Hochschild Mining plc. Deutsche Bank BRICS Metals & Mining Conference London, November 2007

Transcription

1 Hochschild Mining plc Deutsche Bank BRICS Metals & Mining Conference London, November 2007

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 Agenda Company overview Financial overview Operational overview Appendix 2

4 Hochschild Mining a snapshot Over 40 years of underground precious metal mining & exploration in the Americas 2006 IPO to fund growth strategy~115% over the next 5 years Listed on the London Stock Exchange (HOC LN) 4th largest primary silver producer ( moz Ag) Mid-sized gold producer ( koz Au) Significant emphasis on exploration Strong track record on corporate social responsibility 3

5 The 4th largest primary silver producer No. Company 2006 production (moz Ag) % of global¹ 1 Industrias Industrias Peñoles Peñoles 47 7% 2 KGHM KGHM Polska Polska Miedz Miedz 40 6% 3 BHP BillitonBHP Billiton 37 6% 4 Kazakhmys Kazakhmys 22 3% 5 Polymetal Polymetal 17 3% 6 Buenaventura Buenaventura 17 3% 7 Grupo Mexico Grupo Mexico 8 Rio Tinto Rio Tinto 9 Coeur d'alene Coeur d'alene Primary silver producers 3% 2% 2% 10 Goldcorp Goldcorp 11 Volcan Volcan 12 Pan American Pan American 13 Hochschild Hochschild Polymetal Coeur Coeur Pan Pan American American Hochschild % 2% 2% 2% Source: Silver Institute, CRU ¹ World excluding China 4

6 and a mid-sized producer of gold Select companies 2006 production (koz Au) % of global Randgold Randgold % Meridian Meridian % Peter HambroPeter Hambro % Agnico Eagle Agnico Eagle % Hochschild Hochschild Mining Mining Highland GoldHighland Gold % 0.2% High River High River % Source: GFMS, Company filings 5

7 Significant production growth Doubling production in the next 5 years >50 45 Moz Ag Eq ~ H107 H207E 2007E 2008E 2009E 2010E 2011E 6

8 Focusing on the Americas Six operating mines in three countries & five exploration offices San Felipe (70%) Resource delineation Polymetalic deposit Production 2009 x Moris (70%) Open pit mine Gold dore Since Q307 Exploration Offices Argentina Chile Mexico Peru USA Legend x Mine Development projects Resource delineation Pallancata (60%) Underground mine Silver/gold conc. Since Q307 Selene (100%) Underground mine Silver/gold dore Since2003 x x San José (51%) Underground mine Gold/silver dore Since Q207 Arcata (100%) Underground mine Silver/gold conc. Since 1964 Ares (100%) Underground min Gold/silver dore Since

9 Exploiting our niche high grade underground mining Alexia Vein Mariana Vein Macarena Proving up R&R more expensive than open pit Long reserve life of mine not economically rationale Industry average reserve life of 4 years 1 Arcata has had average mine life of 3 years since 1990 and has been in production for over 40 years Ramal 2 Vein ¹ Source: JPMorgan Research 8

10 Growing our asset base Exploration philosophy & goals Maintain a highly motivated, technically proficient, well funded exploration team with a successful track record Focus on high grade, low cost deposits / targets Consistent & rigorous approach for measuring value creation of exploration through technical excellence Best international industry practices Reserve growth (6 months) koz Au 1, Gold (+5%) Silver (+23%) Dec-06 Jun moz Ag As at 30 June 2007 Silver (moz) Gold (koz) Zinc (kt) Lead (kt) Proven & Probable Reserve Measured & Indicated Resources Inferred

11 Extending reserve life Stated goal: 4 year reserve life + 4 year resource tail at all mines 5 Average reserve life At IPO End 2006 Mid

12 Diversification Resources by country Resources by commodity 12% 11% 2% 1% 19% 27% 58% 69% Peru Argentina Mexico Silver Gold Zinc Lead Copper 11

13 Responsibility towards employees, the environment and local communities Health & safety Finalizing adoption of U.S. Department of Labor OSHAS standards Ares Mining Unit National Safety Contest: 2003 National Prize 2005 Third Place Arcata Mining Unit 2004 Second Place National Safety Contest: 1998 Second Place 1999 National Prize 2000 Second Place 2005 Second Place Trophy JOHN T.RYAN 2001 Underground Mining 2002 Underground Mining Selene Mining Unit National Safety Contest: 2003 Second Place 2004 National Prize 2005 National Prize 2006 Second Place Environmental Environmental Management System certified to ISO standards Reforestation program Sipán before Sipán today Community TECSUP (leading technical institute in Peru) Self-sustaining programs Healthcare campaigns Schools Alpaca Genetic Improvement Program Community training programs focused on developing technical skills for future employment Ongoing negotiations with local communities for current & future development 12

14 Agenda Company overview Financial overview Operational overview Appendix 13

15 Financial highlights Financial strength to pursue our growth strategy $ million unless stated H107 H106 FY06 Revenue $121 $101 $211 Adjusted EBITDA 1 $56 $56 $108 Adjusted EBITDA 1 margin 46% 56% 51% Earnings per share 2 $0.10 $0.09 $0.19 Operating cash flow $21 $34 $126 Net cash position $300 ($78) $406 ¹ Adjusted EBITDA is calculated as profit from continuing operations before exceptional items, net finance costs and income tax plus depreciation, amortization and exploration costs other than personnel and other expenses 2 Earnings per share using the weighted average number of shares outstanding for the period (2006: 243 million; 2005: 230 million). Current share outstanding 307 million. 14

16 Main actions to achieve 2007 & 2011 production targets Investing heavily for growth: ~$310 million capex ( ) Ares Action 2007: increased capacity by 16% Capex US$m 0.3 Capital spend 2006 Arcata 2007: increased capacity by 20% 2009: increasing capacity by 25% /2008 Selene 2007: increased capacity by 100% San José Q207: commenced production 2008: increasing capacity by 100% / /2008 Moris Q307: commenced production Pallancata Q307: commenced production San Felipe Mid-07: entered feasibility Q409: scheduled commencement 2 ~ /

17 Stock price performance 100% un-hedged exposure to gold and silver Rebased to 100 Volume Hoc hsc hild Gold Silver Volume (000s) 140 5, ,500 4, ,500 3, , ,000 1, , Nov-06 Dec-06 Jan-07 Feb-07 Mar-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct

18 relative to our peers IPO to date HOC: 350p 474p 2007 to date HOC: 404p 474p Hochschild 35.4% Hochschild 17.3% UK peers Randgold Peter Hambro Highland Gold Average (34.2)% 12.9% 23.3% 49.7% Randgold Peter Hambro Highland Gold Average (27.2)% 23.2% 48.7% 48.2% NA peers Hecla Meridian Pan American Apex Silver Coeur D Alene Average (20.8)% 32.2% 23.0% 19.9% 21.0% 50.8% Hecla Apex Silver Meridian Pan American Coeur D Alene Average (22.4)% 27.9% 24.5% 16.5% 7.4% 10.8% Commodities Gold Silver Average 16.8% 23.1% 29.5% Gold Silver Average 12.3% 19.6% 26.9% Indices FTSE 350 Mining TSX DJ Euro Stoxx S&P 500 FTSE % 12.2% 9.9% 9.1% 43.8% FTSE 350 Mining TSX DJ Euro Stoxx S&P 500 FTSE % 7.0% 5.9% 1.4% 46.4% Average 18.5% Average 14.3% Source: Datastream, 6 November

19 Agenda Company overview Financial overview Operational overview Appendix 18

20 Arcata Peru (100%) Reserves & resources 4,000 Reserves Resources 10 3,000 8 Tonne (kt) 2,000 1, LOM High grade silver resource 586 g/t Ag & 1.5 g/t Au Capacity expansion completed ahead of schedule 350 ktpa 420 ktpa in Q Further expansion 618 ktpa in Q408 Significant mineralized potential provides upside 2007 Exploration budget: $4.5 million program to expand R&R base in anticipation of expansion Au koz 0 Production Dec-03 Dec-04 Dec-05 Dec-06 Jun-07 Au (koz) Ag (Moz) mo Ag moz 19

21 Ares Peru (100%) Reserves & resources 1,200 Reserves Resources 4 Tonne (kt) 1, LOM Mature high grade gold deposit 7.67 g/t Au & 211 g/t Ag 2007 exploration budget: $1.5 million directed towards extensive exploration of surrounding areas Decreasing mine grade but maintaining mine life with increased capacity Capacity expansion completed on time and budget on Q to 325 ktpa Au koz 0 Production Dec-03 Dec-04 Dec-05 Dec-06 Jun-07 Au (koz) Ag (Moz) mo Ag moz * June

22 Selene Peru (100%) Reserves & resources 2,500 Reserves Resources 6 Tonne (kt) 2,000 1,500 1, LOM Grades 284 g/t Ag & 1.9 g/t Au Continue to develop the Explorador vein 2007 Exploration budget: $2.6 million focused on the expansion of R&R in the Explorador, Tumiri and Sofia veins Expanding plant capacity on schedule Q ktpa Expansion to accommodate Pallancata ore Au koz 0 Production Dec-03 Dec-04 Dec-05 Dec-06 Jun-07 Au (koz) Ag (Moz) mo Ag moz 21

23 San José Argentina (51%) Mine installations and development completed and operational Production commenced Q Exploration budget: HOC: $3.8 million Minera Andes: $1.96 million Program to expand resources in the Frea, Kospi, Odin A&B Veins as well as test potential mineralization in other targets Jun 2007 R&R total (HOC 51%) Reserves: g/t Ag, 6.7 g/t Au Resources*: g/t Ag, 7.8 g/t Au LOM (R&R): 10.3 years Q308 planned expansion to double capacity Successful entrance into a new country Successfully building relations with local communities * Measured + indicated + inferred, includes reserves 22

24 Pallancata Peru (60%) Commenced production on schedule in Q307 Underground development advancing according to plan Power line and road access to the Selene processing plant completed 2007 Exploration budget: $3.4 million HOC + $1.6 million IMC (JV partner) designed to expand reserves and resources in the Pallancata and Mariana veins Future exploration targets: The Mercedes, Virgen del Carmen and San Javier veins Jun 2007 R&R total (HOC 60%) Reserves: g/t Ag, 1.08 g/t Au Resources*: g/t Ag, 1.5 g/t Au LOM (R&R): 16.5 years 2008 planned expansion to 350 ktpa * Measured + indicated + inferred, includes reserves 23

25 Moris Mexico (70%) Commenced production on schedule in 1 mtpa capacity open pit crush & heap leach operation 2007 exploration budget: HOC: $0.8 million EXMIN: $321,000 Program to explore La Nopalera, El Cajón and South Crestón targets to increase resources and test district potential Jun 2007 R&R total ( Hoc 70%) Reserves: g/t Au Resources*: g/t Au LOM (R&R): 2.8 years * Measured + indicated + inferred, includes reserves 24

26 Exploring the region Exploration offices in Peru, Argentina, Mexico, Chile and the USA New opportunities Feasibility completed Claudia Azuca Manantiales Puesto Chacon Ares Arcata Selene San José Pallancata Moris San Felipe Peñon Blanco Moctezuma Gonzalito Existing mining operations El Gachi Pozos Paraíso Development projects Resource delineation La Flora Tres Chepas Gavilanes Ccello Punta Target definition Prospect To Divest / Drop / JV Quevar (JV) Tignamar Calderón El Pino (JV) Sierra Mojina (JV) El Pocito (JV) San Luis del Cordero Patahuasi 596,470 Has. 77,600 Has. 181,425 Has. 60, Has. Generative 25

27 San Felipe Mexico (70%) Mexico 70% earn in JV Polymetalic deposit High grade resources: Total Jun 2007 (HOC 70%) % Zn, 3.21% Pb, 0.42% Cu and 71 g/t Ag* 18,627 meters drilled, more than the half of it in 2007 in the Ventana ore-body Significant upside in 7 other out-cropping targets Commence feasibility mid-2007 Capacity 700 ktpa late 2009 to 1,080 ktpa by late 2010 * Measured + indicated + inferred, includes reserves 26

28 El Gachi Mexico (70%) * Measured + indicated + inferred, includes reserves El Gachi providing additional upside to San Felipe, 60 km from San Felipe 2.5 to 8.0 m manto identified in the property Historic (no JORC) resource of ± 100 K gr Ag & % Pb + Zn Significant upside potential 27

29 Azuca Peru (100%) >5 km of plus metre wide veins mapped Encouraging results from previous Hochschild drilling programs on the Azuca 1 and Minaspata veins (eg g/t Au and 917 g/t Ag, and g/t Au and 488 g/t Ag respectively) +5 g/t drill intercepts published by another exploration company on an adjacent property (part of same vein district) * Measured + indicated + inferred, includes reserves 28

30 Delivering IPO commitments Finance 100% hedge free Strong financial capacity $310 milllion capex for operations ( ) $500 $750 million available for acquisitions 100% long-term debt repaid Actively looking for acquisitions Dividends declared & paid Explorations Reserves increased by 15% in H107 Resources increased by 9% in H107 Avg. LOM up from 3.7 years to 4.1 years in H107 Strong project pipeline Operations Unit costs contained despite industry pressures Capacity expansions completed in Ares and Arcata, and Selene on schedule San José, Moris and Pallancata in production on time San Felipe moved to feasibility stage Close to 26 moz Ag eq. in 2007 On track to produce 50 moz Ag eq. in

31 Agenda Company overview Financials & valuation Operations & projects Appendix 30

32 Corporate information Stock information Trading statistics Stock exchange listing London Stock Exchange Market cap US$2.26bn Ordinary shares in issue 307,350,266 3 mo. ADTV 529,178 shares Free float 29% 3 mo. ADTV $4.0m per day Institutional shareholders >3% Blackrock 52-wk high/low (p) 511 (7Nov07) / 299 (13Jun07) Institutional ownership split 25% 8% 2% UK US Canada RoW 65% 31

33 Analyst coverage Institution Tgt price Recommendation Cazenove 423 Outperform Goldman Sachs 423 Neutral Buy Hold Sell UBS 500 Buy Citi 425 Buy Canaccord Adams 450 Buy 30% HSBC 400 Neutral JP Morgan 434 Overweight 70% 32

34 Executive Directors & Management Eduardo Hochschild Executive Chairman Roberto Dañino Deputy Chairman & Executive Director Alberto Beeck Executive Director, Strategy & Corporate Development Miguel Aramburú Chief Operating Officer Jorge Benavides Chief Executive of Exploration & Geology Officer Ignacio Rosado Chief Financial Officer Javier Durand Legal Manager José Augusto Palma Senior Adviser, Executive Committee Ignacio Bustamente General Manager, Operations Peru Isac Burstein Corporate Exploration Manager Raymond Jannas Corporate Exploration Manager 33

35 Hochschild Mining plc Deutsche Bank BRICS Metals & Mining Conference London, November 2007