implementing behaviour change programmes across the
business (already ongoing)
– Using higher efficiency vehicles, with lower GHG emissions
As we start to implement these measures, we recognise the
importance of monitoring and assessing progress against our
GHG emission reduction targets. Therefore, an action plan will
be established within the next year for the Board of Directors to
oversee progress against our GHG emission reduction targets and
ensure continued progress towards our Scope 1 and 2 reduction
ambition by 2030.
Hochschild’s Scope 1 and 2 GHG emissions reduction
ambition for 2030 and net zero target for 2050
-30%
60,000
40,000
20,000
0
2021
2022
2023
2030
2050
Next steps
Over the course of the next year, we will continue to review
and, adapt as necessary, our governance structures, risk
management practices, strategy and targets relating to climate
change – in alignment with the UK’s CFD and TCFD’s
recommendations. Although we have already begun to make
progress in this respect, we are aware that further action is
required to fully align with TCFD’s recommendations. Within the
following table, we have detailed the current status of our
compliance with each of the TCFD’s recommendations and our
planned next steps to increase our compliance. It should also
be noted that we have not yet financially quantified climate-
related risks and opportunities associated with our business,
and therefore we have not included any climate-related
disclosures within our annual financial report.
We are also aware of emerging regulatory requirements which
we will also need to monitor and consider when publishing
future disclosures associated with climate-related issues (from
2025 onwards). For example:
– The International Sustainability Standards Board (ISSB) (of the
International Financial Reporting Standards – IFRS) which has
released the new “IFRS S2 Sustainability Disclosure Standard”.
The IFRS S2 supersedes the TCFD’s recommendations and
requires a number of additional climate-related disclosures
(when compared with the TCFD’s recommendations)
– The UK government’s Department for Business and Trade
(DBT) is currently developing the UK’s Sustainability
Disclosure Standards (SDS) – which are due to be published
by July 2024. The UK SDS will be based upon the IFRS’s
Sustainability Disclosure Standards – and will form the basis
of any future requirements in UK legislation/regulation for
companies to report on risks and opportunities relating to
climate change and sustainability
We will continue to monitor the UK’s regulatory landscape to
ensure that we are disclosing in alignment with all relevant
climate-related disclosure requirements.
TCFD Pillar/Recommendation
Status
Next steps
Governance
1.
Describe the board’s oversight of
climate-related risks and opportunities
Partially
consistent
2.
Describe management’s role in assessing
and managing climate-related risks and
opportunities
Partially
consistent
Describe the organization’s processes
for identifying and assessing
climate-related risks.
Describe the organization’s processes
for managing climate-related risks.
Describe how processes for identifying,
assessing, and managing climate-related
risks are integrated into the organization’s
overall risk management.
Partially
consistent
Partially
consistent
Partially
consistent
Establishment of governance processes and monitoring and
reporting programmes relating to the managing of climate-related
topics. We aim to complete this in 2024.
Develop an action plan for the Board of Directors to oversee progress
against our GHG emission reduction targets and ensure continued
progress towards our Scope 1 and 2 reduction ambition by 2030. We
aim to complete this in 2024.
Undertake additional physical and transition assessments which
consider a wider range of time horizons, updated climate scenario
data and newly acquired/newly operational assets – to better
understand the potential impact of climate-related risks and
opportunities on our assets, business model and strategy. We aim to
complete this in 2024/2025.
Describe the climate-related risks and
opportunities the organization has identified
over the short, medium, and long term.
Consistent –
Describe the impact of climate-related risks
and opportunities on the organization’s
businesses, strategy, and financial planning.
Partially
consistent
Describe the resilience of the organization’s
strategy, taking into consideration different
climate-related scenarios, including a 2°C
or lower scenario.
Partially
consistent
Disclose the metrics used by the
organization to assess climate-related risks
and opportunities in line with its strategy
and risk management process.
Partially
consistent
Based upon the results of our previously completed and future
planned physical and transition assessments quantify the financial
impact of potentially material climate-related risks and opportunities.
We aim to complete this in 2024/2025.
Integrate the results of our previously completed and future planned
physical and transition assessments into our business strategy – to
inform future financial planning. We aim to complete this in 2024/2025.
Undertake additional physical and transition assessments (as
described in the next steps for TCFD recommendation 3/4/5) – to
better understand the resilience of our business model and strategy
under a range of climate scenarios. We aim to complete this in
2024/2025.
Hochschild will continue to explore the use of additional metrics which
could be used to support our management of climate-related risks
and opportunities (including the consideration of metrics related to
any climate-related risks and opportunities which may be quantified
in future assessments – as described in the next steps associated
with TCFD recommendation 7).
Risk
Management
Strategy
Metrics &
Targets
3.
4.
5.
6.
7.
8.
9.
10. Disclose Scope 1, Scope 2, and if
Consistent –
appropriate, Scope 3 greenhouse gas
(GHG) emissions, and the related risks.
11. Describe the targets used by the
Consistent –
organization to manage climate-related
risks and opportunities and performance
against targets.
88
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RISK MANAGEMENT
How we identify
and manage risks
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.
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.
2023 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 2022 Annual Report by the removal of Liquidity Risk
as a significant risk in light of the granting of the Inmaculada
Modified Environmental Impact Assessment in August 2023.
In the second half of 2023, the Group entered El Niño as a new
risk on the Group’s risk register given the initial potentially
severe predictions of the impact of this weather event on the
Pacific coastal areas of Peru. In December 2023, the Peruvian
Government downgraded its assessment of the severity of El
Niño. For the purposes of presentation, the actions taken by the
Company in H2 2023 to mitigate this specific risk are detailed
within the commentary of Climate Change risks.
Reasons for the year-on-year change in the profile of a specific
risk can be found in the commentary section of the relevant risk.
Risk management process
5
1
Proactive risk identification
and management process
4
2
3
Risk heat map
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.
3.
4.
5.
6
Commodity price
Commercial counterparty
Operational performance
Business interruption/supply chain
Information security and cybersecurity
Exploration and reserve and resource replacement
7.
Personnel: recruitment and retention
8.
9
10.
11
12.
13.
14.
Personnel: labour relations
Project development
Political, legal and regulatory
Health and safety
Environmental
Climate change
Community relations
Unchanged
Higher
Lower
1
2
3
4
5
h
g
H
i
t
c
a
p
m
I
Identify
Business processes are reviewed to identify
risks to Hochschild’s strategic objectives with
a risk matrix prepared for each process.
Measure
Each risk identified is analysed for probability
of occurrence and scale of impact to determine
the level of threat to strategic objectives.
Manage
Taking into consideration the relevant risk
appetite and the scale of risk, mitigating actions
and controls are designed and implemented.
Monitor
Mitigation and controls monitored to ensure
effectiveness and to take all actions necessary
to achieve a level of risk management within
the defined appetite for risk.
Report
Established reporting within the business
on risk management by Internal Audit
function. Principal and emerging risks
reported on quarterly basis to Audit
Committee and the Board.
14
10
6
4
11
12
8
1
2
3
7
5
13
9
w
o
L
Low
Probability
High
Risks as at 31 December 2023
90
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CONTINUED
Change in risk profile vs 2022
Unchanged
Higher
Lower
N New
Financial risks
Risk, change & impact
Mitigation
Commentary
Risk, change & impact
Mitigation
Commentary
1. Commodity price
Adverse movements in precious metal
prices could materially impact the
Group in various ways beyond a
reduction in the financial results of
operations. These include impacts on
the feasibility of projects, the economics
of mineral resources, heightened
personnel retention and sustainability
related risks.
See the Market Review on pages 10 to 15
for further details on how commodity
prices performed in 2023
– Constant focus on maintaining
a low all-in sustaining cost of
production and an efficient level
of administrative expense.
– Policy to maintain reasonable levels
of financial leverage to ensure
flexibility through price cycles.
– Flexible hedging policy that allows
the Company to contract hedges to
mitigate the effect of price
movements taking into account the
Group’s asset mix, forecast
production and debt profile.
The Group’s principal strategy to mitigate against commodity price volatility is
focused on conserving capital and optimising cash flow through:
5. Information security
and cybersecurity
– controlling operating and administrative costs;
– optimising sustaining capital expenditure; and
– maintaining low working capital.
To ensure an ongoing level of cash flow stability, the Company executed
hedges during 2023 for the following years in respect of production from the
specified operation:
Inmaculada
2024: 100,000 ounces of gold with an average floor at $2,000 per ounce and an
average cap of $2,252 per ounce.
Mara Rosa
2024: 27,600 ounces of gold at a fixed price of $2,100 per ounce
2025: 50,000 ounces of gold at a fixed price of $2,117 per ounce
2026: 50,000 ounces of gold at a fixed price of $2,167 per ounce
2027: 50,000 ounces of gold at a fixed price of $2,206 per ounce
Failure of any of the Group’s business
critical information systems as a result of
unauthorised access by third parties
may affect the Group’s ability to operate.
– Compliance with ISO 27001, an
internationally recognised
certification to evaluate information
security management systems.
– Dedicated team within the IT
department focused on preventing
cyber-attacks.
Security of the Group’s information and networks are assured through the
following means:
– we have world-class cybersecurity tools supported by artificial intelligence
that secure and protect our network as well as our computer assets and the
information that resides in them. Additionally, we have a CiberSOC (Cyber
Security Operation Center) that works 24x7 to monitor the different events
and possible attacks that may arise;
– Audits performed by the internal
– every year we perform ethical hacking evaluations to identify possible
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.
vulnerabilities at the level of our technological infrastructure as well as the
different applications that we use to operate;
– we commissioned a review, by external consultants, of the vendor that
provides cybersecurity monitoring services;
– we train colleagues and keep them informed about the risks that exist
relating to cybercrime and information theft, as well as good practices
associated with cybersecurity;
– our Information Security Management System (ISMS) is ISO certified; and
– we added another layer of our server backups in the cloud to enhance the
level of protection.
General
The Group has an internal Permitting Committee to co-ordinate efforts with a
view to streamlining the permitting process for exploration and operational
requirements. Senior executives actively participate in industry initiatives to
simplify the permitting process.
Limited greenfield exploration is undertaken, with the aim of providing the
Group with a balanced portfolio of advanced and early-stage opportunities in
stable jurisdictions in the Americas.
Developments during the year
Securing permits from the communities for exploration remains challenging.
The Company’s annual exploration drilling programme, which was suspended
during the year pending approval of the Inmaculada MEIA, resumed once
approval came through in August 2023.
The year-on-year changes in the Company’s attributable Reserves and
Resources were -11.6% and -2.4% respectively.
Further details on brownfield exploration are provided on page 39.
6. 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.
– Alternate use of independent experts
and internal qualified persons to
undertake annual audit of mineral
reserve and resource estimates.
– Adherence to the JORC Code and
guidelines therein.
The Group’s annual audit of mineral reserve and resource estimates as
at 31 December 2023 has been undertaken internally by an appropriately-
qualified competent person. An external audit will be commissioned for the
2024 annual audit.
See page 228 for further details.
7. Personnel: recruitment and
retention
Inability to attract or retain personnel
through a shortage of skilled personnel.
For further details see the Directors’
Remuneration Report on page 123
– The Group’s approach to
recruitment and retention provides
for the payment of competitive
compensation packages, well
defined career plans, training and
development opportunities and the
overall employee value proposition.
General
The Group has undertaken a number of initiatives to improve the retention of
employees. These include the use of financial benefits such as the LTIP and
non-financial benefits (e.g. flexible working arrangements for office-based
staff) and personal development through tailored personal plans, training on
leadership and cultural transformation in the areas of social, safety and
environmental as well as diversity and sexual harassment training. In addition,
initiatives have been launched on causes valued by employees; providing
employees with the opportunity to contribute to the relaunched purpose of
the Company which includes innovation, community relations and
environmental performance.
2. Commercial counterparty
Insolvency of a customer or other
business counterparty (bank, insurance
company, contractor, etc) could result in
the Group’s inability to collect accounts
receivable or to access funds or to
receive services which could adversely
impact the Group’s profitability.
– Active assessment of customers and
During the year, the Group undertook the following:
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.
– Commercial counterparty monitoring: The Company undertakes an annual
review of existing customers which encompasses analysis of corporate
governance, balance sheet strength and other aspects impacting credit
quality. Customers and financial counterparties are also the subject of
ongoing monitoring. During the year, such monitoring revealed the potential
risk of lost revenue following the discovery of fraud by a significant customer
involving its suppliers and employees. Shipments were suspended and
payment terms were renegotiated until the Company was reassured that no
significant risk existed.
– Review of financial counterparties: The Group continued to implement
policies to identify suitable financial counterparties to support the Group’s
treasury and insurance needs. On an ongoing basis, the Group has adopted
a number of practices such as the placing of limits on cash balances
invested with financial institutions and monitoring credit ratings.
Operational risks
Risk, change & impact
Mitigation
Commentary
3. Operational performance
Failure to meet production targets and
manage the cost base could adversely
impact the Group’s profitability.
– Close monitoring of operational
performance, costs and capital
expenditure as well as the overall
profitability at all stages of the
mining value chain.
– Monitoring the adequacy of key
mining components such as tailings
storage facilities, waste rock deposits
and pipelines in close liaison with
relevant departments ensuring that
procurement, construction and
permitting are undertaken
appropriately.
In 2023 the Group’s production was 300,749 gold equivalent ounces.
In setting budgets for the year, the Group continued to focus on maintaining
controlled levels of costs, capital expenditure and expenses.
As reported in the Financial Review from page 40, the all-in sustaining cost
from operations was better than the revised guidance for the year, at
$1,454 per gold equivalent ounce. A committee comprising members of the
Operations team continued to meet during the year to oversee the adequacy
of key components. Projects including the expansion of various components
at Inmaculada including the Tailings Storage Facility, waste rock deposit and
reverse osmosis plant were deferred until 2024 due to the delay in securing the
approval of the Inmaculada MEIA.
4. Business interruption/
supply chain
– Insurance coverage to protect
against major risks.
In addition to maintaining insurance policies covering machinery breakdown,
mitigating actions taken during the year include the following:
– Management reporting systems to
– the use of a Maintenance Module of SAP HANA to monitor critical supplies
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.
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.
and inventory;
– maintaining back-up equipment to ensure power supply in Peru and
Argentina; and
– a Crisis Response Plan (CRP) on how to mount a coordinated response to
unforeseen disruption.
Specifically with regards to supply chain risks across the Group, the Company:
– has identified alternative suppliers for numerous critical consumables;
– has restored stocks of critical consumables and strategic spare parts to
pre-pandemic levels;
– requires, of certain suppliers, the maintenance of minimum stock levels; and
– monitors the financial position of key suppliers.
92
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RISK MANAGEMENT
CONTINUED
Change in risk profile vs 2022
Unchanged
Higher
Lower
N New
Operational risks (continued)
Sustainability risks
Risk, change & impact
Mitigation
Commentary
Risk, change & impact
Mitigation
Commentary
11. Health and safety
– Health and safety operational
policies and procedures reflect the
Group’s zero tolerance approach to
accidents.
The Group is pleased to report on its continued strong safety performance in
2023 with our principal KPIs at all-time lows, with the accident frequency at
0.99 (2022: 1.37) and accident severity at 37 (2022: 93) and the attainment of our
ongoing objective of Zero Fatalities (2022: Zero fatalities).
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.
– 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.
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 pillars covering training, effective
communication, recognition and aligning compensation with measurable
safety performance. A risk perception programme designed in-house was
implemented during the year yielding very encouraging results. This
behaviour-based programme uses past examples as case studies to
learn from.
Following its roll-out in 2022, the Company made continued use of the
Seguscore, which is a holistic measure of the Group’s safety performance
combining traditional indicators (including those referred to above) with
leading indicators reflecting the outcome of internal and external safety
audits.
For further details on the Seguscore and other safety initiatives, please refer to
the safety section of the Sustainability Report on pages 69 and 70.
12. Environmental
– The Group has a dedicated team
responsible for environmental
management.
In 2023, the Group performed strongly in its ECO Score (with a score of 5.76 out
of 6 (2022: 5.27)), reflecting the following notable achievements:
– three operations achieving a perfect score of 6 out of 6 (Ares, Arcata and
The Group may suffer from reputational
risk and may be liable for losses arising
from environmental hazards associated
with the Group’s activities and
production methods, ageing
infrastructure, or may be required to
undertake corrective actions or extensive
remedial clean-up action or pay for
governmental remedial clean-up actions
or be subject to fines and/or penalties.
– The Group has 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.
Sipan);
– the lowest water consumption since 2015 (163 l/person/day);
– the lowest domestic waste generated since 2015 (0.93 kg/person/day); and
– the Group maintains a very high level of environmental culture compliance
(using an internal scoring system).
In addition, during the year:
– we continued to implement our tailor-made Environmental Management
System on schedule;
– the Environmental team continued with its efforts on reporting widely on the
Group’s environmental performance by participating in numerous reporting
initiatives resulting in improvements in the 2023 rating updates; and
– reviewed and restructured the Environmental Culture Transformation Plan
(ECTP) in line with our updated EMS Processes and Company attributes
which in 2023 included training for Environmental Ambassadors and
environmental workshops for key stakeholders in Peru, Argentina and Brazil.
As disclosed in the Operational risks section, the Group has published
information on its website regarding its TSFs, including their construction
method and risk profile. It also continues to commission independent third
party reviews and monitors their stability on an ongoing basis.
For further details, please refer to the environmental section of the
Sustainability Report on pages 62 to 68.
8. Personnel: labour relations
Failure to maintain good labour relations
with workers and/or unions may result in
work slowdown, stoppage or strike.
– Development of a tailored labour
relations strategy focusing on profit
sharing, working conditions,
management style, development
opportunities, motivation and
communication.
– Periodic meetings with mineworkers
and unions to ensure a complete
understanding of expectations and
to keep all parties updated on the
Group’s financial performance.
Peru
The Group’s Peruvian operation generated sufficient taxable income to give
rise to an entitlement to statutory profit sharing for Peruvian mineworkers.
As reported earlier in the Annual Report, the Pallancata mine was placed on
care and maintenance at the end of 2023. The redundancy packages for
affected workers were successfully negotiated with the three trade unions.
The Boluarte government has not taken further steps following the enactment
of new laws by Pedro Castillo’s Government to empower labour unions and
prompting the risk of increased industrial unrest. We monitor, on an ongoing
basis, the social risk and work with all stakeholders to prevent disruption
arising from these risks.
Argentina
In Argentina the Company maintains constructive relations with the labour
unions through ongoing and regular dialogue. In addition to AOMA (Mining
National Union for hourly workers), ASIJEMIN (National Union for mining
employees) has been confirmed by the national authorities as a union with
legitimate rights of representation and with whom the Company maintains
open and regular dialogue.
Following his election, President Milei has implemented austerity measures
and reforms which are being contested by the country’s labour unions who
called for a 12-hour nationwide strike and which was subsequently held in
December 2023.
Brazil
In Brazil, in advance of start of operations at Mara Rosa, Hochschild
established a Union Negotiation Committee. In November 2023, discussions
were initiated with the Union of Workers in Extractive Industries of Vale do Rio
Crixás which represents the mining sector in the region. Meetings with the
participation of all employees were held in December 2023 and January 2024
to discuss matters chosen by employees.
9. Project development
Failure to manage the timely
construction/development of projects
within budget could adversely impact
the Group’s financial position,
production profile and reputation.
– Cross-disciplinary project teams,
which report to the relevant
Vice-President, monitor execution
against agreed timelines and
budget.
– Support by corporate departments,
such as HR, Internal Audit and
Procurement, to ensure compliance
with Group procedures and
standards.
Mara Rosa (Brazil)
During the year, the Company successfully progressed with the construction
of the Mara Rosa mine on schedule and on budget, resulting in the first gold
pour in February 2024 and the full plant ramp-up starting in Q2 2024.
For further details on Mara Rosa, the Company’s first mine in Brazil, see pages
4 and 5, and page 38.
Snip (Canada)
Having conducted a detailed review of the project economics and in line with
its disciplined approach to capital allocation, the Group terminated its option
over the Snip project in British Columbia in April 2023.
– 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.
10. Political, legal
and regulatory
Changes in the government, political,
legal, tax and regulatory landscape
could result in significant additional
expense, restrictions on or suspensions
of operations and may lead to delays in
the development of current operations
and projects.
Delays in granting/securing the
necessary environmental and
operational permits for exploration or
operations, including specifically
Pallancata’s Third Modified
Environmental Impact Assessment
(MEIA) and operational permit for the
new areas of Inmaculada could affect
future production and financial results of
the Group.
Peru
Political
The impeachment of former president Castillo, following his failed coup in
which he attempted to dissolve Congress and control the judiciary, triggered
violent protests across the country. Protesters blocked key highways and
roads, and invaded airports and destroyed public and private property,
demanding the resignation of his successor Dina Boluarte, the dissolution of
Congress, and the approval of a constituent assembly to draft and approve a
new constitution.
Boluarte’s government was able to contain the social unrest, but the
government’s high disapproval generates uncertainty and constitutes a risk.
Environmental permits
Inmaculada’s MEIA was approved on 1 August 2023.
The Company has commenced the environmental permitting process to
enable production from the Royropata zone at Pallancata and to support the
ongoing associated brownfield activities.
Easement and other permits
The Company is in the process of renewing, for an additional 10-year period,
the easement by the State over the land on which the key mining components
of the Inmaculada mine are located.
Argentina
President Milei started his presidential term on 10 December 2023. President
Milei has embarked on a series of economic reforms and institutional reforms
to reign-in Argentina’s economic crises, where high levels of inflation, poverty
and socialist policies have become the norm. Labour unions and other
socialist leaning organisations have initiated strikes and other measures to
pressurise Milei’s government to halt these reforms.
Brazil
President Lula da Silva took office and is governing based on a centre-left
political and economic platform. The Governor of the State of Goiás, where
Mara Rosa is located, was re-elected for another term.
94
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RISK MANAGEMENT
CONTINUED
Change in risk profile vs 2022
Unchanged
Higher
Lower
N New
Sustainability risks (continued)
Risk, change & impact
Mitigation
Commentary
13. Climate change
– Enhanced management oversight
and operating protocols to:
Actions taken in 2023 include:
– Set an ambition to reduce our Scope 1 and 2 Greenhouse Gas emissions by
– quantify and verify carbon
footprint, including Scope 3;
– maximise the efficient use of
natural resources and minimise
energy consumption;
– maximise the use of renewable
energy; and
– promoting transparency with
regards to the Group’s
performance through participation
in investor-led reporting initiatives.
Changes in climate and weather
patterns, including the occurrence of
extreme weather events such as higher
rainfall, droughts and storm conditions,
may cause operational disruption and,
at worse, could result in a suspension of
operations.
Failure to comply with climate-related
laws and regulations could result in
reputational risks for the Group,
increased costs and longer permitting
delays.
Lack of climate change actions could
result in restricted access to capital.
Read our 2023 CFD Report from page 76.
14. Community relations
Communities living in the areas
surrounding the Group’s operations may
oppose the activities carried out at
existing mines or, with respect to
development projects and prospects,
may invoke their rights to be consulted
under new laws.
These actions may result in loss of
production, increased costs and
decreased revenues, longer lead times,
additional costs for exploration and
have an adverse impact on the Group’s
ability to obtain the relevant permits.
– The Group has a dedicated team
responsible for Community
Relations.
– Constructive engagement with local
communities based on several years
of positive relations.
– Community Relations strategy
focuses on promoting education,
health and nutrition, and sustainable
development.
– Policy to actively recruit workers
from local communities.
– Policy of hiring service providers
from local communities.
– The Group has also engaged with
local governments to support public
investment initiatives through
technical assistance and direct
investment.
30% by 2030, against our 2021 baseline; and
– Ongoing reporting to the Board and Sustainability Committee on status of
climate change-related risks.
Reporting of the Group’s performance has been enhanced through:
– continued external assurance of the calculation of the Group’s carbon
footprint at operations;
– reporting in line with the Task Force on Climate-related Financial Disclosures
(TCFD). Reporting in 2024 will be in compliance with the mandatory
Climate-related Financial Disclosure (CFD) requirements for companies
across the UK, which have been developed and adapted from the TCFD; and
– participation in CDP information request (improved score from C in 2021 to B
in 2022).
Coastal El Niño Preparedness
In response to the Peruvian Government’s assessment of a potentially severe
El Niño event affecting the Pacific coastal regions, the Company took a
number of actions seeking to mitigate the impact on the Company and its
operations. These included:
– the establishment of a taskforce headed by the General Manager of the
Peruvian operations to identify potential impacts on people, assets and
processes, and to formulate mitigating measures;
– the sourcing of equipment, such as frontloaders, to carry out any necessary
roadworks close to Inmaculada;
– specific reviews of critical stocks required by the Peruvian operations; and
– the appointment of a meteorologist to monitor the latest national
assessments as well as the conditions local to our Peruvian operations.
As stated in the introduction to the Risk Management report, the initial
predictions of the impact of the Coastal El Niño were downgraded in late 2023/
early 2024.
Overall
The polarised political climate in Peru has led to an increase in social conflicts
by some local communities, which are trying to take advantage of the situation
to increase their economic demands. As a result, social conflicts (e.g.
blockades of access roads to the mining units) have become common as a
mechanism to pressure mining companies into giving into their demands.
Despite the existence of pre-existing agreements, many communities refuse to
recognise their validity and demand renegotiation of the agreements, which
has led to numerous rounds of discussions. These discussions are continuing
at the time of writing.
Governmental authorities remain very sensitive to conflicts between
communities and mining companies and typically take a cautious approach
by prioritising dialogue between parties and supporting social demands
regardless of their merit.
Hochschild developments
The Group continues to implement its social engagement strategy in
recognition of its responsibilities to host communities. The Group invested
significant resources to understand the needs and expectations of local
communities and governments and actively participates in discussions with
different stakeholders, some of which include the participation of the State.
During the year:
– the Group spent or donated $4.8 million (2022: $7.0 million) to benefit local
communities and supported local communities and local governments;
– we continued to support the communities with a wide range of programmes
covering our areas of focus: education, health and nutrition, and sustainable
development; and
– the Community Relations team continued to support the business, for
example, in relation to permitting and environmental studies.
– the Company maintained a close dialogue with various community leaders
in Mara Rosa – from public authorities to representatives from different
economic sectors – to help us generate a direct positive impact on the
development of the municipality. At the end of 2023, 55% of Hochschild’s
Brazilian workforce was from Mara Rosa and the region.
Further details can be found in the Sustainability Report from page 52.
96
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 the period from the date of this
statement and ending at the end of the second calendar year
(the “Viability Period”) is the appropriate time horizon in light of:
– the inherent uncertainty of longer-term forecasting in a
cyclical industry which, in the case of precious metals, is
largely driven by global macro-economic factors; and
– the large number of external variables that need to be taken
into account in establishing any meaningful forecast of the
Group’s business.
Approach to assessing viability
In assessing the Group’s viability, the Directors have considered
a number of scenarios affecting the Inmaculada and/or Mara
Rosa mines which are within reasonable contemplation taking
into account the principal risks to which the Group is exposed.
Read more in our Risk Management Report from page 90.
Inmaculada and Mara Rosa are collectively expected to
generate c.82% of attributable Group production in 2024.
In their assessment of the financial impact of each of the above
scenarios, the Directors made the same assumptions as those used
for the Base Case Scenario in the Going Concern analysis, namely:
– December 2023 consensus prices as detailed below:
$/oz 2024
Au
Ag
2025 2026
1,899 1,803 1,724
22.4
23.0
24.0
– operational forecasts are in line with the 2024 budget for 2024
and the 2023 LOM plans for 2025 onwards;
– debt repayments between 2024 and 2026 will proceed as planned;
– the US$200 million medium-term credit facility will be drawn
down in 2024 as currently expected;
– US$100 million of the Group’s medium-term facility is
refinanced in 2025 with a two-year grace period;
– in the cases where a scenario envisages a mine or plant
stoppage which results in a delay in production, production will
be recovered once plant capacity at the relevant mine/(s)
becomes available, albeit after the three-year time horizon ; and
– with regards to Pallancata, the forecasts incorporate the
expenses relating to the MEIA incurred in 2024, and the
construction capex to be paid in 2025 and 2026.
The financial impact of outstanding hedges as at the date of this
report (as detailed in the commentary accompanying
Commodity Price risk on page 92) has been reflected in the
forecasts used to analyse the selected scenarios.
The following scenarios were analysed:
Scenario 1: A community-led protest results in a blockade of a
principal road to/from the mine and damage to a critical plant
component
A protest by a local community obstructs the access road to
Inmaculada for two months. Furthermore, it is assumed that a
component of the plant is damaged and repair works will take six
months to complete. The impact analysis takes into account the
cost of negotiating a settlement and other associated expenses.
Scenario 2: A strike by mineworkers
A widespread mineworkers’ strike results in a suspension of
operations at Inmaculada and Mara Rosa for one month in
different months. The impact analysis takes into account the
cost of negotiating a settlement and other associated expenses.
Scenario 3: The occurrence of a material safety accident
A severe fatal accident occurs at Inmaculada and Mara Rosa
which results in a one-month stoppage of operations. The impact
analysis takes into account other financial liabilities that may
result including the cost of remedial work and regulatory fines.
Scenario 4: The occurrence of a material environmental incident
A key part of Inmaculada and Mara Rosa’s plant infrastructure is
compromised which results in a major spillage of contaminants.
The impact analysis assumes a suspension of operations of one
month in different months and takes into account the cost of
repairs, remediation and regulatory fines and other
associated expenses.
Scenario 5: The failure of the mill or other critical plant component
A major failure of one of the mills at Inmaculada’s plant causes a
stoppage of six months which requires civil works, repairs and
the acquisition of spare equipment. The impact analysis takes
into account the cost of the works and replacement costs as well
as contributions from relevant insurance policies.
Scenario 6: Precious metal prices fall to a level that is 10% below
the annual average consensus prices
Following such a fall in prices, the Company would seek to
reduce variable costs and capital expenditure by 5%.
In their assessment of the financial impact of each of the above
scenarios, the Directors concluded that upon the occurrence of
one of the scenarios, the Company would be viable. Taking into
account the causes of operational stoppages in the past and
the extent of the disruption caused, the Directors are of the
opinion that a combination of two or more of the above
scenarios taking place concurrently is remote.
Should prices fall further than the Assumed Prices or the
scenarios in reality are more severe than those modelled or a
combination of scenarios occurs, the Board would oversee the
implementation of mitigating actions which include:
– the use of lines of credit with relationship banks, noting that over
$150 million of pre-approved, but uncommitted, working capital
credit lines were already available (subject to compliance with
covenant ratios under the medium-term credit facilities);
– refinancing one or both of the medium-term credit facilities;
– raising capital at either the corporate or asset levels; and
– other measures such as pay-outs under insurance policies, working
capital management, asset sales and commodity price hedging.
For examples of the actions taken by the Board during the year
under review to mitigate the impact of the Group’s principal
risks, please refer to the commentary in the Risk Management
section of this report.
Conclusion
While it is always possible that combinations of weak precious
metal prices and the occurrence of more than one of the above
referenced scenarios could threaten the solvency and liquidity
of the Company over the next three years, such combinations
are considered to be remote. The Directors have therefore
assessed the impact of each scenario, using the Assumed Prices
and other factors considered to be reasonable, and, accordingly,
can confirm that they have a reasonable expectation that the
Company will be able to continue in operation and meet its
obligations over the next three years.
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STR ATEGIC REPORT
CONTINUED
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
– 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
Business model (page 26)
– Risk Management & Viability
(page 90)
– Audit Committee report
(page 114)
Environment section of
the Sustainability Report
(page 62)
The following sections of the
Sustainability Report:
Our People (page 71),
Health & Safety (page 69)
Community Relations section
of the Sustainability Report
(page 58)
Our People section of
the Sustainability Report
(page 71)
Audit Committee report
(page 114)
Business model
Principal risks
Environmental matters
– Code of Conduct*
Employees
– Corporate Sustainability
Policy*
– Corporate Environmental
Policy
– 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 Anti-bribery Policy*
– Whistleblowing Policy*
Anti-corruption and Anti-
bribery matters
* Copies available from http://www.hochschildmining.com/en/responsibility.
Eduardo Landin
Chief Executive Officer
12 March 2024
98
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Strategic Report 1—99Governance 100—149Financial Statements 150—226Further Information 227—231Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023 BOARD OF DIRECTORS
A highly skilled and
experienced Board
Audit Committee
Nomination Committee
Remuneration Committee
Sustainability Committee
Chair
Gender of Directors on the Board
Tenure of Independent Non-Executive Directors
Male
Female
5/8
3/8
0-3 years 80%
4-6 years 20%
7+ years
0%
Eduardo Hochschild
Chair of the Board
Joined the Group in 1987 and
appointed Board Chair in 2006.
Committee membership
Eduardo Landin
Chief Executive Officer
Appointed to the Board
in August 2023.
Committee membership
Key skills and competencies
– Over 35 years’ involvement with the Group
– Extensive board experience of
companies in Latin America
– Proven ability to implement long-term
strategies in both the non-profit and
corporate sectors
Current external appointments
Commercial: Cementos Pacasmayo S.A.A.
(Chair), Aclara Resources Inc. (Chair)
Non-profit: UTEC (Chair), TECSUP,
Museum of Contemporary Art, Lima
(Chair), Conferencia Episcopal Peruana
Key skills and competencies
– Long-standing operational experience
– Broad knowledge of strategic planning
and operational control
– Qualified Mechanical Engineer
Current external appointments
Non-profit: Patronato Universidad
del Pacifico
Jorge Born Jr.
Non-Executive Director
Key skills and competencies
– Extensive experience of managing
international businesses
Appointed to the Board in 2006.
– Deep understanding of socio-political
Committee membership
issues in Latin America
– Corporate finance
Current external appointments
Commercial: President of Consult & Co.
and Non-Executive Director of Aclara
Resources Inc.
Non-profit: Bunge and Born Charitable
Foundation (President)
Previous experience
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.
Previous experience
Prior to his appointment as CEO in August
2023, Eduardo served as COO of the
Company since March 2013. He joined the
Company in January 2008 as General
Manager of Argentinian operations and,
In 2011, became General Manager of
Projects with direct responsibility for the
development of the Inmaculada and
Crespo Advanced Projects. Eduardo
previously worked at Cementos
Pacasmayo, in the Government of Peru’s
Ministry of Energy and Mines and at
Repsol S.A. in England, Spain and Peru.
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.
Jill Gardiner
Independent Non-
Executive Director
Key skills and competencies
– Long-standing career in investment
banking in Canada focusing on strategy
and M&A
Appointed to the Board in August
2020.
Committee membership
– Significant experience on listed
company boards
– In-depth knowledge of corporate
governance/finance
Current external appointments
Commercial: Non-Executive Chair
of Capital Power Corporation
Non-profit: ARC Foundation
Tracey Kerr
Independent Non-
Executive Director
Appointed to the Board in
December 2021. Designated
Non-Executive Director for
workforce engagement.
Committee membership
Key skills and competencies
– Extensive experience of managing
sustainability in mining
– Geology, having overseen global
exploration activities
– UK listed company governance
Current external appointments
– Commercial: Non-Executive Director
of Weir Group PLC, Jubilee Metals PLC
and Antofagasta plc
Previous experience
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.
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.
Joanna Pearson
Independent Non-Executive
Director
Appointed to the Board in October
2023.
Committee membership
Key skills and competencies
– Extensive experience of public
company financial reporting
and risk management
– Mining sector experience
– UK listed company governance
Current external appointments
Commercial: Non-Executive Director
of Goldshore Resources Inc.
Previous experience
Joanna was formerly Executive Vice
President and Chief Financial Officer of
the FTSE 100 company, Endeavour Mining
plc, and, prior to that, was an audit partner
at Deloitte LLP, Vancouver for 12 years
where she conducted multinational audit
engagements for US and Canadian listed
companies primarily in mining and
emerging markets.
Joanna is a Chartered Professional
Accountant of British Columbia.
Michael Rawlinson
Senior Independent Director
Appointed to the Board in 2016 and
as Senior Independent Director
in January 2018.
Committee membership
Key skills and competencies
– Significant knowledge of the mining
sector
– Corporate finance, strategy and M&A
– UK listed company governance
Current external appointments
Commercial: Adriatic Metals Plc (Chair)
and Non-Executive Director of Capital
Limited and Andrada Mining
Previous experience
Michael’s career of over 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.
Mike Sylvestre
Independent Non-Executive
Director
Appointed to the Board in May 2022.
Committee membership
Key skills and competencies
– Extensive experience of managing
mining operations
– In-depth knowledge of the Canadian
market, a key mining hub
– Mining Engineering (B.Sc and M.Sc.
from McGill University and Queen’s
University respectively)
Current external appointments
Commercial: Non-Executive Director of
TSX-listed Nickel Creek Platinum Corp.
and Vista Gold Corp.
Raj Bhasin
Company Secretary
Joined the Group and appointed
Company Secretary in 2007.
Key skills and competencies
Raj is a solicitor and Chartered
Secretary with over 25 years’
experience in FTSE-listed companies.
He has significant experience in
corporate and commercial law.
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.
Previous experience
Raj previously served as Deputy
Company Secretary and Commercial
Counsel at Burberry Group plc.
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DIRECTORS’ REPORT
The Directors present their report for the year ended
31 December 2023.
Information in Directors’ Report
The Directors’ Report comprises the Corporate Governance
Report from pages 104 to 122, this Report on pages 102 and
103, and the Supplementary Information on pages 145 to 148.
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 65; and
– policy on financial risk management in note 39 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 did not declare an interim dividend in respect of
the year ended 31 December 2023 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 100 and
101. Other than Eduardo Landin and Joanna Pearson, who were
appointed on 26 August 2023 and 1 October 2023 respectively,
all of the Directors were in office for the duration of the year
under review. Nicolas Hochschild and Eileen Kamerick resigned
from the Board at the conclusion of the AGM on 9 June 2023
and Ignacio Bustamante stepped down from the Board on
31 December 2023.
All Directors will be retiring and seeking re-election (or, election
in the case of Eduardo Landin and Joanna Pearson) by
shareholders at the 2024 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 $8.2 million to benefit
local communities (either directly or through local authorities)
(2022: $7.0 million).
Relationship Agreement
Pelham Investment Corporation (the “Significant Shareholder”),
Eduardo Hochschild (who together with the Significant
Shareholder are collectively referred to as the “Controlling
Shareholders”) and the Company entered into a relationship
agreement (“the Relationship Agreement”) in preparation for the
Company’s IPO in 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 Significant Shareholder are set out in the Corporate
Governance Report on page 111 and, with regard to the right to
appoint Directors to the Board, are set out on page 112.
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.
Going concern
After their thorough review of Group liquidity and covenant
forecasts the Directors have a reasonable expectation that the
Group and the Company have adequate resources to continue
in operational existence for the period to 30 April 2025 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 18th AGM of the Company will be held at 9.30am on 13 June
2024. 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.
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 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 149 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
12 March 2024
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A robust approach to
corporate governance
Eduardo Hochschild
Company Chair
“
The Board and the Committees
took active steps to ensure
continuity of leadership and
reaching out to key stakeholders.”
Dear Shareholder
I am pleased to present the Corporate Governance Report
for 2023.
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.
2023 was a defining year for the Company; with the approval
of the vital Modified Environmental Impact Assessment (MEIA)
for our flagship asset, Inmaculada, for another 20 years,
and the continued excellent progress with the construction
of Hochschild’s first mine in Brazil, Mara Rosa. Given the
importance of the former, it is unsurprising that the Board
devoted a lot of its time in the first half of the year in meeting
on an ad-hoc basis and receiving updates from management
on relevant developments and, out of prudence, overseeing
the necessary actions in preparing for an extended delay or
unfavourable outcome. A summary of the matters discussed
at these ad-hoc and our scheduled meetings are provided later
in this report.
Ensuring the Board is fit for purpose
With the planned retirement of Eileen Kamerick from the Board
earlier in the year, I am happy to report that the Nomination
Committee oversaw the successful execution of the Board
succession plan which resulted in the appointment of Joanna
Pearson as a Non-Executive Director in October. With her
long-standing expertise and experience in financial reporting
in the sector, she is ideally placed to assume the role of Audit
Committee Chair following this year’s Annual General Meeting.
In relation to the change in executive leadership, the Board
was pleased to be able to appoint Eduardo Landin, who was our
Chief Operating Officer for 10 years, as our new Chief Executive
Officer. The transition of responsibilities has been a smooth one,
and for that we thank Ignacio who remained on the Board, as a
Non-Executive Director, until the end of the year.
Engaging With Our Investors
Since securing the approval of the Inmaculada MEIA, there is a
common theme that has informed, and will continue to inform,
the Directors’ approach to governance at Hochschild Mining;
that of engaging with our investors and seeking their views.
As described in the Directors’ Remuneration Report, the
Remuneration Committee launched an open engagement
programme seeking the views of our significant shareholders
on matters of governance and executive remuneration. In
November, we were pleased to host a Capital Markets event and
retail investor presentation setting out the Company’s strategic
objectives and latest developments in key areas such as ESG
(environmental, social and governance matters) and our
exploration programme. Finally, as set out in Jill Gardiner’s
introductory letter to the Audit Committee Report, the Company
will be undertaking a tender of the audit engagement. As a
critical provider of assurance for our investors, we are inviting
views from our shareholders on the tender process before its
launch in the second half of the year.
I trust you will find this report to be informative. If you should
have any queries, please do not hesitate to contact me at
Chairman@hocplc.com.
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:
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 2023. 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 145 to 148.
Provision
Explanation
The Chairman has been in post beyond nine
years from the date of his first appointment to
the Board
As a major shareholder of the Company and given his significant experience of mining in Peru, the
Directors consider Mr Hochschild’s continued role as Board Chair to be in the best interests of the
Company. As described later in this report, the Company’s governance structure incorporates a
number of checks and balances to ensure ongoing objectivity and that undue influence is not
exercised.
The Company’s remuneration schemes and
policies should include provisions that would
enable the Company to recover sums or share
awards (i.e. clawback)
In order to overcome the legal difficulties in enforcing clawback in Peru, the Group’s policy wording
relating to the events which may lead to the application of malus has been clarified so as to include
references to misconduct, reputational damage, error in calculation and any material breach of an
individual’s employment contract.
Our governance structure
Board
Company Chair
Eduardo Hochschild
2 Non-independent Directors
5 Independent Directors
Audit Committee1
Nomination Committee1
Exploration Working Group
Chair
Jill Gardiner
READ MORE
Page 114
Chair
Eduardo Hochschild
READ MORE
Page 119
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 123
READ MORE
Page 52
104
105
Eduardo Hochschild
Company Chair
1
Terms of reference are available at www.hochschildmining.com
Strategic Report 01—99Governance 100—149Financial Statements 150—226Further Information 227—231Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023 CORPOR ATE GOVERNANCE REPORT
CONTINUED
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.
2023 Board meetings
11 Board meetings were held during the year, of which five were
scheduled meetings. The ad-hoc meetings were convened to:
– primarily consider periodic updates from management on:
• the progress of the Peruvian government’s review of the
Inmaculada MEIA;
Attendance at the scheduled Board meetings convened during
2023 is summarised in the table below:
Governance
Director
Jorge Born
Jill Gardiner
Eduardo Hochschild
Tracey Kerr
Eduardo Landin1
Joanna Pearson2
Michael Rawlinson
Mike Sylvestre
Former Directors
Ignacio Bustamante3
Nicolas Hochschild4
Eileen Kamerick4
Attendance (Maximum)
4 (5)
5 (5)
5 (5)
5 (5)
2 (2)
1 (1)
5 (5)
5 (5)
5 (5)
2 (2)
2 (2)
1 Eduardo Landin joined the Board following his appointment as CEO on 26 August 2023.
2 Joanna Pearson joined the Board on 1 October 2023.
3 Ignacio Bustamante resigned as Chief Executive Officer (CEO) on 26 August 2023 but
continued to serve on the Board, until 31 December 2023, as a Non-Executive Director
nominated by the Company’s largest shareholder, Pelham Investment Corporation
(controlled by Eduardo Hochschild).
4 Nicolas Hochschild and Eileen Kamerick retired from the Board at the conclusion
• potential contingent financing arrangements in the event
of the 2023 AGM on 9 June 2023.
of an extended delay in securing, or a refusal of, the
Inmaculada MEIA;
• the social climate in the regions close to the Company’s
operations; and
– the appointments of Eduardo Landin as Chief Executive
Officer and Rodrigo Nunes as Chief Operating Officer.
In addition to the regular updates from across the business,
the principal matters considered by the Board during 2023
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
Financial
– Updates on the ongoing implementation of the Company’s Safety Culture Transformation Plan (see page 69 for further
details); and
– Quarterly reviews of the Company’s Health Dashboard detailing a number of health-related indicators for each of the
Company’s sites.
– The stress-tested scenarios and the underlying assumptions used in the going concern and viability statements in support
of the 2022 annual financial statements and 2023 half-yearly financial statements;
– Approval of the 2022 Annual Report and Accounts and the 2023 Half-Yearly Report;
– The Group’s ongoing financial position and projected cash flows. This included consideration of securing future cash flow
certainty by hedging a limited amount of future production from Inmaculada and Mara Rosa;
– The revised 2023 production and cost guidance following receipt of the Inmaculada MEIA approval;
– Updates on unbudgeted expenditure; and
– The 2024 budget.
Strategy & Growth
– The Group’s annual strategic plan†;
– Receiving updates on work at the Snip project and the subsequent decision to terminate the option to earn-in a 60%
interest in the property†;
– The identification of business development opportunities for the short term and medium/long term;
– The sale of the Crespo project which is due to complete in Q1 2024;
– A review of the Company’s investments since IPO; and
– Updates on the Group’s operational innovation projects.
Business
performance
– Detailed updates on operational performance including progress on securing key permits/regulatory approvals such as
the Inmaculada MEIA;
– Presentations on progress against the project plans for the construction of the Mara Rosa mine; and
– The scheduled suspension of operations at the Pallancata mine which was placed on care and maintenance at the end of
the year.
Risk
– Political developments in the Company’s countries of operation;
– The Group’s Risk Register detailing the significant and emerging risks faced by the Group and their corresponding
mitigation plans. As reported in the Risk Management report. Liquidity Risk was removed from the Risk Register following
the approval of the Inmaculada MEIA. In addition, the risks posed by the potential coastal El Niño impacting Peru were
considered before the Peruvian Government downgraded its severity assessment; and
– Renewal of the Group’s Directors’ and Officers’ Liability Insurance.
– The changes in executive leadership with the appointments of Eduardo Landin as Chief Executive Officer and Rodrigo
Nunes as Chief Operating Officer;
– The appointment of Joanna Pearson as an Independent Non-Executive Director;
– Updates and presentations from the Company Secretary and the Company’s external legal advisers on governance
developments and Directors’ duties and responsibilities;
– An update on the implementation of the 2022 Board evaluation recommendations;
– The process for the internally-led 2023 Board evaluation and the findings of the review; and
– The annual reviews of the Directors’ conflicts of interest and the independence of Non-Executive Directors.
Sustainability
– Reviews of the social climate in Peru, Argentina and Brazil and their potential impact on the Group as well as the Company’s
redefined social engagement strategy;
– Performance of the Group against the internally-designed environmental corporate scorecard (the ECO Score) and updates
on the Company’s implementation of the Environmental Cultural Transformation Plan;
– Adoption of 2030 ambitions in relation to various aspects of ESG performance;
– Review of the 2022 Sustainability and TCFD Reports; and
– Feedback on employees’ views following the Online Employee Forum hosted by Tracey Kerr.
Investors’ views
– Regular reports from the Head of Investor Relations on investor sentiment as part of the Group’s comprehensive
engagement schedule (see later section headed Shareholder engagement in 2023 on page 109);
– Feedback from investors and proxy voting agencies on the 2023 AGM business; and
– Views of major shareholders on governance and remuneration matters during the open engagement programme which
commenced in H2 2023 led by Michael Rawlinson as Senior Independent Director & Chair of the Remuneration Committee.
† See pages 110 and 111 on how wider stakeholders’ interests were considered in relation to these key Board decisions.
Senior executives of the organisation are invited to attend
Board meetings and to make presentations on their areas of
responsibility. In the event a Director is unable to attend a Board
or Committee meeting, comments are encouraged to be fed
back to the Chairman of the relevant meeting who ensures that
the absent Director’s views are conveyed.
In between Board meetings, Directors are kept informed of latest
developments through monthly management reports on the
Company’s operations, safety performance, exploration activity
and financial position. In addition, monthly update meetings are
diarised which provide an opportunity for the CEO to brief the
Board on the latest developments.
Purpose and culture
The Group was established over a hundred years ago and
over time it has characterised itself not only through sound
operations but also in striving to achieve the highest standards
of safety and with regards to its social impact. This approach is
reflected and described in further detail in the Code of Conduct,
originally adopted in 2010 and last updated in 2022, which sets
out the standards and behaviours expected from all levels within
the Company as well as our partners, namely: professionalism,
honesty, integrity, respect for our stakeholders and a
commitment to safety, our communities and the environment.
These are further reiterated in the Group’s anti-bribery and
corruption policies.
The Company launched its reformulated corporate purpose
in 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 overleaf).
The Company frequently implements programmes to reinforce
the Company’s purpose and culture. During 2023 these included
a series of events themed around the Olympics which sought to
highlight the key values associated with the Company’s culture.
2023 HOC Olympics at Inmaculada
Setting the tone
The Board sets the tone from the top, reflecting these values
in its deliberations and decision-making. The Chief Executive
Officer (CEO) is the crucial conduit through which the tone is
cascaded throughout the organisation. Examples of the key
communications and initiatives led by the CEO related to the
following topics:
– the values and behaviours that emanate from Hochschild’s
corporate purpose;
– the launch of a review of business processes to improve
operational efficiency; and
– safety and environmental responsibility.
In addition, on assuming the role of CEO in late August 2023,
Eduardo Landin met with senior personnel across the
organisation setting out his vision and priorities for the Group.
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CONTINUED
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 growth strategy. See the Strategy section on page 28.
Brilla
The Company has developed the Brilla programme (“Shining”
in English) uses a points-based system to acknowledge
colleagues who have been recognised by their peers for
outstanding contributions aligned with Hochschild’s cultural
attributes. The top 3 from each of HOC’s sites were selected
for initiatives such as mentoring a colleague, leading
innovation projects or implementing new processes which
have generated operational savings.
The award ceremony was held in each location led by the Unit
Manager and, in the case of Lima, was hosted by the CEO. As
part of the recognition for the first-place winners, a video was
made where the winner finds out the news in the company of
their family.
Cultural Olympics
The Cultural Olympics took place at Inmaculada, aiming
to promote and strengthen our cultural attributes through
sports, recreational activities, and challenges that colleagues
highly value. The events saw the participation of 16 teams,
each consisting of 15 members, and were held over three days.
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
Innovation
Inspiring others
and promoting
talent
Efficiency
Safety – Accident Frequency Index (LTIFR),
Accident Severity Index, High Potential Event rate,
Leading indicators, Seguscore (see page 69 for
further details)
Environmental – ECO Score
Ethical practices/Integrity – Whistleblowing
reports (online and offline channels), compliance
training, internal audit reports
Submissions of operational efficiency projects via
the Innova platform
Team and individual development plans, staff
turnover/retention rates, results of diversity and
inclusion programmes
Operational KPIs including AISC, Production and
Brownfield Exploration results, Financial KPIs
including Adjusted EBITDA, Working Capital,
Cash Balance, Debt Covenant ratios
The Company periodically commissions working climate surveys
as a key tool of gauging the views of employees and the success
of the Company’s programmes on corporate culture. The timing
of our next working climate survey is under review with a
decision to be taken in the second half of 2024. Action plans
to address key areas identified in the last survey conducted in
2019 continue to be implemented, tailored by each department
and which are focused on the following general themes:
– recognising others’ achievements;
– improving training programmes;
– reflecting the corporate culture in the style of management;
and
– improving the employee value proposition.
Engagement
The Directors receive briefings from the Company Secretary
and legal advisers on their duties under English law to promote
the success of the Company. As in other large companies,
these duties are, in part, discharged through a framework
of delegated authorities.
The Board ensures there is regular and sustained engagement
with its shareholders and other stakeholders which is fed back
to the Board and taken into consideration in discussions and
decision-making. This section of the report includes the 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.
Shareholders
Our approach
The Board Chair, with the support of the Senior Independent
Director and the Company Secretary, is available to engage with
major shareholders on matters of governance and performance
against strategy.
The Chief Executive Officer is responsible for discussing
strategy and business performance with the Company’s
shareholders and conveying their views to the other members of
the Board. He is supported in this regard by the Chief Financial
Officer and the Head of Investor Relations who is based in the
London corporate office.
In addition to the direct means of contact as detailed in the table
below, Directors are kept informed of major shareholders’ views
through copies of (i) relevant analysts’ and brokers’ briefings, (ii)
voting recommendation reports issued by institutional investor
agencies, and (iii) significant correspondence from shareholders
with respect to the business to be put to shareholder vote at
General Meetings.
Shareholder engagement in 2023
The following table summarises the shareholder engagement
initiatives and events during the year:
Date
Event
January
(and May, July,
October)
Conference calls following each
Quarterly Production Report
February/March
BMO Global Metals & Mining Conference
April
May
June
August
September
October
November
2022 annual results presentation & UK
roadshow
BoA Merrill Lynch Global Metals, Mining
and Steel Conference
AGM
H1 2023 results presentation
H1 2023 results UK roadshow
Denver Gold Forum
Open engagement with major shareholders on
governance and remuneration-related matters
Capital markets event & virtual retail
investor presentation
Copies of presentations given at
the above events are available at
www.hochschildmining.com/investors/
results-reports-presentations
An extensive investor relations schedule resulted in management
holding approximately 100 investor meetings during the year.
The Company continued its use of the Investor Meet Company
platform whereby approximately 90 individual investors were
able to attend virtually a live presentation from the CEO on the
day of the Capital Markets event in November 2023 and submit
questions. This enabled the Company to facilitate engagement
with retail investors on occasions which would previously have
been attended exclusively by institutional investors.
In addition to the above, the Non-Executive Directors are
available to meet shareholders on request.
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Open engagement programme
In Autumn 2023, an open engagement programme was
launched to discuss governance and remuneration-related
matters with the participation of Michael Rawlinson, as the
Senior Independent Director and Chair of the Remuneration
Committee, Tracey Kerr as Chair of the Sustainability
Committee and Non-Executive Director designated for
Workforce Engagement and the Company Secretary.
The invitation, which was made to 16 major investors (being
holders of more than 1% of the Company’s shares) and three
proxy voting agencies, resulted in feedback from two investors
and meetings with two additional investors and two proxy
voting agencies. Topics covered during these meetings
included CEO succession, 2022 executive remuneration,
the Board Chair’s tenure, and the proposed changes to
the Directors’ Remuneration Policy.
2023 AGM
The resolutions put to the 2023 AGM were passed with the support
of an average of over 96% of the votes cast, with the exception of
the re-election of the Board Chair, Eduardo Hochschild. This voting
outcome reflected concerns with respect to the tenure of Eduardo
Hochschild as Chair and the lack of a defined succession plan and
a publicly disclosed definitive timeline for retirement.
The Board believes that, taking into account Eduardo
Hochschild’s long-standing involvement with the Company,
his significant shareholding, and the governance structure
and practices that have been adopted as described later in
this report, his continued role as Board Chair remains in the
best interests of the Company.
As is the case for all senior positions, the Company has a
succession plan in place in relation to the Chair. Whilst there
are no short or medium-term plans for Eduardo Hochschild
to retire, he has informed the Board that, absent any change
in circumstances, his intention is to retire by the age of 70
(being within the next 10 years).
Other stakeholders
On pages 48 to 51 of the Strategic Report, we have identified our
key stakeholder groups, described how the Company engages
with them and an indication of the issues raised by each group
during the year.
The Directors are aware of their duty under English company law
(the “section 172 duties”) to act in the way that is considered, in good
faith, as most likely to promote the success of the Company for the
benefit of its shareholders and other factors. These include the likely
consequences of any decisions in the long term, the interests of the
Company’s employees, the need to foster the Company’s business
relationships with all stakeholders, the impact of the Company’s
operations on the community and environment, and the desire to
maintain a reputation for high standards of business conduct.
By understanding stakeholders’ views and expectations, the Board
is able to successfully steer the Company towards achieving its
strategic goals in a sustainable manner and which acknowledges
its licence to operate.
Below, we have summarised how the Board receives feedback from
its key stakeholder groups:
Employees
Social
Government/
Regulators
Suppliers/
Lenders
Customers
Tracey Kerr, as Chair of the Sustainability
Committee, is our designated Director to oversee
workforce engagement who, in addition to receiving
quarterly updates from the Vice President of Human
Resources on discussions with trade unions and
other employee group meetings, also chaired an
online employee forum during the year. See below
for further information.
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.
2023 Online Employee Forum
During the year, Tracey Kerr chaired an Online Employee
Forum with participants from the San Jose operation in
Argentina. The forum, which was launched in 2022, has
proven to be valuable for Directors who learn, first-hand,
the views of colleagues across the business on a variety
of subjects. During this session, colleagues expressed their
satisfaction with the support they receive from across the
organisation as well as acknowledging the importance placed
by management on safety. Feedback was also received on
areas of improvement for consideration by management
including specific improvements to the office buildings and
the frequency and form of corporate communications.
Impact on wider stakeholder group of key decisions in 2023
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 106 and
107. 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 Strategic Review
As it does each year, the Board carried out a review of the Group’s
strategy. The discussion in 2023 identified six strategic objectives
as key drivers for growth, with a five-year target set for each one.
Each objective reflects the pillars of Hochschild’s corporate
purpose and incorporates taking a leading role in promoting
good ESG practices as well as seeking to become an employer
110
of choice by providing a positive working environment. By taking
this approach, the Board has mandated that every strategic
business decision should promote sustainability for a wide range
of stakeholders.
(b) Termination of the Snip option
The Board took a balanced approach in its decision to terminate
the option to acquire a 60% interest in the Snip project in British
Columbia. On the one hand, it considered (a) the interests of
employees, local stakeholders and government who would
benefit from the generation of sustainable value at the project,
(b) shareholders’ concerns with respect to (i) the limited scope
for growth from the Company’s existing portfolio of operating
assets and (ii) the lack of geographic diversification. On the
other hand, the Board considered and concluded the overriding
need to preserve shareholder value by redeploying capital
elsewhere in the Group in light of the projected investment
required to maintain and, ultimately, exercise the option.
Division of responsibilities
Board composition
As detailed in the notes accompanying the table on Board
meeting attendance on page 106, there were a number of
changes to the composition of the Board during the year.
Notwithstanding these changes, the Board comprised, at all
times, a majority of Non-Executive Directors considered to
be of independent judgement and character. As previously
announced by the Company, with the exception of Eduardo
Hochschild, Jorge Born is the only serving non-independent
Non-Executive Director as he has been nominated to the Board
by the Company’s largest shareholder under its rights pursuant
to the Relationship Agreement (further details of which can be
found on page 102 of the Directors’ Report).
Chair and Chief Executive
The Board is led by the Chair, Eduardo Hochschild, who controls
Pelham Investment Corporation, the largest shareholder of the
Company with a c.38% holding (the “Significant Shareholder”).
The Board has approved a document which sets out the
division of responsibilities between the Chair and Chief
Executive Officer.
As Chair of the Board, Eduardo Hochschild is responsible for
leading the Board of Directors and ensuring that the Board is
enabled to play a full and constructive part in the development
and determination of the Group’s strategy and overall
commercial objectives.
Eduardo Landin, who was appointed Chief Executive Officer on
26 August 2023, is responsible for the formulation of the vision
and long-term corporate strategy of the Group, the approval
of which is a matter for the full Board.
The Chief Executive Officer is responsible for leading the
executive team in the day-to-day management of the
Group’s business.
Status of the Chair
In light of his significant shareholding, Eduardo Hochschild is
not considered to be independent. However, the other Directors
of the Board continue to assert that he chairs the Board in an
objective manner and encourages open and full debate. The
Directors are satisfied that the composition of the Board and
the implementation of certain contractual arrangements act
as additional measures which prevent the exercise of undue
influence by Eduardo Hochschild.
Firstly, the significant presence of Independent Directors and
the active role of the Senior Independent Director ensure that
the views of minority shareholders are well represented.
Secondly, the undertakings provided in the Relationship
Agreement (as described below) ensure that the Company
and its subsidiaries are capable of carrying on their business
independently of Eduardo Hochschild and his associates.
The Relationship Agreement, which was revised in 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 103.
Senior Independent Director
Michael Rawlinson is the Senior Independent Director. His
role is not only to act as a central point of contact for the
Non-Executive Directors as a group but to also act as a
conduit between the Non-Executive Directors and the executive
management team. To facilitate this, Michael Rawlinson chairs
meetings of the Non-Executive Directors and of the Independent
Non-Executive Directors after each Board meeting. This
provides the opportunity to gather feedback and thoughts on
Board discussions which are subsequently relayed to the Board
Chair and/or the executive team as appropriate. A crucial part
of the role of the Senior Independent Director is to meet with
major shareholders if concerns have not been addressed by the
executive team. While no such meetings were requested during
the year, Michael led two meetings with investors as detailed in
the earlier section entitled “Shareholder engagement in 2023”.
Non-Executive Directors
The Company’s Non-Executive Directors have held senior
positions in the corporate sector. Each such Director brings
their experience and independent perspective to enhance the
Board’s capacity to help develop proposals on strategy and to
oversee and grow the operations within a sound framework of
corporate governance.
Details of the tenure of appointment of Non-Executive Directors
are provided in the Directors’ Remuneration Report.
Independence of Non-Executive Directors
In keeping with its usual practice, the Board considered, during
the year, the independence of Non-Executive Directors taking
into account the circumstances set out in Provision 10 of the
Code. The Board has concluded that, with the exception of
Eduardo Hochschild in light of his shareholding, and Jorge Born,
who is a nominee director of the Significant Shareholder, all other
Non-Executive Directors are considered to be independent.
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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.
In the exercise of its nominating rights, the Significant
Shareholder appointed (a) Nicolas Hochschild on 26 May 2022
who served until the conclusion of the 2023 AGM on 9 June
2023; (b) Ignacio Bustamante on 26 August 2023 who served
until 31 December 2023; and (c) Jorge Born who replaced
Ignacio Bustamante.
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 119 to 122.
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.
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 100 and 101 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 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.
Briefings
The Directors receive regular briefings from the Company
Secretary on developments in the areas of corporate law
and corporate governance that affect their roles as Directors
of a UK listed company. By way of example, during the year, the
Company Secretary gave presentations, on among other things,
the reform of audit governance in the UK. In addition, the
Directors have ongoing access to the Company’s officers and
advisers with presentations arranged periodically on topics such
as Directors’ duties and disclosure obligations.
Advice
The Company has procedures by which members of the Board
may take independent professional advice at the Company’s
expense in the furtherance of their duties.
Board effectiveness
The Board is committed to the process of continuous
improvement and so, during the year (a) took a number of
actions to implement the findings of the internal evaluation
in 2022, and (b) undertook an internally facilitated evaluation.
Induction
New Board appointees are offered the opportunity to meet
with key management personnel and the Company’s principal
advisers as well as undertaking visits to the Group’s operations.
In addition, where appointees will serve on any of the Board
Committees, sessions with the relevant Committee Chair
are organised.
Joanna Pearson selection and induction process
1. Selection
Search firm, London Search Associates, engaged to compile a long-list of candidates
with the skills and experience sought by the Nomination Committee
Designated members of the Nomination Committee compile a short-list of candidates
2.
Interviews
Board Chair
and designated
members of
the Nomination
Committee
4.
Provision of Key
Documentation
On Governance,
Key Corporate
Policies, Directors’
& Officers’ Liability
Insurance and
other useful
information
3.
Conflicts
of Interest
Nomination
Committee
considers and
approves any
conflicts of
interest and
recommends
Joanna Pearson’s
appointment to
the Board
5.
The Board
Perspective
Meets with other
Board members
6.
The Operational
Perspective
Meetings with the
CEO, CFO, COO
7.
Briefings
Vice Presidents,
Head of Internal
Audit, Head of
Investor Relations
and Company
Secretary
Evaluation
Implementation of 2022 Board evaluation
The table below sets out the key actions taken in 2023 in respect of the principal recommendations arising from the prior
year’s review.
Area of Focus
Action
Update
Workings of the Board
– Ongoing review of Board material to facilitate
detailed discussions on matter under consideration
– Exploring options to maximise time for discussion
between Board members outside of the boardroom
– Enhancing the post-Board meeting reviews and
process of feeding back to executive management
Maximising Board input
on Strategic Reviews
Implementing practical suggestions on strategy
planning and periodic updates on progress against
agreed objectives
Enhancements to Board material have been
implemented, facilitating a more in-depth discussion of
the specific subject matter.
Meetings of specified attendees are held after each
Board meeting to allow comprehensive feedback to be
conveyed to executive management. These in-camera
sessions comprise, meetings of (a) the Directors without
management present, (b) the Non-Executive Directors
only, and (c) the Independent Directors only.
Suggestions adopted in advance of 2023 annual
strategic review which, among other things, illustrated
progress made against the prior year’s strategic
objectives. This practice will continue to be implemented
for future Board strategy sessions.
Risk Reporting
Workings of the
Committees
Ongoing review to incorporate tolerance thresholds in risk
reporting and detailed contingency scenario planning
Relevant Board material incorporates review of downside
scenarios and key risks
Specific topics for further consideration identified for
further discussion by the Remuneration and Nomination
Committees and the Exploration Working Group
Steps taken include:
– Increased scope of senior leadership succession
planning implemented by Nomination Committee
– Consideration of alternative LTIP performance
measures incorporated into the Directors’
Remuneration Policy review by the Remuneration
Committee
– Reformatting of material for Exploration Working
Group (EWG) to be implemented on resumption of
brownfield/greenfield activities post approval of the
Inmaculada MEIA
2023 Board evaluation
Process
The 2023 Board evaluation, undertaken in the latter part of the year, took the form of one-to-one interviews led by
Michael Rawlinson, as Senior Independent Director supported by the Company Secretary.
The interviews were wide-ranging and covered a number of areas including:
– The Board: its workings, composition and specific aspects of its role, e.g. Strategy & M&A, Governance & Risk, and Culture & People
– Developing: retrospective review, and identifying short-/medium-term areas of focus
– The Committees: a review of their workings and deeper dives into specific areas of responsibility
– Peer Reviews: consideration of the skills and strengths around the Board table. The evaluation of the Chair’s performance
was considered by the Non-Executive Directors led by the Senior Independent Director
Findings
The principal recommendations arising from the 2023 Board evaluation process include the following:
Area of focus
Action
Workings & Composition
of the Board
– The resumption of Board meetings in Lima and mine sites would provide further opportunities for Directors
to meet with colleagues across the business
– Matters identified as key priority areas/concerns by the Directors to be reflected in Board material
– Specific skillsets considered desirable around the Board table to be incorporated into the Nomination
Committee’s brief when recruiting additional Non-Executive Directors
Retrospective Review
Review papers with regards to specific matters to be produced for Board discussion
Workings of the
Committees
Specific practical suggestions to support the work of the Committees including:
– Increasing the visibility of workplace diversity below Board level
– Training & development of the Directors to be facilitated by the participation of expert speakers at meetings
of the Directors
– Increased oversight of relevant matters of strategic importance by the Sustainability Committee
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CORPOR ATE GOVERNANCE REPORT
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Audit Committee Report
“
In addition to its usual financial reporting
responsibilities, the Audit Committee played
an active role in integrating processes in
Brazil and planning for an audit tender.”
Jill Gardiner
Audit Committee Chair
2023 meeting attendance
Members
Independent
Maximum
possible
attendance
Actual
attendance
Jill Gardiner,
Non-Executive Director (Chair)*
Joanna Pearson,
Non-Executive Director**
Michael Rawlinson,
Non-Executive Director
Mike Sylvestre,
Non-Executive Director ***
Former Member
Eileen Kamerick, Non-Executive
Director (Former Chair)*
Yes
Yes
Yes
Yes
Yes
Dear Shareholder
I am pleased to present the Audit Committee Report for the
year ended 31 December 2023.
Firstly, I would like to thank my predecessor Eileen Kamerick
who, having chaired the Committee for over six years, retired
from the Board at the 2023 AGM. During the year we welcomed
Mike Sylvestre to the Committee who brings mining operational
expertise and, in addition, we were able to announce Joanna
Pearson’s appointment to the Board and the Committee.
Having assumed the role of Committee Chair on an interim
basis, I am delighted that Joanna will be succeeding me from
the conclusion of this year’s AGM. Joanna brings extensive
experience of financial reporting, audit and risk management
as an experienced auditor and also as a former CFO of a
London-listed mining company.
The Audit Committee had a busy year. In the early part of 2023,
the Committee considered the financial reporting implications
for the 2022 Annual Report and Accounts of the uncertainty
caused by the extended delay in securing the Inmaculada
MEIA, which was ultimately approved in August. As a result,
significant time was spent reviewing with management and
the auditors numerous scenarios and disclosures related to
the assessment of Going Concern and the Viability Statement.
As the Company made progress with the construction of its first
operation in Brazil, the Committee received regular updates
from the Internal Audit function on the continued roll-out of the
Hochschild compliance programme. This brings together, among
other things, the implementation of Group procedures on ethics
and training to colleagues at our office in Belo Horizonte and
on-site at Mara Rosa. Further details can be found on page 116.
With respect to the 2023 financial statements, the Committee
has reviewed management’s material accounting judgements
and disclosures where the issues of impairments and mine
closure costs in particular were closely scrutinised. Further details
on these key accounting matters are provided on page 117.
Finally, as detailed later in this report, the Audit Committee will
be overseeing the tender of the Group’s audit engagement in
the second half of this year. This process has been scheduled
such that the Company can meet the requirement to appoint
a new auditor to replace EY by 2026, as well as ensuring a
sufficient handover period. As a key provider of assurance for
investors, the Audit Committee would be pleased to receive
shareholders’ views on the conduct of the tender which can
be conveyed by email to info@hocplc.com
*
Jill Gardiner assumed the Chair of the Committee following Eileen Kamerick’s
retirement from the Board on 9 June 2023.
** Joanna Pearson joined the Committee on October 2023.
*** Mike Sylvestre joined the Committee on 9 June 2023.
Jill Gardiner
Committee Chair
Key roles and responsibilities
– To monitor the integrity and material accuracy of the
Company’s financial statements and related disclosures;
– To monitor the effectiveness of the Company’s internal
controls and risk management systems and review the
preparation of the going concern and viability statements;
– To review, on behalf of the Board, the Company’s procedures
for detecting fraud, the Company’s systems and controls for
the prevention of bribery and to review and conclude on
non-compliance;
– Oversight of the Internal Audit function, review of its annual
work plan and its findings;
– To oversee the relationship with the Company’s external Auditor;
– To review the effectiveness of the external audit process; and
– To report to shareholders annually on the Committee’s
activities including details of the significant audit issues
encountered during the year and how they have been
addressed.
Membership
Eileen Kamerick was the chair of the Audit Committee until her
retirement from the Board on 9 June 2023. Eileen was formerly a
Chief Financial Officer of a number of US-based companies
operating in the mining, oil and gas, investment banking and
recruitment sectors. Eileen currently chairs the audit committees
of the Legg Mason Closed End Mutual Funds and NASDAQ-listed
ACV Auctions Inc. Eileen holds the Directorship Certification of
the US National Association of Corporate Directors (NACD) and is
a Board Leadership Fellow of the NACD.
Following Eileen’s retirement from the Board, Jill Gardiner was
appointed Committee Chair on an interim basis while the
recruitment of a permanent successor was overseen by the
Nomination Committee. Jill Gardiner was formerly an investment
banker at RBC Capital Markets with a focus on certain
commodity and energy related industries and has built up
extensive experience of public company corporate governance
and financial reporting through numerous Board and Committee
positions. Jill currently serves as Chair of TSX-listed Capital Power
Corporation and as an ex-officio member of its Audit Committee
and, until recently, she served on the Board and Audit Committee
of NYSE-listed Compass Minerals.
Michael Rawlinson’s career in banking specialised in the mining
sector, having initially worked as an analyst and corporate
financier, serving most recently as Global Co-Head of Mining and
Metals at Barclays Investment Bank from 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).
Mike Sylvestre spent a significant portion of his career with Vale
Canada (formerly Inco Ltd), a world leading producer of nickel
where he held key senior management positions domestically
and internationally. Most notably, he held the position of CEO New
Caledonia and President, Manitoba Operations. He previously
served as Vice President of Operations for PT Vale Indonesia.
He is a member of the Professional Engineers of Ontario and
a graduate of the Institute of Corporate Directors (ICD) in
partnership with the Rotman School of Management.
Joanna Pearson joined the Audit Committee on appointment to
the Board on 1 October 2023. She was formerly Executive Vice
President and Chief Financial Officer of the FTSE 100 company,
Endeavour Mining plc (2020-2023), and, prior to that, was an
audit partner at Deloitte LLP, Vancouver for 12 years where she
conducted multinational audit engagements for US and Canadian
listed companies primarily in mining and emerging markets. Since
June 2021, Joanna has been a Non-Executive director of Goldshore
Resources Inc., a junior resource exploration company listed on
the TSX-Venture exchange in Canada, where she also chairs the
company’s Audit Committee. Joanna is a Chartered Professional
Accountant of British Columbia. Joanna will assume the Chair of
the Audit Committee at the conclusion of the forthcoming AGM.
The Committee members are considered to be Independent
Directors and the Board is satisfied that at least one member has
recent and relevant financial experience and that the Committee,
as a whole, has competence relevant to the sector in which the
Company operates.
For further details on the skills and experience of the Committee
members, please refer to the biographical details on pages 100
and 101. 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 2022 Annual Report and Accounts and the 2023 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 2022 annual audit and the 2023 Half-
Yearly Report.
Risk management
Consideration and challenge of risk management assessments
which incorporate a risk matrix detailing (i) the most significant
and emerging risks facing the Group, (ii) an evaluation reflecting
the likelihood of the occurrence of the risk and the extent of the
potential impact on the Group, and (iii) commentary on the steps
taken to manage each specific risk. See page 90 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.
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Internal audit
The Audit Committee continued to oversee and challenge the
Group’s adoption of a risk-based approach to internal audit.
The Audit Committee Chair receives a quarterly report from
the Head of Internal Audit which sets out specific areas covered,
improvements being recommended and introduced, and
proposals for the programme over the following three months.
The CEO and Chief Financial Officer also receive copies of these
reports who ensure that adequate support is provided for the
activities of the Internal Audit function. During the year, the
Committee met with the Head of Internal of Audit without the
presence of executive management to discuss, among other
things, the scheduled work plan.
Brazil Compliance Programme:
During 2023, the Company rolled out a Compliance and
Ethics programme at its new sites in Brazil. This included:
– Campaigns on harassment at the workplace, with training
for all employees and installation of visual signs throughout
the Mara Rosa unit
– The launch of a podcast and an online portal, through
which employees have centralised and intuitive access to
policies and related documents
– Online training on related subject matters, such as dealing
with conflicts of interest
– Pro-active due diligence of significant suppliers and
ongoing monitoring of all suppliers to our Brazilian sites
Compliance HOC Podcast was produced to provide colleagues with accessible content
See page 74 of our Sustainability Report for more details
Internal control
Through the processes described on page 118, 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. The Head of Internal Audit
also circulates, on a periodic basis, summaries of ongoing
investigations into matters raised through the Company’s
whistleblowing channels, and their relevant status.
Fraud and bribery
The Audit Committee continued to review and challenge
the actions taken by management to promote ethical and
transparent working practices.
The Group’s Code of Conduct describes the values and
standards of behaviour expected of our employees and our
business partners. In addition, the Group has adopted a specific
anti-bribery and anti-corruption policy to reflect the Board’s
zero tolerance to these types of acts. The Code of Conduct
was reviewed in 2022 and circulated earlier this year with all
recipients required to confirm receipt online and confirming
their agreement to its terms.
External audit
Ongoing Relationship Management
The Audit Committee oversees the relationship with the
external Auditor. EY was first appointed by the Company as
Auditor in 2006 and, following a tender process undertaken
in Q1 2016, was reappointed. The Audit Committee evaluated
the performance of EY in 2023 and concluded that it was
appropriate to recommend the reappointment of EY as
external Auditor at the 2023 Annual General Meeting. The Audit
Committee reviewed the findings of the external Auditor and
management letters, and reviewed and approved the audit fees.
In line with its usual practice, the Audit Committee evaluated
the effectiveness of EY and the external audit process taking
into account the results of Hochschild management’s internal
survey relating to EY’s performance as well as views and
recommendations from management and its own experiences
with the external Auditor. Key criteria of the evaluation included
resources and expertise, quality and timeliness of the audit
process, quality of communication and reporting to the
Audit Committee.
Mandatory audit tender
In line with relevant legal and regulatory requirements, EY is
subject to mandatory rotation on completion of 20 years and,
therefore, must be replaced as the Company’s external Auditor
by 16 October 2026 (the “Statutory Deadline”). In August 2023,
the Audit Committee approved a detailed timeline for the tender
process which will be undertaken in the second half of 2024 with
a view that the successor firm will be selected by the end of the
year and, subject to approval at the 2026 AGM, will undertake
the H1 2026 and subsequent reviews, and the annual audits
from 2026. The timing of the tender is considered to be in the
best interests of the Company’s shareholders as it provides
certainty in good time before the Statutory Deadline and allows
for sufficient time to ensure a smooth transition to the successor
firm. Details of the conduct of the tender will be provided in the
2024 Annual Report and Accounts.
Auditor objectivity
The Audit Committee has adopted a policy on the use of the
external Auditor for the provision of non-audit services (see later
section on Auditor independence for more details). In addition,
objectivity is also ensured by the regular rotation of the lead
audit partner which, in the case of Hochschild, is due to next
take place after approval of the 2023 financial statements.
Governance
The Audit Committee received updates from the Auditor and
the Company Secretary on regulatory and other developments
impacting the Committee’s role such as the status of reforms of
UK audit governance.
Evaluation
The Committee’s performance was evaluated as part of the
annual Board review which, as reported earlier in this Corporate
Governance Report, was facilitated during the year by the
Senior Independent Director and the Company Secretary.
Aspects of the Committee’s role were discussed in the one-to-
one interviews held with each Board member.
Tax compliance strategy
The Audit Committee approved on behalf of the Board a
document on the Group’s approach to UK tax matters. The
document can be found at: https://www.hochschildmining.com/
media/wmwptyk2/uk-tax-strategy-approved-2023.pdf
(b) Mine rehabilitation provision
The Audit Committee considered the judgement exercised
by management in assessing the amounts required to be paid
by the Company to rehabilitate the Group’s assets.
In its assessment of the analysis undertaken by management
and, where relevant, with the input provided by specialist
experts, the Audit Committee took into account:
– the basis of the estimation of future rehabilitation costs;
– the discount rate applied;
– the significant changes in estimates and the basis and level
of the increased costs; and
– the accounting for the changes in the provisions.
The Audit Committee concluded the provision to be appropriate.
(c) Accounting for hedges
The Audit Committee reviewed management’s use of hedge
accounting in respect of various forward contracts, gold
hedging arrangements and option contracts relating to future
production at Inmaculada and Mara Rosa.
The Committee:
– reviewed the basis of the valuation and the calculation of
any realised and unrealised gains or losses on the hedging
arrangements; and
– considered the presentation of the proposed accounting
treatment in the statement of other comprehensive income
or the income statement, as appropriate.
In conclusion, the Committee was comfortable with the related
presentation and disclosures in the consolidated financial
statements were appropriate.
Significant issues relating to the 2023 financial statements
As recommended by the Code, the following is a summary of
the significant issues considered by the Committee in relation
to the 2023 financial statements and how these issues have
been addressed.
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.
(a) Impairments
The Audit Committee considered management’s analysis of
potential indicators of impairment and impairment reversals
across the Group’s operating and development stage assets.
In addition, the Committee considered the analysis undertaken
with respect to (a) the Group’s exploration assets, namely
Crespo, Volcan, Arcata, Azuca, and Volcan; and (b) the Group’s
investment in Aclara.
Having concluded on the presence, or not, of triggering factors,
the Audit Committee:
– reviewed and challenged the discount rate used for the
impairment analysis with respect to San Jose; and
– the basis of the calculation of the proposed impairment
charges in relation to Crespo, Azuca and the Group’s
investment in Aclara.
In conclusion, the Audit Committee concurred with
management that, in addition to the impairments recognised
and previously reported in the half-yearly financial statements
with respect to San Jose, Azuca and Aclara, an additional
impairment of c.$22 million be recognised with respect to
Crespo, such that in respect of the full year, the asset is subject
to a total impairment of $46 million.
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.
2023 Audit and non-audit fees
Please refer to note 34 to the consolidated financial statements
for details of the fees paid to the external Auditor.
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Safeguards
Additional safeguards to ensure Auditor objectivity and
independence include:
– six-monthly reports to the Audit Committee from the Auditor
analysing the fees for non-audit services rendered; and
– an annual assessment, by the Audit Committee, of the
Auditor’s objectivity and independence in light of all
relationships between the Company and the audit firm.
Compliance Statement required under Article 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.
Reports from the Head of the Internal Audit function;
Reviews of accounting and financial reporting processes
together with the internal control environment at Group level.
This involves the monitoring of performance and the taking
of relevant action through the monthly review of Key
Performance Indicators and, where required, the production
of revised forecasts. The Group has adopted a standard
accounting manual to be followed by all finance teams,
which is continually updated to ensure the consistent
recognition and treatment of transactions and production
of the consolidated financial statements;
The external Auditor’s observations of the Company’s
internal control environment;
Review of budgets and reporting against budgets; and
Consideration of progress against strategic objectives.
Internal control and risk management
The system of internal control is designed to manage rather
than eliminate the risk of failure to achieve business objectives
and it must be recognised that such a system can only provide
reasonable and not absolute assurance against material
misstatement or loss.
Audit Committee’s assessment
At its March 2024 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.
Nomination Committee Report
“
The year brought into focus the issue of
succession; not only with respect to the
Board, but also with regards to the executive
leadership of the Company.”
Dear Shareholder
I am pleased to present the Nomination Committee’s
2023 report.
The year brought into focus the issue of succession; not only
with respect to the Board, but also with regards to the executive
leadership of the Company. I am pleased therefore that the
process of recruiting an Independent Non-Executive Director
to chair the Audit Committee which was overseen by the
Committee resulted in the appointment of Joanna Pearson.
Her past experience as an auditor and, in particular, of
companies in the natural resources sector, makes her
ideally-placed for the role.
Later in this report, we discuss the change in executive
leadership and the Committee’s considerations in appointing
Eduardo Landin as our new CEO. We welcome Eduardo to the
Board and thank Ignacio for agreeing to serve, as a Non-
Executive Director, until the end of the year after having
ensured a smooth transition.
Finally, at the end of the year, Jorge Born, who has served as a
Non-Executive Director since 2006, became a nominee director
of Pelham Investment Corporation under the terms of the
Relationship Agreement. While the Directors and management
have valued, and will continue to value, Jorge’s objective and
independent approach to Board discussions, his status as a
director nominated by a significant shareholder means that
under the UK Corporate Governance Code, he now serves as
a non-independent Non-Executive Director.
Eduardo Hochschild
Committee Chair
Eduardo Hochschild
Committee Chair
2023 Meeting attendance
Members
Independent
Maximum
possible
attendance
Actual
attendance
Eduardo Hochschild,
Committee Chair
Jorge Born,
Non-Executive Director
Jill Gardiner,
Non-Executive Director
Tracey Kerr,
Non-Executive Director
Joanna Pearson,
Non-Executive Director2
Michael Rawlinson,
Non-Executive Director
Mike Sylvestre,
Non-Executive Director
Former Members
Ignacio Bustamante,
Non-Executive Director3
Nicolas Hochschild,
Non-Executive Director4
Eileen Kamerick,
Non-Executive Director4
No
No1
Yes
Yes
Yes
Yes
Yes
No
No
Yes
1
2
3
4
As a Non-Executive Director nominated by the Significant Shareholder, Jorge Born
is not considered to be independent.
Joanna Pearson joined the Committee on appointment to the Board on 1 October 2023.
Ignacio Bustamante was a member of the Committee between 26 August 2023,
when his role changed from CEO to Non-Executive Director, and 31 December
2023 when he stepped down from the Board.
Nicolas Hochschild and Eileen Kamerick stepped down from the Committee on
9 June 2023 having stepped down from the Board.
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Key roles and responsibilities
– identify and nominate candidates for Board approval;
– make recommendations to the Board on composition
and balance;
– oversee the succession planning of Board and senior
management positions; and
– review the Directors’ external interests with regards to actual,
perceived or potential conflicts of interest.
Membership and meetings
The members of the Committee are listed in the table opposite
which also details the changes to the Committee composition during
the year. At all times, a majority of the members of the Committee
were independent.
The Company Secretary acts as Secretary to the Committee.
Activity during the year
The Committee met five times during the year and a summary
of the matters considered is provided below. In addition, the
Committee passed a number of written resolutions in relation
to the consideration of conflicts of interest arising (a) from any
proposed external directorships or (b) prior to appointment to
the Board (see section headed “Conflicts of Interest” below).
Reporting and monitoring
– The approval of the report of the Committee’s activities for
inclusion in the 2022 Annual Report
– The recommended adoption of 2030 objectives with respect
to Board gender diversity, independence and Director tenure
as part of the Company’s 2030 ESG ambitions
Board/Committee composition
– The search and recruitment for an Independent Non-
Executive Director to act as Chair of the Audit Committee,
which resulted in the appointment of Joanna Pearson
– The appointment of Ignacio Bustamante as a Non-Executive
Director nominated by the Company’s Significant Shareholder
and the subsequent appointment of Jorge Born as his successor
– The recommended appointments to the Board Committees
as a result of changes in the composition of the Board during
the year
Executive leadership changes
– The recommended appointments of Eduardo Landin as CEO
and Rodrigo Nunes as COO.
Following the resignation of Ignacio Bustamante, the
Nomination Committee considered the approved management
succession plan in light of the prevailing key priorities, primarily
the continued focus on securing the approval of the Inmaculada
MEIA and minimising disruption to the business by avoiding a
prolonged or uncertain transition. In addition, the Committee
considered the challenges associated with the recruitment of
an external candidate given the limited pool of suitably qualified
senior executives with experience of operating in Hochschild’s
countries of operation. In conclusion, it was agreed that
Eduardo Landin’s long-standing operating experience in Latin
America and Rodrigo’s project-development skills made them
the best candidates for the CEO and COO roles respectively.
Board skills matrix
Eduardo Hochschild
Jorge Born
Jill Gardiner
Tracey Kerr
Eduardo Landin
Joanna Pearson
Michael Rawlinson
Mike Sylvestre
4
x
5
x
x
x
x
6
x
x
x
x
7
x
x
x
x
x
2
x
x
x
1
x
x
x
3
x
x
x
x
x
x
x
8
9 10
11
x
x
x
x
x
x
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.
Succession planning
Board succession plan
– To support the search process which resulted in the
appointment of Joanna Pearson, the Committee conducted
its annual review of the Board skills matrix. This document
maps the extent to which key strategic skills and other
desirable attributes are represented around the Board table,
thereby identifying any present gaps and those that could
arise following anticipated changes to the composition of the
Board (see Board skills table above). For further details on the
succession of the Chair, please refer to page 110.
Executive succession and development plan (the HOC Talent
Review Plan)
– Considered the HOC Talent Review Plan which, in addition to
setting out the developmental needs for senior executives, also
identifies successors to “Critical Positions” and their personal
development strategies. In reviewing this Plan, the Committee
also seeks to improve the diversity on the pipeline of talent
coming through to executive management level.
Conflicts of interest
Considered any existing or potential conflicts of interest:
(a) prior to the acceptance of external directorships by the
following Board members:
(i) Jill Gardiner’s appointment to the Board of Compass
Minerals International
(ii) Nicolas Hochschild’s appointment to the Board of Aclara
Resources Inc.
(iii) Ignacio Bustamante’s appointment to the Board of a
private base metal mining company
(b) prior to the recommended appointment of Joanna Pearson
to the Board
Appointments to the Board
The Company’s approach
In seeking candidates for appointment to the Board, regard is
given to relevant experience and the skills required to complete
the composition of a balanced Board (with reference to the
Board skills matrix) and taking into account the challenges
and opportunities facing the Company. Other factors are also
considered such as the opportunity to increase diversity and
the time commitment for the role. With respect to the latter,
the Company does not take a prescribed approach with
reference to the number of other Board positions but rather
an assessment on a case-by-case basis of the capacity to
assume the responsibilities required of the role in question.
Recruitment process
The recruitment process for Joanna Pearson commenced in
June 2023 supported by search firm London Search Associates.
The firm provided a long-list of potential candidates with
experience of financial reporting and audit. A short-list was
drawn up by a sub-committee of the Nomination Committee,
the members of which carried out interviews in August 2023
prior to recommending Joanna’s appointment to the Board.
Other than with respect to previous Non-Executive Director
searches, neither the Company nor any individual Director
has any connection with London Search Associates.
Diversity
Policy on Board appointments
The Board is committed to the overriding principle that every
member and potential appointee must be able to demonstrate
the skills and knowledge to be able to make a valued
contribution to the Board. It is also acknowledged that diversity
brings new perspectives which can drive superior business
performance and promote innovation.
The Directors have therefore adopted a multifaceted approach
to Board (and, by extension, Committee) recruitment which:
– primarily considers a candidate’s merits; and
– seeks opportunities to ensure the ongoing diversity of
the Board whether of gender, culture, race, professional
background, nationality or otherwise and which reflects
the Company’s specific circumstances, primarily that it is
headquartered in Peru with operating assets located solely
in South America.
Compliance with LR 9.8.6R(9) (Diversity Disclosures)
The following tables are included in compliance with
the FCA Listing Rules requirements on Board/Senior
management diversity.
The information used to complete the tables below was
requested of each Director by the Company Secretary who
provided the categories and sub-categories of ethnicity referred
to in the FCA Listing Rules (based on those used by the UK
Office for National Statistics).
Each Director was provided the opportunity to appear in the
following tables as “not specified/preferred not to say”.
Statement of Compliance
Target
Compliance
Explanation (where non-compliant)
While the Company has made
significant progress in a relatively
short of period of time in
improving the gender diversity
of the Board, the proportion of
women on the Board as at 31
December 2023 is just short of
the target, at 38%.
While the Company is not
currently compliant with this
target, the Board succession plan
envisages the appointment of
Tracey Kerr as Senior Independent
Director to succeed Michael
Rawlinson.
It is noted that two of the Board
Committees are chaired by
women.
At least 40% of the
board are women
No
No
Yes
At least one of the
senior board
positions (Chair,
CEO, Senior
Independent
Director or CFO) is
held by a woman
At least one
member of the
board is from a
minority ethnic
background
There have been no changes to the above information since
31 December 2023 up until the date of approval of this report.
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DIRECTORS’ REMUNER ATION REPORT
Gender diversity
Men
Women
Not specified/
prefer not to say
* Subject to rounding
** The CFO is not a Board member
Ethnic background
White British or other White
(including minority-white
groups)
Mixed/Multiple Ethnic
Groups
Asian/Asian British
Black/African/Caribbean/
Black British
Other ethnic group,
including Arab
Not specified/
prefer not to say
* Subject to rounding.
** The CFO is not a Board member.
Number
of Board
members
Percentage
of the
Board*
Number of senior positions
on the Board (CEO, CFO, SID
and Chair)**
Number in executive
management
Percentage of executive
management
5
3
–
63%
37%
–
4
0
–
6
0
–
100%
0
–
Number
of Board
members
Percentage
of the
Board*
Number of senior positions
on the Board (CEO, CFO, SID
and Chair)**
Number in executive
management
Percentage of executive
management
Michael Rawlinson
Remuneration Committee Chair
7
0
0
0
1
0
88%
0
0
0
12%
0
2
0
0
0
2
0
0
0
1
0
5
0
0
0
17%
0
83%
0
“
2023 saw the Remuneration
Committee take several factors into
consideration in its decision making.
It has sought to reflect the impact of
the delayed MEIA, the impressive
progress at Mara Rosa and the
unprecedented levels of safety and
environmental performance.”
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 71 for further details of the diversity and inclusion initiatives and the progress made by the Company over the
course of 2023.
Dear Shareholder
On behalf of the Board, I am pleased to present the Directors’
Remuneration Report for the year ending 31 December 2023
which is split into three sections: this Annual Statement, the
Directors’ Remuneration Policy and the Annual Report on
Remuneration.
2022 Annual Bonus
Firstly, I would like to provide shareholders with a brief update
on the Remuneration Committee’s decision with regards to the
2022 annual bonus. As reported in my letter last year, given the
significant uncertainty of securing approval of the Inmaculada
MEIA, the Remuneration Committee took the decision in April
2023 to defer 2022 annual bonus outcomes until it was clear
whether its release in whole or in part would be appropriate.
Following its approval in August 2023, the Committee took into
account a number of factors including the significance of the
MEIA for the Group, the improved financial health of the
Company and, the significant efforts of the various teams in
securing approval. Accordingly, it was considered appropriate
that the 2022 bonus be released in full.
Pay and performance in 2023
2023 Performance
General
2023 was very much a year of two parts, with management’s
focus initially on securing the approval of the Inmaculada MEIA
which, as mentioned above, was ultimately achieved in August
2023, thereby effectively extending our ability to operate our
flagship mine for another 20 years.
Up until August 2023, management maintained its focus on cash
conservation, which affected the Company’s ability to pursue
mine development and the brownfield exploration programme,
thereby impacting production (and hence, revenues) and our
brownfield-led growth strategy. This all changed in the second
half of the year, after the MEIA was approved, when the
Company benefited from a much stronger performance, with
production at the top end of the range of the year’s revised
guidance, and costs, overall, in line with expectations. Looking
at the year’s performance overall, the key operational objectives
set at the beginning of the year were only partially achieved.
Strategic growth
A notable highlight of the year was, undoubtedly, the impressive
progress made on the construction of the Mara Rosa mine
which was completed on budget and on schedule with first gold
pour having recently taken place. The Company is confident
that commercial production will commence during this first half
of 2024. Management also made good strides with the
permitting of the Royropata deposit which will see future
production restarting from the Pallancata mine.
Responsibility
Safety underpins everything we do at Hochschild and it is a
matter of great pride that our key safety indices demonstrate
the Company’s strongest performance on this front in recent
history. This is all the more commendable given the higher
safety-risk profile of construction works, which continued at
Mara Rosa throughout the year. The Group also had a strong
year of environmental performance as highlighted by our
full-year ECO Score.
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We continued to look at wider employee pay matters by
reviewing the alignment of elements of pay across the
organisation with our strategic objectives. Our community
relations initiatives, while subject to budgetary constraints in
light of the delay with the Inmaculada MEIA, remained targeted
on supporting education, connectivity, health and nutrition, and
promoting socio-economic development.
You can read further about these initiatives in our Sustainability
Report from page 52.
Assessing performance
The Remuneration Committee reflected on what was a
challenging year, balancing on one side, the wide-ranging
negative impact of the delayed MEIA on the business. This was
set against the strategic importance of the progress made in
permitting for future production at Pallancata, the hugely
impressive progress at Mara Rosa and the unprecedented levels
of safety and environmental performance. It was concluded that
as the operational objectives set at the beginning of the year in
relation to production, EBITDA and costs were only partially met,
overall the final bonus outcome for 2023 was just over 74% of
maximum. Further details of the performance outcomes are
set out in the Annual Report on Remuneration.
LTIP vesting
The 2021 LTIP awards have reached the end of their
performance period (being the 2021, 2022 and 2023 financial
years) and are due to vest on 27 May 2024. The 2021 awards
were subject to three performance measures based on the
Company’s relative TSR performance against a tailored peer
group (50%), the additions of measured and indicated resources
(25%), and a consistency metric measured against average
bonus scorecard outcomes (25%). The 2021 LTIP awards will vest
as to 40.3% of maximum and further details of the performance
outcomes are also set out in the Annual Report on Remuneration.
Renewal of Directors’ Remuneration Policy at 2024 AGM
We will be renewing our three-yearly Directors’ Remuneration
Policy at our 2024 AGM. Following extensive consultation with
our top shareholders, and proxy agencies, we are proposing to
largely roll forward our current Directors’ Remuneration Policy
and the only material changes that we are proposing to make
are to:
– increase our post-employment shareholding requirement so
that it will apply at the full guideline level – currently 250% of
base salary – for two years from cessation of employment (at
present this requirement tapers after one year to 50% of the
guideline level); and
– replace the consistency metric on LTIP awards (which
determined 25% of the vesting of the overall award) from 2024
onwards with objectives aligned with the Group’s strategies
relating to ESG and workforce diversity and inclusion. For
further information on the Remuneration Committee’s
consideration of alternative performance conditions, such
as emissions-related targets, please refer to page 141 of the
Annual Report on Remuneration.
No other material changes are proposed to the compensation
package available to our Executive Directors or in the overall
architecture of the incentive plans which we operate and which
we believe continue to be appropriate.
Board changes
(i) Ignacio Bustamante stepping down as CEO
We announced in May 2023 that our Chief Executive Officer,
Ignacio Bustamante would be stepping down to relocate to
London and assume a new role at another company. The
remuneration-related arrangements for Ignacio leaving
Hochschild are set out in the Annual Report on Remuneration,
and the Committee is satisfied that these are fully in line with
our Directors’ Remuneration Policy whereby:
– he continued to receive fixed pay reflecting contractual
entitlements until he stepped down as CEO on 26 August
2023; and
– he is not eligible to receive a bonus for 2023 and all his
in-flight LTIPs lapsed on stepping down as CEO.
To assist in a smooth CEO transition, Ignacio agreed to
continue to serve on the Board as a Non-Executive Director
(representing our largest shareholder, Pelham Investment
Corporation) until the end of the financial year. He received a
standard base fee for his role as Non-Executive Director during
that period, consistent with our Directors’ Remuneration Policy.
(ii) Eduardo Landin’s appointment as CEO
Eduardo Landin succeeded Ignacio Bustamante as CEO on
26 August 2023 and joined the Board as an Executive Director
on that date. His remuneration arrangements on promotion to
the Board were determined by the Remuneration Committee
according to the Directors’ Remuneration Policy and market
conditions for the role. His starting salary as CEO was
US$550,000 (compared to Ignacio’s salary of US$700,000).
Eduardo is eligible for the same opportunity for annual bonus
and LTIP as his predecessor (being 180% of base salary and
200% of base salary respectively) but each will be pro-rated
for 2023 to reflect his time in role. In light of his performance
since appointment, the Remuneration Committee has agreed
an increase in Eduardo Landin’s salary to US$600,000. Further
details can be found later in the report.
Format of the report and matters to be approved at our
2024 AGM
At the 2024 AGM, shareholders will be asked to approve three
resolutions related to Directors’ remuneration matters. These
resolutions are:
– To approve the Directors’ Remuneration Report
– To approve the updated Directors’ Remuneration Policy
– To renew the Deferred Bonus Plan
The vote to approve the Directors’ Remuneration Report is the
normal annual advisory vote on such matters. If approved by
our shareholders, the Directors’ Remuneration Policy will apply
for a maximum of three years from the 2024 AGM and will
replace the Directors’ Remuneration Policy previously approved
at the 2021 AGM. The Deferred Bonus Plan is our existing plan
for the deferral of annual bonus into awards over Company
shares. It was first established in 2014 and, as is normal, the
authority to operate this plan must be renewed after 10 years.
As in past years, I would like to assure all our shareholders that
the Committee welcomes all input on remuneration matters,
and if you have any comments or questions on any element of
the Directors’ Remuneration Report, please do not hesitate to
contact me at info@hocplc.com.
Michael Rawlinson
Chair of the Remuneration Committee
This report has been prepared according to the requirements of the Companies Act 2006 (“the Act”), Regulation 11 and Schedule 8
of the Large and Medium-Sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013, the Companies
(Miscellaneous Reporting) Regulations 2018, the Companies (Directors’ Remuneration Policy and Directors’ Remuneration Report)
Regulations 2019 and other relevant requirements of the FCA Listing Rules. In addition, the Board has applied the principles of good
corporate governance set out in the UK Corporate Governance Code, and has considered the guidelines issued by its leading
shareholders and bodies such as ISS (Institutional Shareholder Services), the Investment Association, and Glass Lewis.
Directors’ Remuneration Policy (unaudited)
This section sets out our new Remuneration Policy (the 2024 Policy), which will be presented to shareholders for approval at, and
take effect from, the 2024 AGM. The principal objectives of the Remuneration Policy are to:
– attract, retain, and motivate the Group’s executives and senior management;
– provide management incentives that align with and support the Group’s business strategy; and
– align management incentives with the creation of shareholder value.
The Group seeks to achieve this alignment over both the short and long term through the use of an annual performance-related
bonus, which rewards the achievement of a balanced mix of financial, operational and other relevant performance measures, and the
use of a Long-Term Incentive Plan (LTIP) which is linked to longer-term critical measures of financial and non-financial performance.
The Committee takes into consideration the remuneration arrangements for the wider employee population in making its decisions
on remuneration for senior executives. Remuneration decisions are also driven by external considerations, in particular relating to
the global demand for talent in the mining sector.
The Committee is satisfied the principles of provision 40 of the UK Corporate Governance Code relating to the design of
remuneration policies and practices have been applied:
Clarity: we ensure pay for performance and our policy is designed to be logical and transparent
Simplicity: Executive Director remuneration comprises a minimum of components, based on a regular package including fixed pay,
and short- and long-term variable pay
Risk: a significant proportion of the Executive Director remuneration package is delivered in long-term or deferred pay which
ensures the longer-term impact of decisions is reflected in pay. Furthermore, the combination of in-post and post-employment
shareholding requirements, as well as capturing several categories of performance in the variable pay elements, helps to ensure
appropriate risk management by senior executives
Predictability: variable pay is subject to the achievement of specific and transparent performance targets, and the Committee has
the ability to apply its discretion to ensure variable pay outcomes reflect underlying corporate health
Proportionality: the Executive Director pay mix is similar to that at comparable international mining peers, and the Committee has
the ability to apply its discretion to ensure overall pay outcomes are proportionate to the Company’s long-term performance
Alignment to culture: variable pay captures several categories of performance, including non-financial objectives such as those
relating to safety and environmental performance, helping to ensure pay reflects multiple perspectives on performance, and not
just financial outcomes
Summary of Policy changes
The table below sets out the key changes between the 2021 Policy and the 2024 Policy, to be approved by shareholders at the
2024 AGM:
Policy element
LTIP
Post-employment shareholding
requirements
Description of change
The Consistency Performance Condition, which acknowledges the consistent performance of annual operational and
ESG objectives has been replaced by specific objectives aligned with the Group’s strategies on ESG, and workforce
diversity and inclusion
The current requirement tapers for the second year post-employment to half of the level required for the first year
The new requirement will increase the post-employment shareholding requirement to apply in full for all of two-year
period following termination of employment, at the lower of the actual shareholding at time of leaving and the in-post
shareholding requirement (250% of salary)
The increased requirement will apply to new LTIP awards granted to Executive Directors from the introduction of the
new Policy
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Policy Table
The table below provides a summary of each element of the Remuneration Policy for Executive Directors.
Element: Base salary and Compensation for Time Services (CTS)
Objective and link to strategy: To support recruitment and retention
Operation
Opportunity
Performance
metrics
Salary is reviewed annually, usually in March, or following a
significant change in responsibilities.
To avoid setting expectations, there is no prescribed maximum
salary.
None
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 CTS and profit share, both of which are
provided for by Peruvian law
None
In respect of existing Executive Directors, it is anticipated that
salary increases will generally be in line with the wider employee
population. In exceptional circumstances (including, but not
limited to, a material increase in job size or complexity, the
reversal of a previous salary reduction, or if an Executive
Director has not received an increase for a number of years), the
Committee has discretion to make appropriate adjustments to
salary levels.
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.
If an Executive Director is not subject to Peruvian law (such as
CTS), the Committee may make payments in consideration of
pension as applicable in the Director’s country of residence and
in line with other company employees in that country.
Element: Benefits
Objective and link to strategy: Helps recruit and retain high-calibre Executive Directors
Operation
Opportunity
Performance
metrics
Executive Directors receive certain allowances which may
include medical insurance, the use of a car and driver, and
personal security.
The value of the other benefits varies by role and individual
circumstances; eligibility and cost are reviewed periodically.
None
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).
Element: Annual bonus
Objective and link to strategy: To achieve alignment with the Group’s annual objectives and commitment to operating responsibly
Operation
Opportunity
Performance metrics
Performance measures, targets and weightings are set at the
start of the year. At the end of the year, the Committee
determines the extent to which targets have been achieved,
taking into account individual performance.
The maximum
annual bonus
opportunity is
180% of salary.
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.
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.
Performance is determined by the Committee by reference to a
scorecard made up of Group growth, profitability and
operational excellence measures as well as measures on
corporate social responsibility. The corporate social
responsibility measures are typically weighted no higher than
30% of maximum.
The Committee may adjust year-on-year the weightings for
individual measures, to ensure alignment with the business
priorities for the year. Performance targets are generally
calibrated with reference to the Company’s budget for the year.
Each objective in the scorecard has a “threshold”, “target” and
“maximum” performance target, achievement of which
translates into a score for each objective.
The Committee uses its judgement to determine the overall
scorecard outcome based on the achievement of the targets
and the Committee’s broad assessment of Company and
individual performance. A review of the quality of earnings is
conducted by the Committee to determine whether any
adjustments should be made to the reported profit for the
purpose of bonus outcomes. This ensures that bonus outcomes
are not impacted by unbudgeted non-recurring or one-off
items, or circumstances outside of management’s control such
as material changes in commodity prices that could distort the
overall quality of earnings.
Malus provisions apply, i.e. the Committee has the discretion to
reduce bonus payments and/or deferred bonus awards on the
occurrence of an adverse event that is attributable (directly or
indirectly) to an act or failure to act by the individual. Such
events include those related to health and safety, the
environment or community relations. Other trigger events
include misconduct; or material error, material misstatement,
material failure of risk management, action or omission resulting
in serious reputational damage, or any material breach of an
individual’s employment contract.
To the extent permitted by applicable law, the Committee also
has the discretion to claw back deferred bonus awards which
have already vested, if it considers appropriate to do so, in
certain circumstances. Such circumstances include misconduct
or material error, material misstatement, material failure of risk
management and action or omission resulting in serious
reputational damage.
Details of the measures, weightings and targets applicable for
the financial year under review are provided in the Annual
Report on Remuneration, unless they are considered to be
commercially sensitive.
Element: Long-Term Incentive Plan (LTIP)
Objective and link to strategy: To directly incentivise sustained shareholder value creation through long-term operational
performance and to support the recruitment of senior positions and longer-term retention
Operation
Opportunity
Performance metrics
Awards are made annually, in the form of a conditional right to a
cash payment, with vesting subject to the attainment of specific
performance conditions and continued employment.
Awards have a performance and vesting period of at least three
years. Vested awards are invested in Company shares and
normally required to be held for a further two years. Dividends, if
any, will accrue to shares during the holding period.
Maximum annual
award level is
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.
Due to legal difficulties arising from its enforcement in Peru, the
Committee is unable to operate clawback.
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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. An extended
post-employment shareholding requirement will apply to equity-based awards granted after the effective date of the 2024
Remuneration Policy, requiring Executive Directors on the termination of their employment to hold the lower of (i) their shareholding
at the date of termination and (ii) shares equivalent to their in-post shareholding requirement for a two-year period post-employment.
Shares from awards made prior to the 2024 AGM will be subject to the post-employment shareholding requirement applicable at the
time which those awards were made.
Notes to the Policy Table
Committee discretions
The Committee will operate the annual bonus plan, the Deferred Bonus Plan and LTIP according to their respective rules and
the above policy table. The Committee retains discretion, consistent with market practice, in a number of respects, in relation
to the operation and administration of these plans.
These discretions include, but are not limited to, the following:
– selection of participants;
– the timing and size of awards (within the overall limits of this policy);
– the determination of performance measures and targets and resultant vesting;
– various discretions required when dealing with a change of control (e.g. the timing of testing performance conditions) or
restructuring of the Group;
– determination of a good/bad leaver based on the rules of each plan and the appropriate treatment chosen; and
Remuneration Policy for other employees
The Committee takes into consideration the remuneration arrangements for the wider employee population in making its
decisions on remuneration for senior executives. The Company’s approach to annual salary reviews is consistent across the Group,
with consideration given to the scope of the role, level of experience, responsibility, individual performance and pay levels in
comparable companies.
In general, the Remuneration Policy and principles which apply to other senior executives are broadly consistent with those set out
in this report for the Executive Directors. Generally, remuneration is linked to Company and individual performance in a way that is
ultimately aimed at reinforcing the delivery of shareholder value.
Senior employees above a specific grade are eligible to participate in an annual bonus scheme with a similar design to that for the
Executive Directors. Opportunities and specific performance conditions vary by organisational level with business area-specific
metrics incorporated where appropriate.
All employees based in Peru participate in the statutory profit share scheme whereby an amount equal to 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.
Pay scenario chart
The chart below provides an estimate of the potential future reward opportunities for the CEO, and the potential split between
the different elements of remuneration under four different performance scenarios: “minimum”, “on-target”, “maximum” and
“maximum +50%”.
Potential reward opportunities are based on the proposed Remuneration Policy, applied to the CEO’s base salary to be paid for
2024 of $600,000 (see page 140 for more details).
– adjustments in certain circumstances, such as rights issues, corporate restructuring events and special dividends.
Performance scenario – CEO
Payments from existing awards
Executive Directors are eligible to receive payment from any award made prior to the approval and implementation of the
Remuneration Policy detailed in this report (such as awards made under a previous policy, or awards made prior to appointment
to the Board). Details of any such payments will be set out in the Annual Report on Remuneration as they arise.
Performance measurement selection and approach to target-setting
The measures used under the annual bonus are selected annually to reflect the Group’s main strategic objectives for the year
and reflect both financial and non-financial priorities.
Performance targets are set to be stretching and achievable, taking into account the Company’s strategic priorities and the
economic environment in which the Company operates. Targets are set taking into account a range of reference points including
the Group’s strategic and operating plan.
The Committee considers a combination of relative TSR and internal KPIs to be the most appropriate measures of long-term
performance for the Company and together with the annual bonus measures, provide a balance between absolute and relative
performance, between short-term and long-term performance measures, and between external and internal measures of
performance. TSR, in particular, aligns with the Company’s focus on shareholder value creation and rewards management for
performance relative to sector peers, and is transparent, visible and motivational to executives.
For both annual bonus and LTIP, performance conditions will generally remain unchanged once set. However, the Committee
has discretion to vary the performance condition for in-flight awards in certain circumstances to ensure they continue to be fair,
reasonable and fulfil the commercial purposes of the original condition. For example, in the event of corporate activity amongst the
TSR comparator group during a performance period, the Committee may make adjustments to the comparator group (for example,
excluding that company, replacing that company with the acquiring company, including a substitute for that company, or tracking
the future performance of that company by reference to the median of the remaining comparators). Other examples of special
circumstances include but are not limited to rights issues, corporate restructuring, and special dividends.
Maximum with
share price growth
Maximum
On-target
Minimum
22%
22%
43%
100%
$657k
37%
37%
41%
41%
$3,032k
$3,032k
37%
20%
$1,532k
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
Fixed Pay
Single-year variable
Multi-year variable
The “minimum” scenario shows base salary and benefits (that is, fixed remuneration), and associated CTS. These are the only
elements of the CEO’s remuneration package which are not at risk.
The “on-target” scenario reflects fixed remuneration, plus statutory profit share, a target payout of 50% of the maximum annual
bonus and threshold vesting of 25% of the maximum award under the LTIP, and associated CTS.
The “maximum” scenario reflects fixed remuneration, plus full payout of all incentives, and associated CTS.
The “maximum +50%” scenario reflects the requirement for a scenario where 50% share price appreciation is included. As the LTIP
is not denominated in shares until after the end of the performance period, this scenario is the same as the “maximum” scenario.
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DIRECTORS’ REMUNER ATION REPORT
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Approach to remuneration on recruitment or promotion
The Committee’s policy is to set the remuneration package for a new Executive Director in accordance with the approved
Remuneration Policy at the time of the appointment. The overarching aim is to ensure that the Company pays no more than
is necessary to appoint individuals of an appropriate calibre.
In the cases of appointing a new Executive Director, the Committee may make use of any of the existing components of
remuneration as set out in the Policy Table. In determining the appropriate remuneration for a new Executive Director, the
Committee will take into consideration all relevant factors (including the nature of remuneration and where the candidate was
recruited from) to ensure that arrangements are in the best interests of Hochschild and its shareholders. Where an individual is
appointed on an initial base salary that is below market, any shortfall may be managed with phased increases over a period of time,
subject to the individual’s development in the role. This may result in salary increases that are above those received by the wider
employee population during this period.
In addition to the components of remuneration as set out in the Policy Table, the Committee may also make an award in respect
of a new appointment to “buy-out” incentive arrangements forfeited on leaving a previous employer on a like-for-like basis, having
regard to the fair value of the instruments, as determined by the Committee. In doing so, the Committee will consider relevant
factors including any performance conditions attached to these awards and the likelihood of those conditions being met and the
vesting dates of the forfeited awards. The Committee aims to use the current remuneration structure in making recruitment awards,
but in some cases it may be required to use the flexibility afforded by Listing Rule 9.4.2R, if appropriate, in relation to such buy-out
awards. For the avoidance of doubt, buy-out awards are not subject to a formal cap. Any awards to a newly recruited Executive
Director which are not buy-outs will be subject to the limits for the annual bonus plan and LTIP as stated in the general policy.
In cases of appointing a new Executive Director by way of internal promotion, the Committee will determine remuneration in line
with the Policy for external appointees as detailed above. Where an individual has contractual commitments made prior to his or
her promotion to the Board, the Company will continue to honour these arrangements. Incentive opportunities for below-Board
employees are typically no higher than for Executive Directors, but measures may vary to provide better line-of-sight.
For external and internal appointments, the Committee may agree that the Company will meet certain relocation expenses in the
year of appointment and for a further two financial years, as it considers appropriate.
Service contracts
In accordance with the 2018 UK Corporate Governance Code, notice periods for an Executive Director shall not exceed a maximum
of 12 months. Required treatment on termination of an employee under Peruvian law is summarised below, in relation to the service
contract of the CEO.
Executive Director
Eduardo Landin
Date of service contract
3 October 2011
Executive Director service contracts, including arrangements for early termination, are carefully considered by the Committee.
Eduardo Landin was appointed CEO and a Director of the Company with effect from 26 August 2023 and is employed under a
contract of employment with Compañia Minera Ares S.A.C. (Ares) dated 3 October 2011. 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 and company practice, the Committee has discretion to
award senior executives up to an additional 12 months’ base salary on termination (other than for the prescribed reasons outlined
above). The prevailing circumstances and shareholder expectations will be taken into consideration at the time of termination.
Non-Executive Directors
The Group’s Non-Executive Directors serve under Letters of Appointment as detailed in the table below. In accordance with their
terms, the Non-Executive Directors serve for an initial period of three years which is automatically extended for further three-year
terms. Notwithstanding this, all Directors are subject to annual re-election by the Company in general meeting in line with the UK
Corporate Governance Code, and the appointments of Non-Executive Directors may be terminated by the Board or the Director
giving not less than three months’ notice. Details of the terms of appointment of the Company’s Non-Executive Directors are shown
in the table below. The appointment and reappointment and the remuneration of Non-Executive Directors are matters reserved for
the full Board.
Non-Executive Director
Eduardo Hochschild
Jorge Born Jr.
Jill Gardiner
Michael Rawlinson
Tracey Kerr
Mike Sylvestre
Joanna Pearson
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
18 December 2015
4 December 2021
22 February 2022
20 September 2023
1 January 2025
16 October 2024
1 August 2026
1 January 2025
10 December 2024
27 May 2025
1 October 2026
Note: Copies of the Directors’ letters of appointment and service agreements are available for inspection at the Company’s registered office.
The Non-Executive Directors are not eligible to participate in the Company’s performance-related incentive plans and do not
receive any pension contributions. As part of his change of role from Executive to Non-Executive Chairman on 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:
Performance
metrics
None
Objective
Details
Opportunity
To attract and retain
Non-Executive Directors of
the highest calibre with broad
commercial and other
experience relevant to the
Company.
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.
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/or as Senior
Independent Director and can also be paid for
memberships of Committees.
Fee levels are reviewed by reference to
FTSE-listed companies and other precious
metal companies of similar size and complexity.
Time commitment, level of involvement required
and responsibility are taken into account when
reviewing fee levels.
The Company repays any reasonable expenses
that a Non-Executive Director incurs in carrying
out their duties, including travel, hospitality-
related and other benefits and related tax
liabilities, if appropriate.
In exceptional circumstances, if there is a
temporary yet material increase in the time
commitments for Non-Executive Directors, the
Company may pay extra fees on a pro rata
basis to recognise the additional workload.
In recruiting a new Non-Executive Director, the Committee will use the Policy as set out in the table above.
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The Board recognises that Executive Directors may be invited to serve as directors of other companies, which can bring benefits to the
Group. Executive Directors are entitled to accept appointments outside the Company providing that the Chair’s permission is sought
and granted. The Policy is that fees may be retained by the Director, reflecting the personal risk assumed in such appointments.
Details of external appointments and the associated fees received are included in the Annual Report on Remuneration.
Consideration of employee conditions elsewhere in the Company
The Committee does not currently consult with employees specifically on the effectiveness and appropriateness of the executive
Remuneration Policy and framework. However, the Company seeks to promote and maintain good relationships with employee
representative bodies as part of its employee engagement strategy and consults on matters affecting employees and business
performance as required in each case by law and regulation in the jurisdictions in which the Company operates. Although the
Committee does not consult directly with employees on the Directors’ Remuneration Policy, the Committee takes into consideration
the remuneration arrangements for the wider employee population in making its decisions on remuneration for senior executives.
Consideration of shareholder views
When determining remuneration, the Committee takes into account views of shareholders and best practice guidelines issued by
institutional shareholder bodies. The Committee will continue to monitor trends and developments in corporate governance and
market practice to ensure the structure of the executive remuneration remains appropriate.
The Committee is always open to feedback from shareholders on Remuneration Policy and arrangements, and commits to
undergoing shareholder consultation in advance of any significant changes to Remuneration Policy. Further details on the votes
received in respect of remuneration resolutions presented at last year’s AGM and any remuneration related matters discussed with
shareholders during the year are provided in the Annual Report on Remuneration.
DIRECTORS’ REMUNER ATION REPORT
CONTINUED
Leaver and change-of-control provisions
Payments to a departing Executive Director will be determined by the local employment law, the terms of the Executive Director’s
service contract, and the rules of any relevant variable incentive plan. For a summary of the payments required to be made to a
departing Executive Director under Peruvian law, please see the summary in the “Service Contracts” section, above.
When determining termination payments in the event of early termination, the Committee will take into account a variety of
factors including length of service, personal and Group performance, the Director’s obligation to mitigate their loss, statutory
compensation to which a Director may be entitled and other payments which may be payable under a settlement agreement.
As part of a settlement agreement, the Company may reimburse reasonable legal costs incurred in connection with a termination
of employment and/or agree to make a contribution towards outplacement services, if the Committee considers it appropriate.
The table below summarises how the awards under the annual bonus and LTIP are typically treated in specific circumstances.
When considering the appropriate treatment, the Committee reviews all potential incentive outcomes to ensure they are fair
to both shareholders and participants.
Reason for leaving
Treatment of awards
Timing of vesting
Annual bonus
Good leaver: Retirement, ill health, disability,
death or any other reasons the Committee
may determine in its absolute discretion
Cash bonuses will only be paid to the extent that Group and personal objectives set
at the beginning of the year have been achieved. Any resulting bonus would
typically be pro-rated for time served during the year.
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
Good leaver: Retirement, ill health, disability,
redundancy, injury or any other reasons the
Committee may determine in its absolute
discretion
Any outstanding awards will be pro-rated for time and performance. The
Committee has a standard ability to vary time pro-rating.
Death
Any outstanding awards will be pro-rated for time and performance, unless the
Committee determines otherwise.
Change-of-control and company/business
sale
Any outstanding awards will be pro-rated for time and performance. The
Committee has a standard ability to vary time pro-rating. On a
change-of-control, Hochschild awards may alternatively be exchanged for new
equivalent awards in the acquirer, where appropriate.
Any other reason
Awards lapse.
Deferred Bonus Plan (DBP)
Good leaver: Death, ill health, disability,
redundancy, injury, retirement with
agreement of the Director, sale of employer of
transfer of employment, or any other reasons
the Committee may determine in its absolute
discretion
Change-of-control and company/business
sale
Any outstanding awards would be retained by the good leaver.
Any outstanding awards would typically accelerate in full subject to time pro
rating. On a change-of-control, Hochschild awards may alternatively be
exchanged for new equivalent awards in the acquirer, where appropriate.
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
Not applicable
Normal vesting
date, although the
Committee has
discretion to
accelerate
On date of event
Any other reason
Awards lapse.
Not applicable
The Remuneration Committee has discretion to determine the most appropriate treatment of vested LTIP awards that are subject
to a holding period, based on the individual circumstances at the time.
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Annual Report 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 2023, and how the Remuneration Committee intends to implement the updated Directors’
Remuneration Policy in 2024. Any information contained in this section of the report that is subject to audit has been marked as such.
Remuneration Committee membership
The Remuneration Committee was chaired during the year under review by Michael Rawlinson, and its other members were Jill
Gardiner, Tracey Kerr and Joanna Pearson (from 1 October 2023). 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.
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 2023 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 2023 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 2023 were £79,120.75, excluding expenses and VAT, and were charged on the basis
of FIT’s standard terms of business for advice provided.
Members of senior management attend meetings at the invitation of the Committee. During the year, such members included the
Chair, the CEO and the Vice President of Human Resources. No Director or senior executive is present when his or her own
remuneration arrangements are considered by the Committee. The Company Secretary acts as Secretary to the Committee.
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 2022 Annual Report on Remuneration at our 2023 AGM:
The Committee’s terms of reference
The duties of the Remuneration Committee are to determine and agree with the Board the broad policy for the remuneration of the
Executive Directors, the other members of senior management and the Company Secretary, as well as their specific remuneration
packages including pension rights and, where applicable, any compensation payments. In determining such policy, the Remuneration
Committee shall take into account all factors which it deems necessary to ensure that members of the senior executive management
of the Group are provided with appropriate incentives to encourage strong performance, and are rewarded in a fair and responsible
manner for their individual contributions to the success of the Group.
The Remuneration Committee met six times during the year, of which five were scheduled meetings. Attendance at the scheduled
meetings is detailed below:
2023 Meeting attendance
Members
Michael Rawlinson, Non-Executive Director (Chair)
Jill Gardiner, Non-Executive Director
Tracey Kerr, Non-Executive Director
Joanna Pearson, Non-Executive Director
The Committee undertook the following items of business:
2022 Remuneration and reporting
Independent
Yes
Yes
Yes
Yes
Maximum
possible
attendance
Actual
attendance
5
5
5
1
5
5
5
1
– Reviewed and approved incentive outcomes for 2022 (2022 annual bonus and vesting of 2020 LTIP awards);
– Considered and approved full deferral of the 2022 bonus payable to the CEO and partial deferral to other selected employees in
light of uncertainty regarding the renewal of the MEIA and the subsequent release of those amounts following the MEIA renewal
being approved in August 2023;
– Considered and approved the 2022 Directors’ Remuneration Report;
2023 Remuneration
– Reviewed Ignacio Bustamante’s total remuneration, including salary for 2023 (which remained unchanged from the level set
in 2016);
– Reviewed and approved the remuneration treatments connected with Ignacio Bustamante stepping down as our CEO;
– Reviewed and approved the total remuneration for Eduardo Landin on his appointment as CEO;
– Considered and approved 2023 objectives for each CEO;
– Approved the opportunity/award level and performance targets for 2023 annual bonus and LTIP awards;
Policy and keeping informed
– Considered feedback from shareholders regarding the 2022 Directors’ Remuneration Report;
– Engaged with major shareholders and the leading proxy advisory services regarding renewal of the Directors’ Remuneration
Policy at our 2024 AGM;
– Reviewed potential ESG-related key performance indicators for possible inclusion in the LTIP;
– Regularly considered market trends in executive remuneration and key themes for 2023 and 2024; and
– Received updates on workforce remuneration across the Group.
For (including discretionary)
Against
Total votes cast (excluding withheld votes)
Votes withheld
2021 Remuneration
Policy
2022 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
320,257,876
13,287,776
333,545,652
36,814,653
% of votes cast
96.02%
3.98%
Note: Votes withheld are not included in the final proxy figures as they are not recognised as votes in law.
The Committee is committed to listening to and engaging with the views of our shareholders and takes an interest in voting
outcomes. The Committee will continue to be transparent in our remuneration decision-making and to engage with our
shareholders on remuneration matters. In Autumn 2023 we engaged with our major shareholders and with leading proxy agencies
regarding our plans to renew our Directors’ Remuneration Policy at the 2024 AGM.
During the year, the Committee received and considered a report summarising the base salaries, benefits and incentives received
by each category of Group staff and summarising the bonus potential and performance metrics used in each of the annual bonus
schemes in operation across the Group. In addition, the Committee ensures that it remains informed regarding mandatory profit
sharing for Peru-based employees.
The Company undertakes varied forms of engagement with employees. In 2023, this included a Strategic Alignment workshop led
by the newly appointed CEO, Eduardo Landin, with the senior managers across the operations in Peru, Argentina and Brazil. The
year also saw the continuation of the roundtable sessions hosted by Tracey Kerr as the Non-Executive Director designated for
workforce engagement (and a member of the Remuneration Committee). In addition, there are frequent and periodic meetings held
by mine management with mine-site employees as well as regular engagement with workers’ appointed representatives regarding
many aspects of the business. These processes provide an opportunity for feedback on Executive Directors’ pay to be given and
explanations to be shared, although most of the engagement process is focused on wider employee welfare; a report on any
material feedback regarding remuneration is received by the Remuneration Committee.
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Single total figure of remuneration for Executive Directors (audited)
The table below sets out a single figure for the total remuneration received by Ignacio Bustamante, until he moved to a Non-
Executive role in August, and Eduardo Landin, our new Chief Executive Officer, for the year ended 31 December 2023 and (where
relevant) the prior year:
Salary and fees for the year ended 31 December 2023
Executive Director
Eduardo Landin1
Ignacio Bustamante1
August –
December
2023
(US$000)
2022
(US$000)
January
– August
2023
(US$000)
2022
(US$000)
Executive Director
Eduardo Landin
Ignacio Bustamante
Base salary from
1 March 2023
or date of appointment
(US$000)
550
700
Base salary from
1 March 2022
(US$000)
n/a
700
% change
n/a
–
Base salary2
Taxable benefits3
Total fixed
Single-year variable4
Multi-year variable5
Profit share6
Total variable
Compensation for Time Service (CTS)7
Tax refunds8
Total remuneration
All figures are rounded to the nearest $000
190
7
197
253
240
23
516
36
2
751
–
–
–
–
–
–
–
–
–
–
409
29
438
–
–
43
43
34
4
702
29
731
1,075
0
69
1,144
104
7
519
1,986
Notes for 2023 values (unless otherwise stated):
1
Eduardo Landin succeeded Ignacio Bustamante as Chief Executive Officer on 26 August 2023. Ignacio became a Non-Executive Director from that date and his remuneration for
that role is reported separately in the table for Non-Executive Directors, below.
2 Figures disclosed include, where appropriate, certain statutory payments accounted for internally within base salary (“Statutory Supplements”) including additional pay for Labour
Day (Eduardo Landin 2023: $Nil, Ignacio Bustamante 2023: $Nil, 2022: $1,900).
3 Taxable benefits include: company car (Ignacio Bustamante: $22k; Eduardo Landin: $Nil) and medical insurance (Ignacio Bustamante: $7k; Eduardo Landin: $7k).
4 Outcomes for performance during the year under the Annual Bonus Plan. See following sections for further details.
5 2023 Multi-year variable value relates to the partial vesting of the 2021 LTIP awards based on performance to 31 December 2023. See following sections for further details.
6 All-employee profit share mandated by Peruvian law. Amount received by Ignacio Bustamante in 2023 was pro-rated in light of his resignation as CEO on 26 August 2023.
7 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 2023 CTS comprises: CTS on base salary (Ignacio Bustamante: $34k; Eduardo Landin: $16k), on LTIP (Ignacio Bustamante: $NIL; Eduardo Landin: $10k) and on bonus (Ignacio
Bustamante: $Nil; Eduardo Landin: $11k) (difference due to rounding). 2022 CTS comprises: CTS on base salary (Ignacio Bustamante: $58k) and on bonus (Ignacio Bustamante: $46k).
8 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 2023 and the prior year received
by each Non-Executive Director serving during the year:
Eduardo Hochschild1
Jorge Born Jr
Jill Gardiner
Tracey Kerr2
Michael Rawlinson
Mike Sylvestre3
Joanna Pearson4
Former Directors
Ignacio Bustamante5
Nicolas Hochschild6
Eileen Kamerick7
Base fee
(US$000)
Additional fees
(US$000)
Taxable benefits
(US$000)
Total
(US$000)
2023
4002
2022
400
87
87
87
87
87
15
30
38
39
87
87
87
87
48
n/a
n/a
34
87
2023
2022
0
0
22
30
47
10
3
0
0
13
0
0
10
20
45
3
n/a
n/a
0
27
2023
665
2022
601
0
0
0
0
0
0
0
0
0
0
0
0
0
0
n/a
n/a
0
0
2023
1,058
87
109
117
134
97
18
30
38
52
2022
1,001
87
97
107
132
51
n/a
n/a
34
114
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 Amounts actually paid to Tracey Kerr and Eduardo Hochschild in 2023 were adjusted to correct overpayments in 2022 due to payroll processing errors as disclosed in last year’s
Remuneration Report. The table therefore reflects the intended amounts paid in respect of 2023.
3 Mike Sylvestre was appointed to the Board on 26 May 2022.
4 Joanna Pearson was appointed to the Board on 1 October 2023.
5 Ignacio Bustamante became a Non-Executive Director on 26 August 2023 when he stepped down as Chief Executive Officer and stepped down from the Board on 31 December 2023.
6 Nicolas Hochschild was appointed to the Board on 26 May 2022 and stepped down from the Board on 9 June 2023.
7 Eileen Kamerick retired from the Board on 9 June 2023.
Base salary above excludes CTS. All salaries are denominated in US dollars.
Non-Executive Directors
The Non-Executive Directors’ fees have been set at a level to reflect the amount of time and level of involvement required in order
to carry out their duties as members of the Board and its Committees. The annual rates of fees payable to the Non-Executive
Directors of the Company in 2023 and 2022 are set out in the table below. All Non-Executive Directors receive a base fee, and
additional fees are paid for acting as Chair or member of one of the Board Committees (excluding the Nomination Committee) and
as Senior Independent Director. No changes were made to the base fees and the Committee Chair, Committee member and Senior
Independent Director fees in 2023.
Non-Executive Chairman’s fee
Non-Executive Directors’ base fee
Additional fees
Senior Independent Director
Chair of the Audit, Remuneration and Sustainability Committees
Committee membership fee (Audit; Remuneration; Sustainability)
Fee level from
1 March 2023
(Stated currency p.a.)
Previous fee level
(Stated currency p.a.)
US$400,000
US$400,000
£70,000
£70,000
£14,000
£14,000
£5,000
£14,000
£14,000
£5,000
% change
–
–
–
–
–
Incentive outcomes for the year ended 31 December 2023 (audited)
Annual bonus in respect of 2023 performance
Objectives for the 2023 bonus were set by the Committee at the beginning of the year and assessment of performance during the
year was undertaken at the March 2024 Committee meeting.
Details of the bonus paid to the CEO (Eduardo Landin) for 2023, 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
Adjusted Production (Oz Ag Eq)1
Adjusted EBITDA2
AISC from operations with growth3
Strategy
Strategic advancement
Brownfield exploration Inferred resources (subject to permits
available) (Oz Ag Eq)
Responsibility
Accident frequency rate (LTIFR)
Accident Severity Index
Social key milestones
ECO Score4
2023 Targets
2023 Assessment
Target
weighting
Threshold
Target
Maximum
2023 result
Final bonus
score/
(Maximum)
15%
15%
15%
15%
10%
10%
5%
5%
10%
24.6m
25.2m
25.9m
25.09m 6.85% (15%)
US$180m
US$195m
US$210m
US$187.7m 6.03% (15%)
US$17.6/oz
US$17.2/oz
US$16.8/oz
US$17.1/oz
9.67% (15%)
Remco Assessment
Full Vesting
15% (15%)
Remco Assessment
Partial Vesting
7% (10%)
2.50
300
–
–
1.60
150
0.99
37
10% (10%)
5% (5%)
Remco Assessment
Partial Vesting
4.5% (5%)
4.75
–
5.25
5.76
10% (10%)
Bonus payable (as a percentage of maximum opportunity)
74.05%
Notes:
1 Production was adjusted to neutralise the impact on production caused by external factors i.e. the national protests in Q1 2023 following the impeachment of President Castillo.
2 Adjusted EBITDA is used for the annual bonus and is determined based on EBITDA adjusted primarily to neutralise price effects, unbudgeted expenditure or external factors. Such
adjustments in 2023 included (a) commodity prices which were higher than those used for the preparation of the 2023 budget (c.US$99 million), (b) lost revenue resulting from, and
costs associated with, the above-mentioned national protests, (c) higher-than-budgeted provision for bonuses, and (d) unbudgeted social-related expenses.
3 All-in sustaining cost (AISC) is adjusted to ensure comparability with the objective set at the beginning of the year and therefore disregards (a) additional costs incurred as a result
of the above-mentioned national protests, (b) higher-than-budgeted provision for bonuses, and (c) the additional costs due to higher-than-forecast commodity prices.
4 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).
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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 2023 bonus objectives
In arriving at the above bonus scorecard, the Committee paid particular attention to the following aspects of the Company’s performance:
– Operational performance
As mentioned in the Annual Statement, operational performance in 2023 was largely influenced by the process of securing
approval of the Inmaculada MEIA; with the period up until its approval in August 2023 seeing management prioritising cash
conservation with the associated impacts on production, mine development and brownfield exploration. After the MEIA approval,
the Company benefited from a robust performance in the second half of the year which concluded with annual production at the
top end of the range of the year’s revised guidance, and costs, overall, in line with expectations.
Overall, the full year operational performance was judged against the objectives set at the beginning of the year in relation to
production, EBITDA and costs (adjusted, where appropriate, for external factors as described in the footnotes to the table above)
which were only partially satisfied.
– Safety
The Company’s robust safety performance in 2023 which, in addition to seeing the Company achieve its long-term objective of
Zero Fatalities, saw record lows in our accident frequency and severity rates. This was considered to be all the more commendable
in light of the higher safety risk profile associated with the ongoing construction of Mara Rosa and the increased use of manual
mining methods at Pallancata during the latter stages of that operation.
– ECO Score
The overall ECO Score for the year is 5.76 against a stretch target of 5.25. This internally designed award-winning measure of
environmental management reflects the following:
• our lowest water consumption since 2015 (1.63 l/person/day)
• domestic waste generation of 0.93 kg/person/day
Further details on the ECO Score can be found on the Company’s website at www.hochschildmining.com
– Strategic advancement
In evaluating performance against this objective, the Committee considered a range of actions taken to position the Company for
long-term and sustainable growth to benefit our shareholders, including:
Mara Rosa mine (Brazil)
• the achievement of several notable milestones resulting in the timely completion of construction of the mine and within budget. The
Company was pleased to announce the first gold pour in February 2023
Pallancata MEIA (Peru)
• approval of the preliminary environmental evaluation approved by the Peruvian Governmental Authority
• the considerable progress made with the feasibility studies in line with the project plan
– Brownfield exploration
The work done during the year against the objectives set for each of the Company’s sites. Given the suspension of the brownfield
exploration programme due to the Inmaculada MEIA delay, the Committee assessed this objective to have only partially vested.
– Social key milestones
The Remuneration Committee’s consideration of performance against this objective took into account the actions taken by
management to implement a new community relations strategy overseen by a reorganised Community Relations department
and external advisers to identify key opportunities. In addition, the occurrence of minor levels of local disruption, which did not
impact production, was a contributory factor in determining that this objective was only partially met.
– Experience of key stakeholders
The Committee also took into account the experience of the Group’s key stakeholders during the year, noting::
– the share price performance during the year with the positive headwinds caused by the approval of the Inmaculada MEIA:
– the Group has not made use of any government-sponsored schemes or grants in any of the countries in which it operates;
– the Company’s ongoing programme of initiatives to assist local communities and other local stakeholders; and
– the continued reporting initiatives undertaken in 2023 reinforcing the Group’s commitment to transparency.
For further details see the Sustainability Report on page 52.
In conclusion, the Committee agreed that Eduardo Landin be awarded a bonus of 74.05% of the maximum opportunity in respect of
his performance as CEO (which amount was pro-rated for time in that role). In addition, Eduardo has separately received a bonus in
respect of his performance in his previous role as Chief Operating Officer.
2021 LTIP vesting
On 27 May 2021, Ignacio Bustamante and Eduardo Landin were each granted an award under the LTIP with a face value of
US$1,400,000 and US$595,000 respectively. The 2021 LTIP award held by Ignacio Bustamante lapsed when he stepped down as CEO
(along with his other LTIP awards).
Vesting of the 2021 LTIP was dependent on (i) three-year relative TSR performance against a tailored peer group (50% of the total
award) and (ii) internal KPIs as summarised in the table below (50% 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
50%
Internal KPIs:
Measured & Indicated Resources (M&IR) per share3 – absolute
growth over three-year performance period 2021-2023
25%
Consistency Performance Condition
25%
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
180 Ag Eq Moz growth in M&IR – full vesting
160 Ag Eq Moz growth in M&IR – 75% vesting
120 Ag Eq Moz growth in M&IR – 25% vesting
Straight-line vesting between these points
MI&R growth measured as Total M&I Resource
Additions over three years
Average bonus scorecard outcome 2021-2023 with
threshold vesting of 25% requiring an average
achievement of 60% scorecard attainment with
straight-line vesting up to full vesting requiring an
average of 100% scorecard attainment. There is an
overriding underpin whereby if the annual scorecard
achievement is less than 60% in any one year, then
the vesting of this LTIP component will be nil.
Notes:
1 TSR is calculated in common currency.
2 The 2021 LTIP peer group, at the time of measurement of the award, comprised: Agnico-Eagle Mines, Alamos Gold, AngloGold Ashanti, Barrick Gold, Centamin, Cia des Minas
Buenaventura, Coeur Mining, Eldorado Gold, Endeavour Silver, First Majestic Silver, Fortuna Silver Mines, Fresnillo, Gold Fields, Hecla Mining, IAMGOLD, Kinross Gold, Newmont
Mining, OceanaGold Corp, Pan American Silver and SSR Mining.
3 M&IR additions only in the three-year period.
The Remuneration Committee considered the outcome of the performance conditions between 1 January 2021 and 31 December
2023, noting in particular:
(i) that the Company’s TSR over the performance period ranked below median for the tailored peer group thereby resulting in nil
vesting as to 50% of the award
(ii) that the Company’s M&IR additions totalled 237.4 Ag Eq Moz resulting in 100% vesting as to 25% of the award
(iii) that the average bonus scorecard was 79.3% of maximum resulting in 61.2% vesting as to 25% of the award
Accordingly, the 2021 LTIP awards will vest as to 40.3%.
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Scheme interests awarded in 2023 (audited)
On 20 April 2023, Ignacio Bustamante and Eduardo Landin were each granted a cash-settled award under the LTIP with a face
value of $1,400,000 and $595,000, respectively. The 2023 LTIP award held by Ignacio Bustamante lapsed when he stepped down as
CEO (along with his other outstanding LTIP awards).
Vesting is dependent on performance conditions measured from 1 January 2023 to 31 December 2025, 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 normally vest on the third anniversary of the date of grant, subject to continued employment, and are subject to potential
malus in line with the Company’s Malus policy (see page 127 for further details). Due to legal difficulties arising from its enforcement
in Peru, the Remuneration Committee is unable to operate clawback.
After payment of tax, all of the vested cash award will be required to be invested in Hochschild shares which will be held for a further
period of two years. Dividends, if any, will accrue to shares during the holding period. Further details, including vesting schedules, are
provided in the table below:
Executive Director
Grant date
Ignacio Bustamante1
20.04.23
Eduardo Landin
20.04.23
Performance period
1 January 2023 to
31 December 2025
1 January 2023 to
31 December 2025
Face value of
award at grant
Award value for
threshold performance
$1,400,000
$595,000
$350,000
$148,750
Notes:
1
Ignacio Bustamante’s 2023 LTIP award lapsed when he stepped down as CEO on 26 August 2023 (as well as his other outstanding LTIP awards).
Performance measure
Weighting
Performance targets
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 2023-2025
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 three years
Average bonus scorecard outcome 2023-2025 with threshold vesting of 25% requiring an
average achievement of 60% scorecard attainment with straight-line vesting up to full
vesting requiring an average of 100% scorecard attainment. There is an overriding
underpin whereby if the annual scorecard achievement is less than 60% in any one year,
then the vesting of this LTIP component will be nil.
Notes:
1 TSR is calculated on the basis of common currency.
2 The 2023 LTIP peer group, at the date of grant, comprised: Agnico-Eagle Mines, Alamos Gold, AngloGold Ashanti, Barrick Gold Corp, Centamin, Cia des Minas Buenaventura, Coeur
Mining, Eldorado Gold Corp, Endeavour Silver Corp, Equinox Gold, First Majestic Silver Corp, Fortuna Silver Mines, Fresnillo, Gold Fields, Hecla Mining, IAMGOLD, Kinross Gold,
Kirkland Lake, Newmont Mining, OceanaGold Corp, Pan American Silver, Polymetal International and SSR Mining.
3 M&IR additions only in the three-year period.
Exit payments made in the year (audited)
Ignacio Bustamante stepped down as Chief Executive Officer on 26 August 2023. Mr Bustamante continued to serve on the Board
as a Non-Executive Director representing Pelham Investment Corporation, Hochschild’s largest shareholder controlled by Eduardo
Hochschild until 31 December 2023 to assist with a smooth CEO handover. Mr Bustamante continued to receive his normal fixed
pay as CEO until 26 August 2023 in accordance with his contractual entitlements. He will not be eligible to receive a bonus in respect
of 2023 and his outstanding LTIP awards have lapsed in full.
Payments to past Directors (audited)
No payments were made to past Directors in the year.
Implementation of Remuneration Policy for 2024
A summary of how the Remuneration Policy will be applied for the year ended 31 December 2024 is provided below.
Salary
The Committee reviewed the CEO’s salary and has determined that it will be increased by 9% to $600,000 with effect from 1 March 2024.
The review, which took place as originally intended following Eduardo’s appointment as CEO, reflected the Board’s overall positive
assessment of his first six months in the role. In addition, the Board felt it appropriate to acknowledge the positive outcomes of key
stakeholder interactions including the Capital Markets Event in November 2023, and the leadership demonstrated in the
achievement of key strategic milestones such as the incorporation of Mara Rosa as the first Brazilian asset in Hochschild’s portfolio.
140
The Remuneration Committee reserves the right to further adjust the salary upwards above inflation should it be considered
appropriate to do so.
Annual bonus
The maximum annual bonus opportunity for the CEO for the 2024 financial year will be 180% of salary. The bonus payment will be
subject to performance against broadly the same measures as those used in 2023. Further disclosure of measures and targets,
where not commercially sensitive, will be provided in next year’s Annual Report on Remuneration.
As in previous years, the Committee will assess performance against the objectives set and calculate an overall bonus score which
will be applied to the maximum bonus opportunity. The bonus will be subject to malus provisions in line with the Remuneration Policy
and, a discretionary override will be applied such that the occurrence of any fatality during the year at the Group’s operations will
result in the reduction, to nil, of the safety-related objectives.
Any bonus earned above 150% of salary will be paid in shares and deferred for two years.
LTIP
The Committee will make awards in 2024 at levels up to 200% of base salary. The awards will be made on the same terms as those
applying to the 2023 awards with the exception that the Consistency performance condition will be replaced with targets aligned
with the Group’s strategies on ESG and workforce diversity and inclusion.
Vested LTIP awards will be invested (on a post-tax basis) in the Company’s shares which are required to be held for a further two years.
The performance conditions are:
– Relative TSR performance vs tailored peer group (50% weighting: same median to upper quintile range as for 2023 awards)
– Measured & Indicated Resources (M&IR) per share (25% weighting: growth over three-year performance period 2024-2026,
reflecting the same absolute growth targets as for 2021, 2022 and 2023 awards)
– ESG Performance Condition (25% weighting: subject to year-on-year improvements over the three-year performance period in at
least 35% of the 14 selected ESG key performance indicators covering communities, environmental management, people and
health & safety)
The Committee had considered the incorporation of objectives related to the Company’s Net Zero by 2050 goal but this was not yet
considered to be the appropriate time given the nature of the actions that would need to occur to see significant reductions in the
Company’s relatively low GHG emissions. These include the renewal of electricity supply contracts to providers who source
electricity from a higher proportion of renewable sources and eventual fleet renewal/upgrades as and when technology permits.
Malus provisions will apply to LTIP awards granted in 2024 in line with the Remuneration Policy.
Non-Executive fees
Fees for the Chair and Non-Executive Directors (i.e. base, additional and Committee membership fees) will be the subject of a 5%
increase with effect from 1 March 2024.
Annual percentage change in Directors’ remuneration
The tables below show the percentage change in Board Directors’ remuneration between 2020 and 2023 compared with the
percentage change in remuneration for all other employees.
2023
Executive Directors
Non-Executive Directors
Average all employees8
Base salary1/
Non-Executive fees1a
Taxable benefits2
Single-year variable3
% change
Eduardo Landin
Ignacio Bustamante4
Eduardo Hochschild
Jorge Born Jr
Ignacio Bustamante4
Jill Gardiner
Nicolas Hochschild
Eileen Kamerick5
Tracey Kerr
Michael Rawlinson
Mike Sylvestre
Joanna Pearson
n/a
-41.7%
-1.8%
0%
n/a
12.4%
11.8%
-54.4%
9.3%
1.5%
90.2%
n/a
6%
n/a
0%
10.6%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
-100%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
-16%
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CONTINUED
2022
Executive Directors
Non-Executive Directors
Average all employees8
2021
Executive Directors
Non-Executive Directors
Average all employees8
2020
Executive Directors
Non-Executive Directors
Average all employees8
Ignacio Bustamante
Eduardo Hochschild
Dr Graham Birch5
Jorge Born Jr
Jill Gardiner
Nicolas Hochschild6
Eileen Kamerick
Tracey Kerr7
Michael Rawlinson
Dionisio Romero Paoletti5
Mike Sylvestre6
Ignacio Bustamante
Eduardo Hochschild
Dr Graham Birch9
Jorge Born Jr
Jill Gardiner
Eileen Kamerick
Tracey Kerr
Michael Rawlinson
Dionisio Romero Paoletti
Ignacio Bustamante
Eduardo Hochschild
Dr Graham Birch
Jorge Born Jr
Jill Gardiner
Eileen Kamerick
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%
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 136).
1a Note that Non-Executive Director fees other than those paid to Eduardo Hochschild are denominated in British Pounds but are reported in US Dollars at the relevant rate for
reporting purposes. % changes from 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 3 to table on single figure of total remuneration for details of taxable benefits paid to Executive Directors on page 136).
3 Single-year variable comprises (a) bonus (calculated with reference to base salary only, i.e. before CTS and tax rebates) and (b) statutory profit-share.
4 Ignacio Bustamante stepped down as CEO on 26 August 2023 but remained on the Board as a Non-Executive Director until 31 December 2023.
5 Year-on-year % reductions reflect the fact that Dr Graham Birch and Dionisio Romero Paoletti retired from the Board on 26 May 2022 and Eileen Kamerick retired on 9 June 2023.
6 Nicolas Hochschild and Mike Sylvestre were appointed to the Board on 26 May 2022.
7 Year-on-year % increase reflects the fact that Tracey Kerr was appointed to the Board on 10 December 2021.
8 “All employees” comprises full-time salaried employees in Peru. 2023 percentage change is an approximation only, as final data is not available as at the date of the report.
9 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 2022 to the financial year ended 31 December 2023.
Distribution to shareholders (US$000)1
Employee remuneration (US$000)
2023
NIL
2022
10,000
% change
N/A
2023
174,208
2022
172,0492
% change
1.3%
Notes:
1 Comprises all cash dividends paid in respect of each year.
2 2022 value has been restated (see note 10 to the consolidated financial statements for further information).
The Directors are not recommending the payment of a final dividend for the year ended 31 December 2023.
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 2013. 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.
300
250
200
150
100
50
0
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Hochschild Mining PLC
FTSE 250
FTSE 350 Precious Metals and Mining Index
CEO
CEO single figure
of remuneration ($000)
Annual bonus outcome
(% of maximum)
LTI vesting outcome
(% of maximum)
2014
924
2015
1,328
2016
3,474
Ignacio
Bustamante
2018
2017
4,519
4,174
2019
3,665
2020
1,933
2021
1,996
2022
1,986
Ignacio
Bustamante
and
Eduardo
Landin1
2023
IB 519
EL 751
67%
67%
83%
83%
90%
95%
90%
78.5%
85.35%
74.05%
0%
0%
0%
(ELTIP)
90%
(LTIP)
86%
(ELTIP)
100%
(LTIP)
43%
(ELTIP)
100%
(LTIP)
34%
(ELTIP)
0%
(LTIP)
0%
(LTIP)
0%
(LTIP)
0%
(LTIP)
40.3%
(LTIP)
Notes:
1
The 2023 figures represent the single figure of total remuneration for Ignacio Bustamante from 1 January 2023 to 26 August 2023 and Eduardo Landin from 26 August 2023 to
31 December 2023.
142
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CONTINUED
SUPPLEMENTARY INFORMATION
Directors’ interests (audited)
The interests of the Directors and their families in the ordinary shares of the Company as at 31 December 2023 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 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.
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?
0
0
0
0
0
0
250%
250%
01
235%3
No
No
Shares held
Owned outright
or vested at 31
Dec 2022 (or date
of appointment
if later)
Owned outright
or vested at 31
Dec 2023 (or date
of retirement
if earlier)
01
01
1,214,115
1,214,115
196,900,306
196,900,306
0
0
0
0
0
04
0
0
0
0
0
0
0
0
0
0
Eduardo Landin
Ignacio Bustamante2
Eduardo Hochschild
Jorge Born Jr
Jill Gardiner
Tracey Kerr
Michael Rawlinson
Mike Sylvestre
Joanna Pearson
Former Directors
Nicolas Hochschild
Eileen Kamerick
Notes:
1
A review of the Company’s internal records following approval of this report found that the numbers and percentage disclosed in the table for Eduardo Landin should have
reflected a shareholding of 282,700 ordinary shares as at the date of appointment (as announced by the Company on 29 August 2023) and as at 31 December 2023 which
represents 70% of salary (using the data referred to in footnote 3 below).
2 Ignacio Bustamante stepped down as CEO on 26 August 2023 but remained on the Board until 31 December 2023.
3 Using the Company’s closing share price and GBP/USD exchange rate as at 29 December 2023 (being the last trading day of the year) of £1.071 and £1:$1.27 respectively.
4 As at 1 October 2023, being the date on which Joanna Pearson was appointed to the Board.
There have been no changes to Directors’ shareholdings since 31 December 2023.
Directors’ interests in share options, shares and cash awards in Hochschild Long-Term Incentive Plans
Details of Directors’ interests in shares and cash awards under Hochschild’s Long-Term Incentive Plans are set out in the table below.
Eduardo Landin
2021 LTIP
2022 LTIP
2023 LTIP
Date
of grant
Share price
at grant
Exercise price
at grant
Number of
shares
awarded
Max value
Performance
period
27.05.21
23.02.22
20.04.23
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
$595,000
01.01.21 – 31.12.23
$595,000
01.01.22 – 31.12.24
$595,000
01.01.23 – 31.12.25
Vesting
date
27.05.24
23.02.25
20.04.26
As noted above, all LTIP awards previously held by Ignacio Bustamante lapsed when he stepped down as CEO on 26 August 2023.
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 2023 fees received in respect of external directorships by Ignacio Bustamante, being the only Executive
Director in office during 2023 in receipt of such fees.
Name of Executive
Director
Name of company
Ignacio Bustamante
Profuturo AFP
Ignacio Bustamante
Scotiabank Peru SAA
Signed on behalf of the Board.
Michael Rawlinson
Chair of the Remuneration Committee
12 March 2024
Fee received
US$28,000
US$40,000
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 514,458,432
ordinary shares of 1 pence each (“shares”). 582,869 shares were
issued during the year to satisfy the vesting of awards granted
to employees under the Company’s Deferred Bonus Plan.
The Hochschild Mining Employee Share Trust (“the Trust”) is an
employee share trust established to hold shares on trust for the
benefit of employees within the Group.
The Trustee of the Trust has absolute discretion to vote or
abstain from voting in relation to the shares held by it from time
to time and in doing so may take into account the interests of
current and future beneficiaries and other considerations.
Current share repurchase authority
The Company obtained shareholder approval at the AGM held
in June 2023 for the repurchase of up to 51,387,556 shares
which represents 10% of the Company’s issued share capital
(“the 2023 Authority”). Whilst no purchases have been made by
the Company pursuant to the 2023 Authority, it is intended that
shareholder consent will be sought on similar terms at this year’s
AGM when the 2023 Authority expires.
Additional share capital information
This section provides additional information as at 31 December
2023.
(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 30 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.
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CONTINUED
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 (DTRs).
As at 31 December 2023
Eduardo Hochschild1
BlackRock
Majedie Asset Management Limited2
Equinox Partners Investment Management, LLC
Van Eck Associates Corporation
Number of
ordinary
shares/voting
rights
Percentage of
issued share
capital
Nature of
holding
196,900,306
38.27%
Indirect
Below 5%
Below 5%
–
25,384,745
4.93%
Indirect
15,907,641
15,465,722
3.09%
3.01%
Direct
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.
Subsequent to 31 December 2023, the Company was notified by Equinox Partners Investment Management, LLC that it no longer
had an interest in the Company’s shares that is notifiable under the DTRs.
Shareholder agreements
The Relationship Agreement entered into prior to the IPO
between, amongst others, the Major Shareholder (as defined
in the Relationship Agreement) and Eduardo Hochschild
(collectively “the Controlling Shareholders”) and the Company:
– Contains provisions restricting the Controlling Shareholders’
rights to exercise their voting rights to procure an
amendment to the Articles that would be inconsistent with
the Relationship Agreement
– Contains an undertaking by the Controlling Shareholders that
they will, and will procure that their Associates will, abstain
from voting on any resolution to approve a transaction with a
related party (as defined in the FCA Listing Rules) involving the
Controlling Shareholders or their Associates
Significant agreements
A change of control of the Company following a takeover bid
may cause a number of agreements to which the Company,
or any of its trading subsidiaries, is party to take effect, alter
or terminate. Such agreements include commercial trading
contracts, joint venture agreements and financing arrangements.
Further details are given below of those arrangements where the
impact may be considered to be significant in the context of
the Group.
(a) $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 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
146
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.
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.
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.
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CONTINUED
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
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
(1)
(2)
(4)
(5)
(6)
(7)
(8)
(9)
Interest capitalised
Publication of unaudited financial information
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
(10)(a)
Contract of significance in which a Director is interested
(10)(b)
Contract of significance with controlling shareholder
(11)
(12)
(13)
(14)
Provision of services by a controlling shareholder
Shareholder waivers of dividends
Shareholder waivers of future dividends
Agreement with controlling shareholder
Location
Note 16 to the consolidated financial statements
Not applicable
None
None
None
None
None
None
Directors’ Report
Directors’ Report
Directors’ Report
Directors’ Report
Directors’ Report
Directors’ Report
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.
148
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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 2023
and of the Group’s loss for the year then ended;
– the Group financial statements have been properly prepared in
accordance with UK adopted international accounting
standards;
– the Parent Company financial statements been properly
prepared in accordance with UK adopted international
accounting standards as applied in accordance with section
408 of the Companies Act 2006; 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 2023 which comprise:
Group
Parent Company
Consolidated statement of
financial position as at 31
December 2023
Statement of financial position as
at 31 December 2023
Consolidated income statement
for the year then ended
Statement of changes in equity for
the year then ended
Consolidated statement of
comprehensive income for the
year then ended
Statement of cash flows for the
year then ended
Consolidated statement of
changes in equity for the year
then ended
Related notes 1 to 14 to the financial
statements including material
accounting policy information
Consolidated statement of cash
flows for the year then ended
Related notes 1 to 40 to the
consolidated financial
statements, including material
accounting policies
The financial reporting framework that has been applied in their
preparation is applicable law and UK adopted international
accounting standards and as regards to the Parent Company
financial statements, as applied in accordance with section 408
of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor’s responsibilities for the audit of the financial statements
section of our report below.
We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinion.
Independence
We are independent of the Group and Parent Company in
accordance with the ethical requirements that are relevant to
our audit of the financial statements in the UK, including the
Financial Reporting Council’s (FRC) Ethical Standard as applied
to listed public interest entities, and we have fulfilled our other
ethical responsibilities in accordance with these requirements.
The non-audit services prohibited by the FRC’s Ethical Standard
were not provided to the Group or the Parent Company and we
remain independent of the Group and the Parent Company in
conducting the audit.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the
directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate. Our
evaluation of the Directors’ assessment of the Group and Parent
company’s ability to continue to adopt the going concern basis
of accounting included:
– Confirming our understanding of the Directors’ going concern
assessment process and the key factors and assumptions that
were considered in their assessment;
– Auditing the key factors and assumptions adopted in the
assessment of going concern and the cash flow model,
including considering whether management had exercised
any bias in selecting their assumptions, by comparing against
past performance and available market data;
– Checking the reasonableness of all key assumptions in
management’s forecasts, including the forecast gold and
silver price used; the production profiles which form the basis
of the cash flow forecast; and the mitigating factors that exist
and that can be utilised to ensure the liquidity of the Group.
– Obtaining the Director’s going concern assessment, including
cash flow forecast and covenant calculations for the going
concern period which covers 13 months from the audit report
date to 30 April 2025. The Directors have modelled a number
of adverse scenarios in order to incorporate unexpected
changes to the forecast liquidity of the Group. We evaluated
the sufficiency of the sensitivities performed, by assessing
whether the adverse scenarios were appropriately severe
based on historical track record;
– Understanding the operation of management’s model,
checking the clerical accuracy of management’s modelling,
and recalculating management’s forecasts of their
compliance with borrowing covenants throughout the
assessment period under management’s scenarios;
– Verifying the terms, maturity, interest rates, and any
restrictions or covenants of the borrowings held by the Group
at the date of approving the financial statements against the
original contracts;
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 25 reporting components of the Group, we
selected six components covering entities within the UK, Peru,
Argentina, Brazil and Chile, which represent the principal
business units within the Group.
Of the six components selected, we performed an audit of the
complete financial information of four components (“full scope
components”) which were selected based on their size or risk
characteristics. For the remaining two components (“specific
scope components”), we performed audit procedures on
specific accounts within those components that we considered
had the potential for the greatest impact on the financial
statements either because of the size of these accounts or their
risk profile.
The reporting components where we performed audit procedures
accounted for 99% (2022: 97%) of the Group’s Adjusted EBITDA
(on an absolute basis), 100% (2022: 100%) of the Group’s
Revenue and 98% (2022: 98%) of the Group’s Total Assets.
For the current year, the four full scope components contributed
99% (2022: 97%) of the Group’s Adjusted EBITDA (on an absolute
basis), 100% (2022: 100%) of the Group’s Revenue and 92% (2022:
76%) of the Group’s Total Assets. The two specific scope
components contributed 6% (2022: 22%) of the Group’s Total
Assets. The audit scope of these specific scope components will
not have included testing of all significant accounts of the
component but will have contributed to the coverage of some
significant accounts tested for the Group.
The remaining 19 components together represent 1% of the
Group’s Adjusted EBITDA (on an absolute basis) (2022: 3%), 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.
– Obtaining the contract with Cerrado Gold in relation to Project
Marlin to verify the terms, required consideration and
exploration expenses, to ensure they are consistent with the
cash flows recognised in management’s model;
– Checking the consistency of the factors and assumptions
adopted in the going concern assessment with other areas of
our audit, including the Group’s asset impairment tests;
– Challenging the adequacy of the going concern assessment
period until 30 April 2025, considering whether any events or
conditions foreseeable after the period indicated a longer
review period would be appropriate;
– Considering the results of the reverse stress tests in order to
identify what factors would lead to the Group utilising all
liquidity during the going concern period. We assessed the
likelihood of these factors in the context of the outlook for
production and for commodity prices and against historic
market lows, as well as our own industry experience;
– Obtaining bank confirmations covering over 99% of the
Group’s cash and cash equivalents as at 31 December 2023.
We also obtained bank statements to validate the Group’s
cash and cash equivalents as of 31 January 2024 and 29
February 2024; and
– Reviewing the support prepared by management and the
disclosures relating to the viability assessment and considered
whether they accurately represented the process followed by
management and whether the Group complied with the UK
Corporate Governance Code disclosure requirements.
Based on the work we have performed, we have not identified
any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the
Group and Parent company’s ability to continue as a going
concern for a period to 30 April 2025.
In relation to the Group and Parent Company’s reporting on how
they have applied the UK Corporate Governance Code, we have
nothing material to add or draw attention to in relation to the
Directors’ statement in the financial statements about whether
the Directors considered it appropriate to adopt the going
concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with
respect to going concern are described in the relevant sections
of this report. However, because not all future events or
conditions can be predicted, this statement is not a guarantee
as to the Group’s ability to continue as a going concern.
Overview of our audit approach
Audit scope
– We performed an audit of the complete financial
information of four components, and audit procedures on
specific balances for a further two components and for the
remaining 19 components we performed other audit
procedures.
– The components where we performed full or specific audit
procedures accounted for 99% of Adjusted EBITDA, 100% of
Revenue and 98% of Total Assets.
We identified recoverability of the carrying value of the
Group’s mining assets and associates as a key audit
matter that, in our professional judgement, had the
greatest effect on our overall audit strategy, the
allocation of resources in the audit and in directing the
audit team’s efforts.
Key audit
matters
Materiality We tested to an overall Group materiality of US$4.8m.
Final materiality was calculated as US$5.5m based on 2%
of the Group’s Adjusted EBITDA. Given our planning
materiality was lower than the final materiality we
continued to use US$4.8m as our materiality.
150
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CONTINUED
The charts below illustrate the coverage obtained from the work
performed by our audit teams.
Adjusted EBITDA %
Revenue %
Total assets %
Full scope
components 99%
Other procedures 1%
Full scope
components 100%
Full scope
components 92%
Specific scope
components 6%
Other procedures 2%
Changes from the prior year
Our audit scope remains largely consistent with 2022, with the
primary change of Amarillo Mineração do Brasil Ltda from a
specific scope entity to a full scope entity as capital expenditure
and related activity has increased in that component compared
with 2022.
Involvement with component teams
In establishing our overall approach to the Group audit, we
determined the type of work that needed to be undertaken at
each of the components by us, as the primary audit
engagement team, or by component auditors from other EY
global network firms operating under our instruction. Of the four
full scope components, audit procedures were performed on
two of these by component audit teams, and directly by the
primary audit team on the other two. For the two specific scope
components, the work was performed by the primary audit
team. Where the work was performed by component auditors,
we determined the appropriate level of involvement to enable us
to determine that sufficient audit evidence had been obtained
as a basis for our opinion on the Group as a whole.
The Group audit team continued to follow a programme of
planned visits that has been designed to ensure that the Senior
Statutory Auditor visits each of the primary operating locations
where the Group audit scope is focused. During the current
year’s audit cycle, visits were undertaken by the primary audit
team to the component teams in Peru and Argentina and also to
local management in Brazil. These visits involved discussing the
audit approach with the component team and any issues arising
from their work, and meetings with local management. The
primary team interacted regularly with the component teams
where appropriate during various stages of the audit, reviewed
relevant working papers and were responsible for the scope and
direction of the audit process. This, together with the additional
procedures performed at Group level, gave us appropriate
evidence for our opinion on the Group financial statements.
Climate change
Stakeholders are increasingly interested in how climate change will
impact Hochschild Mining PLC. The Group has determined that the
most significant future impacts from climate change on its
strategy and operations will be from potential governmental and
societal responses to climate change risks, changes in weather
patterns and consequential restricted access to capital as a result
of failing to respond to these risks. These are explained on pages
76 to 89 in the Task Force for Climate related Financial Disclosures
(‘TCFD’) report and on page 96 in the principal risks and
uncertainties. All these disclosures form part of the ‘Other
information’, rather than the audited financial statements. Our
procedures on these unaudited disclosures therefore consisted
solely of considering whether they are materially inconsistent with
the financial statements, or our knowledge obtained in the course
of the audit or otherwise appear to be materially misstated, in line
with our responsibilities on ‘Other information’.
In planning and performing our audit we assessed the potential
impacts of climate change on the Group’s business and any
consequential material impact on its financial statements.
As explained in Note 2 to the Consolidated Financial Statements
and the TCFD report on pages 76 to 89 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. We note that, new as of 2023, Hochschild have introduced
a 2030 interim ambition as a part of their overarching ambition to
be net zero by 2050. Specifically, the 2030 interim ambition relates
to reducing greenhouse gas emissions (GHG) scope 1 and 2
emissions by 30%, against the 2021 baseline emissions level, by
2030. We note that the Group are intending to conduct a financial
impact assessment in 2024/2025 to determine the financial
statement impact of these measures. Therefore, until this
assessment has been completed, we are unable to determine the
full future economic impact on its business model and operational
plans and therefore the potential impacts are not fully
incorporated in these financial statements.
Based on our work we have not identified the impact of climate
change on the financial statements to be a key audit matter or to
impact a key audit matter.
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.
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
recorded by management
to be reasonable.
We are satisfied that the
carrying values of the
Inmaculada, San Jose, Mara
Rosa and Volcan do not
require impairment nor
reversal of impairment as at
31 December 2023.
We concluded that the
related disclosures in the
Group financial statements
are appropriate
Risk
Our response to the risk
Recoverability of the carrying value of the
Group’s mining assets
Refer to the Audit Committee Report;
Accounting policies (page 163); and Notes
16,17 and 18 of the Consolidated Financial
Statements (pages 186 to 191)
At 31 December 2023 the carrying values
of the Group’s mining assets were:
– Property, plant and equipment: US$1,018.9m
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 2023.
(2022: US$926.9m);
– We challenged the validity of the indicators identified by management,
– Evaluation and exploration assets: US$67.3m
with a focus on the following key assumptions:
(2022: US$123.5m); and
– Intangible assets: US$30.0m
(2022: US$19.3m)
– Investments in associates: US$25.2m (2022:
US$33.2m)
IFRS requires companies to test cash generating
units (CGUs) for impairment whenever an
indicator exists. An intangible asset with an
indefinite useful life is tested for impairment at
least annually and whenever there is an
indication that the asset might be impaired. For
the Group, CGUs represent individual mines
and advanced exploration projects.
Additionally, IFRS requires testing of CGUs for
impairment reversal at the end of each
reporting period where there is any indicator
that an impairment loss recognised in prior
periods (for an asset other than goodwill) may
no longer exist, or may have decreased.
For the Group, the appropriate CGUs are:
– Operating mines: Pallancata, Inmaculada,
San Jose and Mara Rosa;
– Advanced exploration projects: Volcan,
Azuca, Arcata and Crespo; and
– Investment in associate: Aclara
In August 2023 the Group received approval of
the Modified Environmental Impact
Assessment (‘MEIA’) for the Inmaculada mine
from the Peruvian Authorities, allowing that
mine to be operated for 20 years from the
MEIA issuance date.
The Volcan CGU includes an intangible asset
with an indefinite useful life and therefore is
tested for impairment at least annually.
A number of impairment indicators were
identified across the Group’s CGUs, including
but not limited to:
– challenging macroeconomic conditions in
Argentina, impacting San Jose;
– the receipt of an offer for Crespo, Azuca and
Arcata; and
– a reduction in share price for the Aclara
Investment in associate.
As disclosed in Notes 16 and 17 to the
consolidated financial statements, total
impairment charges of $88.1m were
recognised in the year, consisting of:
– $17.4m in San Jose;
– $46.8m in Crespo;
– $16.7m in Azuca; and
– $7.2m in Aclara.
The risk relating to recoverability of the
carrying value of mining assets has increased
in comparison to the prior year.
– comparing and assessing management’s prices to analysts’ consensus
forecasts for gold and silver as at 31 December 2023.
– obtaining relevant support of management’s position on market
interest rates and other macro-economic factors.
– challenging the economic performance of the CGUs during the year,
discussed with management and reviewed the approved mine plans
and/or budgets.
– for exploration projects, obtaining an understanding of management’s
plans to recover the carrying value in full from successful development
or by sale. We also obtained technical reports from third-parties for E&E
projects.
– obtaining relevant support about expected renewal/extension of mining
permits.
– We obtained the recoverable value model from management for the
Group’s CGUs, E&E assets and Investment in associate. We performed the
following procedures:
– assessed the appropriateness of the methodology applied in preparing
each model by reference to industry and valuation practices;
– undertook an assessment of management’s track record of accuracy in
forecasting to determine the reliability of current forecasts. We further
agreed the main inputs to the approved mine plans, budgets, technical
reports and historic figures.
– involved our valuation specialists to assist us in challenging and
assessing the appropriateness of the discount rate used in the
calculation.
– challenged management on its forecasts for Argentina, by reference to
forecast inflation and currency devaluation, along with ongoing political
uncertainty.
– with respect to the Crespo asset, verified the consideration offered to
the Group to sell the asset, including contingent consideration for a
1.5% Net Smelter Return (NSR) Royalty. We additionally engaged EY
valuations specialists to assist us in critically assessing management’s
contingent consideration calculations and methodology.
– assessed managements held for sale disclosures in relation to Crespo
to ensure these were in line with IFRS 5 Non-current Assets Held for Sale
and Discontinued Operations
– With respect to the Volcan asset, challenged management on the
valuation with regards to potential contra-evidence, corroborating its
position including through discussion with regional hydrological
specialists, EY Chile mining teams and through an assessment of the
revenue royalty received in the year.
– With respect to the recoverable value model for the Azuca CGU,
considered by way of an enterprise valuation under FVLCD, we agreed
the main inputs used to information from third party/independent
sources and involved our valuation specialists to assist us in assessing
the appropriateness of the methodology and EV (Enterprise Valuation) of
comparable entities.
– With respect to Aclara challenged management on the quantum of the
impairment recognised and any potential reversal by reference to
Management’s discounted cashflow model; and
– We reviewed, by reference to the FRC’s guidance, the appropriateness,
sufficiency, and clarity of the impairment-related disclosures, including
around reasonably possible changes in estimates.
The above audit procedures over this risk area, covering 100% of the
amount at risk, were performed by the Group audit team.
152
153
Strategic Report 01—99Governance 100—149Financial Statements 150—226Further Information 227—231Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023 INDEPENDENT AUDITOR’S REPORT
CONTINUED
The accounting for Amarillo Gold acquisition and going concern
was considered to be a Key Audit Matter in 2022 as the
accounting for acquisitions under IFRS can be complex and
required management to form a number of judgements and
estimates around matters including (but not limited to): the
method of accounting to be applied the accounting treatment
of royalties; the fair value of assets and liabilities; and whether
any deferred tax should be provided on any adjustments. This
matter also had a significant effect on the allocation of
resources in the audit. In the current year this is no longer a Key
Audit Matter as the acquisition was fully completed in 2022.
Revenue recognition is a significant risk presumed by ISAs (UK).
It is not included above, as Hochschild’s revenue streams are
largely routine in nature and do not involve significant
judgement or use of significant estimates. Consequently, the
auditing of revenue recognition did not have the greatest effect
on our overall audit strategy, the allocation of resources in the
audit or in directing the efforts of the engagement team.
As part of our audit, we also address the risk of management
override of internal controls, including evaluating whether there
is evidence of bias by the Directors that may represent a risk of
material misstatement due to fraud. We determined that the risk
of management override does not represent a separate key
audit matter, on the basis that it is our assessment that this risk
principally manifests itself through recoverability of the carrying
value of the Group’s mining assets, where there are a number of
significant judgements and estimates involved that are
susceptible to management bias.
Our application of materiality
We apply the concept of materiality in planning and performing
the audit, in evaluating the effect of identified misstatements on
the audit and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually
or in the aggregate, could reasonably be expected to influence
the economic decisions of the users of the financial statements.
Materiality provides a basis for determining the nature and extent
of our audit procedures.
We determined planning materiality for the Group to be US$4.8m
(2022: US$5.1m), the level on which we based our testing Final
materiality was calculated as US$5.5m based on 2% (2022: 2%)
of the Group’s Adjusted EBITDA. Given our planning materiality
was lower than the final materiality we continued to use US$4.8m
as our materiality for our testing. We believe that Adjusted
EBITDA is an earnings-based measure that is significant to users
of the financial statements. This is considered to be a critical
measure for users of the financial statements, given the focus
on this metric by the Group’s shareholders, investors and
external lenders. In addition, the Adjusted EBITDA measure
is used to assess the Group’s compliance with key restrictive
covenants on the Group’s borrowings.
We determined materiality for the Parent Company to be
US$8.8m (2022: US$5.4m), which is 1% (2022: 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 net
finance income/(cost), foreign
exchange loss and income tax
(US$82.1m)
– Add: Depreciation and amortisation
in cost of sales and in administrative
expenses (US$145.2m)
– Add: Exploration expenses other than
personnel and other exploration
related fixed expenses (US$15.9m)
– Deduct: Other non-cash expenses
(US$31.1m)
– US$274.4m Adjusted EBITDA
– Materiality of US$4.8m (2% of
materiality basis).
– During the course of our audit we
reassessed our initial materiality and
we maintained our Planning Materiality
level for the purpose of completing our
audit procedures as the same was
below our final materiality
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% (2022:
75%) of our planning materiality, namely US$3.6m (2022:
US$3.8m). We have set performance materiality at this
percentage due to our understanding of the Group’s control
environment, and that there have been no significant events
that would alter our expectation that there is a low likelihood of
misstatements that would be material individually or in
aggregate to the financial statements.
Audit work at component locations for the purpose of obtaining
audit coverage over significant financial statement accounts is
undertaken based on a percentage of total performance
materiality. The performance materiality set for each
component is based on the relative scale and risk of the
component to the Group as a whole and our assessment of the
risk of misstatement at that component. In the current year, the
range of performance materiality allocated to components was
US$2.0m to US$3.9m (2022: US$2.0m to US$3.9m).
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$240k
(2022: US$260k), 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 149, 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.
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 103 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 97;
– Director’s statement on whether it has a reasonable
expectation that the Group will be able to continue in
operation and meets its liabilities set out on pages 103 and
Note 2(d) of the Consolidated Financial Statements;
– Directors’ statement on fair, balanced and understandable set
out on page 103;
– Board’s confirmation that it has carried out a robust
assessment of the emerging and principal risks set out on
page 118;
– The section of the Annual Report that describes the review of
effectiveness of risk management and internal control
systems set out on page 118; and;
– The section describing the work of the Audit Committee set
out from page 114.
Responsibilities of Directors
As explained more fully in the Directors’ responsibilities
statement set out on page 149, the Directors are responsible for
the preparation of the financial statements and for being
satisfied that they give a true and fair view, and for such internal
control as the Directors determine is necessary to enable the
preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are
responsible for assessing the Group and Parent Company’s
ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern
basis of accounting unless the Directors either intend to
liquidate the Group or the Parent Company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the
financial statements
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to
issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with ISAs (UK) will always
detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken
on the basis of these financial statements.
154
155
Strategic Report 01—99Governance 100—149Financial Statements 150—226Further Information 227—231Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023 – 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 18 years, covering
the years ending 31 December 2006 to 31 December 2023.
– 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
12 March 2024
INDEPENDENT AUDITOR’S REPORT
CONTINUED
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,
Argentina and Brazil). In addition, we concluded that there are
certain significant laws and regulations that may have an
effect on the determination of the amounts and disclosures in
the financial statements, mainly relating to health and safety,
employee matters, bribery and corruption practices,
environmental and certain aspects of company legislation
recognising the regulated nature of the Group’s mining
activities and its legal form.
– We understood how Hochschild Mining PLC is complying with
those frameworks by making enquiries of management,
internal audit, those responsible for legal and compliance
procedures and the Company Secretary. We corroborated our
enquiries through our review of Board minutes, papers
provided to the Audit Committee and correspondence
received from regulatory bodies, and noted there was no
contradictory evidence.
– We assessed the susceptibility of the Group’s financial
statements to material misstatement, including how fraud
might occur, by meeting with management from various parts
of the business, including outside the finance function, to
understand what areas were susceptible to fraud. We also
considered performance targets and their propensity to
influence management to manage the Group’s earnings.
– We considered the programmes and controls that the Group
has established to address risks identified, or that otherwise
prevent, deter and detect fraud; and how senior management
monitors those programmes and controls. Where risk was
considered as higher, we performed audit procedures to
address each identified fraud risk.
– Based on this understanding we designed our audit
procedures to identify non-compliance with such laws and
regulations that could have a material impact on the financial
statements. Our procedures involve: incorporated data
analytics across our audit approach, journal entry testing with
a focus on manual consolidation journals and journals
meeting our defined risk criteria based on our understanding
of the business; enquiries of the legal counsel, Group
management, internal audit and all full and specific scope
management; review of Board and Audit Committee reporting;
evaluating any investigations into matters of non-compliance
with support from our IT, forensics and legal specialists as
necessary; and focused testing as referred to in the key audit
matters section above.
FINANCIAL STATEMENTS
Consolidated income statement
For the year ended 31 December 2023
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
(Loss)/profit 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
(Loss)/profit before income tax
Income tax (expense)/benefit
(Loss)/profit for the year
Attributable to:
Equity shareholders of the Parent
Non-controlling interests
Basic (loss)/earnings per ordinary share for the year
(expressed in US dollars per share)
Diluted (loss)/earnings 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 2023
Year ended 31 December 2023
Exceptional
Before
items
exceptional
(note 11)
items
US$000
US$000
Total
US$000
Year ended 31 December 2022
Exceptional
Before
items
exceptional
(note 11)
items
US$000
US$000
Total
US$000
Notes
5
6
7
8
9
12
12
19
13
13
13
693,716
(508,214)
185,502
(47,192)
(21,297)
(14,862)
30,261
(47,553)
–
–
–
–
–
–
–
693,716
735,643
(508,214)
(527,643)
185,502
208,000
(47,192)
(21,297)
(14,862)
30,261
(54,158)
(56,826)
(14,032)
3,340
(8,960)
(56,513)
(39,302)
–
–
–
–
–
–
–
–
735,643
(527,643)
208,000
(54,158)
(56,826)
(14,032)
3,340
(39,302)
(2,731)
(80,843)
(83,574)
(1,832)
11,363
9,531
82,128
(89,803)
(2,277)
7,473
(18,199)
(15,620)
(7,183)
–
–
–
(7,675)
(9,460)
7,473
(18,199)
(15,620)
53,505
(96,986)
(43,481)
45,190
11,363
56,553
(1,677)
5,211
(21,776)
(2,622)
24,326
(9,923)
(11,600)
–
–
–
5,211
(21,776)
(2,622)
1,440
25,766
14
(44,000)
27,448
(16,552)
(17,581)
(3,353)
(20,934)
9,505
(69,538)
(60,033)
6,745
(1,913)
4,832
8,991
514
9,505
0.02
0.02
(63,997)
(55,006)
(5,541)
(5,027)
(69,538)
(60,033)
(0.12)
(0.10)
(0.12)
(0.10)
4,874
1,871
6,745
0.01
0.01
(1,913)
–
(1,913)
–
–
2,961
1,871
4,832
0.01
0.01
(Loss)/profit for the year
Other comprehensive income that might be reclassified to profit or loss in subsequent periods, net of tax:
Net loss on cash flow hedges
Deferred tax benefit on cash flow hedges
Exchange differences on translating foreign operations
Share of other comprehensive income of an associate
Other comprehensive income that will not be reclassified to profit or loss in subsequent periods, net of tax:
Net loss on equity instruments at fair value through other comprehensive income (OCI)
Other comprehensive income/(loss) for the year, net of tax
Total comprehensive loss for the year
Total comprehensive loss attributable to:
Equity shareholders of the Parent
Non-controlling interests
Notes
39(a)
39(e)
19
20
Year ended 31 December
2022
US$000
2023
US$000
(60,033)
4,832
(19,704)
(16,929)
6,617
17,722
(855)
3,780
(49)
(49)
3,731
(56,302)
4,994
(12,739)
1,283
(23,391)
(152)
(152)
(23,543)
(18,711)
(51,275)
(20,582)
(5,027)
1,871
(56,302)
(18,711)
156
157
Strategic Report 01—99Governance 100—149Financial Statements 150—226Further Information 227—231Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023
FINANCIAL STATEMENTS
CONTINUED
Consolidated statement of financial position
As at 31 December 2023
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
Deferred income tax assets
Current assets
Inventories
Trade and other receivables
Derivative financial assets
Income tax receivable
Other financial assets
Cash and cash equivalents
Assets held for sale
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
Derivative financial liabilities
Borrowings
Provisions
Deferred income tax liabilities
Current liabilities
Trade and other payables
Derivative financial liabilities
Borrowings
Provisions
Income tax payable
Liabilities directly associated with assets held for sale
Total liabilities
Total equity and liabilities
As at
31 December
2023
US$000
As at
31 December
2022
US$000
Notes
16
17
18
19
20
21
22
31
23
22
39(a)
14
24
24
25
1,018,853
67,322
29,983
22,927
460
–
12,438
763
926,913
123,462
19,328
33,242
509
1,015
6,498
4,213
1,152,746
1,115,180
68,261
80,456
846
4,713
2,264
89,126
17,398
263,064
1,415,810
61,440
85,408
2,186
9,226
–
143,844
–
302,104
1,417,284
30
30
9,068
–
9,061
–
(234,837)
(238,800)
834,231
608,462
60,122
668,584
1,711
16,581
234,999
147,372
67,039
467,702
135,839
1,190
112,064
26,741
2,979
711
279,524
747,226
886,980
657,241
65,475
722,716
1,623
–
275,000
123,506
80,045
480,174
144,102
–
43,989
24,177
2,126
–
214,394
694,568
1,415,810
1,417,284
26
39(a)
28
29
31
26
39(aa)
28
29
14
25
Consolidated statement of cash flows
For the year ended 31 December 2023
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 Argentinian bonds
Proceeds from sale of Argentinian bonds
Proceeds from sale of financial assets at fair value though profit and loss
Proceeds from sale of property, plant and equipment
Sale of royalty related to Volcan project
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 generated/(used in) from financing activities
Net decrease 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$10,175,000 (2022: US$31,302,000).
Year ended 31 December
2022
US$000
2023
US$000
Notes
35
217,016
144,271
28
29
17
18
13
13
21
28
28
27
32
32
5,508
(24,839)
(13,325)
(5,599)
2,409
(12,962)
(10,409)
(20,391)
178,761
102,918
(259,730)
(210,372)
(2,523)
(122,988)
(124)
–
–
723
1,148
15,000
(353)
(10,204)
5,248
–
1,089
–
(245,506)
(337,580)
137,413
28,911
(111,980)
(11,557)
(2,338)
(326)
(1,639)
(286)
–
(22,017)
22,769
(6,588)
(43,976)
(241,250)
(10,742)
(1,695)
143,844
386,789
24
89,126
143,844
These financial statements were approved by the Board of Directors on 12 March 2024 and signed on its behalf by:
Eduardo Landin
Chief Executive Officer
12 March 2024
158
159
Strategic Report 01—99Governance 100—149Financial Statements 150—226Further Information 227—231Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023 – (22,017)
(22,017)
– (22,017)
These consolidated financial statements were approved for issue by the Board of Directors on 12 March 2024.
FINANCIAL STATEMENTS
CONTINUED
Consolidated statement of changes in equity
For the year 31 December 2023
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
comprehensive
loss of an
associate
US$000
Dividends
expired
US$000
Cumulative
translation
adjustment
US$000
Unrealised
gain/
(loss) on
hedges
US$000
Share-
based
payment
reserve
US$000
Merger
reserve
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
74
(9)
99
(25,163)
13,476 (210,046)
3,912 (217,657) 248,664
695,554
63,890 759,444
Balance at
1 January 2022
Other
comprehensive
income/(expense)
Profit for the year
Total comprehensive
income/(expense) for
the year
Dividends
Dividends paid to
non-controlling
interests
32
32
–
–
–
–
–
Issuance of deferred
bonus shares
30 303,268
Cancellation of
deferred bonus
shares
30 (303,268)
Cancellation of share
premium account
30
– (438,041)
30 (217,445)
30(c)
30(c)
–
–
9,061
Nominal value
reduction
Share-based
payments
Forfeiture of share
options
Balance at
31 December 2022
Other comprehensive
income/(expense)
Loss for the year
Total comprehensive
income/(expense) for
the year
Cancellation of
dividends expired
Dividends to non-
controlling interests
32
Exercise of
share-based
payments
Accrual of
share-based
payments
Forfeiture of share
options
Balance at
31 December 2023
30(c)
30(c)
30(c)
–
–
–
–
–
7
–
–
9,068
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(78)
(49)
–
–
–
–
–
(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)
–
–
– (303,268)
– 303,268
– 438,041
– 217,445
–
–
–
–
–
(286)
(286)
–
–
–
–
–
–
–
–
–
–
4,286
–
4,286
4,286
–
4,286
(1,886)
(1,886)
1,886
–
1,274
99
(37,902)
1,541 (210,046)
6,312 (238,800) 886,980
657,241
65,475 722,716
(855)
–
–
–
–
17,722
(13,087)
–
–
17,722
(13,087)
(49)
(855)
–
(99)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3,731
–
3,731
–
3,731
– (55,006)
(55,006)
(5,027) (60,033)
3,731 (55,006)
(51,275)
(5,027) (56,302)
(99)
152
53
–
53
–
–
(584)
(584)
577
–
–
2,443
2,443
–
2,443
(1,528)
(1,528)
1,528
–
(326)
(326)
–
–
–
–
2,443
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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 38.27% and it is held through Pelham Investment Corporation
(“Pelham”), a Cayman Islands company.
On 8 November 2006, the Company’s shares were admitted to the Official List of the UKLA (United Kingdom Listing Authority) and
to trading on the London Stock Exchange.
The Group’s principal business is the mining, processing and sale of silver and gold. At 31 December 2023, the Group has one
operating mine (Inmaculada) located in southern Peru and one operating mine (San Jose) located in Argentina. The Group’s
previously operating Pallancata mine went into care and maintenance in November 2023. The Group also has a late-stage
development project in Brazil, Mara Rosa, which is expected to be commissioned in the first half of 2024. The Group also has a
portfolio of projects located across Peru, Argentina, United States, Canada, Brazil, and Chile, at various stages of development.
The Group’s subsidiaries are as follows:
Company
Hochschild Mining (Argentina) Corporation S.A.1
MH Argentina S.A.2
Minera Santa Cruz S.A.1 and 11
Minera Hochschild Chile S.C.M. 3
Andina Minerals Chile SpA (formerly Andina Minerals Chile Ltd.) 3
Southwest Minerals (Yunnan) Inc. 4
Hochschild Mining Holdings Limited5
Hochschild Mining Ares (UK) Limited5
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
Empresa de Transmisión Aymaraes S.A.C. 4
Minera Antay S.A.C. 4 and 10
Compañía Minera Crespo S.A.C. 4
Hochschild Mining (US) Inc. 7
Hochschild Mining Canada Corp8
Principal activity
Holding company
Exploration office
Production of gold and silver
Exploration
Exploration
Exploration
Country of
incorporation
Argentina
Argentina
Argentina
Chile
Chile
China
Holding company
England and Wales
Administrative office
England and Wales
Exploration
Exploration
Exploration
Holding company
Production of gold and silver
Production of gold and silver
Power transmission
Exploration
Exploration
Holding company
Exploration
Holding company
Holding company
Exploration
Mauritius
Mauritius
Mexico
Peru
Peru
Peru
Peru
Peru
Peru
USA
Canada
Canada
Canada
Brazil
Equity interest at
31 December
2023
%
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
100
100
(127)
419
(20,180)
(11,546) (210,046)
6,643 (234,837) 834,231
608,462
60,122 668,584
Hochschild Mining Brazil Holdings Corp. (formerly 1334940 BC)8
Tiernan Gold Corp. 8
Amarillo Mineracao do Brasil Ltda. 9
1 Registered address: Av. Santa Fe 2755, floor 9, Buenos Aires, Argentina.
2 Registered address: Sargento Cabral 124, Comodoro Rivadavia, Provincia de Chubut, Argentina.
3 Registered address: Av. Apoquindo 4775 of 1002, Comuna Las Condes, Santiago de Chile, Chile.
4 Registered address: La Colonia 180, Santiago de Surco, Lima, Peru.
5 Registered address: 17 Cavendish Square, London, W1G0PH, United Kingdom.
6 Registered address: Calle Aguila Real No 122, Colonia Carolco, Monterrey, Nuevo Leon, CP 64996, Mexico.
7 Registered address: 1025 Ridgeview Dr. 300, Reno, Nevada 89519, USA.
8 Registered address: Suite 1700, Park Place, 666 Burrard Street, Vancouver BC, V6C 2X8.
9 Registered address: Fazenda Invernada s/n, Zona Rural, Mara Rosa - Goiás – Brazil, CEP: 76.490-000.
10 The Company was liquidated on 22 February 2023.
11 The Group has a 51% interest in Minera Santa Cruz S.A. (Minera Santa Cruz), while the remaining 49% is held by a non-controlling interest. The significant financial information
in respect of this subsidiary before intercompany eliminations as at and for the years ended 31 December 2023 and 2022 is as follows:
160
161
Strategic Report 01—99Governance 100—149Financial Statements 150—226Further Information 227—231Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023 1 Corporate information continued
– Ore reserves and resources – note 2(h).
– Valuation of financial instruments – note 39.
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
2023
US$000
136,098
100,511
(71,813)
(44,965)
2022
US$000
159,703
99,997
(67,710)
(61,230)
(119,831)
(130,760)
22,182
242,461
(52,829)
1,251
(4,090)
(4,480)
(10,269)
66,034
(48,227)
(11,098)
15,473
243,469
(50,967)
652
(4,364)
7,761
3,811
18,085
(47,197)
18,643
(Loss)/profit attributable to non-controlling interests in the consolidated income statement, non-controlling interest in the
consolidated statement of financial position, and dividends declared to non-controlling interests in the consolidated statement of
changes in equity are solely related to Minera Santa Cruz.
2 Material accounting policies
(a) Basis of preparation
The consolidated financial statements of the Group have been
prepared in accordance with UK adopted International
Accounting Standards.
The basis of preparation and accounting policies used in
preparing the consolidated financial statements for the years
ended 31 December 2023 and 2022 are set out below. The
consolidated financial statements have been prepared on a
historical cost basis except for the revaluation of certain
financial instruments that are measured at fair value at the end
of each reporting period, as explained below. These accounting
policies have been consistently applied, except for the effects of
the adoption of new and amended accounting standard.
The financial statements are presented in US dollars (US$) 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 2022.
Amendments and interpretations apply for the first time in 2023,
but do not have an impact on the consolidated financial
statements of the Group. The Group has not early adopted any
other standard, interpretation or amendment that has been
issued but is not yet effective.
– Definition of Accounting Estimates – Amendments to IAS 8
– Disclosure of Accounting Policies – Amendments to IAS 1
– Deferred Tax related to Assets and Liabilities arising from a
Single Transaction – Amendments to IAS 12
– International Tax Reform—Pillar Two Model Rules –
Amendments to IAS 12. The Group does not foresee any tax
implications from the implementation of this reform
Standards, interpretations and amendments to existing
standards that are not yet effective and have not been
previously adopted by the Group
Certain new standards, amendments and interpretations to
existing standards have been published and are mandatory for
the Group’s accounting periods beginning on or after 1 January
2024 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.
There are numerous uncertainties inherent in estimating ore
reserves and resources. Assumptions that are valid at the time
of estimation may change significantly when new information
becomes available. Changes in the forecast prices of commodities,
exchange rates, production costs or recovery rates may change
the economic status of reserves and resources and may,
ultimately, result in the reserves and resources being updated.
– Recoverable values of mining assets – notes 2(k), 16, 17 and 18.
The values of the Group’s mining assets are sensitive to a range
of characteristics unique to each mine unit. Key sources of
estimation for all assets include uncertainty around ore reserve
estimates and cash flow projections. In performing impairment
reviews, the Group assesses the recoverable amount of its
operating assets principally with reference to fair value less
costs of disposal, assessed using discounted cash flow models.
In performing impairment reviews, the Group assesses the
recoverable amount of its operating assets principally with
reference to fair value less costs of disposal, assessed using
discounted cash flow models. The recoverable values of the
CGUs and advanced exploration projects are determined
using a FVLCD methodology. FVLCD for CGUs was determined
using a combination of level 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 the value-in-situ methodology,
which applies a realisable “enterprise value” to unprocessed
mineral resources per ounce of resources, to estimate the
amount that would be paid by a willing third party in an arm’s
length transaction (notes 17 and 18(2)).
For the CGU’s discounted cash flow model, the Group uses two
approaches, depending on the circumstances: (i) the
traditional approach, which uses a single cash flow projection,
and (ii) the expected cash flow approach, which uses multiple,
probability-weighted cash flow projections. As at 31 December
2023, the impairment reviews for the Group’s operating assets
were performed using a traditional approach.
There is judgement involved in determining the assumptions that
are considered to be reasonable and consistent with those that
would be applied by market participants. Significant estimates
used include future gold and silver prices, future capital
requirements, reserves and resources volumes, production costs
and the application of discount rates which reflect the macro-
economic risk in Peru and Argentina, as applicable. Judgement
is also required in determining the risk factor that will be applied
by market participants to take into account the water
restrictions imposed by the Chilean government over the Volcan
cash-generating unit. Changes in these assumptions will affect
the recoverable amount of the property, plant and equipment,
evaluation and exploration assets, and intangibles.
– Mine closure costs – notes 2(o) and 29(1).
The Group assesses its mine closure cost provision
annually. Significant estimates and assumptions are made
in determining the provision for mine closure cost as there
are numerous factors that will affect the ultimate liability.
These factors include estimates of the extent and costs of
rehabilitation activities, technological changes, regulatory
changes, cost increases, mine life and changes in discount
rates. Those uncertainties may result in future actual
expenditure differing from the amounts currently provided. The
provision at the balance sheet date represents management’s
best estimate of the present value of the future closure costs
required. In July 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 Argentina’s new
law, subject to further review once regulation is published.
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 39).
– Non market performance conditions on LTIP 2021, LTIP 2022
and LTIP 2023 – note 30(c).
There are two parts to the performance conditions attached
to LTIP awards: 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) three-year
growth of the Company’s Measured and Indicated Resources
(MIR) per share (calculated on an enterprise value basis), and
(ii) average outcome of the annual bonus scorecard in respect
of 2021, 2022 and 2023, regarding LTIP 2021; 2022, 2023 and
2024, regarding LTIP 2022; and 2023, 2024 and 2025,
regarding LTIP 2023, calculated as the simple mean of the
three scorecard outcomes.
Critical judgements:
– Income tax – notes 2(t), 2(u), 14, 31 and 37(a).
Judgement is required in determining whether deferred tax
assets are recognised on the statement of financial position.
Deferred tax assets, including those arising from un-utilised
tax losses require management to assess the likelihood that
the Group will generate taxable earnings in future periods, in
order to utilise recognised deferred tax assets. Estimates of
future taxable income are based on forecast cash flows from
operations and the application of existing tax laws in each
jurisdiction. To the extent that future cash flows and taxable
income differ significantly from estimates, the ability of the
Group to realise the net deferred tax assets recorded at the
balance sheet date could be impacted. The Group analyses
the possibility of generating profit in all the companies and
determines the recognition of deferred tax. No deferred tax
asset is recognised in the holding and exploration entities as
they are not expected to generate any profit to settle the
temporary difference (refer to note 31).
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 37(a)). The
final resolution of these transactions may give rise to material
adjustments to the income statement and/or cash flow in future
periods. The Group reviews each significant tax liability or benefit
each period to assess the appropriate accounting treatment.
– Life of mine (LOM).
There are several aspects which are determined by the life
of mine, such as ore reserves and resources, recoverable
values of mining assets, mine rehabilitation provision and
depreciation. The life of mine for an operation is specified in
the relevant Environmental Impact Assessment (EIA) which is
amended from time to time as more resources at the mine are
identified. EIAs are permits which are granted in the ordinary
course of business to the mining industry. While the processing
of such permits may be subject to delays, the Group has never
had an EIA denied. A crucial element of Peru’s legal framework
is the principle of predictability which, in essence, means that
if the legal requirements for any given permit have been
satisfied, the State cannot unlawfully deny the granting
of the permit. Taking this into consideration, as well as the
Group’s operational experience, the Group believes that
permits will be secured such that operations can continue
without interruption. In the unlikely scenario that this does not
occur, there could be material changes to those items in the
financial statements that are determined by the life of mine.
162
163
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCONTINUED Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023Strategic Report 01—99Governance 100—149Financial Statements 150—226Further Information 227—231 2 Material accounting policies continued
– Determination of functional currencies – note 2(e).
The determination of functional currency requires
management judgement, particularly where there may be
several currencies in which transactions are undertaken and
which impact the economic environment in which the entity
operates. In Argentina, the exchange control restrictions limit
the companies to hold US dollars but do not restrict carrying
out transactions in US dollar.
– Recognition of evaluation and exploration assets and transfer
to development costs – notes 2(g), 16 and 17.
Judgement is required in determining when the future
economic benefit of a project can reasonably be regarded as
assured, at which point evaluation and exploration expenses
are capitalised. This includes the assessment of whether there
is sufficient evidence of the probability of the existence of
economically recoverable minerals to justify the
commencement of capitalisation of costs; the timing of the
end of the exploration phase, the start of the development
phase; and the commencement of the production phase. For
this purpose, the future economic benefit of the project can
reasonably be regarded as assured when the Board
authorises management to conduct a feasibility study,
mine-site exploration is being conducted to convert resources
to reserves, or mine-site exploration is being conducted to
confirm resources, all of which are based on supporting
geological information.
– Pandemic expenses
The Group analyses the effect of pandemics in its operations
and accounting treatment, because they generate stoppages,
low capacity production and incremental costs. In the case of
Covid-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 be recognised as exceptional expenses, consideration
has been made as to whether they meet the criteria as set out
in the Group’s accounting policy (note 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 cease 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 costs 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(a).
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(a)).
The transaction was accounted as a purchase of assets as no
systems, processes or outputs were acquired, with the main
asset acquired being the Mara Rosa project which is in a
development stage.
(c) Basis of consolidation
The consolidated financial statements set out the Group’s
financial position, performance and cash flows as at
31 December 2023 and 31 December 2022 and for the
years then ended, respectively.
Subsidiaries are those entities controlled by the Group
regardless of the amount of shares owned by the Group. Control
is achieved when the Group is exposed, or has rights, to variable
returns from its involvement with the investee and has the ability
to affect those returns through its power over the investee.
Non-controlling interests’ rights to safeguard their interest are
fully considered in assessing whether the Group controls a
subsidiary. Specifically, the Group controls an investee if, and
only if, the Group has:
– power over the investee (i.e. existing rights that give it the
current ability to direct the relevant activities of the investee);
– exposure, or rights, to variable returns from its involvement
with the investee; and
– the ability to use its power over the investee to affect its returns.
Generally, there is a presumption that a majority of voting rights
result in control. To support this presumption and when the Group
has less than a majority of the voting or similar rights of an
investee, the Group considers all relevant facts and circumstances
in assessing whether it has power over an investee, including:
– the contractual arrangement with the other vote holders of the
investee;
– rights arising from other contractual arrangements; and
– the Group’s voting rights and potential voting rights.
The Group re-assesses whether or not it controls an investee if
facts and circumstances indicate that there are changes to one
or more of the three elements of control.
Basis of consolidation
Subsidiaries are consolidated from the date of their acquisition,
being the date on which the Group obtains control, and continue
to be consolidated until the date that such control ceases.
Assets, liabilities, income and expenses of a subsidiary acquired
or disposed of during the year are included in the consolidated
financial statements from the date the Group gains control until
the date the Group ceases to control the subsidiary.
Profit or loss and each component of OCI are attributed to the
equity holders of the parent of the Group and to the non-
controlling interests, even if this results in the non-controlling
interests having a deficit balance. When necessary, adjustments
are made to the financial statements of subsidiaries to bring
their accounting policies in line with the Group’s accounting
policies. All intra-group assets and liabilities, equity, income,
expenses and cash flows relating to transactions between
members of the Group are eliminated in full on consolidation.
A change in the ownership interest of a subsidiary, without loss
of control, is accounted for as an equity transaction, affecting
retained earnings. If the Group loses control over a subsidiary, it
(i) derecognises the assets (including goodwill) and liabilities of
the subsidiary; (ii) derecognises the carrying amount of any
non-controlling interest (NCI); (iii) derecognises the cumulative
translation differences, recorded in equity; (iv) recognises the
fair value of the consideration received; (v) recognises the fair
value of any investment retained; (vi) recognises any surplus or
deficit in profit or loss; and (vii) reclassifies the parent’s share of
components previously recognised in other comprehensive
income to profit or loss or retained earnings, as appropriate.
An NCI represents the equity in a subsidiary not attributable,
directly and indirectly, to the parent company and is presented
separately within equity in the consolidated statement of
financial position, separately from equity attributable to owners
of the parent.
Losses within a subsidiary are attributable to the NCI even if that
results in a deficit balance.
Business combinations
Business combinations are accounted for using the acquisition
method. The cost of an acquisition is measured as the
aggregate of the consideration transferred, measured at
acquisition date fair value and the amount of any NCI in the
acquiree. The choice of measurement of NCI, either at fair value
or at the proportionate share of the acquiree’s identifiable net
assets, is determined on a transaction by transaction basis.
Acquisition costs incurred are expensed and included in
administrative expenses.
Goodwill is initially measured at cost, being the excess of the
aggregate of the consideration transferred and the amount
recognised for the NCI, and any interest previously held, over the
net identifiable assets acquired and the liabilities assumed.
Assets acquired and liabilities assumed in transactions separate
to the business combinations, such as the settlement of
pre-existing relationships or post-acquisition remuneration
arrangements, are accounted for separately from the business
combination in accordance with their nature and applicable
IFRSs. Identifiable intangible assets meeting either the
contractual-legal or the separability criteria are recognised
separately from goodwill. Contingent liabilities representing a
present obligation are recognised if the acquisition date fair
value can be measured reliably.
(d) Going concern
Directors’ assessment
The Directors have reviewed Group liquidity, including cash
resources and borrowings (refer to note 28 on details of the
US$300 million and US$200 million medium-term loans) and
related covenant forecasts to assess whether the Group is able
to continue in operation for the period to 30 April 2025 (the
“Going Concern Period”) which is at least 12 months from the
date of these financial statements. In line with their usual
practice, the Directors also considered the impact of a downside
scenario on the Group’s future cash flows and liquidity position
as well as debt covenant compliance. In this scenario,
consideration was given to the potential combined impact of
a three-month delay in Mara Rosa commencing commercial
production, Group-wide operational disruption, unforeseen
social-related costs and capital expenditure, and lower precious
metal prices (“the Downside Assumptions”).
More specifically, the scenarios reviewed by the Directors
included a base case (the “Base Scenario”), reflecting (among
other things) budgeted production for 2024, 2025 life-of-mine
plans for Inmaculada, San Jose and Mara Rosa, and average
precious metal prices of $1,869/oz for gold and $23.7/oz for silver,
being the average analysts’ consensus for the next 13 months.
The Directors also considered a “Severe” scenario which took
into account the combined impact of the Downside
Assumptions, the occurrence of which are considered by the
Directors to be unlikely. Even in this Severe scenario it has been
assumed that all employees remain on full pay and that
mitigating actions, while available, would not be necessary to
maintain a comfortable level of liquidity.
Under the Base Scenario and the Severe Scenario, the Group’s
liquid resources remained more than adequate for the Group’s
forecast expenditure with sufficient headroom maintained to
comply with debt covenants. The results of reverse stress tests
were also considered.
Conclusion
After their review, the Directors have a reasonable expectation
that the Group and the Company have adequate resources to
continue in operational existence during the Going Concern
Period. Accordingly, they continue to adopt the going concern
basis of accounting in preparing the annual financial statements.
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(e) Currency translation
The functional currency for each entity in the Group is
determined by the currency of the primary economic
environment in which it operates. For the holding companies
and operating entities this currency is US dollars and for the
other entities it is the local currency of the country in which it
operates. The Group’s financial information is presented in US
dollars, which is the Company’s functional currency.
Transactions denominated in currencies other than the
functional currency of the entity are initially recorded in the
functional currency using the exchange rate prevailing at the
date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are remeasured at the
exchange rate prevailing at the statement of financial position
date. Exchange gains and losses on settlement of foreign
currency transactions which are translated at the rate prevailing
at the date of the transactions, or on the translation of monetary
assets and liabilities which are translated at period-end
exchange rates, are taken to the income statement. Non-
monetary assets and liabilities denominated in foreign
currencies that are stated at historical cost are translated to the
functional currency at the foreign exchange rate prevailing at
the date of the transaction. Exchange differences arising from
monetary items that are part of a net investment in a foreign
operation are recognised in equity and transferred to income on
disposal of such net investment.
Subsidiary financial statements expressed in their
corresponding functional currencies are translated into US
dollars by applying the exchange rate at period-end for assets
and liabilities and the transaction date exchange rate for
income statement items. The resulting difference on
consolidation is included as a cumulative translation adjustment
in equity. On disposal of a foreign operation, the component of
OCI relating to that particular foreign operation is reclassified to
profit or loss.
(f) Property, plant and equipment
Property, plant and equipment is stated at cost or deemed
cost less accumulated depreciation and impairment losses.
Cost comprises its purchase price and directly attributable
costs of acquisition or construction required to bring the
asset to the condition necessary for the asset to be capable
of operating in the manner intended by management.
Economical and physical conditions of assets have not
changed substantially over this period.
The cost less residual value of each item of property, plant
and equipment is depreciated over its useful life. Each item’s
estimated useful life has been assessed with regard to both
its own physical life limitations and the present assessment of
economically recoverable reserves and resources of the mine
property at which the item is located. Estimates of remaining
useful lives are made on a regular basis for all mine buildings,
machinery and equipment, with annual reassessments for major
items. Depreciation is charged to cost of production on a units of
production basis for mine buildings and installations and plant
and equipment used in the mining production process, or
charged directly to the income statement over the estimated
useful life of the individual asset on a straight-line basis when
not related to the mining production process. Changes in
estimates, which mainly affect units of production calculations,
are accounted for prospectively. Depreciation commences when
assets are available for use. Land is not depreciated.
An asset’s carrying amount is written-down immediately to its
recoverable amount if the asset’s carrying amount is greater
than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing the
net proceeds with the carrying amount and are recognised
within other income/expenses, in the income statement.
The expected useful lives under the straight-line method are
as follows:
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.
Investment in associates
(i)
An associate is an entity over which the Group has significant
influence. Significant influence is the power to participate in the
financial and operating policy decisions of the investee, but is
not control or joint control over those policies.
The considerations made in determining significant influence
are similar to those necessary to determine control over
subsidiaries. The Group’s investment in its associate are
accounted for using the equity method.
Under the equity method, the investment in an associate
is initially recognised at cost. The carrying amount of the
investment is adjusted to recognise changes in the Group’s share
of net assets of the associate since the acquisition date. Goodwill
relating to the associate is included in the carrying amount of the
investment and is not tested for impairment separately.
The statement of profit or loss reflects the Group’s share of
the results of operations of the associate. Any change in OCI
of those investees is presented as part of the Group’s OCI.
In addition, when there has been a change recognised directly
in the equity of the associate, the Group recognises its share of
any changes, when applicable, in the statement of changes in
equity. Unrealised gains and losses resulting from transactions
between the Group and the associate are eliminated to the
extent of the interest in the associate.
The aggregate of the Group’s share of profit or loss of an
associate is shown on the face of the statement of profit or loss
outside operating profit and represents profit or loss after tax
and non-controlling interests in the subsidiaries of the associate.
The financial statements of the associate are prepared for the
same reporting period as the Group. When necessary,
adjustments are made to bring the accounting policies in line
with those of the Group.
After application of the equity method, the Group determines
whether it is necessary to recognise an impairment loss on its
investment in its associate. At each reporting date, the Group
determines whether there is objective evidence that the
investment in the associate is impaired. If there is such evidence,
the Group calculates the amount of impairment as the
difference between the recoverable amount of the investment
and its carrying value, and then recognises the loss within
“Share of profit of an associate” in the statement of profit or loss.
Upon loss of significant influence over the associate, the Group
measures and recognises any retained investment at its fair
value. Any difference between the carrying amount of the
associate upon loss of significant influence and the fair value
of the retained investment and proceeds from disposal is
recognised in profit or loss.
Intangible assets
(j)
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.
(k) Impairment of non-financial assets
Assets that have an indefinite useful life are not subject to
amortisation and are tested annually for impairment.
The carrying amounts of property, plant and equipment and
evaluation and exploration assets are reviewed for impairment if
events or changes in circumstances indicate that the carrying
value may not be recoverable. If there are indicators of
impairment, an exercise is undertaken to determine whether the
carrying values are in excess of their recoverable amount. Such
review is undertaken on an asset by asset basis, except where
such assets do not generate cash flows independent of other
assets, and then the review is undertaken at the cash-
generating unit (CGU) level.
The assessment requires the use of estimates and assumptions
such as long-term commodity prices, discount rates, future
capital requirements, reserves and resources volumes (reflected
in the production volume). Changes in these assumptions will
affect the recoverable amount of the property, plant and
equipment and evaluation and exploration assets.
If the carrying amount of an asset or its cash-generating unit
(CGU) exceeds the recoverable amount, an impairment
provision is recorded to reflect the asset at the lower amount.
Impairment losses are recognised in the income statement.
Calculation of recoverable amount
The recoverable amount of assets is the greater of their value in
use (VIU) and fair value less costs of disposal (FVLCD) to sell.
FVLCD is based on an estimate of the amount that the Group
may obtain in a sale transaction on an arm’s length basis. VIU is
based on estimated future cash flows discounted to their
present value using a discount rate that reflects current market
assessments of the time value of money and the risks specific to
the asset. For an asset that does not generate cash inflows
largely independent of those from other assets, the recoverable
amount is determined for the CGU to which the asset belongs.
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2 Material accounting policies continued
In performing impairment reviews, the Group assesses the
recoverable amount of its operating assets principally with
reference to fair value less costs of disposal, assessed using
discounted cash flow models. The recoverable values of the
CGUs and advanced exploration projects are determined using
a FVLCD methodology. FVLCD for CGUs was determined using a
combination of level 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 the value-in-situ methodology, which
applies a realisable “enterprise value” to unprocessed mineral
resources per ounce of resources to estimate the amount that
would be paid by a willing third party in an arm’s length
transaction (notes 17 and 18(2)).
For the CGU’s discounted cash flow model, the Group uses two
approaches, depending on the circumstances: (i) the traditional
approach, which uses a single cash flow projection, and (ii) the
expected cash flow approach, which uses multiple, probability-
weighted cash flow projections. As at 31 December 2023, the
impairment reviews for the Group’s operating assets were
performed using a traditional approach.
Reversal of impairment
An impairment loss is reversed if there has been a change in the
estimates used to determine the recoverable amount. An
impairment loss is reversed only to the extent that the asset’s
carrying amount does not exceed the carrying amount that
would have been determined, net of depreciation or
amortisation, if no impairment loss had been recognised.
Inventories
(l)
Inventories are valued at the lower of cost or net realisable value.
Cost is determined using the weighted average method.
The cost of work in progress and finished goods (ore inventories)
is based on the cost of production. For this purpose, the costs of
production include:
– costs, materials and contractor expenses which are directly
attributable to the extraction and processing of ore;
– depreciation of property, plant and equipment used in the
extraction and processing of ore; and
– related production overheads (based on normal operating
capacity).
Net realisable value is the estimated selling price in the ordinary
course of business, less applicable variable selling expenses.
(m) Trade and other receivables
Current trade receivables are carried at the original invoice
amount less provision made for impairment of these receivables.
Non current receivables are stated at amortised cost. A
provision for impairment of trade receivables is established
using the expected credit loss impairment model according IFRS
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.
(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.
(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 33) 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.
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(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 37).
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 37).
(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.
Income tax
(t)
Income tax for the year comprises current and deferred tax.
Income tax is recognised in the income statement except to the
extent that it relates to items charged or credited directly to
equity, in which case it is recognised in equity.
Current tax expense is the expected tax payable on the taxable
income for the year, using tax rates enacted at the statement of
financial position date, and any adjustment to tax payable in
respect of previous years.
Deferred tax is provided using the balance sheet liability
method, providing for temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes, with the
following exceptions:
– where the temporary difference arises from the initial
recognition of goodwill or of an asset or liability in a
transaction that is not a business combination that at the time
of the transaction affects neither accounting nor taxable
profit or loss; and
– in respect of taxable temporary differences associated with
investments in subsidiaries and associates, where the timing
of the reversal of the temporary differences can be controlled
and it is probable that the temporary differences will not
reverse in the foreseeable future.
Deferred tax assets and liabilities are measured at the tax rates
that are expected to apply to the period when the asset is
realised or the liability is settled based on the tax rates (and tax
laws) that have been enacted or substantively enacted at the
statement of financial position date.
A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against
which the asset can be utilised. Deferred tax assets are reduced
to the extent that it is no longer probable that the related tax
benefit will be realised.
(u) Uncertain tax positions
An estimated tax liability is recognised when the Group has a
present obligation as a result of a past event, it is probable that
the Group will be required to settle that obligation and a reliable
estimate can be made of the amount of the obligation. The
liability is the best estimate of the consideration required to
settle the present obligation at the balance sheet date, taking
into account risks and uncertainties surrounding the obligation.
Separate liabilities for interest and penalties are also recorded
if appropriate.
Movements in interest and penalty amounts in respect of tax
liability are not included in the tax charge, but are disclosed in
the income statement. Tax liabilities are based on
management’s interpretation of country-specific tax law and
the likelihood of settlement. This involves a significant amount
of judgement as tax legislation can be complex and open to
different interpretation. Management uses in-house tax experts,
professional firms and previous experience when assessing tax
risks. Where actual tax liabilities differ from the liabilities,
adjustments are made which can have a material impact on
the Group’s profits for the year. Refer to note 37(a) for specific
tax contingencies.
(v) Leases
Right-of-use assets (note 27)
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 12 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.
On July 2023, the Group purchased AL41 bonds, which are
sovereign bonds denominated in US dollars that were paid with
Argentine pesos and that pay income in US dollars in local
accounts. They are national public securities issued in dollars
with a fixed rate of 3.50% per year with a maturity date of 9 July
2024. Its technical value is $100.56 with a residual value of
100.00%.
Subsequent measurement
For purposes of subsequent measurement, the Group’s financial
assets are classified in the following categories:
– Financial assets at amortised cost (debt instruments)
The Group measures financial assets at amortised cost if both
of the following conditions are met:
– The financial asset is held within a business model with the
objective to hold financial assets in order to collect contractual
cash flows
– The contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments of
principal and interest on the principal amount outstanding
Financial assets at amortised cost are subsequently measured
using the effective interest (EIR) method and are subject to
impairment. Gains and losses are recognised in profit or loss
when the asset is derecognised, modified or impaired.
The Group’s financial assets at amortised cost includes
trade receivables.
– 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.
The Group has listed and non-listed equity investments under
this category.
– Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include
financial assets held for trading, financial assets designated
upon initial recognition at fair value through profit or loss, or
financial assets mandatorily required to be measured at fair
value. Financial assets are classified as held for trading if they
are acquired for the purpose of selling or repurchasing in the
near term. Derivatives, including separated embedded
derivatives, are also classified as held for trading unless they are
designated as effective hedging instruments. Financial assets
with cash flows that are not solely payments of principal and
interest are classified and measured at fair value through profit
or loss, irrespective of the business model. Notwithstanding the
criteria for debt instruments to be classified at amortised cost or
at fair value through OCI, as described above, debt instruments
may be designated at fair value through profit or loss on initial
recognition if doing so eliminates, or significantly reduces, an
accounting mismatch.
Financial assets at fair value through profit or loss are carried in
the statement of financial position at fair value with net changes
in fair value recognised in the statement of profit or loss.
The Group has listed equity investments and embedded
derivatives under this category. Dividends on listed equity
investments are also recognised as other income in the statement
of profit or loss when the right of payment has been established.
Derecognition
A financial asset (or, where applicable, a part of a financial asset
or part of a group of similar financial assets) is primarily
derecognised (i.e., removed from the Group’s consolidated
statement of financial position) when:
– The rights to receive cash flows from the asset have expired
– The Group has transferred its rights to receive cash flows from
the asset or has assumed an obligation to pay the received
cash flows in full without material delay to a third party under
a “pass-through” arrangement; and either (a) the Group has
transferred substantially all the risks and rewards of the asset,
or (b) the Group has neither transferred nor retained
substantially all the risks and rewards of the asset, but has
transferred control of the asset
170
171
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCONTINUED Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023Strategic Report 01—99Governance 100—149Financial Statements 150—226Further Information 227—231 2 Material accounting policies continued
Impairment of financial assets
The Group recognises an allowance for expected credit losses
(ECLs) for all debt instruments not held at fair value through
profit or loss. ECLs are based on the difference between the
contractual cash flows due in accordance with the contract and
all the cash flows that the Group expects to receive, discounted
at an approximation of the original effective interest rate.
For trade receivables, the Group applies a simplified approach
in calculating ECLs. Therefore, the Group does not track
changes in credit risk, but instead recognises a loss allowance
based on lifetime ECLs at each reporting date.
Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as
financial liabilities at fair value through profit or loss, loans and
borrowings, payables, or as derivatives designated as hedging
instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value and, in
the case of loans and borrowings and payables, net of directly
attributable transaction costs.
The Group’s financial liabilities include trade and other
payables, loans and borrowings including bank overdrafts, and
derivative financial instruments.
Subsequent measurement
The measurement of financial liabilities depends on their
classification, as described below:
– Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include
financial liabilities held for trading and financial liabilities
designated upon initial recognition as at fair value through profit
or loss.
– Loans and borrowings
This is the category most relevant to the Group. After initial
recognition, interest-bearing loans and borrowings are
subsequently measured at amortised cost using the EIR method.
Gains and losses are recognised in profit or loss when the
liabilities are derecognised as well as through the EIR
amortisation process.
Amortised cost is calculated by taking into account any
discount or premium on acquisition and fees or costs that are
an integral part of the EIR. The EIR amortisation is included in
finance costs in the statement of profit or loss.
This category generally applies to interest-bearing loans
and borrowings.
Derecognition
A financial liability is derecognised when the obligation under
the liability is discharged or cancelled or expires. When an
existing financial liability is replaced by another from the same
lender on substantially different terms, or the terms of an
existing liability are substantially modified, such an exchange or
modification is treated as the derecognition of the original
liability and the recognition of a new liability. The difference in
the respective carrying amounts is recognised in the statement
of profit or loss.
Derivative financial instruments and hedge accounting
In 2021 and 2023, the Group signed silver and gold forward
agreements, respectively. The silver and gold forward is being
used to hedge the exposure to changes in the cash flows of the
silver and gold commodity prices. Consequently, the Group has
opted to apply hedge accounting under the requirements of
IFRS 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
– 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.
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.
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.
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 39(e).
For assets and liabilities that are recognised in the financial
statements on a recurring basis at fair value, the Group
determines whether transfers have occurred between levels in
the hierarchy by re-assessing categorisation (based on the
lowest level input that is significant to the fair value
measurement as a whole) at the end of each reporting period.
The Group determines the policies and procedures for both
recurring fair value measurement and unquoted financial
assets, and for non-recurring measurement.
At each reporting date, the Group analyses the movements
in the values of assets and liabilities which are required to be
re-measured or re-assessed as per the Group’s accounting
policies. For this analysis, the Group verifies the major inputs
applied in the latest valuation by agreeing the information
in the valuation computation to contracts and other
relevant documents.
The Group, in conjunction with its external valuers where
applicable, also compares the changes in the fair value of each
asset and liability with relevant external sources to determine
whether the change is reasonable.
For the purpose of fair value disclosures, the Group has
determined classes of assets and liabilities on the basis of the
nature, characteristics and risks of the asset or liability and the
level of the fair value hierarchy as explained above.
(ab) Export incentive programme
On 3 October 2023 the Argentinian Government approved that
exporters of crude oil, gas and derivatives, who meet certain
conditions, may receive 25% of the funds received from exports
through negotiable securities acquired in foreign currency and
settled in local currency.
On 23 October 2023 the export incentive programme was
approved increasing the percentage to 30%. On 20 November
2023 the percentage increased to 50% and since 13 December
2023 changed to 20%. As at 31 December 2023 the Group
recognised a benefit from the programme of US$21,164,000,
disclosed as other income (refer to note 12).
172
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCONTINUED Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023Strategic Report 01—99Governance 100—149Financial Statements 150—226Further Information 227—231 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). The Pallancata mine unit was
put into care and maintenance on November 2023
Inmaculada
US$000
San Jose
US$000
Pallancata
US$000
Exploration
US$000
Other1
US$000
Year ended 31 December 2022
Revenue from external customers
413,899
243,958
78,429
Inter-segment revenue
–
–
–
Total revenue from customers
413,899
243,958
78,429
Provisional pricing adjustment
29
(489)
(863)
Total revenue
413,928
243,469
77,566
–
–
–
–
–
Adjustment
and
eliminations
US$000
(9,872)
(9,872)
Total
US$000
736,966
–
736,966
–
(1,323)
680
9,872
10,552
–
10,552
(9,872)
735,643
– Operating unit – Inmaculada, which generates revenue from the sale of gold and silver (dore)
Segment profit/(loss)
163,509
31,512
(8,789)
(57,798)
8,323
385
137,142
– 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
Year ended 31 December 2023
Revenue from external customers
396,499
241,301
54,177
Inter-segment revenue
Total revenue from customers
Provisional pricing adjustment
Total revenue
–
–
–
396,499
241,301
54,177
145
1,160
(131)
396,644
242,461
54,046
–
–
–
–
–
Total
US$000
692,542
–
692,542
1,174
565
9,609
10,174
–
(9,609)
(9,609)
–
10,174
(9,609)
693,716
152,208
30,340
(19,484)
(21,485)
8,026
(262)
149,343
Segment profit/(loss)
Others2
Profit from operations before income tax
Other segment information
Depreciation3
Amortisation
Impairment and write-off of assets, net
(1,738)
(17,398)
(859)
(63,495)
(74,955)
(52,241)
(19,477)
(72)
(588)
–
(553)
(7)
(5,492)
(135)
(84)
Assets
Capital expenditure
Current assets
Other non-current assets
Total segment assets
Not reportable assets4
Total assets
86,031
47,682
6,428
148,124
127
23,703
524,504
548,207
–
63,795
135,680
199,475
–
4,125
10,325
14,450
–
16,714
410,070
426,784
–
548,207
199,475
14,450
426,784
4,325
35,579
39,904
186,990
226,894
(192,824)
(43,481)
(152,718)
(802)
(83,574)
288,392
112,662
1,116,158
1,228,820
186,990
1,415,810
–
–
–
–
–
–
–
–
–
Others2
Profit from operations before income tax
Other segment information
Depreciation3
Amortisation
Reversal of impairment/(impairment) and
write-off of assets, net
Assets
Capital expenditure
Current assets
Other non-current assets
Total segment assets
Not reportable assets4
Total assets
(78,553)
(50,243)
(9,046)
(724)
–
(380)
39
(4,264)
(199)
–
15,476
(5,346)
(598)
(86)
(1)
78,176
50,112
13,518
196,792
1,268
19,872
508,768
528,640
–
62,796
159,617
222,413
–
16,965
21,345
38,310
–
–
337,654
337,654
–
528,640
222,413
38,310
337,654
4,171
42,319
46,490
243,777
290,267
(111,376)
25,766
(142,486)
(970)
9,531
339,866
103,804
1,069,703
1,173,507
243,777
1,417,284
–
–
–
–
–
–
–
–
–
1 “Other” revenue relates to revenues earned by Empresa de Transmisión Aymaraes S.A.C.
2
3
4
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.
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).
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.
1 “Other” revenue relates to revenues earned by Empresa de Transmisión Aymaraes S.A.C.
2
3
4
Comprised of administrative expenses of US$47,192,000, other income of US$30,261,000, other expenses of US$56,513,000, write-off of assets (net) of US$2,731,000,
impairment of non-current assets of US$80,843,000, share of losses of an associate of US$9,460,000, finance income of US$7,473,000, finance expense of US$18,199,000, and
foreign exchange loss of US$15,620,000.
Includes depreciation capitalised in the Crespo project (US$334,000), San Jose unit (US$3,025,000), Mara Rosa project (US$194,000), products in process (US$316,000) and
recognised against the mine rehabilitation provision (US$2,712,000).
Not reportable assets are comprised of financial assets at fair value through OCI of US$460,000, other receivables of US$63,473,000, income tax receivable of US$4,713,000,
deferred income tax asset of US$763,000, investment in associates US$22,927,000, derivative financial assets of US$846,000, other financial assets of US$2,264,000, assets held
for sale of US$2,418,000, and cash and cash equivalents of US$89,126,000.
174
175
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCONTINUED Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023Strategic Report 01—99Governance 100—149Financial Statements 150—226Further Information 227—231 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
Finland
USA
China
Peru
Total
Inter-segment
Peru
Total
Year ended 31 December
2023
US$000
2022
US$000
278,076
157,131
101,331
74,220
8
–
7,846
3,128
50,036
–
21,940
350,898
143,216
126,321
51,033
14,490
(88)
20,428
–
27,481
1,167
697
693,716
735,643
9,609
9,872
703,325
745,515
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:
Year ended 31 December 2023
Year ended 31 December 2022
US$000 % Revenue
Segment
US$000 % Revenue
Segment
Argor Heraus
Asahi Refining Canada
LS MnM (formerly LS Nikko)
Aurubis AG
157,580
157,149
97,020
74,220
23% Inmaculada and San Jose
23% Inmaculada and San Jose
14% Pallancata and San Jose
11% Pallancata and San Jose
195,148
135,563
126,321
47,856
MKS Switzerland S.A.
120,496
17%
Inmaculada
155,750
27% Inmaculada and San Jose
18%
17%
7%
21%
Inmaculada
Pallancata and San Jose
Pallancata and San Jose
Inmaculada
Non-current assets, excluding financial instruments and deferred income tax assets, were allocated to the geographical areas in
which the assets are located as follows:
Peru
Brazil
Argentina
Chile
Canada
Total non-current segment assets
Financial assets at fair value through OCI
Financial assets at fair value through profit and loss
Investment in associates
Trade and other receivables
Deferred income tax assets
Total non-current assets
As at 31 December
2023
US$000
589,133
349,920
135,680
41,425
2022
US$000
668,353
184,811
159,617
56,867
–
55
1,116,158
1,069,703
460
–
22,927
12,438
763
509
1,015
33,242
6,498
4,213
1,152,746
1,115,180
4 Acquisitions and disposals
(a) 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 included the construction stage Posse gold project as well as certain early-stage
exploration targets.
The Group has applied its judgement to weigh the characteristics of Amarillo’s acquisition and conclude whether it constitutes the
acquisition of a business or a set of assets and activities. Since there are no outputs acquired, the Group based its conclusion on the
fact that the processes acquired are not critical to the ability to develop or convert the actual inputs into outputs. In this context,
and in application of IFRS 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% 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
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
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.
5 Revenue
Gold (from dore bars)
Silver (from dore bars)
Goods sold
US$000
321,974
166,596
Gold (from concentrates)
102,200
Silver (from concentrates)
93,353
565
Services
Total
Year ended 31 December 2023
Revenue from customers1
Year ended 31 December 2022
Revenue from customers1
Shipping
services
US$000
738
499
3,697
2,920
–
Total
US$000
322,712
167,095
105,897
96,273
565
Provisional
pricing
US$000
Total
US$000
Goods sold
US$000
Shipping
services
US$000
129 322,841
41 167,136
1,144 107,041
337,847
183,381
89,991
(140)
96,133
117,534
–
565
680
915
696
2,687
3,235
–
Total
US$000
338,762
184,077
Provisional
pricing
US$000
Total
US$000
(11) 338,751
57 184,134
92,678
(1,628)
91,050
120,769
259 121,028
680
–
680
684,688
7,854
692,542
1,174 693,716
729,433
7,533
736,966
(1,323) 735,643
176
177
1
Includes commercial discounts (refinery treatment charges, refining fees and payable deductions for processing concentrate), and are deducted from gross revenue on a per
tonne basis (treatment charge), per ounce basis (refining fees) or as a percentage of gross revenue (payable deductions). In 2023, the Group recorded commercial discounts of
US$20,299,000 (2022: US$19,090,000).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCONTINUED Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023Strategic Report 01—99Governance 100—149Financial Statements 150—226Further Information 227—231 6 Cost of sales before exceptional items
Cost of sales comprises:
Direct production costs excluding depreciation and amortisation
Depreciation and amortisation in production costs
Other items and workers profit sharing
Fixed costs during operational stoppages and reduced capacity
Change in inventories
Cost of sales
The main components included in cost of sales are:
Depreciation and amortisation in cost of sales1
Personnel expenses (note 10)2
Mining royalty (note 38)
Change in products in process and finished goods
Fixed costs at the operations during stoppages, reduced capacity and excess absenteeism3
Year ended 31 December
2023
US$000
362,980
144,812
1,862
3,314
(4,754)
2022
US$000
384,183
137,747
3,321
8,023
(5,631)
508,214
527,643
Year ended 31 December
2023
US$000
143,171
121,938
6,267
(4,754)
3,314
2022
US$000
136,427
121,203
6,307
(5,631)
8,023
1 The depreciation and amortisation in production cost is US$144,812,000 (2022: US$137,747,000).
2
3
Includes workers profit sharing of US$1,862,000 (2022: US$3,321,000) and excludes personnel expenses of US$3,032,000 (2022: US$4,498,000) included within unallocated fixed
cost at the operations (see below).
Corresponds to the unallocated fixed cost accumulated as a result of excess absenteeism and idle capacity. These costs mainly include personnel expenses of US$3,032,000
(2022: US$4,498,000), third party services of US$865,000 (2022: US$3,090,000), supplies of US$34,000 (2022: US$146,000), depreciation and amortisation of US$Nil (2022:
US$2,000) and other costs of US$617,000 (2022: US$287,000).
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
2023
US$000
25,633
2022
US$000
30,478
7,946
1,075
1,399
948
128
2,085
1,716
167
822
858
4,415
47,192
9,206
445
1,218
630
479
2,077
1,844
184
1,391
821
5,385
54,158
1
2
Corresponds to audit fees of US$1,768,000 (2022: US$1,813,000), legal fees of US$914,000 (2022: US$1,733,000), tax and advisory fees of US$2,507,000 (2022: US$3,954,000),
and other professional fees of US$2,757,000 (2022: US$1,706,000).
Predominantly relates to advertising costs of US$289,000 (2022: US$376,000), insurance fees of US$548,000 (2022: US$888,000), repair and maintenance of US$344,000
(2022: US$489,000), supplies costs of US$109,000 (2022: US$237,000), tax penalties of US$2,000 (2022: US$660,000), travel expenses of US$1,065,000 (2022: US$822,000) and
personnel transportation of US$127,000 (2022: US$165,000).
8 Exploration expenses
Mine site exploration1
Arcata
Ares
Inmaculada
Pallancata
San Jose
Mara Rosa
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
2023
US$000
2022
US$000
63
407
1,371
1,070
8,233
5
877
366
2,946
6,000
7,700
–
11,149
17,889
143
63
(62)
772
4,337
(77)
2,176
19,632
–
1
2,320
24,665
456
1
7
1,916
(1)
2,379
4,759
638
52
783
97
313
2,301
–
3,494
7,535
3,067
176
21,297
56,826
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
3
Prospects expenditure relates to detailed geological evaluations in order to determine zones which have mineralisation potential that is economically viable for exploration.
Exploration expenses are generally incurred in the following areas: mapping, sampling, geophysics, identification of local targets and reconnaissance drilling.
Generative expenditure is early stage exploration expenditure related to the basic evaluation of the region to identify prospects areas that have the geological conditions
necessary to contain mineral deposits. Related activities include regional and field reconnaissance, satellite images, compilation of public information and identification of
exploration targets.
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$7,244,000 in 2023 (2022: US$26,318,000).
9 Selling expenses
Personnel expenses (note 10)
Warehouse services
Taxes1
Other2
Total
1 Corresponds to the export duties in Argentina.
Year ended 31 December
2023
US$000
165
1,614
11,227
1,856
14,862
2022
US$000
482
1,328
10,344
1,878
14,032
2 Mainly corresponds to insurance expenses of US$250,000 (2022: US$337,000), other professional fees of US$514,000 (2022: US$460,000), analysis services of US$457,000 (2022:
US$516,000), and consumption of supplies of US$293,000 (2022: US$221,000).
178
179
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCONTINUED Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023Strategic Report 01—99Governance 100—149Financial Statements 150—226Further Information 227—231 10 Personnel expenses
Salaries and wages
Workers’ profit sharing (note 29)
Other legal contributions
Statutory holiday payments
Long-Term Incentive Plan
Termination benefits1
Other2
Total
1
Includes exceptional personnel expenses amounting to US$8,960,000 (2022: US$Nil) (refer to note 11(1)). The Group’s previously operating Pallancata mine went into care and
maintenance in November 2023 and consequently 463 employees were terminated in 2023.
2 Mainly includes training expenses of US$725,000 (2022: US$1,219,000).
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
2023
US$000
124,970
25,633
4,759
165
13,194
5,487
2022
US$000
125,701
30,478
7,535
482
5,802
2,051
174,208
172,049
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$3,032,000
(2022: US$4,498,000). Exceptional personnel expenses included in cost of sales amount to US$Nil (2022: US$Nil).
2 Exceptional personnel expenses included in other expenses amount to US$8,960,000 (2022: US$Nil).
The average number of employees for 2023 and 2022 were as follows:
Peru
Argentina
Chile
Brazil
Canada
United Kingdom
Total
Year ended 31 December
2023
1,915
1,432
3
127
2
12
2022
2,177
1,407
4
88
13
11
3,491
3,700
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.
Year ended 31 December
2023
US$000
2022
US$000
119,621
121,999
3,207
27,808
8,832
2,675
10,991
1,074
4,733
27,866
7,413
3,002
5,468
1,568
174,208
172,049
(Impairment)/impairment reversal of non-financial assets, net
Other expenses
Restructuring of the Pallancata mine unit 1
Total
Impairment of non-financial assets2
Reversal of impairment of non-financial assets3
Total
Share of loss on an associate
Impairment of Aclara Resources Inc. 4
Total
Income tax benefit/(charge)5
Total
Year ended
31 December
2023
US$000
Year ended
31 December
2022
US$000
(8,960)
(8,960)
(80,843)
–
(80,843)
(7,183)
(7,183)
27,448
27,448
–
–
(4,199)
15,562
11,363
(9,923)
(9,923)
(3,353)
(3,353)
The exceptional items for the year ended 31 December 2023 and 2022 correspond to:
1 Corresponds to the restructuring charges in Pallancata mine unit resulting from placing the operation in care and maintenance.
2
Corresponds to the impairment related to the Azuca project of US$16,673,000, the impairment of the Crespo project of US$46,772,000 and the San Jose mine unit of
US$17,398,000 (2022: corresponds to the impairment related to the Azuca project of US$4,199,000) (refer to notes 16, 17 and 18).
3 Reversals of impairment related to the Pallancata mine unit (refer to notes 16 and 17).
4
5
Corresponds to the impairment charge of US$7,183,000 (2022: US$9,923,000) based on the updated valuation of the investment in Aclara Resources Inc. as at 31 December
2023 (refer to note 19).
The current tax credit generated by the restructuring of the Pallancata mine unit of US$2,643,000 (2022: US$Nil) and the deferred tax credit generated by the impairment of
the Azuca project of US$4,918,000 (2022: US$1,238,000), the impairment of the Crespo project of US$13,798,000 (2022: US$Nil), and the impairment of the San Jose mine unit of
US$6,089,000 (2022: US$Nil); net in 2022 of the deferred tax charge generated by the reversal of the impairment of the Pallancata mine unit of US$4,591,000.
180
181
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCONTINUED Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023Strategic Report 01—99Governance 100—149Financial Statements 150—226Further Information 227—231 12 Other income and other expenses before exceptional items
13 Finance income, finance costs and foreign exchange loss
Other income
Gain on sale of property, plant and equipment
Logistic services
Income on recovery of expenses
Recovery of previously written off account receivable
Sale of mine concessions
Tax benefit in Canada1
Income from export programme in Argentina2
Other3
Total
Other expenses
Increase in provision for mine closure (note 29(1))
Provision of obsolescence of supplies (note 23)
Write off of value added tax
Corporate social responsibility contribution in Argentina4
Care and maintenance expenses of Ares mine unit
Care and maintenance expenses of Arcata mine unit
Care and maintenance expenses of Pallancata mine unit
Care and maintenance expenses of Selene mine unit
Voluntary retirement plan in Argentina5
Damage Inmaculada machine belt
Depreciation right-of-use assets
Contingency6
Other7
Total
Year ended
31 December
2023
Before
exceptional
items
US$000
Year ended
31 December
2022
Before
exceptional
items
US$000
142
1,704
2,064
–
1,150
3,190
21,164
847
30,261
294
218
337
546
–
–
–
1,945
3,340
(28,365)
(17,797)
(1,586)
(184)
(3,637)
(2,788)
(3,178)
(2,463)
(202)
–
–
(192)
(817)
(4,141)
(47,553)
(422)
(159)
(3,360)
(3,291)
(4,207)
–
–
(1,329)
(1,321)
(105)
(3,098)
(4,213)
(39,302)
1 British Columbia exploration tax credit generated in Hochschild Mining Canada, a Canadian subsidiary of the Group.
2
Benefit arising from being able to access the Argentina government’s Export Incentive Programme, allowing certain companies to translate a certain proportion of US dollar
sales at a preferential market exchange rate.
3 Mainly corresponds to the gain on sale of supplies of US$201,000 (2022: gain on sale of supplies of US$480,000).
4 Relates to a contribution in Argentina to the Santa Cruz province calculated as a proportion of sales.
5 Related to payments made and the provision recognised under voluntary retirement plan in Minera Santa Cruz.
6 Mainly related to contingencies in Minera Santa Cruz related to labour lawsuits.
7
Mainly corresponds to the expenses due to penalties in CMA of US$2,428,000 (2022: US$1,530,000), insurance of Minera Santa Cruz of US$Nil (2022: US$941,000), termination
benefits in Pallancata mine unit of US$Nil (2022: US$987,000).
Finance income
Interest on deposits and liquidity funds1
Interest income
Unwind of discount on mine rehabilitation (note 29)
Other
Total
Finance costs
Interest on secured bank loans (note 28)
Other interest
Interest expense
Loss on discount of other receivables2
Loss from changes in the fair value of financial instruments3
Unwind of discount on mine rehabilitation (note 29)
Other
Total
Foreign exchange loss
Argentina4
Peru
Others
Total
Year ended
31 December
2023
US$000
Year ended
31 December
2022
US$000
4,892
4,892
–
2,581
7,473
(9,520)
(2,701)
(12,221)
(893)
(1,821)
(1,703)
(1,561)
(18,199)
(16,020)
81
319
(15,620)
2,553
2,553
1,931
727
5,211
(10,360)
(1,551)
(11,911)
(779)
(7,096)
–
(1,990)
(21,776)
(1,032)
(2,490)
900
(2,622)
1 Interest on deposits and liquidity funds of US$471,000 (2022: 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 loss on sale of the C3 Metals Inc shares of US$292,000 (note 21) (2022: fair value change of US$2,140,000 on the C3 Metals Inc shares) and the foreign exchange
effect of US$1,529,000 related to the bonds in San Jose (2022: the foreign exchange transaction costs of US$4,956,000 to acquire US$5,248,000 through the sale of bonds in
Argentina).
4 Increase of foreign exchange loss in Argentina due to the devaluation at the end of 2023.
14 Income tax expense
Current corporate income tax
Corporate income tax expense
Prior year adjustment in Minera Santa Cruz
Withholding tax
Deferred taxation
Year ended 31 December 2023
Before
exceptional
items
US$000
Exceptional
items
US$000
Total
US$000
16,319
(2,643)
13,676
–
609
–
–
–
609
16,928
(2,643)
14,285
Origination and reversal of temporary differences (note 31)
20,245
(24,805)
(4,560)
Prior year adjustment in Amarillo
Corporate income tax
Current mining royalties
Mining royalty charge (note 38)
Special mining tax charge (note 38)
Total current mining royalties
–
20,245
37,173
–
(24,805)
(27,448)
–
(4,560)
9,725
4,520
2,307
6,827
–
–
–
4,520
2,307
6,827
Year ended 31 December 2022
Before
exceptional
items
US$000
Exceptional
items
US$000
Total
US$000
18,253
(2,353)
276
16,176
(5,376)
(664)
(6,040)
10,136
4,787
2,658
7,445
–
–
–
–
3,353
–
3,353
3,353
18,253
(2,353)
276
16,176
(2,023)
(664)
(2,687)
13,489
–
–
–
4,787
2,658
7,445
182
183
Total taxation expense/(benefit) in the income statement
44,000
(27,448)
16,552
17,581
3,353
20,934
The weighted average statutory income tax rate was 27.2% for 2023 and 39.2% for 2022. 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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCONTINUED Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023Strategic Report 01—99Governance 100—149Financial Statements 150—226Further Information 227—231 14 Income tax expense continued
There were tax charges in relation to the cash flow hedge losses (2022: charges) recognised in equity during the year ended
31 December 2023 of US$6,617,000 (2022: US$4,994,000).
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:
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 antidilutive potential ordinary shares as at 31 December 2023.
As at 31 December 2023 and 2022, EPS has been calculated as follows:
Profit from operations before income tax
At average statutory income tax rate of 27.2% (2022: 39.2%)
Expenses not deductible for tax purposes
Taxable income on local currency (pesos) related to AL41 Bond Argentina
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 -0.1% (2022: 74.5%) before foreign exchange effect
and withholding tax
Foreign exchange rate effect4
Corporate income tax at average effective income tax rate of -21.0% (2022: 51.3%) before withholding tax
Special mining tax and mining royalty3
Corporate income tax and mining royalties at average effective income tax rate of -36.7% (2022: 80.2%) before
withholding tax
Withholding tax
Total taxation charge in the income statement at average effective tax rate -38.1% (2022: 81.2%) from operations
As at 31 December
2023
US$000
(43,481)
(11,818)
2,987
961
(1,567)
10,249
(2,014)
–
(315)
1,567
50
9,066
9,116
6,827
2022
US$000
25,766
10,088
2,239
–
(2,412)
14,047
(2,196)
(2,353)
(664)
446
19,195
(5,982)
13,213
7,445
15,943
609
16,552
20,658
276
20,934
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$5,742,000 (2022: US$282,000), the tax charge related to the Inmaculada mine unit depreciation of
US$2,361,000 (2022: US$787,000), and the effect of not recognised tax losses of US$2,146,000 (2022: US$10,811,000).
3 Corresponds to the impact of a mining royalty and special mining tax in Peru (note 38).
4
The foreign exchange effect is composed of US$7,107,000 loss (2022: US$2,847,000 profit) from Argentina and a profit of US$948,000 (2022: US$1,816,000 profit) from Peru and
a loss of US$2,914,000 (2022: US$1,315,000 profit) from Brazil. This mainly corresponds to the foreign exchange effect of converting tax bases and monetary items from local
currency to the corresponding functional currency. The main contributor of the foreign exchange effect on the tax charge in 2023 is the devaluation of the Argentinian pesos
(2022: Argentinian pesos).
The amounts after offset, as presented on the face of the statement of financial position, are as follows:
Income tax receivable1
Income tax payable2
Total
As at 31 December
2023
US$000
4,713
(2,979)
1,734
2022
US$000
9,226
(2,126)
7,100
1
Mainly corresponds to the tax credit of Compañia Minera Ares of US$4,280,000 and Minera Santa Cruz of US$118,000 (2022: 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).
2 Mainly corresponds to the mining royalties payables of Compañia Minera Ares of US$2,479,000 (2022: Mainly corresponds to the mining royalties payables of Compañia
Minera Ares of US$2,079,000).
Basic earnings per share
Before exceptional items (US$)
Exceptional items (US$)
Total for the year (US$)
Diluted earnings per share
Before exceptional items (US$)
Exceptional items (US$)
Total for the year (US$)
Profit before exceptional items and attributable to equity holders of the Parent is derived as follows:
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)
As at 31 December
2023
2022
0.02
(0.12)
(0.10)
0.02
(0.12)
(0.10)
0.01
–
0.01
0.01
–
0.01
As at 31 December
2023
(55,006)
63,997
8,991
2022
2,961
1,913
4,874
Profit before exceptional items attributable to equity holders of the Parent for the purpose of diluted earnings per
share (US$000)
8,991
4,874
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)
As at 31 December
2023
2022
514,264
513,876
–
8,387
Weighted average number of ordinary shares in issue for the purpose of diluted earnings per share (thousands)
514,264
522,263
184
185
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCONTINUED Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023Strategic Report 01—99Governance 100—149Financial Statements 150—226Further Information 227—231 16 Property, plant and equipment
Year ended 31 December 2023
Cost
At 1 January 2023
Additions
Change in discount rate (note 29(1))
Change in mine closure estimate (note 29(1))
Disposals
Write-offs6
Foreign exchange effect
Mining
properties and
development
costs3
US$000
Land and
buildings
US$000
Plant and
equipment
US$000
1 and 7 Vehicles4
US$000
Mine
closure
asset
US$000
Construction
in progress
and capital
advances
US$000
3 and 5
Total
US$000
1,823,207
563,782
651,098
12,302
104,860
76,854
3,232,103
162,569
962
16,422
(330)
–
106,122
285,745
–
–
(91)
(518)
9,273
–
–
–
–
–
–
(1,218)
(14,849)
498
125
–
–
(302)
(131)
8
693
(1,535)
13,931
–
–
323
–
–
–
(958)
4,672
(692)
(19,395)
(1,535)
13,931
(1,611)
(16,456)
14,899
(88,831)
Transfers and other movements2
(59,334)
(5,107)
(4,996)
At 31 December 2023
1,935,106
560,135
646,582
12,240
116,887
167,295
3,438,245
Accumulated depreciation and impairment
At 1 January 2023
Depreciation for the year
Disposals
Write-offs6
Impairment
Foreign exchange effect
1,383,600
397,531
433,720
97,821
22,594
28,032
–
–
–
–
(128)
(13,673)
28,119
3,669
12,941
–
8
(4)
Transfers and other movements2
(55,003)
(7,017)
(5,848)
At 31 December 2023
1,454,537
416,785
455,040
Net book value at 31 December 2023
480,569
143,350
191,542
7,460
2,038
(321)
(52)
129
1
52
9,307
2,933
81,722
2,233
–
–
258
–
1,157
2,305,190
–
–
–
775
–
152,718
(449)
(13,725)
45,891
5
(510)
(1,912)
(70,238)
83,703
33,184
20
2,419,392
167,275
1,018,853
1 Within plant and equipment, costs of US$442,677,000 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$309,409,000 and depreciation charge for the year is US$11,021,000.
2
Mainly includes the transfer of US$2,499,000 from evaluation and exploration assets (Inmaculada of US$2,092,000 and San Jose of US$407,000) (note 17) as they are related to
conversion of resources in to reserves, the transfer to assets held for sale of US$9,415,000 related to the Crespo mine unit (refer to note 25), and the transfer to intangibles of the
transmission line of Amarillo of US$11,801,000.
3 There were borrowing costs capitalised in property, plant and equipment amounting to US$18,790,000.
4 Vehicles include US$1,091,000 of right-of-use assets (note 27).
5 Within construction in progress and capital advances there are capital advances amounting to US$8,825,000, mainly related to Mara Rosa project of US$8,080,000.
6
Corresponds to the write-off of property, plant and equipment as they will no longer be used in the Group due to obsolescence.
7 Plant and equipment include US$3,093,000 of right of use assets (note 27).
Mining
properties and
development
costs
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
advances
US$000
4 and 7
Total
US$000
Year ended 31 December 2022
Cost
At 1 January 2022
Additions
Change in discount rate (note 29(1))
Change in mine closure estimate (note 29(1))
Disposals
Write-offs8
Acquisition of assets (note 4 (a))
Foreign exchange effect
Transfers and other movements3
Initial recognition6 and 29
At 31 December 2022
1,605,319
555,532
635,076
11,997
106,382
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
–
–
(13,490)
7,554
–
–
–
–
–
11,841
67,294
–
–
(1)
2,926,147
201,447
(13,490)
7,554
(1,342)
(122)
(11,461)
12,084
(1,725)
(12,517)
15,078
1,635
102,121
4,414
4,414
–
1,823,207
563,782
651,098
12,302
104,860
76,854
3,232,103
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
1,300,392
377,712
421,067
93,518
20,005
26,053
–
(376)
(9,942)
–
8
–
(10)
(262)
–
86
(350)
(9,243)
(3,774)
(10)
(23)
At 31 December 2022
1,383,600
397,531
433,720
Net book value at 31 December 2022
439,607
166,251
217,378
6,713
1,760
(197)
–
(838)
–
22
7,460
4,842
80,901
1,150
–
–
(329)
–
–
81,722
23,138
1,243
2,188,028
–
–
–
–
–
(86)
1,157
75,697
142,486
(547)
(9,629)
(15,145)
(10)
7
2,305,190
926,913
1
2
3
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.
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.
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 Jose of
US$222,000) (note 17) as they are related to conversion of 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 27).
6 Recognition of the mine closure provision of the Mara Rosa project located in Brazil upon acquisition (note 29).
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 they will no longer be used in the Group due to obsolescence.
2023
In June 2023, management determined that there was a trigger of impairment in the San Jose mine unit due to the increase in the
discount rate from 19.8% to 21.7% mainly explained by the rise in country risk premium in Argentina, and higher costs than expected
due to local inflation. The impairment test performed over the San Jose CGU resulted in an impairment recognised as at 30 June
2023 of US$17,398,000 (US$16,588,000 in property, plant and equipment, US$376,000 in evaluation and exploration assets and
US$434,000 in intangibles).
The Group is conducting a sales process for its Azuca and Crespo projects. This decision to evaluate the sale of these assets is part
of the Group’s strategy to focus its capital on larger-scale projects.
As at 30 June 2023, based on preliminary discussions with interested parties on the investment and costs required for these
projects, given their operational capabilities, management determined that there were triggers of impairment in both the Azuca
and Crespo projects. An impairment test was carried out, adjusting the key inputs used to determine the projects recoverable value,
resulting in an impairment charge of US$42,321,000 (US$15,898,000 in property, plant and equipment, US$26,420,000 in evaluation
and exploration assets and US$3,000 in intangibles) for Azuca, and Crespo.
The recoverable value of the San Jose, CGU, and the Crespo and Azuca assets was determined using a fair value less costs of
disposal (FVLCD) methodology.
The key assumptions on which management has based its determination of FVLCD and the associated recoverable values
calculated for the San Jose CGU and Crespo assets are gold and silver prices, future capital requirements, production costs,
reserves and resources volumes (reflected in the production volume), and the discount rate.
186
187
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCONTINUED Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023Strategic Report 01—99Governance 100—149Financial Statements 150—226Further Information 227—231 16 Property, plant and equipment continued
Real prices US$ per oz.
Gold
Silver
Discount rate (post-tax)
2024
1,850
24.3
2025
1,735
22.6
2026
1,582
21.4
2027
Long-term
1,557
21.8
1,600
22.0
San Jose
Crespo
21.7%
6.0%
The period of seven years and nine years was used to prepare the cash flow projections of San Jose mine unit and Crespo,
respectively, which were in line with their respective life of mines.
With respect to Azuca, given its early stage, the Group applied a value-in-situ methodology, which applies a realisable “enterprise
value” to unprocessed mineral resources. The methodology is used to determine the fair value less costs of disposal of the Azuca
assets. The enterprise value used in the calculation performed as at 30 June 2023 was $0.095 per silver equivalent ounce of
resources. The enterprise value figure is based on observable external market information.
On 28 December 2023, the Group entered into an agreement with a third party whereby the third party acquired the assets and
liabilities of the Crespo project from Compañia Minera Ares (refer to note 25). The closing of the transaction is expected to take
place in March 2024, and the assets and liabilities were transferred to assets and liabilities related to assets held for sale,
respectively. The Group recognised an additional impairment of US$21,124,000 (US$13,405,000 in property, plant and equipment,
US$7,718,000 in evaluation and exploration assets and US$1,000 in intangibles). The recoverable amount of Crespo project was
determined using a fair value less costs of disposal (FVLCD) methodology, based on the economic terms of the sale agreement.
As at 31 December 2023, Azuca does not meet the conditions to be classified as an asset held-for sale under IFRS 5 Non-current
Assets Held for Sale and Discontinued Operations.
No indicators of impairment or reversal of impairment were identified in the other CGUs, which includes other exploration projects.
The estimated recoverable values of the Group’s CGUs are equal to, or not materially different than, their carrying values.
Sensitivity analysis
Other than as disclosed below, management believes that no reasonably possible change in any of the key assumptions above
would cause the carrying value of any of its CGUs to exceed its recoverable amount.
A change in any of the key assumptions would have the following impact:
US$000
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%)1
Post-tax discount rate (decrease by 3%)1
Capital expenditure (increase by 10%)
Capital expenditure (decrease by 10%)
San Jose
(45,500)
43,900
(23,500)
23,300
(39,700)
38,900
(4,100)
4,400
(5,700)
5,700
1
Management believed that a 3% change was a reasonably possible change in the post-tax discount rate in Argentina. However, changes in the perception of Argentina arising
from political, social and financial disruption may give rise to significant movement in the discount rate used in the assessment of the San Jose CGU.
2022
The delay on the government decision on Inmaculada MEIA constituted 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 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
2028-2038
1,466
23.3
1,561
20.8
Inmaculada
5.2%
Inmaculada
443,447
Sensitivity analysis
Other than as disclosed below, management believes that no reasonably possible change in any of the key assumptions above
would cause the carrying value of any of its CGUs to exceed its recoverable amount.
A change in any of the key assumptions would have the following impact:
US$000
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
(53,746)
54,557
(96,669)
(49,831)
94,693
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 31 December 2022 of
US$15,145,000 in property, plant and equipment, and US$417,000 in evaluation and exploration assets.
The recoverable value of the Pallancata CGU was determined using a FVLCD methodology. FVLCD was determined using a
combination of level 2 and level 3 inputs, which result in fair value measurements categorised in its entirety as level 3 in the fair value
hierarchy, to construct a discounted cash flow model to estimate the amount that would be paid by a willing third party in an arm’s
length transaction.
Real prices US$ per oz.
Gold
Silver
Discount rate (post-tax)
31 December 2022 (US$000)
Current carrying value of CGU, net of deferred tax
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.
188
189
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCONTINUED Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023Strategic Report 01—99Governance 100—149Financial Statements 150—226Further Information 227—231 17 Evaluation and exploration assets
Cost
Balance at 1 January 2022
Additions
Acquisition (note 4 b)
Foreign exchange effect
Transfers to property, plant and equipment (note 16)
Transfer to intangibles
Balance at 31 December 2022
Additions
Foreign exchange effect
Transfers to property, plant and equipment (note 16)
Other transfers and adjustments1
Balance at 31 December 2023
Accumulated impairment
Balance at 1 January 2022
Impairment/(reversal of impairment) net
Foreign exchange effect
Transfers to property, plant and equipment (note 16)
Balance at 31 December 2022
Impairment
Foreign exchange effect
Transfers to property, plant and equipment (note 16)
Other transfers and adjustments1
Balance at 31 December 2023
Net book value as at 31 December 2022
Net book value as at 31 December 2023
Azuca
US$000
Crespo
US$000
Mara Rosa
US$000
Volcan
US$000
Others
US$000
Total
US$000
83,844
506
31,347
1,086
–
–
–
–
–
–
–
–
84,350
32,433
367
–
–
–
594
–
–
(33,027)
–
11,733
107,362
(14,492)
(101,897)
(1,927)
779
566
77
–
–
84,717
–
1,422
45,876
4,199
–
–
50,075
16,554
–
–
–
66,629
34,275
18,088
9,878
–
–
–
9,878
17,584
–
–
(27,462)
–
22,555
–
–
–
–
–
–
–
–
–
–
–
779
1,422
81,251
1,607
–
(992)
–
–
25,014
221,456
694
–
–
15,626
107,362
(15,484)
(230)
(102,127)
–
(1,927)
81,866
25,478
224,906
996
(2,043)
–
–
–
(2,571)
2,523
(1,966)
(2,571)
(15,000)
65,819
–
(48,027)
22,907
174,865
36,874
–
(482)
–
5,524
(417)
–
(8)
98,152
3,782
(482)
(8)
36,392
5,099
101,444
–
(881)
–
–
35,511
45,474
30,308
376
–
(72)
–
5,403
20,379
17,504
34,514
(881)
(72)
(27,462)
107,543
123,462
67,322
1
Corresponds to the transfer to assets held for sale of the Crespo project (Cost of US$33,027,000 net of the amortisation of US$27,462,000) (refer to note 25), and the adjustment
of the cost of US$15,000,000 related to the Volcan project due to the royalty agreement with Franco Nevada.
At 31 December 2023, the Group has recorded an impairment with respect to evaluation and exploration assets of the San Jose
mine unit of US$376,000, the Crespo project of US$17,584,000 and the Azuca project of US$16,554,000 (2022: 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). 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$95,000 (2022: US$1,087,000).
18 Intangible assets
Cost
Balance at 1 January 2022
Foreign exchange effect
Additions
Transfers
Balance at 31 December 2022
Foreign exchange effect
Additions
Transfers
Balance at 31 December 2023
Accumulated amortisation and impairment
Balance at 1 January 2022
Amortisation for the year4
Transfers
Foreign exchange effect
Balance at 31 December 2022
Amortisation for the year4
Transfers
Impairment
Foreign exchange effect
Balance at 31 December 2023
Net book value as at 31 December 2022
Net book value as at 31 December 2023
Transmission
line1
US$000
Water
permits2
US$000
Software
licences
US$000
Legal rights3
US$000
Total
US$000
22,157
22,084
1,889
8,580
54,710
–
–
–
(289)
–
–
–
353
6
22,157
21,795
2,248
71
–
1,927
10,578
156
–
(5,507) 6
(218)
353
1,933
56,778
612
124
5,400
62,914
(528)
–
–
–
–
–
21,267
2,248
5,227
984
124
10,9075
34,172
17,551
719
–
–
10,539
–
–
(137)
18,270
10,402
584
–
434
–
19,288
3,887
14,884
–
–
–
(252)
10,150
11,393
11,117
1,881
164
1
–
2,046
109
–
–
–
2,155
202
93
6,645
36,616
87
–
–
6,732
109
970
1
(137)
37,450
802
(5,507) 6
(5,507)
4
–
1,338
3,846
3,889
438
(252)
32,931
19,328
29,983
1
2
3
The transmission line in San Jose is amortised using the units of production method. At 31 December 2023 the remaining amortisation period is approximately 6 years (2022:
7 years) in line with the life of the mine. The transmission line in Mara Rosa is amortised using the units of production method. At 31 December 2023 the Mara Rosa unit hasn’t
started amortisation.
Corresponds to the acquisition of water permits of Andina Minerals Group (“Andina”). These permits have an indefinite life according to Chilean law. The Group used a
discounted cash flow approach to determine the fair value less costs of disposal. The model is based on the Preliminary Economic Assessment (PEA).
Legal rights correspond to expenditures required to give the Group the right to use a property for the surface exploration work, development and production. At 31 December
2023 the remaining amortisation period is 14 years (2022: 2 to 14 years).
4 The amortisation for the period is included in cost of sales and administrative expenses in the income statement.
5 Mainly due to the transfer from property, plant and equipment of the transmission line in Mara Rosa of US$11,031,000.
6 Corresponds to the transfer to assets held for sale of the Crespo mine unit (refer to note 25).
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 2023 and 2022. The estimated recoverable amount is not materially
different than its carrying value.
US$000
Current carrying value Volcan CGU
2023
41,425
2022
56,867
Sensitivity analysis
Management believes that no reasonably possible change in any of the key assumptions above would cause the carrying value
exceed its recoverable amount.
190
191
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCONTINUED Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023Strategic Report 01—99Governance 100—149Financial Statements 150—226Further Information 227—231 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 offering price, and is accounted for using the equity method in the
consolidated financial statements.
The movement of investment in associate is as follows:
Beginning balance
Impairment
Share of loss for the period
The following table summarises the financial information of the Group’s investment in Aclara Resources Inc:
Share of comprehensive profit/(loss) for the period
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
Other income
Finance income
Finance cost
Foreign exchange gain/(loss)
Loss from operations for the year
Group’s share of loss for the year
Other comprehensive profit that may be reclassified to profit or loss in subsequent periods, net of tax
Exchange differences on translating foreign operations
Total comprehensive profit/(loss) for the year
Group’s share of comprehensive profit/(loss) for the year
As at
31 December
2023
US$000
As at
31 December
2022
US$000
34,945
112,064
(6,048)
(2,600)
67,291
90,271
(3,674)
(1)
138,361
153,887
27,672
12,361
(17,106)
22,927
–
(6,815)
(6,991)
59
2,338
(59)
85
(11,383)
(2,277)
(4,273)
(4,273)
(855)
30,777
12,388
(9,923)
33,242
–
(5,261)
(3,642)
–
648
(18)
(111)
(8,384)
(1,677)
6,417
6,417
1,283
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$61,805,000
(2022: US$61,940,000).
2
This represents the 20% share in the total impairment, estimated by the Group, of Aclara’s exploration and evaluation assets of US$85,530,000 (US$7,183,000 impairment in
2023 and US$9,923,000 in 2022) (2022: US$49,615,000, impairment in 2022 of US$9,923,000).
Year ended 31 December
2023
US$000
33,242
(7,183)
(2,277)
(855)
22,927
2022
US$000
43,559
(9,923)
(1,677)
1,283
33,242
Ending balance
On 4 July 2023, Aclara announced the receipt of a notice from the Environmental Service Assessment in Chile of its decision to
terminate the review of Aclara’s application for an environmental impact assessment of the Penco Module due to the finding of
trees considered as “vulnerable species” in the area of the project. Aclara is currently working to refile a revised application.
Aclara’s announcement and the impact that it could have in the first production date of Penco project, were considered as
indicators of impairment. Therefore, in compliance with IAS 36, the Group has performed a valuation on Aclara, and determined an
impairment charge of US$7,183,000.
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,
adjusted by: a three-year delay in the first production date, local inflation and additional risk impacting costs; latest forecast prices;
and a discount rate of 9.6%.
Sensitivity analysis
An increase of 1% in the discount rate and a delay of one additional year in the first production date would have the following
impact in the Group’s investment in Aclara:
Discount rate (increase by 1%)
Delay in first production date (1 additional year)
US$000
(3,578)
(2,551)
In December 2022, the decrease in the fair value of Aclara’s shares, and Aclara’s withdrawal of the application for an environmental
impact assessment (EIA) of its flagship project “Penco”, which is expected to result in a two-year delay to anticipated first
production date, were considered indications of impairment. Therefore, in compliance with IAS 36, the Group 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 two-year delay in the first production date due to the withdrawal of the application for
the EIA.
Sensitivity analysis
An increase of 1% in the discount rate and a delay of one additional year in the first production date would have the following
impact in the Group’s investment in Aclara:
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 2023, after recognising the changes in the Group’s share of net assets of the
associate and the impairment charge is US$22,927,000 (31 December 2022: US$33,242,000).
The fair value of Aclara shares as at 31 December 2023 amounted to US$12,296,000 (31 December 2022: US$7,679,000).
No dividends were received from the associate during 2023 and 2022.
The associate had no contingent liabilities or capital commitments as at 31 December 2023 and 31 December 2022.
192
193
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCONTINUED Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023Strategic Report 01—99Governance 100—149Financial Statements 150—226Further Information 227—231 20 Financial assets at fair value through OCI
22 Trade and other receivables
Beginning balance
Fair value change recorded in OCI
Ending balance
Year ended 31 December
2023
US$000
2022
US$000
509
(49)
460
661
(152)
509
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 2023 and 31 December 2022 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
2023
2022
6
1
147
306
460
–
460
6
1
160
342
509
–
509
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
Fair value change recorded in profit and loss (note 13(3))
Disposals1
Ending balance
Year ended 31 December
2023
US$000
1,015
(292)
(723)
–
2022
US$000
3,155
(2,140)
–
1,015
1
During 2023, the Group sold 25,001,540 shares of C3 Metals Inc., classified as financial assets at fair value through profit and loss, with a fair value at the date of the sale of
US$723,000, generating a loss on disposal of US$292,000 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 2023 and 31 December 2022 is as follows:
Listed equity investments:
C3 Metals Inc.
US$000
2023
2022
–
–
1,015
1,015
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.
Trade receivables1
Advances to suppliers
Duties recoverable from exports of Minera Santa Cruz2
Receivables from related parties (note 33(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
As at 31 December
2023
2022
Non-current
US$000
Current
US$000
Non-current
US$000
–
–
234
–
358
–
–
1
452
1,045
1,210
10,183
12,438
28,051
2,577
–
127
194
93
–
10,399
12,791
54,232
6,569
19,655
80,456
–
–
224
–
502
–
–
130
1,520
2,376
764
3,358
6,498
Current
US$000
41,031
2,242
–
774
215
238
–
6,442
11,294
62,236
4,309
18,863
85,408
The fair values of trade and other receivables approximate their book value.
1 Net of a provision for impairment of trade receivables from customers in Peru of US$1,370,000 (2022: US$1,333,000).
2
Relates to export benefits through the Patagonian Port and silver refunds in Minera Santa Cruz, discounted over 18 months (2022: 18 months) at a rate of 23.10% (2022:
26.58%) for dollars denominated amounts and 185.15% (2022: 68.50%) for Argentinian pesos. The loss on the unwinding of the discount is recognised within finance expense
(2022: finance expense).
3 Net of a provision for impairment of receivables of US$186,000 (2022: US$176,000).
4
5
Mainly corresponds to account receivables from contractors for the sale of supplies of US$1,973,000 (2022: US$2,311,000), loan to third parties of US$719,000 (2022:
US$772,000), and claim receivable of US$345,000 (2022: US$1,242,000), net of a provision for impairment of receivables of US$1,033,000 (2022: US$1,004,000).
Primarily relates to US$7,607,000 (2022: US$12,672,000) 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$5,672,000 (2022: US$4,875,000), and Amarillo Mineracao do
Brasil of US$15,814,000 (2022: US$3,360,000). The VAT is valued at its recoverable amount.
Movements in the provision for impairment of receivables:
At 1 January 2022
Change for the year
Foreign exchange effect
At 31 December 2022
Change for the year
Foreign exchange effect
At 31 December 2023
Individually
impaired
US$000
2,421
35
57
2,513
3
73
2,589
As at 31 December 2023 and 2022, none of the financial assets classified as receivables (net of impairment) were past due.
194
195
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCONTINUED Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023Strategic Report 01—99Governance 100—149Financial Statements 150—226Further Information 227—231 23 Inventories
Finished goods valued at cost
Products in process valued at cost
Products in process accrual valued at cost
Supplies and spare parts1
Provision for obsolescence of supplies
Total
As at 31 December
2023
US$000
4,203
10,998
5,930
51,305
72,436
(4,175)
68,261
2022
US$000
446
8,952
7,272
47,358
64,028
(2,588)
61,440
1
Includes in transit inventory of US$1,485,000 (2022: US$1,594,000).
Finished goods include concentrate and dore. Products in process include stockpile and precipitates (2022: stockpile and
concentrate).
The Group either sells dore bars as a finished product or if it is commercially advantageous to do so, delivers the bars for refining
into gold and silver ounces which are then sold. In the latter scenario, the dore bars are classified as products in process. At
31 December 2023 and 2022 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 (2022: stockpile).
As part of the Group’s short-term financing policies, it acquires pre-shipment loans which are guaranteed by the sales contracts.
The Group has contracts as at 31 December 2023 of US$3,977,000 (2022: US$2,161,000) (refer to note 28).
The amount of expense recognised in profit and loss related to the consumption of inventory of supplies, spare parts and raw
materials is US$110,752,000 (2022: US$118,520,000).
Movements in the provision for obsolescence comprise an increase in the provision of US$1,586,000 (2022: US$422,000) and the
reversal of US$Nil related to supplies and spare parts, that had been provided for (2022: US$Nil).
24 Cash and cash equivalents and other financial assets
Cash and cash equivalents
Cash in hand
Current demand deposit accounts1
Time deposits2
Mutual funds3
Cash and cash equivalents considered for the statement of cash flows (note 2(y))
1 Relates to bank accounts which are freely available and bear interest. The balance has checks in transit.
2 These deposits have an average maturity of 9 days (2022: average of 18 days).
As at 31 December
2023
US$000
782
40,311
37,184
10,849
89,126
2022
US$000
922
53,697
89,225
–
143,844
3
Corresponds to common investment funds that are assets that are formed with the contributions made by the Group, consequently, becoming beneficiary of the fund in which
they decide to invest. As at 31 December 2023 the balance of US$10,849,000 are deposited in Banco Santander and BBVA in Argentina.
Cash and cash equivalents comprise cash on hand and deposits held with banks that are readily convertible into known amounts of
cash and which are subject to insignificant risk of changes in value.
The fair value of cash and cash equivalents approximates their book value. The Group has US$140,000,000 of undrawn medium-
term debt facility (note 28).
Other financial assets
Bonds in Minera Santa Cruz
As at 31 December
2023
US$000
2,264
2022
US$000
–
25 Assets held for sale
On 28 December 2023, the Group entered into an agreement with a third party whereby the third party will acquire the assets and
liabilities of the Crespo project from Compañia Minera Ares. Under the terms of this agreement, the Group will receive
US$15,000,000 as a non-refundable cash payment at closing, and a 1.5% Royalty Net Smelter Return (NSR) over the Crespo project.
The third party will also assume the environmental liabilities of the project of $711,000.
The closing of the transaction is expected to take place in March 2024, and in consequence, as the sale is highly probable to be
completed within the 12 months of the year-end, the assets and liabilities were transferred to assets and liabilities related to asset
held for sale, respectively.
Prior to classifying Crespo’s disposal group as assets and liabilities related to asset held for sale, the Group recognised an
impairment of $21,124,000. The recoverable amount of Crespo project was determined using a FVLCD methodology, based on the
economic terms of the sale agreement (refer to note 16).
The major classes of assets and liabilities classified as assets held for sale as at 31 December 2023 are as follows:
Assets
Transfer from evaluation and exploration assets, net of impairment
Transfer from property, plant and equipment
Transfer from deferred tax asset
Total non-current assets
Liabilities
Transfer from provision for mine closure (note 29)
Total liabilities directly associated with assets held for sale
Net assets directly associated with assets held for sale
26 Trade and other payables
Trade payables1
Salaries and wages payable2
Dividends payable
Taxes and contributions
Guarantee deposits3
Mining royalties (note 38)
Accounts payable to related parties (note 33(a))
Lease liabilities (note 27)
Other4
Total
US$000
5,565
9,415
2,418
17,398
(711)
(711)
16,687
Current
US$000
88,817
28,755
32
10,287
8,623
1,211
622
1,637
4,118
144,102
As at 31 December
2023
2022
Non-current
US$000
Current
US$000
Non-current
US$000
–
–
–
55
–
–
–
1,379
277
1,711
83,418
23,476
–
9,295
7,842
1,446
397
2,714
7,251
135,839
–
–
–
–
–
–
–
1,239
384
1,623
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
3
Salaries and wages payable relates to remuneration payable. At 31 December 2023, there was Board members’ remuneration payable of US$67,000 (2022: US$69,000) and no
Long-Term Incentive Plan payable (2022: US$Nil).
Guarantee deposits made by the contractors of the Group to guarantee the fulfilment of their tasks. The guarantee will be returned to the contractor at the end of the service
and when it is verified that it has been completed correctly.
4 Mainly due to the accrual of the six days of production from 26 to 31 December 2023.
The fair value of trade and other payables approximate their book values.
196
197
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCONTINUED Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023Strategic Report 01—99Governance 100—149Financial Statements 150—226Further Information 227—231 27 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 12 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 (included in cost of sales, administrative, exploration and other expenses)
Interest expense on lease liabilities (included in finance expenses)
Expense relating to short-term leases (included in cost of sales, administrative, exploration and other expenses)
Expense relating to leases of low-value assets (included in cost of sales, administrative, exploration and other expenses)
Variable lease payments (included in cost of sales and exploration expenses)
Total amount recognised in profit or loss
As at 31 December
2023
US$000
(2,199)
(62)
(866)
(743)
(11,422)
(15,292)
2022
US$000
(1,112)
(104)
(1,679)
(1,355)
(7,643)
(11,893)
The Group had total cash outflows for leases of US$15,369,000 in 2023 (2022: US$12,316,000). There were additions to right-of-use
assets and lease liabilities during the year of US$3,493,000 (2022: US$Nil). The future cash outflows relating to leases that have not
yet commenced are US$4,777,000 (2022: US$2,950,000). Short-term leases, leases of low-value assets and variable lease payments
are included in the operating cash flows.
The movement in IFRS 16 lease liabilities in the years 2023 and 2022 is as follows:
As at
1 January
2023
US$000
2,876
(1,637)
1,239
As at
1 January
2022
US$000
4,411
(1,597)
2,814
Additions
US$000
Repayments
US$000
3,493
(2,338)
Additions
US$000
Repayments
US$000
–
(1,639)
Interest
expense
US$000
62
Interest
expense
US$000
104
As at
31 December
2023
US$000
4,093
(2,714)
1,379
As at
31 December
2022
US$000
2,876
(1,637)
1,239
Lease liabilities
Less: current balance
Non-current balance
Lease liabilities
Less: current balance
Non-current balance
28 Borrowings
Secured bank loans (a)
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. From 18 September 2023 the Libor was replaced by the
three-month SOFR plus a spread of 1.91%. The Group repaid US$25,000,000 of the loan on 18 December 2023. Financial
covenants under the agreement are: (i) Consolidated Leverage Ratio <= 3 and (ii) Consolidated Interest Coverage Ratio ≥ 4.00.
– In December 2022, a credit agreement for up to $200,000,000 was signed between Amarillo Mineracao do Brasil Ltd and The Bank
of Nova Scotia and BBVA Securities Inc, with Hochschild Mining PLC as guarantor. The medium-term facility can be withdrawn
until December 2024, and is payable in equal quarterly instalments from February 2025 through November 2027, with an interest
rate of three-month SOFR plus a spread of 2.05%. US$60,000,000 was withdrawn on 9 August 2023 (refer to note 39 (h)), and the
remaining balance of US$140,000,000 was undrawn as at 31 December 2023. Financial covenants under the agreement are: (i)
Consolidated Leverage Ratio <= 3 and (ii) Consolidated Interest Coverage Ratio ≥ 4.00.
(b) Other loans:
Stock market promissory note:
From January to May 2023 Minera Santa Cruz signed four stock market promissory notes with Max Capital, a finance advisory
company located in Argentina, amounting to US$3,907,000,000. The expiration date of the notes is from July 2023 to August 2024.
During the year 2023 the Group repaid US$16,407,000. The balance as at 31 December 2023 is US$2,000,000 (from August to
November 2022 Minera Santa Cruz signed 15 stock market promissory notes with Max Capital, 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 was US$14,500,000).
(c) Capitalised borrowing costs:
Interest expense of US$19,357,000 that is directly attributable to the construction of Mara Rosa (US$19,178,000) and Compañía
Minera Ares S.A.C. (US$179,000) has been capitalised and is included in property, plant and equipment within construction in
progress and capital advances (US$8,267,000) and mining property and development costs (US$10,992,000), and exploration and
evaluation assets (US$98,000) (2022: 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 interest payable of the medium-term bank loans as at 31 December 2023 is US$341,086,000
(2022: 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
2023
US$000
120,001
114,998
2022
US$000
100,000
175,000
–
–
234,999
275,000
The carrying amount of the pre-shipment loans approximates their fair value. The carrying amount and fair value of the medium-
term bank loans are as follows:
As at 31 December
2023
Effective
interest rate
Non-current
US$000
Current
US$000
Effective
interest rate
2022
Non-current
US$000
Pre-shipment loans in Minera Santa Cruz (note 23)
12% to 15%
–
3,977
47.25% and 48.00%
–
Medium-term bank loans
8.91% and 9.09%
234,999
106,087
7.74%
275,000
Other loans (b)
Stock market promissory note in Minera Santa Cruz
–
–
2,000
Total
234,999
112,064
–
–
275,000
14,500
43,989
(a) Secured bank loans:
Pre-shipment loans in Minera Santa Cruz:
– As at 31 December 2023, Minera Santa Cruz has seven loans with Citibank amounting to US$2,815,000 plus interests of
US$82,000, one loan with ICBC amounting to US$447,000 plus interests of US$16,000, and one loan with Santander of US$608,000
plus interests of US$9,000 (31 December 2022: two loans with Citibank amounting to US$1,693,000 plus interests of US$468,000).
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 in equal quarterly instalments from the second anniversary of the loan with an interest rate of three-month USD
Libor plus 1.15% payable quarterly until maturity on 13 December 2024. In September 2021, the Group negotiated with the
same counterpart a US$200,000,000 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 three-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.
Current
US$000
2,161
27,328
Medium-term bank loans
Total
The movement in borrowings during the years 2023 and 2022 are as follows:
Current
Pre-shipment loans
Medium-term bank loans
Stock market promissory note
Non-current
Medium-term bank loans
Total current and non-current borrowings
Accrued interest
As at
1 January
2023
US$000
1,693
25,000
14,500
41,193
275,000
275,000
316,193
2,796
Carrying amount
as at 31 December
Fair value
as at 31 December
2023
US$000
341,086
341,086
2022
US$000
302,328
302,328
2023
US$000
335,899
335,899
2022
US$000
283,677
283,677
Additions
US$000
Repayments
US$000
Reclassifications
and others1
US$000
As at
31 December
2023
US$000
13,506
60,000
3,907
77,413
60,000
60,000
(10,573)
(85,000)
(16,407)
(756)
3,870
100,001
100,001
–
2,000
(111,980)
99,245
105,871
–
–
(100,001)
(100,001)
(756)
18,716
234,999
234,999
340,870
6,193
137,413
(111,980)
9,520
(24,839)
1
Reclassification and others from non-current of US$100,001,000 includes transfer from non-current to current borrowings of US$100,001,000. Current reclassifications and
other of US$99,245,000 includes transfer from non-current borrowings of US$100,001,000 and foreign exchange effect of US$756,000. Reclassifications and others of accrued
interests includes transfer of recognition of transaction costs of US$234,000, capitalisation of interests of US$19,357,000 (28(c)), and foreign exchange effect of US$407,000.
198
199
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCONTINUED Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023Strategic Report 01—99Governance 100—149Financial Statements 150—226Further Information 227—231 28 Borrowings continued
Current
Pre-shipment loans
Medium-term bank loan
Stock market promissory note
Non-current
Bank loans
Total current and non-current borrowings
Accrued interest
29 Provisions
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
At 1 January 2023
Additions
Accretion (note 13)
Change in discount rate
Change in estimates
Foreign exchange effect
Transfers to assets held for sale (note 25)
Utilisation
Payments
At 31 December 2023
Less: current portion
Non-current portion
As at
1 January
2022
US$000
Additions
US$000
Repayments
US$000
Reclassifications
and others
US$000
As at
31 December
2022
US$000
–
–
–
–
13,411
(10,557)
–
15,500
28,911
–
(1,000)
(11,557)
300,000
300,000
300,000
–
Provision
for mine
closure1
US$000
134,035
–
(1,931)
(17,849)
34,124
–
(970)
(10,409)
137,000
(17,668)
119,332
137,000
–
1,703
(2,543)
43,304
–
(711)
(2,712)
(13,325)
162,716
(19,056)
143,660
–
–
–
–
28,911
10,360
(11,557)
(12,962)
Long-Term
Incentive
Plan2
US$000
Workers
profit sharing
US$000
467
(467)
10,892
4,733
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
322
–
(11,000)
4,947
(4,947)
–
4,947
3,207
–
–
–
77
–
–
(4,805)
3,426
(3,426)
–
(1,161)
25,000
–
23,839
(25,000)
(25,000)
(1,161)
4,899
Contingencies3
US$000
3,499
1,813
–
–
–
434
–
(10)
5,736
(1,562)
4,174
5,736
3,655
–
–
–
(916)
–
–
1,693
25,000
14,500
41,193
275,000
275,000
316,193
2,796
Total
US$000
148,893
6,079
(1,931)
(17,849)
34,124
756
(970)
(21,419)
147,683
(24,177)
123,506
147,683
6,862
1,703
(2,543)
43,304
(839)
(711)
(2,712)
(504)
(18,634)
7,971
(4,259)
3,712
174,113
(26,741)
147,372
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 2023 and 2022 respectively, and the cash flows have been adjusted to reflect the risk attached to these cash flows. Uncertainties on the timing
for use of this provision include changes in the future that could impact the time of closing the mines, as new resources and reserves are discovered, technological changes,
regulatory changes, cost increases, changes in discount rates. Those uncertainties may result in future actual expenditure differing from the amounts currently provided. The
discount rate used was 1.84% (2022: 0.95%). Expected cash flows will be over a period from one to 21 years (2022: over a period from one to 21 years).
Based on the internal and external reviews of mine rehabilitation estimates, the provision for mine closure increased by US$43,304,000 due to increase in the Ares mine unit of
US$20,297,000, the Matarani unit of US$21,000, the Azuca project of US$1,000, the Pallancata mine unit of US$2,465,000, the Selene mine unit of US$9,345,000, the Mara Rosa
project of USS$4,591,000, the Inmaculada mine unit of US$7,691,000 and the Sipan mine unit of US$52,000, net of the decrease in the Arcata mine unit of US$321,000, the San
Jose mine unit of US$835,000, and the Crespo project of US$3,000 (2022: increase 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).
A net charge of US$28,365,000 related to changes in estimates (US$29,373,000) and discount rates (-US$1,008,000) for mines already closed were recognised directly in the
income statement (2022: 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).
A net charge of US$12,396,000 related to changes in estimates (US$13,931,000) and discount rates (-US$1,535,000) 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 (2022: 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).
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 2022 (US$1,931,000) to 2023 (US$1,703,000) is explained because the Group is closer to the budget execution periods and the discount
rates used for 2022 were lower than those of 2023.
A change in any of the following key assumptions used to determine the provision would have the following impact:
As at 31 December 2023
Closure costs (increase by 10%) increase of provision
As at 31 December 2022:
Closure costs (increase by 10%) increase of provision
Discount rate (increase by 0.5%) (decrease of provision)
US$000
16,300
(10,051)
US$000
13,700
Discount rate (increase by 0.5%) (decrease of provision)
(8,137)
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$Nil (2022: US$467,000 net decrease) have been recorded as administrative expenses -US$Nil (2022: -US$442,000) and
exploration expenses -US$Nil (2022: -US$25,000). The final result of the benefit was Nil.
The following tables list the inputs to the last Monte Carlo model used for the LTIPs as at 31 December 2021:
For the period ended
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Expected life (years)
LTIP 2020
31 December
2021
US$000
2.37
3.70
0.02
1
The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the awards and is indicative of future trends, which may not
necessarily be the actual outcome. The outcome of the LTIP 2020 as at 31 December 2022 was US$Nil.
3
The non-current balance of US$3,712,000 corresponds to labour lawsuits in Minera Santa Cruz that the Group expect to solve in a period higher than one year. Current
contingencies mainly represents the balance of Ares of US$4,180,000. The main contingency in Ares is related to the OEFA, and the Group is expecting to solve the claims
between June and October 2024.
Weighted average share price (pence £)
179.61
200
201
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCONTINUED Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023Strategic Report 01—99Governance 100—149Financial Statements 150—226Further Information 227—231
30 Equity
(a) Share capital and share premium
Issued share capital
The issued share capital of the Company as at 31 December 2023 is as follows:
Class of shares
Ordinary shares (1 pence per share)
The issued share capital of the Company as at 31 December 2022 is as follows:
Class of shares
Ordinary shares (1 pence per share)
Issued
Number
Amount
514,458,432
£5,144,584
Issued
Number
Amount
513,875,563
£5,138,756
At 31 December 2023 and 2022, all issued shares with a par value of 1 pence were fully paid (2023: weighted average of US$0.018
per share, 2022: weighted average of US$0.018 per share).
The movement in share capital of the Company from 1 January 2022 to 31 December 2023 is as follows:
Shares issued as at 1 January 2022
Deferred bonus shares issued on 20 June 2022
Cancellation of deferred bonus shares on 22 June 2022
Cancellation 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
Issuance of shares for bonus payment on 12 May 2023
Shares issued as at 31 December 2023
Number of
ordinary
shares
513,875,563
513,875,563
Share capital
US$000
226,506
303,268
(513,875,563)
(303,268)
Share
premium
US$000
438,041
–
–
–
–
513,875,563
582,869
514,458,432
–
(438,041)
(217,445)
9,061
7
9,068
–
–
–
–
Following the passing of certain special resolutions at an Extraordinary General Meeting of shareholders held on 26 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;
the reduction of the Company’s share premium account to Nil and crediting the corresponding amount to the Company’s
retained earnings reserve; and
(b)
the reduction in the nominal value of the ordinary shares from 25 pence per ordinary share to 1 pence per ordinary share,
(both (ii) and (iii) above collectively referred to as “the Reductions”).
The Reductions were effective on registration of the relevant court order by the Registrar of Companies, which took place on
24 June 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 2023 and 31 December 2022 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 gold and silver prices.
Share-based payment reserve
The share-based payment reserve is used to recognise the value of equity-settled share-based payment transactions provided to
employees, as a part of their remuneration.
(i) Long-Term Incentive Plan (LTIP)
On 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, on 23 February 2022 the Group approved the grant of 2022 LTIP awards and on 20 April 2023 the Group approved the grant
of 2023 LTIP awards. The 2020 awards give a right to receive a cash payment equivalent to the 50% of the amount (cash-settled
transaction) (refer to note 29(2)), and the other 50% will be used to acquire shares of the Company (equity-settled transaction).
The vesting of the 2021 LTIP, 2022 LTIP and 2023 LTIP awards are subject to the following performance conditions: 50% on
Hochschild’s three-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, 1 January 2022 to 31 December 2024, and
1 January 2023 to 31 December 2025 respectively. The awards will vest in May 2024, in February 2025 and April 2026 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 2020 LTIP, 2021 LTIP, 2022 LTIP and 2023 LTIP:
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Expected life (years)
LTIP 2023
LTIP 2022
LTIP 2021
LTIP 2020
2.28
2.82
3.96
2.4
5.73
3.97
4.13
2.3
2.37
3.71
0.23
2
0.87
3.19
0.51
2.5
Weighted average share price (pence £)
63.90
141.46
221.99
179.61
The 50% subject to internal KPIs is split equally between:
i) Three-year growth of the Company’s Measured and Indicated Resources (MIR) per share (excluding Volcan), the three-year MIR
growth was projected using a normal distribution based on historical data, and factoring in the additional growth expected from
acquisitions
ii) average outcome of the annual bonus scorecard in respect of 2021, 2022 and 2023 for 2021 LTIP, 2022, 2023 and 2024 for 2022
LTIP, and 2023, 2024 and 2025 for 2023 LTIP calculated as the simple mean of the three scorecard outcomes. Probabilities
assigned to each possible outcome, based on historical data and management judgement
The remaining contract life is Nil years (2022: 0.1 years), 0.4 years (2022: 1.4 years), 1.2 years (2022: 2.2 years) and 2.3 years for the
2020 LTIP, 2021 LTIP, 2022 LTIP and 2023 LTIP respectively.
The movement in other reserves is as follows:
Balance at 1 January 2022
Expense recognised in the period
Forfeiture of share options
Balance at 31 December 2022
Expense recognised in the period
Forfeiture of share options
Balance at 31 December 2023
LTIP
2019
US$000
1,798
88
(1,886)
–
–
–
–
LTIP 2020
US$000
LTIP
2021
US$000
LTIP
2022
US$000
LTIP
2023
US$000
947
509
–
1,456
72
(1,528)
–
1,167
1,478
–
2,645
588
–
3,233
–
1,395
–
1,395
1,011
–
2,406
–
–
–
–
1,004
–
1,004
No shares vested during the period (2022: Nil).
(ii) 2022 bonus of employees
The Group agreed to partially pay the 2022 bonus by an issuance of shares. The total amount that was paid in shares was with a
value of US$584,000.
202
203
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCONTINUED Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023Strategic Report 01—99Governance 100—149Financial Statements 150—226Further Information 227—231
31 Deferred income tax
The net deferred income tax assets/(liabilities) are as follows:
Unrecognised tax losses expire in the following years:
Beginning of the year
Income statement benefit/(expense) (note 14)
Equity credit/(charge)
Deferred tax recognised for payment
Deferred tax recognised in assets held for sale
End of the year
As at 31 December
2023
US$000
(75,832)
4,560
7,414
–
(2,418)
2022
US$000
(86,744)
2,687
8,167
58
–
(66,276)
(75,832)
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 2022
Income statement expense
Equity charge
At 31 December 2022
Income statement (expense)/benefit
Recognised in assets held for sale
At 31 December 2023
Deferred income tax assets
At 1 January 2022
Income statement benefit/(expense)
Equity credit
At 31 December 2022
Income statement benefit/(expense)
Recognised in assets held for sale
Equity credit
At 31 December 2023
Differences
in cost
of PP&E
US$000
Mine
development
US$000
Provisional
pricing
adjustment
US$000
45,629
1,281
362
47,272
(108)
(52)
47,112
84,885
4,630
–
89,515
(8,248)
(2,840)
78,427
(56)
359
–
303
(303)
–
–
Others
US$000
Total
US$000
3,152
1,627
–
4,779
3,673
–
133,610
7,897
362
141,869
(4,986)
(2,892)
8,452
133,991
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
12,797
1,747
–
14,544
8,045
(5,310)
–
30,466
1,048
–
31,514
3,260
–
–
365
(1,021)
1,377
721
(8,818)
–
–
–
2,483
1,855
4,338
3,064
–
–
17,279
34,774
(8,097)
7,402
3,238
5,780
5,902
14,920
(5,977)
–
7,414
16,357
46,866
10,037
9,134
66,037
(426)
(5,310)
7,414
67,715
Recognised
Expire after four years
Unrecognised
Expire in one year
Expire in two years
Expire in three years
Expire in four years
Expire after four years
Total
Other unrecognised deferred income tax assets comprise (gross amounts):
Provision for mine closure1
As at 31 December
2023
US$000
2022
US$000
19,651
19,651
12,759
12,759
97
1,040
766
1,196
191,764
194,863
214,514
–
97
1,040
766
189,148
191,051
203,810
As at 31 December
2023
US$000
10,990
2022
US$000
8,191
1
This relates to provision for mine closure expenditure which is expected to be incurred in periods in which taxable profits are not expected to be available to offset the expenditure.
Unrecognised deferred tax liability on retained earnings
At 31 December 2023 and 2022, there was no recognised deferred tax liability for taxes that would be payable on the unremitted
earnings of certain of the Group’s subsidiaries as the intention is that these amounts are permanently reinvested.
32 Dividends
Dividends paid and proposed during the year
Equity dividends on ordinary shares:
Final dividend for 2022: Nil US cents per share (2021: 2.335 US cents per share)
Interim dividend for 2023: Nil US cents per share (2022: 1.95 US cents per share)
Total dividends paid in cash
Total dividends paid on ordinary shares
Proposed dividends on ordinary shares:
Final dividend for 2023: Nil US cents per share (2022: Nil US cents per share)
Dividends declared to non-controlling interests: 0.002 US$ per share (2022: 0.002 US$ per share)
Total dividends declared to non-controlling interests
2023
US$000
2022
US$000
–
–
–
–
–
326
326
11,998
10,019
22,017
22,017
–
286
286
1
Credit/(charge) in the year mainly related to silver forward of US$5,908,000 (2022: silver forward of US$645,000), statutory holiday provision of US$943,000 (2022: US$1,157,000)
and Long-Term Incentive Plan of US$1,909,000 (2022: US$1,512,000).
Dividends paid in 2023 to non-controlling interests amounted to US$326,000 (2022: US$286,000).
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
As at 31 December
2023
US$000
763
(67,039)
(66,276)
2022
US$000
4,213
(80,045)
(75,832)
Dividends per share
There was no interim dividend paid during 2023. There is no proposed final dividend in respect of the year ending 31 December 2023.
204
205
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCONTINUED Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023Strategic Report 01—99Governance 100—149Financial Statements 150—226Further Information 227—231 33 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 2023 and 2022. The
related parties are companies owned or controlled by the main shareholder of the Parent company or associates.
35 Notes to the statement of cash flows
Reconciliation of loss for the year to net cash generated from operating activities
(Loss)/profit for the year
Adjustments to reconcile Group loss to net cash inflows from operating activities
Depreciation (note 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
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 and impairment (note 19)
Gain on sale of property, plant and equipment (note 12)
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
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
2023
US$000
2022
US$000
2023
US$000
2022
US$000
114
733
–
–
–
13
–
127
–
–
30
9
2
774
80
315
–
2
–
–
397
249
352
5
–
–
16
622
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 note 19).
As at 31 December 2023 and 2022, 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)
Short-term employee benefits
Long-Term Incentive Plans
Total compensation paid to key management personnel
Year ended
2023
US$000
2022
US$000
(376)
(11)
541
42
(376)
(418)
494
248
Year ended 31 December
2023
US$000
2022
US$000
6,259
1,157
7,416
7,121
1,174
8,295
This amount includes the remuneration paid to the Directors of the Parent Company of the Group of US$3,555,000 (2022:
US$4,228,000).
34 Auditor’s remuneration
The auditor’s remuneration for services provided to the Group during the years ended 31 December 2023 and 2022 is as follows:
Audit fees pursuant to legislation1
Audit-related assurance services
Total
1 The total fee includes statutory audit fee of US$390,000 in respect of local statutory audits of subsidiaries (2022: US$416,000).
In 2023 and 2022, all fees are included in administrative expenses.
Amounts paid to
Ernst & Young
in the year ended
31 December
2023
US$000
2022
US$000
1,342
145
1,487
1,181
95
1,276
As at 31 December
2023
US$000
2022
US$000
(60,033)
4,832
146,137
139,088
802
2,731
3
970
1,832
35
80,843
(11,363)
292
9,460
(142)
1,586
28,365
(7,473)
18,199
16,552
(3,342)
(8,520)
2,624
(2,856)
(8,091)
1,877
(1,998)
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)
217,016
144,271
206
207
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCONTINUED Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023Strategic Report 01—99Governance 100—149Financial Statements 150—226Further Information 227—231 36 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 12 months
More than one year
(b) Capital commitments
Peru
Argentina
Brazil
As at 31 December
2023
US$000
–
–
2022
US$000
–
4,747
For the year ended
31 December
2023
US$000
2022
US$000
25,911
1,049
16,000
42,960
1,563
3,687
13,412
18,662
37 Contingencies
As at 31 December 2023 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 2023, the
Group had exposures totalling US$19,885,000 (2022: US$20,713,000).
When the Tax authority challenges the deductibility of certain expenses the Group reassesses the case internally and externally,
with the support of a third party professional to determine the probability of success and, depending on the result, makes the
decision whether or not to continue with the claim. Notwithstanding this risk, the Directors believe that management’s interpretation
of the relevant legislation and assessment of taxation is appropriate and that it is probable that the Group’s tax and customs
positions will be sustained in the event of a challenge by the tax authorities. Consequently, the Directors consider that no tax liability
is required to be recognised in respect of these claims or risks.
(b) Guarantees
The Group is required to provide guarantees in Peru in respect of environmental restoration and decommissioning obligations. The
Group has provided for the estimated cost of these activities (see note 29(1)).
38 Mining royalties
Peru
In accordance with Peruvian legislation, owners of mining concessions must pay a mining royalty for the exploitation of metallic and
nonmetallic resources. Mining royalties have been calculated with rates ranging from 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 2023, the amount payable as under the new mining royalty and the SMT amounted to US$1,298,000 (2022:
US$1,234,000) and US$1,181,000 (2022: US$845,000) 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$4,520,000 (2022:
US$4,787,000) of new mining royalty and US$2,307,000 (2022: US$2,658,000) of SMT, both classified as income tax.
208
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 2023, the amount payable as mining royalties amounted to US$1,446,000 (2022: US$1,211,000). The amount recorded
in the income statement as cost of sales was US$6,499,000 (2022: US$6,307,000).
39 Financial risk management
The Group is exposed to a variety of risks and uncertainties which may have a financial impact on the Group and which also impact
the achievement of social, economic and environmental objectives. These risks include strategic, commercial, operational and
financial risks and are further categorised into risk areas to facilitate consolidated risk reporting across the Group.
The Group has made significant developments in the management of the Group’s risk environment which seeks to identify and,
where appropriate, implement the controls to mitigate the impact of the Group’s significant risks. This effort is supported by a Risk
Committee with the participation of the CEO, the Vice Presidents, and the head of the internal audit function. The Risk Committee is
responsible for implementing the Group’s policy on risk management and internal control in support of the Company’s business
objectives, and monitoring the effectiveness of risk management within the organisation.
(a) Commodity price risk
Silver and gold prices have a material impact on the Group’s results of operations. Prices are significantly affected by changes in
global economic conditions and related industry cycles. Generally, producers of silver and gold are unable to influence prices
directly; therefore, the Group’s profitability is ensured through the control of its cost base and the efficiency of its operations.
The Group’s policy is generally to remain hedge-free. However, management continuously monitors silver and gold prices and
reserves the right to take the necessary action, where appropriate and within Board approved parameters, to mitigate the impact
of this risk.
Derivative financial assets – Silver and gold forwards
On 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.
On 12 April 2023, the Group signed agreements with Citibank to hedge the sale of 27,600 ounces of gold at US$2,100 per ounce for 2024.
On 20 April 2023, the Group signed agreements with JP Morgan to hedge the sale of 29,250 ounces of gold at US$2,047 per ounce
for 2023.
On 19 June 2023, the Group signed agreements with Citibank to hedge the sale of 150,000 ounces of gold (50,000 ounces per year)
at US$2,117.05, US$2,166.65 and US$2,205.50 per ounce in 2025, 2026 and 2027 respectively.
On 14 December 2023, the Group signed a gold collar agreement with JP Morgan of 99,999.96 ounces of gold at strike put of
US$2,000 and strike call of US$2,252 per ounce for 2024.
The gold and silver forwards are being used to hedge exposure to changes in cash flows from gold and silver commodity prices.
There is an economic relationship between the hedged item and the hedging instruments due to a common underlying. In
accordance with IFRS 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 and gold forwards is
identical to the hedged risk components. To test the hedge effectiveness, the Group uses the hypothetical derivative method and
compares the changes in the fair value of the gold and silver forwards against the changes in fair value of the hedged item
attributable to the hedged risk. That said, it is observed that the effectiveness tests comply with the requirements of IFRS 9 and that
the hedging strategy is highly effective.
The fair values of the gold and silver forwards were calculated using a discounted cash flow model applying a combination of level 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 gold and silver leg) and compare them with the present
value of the expected cash flows of the flowing legs (the London metal exchange “LME” gold and silver fixing). In the case of the
commodity forward contracts, the models use the LME AU and AG forward curve and the US LIBOR swap curve for discounting.
This approach results in the fair value measurement categorised in its entirety as level 2 in the fair value hierarchy. The fair values of
the silver forwards as at 31 December 2023 and 31 December 2022 are as follows:
31 December 2023
Current assets
Current liabilities
Non-current liabilities
The effect recorded is as follows:
Income statement – revenue
Income statement – finance income
Equity – Unrealised loss on hedges
US$000
846
(1,190)
(16,581)
(16,925)
US$000
7,846
593
19,704
209
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCONTINUED Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023Strategic Report 01—99Governance 100—149Financial Statements 150—226Further Information 227—231 39 Financial risk management continued
31 December 2022
Current assets
Non-current assets
The effect recorded is as follows:
Income statement – revenue
Equity – Unrealised loss on hedges
US$000
2,186
–
2,186
US$000
20,428
16,929
The sensitivity of the fair value of the current hedges outstanding at 31 December 2023 to a reasonable movement in the
commodity prices, with all other variables held constant, determined as a +/-10% change in prices -US$48,225,000/US$49,819,000
effect on OCI.
The Group has price adjustments arising from the sale of concentrate and dore which were provisionally priced at the time the
sale was recorded (refer to note 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
2023
2022
Increase/
decrease in price of
ounces of:
Effect on
profit before tax
US$000
Gold +/-10%
Silver+/-10%
Gold +/-10%
Silver+/-10%
+/-127
+/-45
+/-165
+/-138
(b) Foreign currency risk
The Group produces silver and gold which are typically priced in US dollars. A proportion of the Group’s costs are incurred in
Peruvian nuevos soles, Argentinian pesos, Brazilian reais, sterling pounds, Canadian dollars, Chilean pesos, and Mexican pesos.
Accordingly, the Group’s financial results may be affected by exchange rate fluctuations between the US dollar and the local
currency. The long-term relationship between commodity prices and currencies in the countries in which the Group operates
provides a certain degree of natural protection. The Group does not use derivative instruments to manage its foreign currency risks.
The following table demonstrates the sensitivity of financial assets and liabilities, at the reporting date, denominated in their
respective currencies, to a reasonably possible change in the US dollar exchange rate, with all other variables held constant, of the
Group’s profit before tax and the Group’s equity.
Year
2023
Pounds sterling
Argentinian pesos
Mexican pesos
Peruvian nuevos soles
Reais
Canadian dollars
Chilean pesos
2022
Pounds sterling
Argentinian pesos
Mexican pesos
Peruvian nuevos soles
Reais
Canadian dollars
Chilean pesos
Increase/
decrease in US$/other
currencies’
rate
+/-10%
+/-10%
+/-10%
+/-10%
+/-10%
+/-10%
+/-10%
+/-10%
+/-10%
+/-10%
+/-10%
+/-10%
+/-10%
+/-10%
Effect
on profit
before tax
US$000
-/+93
-/+2,206
+/-1,843
-/+19,384
-/+21,718
-/+450
+/-70
-/+155
-/+3,775
+/-1,821
-/+15,326
-/+7,230
-/+461
+/-763
Effect
on equity
US$000
–
–
–
–
–
+/-16
–
–
–
–
–
–
+/-17
–
(c) Credit risk
Credit risk arises from debtors’ inability to make payment of their obligations to the Group as they become due (without taking into
account the fair value of any guarantee or pledged assets). The Group is primarily exposed to credit risk as a result of commercial
activities and noncompliance, by counterparties, in transactions in cash which are primarily limited to cash balances deposited in
banks and accounts receivable at the statement of financial position date.
Counterparty credit exposure based on commercial activities, including trade and other receivables, embedded derivatives, hedge
instruments and cash balances in banks as at 31 December 2023 and 31 December 2022:
Summary commercial partners
Trade receivables
As at
31 December
2023
US$000
% collected as
at 11 March
2024
US$000
As at
31 December
2022
US$000
% collected
as at 19 April
2023
US$000
29,421
72%
42,364
73%
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
2023
US$000
As at
31 December
2022
US$000
40,759
55,847
–
12,955
27,205
–
–
–
–
–
–
5,172
–
3,035
89,126
1,066
2,436
42,091
8
8,000
109
10,505
60
5,210
4,419
1
14,092
143,844
1 Represents the long-term credit rating as at 3 January 2024 (2022: 3 January 2023).
As at 31 December 2023, the credit rating of the counterparty of the gold forward hedges is A- and A+ (31 December 2022 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 39(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 2023 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$115,000 (2022: +/-US$127,000) recognised in equity. The sensitivity to reasonable
movements in the share price of financial assets at fair value through profit and loss of +/- 25% with all other variables held constant
is +/-US$Nil (2021: +/-US$254,000) recognised in the consolidated statement of profit and loss.
210
211
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCONTINUED Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023Strategic Report 01—99Governance 100—149Financial Statements 150—226Further Information 227—231 39 Financial risk management continued
(e) Fair value hierarchy
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
Level 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.
As at 31 December 2023 and 2022, the Group held the following financial instruments measured at fair value:
Assets and liabilities measured at fair value
Equity shares (notes 20 and 21)
Trade receivables (note 22)
Derivative financial assets
Derivative financial liabilities
Assets measured at fair value
Equity shares (notes 20 and 21)
Trade receivables (note 22)
Derivative financial assets
31 December
2023
US$000
460
29,421
846
(17,771)
31 December
2022
US$000
Level 1
US$000
Level 2
US$000
Level 3
US$000
460
29,421
846
(17,771)
Level 1
US$000
Level 2
US$000
Level 3
US$000
1,524
1,524
42,364
2,186
42,364
2,186
During the period ending 31 December 2023 and 2022, 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 2022
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 2023
Trade receivables/
price adjustments
US$000
27,773
8,063
(1,323)
7,851
42,364
(8,644)
1,174
(5,473)
29,421
The impact of the hedging instrument and hedge item on the statement of financial position is as follows:
Average
price US$/
ounce
ounces
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
2023
Gold forward contracts 277,599.96 From 2,100
to 2,252
Derivative financial
assets and liabilities
(16,925)
(11,546)
(11,546)
2022
Silver forward contracts 3.3 million
25.00 Derivative financial asset
2,186
1,541
1,541
The hedging gain recognised in OCI before tax on silver and gold forward hedges is equal to the change in fair value of the hedged
item attributable to the hedged risk used for measuring effectiveness. There is no ineffectiveness recognised in profit or loss.
212
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 2022
Reclassification adjustments for items included in the income statement on realisation:
Transfer to sales (revenue)
Revaluation arising on the year
Movement in deferred tax
Balance at 31 December 2022
Reclassification adjustments for items included in the income statement on realisation:
Transfer to sales (revenue)
Revaluation arising on the year
Movement in deferred tax
Balance at 31 December 2023
Gold
forward
US$000
Silver forward
US$000
13,476
Total
US$000
13,476
–
–
–
–
(2,522)
(14,996)
5,972
(11,546)
(20,428)
(20,428)
3,499
4,994
1,541
(5,324)
3,138
645
3,499
4,994
1,541
(7,846)
(11,858)
6,617
–
(11,546)
(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 2023
Trade and other payables
Derivative financial liabilities
Borrowings
Total
At 31 December 2022
Trade and other payables
Borrowings
Total
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
118,702
1,190
130,946
250,838
125,192
61,133
186,325
1,656
16,581
138,875
157,112
1,623
116,729
118,352
–
–
126,303
126,303
–
193,885
193,885
–
–
–
–
–
–
–
120,358
17,771
396,124
534,253
126,815
371,747
498,562
(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
Within
1 year
US$000
37,184
(5,870)
As at 31 December 2023
Between
1 and
2 years
US$000
Between
2 and
5 years
US$000
Over
5 years
US$000
–
–
–
–
–
–
–
(106,087)
(120,001)
(114,998)
Total
US$000
37,184
(5,870)
(341,086)
213
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCONTINUED Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023Strategic Report 01—99Governance 100—149Financial Statements 150—226Further Information 227—231 39 Financial risk management continued
Fixed rate
Assets
Liabilities
Floating rate
Liabilities
As at 31 December 2022
Between
1 and
2 years
US$000
Between
2 and
5 years
US$000
Over
5 years
US$000
Within
1 year
US$000
89,225
(16,661)
–
–
–
–
(27,328)
(100,00)
(175,000)
Total
US$000
89,225
(16,661)
(302,328)
–
–
–
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$658,000 effect on profit before tax (2022:
-/+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 2023 and 2022 and that the change in
interest rates is effective from the beginning of the year. In reality, the floating rate will fluctuate over the year and interest rates
will change accordingly.
(h) Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to
provide returns for shareholders, benefits for other stakeholders, and to maintain an optimal capital structure to reduce the cost of
capital. Management considers as part of its capital, the financial sources of funding from shareholders and third parties (notes 28
and 30).
In 2023 the Group received proceeds from borrowings of US$137,413,000 (2022: US$28,911,000) whilst US$111,980,000 (2022:
US$11,557,000) was repaid. In 2022 the Group closed a US$200,000,000 medium-term committed debt facility with Scotiabank and
BBVA and used US$60,000,000 in 2023.
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.
40 Subsequent events
(a) Hedges
In February 2024, the Group hedged 60,000 ounces of 2025 gold production at strike put of $2,000 per ounce and a strike call of
$2,485 per ounce to increase cash flow certainty for the repayment of the medium-term facilities.
(b) Loan facility
In February 2024 the Group drew down an additional US$20,000,000 and in March 2024 an additional US$15,000,000, from the
US$200,000,000 medium-term debt facility signed in 2022 with the Bank of Nova Scotia and BBVA Securities Inc.
(c) Option to acquire Monte Do Carmo project, Brazil
The Group, through its wholly-owned subsidiary Amarillo Mineração do Brasil Ltda. has entered into an option agreement and
certain ancillary agreements with Cerrado Gold Inc. pursuant to which Cerrado has granted Amarillo Mineração the option to
acquire a 100% interest in Cerrado’s Monte Do Carmo project located in the mining-friendly state of Tocantins, Brazil.
In consideration for entering into the option, Amarillo Mineração has agreed to advance to Cerrado an amount equal to $15 million
by way of 10% interest-bearing secured loan and has committed to incur a minimum of $5 million in exploration expenditures at the
project during a 12.5-month period ending on 19 March 2025.
At any time during the Option Period, Amarillo Mineração may, at its sole discretion, elect to exercise the option to acquire a 100%
interest in the project by deemed repayment of the secured loan, and by making further cash payments to Cerrado totalling $45
million in the aggregate, in multiple instalments over the next three years.
Further details can be found in the separate press release (5 March 2024) on the Company’s website at hochschildmining.com.
PARENT COMPANY FINANCIAL STATEMENTS
Parent company statement of financial position
For the year ended 31 December 2023
ASSETS
Non-current assets
Investments in subsidiaries
Other receivables
Current assets
Other receivables
Cash and cash equivalents
Total assets
EQUITY AND LIABILITIES
Equity share capital
Other reserves
Retained earnings
Total equity
Non-current liabilities
Trade and other payables
Provisions
Current liabilities
Trade and other payables
Total liabilities
Total equity and liabilities
As at 31 December
2023
US$000
2022
US$000
Notes
5
6
6
7
8
9
10
9
927,196
587,083
1,878
–
929,074
587,083
5,546
278
5,824
934,898
9,068
6,643
858,989
874,700
1,816
–
1,816
58,382
58,382
60,198
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
934,898
598,374
The profit of the Company after tax amounted to US$328,819,000 (2022: loss of US$559,481,000).
The financial statements were approved by the Board of Directors on 12 March 2024 and signed on its behalf by:
Eduardo Landin
Chief Executive Officer
12 March 2024
214
215
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCONTINUED Strategic Report 01—99Governance 100—149Financial Statements 150—226Further Information 227—231Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023 PARENT COMPANY FINANCIAL STATEMENTS
CONTINUED
Parent company statement of cash flows
For the year ended 31 December 2023
Reconciliation of loss for the year to net cash used in operating activities
Profit/(loss) for the year
Adjustments to reconcile Company profit/(loss) to net cash outflows from operating activities
Year ended 31 December
Notes
2023
US$000
2022
US$000
328,819
(559,481)
(Reversal)/impairment on investment in subsidiary
5
(339,763)
551,679
Write-off of prepayments
Share-based payments
Finance income
Finance costs
Others
Decrease of cash flows from operations due to changes in assets and liabilities
Other receivables
Trade and other payables
Provision for Long-Term Incentive Plan
Cash used in operating activities
Interest received
Net cash used in operating activities
Cash flows from investing activities
Dividends collected
Net cash generated from investing activities
Cash flows from financing activities
Dividends paid
Loans from subsidiaries
Cash flows generated from financing activities
Net increase/(decrease) in cash and cash equivalents during the year
Foreign exchange effect
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
3,766
395
(532)
12
(15)
7
1,156
–
–
4,286
(507)
13
–
(5,418)
(1,396)
(37)
(6,155)
(10,861)
6
12
(6,149)
(10,849)
–
–
–
5,750
5,750
(399)
15
662
278
–
–
(22,017)
33,000
10,983
134
–
528
662
13
10
12
11(a)
7
Parent company statement of changes in equity
For the year ended 31 December 2023
Balance at 1 January 2022
Other comprehensive income
Loss for the year
Total comprehensive profit for the year
Forfeiture of share options
Issuance of deferred bonus shares
Cancellation of deferred bonus shares
Cancellation of share premium account
Nominal value reduction
Dividends
Share-based payments
Balance at 31 December 2022
Other comprehensive income
Profit for the year
Total comprehensive profit for the year
Forfeiture of share options
Exercise of share options
Share-based payments
Balance at 31 December 2023
Other reserves
Equity share
capital
US$000
Share
premium
US$000
Notes
Share-based
payment
reserve
US$000
Total other
reserves
US$000
Retained
earnings
US$000
Total equity
US$000
226,506
458,267
3,912
3,912
435,136
1,123,821
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(559,481)
(559,481)
(559,481)
(559,481)
(1,886)
(1,886)
136
(1,750)
303,268
(303,268)
(217,445)
(458,267)
9,061
–
–
–
7
9,068
4,286
6,312
–
–
–
(1,528)
(584)
2,443
6,643
4,286
6,312
–
–
–
(1,528)
(584)
2,443
6,643
–
–
–
–
–
(303,268)
303,268
458,267
217,445
–
–
–
–
(22,017)
(22,017)
–
4,286
529,486
544,859
–
328,819
328,819
107
577
–
–
328,819
328,819
(1,421)
–
2,443
858,989
874,700
8(c)
8(a)
8(a)
8(a)
8(a)
12
8(c)
8(c)
8(c)
216
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Strategic Report 01—99Governance 100—149Financial Statements 150—226Further Information 227—231Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023 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 38.27% 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 Ltd (“HM Holdings”), indicating that it will not
request a repayment of the interest free loan of US$50,750,000
for the period to 31 March 2025.
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
31 March 2025.
Considering the support available from the subsidiaries
described above, the Directors have a reasonable expectation
that the Company has adequate resources to meet continue in
operation until 31 March 2025, being a period of at least 12
months from the date of these financial statements. These
considerations included the impact of Covid pandemic on the
wider Hochschild Group and the Hochschild Group’s Directors’
assessment of going concern. Accordingly, the financial
statements have been prepared on the going concern basis.
(c) Exemptions
The Company’s financial statements are included in the
Hochschild Mining Group consolidated financial statements
for the years ended 31 December 2023 and 31 December 2022.
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 2022. Amendments to standards and
interpretations which came into force during the year did not
have a significant impact on the financial statements.
Investments in subsidiaries
(e)
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.
– Financial guarantee – note 2(p)
The Company estimates the fair value of the financial
guarantee contract as the difference between the net present
value of the contractual cash flows required under a debt
instrument, and the net present value of the net contractual
cash flows that would have been required without the
guarantee. The present value is calculated using a risk-free
interest rate.
(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. Nonmonetary assets and
liabilities denominated in foreign currencies that are stated at
historical cost are translated to the functional currency at the
foreign exchange rate prevailing at the date of the transaction.
(j) Cash and cash equivalents
Cash and cash equivalents are carried in the statement of
financial position at cost. For the purposes of the statement of
financial position, cash and cash equivalents comprise cash in
hand and deposits held with banks that are readily convertible
into known amounts of cash within three months or less and
which are subject to insignificant risk of changes in value. For
the purposes of the cash flow statement, cash and cash
equivalents as defined above are shown net of outstanding
bank overdrafts.
(k) Share capital
Ordinary shares are classified as equity. Any excess above the
par value of shares received upon issuance of those shares is
classified as share premium. In the case the excess above par
value is available for distribution, it is classified as merger
reserve and then transferred to retained earnings.
(l) Share-based payments
Cash-settled transactions
The fair value of cash-settled share plans is recognised as a
liability over the vesting period of the awards. Movements in that
liability between reporting dates are recognised as personnel
expenses. The fair value of the awards is taken to be the market
value of the shares at the date of award adjusted by a factor for
anticipated relative TSR performance. Fair values are
subsequently remeasured at each reporting date to reflect the
number of awards expected to vest based on the current and
anticipated TSR performance.
Equity-settled transactions
The cost of equity-settled transactions is determined by the fair
value at the date when the grant is made using an appropriate
valuation model and is recognised, together with a
corresponding increase in other reserves in equity, over the
period in which the performance and/or service conditions are
fulfilled. The cumulative expense recognised for equity-settled
transactions at each reporting date until the vesting date
reflects the extent to which the vesting period has expired and
the Company’s best estimate of the number of equity
instruments that vest. The income statement expense for a
period represents the movement in cumulative expense
recognised as at the beginning and end of that period and is
recognised in personnel expenses.
Service and non-market performance conditions are not taken
into account when determining the grant date fair value of
awards, but the likelihood of the conditions being met is
assessed as part of the Company’s best estimate of the
number of equity instruments that will ultimately vest. Market
performance conditions are reflected within the grant date fair
value. Any other conditions attached to an award, but without
an associated service requirement, are considered to be
non-vesting conditions. Non-vesting conditions are reflected in
the fair value of an award and lead to an immediate expensing
of an award unless there are also service and/or performance
conditions. No expense is recognised for awards that do not
ultimately vest because non-market performance and/or
service conditions have not been met. Where awards include
a market or non-vesting condition, the transactions are treated
as vested irrespective of whether the market or non-vesting
condition is satisfied, provided that all other performance and/or
service conditions are satisfied. When the terms of an equity-
settled award are modified, the minimum expense recognised
is the grant date fair value of the unmodified award, provided
the original vesting terms of the award are met. An additional
expense, measured as at the date of modification, is recognised
for any modification that increases the total fair value of the
share-based payment transaction, or is otherwise beneficial to
the employee. Where an award is cancelled by the entity or by
the counterparty, any remaining element of the fair value of the
award is expensed immediately through profit or loss.
(m) Finance income and costs
Finance income and costs mainly comprise interest income on
funds invested, interest expense on borrowings and foreign
exchange gains and losses. Interest income and costs are
recognised as they accrue, taking into account the effective
yield on the asset and liability, respectively.
(n) Income tax
Income tax for the year comprises current and deferred tax.
Income tax is recognised in the income statement except to the
extent that it relates to items charged or credited directly to
equity, in which case it is recognised in equity.
Current tax expense is the expected tax payable on the taxable
income for the year, using tax rates enacted at the statement of
financial position date, and any adjustment to tax payable in
respect of previous years.
Deferred tax is provided using the balance sheet liability
method, providing for temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes with the
following exemptions:
– Where the temporary difference arises from the initial
recognition of goodwill or of an asset or liability in a
transaction that is not a business combination that at the time
of the transaction affects neither accounting nor taxable
profit or loss
– In respect of taxable temporary differences associated with
investments in subsidiaries, associates and joint ventures,
where the timing of the reversal of the temporary differences
can be controlled and it is probable that the temporary
differences will not reverse in the foreseeable future
Deferred tax assets and liabilities are measured at the tax rates
that are expected to apply to the period when the asset is
realised or the liability is settled based on the tax rates (and tax
laws) that have been enacted or substantively enacted at the
statement of financial position date.
A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against
which the asset can be utilised. Deferred tax assets are reduced
to the extent that it is no longer probable that the related tax
benefit will be realised.
218
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CONTINUED
2 Significant accounting policies continued
(o) Financial instruments
A financial instrument is any contract that gives rise to a
financial asset of one entity and a financial liability or equity
instrument of another entity.
Financial assets
Initial recognition and measurement
Financial assets are classified, at initial recognition, as
subsequently measured at amortised cost, fair value through
other comprehensive income (OCI), and fair value through profit
or loss.
The classification of financial assets at initial recognition
depends on the financial asset’s contractual cash flow
characteristics and the Company’s business model for
managing them.
The Company’s business model for managing financial assets
refers to how it manages its financial assets in order to generate
cash flows. The business model determines whether cash flows
will result from collecting contractual cash flows, selling the
financial assets, or both.
Subsequent measurement
The Company measures financial assets at amortised cost
(debt instruments) if both of the following conditions are met:
– The financial asset is held within a business model with the
objective to hold financial assets in order to collect contractual
cash flows, and
– The contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments of
principal and interest on the principal amount outstanding
Financial assets at amortised cost are subsequently measured
using the effective interest rate (EIR) method and are subject to
impairment. Gains and losses are recognised in profit or loss
when the asset is derecognised, modified or impaired.
The Company’s financial assets at amortised cost includes
trade receivables.
Derecognition
A financial asset (or, where applicable, a part of a financial asset
or part of a group of similar financial assets) is primarily
derecognised (i.e., removed from the Company’s consolidated
statement of financial position) when:
– The rights to receive cash flows from the asset have expired, or
– The Company has transferred its rights to receive cash flows
from the asset or has assumed an obligation to pay the
received cash flows in full without material delay to a third
party under a “pass-through” arrangement; and either (a) the
Company has transferred substantially all the risks and
rewards of the asset, or (b) the Company has neither
transferred nor retained substantially all the risks and rewards
of the asset, but has transferred control of the asset
Impairment of financial assets
The Company recognises an allowance for expected credit losses
(ECLs) for all debt instruments not held at fair value through profit
or loss. ECLs are based on the difference between the contractual
cash flows due in accordance with the contract and all the cash
flows that the Company expects to receive, discounted at an
approximation of the original effective interest rate.
For other receivables, the Company applies a simplified
approach in calculating ECLs. Therefore, the Company does not
track changes in credit risk, but instead recognises a loss
allowance based on lifetime ECLs at each reporting date.
All financial liabilities are recognised initially at fair value and, in
the case of loans and borrowings and payables, net of directly
attributable transaction costs.
The Company’s financial liabilities include trade and other
payables, loans and borrowings including bank overdrafts, and
financial guarantee liabilities.
Subsequent measurement
After initial recognition, interest-bearing loans and borrowings
are subsequently measured at amortised cost using the EIR
method. Gains and losses are recognised in profit or loss when
the liabilities are derecognised as well as through the EIR
amortisation process.
Amortised cost is calculated by taking into account any
discount or premium on acquisition and fees or costs that are an
integral part of the EIR. The EIR amortisation is included as
finance costs in the statement of profit or loss.
This category generally applies to interest-bearing loans
and borrowings.
Derecognition
A financial liability is derecognised when the obligation under the
liability is discharged or cancelled or expires. When an existing
financial liability is replaced by another from the same lender on
substantially different terms, or the terms of an existing liability
are substantially modified, such an exchange or modification is
treated as the derecognition of the original liability and the
recognition of a new liability. The difference in the respective
carrying amounts is recognised in the statement of profit or loss.
(p) Financial guarantees
Financial guarantees are initially recognised in the financial
statements at fair value at the time the guarantee is issued. The
Company estimates the fair value of the financial guarantee
contract as the difference between the net present value of the
contractual cash flows required under a debt instrument, and
the net present value of the net contractual cash flows that
would have been required without the guarantee. The present
value is calculated using a risk-free interest rate.
Subsequent to initial recognition, the Company’s liability under
each guarantee is measured at the higher of the amount initially
recognised less cumulative amortisation recognised in profit
and loss, and the amount of ECL. Financial guarantee ECL
reflect the cash shortfalls adjusted by the risks that are specific
to the cash flows. If the ECL exceeds the initially recognised
guarantee amount less cumulative amortisation the difference
is taken to profit and loss.
A financial guarantee liability is derecognised when the liability
underlying the guarantee is discharged or cancelled or expires, or
if the guarantee is withdrawn or cancelled. The carrying amount of
the financial guarantee is taken to the statement of profit or loss.
(q) Dividend distribution
Dividend distribution to the Company’s shareholders is
recognised as a liability in the Company’s financial statements
in the period in which the dividends are approved by the
Company’s shareholders.
The Company measures a liability to distribute non-cash
assets as a dividend to its owners at the fair value of the assets
to be distributed.
3 Profit and loss account
The Company made a profit attributable to equity shareholders
of US$328,819,000 (2022: loss of US$559,481,000).
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.
4 Property, plant and equipment
At 31 December 2023 and 2022 the Company has property,
plant and equipment with cost of equipment of US$265,000
which is fully depreciated.
There were no additions during 2022 and 2023.
5
Investments in subsidiaries
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
Year ended 31 December 2023
Cost
At 1 January 2023
Additions
At 31 December 2023
Accumulated impairment
At 1 January 2023
Reversal of impairment
At 31 December 2023
Net book value at 31 December 2023
Total
US$000
2,338,958
2,338,958
1,200,196
551,679
1,751,875
587,083
2,338,958
350
2,339,308
1,751,875
(339,763)
1,412,112
927,196
The Company tested its investment in subsidiary for impairment in light of increases (2022: decreases) in the Company’s publicly
listed share price. As a result of this test, the Company recognised a reversal of impairment of the investment in HM Holdings of
US$339,763,000 (2022: impairment of US$551,679,000).
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 2023 translated from
pounds sterling into US 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 increase/decrease to the reversal of the
impairment recognised by US$87,793,000 (2022: additional decrease/increase to the impairment recognised by US$54,326,000). A
change in the control premium would have the following impact over the reversal of impairment/impairment recognised in 2023 and
2022 respectively 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
2023
US$000
As at
31 December
2022
US$000
35,117
(35,117)
(21,730)
21,730
Name
As at 31 December 2023
As at 31 December 2022
Country of
incorporation
Equity
interest %
Carrying
value US$000
Country of
incorporation
Equity
interest %
Carrying
value US$000
Hochschild Mining Holdings Ltd
England and Wales
100%
927,196 England and Wales
100%
Total
927,196
587,083
587,083
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 2023 the Company recorded a capital contribution of $350,000 related to the financial guarantee granted over some
borrowings entered into by Amarillo Mineração do Brasil Ltd. (“Amarillo”), one of its indirectly held subsidiaries (note 9).
220
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CONTINUED
6 Other receivables
The movement in share capital of the Company from 1 January 2022 to 31 December 2023 is as follows:
Amounts receivable from subsidiaries (note 11)
Prepayments1
Receivable from Kaupthing, Singer and Friedlander2
Other receivable
Total
Less current balance
Non-current balance
Year ended 31 December
2023
US$000
2022
US$000
7,217
205
–
2
7,424
(5,546)
1,878
6,636
3,992
–
1
10,629
(10,629)
–
1
In 2022, mainly related to the transaction costs incurred for the acquisition of Amarillo of US$3,766,000 (refer to note 4(a) of the Consolidated Financial Statements) written-off
in 2023 and recognised in other expenses.
2 Net of the impairment of receivable of US$186,000 (2022: US$176,000).
The fair values of other receivables approximate their book values.
Movements in the provision for impairment of receivables:
At 1 January 2022
Provided during the year
At 31 December 2022
Provided during the year
At 31 December 2023
As at 31 December 2023 and 2022, none of the financial assets classified as receivables (net of impairment) were past due.
7 Cash and cash equivalents
Total
US$000
197
(21)
176
10
186
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 (2022: Nil days).
8 Equity
(a) Share capital and share premium
Issued share capital
The issued share capital of the Company as at 31 December 2023 is as follows:
Class of shares
Ordinary shares
The issued share capital of the Company as at 31 December 2022 is as follows:
Class of shares
Ordinary shares
Year ended 31 December
2023
US$000
2022
US$000
167
111
278
397
265
662
Issued
Number
Amount
514,458,432
£5,144,584
Issued
Number
Amount
513,875,563
£5,138,756
At 31 December 2023 and 2022, all issued shares with a par value of 1 pence each were fully paid (2023: weighted average of
US$0.018 per share, 2022: weighted average of US$0.018 per share).
222
Shares issued as at 1 January 2022
Deferred bonus shares issued on 20 June 2022
Cancellation of deferred bonus shares on 22 June 2022
Cancellation 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
Issuance of shares for bonus payment on 12 May 2023
Shares issued as at 31 December 2023
Number of
ordinary
shares
Share capital
US$000
513,875,563
513,875,563
226,506
303,268
(513,875,563)
(303,268)
Share
premium
US$000
458,267
–
–
–
–
513,875,563
582,869
514,458,432
–
(458,267)
(217,445)
9,061
7
9,068
–
–
–
–
Following the passing of certain special resolutions at an Extraordinary General Meeting of shareholders held on 26 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;
3. the reduction in the nominal value of the ordinary shares from 25 pence per ordinary share to 1 pence per ordinary share; and
4. (both (ii) and (iii) above collectively referred to as “the Reductions”).
Rights attached to ordinary shares
At general meetings of the Company, on a show of hands and on a poll, every member who is present in person or subject to the
below by proxy, has one vote for every share of which they are the holder/proxy. However, in the case of a vote on a show of hands
where a proxy has been appointed by more than one member, the proxy has one vote for and one vote against if the proxy has been
instructed by one or more members to vote for the resolution and by one or more members to vote against the resolution.
(b) Treasury shares
Treasury shares represent the cost of Hochschild Mining PLC shares purchased in the market and held by the trustee of the
Hochschild Mining Employee Share Trust to satisfy the award of conditional shares under the Group’s Enhanced Long-Term
Incentive Plan granted to the CEO (note 2(o) of consolidated financial statements).
The movement in treasury shares are as follows:
– On 30 March 2020, the Company 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 2023 and 31 December 2022 the balance of treasury shares is Nil
(c) Other reserves
Share-based payment reserve
Share-based payment reserve is used to recognise the value of equity-settled share-based payment transactions provided to
employees, as a part of their remuneration.
Refer to note 30(c) to the consolidated financial statements for details of the share-based payment reserve at 31 December 2023
and 2022.
(d) Retained earnings
Merger reserve
The merger reserve represents the difference between the value of the net assets of the Cayman Holding Companies (Ardsley,
Garrison, Larchmont and Hochschild Mining (Peru)) acquired under the Share Exchange Agreement and the nominal value of the
shares issued in consideration of such acquisition. In addition a merger reserve was generated by certain share placing
transactions made by the Company after the IPO. The merger reserve available for distribution is disclosed within retained
earnings.
As at 31 December 2022 the balance of the merger reserve was capitalised. The movement of the merger reserve is as follows:
As at 1 January 2022
Capitalisation of merger reserve
As at 31 December 2022
US$000
198,398
(198,398)
–
223
Strategic Report 01—99Governance 100—149Financial Statements 150—226Further Information 227—231Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023 NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
CONTINUED
9 Trade and other payables
12 Dividends paid and proposed
Trade payables
Payables to subsidiaries (note 11(a))
Remuneration payable
Taxes and contributions
Financial guarantees1
Others
Total
As at 31 December
2023
2022
Non-current
US$000
Current
US$000
Non-current
US$000
–
731
–
–
1,085
–
1,331
56,215
56
201
576
3
–
731
–
–
1,342
–
Current
US$000
928
49,579
270
170
495
–
1,816
58,382
2,073
51,442
Dividends paid and proposed during the year
Equity dividends on ordinary shares:
Final dividend for 2022: Nil US cents per share (2021: 2.335 US cents per share)
Interim dividend for 2023: Nil US cents per share (2022: 1.95 US cents per share)
Total dividends paid in cash
Total dividends paid on ordinary shares
Proposed dividends on ordinary shares:
Final dividend for 2023: Nil US cents per share (2022: Nil US cents per share)
2023
US$000
2022
US$000
–
–
–
–
–
11,998
10,019
22,017
22,017
–
1 The Company provided financial guarantee to the banks loan entered into by its subsidiary Minera Ares and Amarillo. The financial guarantee was recognised at its fair value
at initial recognition of US$3,298,000 (US$1,472,000 recognised in 2019, additional US$1,476,000 recognised in 2021 and US$350,000 recognised in 2023). 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 and Amarillo would have been charged
were it not for the guarantee provided by the Company.
Trade payables mainly relate to the purchase of third party services. These payables do not accrue interest and no guarantees
have been granted in relation to these payables. The fair value of trade and other payables approximate their book values.
10 Provisions
Beginning balance
(Decrease)/increase in provision, net
At 31 December
Less: current portion
Non-current portion
As at 31 December
2023
US$000
2022
US$000
–
–
–
–
–
37
(37)
–
–
–
Corresponds to the provision related to awards granted under the Long-Term Incentive Plan (LTIP) to designated personnel of the
Company. Includes the following benefit: (i) 2020 awards, granted in February 2020, payable in February 2023, as 50% in cash, with
a result of US$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 29 to the consolidated
financial statements for details of the LTIP awards and assumptions used for the valuation as at 31 December 2023 and 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 2023 and
31 December 2022.
Subsidiaries
Compañía Minera Ares S.A.C.1
Hochschild Mining Holdings Ltd2
Minera Santa Cruz S.A.3
Other subsidiaries
Total
As at 31 December 2023
As at 31 December 2022
Accounts
receivable
US$000
Accounts
payable
US$000
Accounts
receivable
US$000
Accounts
payable
US$000
6,025
–
1,040
152
7,217
6,173
50,750
20
3
5,123
–
998
515
5,286
45,000
20
4
56,946
6,636
50,310
1
The account receivable mainly relates to the LTIP 2023, LTIP 2022, LTIP 2021, and LTIP 2020 (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 2023 amounts to US$887,000 (2022:
US$649,000). 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$5,750,000 (2022: US$45,000,000).
In March 2024, the Company received a support letter from HM Holdings indicating that it will not request a repayment of the interest free loan of US$50,750,000 for the period
to 31 March 2025.
3
The account receivable mainly relates to the LTIP 2023, LTIP 2022, LTIP 2021, and LTIP 2020 (paid in shares that are going to be paid by Hochschild Mining PLC in shares on
behalf of Minera Santa Cruz). The account payable mainly relates to the services performed by Minera Santa Cruz to the Company, which during 2023 amounts to US$Nil
(2022: US$Nil).
The fair values of the receivables and payables approximate their book values. Transactions between the Company and these
companies are on an arm’s length basis.
(b) Compensation of key management personnel of the Company
Key management personnel include the Directors who receive remuneration. The amount of this remuneration totals US$1,071,000
(2022: US$1,140,000).
Dividends per share
There was no interim dividend paid during 2023. There is no proposed final dividend in respect of the year ending 31 December 2023.
13 Finance income
Interests on deposits
Income from guarantee
Total
2023
US$000
2022
US$000
6
526
532
12
495
507
14 Financial risk management
The Company is exposed to a variety of risks and uncertainties which may have an impact on the achievement of financial and
economic objectives. These risks include strategic, operational and financial risk and are further categorised into risk areas to
facilitate risk assessment. The Company is not exposed to significant sources of commodity price, equity or interest rate risk.
(a) Foreign currency risk
Due to the operations of the Company, it has cash and cash equivalents and trade payables denominated in pounds sterling.
Accordingly, the financial results of the Company may be affected by exchange rate fluctuations. The Company does not use
derivative instruments to manage its foreign currency risks. The following table demonstrates the sensitivity of financial assets and
liabilities, at the reporting date denominated in their respective currencies, to a reasonably possible change in the US dollar
exchange rate, with all other variables held constant, of the Company’s profit before tax and the Company’s equity.
Year
2023
Pound sterling
2022
Pound sterling
Increase/
decrease in
US$/other
currencies
rate
Effect
on profit
before tax
US$000
Effect
on equity
US$000
+/-10%
-/+94
+/-10%
-/+40
–
–
(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.
224
225
Strategic Report 01—99Governance 100—149Financial Statements 150—226Further Information 227—231Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023
Inmaculada
San Jose
Pallancata
396,644
242,461
54,046
(243,903)
(198,253)
(73,069)
7,065
(173)
119
(236,838)
(198,426)
(72,950)
(162,570)
(150,470)
(75,810)
(49,324)
(1,373)
(2,211)
5,126
–
(271)
1,639
(49,940)
(19,678)
(489)
(832)
(2,011)
Consolidation
adjustment
and others
565
7,011
(7,011)
–
–
–
–
–
–
Total/HOC
693,716
(508,214)
–
(508,214)
(362,980)
(144,812)
(1,862)
(3,314)
4,754
152,741
44,208
(19,023)
7,576
185,502
–
–
–
–
(533)
(13,868)
–
–
–
–
(461)
–
(47,192)
(21,297)
–
(26,252)
(87,165)
(83,574)
(9,460)
7,473
(18,199)
(15,620)
(47,192)
(21,297)
(14,862)
(26,252)
75,899
(83,574)
(9,460)
7,473
(18,199)
(15,620)
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
CONTINUED
PROFIT BY OPER ATION 1
(Segment report reconciliation) as at 31 December 2023
14 Financial risk management continued
(c) Liquidity risk
Liquidity risk arises from the Company’s inability to obtain the funds it requires to comply with its commitments. Management
constantly monitors the Company’s level of short- and medium-term liquidity in order to ensure appropriate financing is available
for its operations.
The Company is funded by HM Holdings through loans in order to meet its obligations. Liquidity is supported by the balance of cash
and cash equivalent held by the Company of US$278,000 (2022: US$662,000) 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 2023
Trade and other payables
At 31 December 2022
Trade and other payables
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
58,335
51,509
–
–
–
–
–
–
Total
US$000
58,335
51,509
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)
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:
Impairment and write-off of non-current assets, net
Share of post-tax losses from associate
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
Finance income
Finance costs
Foreign exchange loss
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Operating profit before impairment
152,208
30,340
(19,484)
At 31 December 2023
Financial guarantees1
At 31 December 2022
Financial guarantees1
335,000,000
335,000,000
Income tax expense
–
–
–
(16,552)
(16,552)
Profit/(loss) from operations before income tax
152,208
30,340
(19,484)
(206,545)
(43,481)
Profit/(loss) for the year from operations
152,208
30,340
(19,484)
(223,097)
(60,033)
300,000,000
–
–
– 300,000,000
1 On a post-exceptional basis.
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.
226
227
Strategic Report 01—99Governance 100—149Financial Statements 150—226Further Information 227—231Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023 ATTRIBUTABLE METAL RESOURCES AS AT 31 DECEMBER 2023 1,2
Tonnes
(t)
Ag
(g/t)
Au
(g/t)
Ag Eq
(g/t)
Ag
(moz)
Au
(koz)
Ag Eq
(moz)
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 228 to 230 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 2023, 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$1,650 per ounce and Ag Price: US$22.0 per ounce.
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
ATTRIBUTABLE METAL RESERVES AS AT 31 DECEMBER 2023
GROWTH PROJECTS
Reserve category
OPERATIONS
Inmaculada
Proved
Probable
Total
San Jose
Proved
Probable
Total
Mara Rosa
Proved
Probable
Total
GRAND TOTAL
Proved
Probable
TOTAL
Proved and
probable
(t)
1,425,933
3,304,970
4,730,903
300,006
237,883
537,889
11,791,000
12,014,000
23,805,000
13,516,939
15,556,854
29,073,792
Ag
(g/t)
Au
(g/t)
Ag
(moz)
Au
(koz)
Ag Eq
(moz)
177
116
135
283
312
296
–
–
–
25
29
27
4.1
2.9
3.3
5.1
5.7
5.4
1.2
1.2
1.2
1.6
1.6
1.6
8.1
12.4
20.5
2.7
2.4
5.1
–
–
–
10.9
14.7
25.6
188.0
306.4
494.4
49.0
43.7
92.7
455.8
446.2
902.0
692.9
796.1
22.2
35.3
57.6
6.4
5.7
12.1
34.2
33.4
67.6
62.8
74.4
1,489.0
137.3
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.
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
2,455,000
5,236,000
7,691,000
8,533,000
1,196,000
592,000
1,788,000
3,372,000
818,040
497,250
1,315,290
899,640
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
148,284,040
389,760,250
538,044,290
99,176,640
187
132
149
107
306
236
283
481
450
360
416
329
–
–
–
–
47
38
40
46
244
187
188
170
–
–
–
–
438
411
421
371
12
9
10
54
4.45
3.22
3.61
2.78
1.39
1.10
1.29
1.81
7.52
6.16
7.00
5.04
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
0.85
0.70
0.74
0.85
520
374
421
316
410
318
380
617
1,014
822
941
707
90
83
83
39
82
68
71
88
302
244
246
237
53
48
49
39
539
512
523
465
76
62
65
118
14.7
22.2
37.0
29.3
11.8
4.5
16.3
52.1
11.8
5.8
17.6
9.5
351.3
542.4
893.7
763.8
53.5
20.9
74.4
196.7
197.7
98.4
296.1
145.7
–
–
–
–
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
4,023.9
8,762.9
7.9
20.9
28.8
1.1
1.5
41.2
42.7
37.9
–
–
–
–
11.7
17.2
29.0
42.1
59.5
111.8
171.3
172.1
41.1
62.9
104.0
86.6
15.8
6.1
21.8
66.8
26.7
13.1
39.8
20.5
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
361.3
769.0
12,785.7
1,130.2
2,710.1
375.4
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.
228
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Strategic Report 01—99Governance 100—149Financial Statements 150—226Further Information 227—231Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023
RESERVES AND RESOURCES
CONTINUED
CHANGE IN ATTRIBUTABLE RESERVES AND RESOURCES
Ag equivalent content (million ounces)
Inmaculada
Pallancata
San Jose
Mara Rosa
Crespo
Azuca
Volcan
Arcata
Total
Category
Resource
Reserve
Resource
Reserve
Resource
Reserve
Resource
Reserve
Resource
Reserve
Resource
Reserve
Resource
Reserve
Resource
Reserve
Resource
Reserve
Percentage
attributable
December
2023
December
2022
Att.1
December
2023
Att.1
Net
difference
100%
214.8
190.6
100%
51%
100%
100%
100%
100%
100%
71.7
94.3
3.4
66.7
12.6
86.4
67.6
53.6
–
108.6
–
828.8
–
88.7
–
57.6
88.7
–
60.3
12.1
86.4
67.6
53.6
–
108.6
–
828.8
–
88.7
–
(24.2)
(14.1)
(5.6)
(3.4)
(6.4)
(0.6)
–
–
–
–
–
–
–
–
–
–
% change
(11.3%)
(19.7%)
(5.9%)
(100.0%)
(9.6%)
(4.5%)
–
–
–
–
–
–
–
–
–
–
1,541.9
1,505.6
155.4
137.3
(36.2)
(18.1)
(2.4%)
(11.6%)
1 Attributable reserves and resources based on the Group’s percentage ownership of its joint venture projects.
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).
21 Gloucester Place
London
W1U 8HR
United Kingdom
230
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Strategic Report 01—99Governance 100—149Financial Statements 150—226Further Information 227—231Hochschild Mining PLC Annual Report & Accounts 2023Hochschild Mining PLC Annual Report & Accounts 2023
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.
232
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Hochschild Mining PLC Annual Report & Accounts 2023 Hochschild Mining PLC
21 Gloucester Place
London W1U 8HR
United Kingdom
+44 (0) 203 709 3260
info@hocplc.com
www.hochschildmining.com