Hochschild Mining plc. Goldman Sachs Basic Materials Conference May 2008

Transcription

1 Hochschild Mining plc Goldman Sachs Basic Materials Conference May 2008

2 Disclaimer Some statements contained in this presentation or in documents referred to in it are or may be forward-looking statements. Actual results may differ from those expressed in such statements, depending on a variety of factors. Past performance of the Company or its shares cannot be relied on as a guide to future performance. Any forward-looking information contained in this presentation has been prepared on the basis of a number of assumptions which may prove to be incorrect, and accordingly, actual results may vary. This presentation does not constitute, or form part of or contain any invitation or offer to any person to underwrite, subscribe for, otherwise acquire, or dispose of any shares in Hochschild Mining plc or advise persons to do so in any jurisdiction, nor shall it, or any part of it, form the basis of or be relied on in any connection with or act as an inducement to enter into any contract or commitment therefore. No reliance may be placed for any purpose whatsoever on the information or opinions contained in this document or on its completeness and no liability whatsoever is accepted for any loss howsoever arising from any use of this document or its contents otherwise in connection therewith. This presentation has been prepared in compliance with English law and English courts will have exclusive jurisdiction over any disputes arising from or connected with this presentation. 1

3 Hochschild at a glance Leading precious metals producer Corporate social responsibility Low cash costs Significant growth opportunities Proven track record of reserve replacement Underground mining and regional expertise 2

4 2007 highlights 3 mines in 1 country to 6 mines in 3 countries Production of 25.7 moz Ag eq Revenue up 44% to $305 million Adjusted EBITDA¹ up 37% Net profit up over 100% to $85m Pro forma EPS² of $0.28 in 2007 Strong balance sheet Full year dividend of 9.2 cents per share 100% unhedged Reserves up 16% 1 Adjusted EBITDA is calculated as profit from continuing operations before exceptional items, net finance income/(cost), foreign exchange (loss)/gain and income tax plus depreciation, amortization and exploration costs other than personnel and other expenses 2 The pro forma earnings per share calculation assumes that the number of Ordinary Shares in issue immediately after Listing (being 307,350,226) had been in issue from 1 January

5 The 3 rd largest primary silver producer No. Company 2007 production (moz Ag) % of global¹ 1 BHP Billiton 2 Industrias Peñoles % 7% 3 KGHM Polska Miedz 39 6% 4 Volcan 21 3% 5 Kazakhmys 19 3% 6 Pan American Silver 17 3% 7 Goldcorp 8 Buenaventura 9 Polymetal 10 Southern Copper 11 Hochschild Mining 12 Rio Tinto Primary silver producers Pan American 17 Polymetal 16 Hochschild 14 Coeur 12 3% 2% 2% 2% 2% 2% 13 Teck Cominco 12 2% Source: GFMS; Hochschild Mining considered a primary silver producer with approximately 60% of revenue derived from silver ¹ Assumes 2007 production of million ounces 4

6 and a mid-sized producer of gold Select companies 2007 production (koz Au) % of global Randgold Randgold Industrias Peñoles Penoles Peter Hambro Peter Hambro Teck Cominco Teck Cominco Polymetal Polymetal Agnico Eagle Agnico Eagle Hochschild Mining Hochschild Mining Oceana Oceana BHP Billiton BHP Aurizon Aruizon Equigold St Barbara % 0.5% 0.4% 0.4% 0.3% 0.3% 0.3% 0.2% 0.2% 0.2% 0.2% Source: GFMS, Company filings 5

7 Low cost producer Hochschild vs. peer group Silver cash costs for largest primary silver producers 8 $7.30/oz 6 4 $3.94/oz $3.97/oz $4.54/oz 2 0 Hochschild Coeur Pan American Polymetal Lowest cash cost global gold producers (US$/oz) $190/oz $195/oz $270/oz $283/oz $390/oz 50 $18/oz ($184)/oz Agnico-Eagle ($9)/oz Yamana Northgate Hochschild 1 Goldcorp Newcrest Mining Buenaventura Industry Average Source: Company disclosure; World Gold Analyst 1 Calculated on a co-product basis given company s production split. On a by-product basis Au cash costs would be ($440)/oz

8 Financial position Strong and profitable position $ millions Dec Cash and cash equivalents 301 Long term borrowing¹ 55 Short term borrowings² 33 Available bank lines³ 200 ROCE (%)⁴ 23% Total dividend 9.2 Shares outstanding 307,350,226 1 Corresponds to loan from Minera Andes Inc to Minera Santa Cruz, the legal arm of San José 2 Corresponds to pre-shipment loans and current amount due to minority shareholders 3 Secured term loan facility arranged in Return on capital employed is calculated as profit from continuing operations before exploration expense interest and taxes, and exceptional items divided by average capital (borrowings and total equity including minority interest) for the period 7

9 Focused on the Americas CANADA Lake Shore Gold Corp. (19.99%) x PERU Arcata (100%) Ares (100%) Selene (100%) Pallancata (60%) x x MEXICO Moris (70%) San Felipe (70%) ARGENTINA San José (51%) x 8

10 Our strategy for growth 1 Maximize the potential of our existing operations through exploration and expansion 2 Bring into production new, profitable precious metal projects throughout the Americas LONG TERM PROFITABLE GROWTH 9

11 Delivering on our strategy 1 2 Expanding existing operations: San José Arcata Pallancata (Selene) New projects: San Felipe feasibility Lake Shore production Q308 Q308 Q408 Q San Felipe production 2010 Exploration, joint ventures, acquisitions 10

12 Capital expenditure (100% basis) Investing in production platform estimated Arcata $13.2m $22.8m $38.3m Ares $2.2m $3.7m $8.9m Selene $4.3m $27.5m $37.3m Pallancata $12.9m $12.2m $7.9m San José $36.1m $62.8m $55.8m Moris $8.0m $12.1m $0.7m San Felipe $0.1m $0.7m $42.9m Other $2.0m $3.1m $9.7m Total $78.9m $144.7m $201.5m 11

13 1 Arcata - a world class silver deposit Flagship mine, record production High grade deposit (476 g/t Ag and 1.2 g/t Au)¹ Ag & Au production up 38% and 29%, respectively Capacity expansion completed further expansion underway Reserves & resources up 59% and 16%, respectively 1 Reserves as at 31 December

14 1 San José Production commenced Q High grade deposit (403 g/t Ag and 6.01 g/t Au)¹ Plant operating at full capacity of 265 ktpa Plant expansion underway due to positive exploration results Reserves & resources up 19% and 28% respectively 1 Reserves as at 31 December

15 1 Pallancata Production commenced Q at initial rate of 180 ktpa Significant synergies with Selene plant Reserves & resources up 74% and 69% respectively Plan to increase throughput to 500 ktpa in

16 2 San Felipe Mexico 70% earn in JV High grade polymetalic deposit resources: Total Dec % Zn, 3.19% Pb, 0.41% Cu and 71 g/t Ag 1 18,627 meters drilled, more than the half of it in 2007 in the Ventana ore-body Significant upside in 7 other outcropping targets Goal of 4.0 Mt of indicated resources (total) by Q308 In feasibility stage Taking steps to ensure infrastructure in place to commence production in Measured + indicated + inferred, includes reserves 15

17 2 Lake Shore Gold Corp. (LSG) Phased, low-risk approach to establishing a foothold in a prolific gold mining region Strong portfolio of projects and exploration expertise Initial purchase of 19.99% (Feb 2008) Hochschild will increase position to 40% in the next 2 months (shareholder approval granted on 15 May 2008) Use of proceeds - advance projects towards production & accelerate Lake Shore s exploration campaign moz Au of total resources Accretive - $120 per ounce Funding type: Cash 16

18 Exploring the region Exploration offices in Peru, Argentina, Mexico and Chile New opportunities Argentina Canada Feasibility completed Chile Mexico Peru Lake Shore Ares Arcata Selene San José Pallancata Moris San Felipe Existing mining operations Tres Chepas Azuca Peñón Blanco El Gachi Manantiales Claudia Gavilanes Development projects Pozos Resource delineation Target definition To Divest / Drop / JV Quevar (JV) Tignamar Calderón El Pino (JV) Sierra Mojina (JV) El Pocito (JV) Cañadón del Moro La Flora El Mosquito Encrucijada Moris Reg. Parihuana Cacurani Ccello Punta Prospect San Luis Cordero Paraiso 554,298 Has. 35,400 Has. 181,425 Has. 60,889 Has. Generative 17

19 Long-term growth Commitment to achieve 50 moz Ag eq by ~ ~26 '06 '07 '08 '09 '10 '11 Note: Silver equivalent ounces assumes a 60:1 conversation rate 18 Moz Ag Eq. Attributable 11.6m oz Ag/ 196k oz Au 13.6moz Ag/ 201k oz Au 16.9moz Ag/ 153k oz Au

20 Hochschild trading at a discount P/NAV EV/2008E EBITDA Source: Company Reports, Broker Reports, Thomson IBES 19

21 An experienced management team Eduardo Hochschild Executive Chairman Roberto Dañino Deputy Chairman & Executive Director Miguel Aramburú Chief Executive Officer Jorge Benavides Senior Vice President Corporate Development Ignacio Bustamente Chief Operating Officer Raymond Jannas Vice President Exploration & Geology Javier Durand Legal Counsel José Augusto Palma Senior Adviser, Executive Committee Ignacio Rosado Chief Financial Officer Isac Burstein Business Development Manager 20

22 Analyst coverage 7 leading institutions covering our stock: Institution Cazenove Canaccord Adams Citi Goldman Sachs JP Morgan HSBC UBS Analyst Fraser Jamieson Damien Hackett Craig Sainsbury Oscar Cabrera Jon Bergtheil Paul McTaggart Grant Sporre 21

23 Delivering on our commitments Operations Capacity expansions completed on schedule San José, Moris and Pallancata in production on time San Felipe moving to feasibility stage 2007 production target achieved On track to produce 50 moz Ag eq. in 2011 Explorations Increasing reserve and resource base Increased average LOM from 2.8 years (Jun 06) to 3.9 years (Dec 07) Strong project pipeline Finance 100% hedge free Strong financial capacity Dividends declared 2007 results in line with expectations Contained unit costs 22

24 2008 outlook Year of consolidation Stable production Focus on cost containment in inflationary environment Advancing on growth strategy through: Further expansions Feasibility at San Felipe Continue to pursue further acquisitions Positive on fundamentals for silver and gold Remain on track to achieve 50 moz Ag eq production target Q production inline with forecast 23

25 Hochschild Mining plc Goldman Sachs Basic Materials Conference May 2008