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Hochschild Mining exceeds full-year silver production target

|Includes:Gold Resource Corporation (GORO), LSG

Silver producer and FTSE 250 constituent Hochschild Mining (LSE: HOC) reported full-year results which showed a production rise of 8% to 28.2 million attributable silver equivalent ounces, slightly above the group's 28 million target for the period.

Hochschild’s full year revenues jumped 24% to US$539.7 million, while pre-tax profits also achieved record levels of US$98.1 million, helped by an exceptional one-off gain of US$42.3 million relating to the Lake Shore Gold/West Timmins Mining transaction. Earnings per share amounted to US$0.31 compared to a loss of US$0.08 in 2008. Its cash position stood at US$77.8 million following a convertible bond offering and equity placing to raise US$260 million.

The company has maintained its M&A (mergers and acquisitions) activities, investing US$172.9 million in Lake Shore Gold (TSX: LSG) to increase its stake to 38% and US$58.5 million into Gold Resource Corp (OTCBB: GORO) to up its shareholding to 29%, while acquiring Southwestern Resources for US$19.2 million.

Other performance highlights included an 11% reduction in unit cost per tonne to exceed the 2009 target of a 5% reduction, and a 20% increase in the resource life of main operations to 7.1 years, while Azuca's resources almost doubled to 44.1 Moz of silver equivalent.

“This has been a year of delivery for Hochschild with strong financial results and an excellent operational performance. We have delivered record production, exceeded our cost reduction target with an 11% saving and decreased administrative expenses by 26%. We delivered on our M&A strategy with continued investments in Lake Shore Gold and Gold Resource Corp as well as the acquisition of Southwestern Resources,” said chairman Eduardo Hochschild.

Hochschild has increased its exploration budget by 75% to US$50 million for 2010, setting a production target of 29 Moz (million ounces) of silver equivalent including 2.7 Moz of silver from the company’s interests in Lake Shore Gold and Gold Resource Corp.

The company simultaneously announced the resignation of its  chief executive officer Miguel Aramburú, who left for personal reasons, while chief financial officer Ignacio Rosado resigned to pursue a CEO role elsewhere. Aramburú and Rosado will be replaced by Ignacio Bustamante and Ramón Barúa respectively.

Bustamante has previously served as chief operational officer and gemeral manager of Hochschild’s Peruvian operations. The current head of Peruvian operations, Ernesto Balarezo, will assume the role of vice president of operations.

Barúa has most recently served as CEO of Fosfatos del Pacifico, a mining project in northern Peru owned by Hochschild’s associate company Cementos Pacasmayo.

Disclosure: no positions

Stocks: GORO, LSG