TIDMHOC
RNS Number : 2347H
Hochschild Mining PLC
16 August 2016
________________________________________________________________________________
16 August 2016
Hochschild Mining plc
Interim Results for the six months ended 30 June 2016
Strong financial results
-- Revenue of $339.3 million (H1 2015: $190.3 million)1
-- Adjusted EBITDA of $170.3 million (H1 2015: $39.3 million)2
-- Profit before income tax of $60.3 million (H1 2015: $43.4 million loss)
-- Adjusted earnings per share of $0.05 (H1 2015: $(0.09))3
-- Interim dividend of 1.38 US cents per share ($7 million)
H1 2016 operational delivery ahead of expectations
-- H1 2016 AISC per silver equivalent ounce from operations reduced by 27% to $10.9 exceeding guidance4
-- Inmaculada AISC per silver equivalent ounce significantly below guidance at $8.2
-- Half year production of 17.0 million attributable silver equivalent ounces exceeding guidance5
-- Balanced gold and silver production profile (51% gold/49% silver)
Improved financial position
-- Cash balance of $102.8 million as at 30 June 2016 (31 December 2015: $84.0 million)
-- $70 million of debt repaid year-to-date (as at 16 August 2016)
-- Net debt of $266.5 million as at 30 June 2016 (31 December 2015: $350.5 million)
-- Net debt/Annual adjusted EBITDA of 1.0x as at 30 June 2016 (31 December 2015: 2.5x)
H2 2016 Outlook
-- Record attributable production target increased from 32.0 million to 34.0 million silver equivalent ounces
-- AISC now expected to be $11.0-11.5 per silver equivalent ounce (previous guidance of $12.0-12.5 per ounce)
Capital Markets Event
-- Capital Markets Event to be held on 6 September 2016 in London
$000, pre-exceptional unless stated Six months to 30 June 2016 Six months to 30 June 2015 % change
------------------------------------------------- --------------------------- --------------------------- ---------
Attributable silver production (koz) 8,210 6,265 31
Attributable gold production (koz) 118 41 188
Revenue(1) 339,277 190,259 78
Adjusted EBITDA 170,285 39,306 333
Profit /(loss) from continuing operations 35,994 (37,750) 195
Profit/(loss) from continuing operations
(post-exceptional) 37,744 (43,885) 186
Earnings per share ($ pre-exceptional) 0.05 (0.09) 156
Earnings per share ($ post-exceptional) 0.06 (0.11) 155
------------------------------------------------- --------------------------- --------------------------- ---------
Commenting on the results, Eduardo Hochschild, Chairman
said:
"Our long term investment strategy has now started to deliver
strong results with an impressive operational performance combined
with more positive precious metal prices which has in turn led to
our re-entry into the FTSE 250. The Company has returned to
profitability, materially reduced its debt position and is
investing primarily in brownfield growth. In this constructive
environment, the Board has decided to pay a dividend of 1.38 US
cents per share, representing approximately 25% of net earnings,
which we believe is an appropriate payout at this early stage of
the cycle."
________________________________________________________________________________
A live conference call & audio webcast will be held at
2.30pm (London time) on Tuesday 16 August 2016 for analysts and
investors. Details as follows:
For a live webcast of the presentation please click on the link
below:
http://edge.media-server.com/m/p/b8f2u9fv
Conference call dial in details:
UK: +44(0)20 3427 1900 (Please use the following confirmation
code: 6331446).
A recording of the conference call will be available for one
week following its conclusion, accessible from the following
telephone number:
UK: (0)20 3427 0598 (Access code: 6331446)
The On Demand version of the webcast will be available within
two hours after the end of the presentation and is accessible using
the same webcast link.
________________________________________________________________________________
Enquiries:
Hochschild Mining plc
Charles Gordon +44 (0)20 3714 9044
Head of Investor Relations
Hudson Sandler
Charlie Jack +44 (0)207 796 4133
Public Relations
________________________________________________________________________________
About Hochschild Mining plc:
Hochschild Mining plc is a leading precious metals company
listed on the London Stock Exchange (HOCM.L / HOC LN) with a
primary focus on the exploration, mining, processing and sale of
silver and gold. Hochschild has over fifty years' experience in the
mining of precious metal epithermal vein deposits and currently
operates four underground epithermal vein mines, three located in
southern Peru and one in southern Argentina. Hochschild also has
numerous long-term projects throughout the Americas.
CHIEF EXECUTIVE OFFICER'S STATEMENT
A year ago, as Inmaculada began its ramp-up process, we
envisioned a more positive future for the Company with the prospect
of a steady state contribution from this new low cost flagship
mine. Today we can report that the Company has delivered better
than expected operational results and Hochschild is now
successfully delivering on the organic investment strategy that has
been implemented over the last few years. The combination of a
strong production performance, an intense focus on cost control and
an encouraging precious metal price environment has been a powerful
driver for the Company's return to profitability. We are confident
that the foundations are in place to continue delivering robust
results and that this momentum can be maintained.
H1 operational performance
Hochschild's mines delivered a very good first half with both
Inmaculada and Arcata performing above expectations. The Company,
as a whole, produced 118 thousand ounces of gold and 8.2 million
ounces of silver which, when converted to the silver equivalent
number of 17 million ounces, confirms that the run rate is ahead of
the original full year target of 32 million ounces. Inmaculada was
the key driver with grade and recoveries running ahead of plan and
the plant consistently outperforming its design capacity. This led
to production of 111 thousand gold equivalent ounces at an all-in
sustaining cost of around $600 per ounce which places the mine in
the bottom decile of the industry cost curve. In addition, Arcata
enjoyed its finest half for over five years with production
improving by 15% versus the same period of 2015. San Jose in
Argentina has continued to deliver remarkably consistent output in
an improved domestic economic environment. With the Company's
overall cost position substantially lowered, all operations
generated strong cashflow and we can look forward to a further
boost at Pallancata when the transition to feed from the new Pablo
vein is completed.
Financial position
The Company's strategy of de-risking the balance sheet has
continued in 2016 with a further $70 million of medium and short
term debt repaid to date following on from the $105 million
executed in 2015. These ongoing measures have been facilitated by
the Company's strong free cashflow generation resulting from the
operational performance mentioned above. The cash balance at the
half year remained above $100 million despite the debt repayments
whilst capital expenditure was in line across all operations. Our
net debt position has now been reduced by almost 40% in the last
twelve months and we are confident that the maturity of our
remaining long term debt is adequately profiled. The ratio of net
debt to annual adjusted EBITDA currently stands at approximately
1.0x. The precious metal hedge positions carried out to protect the
balance sheet and ensure ongoing debt repayment have amounted to a
$3.1 million negative impact in the first half and there are
currently no plans to hedge 2017 production.
Growth
A key aspect of Hochschild's growth strategy going forward is
our brownfield exploration programme with our team of in-house
geologists firmly believing in the potential for resource gains
both in terms of quality and quantity at all our deposits. The
obvious example has been the discovery and incorporation of the
Pablo vein into the long term mine plan at Pallancata. In this
regard, good developmental progress was made in the first half and
remaining work is on schedule whilst initial underground geological
assessment of the Pablo structure indicates the potential for
further upside from surrounding veins. Furthermore, the overall
improved financial position of the Company has facilitated a new
five year brownfield exploration programme in both Peru and
Argentina. The Company also currently has over 3,000 tonnes per day
of spare plant capacity at our Selene, Arcata and Ares plants in
Peru so there is an exciting opportunity to generate significant
value for the Company even before the longer term expansion options
at Inmaculada, for example, are assessed.
H1 financial performance
The 63% half-on-half increase in total production led to revenue
rising by 78% versus the first half of 2015. Adjusted EBITDA rose
by 333% to $170 million principally driven by the addition of
substantially higher margin production from Inmaculada as well as
an increased contribution from our other operations. As we have
predicted, the strong cashflows from Inmaculada have offset the
finance costs arising from our bond issue in January 2014 to fund
its construction and this has helped the Company to record a very
healthy pre-exceptional earnings per share of $0.05 which is a
material improvement on the loss of $0.09 recorded in the first
half of 2015.
Outlook
The Company's production target for the year has increased by
over 6% to 34.0 million silver equivalent ounces following the good
performances at Inmaculada and Arcata in the first half. All-in
sustaining cost expectations for the Company have also been revised
following a strong first half and are now expected to be between
$11.0 and $11.5 per silver equivalent ounce which compares very
favourably to our original guidance of between $12.0 and $12.5.
The recent market environment for precious metals has been far
more positive than any time in the last three years but the Company
remains fully prepared for any further volatility arising from
macroeconomic or political events. We are confident that our
strategy of ongoing cost reduction, investment in our brownfield
exploration programme and strict balance sheet management will
continue to deliver shareholder value throughout the remainder of
the year and for the foreseeable future.
Ignacio Bustamante, Chief Executive Officer
15 August 2016
OPERATING REVIEW
OPERATIONS
Note: silver/gold equivalent production figures assume an
average gold/silver ratio of 74:1.
Production
In the first half of 2016, the Company delivered attributable
production of 229.1 thousand gold equivalent ounces or 17.0 million
silver equivalent ounces, including 8.2 million ounces of silver
and 118.1 thousand ounces of gold. The overall attributable
production target for 2016 has been revised from 32.0 million
silver equivalent ounces to 34.0 million ounces. This is expected
to consist of approximately 16 million ounces from Inmaculada,
approximately 7 million attributable ounces from the 51% owned San
Jose and the balance from the remaining two Peruvian
operations.
Total group production
Six months Six months
to 30 June to 30 June
2016 2015 % change
------------------------- ------------ ------------- ---------
Silver production
(koz) 9,744 7,701 27
Gold production (koz) 139.43 61.33 127
Total silver equivalent
(koz) 20,062 12,240 64
Total gold equivalent
(koz) 271.11 165.40 64
Silver sold (koz) 10,085 7,785 30
Gold sold (koz) 146.10 58.01 152
------------------------- ------------ ------------- ---------
*Total production includes 100% of all production, including
production attributable to Hochschild's joint venture partner at
San Jose.
Attributable group production
Six months Six months
to 30 June to 30 June
2016 2015 % change
----------------------- ------------ ------------- ---------
Silver production
(koz) 8,210 6,265 31
Gold production (koz) 118.12 40.60 191
Silver equivalent
(koz) 16,951 9,269 83
Gold equivalent (koz) 229.06 125.26 83
----------------------- ------------ ------------- ---------
Attributable production includes 100% of all production from
Arcata, Inmaculada, Pallancata and 51% from San Jose.
Costs
The Company's all-in sustaining cost from operations in H1 2016
was reduced by 27% to $10.9 per silver equivalent ounce mainly
driven by the impact of Inmaculada with a very competitive $8.2 per
silver equivalent ounce.(6) The reduction versus H1 2015 is due to
better than expected grades, higher silver recoveries and
operational efficiency initiatives. Please see pages 8-10 of the
Financial Review for further details on costs.
The all-in sustaining cost per silver equivalent ounce forecast
for 2016 has been revised downwards to be between $11.0 and $11.5
with Inmaculada costs expected to be between $8 and $9 per
ounce.
Inmaculada (Peru)
The 100% owned Inmaculada underground operation is located in
the Department of Ayacucho in southern Peru. It commenced
commissioning in June 2015.
Six months Six months
to 30 June to 30 June
Inmaculada summary 2016 2015 % change
-------------------------- ------------ ------------- ---------
Ore production (tonnes) 619,161 52,325 1,083
Average silver grade
(g/t) 132 89 48
Average gold grade
(g/t) 4.25 2.92 46
Silver produced (koz) 2,370 95.45 2,383
Gold produced (koz) 9.20 3.42 2,216
Silver equivalent
produced (koz) 8,231 349 2,258
Gold equivalent produced
(koz) 111.23 4.71 2,262
Silver sold (koz) 2,468 - -
Gold sold (koz) 82.17 - -
Unit cost ($/t) 64.6 - -
Total cash cost ($/oz
Ag co-product) 4.9 - -
Total cash cost ($/oz
Au co-product) 355 - -
All-in sustaining
cost ($/oz Ag Eq) 8.2 - -
All-in sustaining
cost ($/oz Au Eq) 609 - -
-------------------------- ------------ ------------- ---------
Production
Inmaculada delivered a strong half with grades and silver
recoveries better than expected in the original mine plan and,
combined with higher tonnage per day being processed through the
plant, H1 2016 production was able to reach 111 thousand gold
equivalent ounces (8.2 million silver equivalent ounces).
Costs
The all-in sustaining costs were lower than forecast at $8.2 per
silver equivalent ounce. This was driven by higher than expected
production as well as operational efficiencies versus the original
plan. Overall all-in sustaining costs for 2016 are expected to be
between $8 and $9 in 2016.
Arcata (Peru)
The 100% owned Arcata underground operation is located in the
Department of Arequipa in southern Peru. It commenced production in
1964.
Six months Six months
to 30 June to 30 June
Arcata summary 2016 2015 % change
-------------------------- ------------ ------------- ---------
Ore production (tonnes) 333,397 300,924 11
Average silver grade
(g/t) 327 340 (4)
Average gold grade
(g/t) 1.22 0.97 26
Silver produced (koz) 2,970 2,726 9
Gold produced (koz) 10.36 7.17 44
Silver equivalent
produced (koz) 3,736 3,256 15
Gold equivalent produced
(koz) 50.49 44.00 15
Silver sold (koz) 2,922 2,683 9
Gold sold (koz) 10.14 6.92 47
Unit cost ($/t) 106.0 113.2 (6)
Total cash cost ($/oz
Ag co-product) 11.1 11.5 (4)
Total cash cost ($/oz
Au co-product) 773 889 (13)
All-in sustaining
cost ($/oz Ag Eq) 13.0 13.5 (4)
All-in sustaining
cost ($/oz Au Eq) 965 1,003 (4)
-------------------------- ------------ ------------- ---------
Production
At Arcata, production was a very solid 3.7 million silver
equivalent ounces, a 15% improvement on the same period of 2015 (H1
2015: 3.3 million ounces). This was driven by better than expected
mined tonnage resulting from the success of the Company's 2015
brownfield exploration programme in addition to higher silver
recoveries.
Costs
In H1 2016, all-in sustaining costs fell by 4% to $13.0 per
silver equivalent ounce (H1 2015: $13.5 per ounce) - substantially
below the forecast of $14.5 per ounce (as well as the overall 2015
result of $14.3 per ounce) due to the increased tonnage mentioned
above as well rising gold grades and operational efficiencies.
Brownfield exploration
At Arcata, 2,135 metres were drilled in the first half to test
North-South structures in the central area of the mine. The plan
for the remainder of the year is to drill in the Tunel 4 zone to
extend existing structures and identify new ones. Some highlights
are presented below:
Vein Results
----------------- -------------------------
Ramal Marion Sur DDH-941-GE16:1.3m @ 1.8
g/t Au & 576 g/t Ag
DDH-943-GE16:1.3m @ 4.1
g/t Au & 2,157 g/t Ag
----------------- -------------------------
Tunel 4 DDH-912-GE16:7.8m @ 1.1
g/t Au & 205 g/t Ag
DDH-939-LM16:1.3m @ 3.6
g/t Au & 2,655 g/t Ag
----------------- -------------------------
Pallancata (Peru)
The 100% owned Pallancata silver/gold property is located in the
Department of Ayacucho in southern Peru. Pallancata commenced
production in 2007. Ore from Pallancata is transported 22
kilometres to the Selene plant for processing.
Six months Six months
to 30 June to 30 June
Pallancata summary 2016 2015 % change
-------------------------- ------------ ------------- ---------
Ore production (tonnes) 135,736 289,551 (53)
Average silver grade
(g/t) 341 248 38
Average gold grade
(g/t) 1.77 1.19 49
Silver produced (koz) 1,273 1,948 (35)
Gold produced (koz) 6.37 8.44 (25)
Silver equivalent
produced (koz) 1,745 2,573 (32)
Gold equivalent produced
(koz) 23.58 34.77 (32)
Silver sold (koz) 1,315 1,986 (34)
Gold sold (koz) 6.50 8.33 (22)
Unit cost ($/t) 141.2 99.5 42
Total cash cost ($/oz
Ag co-product) 12.3 12.3 -
Total cash cost ($/oz
Au co-product) 925 980 (6)
All-in sustaining
cost ($/oz Ag Eq) 15.9 15.5 3
All-in sustaining
cost ($/oz Au Eq) 1,176 1,146 3
-------------------------- ------------ ------------- ---------
Production
At Pallancata, as expected, tonnage through the plant in the
first half was lower than the average 2015 rate with operations in
a transitionary period before the introduction of feed from the new
Pablo vein. Production in H1 2016 was 1.3 million ounces of silver
and 6,370 ounces of gold bringing the silver equivalent total to
1.7 million ounces (H1 2015: 2.6 million).
Costs
All-in sustaining costs at Pallancata in the first half were at
$15.9 per silver equivalent ounce (H1 2015: $15.5 per ounce) with
the moderate increase versus the same period of 2015 due to the
aforementioned significant fall in tonnage affecting cost per
tonne. This was partially offset by increased grades and
operational efficiencies. The all-in sustaining cost at the
operation excluding capital expenditure on the Pablo development
was $13.5 per silver equivalent ounce. Costs are expected to fall
substantially when the Pablo vein begins production.
Brownfield exploration
At Pallancata, a drilling campaign has begun to the north and
south of the Pablo structure to test anomalies and add potential
resources (parallel to Pablo). So far, 698 metres have been
drilled.
San Jose (Argentina)
The San Jose silver/gold mine is located in Argentina, in the
province of Santa Cruz, 1,750 kilometres south-southwest of Buenos
Aires. San Jose commenced production in 2007 and is a joint venture
with McEwen Mining Inc. Hochschild holds a controlling interest of
51% in the mine and is the mine operator.
Six months Six months
to 30 June to 30 June
San Jose summary* 2016 2015 % change
-------------------------- ------------ ------------- ---------
Ore production (tonnes) 248,766 232,995 7
Average silver grade
(g/t) 446 448 -
Average gold grade
(g/t) 6.16 6.34 (3)
Silver produced (koz) 3,132 2,932 7
Gold produced (koz) 43.49 42.30 3
Silver equivalent
produced (koz) 6,350 6,062 5
Gold equivalent produced
(koz) 85.81 81.92 5
Silver sold (koz) 3,380 3,115 9
Gold sold (koz) 47.29 42.75 11
Unit cost ($/t) 201.7 219.5 (8)
Total cash cost ($/oz
Ag co-product) 9.1 11.5 (21)
Total cash cost ($/oz
Au co-product) 713 859 (17)
All-in sustaining
cost ($/oz Ag Eq) 11.7 15.4 (24)
All-in sustaining
cost ($/oz Au Eq) 863 1,144 (25)
-------------------------- ------------ ------------- ---------
(*) The Company has a 51% interest in San Jose
Production
The San Jose operation delivered yet another solid half with
production of 3.1 million ounces of silver and 43,490 ounces of
gold resulting in silver equivalent production of 6.4 million
ounces, a 5% improvement on H1 2015 (6.1 million ounces) mostly due
to better than planned grades and higher than expected tonnage.
Costs
At San Jose, all-in sustaining costs were reduced by 24% versus
H1 2015 to $11.7 per silver equivalent ounce mainly driven by the
significant fiscal changes in Argentina in the first half. These
included the elimination of export taxes and the restoration of the
Patagonian port rebate.
Brownfield exploration
At San Jose 1,240 metres has been drilled mainly in the Aguas
Vivas area with the programme ongoing.
FINANCIAL REVIEW
The reporting currency of Hochschild Mining plc is U.S. dollars.
In discussions of financial performance the Group removes the
effect of exceptional items, unless otherwise indicated, and in the
income statement results are shown both pre and post such
exceptional items. Exceptional items are those items, which due to
their nature or the expected infrequency of the events giving rise
to them, need to be disclosed separately on the face of the income
statement to enable a better understanding of the financial
performance of the Group and to facilitate comparison with prior
years.
Revenue
Gross revenue
Gross revenue from continuing operations rose by 74% to $353.3
million in H1 2016 (H1 2015: $202.5 million) primarily driven by
the substantial increase in production at Inmaculada.
Silver
Gross revenue from silver increased 32% in H1 2016 to $172.7
million (H1 2015: $131.3 million) as a result of a 30% increase in
the total amount of silver ounces sold to 10,085 koz (H1 2015:
7,785 koz) driven by the increase from new production at Inmaculada
as well as half-on-half increases at Arcata and San Jose.
Gold
Gross revenue from gold increased by 154% in H1 2016 to $180.5
million (H1 2015: $71.2 million) as a result of a 152% rise in the
total amount of gold ounces sold in H1 2016 (146.1 koz). The
increase in gold sales came from sales from the new Inmaculada
operation as well as increases at Arcata and San Jose.
Gross average realised sales prices
The following table provides figures for average realised prices
(which are reported before the deduction of commercial discounts
and include the effects of the existing hedging agreements) and
ounces sold for H1 2016 and H1 2015:
Six months Six months
to 30 June to 30 June
Average realised prices 2016 2015
---------------------------- ------------ ------------
Silver ounces sold (koz) 10,085 7,785
Avg. realised silver price
($/oz) 17.1 16.9
Gold ounces sold (koz) 146.10 58.01
Avg. realised gold price
($/oz) 1,236 1,227
---------------------------- ------------ ------------
Commercial discounts(7)
Commercial discounts refer to refinery treatment charges,
refining fees and payable deductions for processing concentrates,
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 H1 2016, the Group recorded
commercial discounts of $14.1 million (H1 2015: $12.3 million). The
increase is explained by an increase in concentrate sold from
Arcata. The ratio of commercial discounts to gross revenue in H1
2016 decreased to 4% (H1 2015: 6%).
Net revenue
Net revenue increased by 78% to $339.3 million (H1 2015: $190.3
million), comprising silver revenue of $163.1 million and gold
revenue of $176.0 million. In H1 2016, silver accounted for 48% and
gold 52% of the Company's consolidated net revenue with the strong
increase in the gold percentage versus H1 2015 being due to a full
contribution from the primarily gold producing Inmaculada mine.
Revenue by mine
$000 unless otherwise indicated Six months to 30 June 2016 Six months to 30 June 2015 % change
--------------------------------- --------------------------- --------------------------- ---------
Silver revenue
Arcata 51,204 45,901 12
Inmaculada 40,813 - -
Pallancata 23,123 34,200 (32)
San Jose 57,594 51,186 13
Commercial discounts(7) (9,650) (8,829) 9
Net silver revenue 163,084 122,458 33
Gold revenue
Arcata 12,283 9,018 36
Inmaculada 98,724 - -
Pallancata 8,362 10,990 (24)
San Jose 61,156 51,177 19
Commercial discounts(7) (4,497) (3,509) 28
Net gold revenue 176,028 67,676 160
--------------------------------- --------------------------- --------------------------- ---------
Other revenue 165 125 32
--------------------------------- --------------------------- --------------------------- ---------
Net revenue 339,277 190,259 78
--------------------------------- --------------------------- --------------------------- ---------
Costs
Total pre-exceptional cost of sales increased to $238.7 million
in H1 2016 (H1 2015: $174.5 million). The direct production cost
was $139.0 million (H1 2015: $111.7 million) with the increase due
to the addition of the new Inmaculada mine since H1 2015.
Depreciation in H1 2016 was $88.5 million (H1 2015: $57.0 million)
with the increase mainly due to the addition of Inmaculada
depreciation. Other items, which in H1 2015 principally included
the costs associated with stoppages in Argentina, decreased to
$(0.08) million in H1 2016 (H1 2015: $4.9 million), as there have
been no stoppages at the mine. Change in inventories was $11.3
million in H1 2016 (H1 2015: $1.0 million) with the difference
explained by finished goods from December 2015 being sold in
January 2016.
Six months Six months
to 30 to 30
$000 June 2016 June 2015 % Change
------------------------------- ----------- ----------- ---------
Direct production cost
excluding depreciation 139,037 111,651 25
Depreciation and amortisation
in production cost 88,516 56,962 55
Other items (78) 4,928 (102)
Change in inventories 11,273 953 (1,083)
------------------------------- ----------- ----------- ---------
Pre-exceptional cost of
sales 238,748 174,493 37
------------------------------- ----------- ----------- ---------
Unit cost per tonne
The Company reported unit cost per tonne at its main operations
of $108.7 in H1 2016, a significant fall versus the same period of
last year (H1 2015: $138.3). For further explanation on the
increase in unit cost per tonne please refer to page 6 of the
Operating Review.
Unit cost per tonne by operation (including royalties)(8)
Six months Six months
to 30 to 30 June
Operating unit ($/tonne) June 2016 2015 % change
-------------------------- ----------- ------------ ---------
Peru 87.2 106.5 (18)
Arcata 106.0 113.2 (6)
Inmaculada 64.6 - -
Pallancata 141.2 99.5 42
-------------------------- ----------- ------------ ---------
Argentina
San Jose 201.7 219.5 (8)
-------------------------- ----------- ------------ ---------
Total 108.7 138.3 (21)
-------------------------- ----------- ------------ ---------
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 reconciliation(9)
Six months Six months
to 30 to 30 June
$000 unless otherwise indicated June 2016 2015 % change
----------------------------------- ----------- ------------ ---------
Group cash cost 168,128 142,157 18
----------------------------------- ----------- ------------ ---------
(+) Cost of sales 238,748 174,493 37
(-) Depreciation and amortisation
in cost of sales (93,527) (56,536) 65
(+) Selling expenses 7,077 11,600 (39)
(+) Commercial deductions 15,830 12,600 26
Gold 5,934 3,519 69
Silver 9,896 9,081 9
----------------------------------- ----------- ------------ ---------
Revenue 339,277 190,259 78
----------------------------------- ----------- ------------ ---------
Gold 176,028 122,458 44
Silver 163,084 67,676 141
Others 165 125 32
----------------------------------- ----------- ------------ ---------
Ounces sold
----------------------------------- ----------- ------------ ---------
Gold 146.1 58.0 152
Silver 10,085 7,785 30
----------------------------------- ----------- ------------ ---------
Group cash cost ($/oz)
----------------------------------- ----------- ------------ ---------
Co product Au 597 872 (32)
Co product Ag 8.0 11.8 (32)
By product Au (33) 183 (118)
By product Ag (1.4) 9.1 (115)
----------------------------------- ----------- ------------ ---------
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. 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.
All-in sustaining cost reconciliation
All-in sustaining cash costs per silver equivalent ounce(10)
Six months to 30 June 2016
San Main Corporate
$000 unless otherwise indicated Arcata Inmaculada Pallancata(11) José operations & others Total
----------------------------------- ------ ---------- -------------- ---------- ----------- --------- -------
(+) Production cost excluding
depreciation 34,119 37,580 18,790 48,548 139,037 - 139,037
(+) Other items in cost of
sales (151) 44 (150) 179 (78) - (78)
(+) Operating and exploration
capex for units 8,851 25,693 5,049 15,712 55,305 24 55,329
(+) Brownfield exploration
expenses 313 1 531 619 1,464 1,294 2,758
(+) Administrative expenses
(excl depreciation and before
exceptional items) 750 1,743 361 3,880 6,734 14,749 21,483
(+) Royalties and special mining
tax(12) - 1,373 284 - 1,657 1,369 3,026
----------------------------------- ------ ---------- -------------- ---------- ----------- --------- -------
Sub-Total 43,882 66,434 24,866 68,938 204,119 17,436 221,555
----------------------------------- ------ ---------- -------------- ---------- ----------- --------- -------
Au ounces produced 10,362 79,204 6,372 43,493 139,430 - 139,430
Ag ounces produced (000s) 2,970 2,370 1,273 3,132 9,744 - 9,744
Ounces produced (Ag Eq 000s
oz) 3,736 8,231 1,745 6,350 20,062 - 20,062
----------------------------------- ------ ---------- -------------- ---------- ----------- --------- -------
Sub-total ($/oz Ag Eq) 11.7 8.1 14.3 10.9 10.2 - 11.0
----------------------------------- ------ ---------- -------------- ---------- ----------- --------- -------
(+) Commercial deductions 4,077 828 2,570 8,355 15,830 - 15,830
(+) Selling expenses 693 510 365 5,509 7,077 - 7,077
----------------------------------- ------ ---------- -------------- ---------- ----------- --------- -------
(-) Patagonian port benefit - - - (8,360) (8,360) (8,360)
----------------------------------- ------ ---------- -------------- ---------- ----------- --------- -------
Sub-total 4,770 1,338 2,935 5,504 14,547 - 14,547
----------------------------------- ------ ---------- -------------- ---------- ----------- --------- -------
Au ounces sold 10,136 82,167 6,499 47,294 146,096 - 146,096
Ag ounces sold (000s) 2,922 2,468 1,315 3,380 10,085 - 10,085
Ounces sold (Ag Eq 000s oz) 3,672 8,548 1,796 6,880 20,896 - 20,896
----------------------------------- ------ ---------- -------------- ---------- ----------- --------- -------
Sub-total ($/oz Ag Eq) 1.3 0.2 1.6 0.8 0.7 - 0.7
----------------------------------- ------ ---------- -------------- ---------- ----------- --------- -------
All-in sustaining costs ($/oz
Ag Eq) 13.0 8.2 15.9 11.7 10.9 - 11.7
----------------------------------- ------ ---------- -------------- ---------- ----------- --------- -------
Six months to 30 June 2015
San Main Corporate
$000 unless otherwise indicated Arcata Inmaculada Pallancata José operations & others Total
----------------------------------- ------ ---------- ---------- ---------- ----------- --------- -------
(+) Production cost excluding
depreciation 33,629 - 27,186 49,559 110,374 - 110,374
(+) Other items in cost of
sales 1,058 - 595 3,275 4,928 - 4,928
(+) Operating and exploration
capex for units 5,283 - 5,010 19,968 30,261 1,199 31,460
(+) Brownfield exploration
expenses 37 - 1,183 555 1,775 1,180 2,955
(+) Administrative expenses
(excl depreciation and before
exceptional items) 1,616 - 1,265 3,439 6,320 11,642 17,962
(+) Royalties and special mining
tax(12) - - 373 - 373 - 373
----------------------------------- ------ ---------- ---------- ---------- ----------- --------- -------
Sub-Total 41,623 - 35,612 76,796 154,031 14,021 168,052
----------------------------------- ------ ---------- ---------- ---------- ----------- --------- -------
Au ounces produced 7,168 - 8,443 42,300 57,911 57,911
Ag ounces produced (000s) 2,726 - 1,948 2,932 7,606 - 7,606
Ounces produced (Ag Eq 000s
oz) 3,256 - 2,573 6,062 11,891 - 11,891
----------------------------------- ------ ---------- ---------- ---------- ----------- --------- -------
Sub-total ($/oz Ag Eq) 12.8 - 13.8 12.7 13.0 - 14.1
----------------------------------- ------ ---------- ---------- ---------- ----------- --------- -------
(+) Commercial deductions 1,974 - 3,750 6,876 12,600 - 12,600
(+) Selling expenses 475 - 544 10,581 11,600 - 11,600
----------------------------------- ------ ---------- ---------- ---------- ----------- --------- -------
Sub-total 2,449 - 4,294 17,457 24,200 - 24,200
----------------------------------- ------ ---------- ---------- ---------- ----------- --------- -------
Au ounces sold 6,921 - 8,333 42,754 58,008 - 58,008
Ag ounces sold (000s) 2,683 - 1,986 3,115 7,785 - 7,785
Ounces sold (Ag Eq 000s oz) 3,196 - 2,602 6,279 12,077 - 12,077
----------------------------------- ------ ---------- ---------- ---------- ----------- --------- -------
Sub-total ($/oz Ag Eq) 0.8 - 1.7 2.8 2.0 - 2.0
----------------------------------- ------ ---------- ---------- ---------- ----------- --------- -------
All-in sustaining costs ($/oz
Ag Eq) 13.5 - 15.5 15.4 15.0 - 16.1
----------------------------------- ------ ---------- ---------- ---------- ----------- --------- -------
Administrative expenses
Administrative expenses before exceptional items increased to
$22.2 million (H1 2015: $18.8 million) primarily due to increased
personnel expenses.
Exploration expenses
In H1 2016, pre-exceptional exploration expenses were broadly
flat at $4.0 million (H1 2015: $4.1 million). In addition, the
Group capitalises part of its brownfield exploration, which mostly
relates to costs incurred converting potential resource to the
Inferred or Measured and Indicated category. In H1 2016, the
Company capitalised $0.3 million relating to brownfield exploration
compared to $0.7 million in H1 2015, bringing the total investment
in exploration for H1 2016 to $4.3 million (H1 2015: $4.8
million).
Selling expenses
Selling expenses decreased by 39% versus H1 2015 to $7.1 million
(H1 2015: $11.6 million) mainly due to the elimination of export
duties at San Jose. Selling expenses in H1 2016 consisted mainly of
logistic costs for the sale of concentrate in addition to
approximately 1.5 months of final export duties on concentrate.
Previously, export duties in Argentina were levied at 10% of
revenue for concentrate and 5% of revenue for dore.
Other income/expenses
Other income before exceptional items was $12.9 million (H1
2015: $2.6 million). The increase is mainly due to the impact of
the Patagonian port benefit ($8.4 million) reintroduced towards the
end of 2015 and incremental revenue from logistic services provided
to third parties. Other expenses before exceptional items was $6.2
million (H1 2015: $4.6 million) with the rise due to costs
associated with energy contract renegotiation and costs to
reorganise land concessions.
Adjusted EBITDA
Adjusted EBITDA increased by 333% over the period to $170.3
million (H1 2015: $39.3 million) driven by the substantial positive
effects of the new low-cost Inmaculada contribution.
Adjusted EBITDA is calculated as profit from continuing
operations before exceptional items, net finance costs and income
tax plus non-cash items (depreciation and amortisation) and
exploration expenses other than personnel and other exploration
related fixed expenses.
$000 unless otherwise indicated Six months to 30 June 2016 Six months to 30 June 2015 % change
------------------------------------------------- --------------------------- --------------------------- ---------
Profit from continuing operations before
exceptional items, net finance cost, foreign
exchange
loss and income tax 73,923 (20,707) 457
Depreciation and amortisation in cost of sales 93,527 56,536 65
Depreciation and amortisation in administrative
expenses 689 817 (16)
Exploration expenses 4,043 4,092 (1)
Personnel and other exploration related fixed
expenses (1,897) (1,432) (32)
Adjusted EBITDA 170,285 39,306 333
------------------------------------------------- --------------------------- --------------------------- ---------
Adjusted EBITDA margin 50% 21%
------------------------------------------------- --------------------------- --------------------------- ---------
Finance income
Finance income before exceptional items of $0.5 million was
similar to H1 2015 ($0.6 million) and mainly includes interest
received on deposits.
Finance costs
Finance costs before exceptional items increased from $14.6
million in H1 2015 to $17.4 million in H1 2016 principally due to
the expensing of interest on the Senior Notes that was previously
capitalised during the construction of Inmaculada in line with the
IFRS standards and costs related to the Company's precious metal
hedge agreements. These effects offset the fall in interest due to
the repayment of debt since H1 2015.
Foreign exchange losses
The Group recognised a foreign exchange gain of $0.4 million (H1
2015: $1.2 million loss) as a result of exposures to currencies
other than the functional currency, specifically the Peruvian Nuevo
Sol and Argentinean Peso.
Income tax
The Group's pre-exceptional income tax charge was $21.4 million
(H1 2015: $1.8 million). The substantial increase in the charge is
explained by the Company's significant increase in profitability in
the period for reasons explained above.
Exceptional items
Exceptional items in H1 2016 totalled $1.8 million profit after
tax (H1 2015: $(6.1) million). Exceptional items principally
included: a $2.7 million gain on the reversal of the mining reserve
tax in Argentina in addition to the reversal of the associated
interest on the reserve tax ($1.0 million); the effect of a
donation to Universidad de Ingenieria y TecnologÃa financed with a
gain on sale of Asociación Sumac Tarpuy of ($0.2 million) net; and
a property, plant and equipment write-off of $0.5 million. These
items excluded the exceptional tax effect that amounted to a $1.1
million tax charge (H1 2015: $1.3 million tax credit).
Cash flow and balance sheet review
Cash flow:
Six months Six months
to to
$000 unless otherwise 30 June 30 June
indicated 2016 2015 Change
---------------------------- ----------- ----------- ----------
Net cash generated from
operating activities 144,596 18,320 126,276
Net cash used in investing
activities (54,840) (119,212) 64,372
Cash flows generated
in financing activities (70,775) 70,215 (140,990)
---------------------------- ----------- ----------- ----------
Net increase in cash
and cash equivalents
during the period 18,981 (30,677) 49,658
---------------------------- ----------- ----------- ----------
Operating cash flow increased from $18.3 million in H1 2015 to
$144.6 million in H1 2016, mainly due to the cash contribution from
the Inmaculada mine. Net cash used in investing activities
decreased to $(54.8) million in H1 2016 from $(119.2) million in H1
2015 mainly due to the completion of the Inmaculada mine since H1
2015. Finally, cash generated from financing activities decreased
to $(70.8) million from an inflow of $70.2 million in H1 2015
primarily due to the repayment of $65 million of debt in H1 2016
versus the raising of $75 million of short term debt in Peru in H1
2015. As a result, total cash inflow increased from a $(30.7)
million outflow in H1 2015 to $19.0 million in H1 2016 ($49.7
million difference).
Working capital
Six months to Six months to
$000 unless otherwise indicated 30 June 2016 30 June 2015
----------------------------------------- -------------- --------------
Trade and other receivables 128,344 161,903
Inventories 59,174 59,570
Net other financial assets (13,689) 7,511
Net income tax receivable 2,660 21,921
Trade and other payables and provisions (236,454) (217,466)
----------------------------------------- -------------- --------------
Working capital (59,965) 33,349
----------------------------------------- -------------- --------------
The Group's working capital position improved by $93.4 million
to $(60.0) million in H1 2016 from $33.3 million in H1 2015. This
was primarily explained by: lower trade and other receivables
($(33.6) million) due to VAT recoveries of $20 million in H2 2015
and $12 million in H1 2016; lower net financial assets ($21.2
million) primarily due to the hedge liability position in H1 2016
versus an asset position in H1 2015; and higher trade and other
payables and provisions ($(18.9) million).
Net debt
As at 30 As at 30 June
$000 unless otherwise indicated June 2016 2015
--------------------------------- ----------- --------------
Cash and cash equivalents 102,846 84,316
Long term borrowings (290,557) (442,898)
Short term borrowings(13) (78,803) (97,053)
--------------------------------- ----------- --------------
Net debt (266,514) (455,635)
--------------------------------- ----------- --------------
The Group's reported net debt position was $266.5 million as at
30 June 2016 (H1 2015: $455.6 million). The reduction includes the
net effect of: the equity rights issue ($95 million) in H2 2015;
the prepayment of the Scotiabank medium term loan (($100) million);
the repurchase of Senior Notes (($55) million); the repayment of
pre-shipment loans ($15m) in H1 2016; the cash generated mainly in
Inmaculada and the other units; and the final cash outflow required
to complete the construction of Inmaculada.
Capital expenditure(14)
Six months
to Six months
30 June to
$000 unless otherwise indicated 2016 30 June 2015
--------------------------------- ----------- --------------
Arcata 8,851 5,283
Ares 10 -
Selene 13 130
Pallancata 5,036 4,880
San Jose 15,712 19,968
Inmaculada(15) 25,693 98,978
Operations 55,315 30,261
--------------------------------- ----------- --------------
Crespo 2,260 1,012
Volcan 410 565
Azuca 1,175 137
Other 33 1,199
--------------------------------- ----------- --------------
Total 59,193 132,152
--------------------------------- ----------- --------------
H1 2016 capital expenditure of $59.2 million (H1 2015: $132.2
million) mainly comprised operational capex of $55.3 million (H1
2015: $30.3 million), an increase versus H1 2015 due the
commissioning of Inmaculada in H2 2015.
Forward looking Statements
This announcement 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 announcement. 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
RISKS
The principal risks and uncertainties facing the Company in
respect of the year ended 31 December 2015 are set out in detail in
the Risk Management & Viability section of the 2015 Annual
Report and in Note 36 to the 2015 Consolidated Financial
Statements.
The key risks disclosed in the 2015 Annual Report (available at
www.hochschildmining.com) are categorised as:
o Financial risks which include commodity price risk and
refinancing risk;
o Operational risks including the risks associated with
operational performance, delivery of projects, business
interruption, exploration & reserve and resource replacement
and personnel risks;
o Macro-economic risks which include political, legal and
regulatory risks; and
o Sustainability risks including risks associated with health
and safety, environmental and community relations.
These risks continue to apply to the Company in respect of the
remaining six months of the financial year.
RELATED PARTIES TRANSACTION
Related parties transactions are disclosed in note 18 to the
condensed set of financial statements.
GOING CONCERN
The Company's business activities, together with the factors
likely to affect future development, performance and position are
set out in the Operating Review on pages 4 to 7. The financial
position of the Company, its cash flow and liquidity position are
described in the Financial Review on pages 8 to12.
The Directors believe that the financial resources available at
the date of the issue of these condensed interim financial
statements are sufficient for the Company to manage its business
risks successfully.
The Company's forecasts and projections, taking into account
reasonably possible changes in operational performance and in
particular the price of gold and silver, and other mitigating
actions described in the Risks section above, show that there are
reasonable expectations that the Company will be able to operate on
funds currently held and those generated internally, for the
foreseeable future.
After making enquiries and considering the above, the Directors
have a reasonable expectation that the Company has adequate
resources to continue in operational existence for the foreseeable
future and consider the going concern basis of accounting to be
appropriate. As a result they continue to adopt the going concern
basis of accounting in preparing the condensed interim financial
statements.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors confirm that, to the best of their knowledge, the
interim condensed consolidated financial statements have been
prepared in accordance with IAS 34 "Interim Financial Reporting" as
adopted by the European Union and that the interim management
report includes a fair review of the information required by
Disclosure and Transparency Rules 4.2.7 and 4.2.8.
A list of current Directors and their functions is maintained on
the Company's website.
For and on behalf of the Board
Ignacio Bustamante
Chief Executive Officer
15 August 2016
INDEPENT REVIEW REPORT TO HOCHSCHILD MINING PLC
Introduction
We have been engaged by Hochschild Mining plc (the 'Company') to
review the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2016 which
comprises the Interim condensed consolidated income statement, the
Interim condensed consolidated statement of comprehensive income,
the Interim condensed consolidated statement of financial position,
the Interim condensed consolidated statement of cash flows, the
Interim condensed consolidated statement of changes in equity and
the related notes 1 to 21. We have read the other information
contained in the half yearly financial report and considered
whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of
financial statements.
This report is made solely to the company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK and Ireland) "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
company, for our work, for this report, or for the conclusions we
have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the
Group are prepared in accordance with International Financial
Reporting Standards as adopted by the European Union. The condensed
set of financial statements included in this half-yearly financial
report has been prepared in accordance with International
Accounting Standard 34, "Interim Financial Reporting", as adopted
by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2016 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
London
15 August 2016
Interim condensed consolidated income statement
Six-months ended Six-months ended
30 June 2016 30 June 2015
Notes (Unaudited) (Unaudited)
----- ------------------------------------ -----------------------------------
Exceptional Exceptional
Before items Before items
exceptional (Note exceptional (Note
items 7) Total items 7) Total
US$000 US$000 US$000 US$000 US$000 US$000
----------- ----------- --------- ----------- ----------- ---------
Continuing
operations
Revenue 4 339,277 - 339,277 190,259 - 190,259
Cost of sales 5 (238,748) - (238,748) (174,493) - (174,493)
----------- ----------- --------- ----------- ----------- ---------
Gross profit 100,529 - 100,529 15,766 - 15,766
Administrative
expenses (22,172) - (22,172) (18,779) - (18,779)
Exploration
expenses (4,043) - (4,043) (4,092) - (4,092)
Selling expenses (7,077) - (7,077) (11,600) - (11,600)
Other income 6 12,900 3,418 16,318 2,602 - 2,602
Other expenses (6,214) (1,000) (7,214) (4,604) - (4,604)
Impairment and
write-off of
non-financial
assets (net) - (498) (498) - (5,917) (5,917)
Profit/(loss)
from continuing
operations before
net finance
income/(cost),
foreign exchange
gain/(loss) and
income tax 73,923 1,920 75,843 (20,707) (5,917) (26,624)
Finance income 8 483 959 1,442 581 - 581
Finance costs 8 (17,430) - (17,430) (14,636) (1,486) (16,122)
Foreign exchange
gain/(loss) 442 - 442 (1,211) - (1,211)
----------- ----------- --------- ----------- ----------- ---------
Profit/(loss)
from continuing
operations before
income tax 57,418 2,879 60,297 (35,973) (7,403) (43,376)
Income tax
(expense)/benefit 9 (21,424) (1,129) (22,553) (1,777) 1,268 (509)
----------- ----------- --------- ----------- ----------- ---------
Profit/(loss)
for the period
from continuing
operations 35,994 1,750 37,744 (37,750) (6,135) (43,885)
Attributable
to:
Equity shareholders
of the Company 27,220 596 27,816 (38,341) (6,135) (44,476)
Non-controlling
interests 8,774 1,154 9,928 591 - 591
----------- ----------- --------- ----------- ----------- ---------
35,994 1,750 37,744 (37,750) (6,135) (43,885)
=========== =========== ========= =========== =========== =========
Basic and diluted
earnings per
ordinary share
from continuing
operations and
for the period
(expressed in
U.S. dollars
per share) 0.05 0.01 0.06 (0.09) (0.02) (0.11)
=========== =========== ========= =========== =========== =========
Interim condensed consolidated statement of comprehensive
income
Six-months ended
Notes 30 June
----- --------------------------
2016 2015
(Unaudited) (Unaudited)
US$000 US$000
------------ ------------
Profit/(loss) for the period 37,744 (43,885)
Other comprehensive income to
be reclassified to profit or
loss in subsequent periods:
Exchange differences on translating
foreign operations 2 (309)
Change in fair value of available-for-sale
financial assets 502 201
Recycling of the loss on available-for-sale
financial assets (38) (1)
Change in fair value of cash
flow hedges (43,382) 9,509
Recycling of the loss/(gain)
on cash flow hedges 3,116 (4,991)
Deferred income tax relating
to components of other comprehensive
income 9 11,274 (1,266)
------------ ------------
Other comprehensive (loss)/gain
for the period, net of tax (28,526) 3,143
------------ ------------
Total comprehensive income/(expense)
for the period 9,218 (40,742)
------------ ------------
Total comprehensive income/(expense)
attributable to:
Equity shareholders of the Company (710) (41,333)
Non-controlling interests 9,928 591
------------ ------------
9,218 (40,742)
============ ============
Interim condensed consolidated statement of financial
position
As at As at
30 31
June December
2016 2015
(Unaudited)
Notes US$000 US$000
----- ------------- ----------
ASSETS
Non-current assets
Property, plant and equipment 10 1,012,495 1,045,516
Evaluation and exploration
assets 11 140,221 138,171
Intangible assets 27,240 27,981
Available-for-sale financial
assets 814 366
Trade and other receivables 16,852 10,187
Income tax receivable - 47
Deferred income tax assets 1,199 -
1,198,821 1,222,268
------------- ----------
Current assets
Inventories 59,174 70,286
Trade and other receivables 111,492 124,827
Income tax receivable 18,608 20,384
Other financial assets 12 6,139 21,267
Cash and cash equivalents 14 102,846 84,017
------------- ----------
298,259 320,781
------------- ----------
Total assets 1,497,080 1,543,049
============= ==========
EQUITY AND LIABILITIES
Capital and reserves attributable
to shareholders of the Parent
Equity share capital 16 223,805 223,805
Share premium 16 438,041 438,041
Treasury shares (426) (898)
Other reserves (230,803) (203,649)
Retained earnings 245,977 218,093
------------- ----------
676,594 675,392
Non-controlling interests 94,797 90,113
Total equity 771,391 765,505
------------- ----------
Non-current liabilities
Trade and other payables 20,873 20,379
Borrowings 15 290,557 339,778
Provisions 123,489 121,402
Deferred income 25,000 25,000
Deferred income tax liabilities 59,099 64,274
------------- ----------
519,018 570,833
------------- ----------
Current liabilities
Trade and other payables 84,866 101,892
Other financial liabilities 12 19,828 1,141
Borrowings 15 78,803 94,760
Provisions 7,226 6,115
Income tax payable 15,948 2,803
------------- ----------
206,671 206,711
------------- ----------
Total liabilities 725,689 777,544
------------- ----------
Total equity and liabilities 1,497,080 1,543,049
============= ==========
Interim condensed consolidated statement of cash flows
Six-months ended
30 June
----------------------------------
2016 (Unaudited) 2015 (Unaudited)
Notes US$000 US$000
----- ---------------- ----------------
Cash flows from operating
activities
Cash generated from operations 158,827 44,503
Interest received 431 346
Interest paid 15 (14,341) (18,554)
Payment of mine closure
costs (1,427) (969)
Income tax received/(paid) 1,106 (7,006)
---------------- ----------------
Net cash generated from
operating activities 19 144,596 18,320
---------------- ----------------
Cash flows from investing
activities
Purchase of property, plant
and equipment (53,982) (116,012)
Purchase of evaluation and
exploration assets (2,050) (2,732)
Purchase of intangibles - (592)
Proceeds from sale of subsidiary 1,100 -
Proceeds from sale of available-for-sale
financial assets 54 3
Proceeds from sale of property,
plant and equipment 10 38 121
Net cash used in investing
activities (54,840) (119,212)
---------------- ----------------
Cash flows from financing
activities
Proceeds from borrowings 15 12,497 100,784
Repayment of borrowings 15 (77,928) (29,924)
Dividends paid to non-controlling
interests 17 (5,344) (645)
Cash flows (used in)/generated
from financing activities (70,775) 70,215
---------------- ----------------
Net increase/(decrease)
in cash and cash equivalents
during the period 18,981 (30,677)
Impact of foreign exchange (152) (1,006)
Cash and cash equivalents
at beginning of period 84,017 115,999
---------------- ----------------
Cash and cash equivalents
at end of period 14 102,846 84,316
================ ================
Interim condensed consolidated statement of changes in
equity
Other reserves
Capital
and
reserves
Unrealised attributable
gain/(loss) to
on Unrealised shareholders
Equity available-for-sale gain Cumulative Share-based Total of
share Share Treasury financial on translation Merger payment other Retained the Non-controlling Total
capital premium Shares assets hedges adjustment reserve reserve reserves earnings Parent interests Equity
Note US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000
Balance at 1
January 2016 223,805 438,041 (898) 32 15,312 (13,602) (210,046) 4,655 (203,649) 218,093 675,392 90,113 765,505
------- ------- ----- --- -------- -------- --------- ------- --------- -------- -------- ------- --------
Other
comprehensive
gain/(loss) - - - 464 (28,992) 2 - - (28,526) - (28,526) - (28,526)
Profit for the
period - - - - - - - - - 27,816 27,816 9,928 37,744
----- --- -------- -------- -------
Total
comprehensive
(loss)/income
for the period - - - 464 (28,992) 2 - - (28,526) 27,816 (710) 9,928 9,218
Dividends
declared
to
non-controlling
interests 17 - - - - - - - - - - - (5,244) (5,244)
Share-based
payments 1,529 1,529 383 1,912 - 1,912
Exercise of share
options - - 472 - - - - (157) (157) (315) - - -
Balance at 30
June 2016
(unaudited) 223,805 438,041 (426) 496 (13,680) (13,600) (210,046) 6,027 (230,803) 245,977 676,594 94,797 771,391
======= ======= ===== === ======== ======== ========= ======= ========= ======== ======== ======= ========
Balance at 1
January 2015 170,389 396,021 (898) 14 3,126 (13,005) (210,046) 2,576 (217,335) 451,047 799,224 95,160 894,384
----- --- -------- -------- -------
Other
comprehensive
gain/(loss) - - - 200 3,252 (309) - - 3,143 - 3,143 - 3,143
(Loss)/profit
for the period - - - - - - - - - (44,476) (44,476) 591 (43,885)
----- --- -------- -------- -------
Total
comprehensive
(loss)/income
for the period - - - 200 3,252 (309) - - 3,143 (44,476) (41,333) 591 (40,742)
Exercise of share
options 16 220 - - - - - - (1,560) (1,560) 1,340 - - -
Share-based
payments - - - - - - - 1,679 1,679 316 1,995 - 1,995
Balance at 30
June 2015
(unaudited) 170,609 396,021 (898) 214 6,378 (13,314) (210,046) 2,695 (214,073) 408,227 759,886 95,751 855,637
======= ======= ===== === ======== ======== ========= ======= ========= ======== ======== ======= ========
Notes to the interim condensed consolidated financial
statement
1 Corporate Information
Hochschild Mining plc (hereinafter the "Company" and together
with its subsidiaries, the "Group") 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 23
Hanover Square, London W1S 1JB, United Kingdom. Its ordinary shares
are traded on the London Stock Exchange.
The Group's principal business is the mining, processing and
sale of silver and gold. The Group has three operating mines
(Arcata, Pallancata and Inmaculada) located in Southern Peru, and
one operating mine (San Jose) located in Argentina. The Group also
has a portfolio of projects located across Peru, Argentina, Mexico
and Chile at various stages of development.
These interim condensed consolidated financial statements were
approved for issue on behalf of the Board of Directors on 15 August
2016.
2 Significant Accounting Policies
(a) Basis of preparation
These interim condensed consolidated financial statements set
out the Group's financial position as at 30 June 2016 and 31
December 2015 and its financial performance and cash flows for the
six months ended 30 June 2016 and 30 June 2015.
They have been prepared in accordance with IAS 34 Interim
Financial Reporting in accordance with International Financial
Reporting Standards ('IFRS') as adopted by the European Union.
Accordingly, the interim condensed consolidated financial
statements do not include all the information required for full
annual financial statements and therefore, should be read in
conjunction with the Group's 2015 annual consolidated financial
statements as published in the 2015 Annual Report.
The interim condensed consolidated financial statements do not
constitute statutory accounts as defined in the Companies Act 2006.
The financial information for the full year is based on the
statutory accounts for the financial year ended 31 December 2015. A
copy of the statutory accounts for that year, which were prepared
in accordance with IFRS as adopted by the European Union has been
delivered to the Registrar of Companies. The auditor's report under
section 495 of the Companies Act 2006 in relation to those accounts
was unmodified and did not include a reference to any matters to
which the auditor drew attention by way of emphasis without
qualifying the report and did not contain a statement under s498(2)
or s498(3) of the Companies Act 2006.
The impact of the seasonality or cyclicality of operations is
not regarded as significant on the interim condensed consolidated
financial statements.
The interim condensed consolidated financial statements are
presented in US dollars ($) and all monetary amounts are rounded to
the nearest thousand ($000) except when otherwise indicated.
(b) Changes in accounting policies and disclosures
The accounting policies adopted in the preparation of the
interim condensed 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
2015, except for the adoption of new standards and interpretations
effective for the Group from 1 January 2016, which has not had a
material impact on the annual consolidated financial statements or
the interim condensed 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.
(c) Going concern
After making enquiries, the Directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. Accordingly, they
continue to adopt the going concern basis in preparing the
condensed set of financial statements. For further detail refer to
the detailed discussion of the assumptions outlined in the Going
Concern section of the announcement.
3 Segment reporting
The following tables present revenue and profit/(loss)
information for the Group's operating segments for the six months
ended 30 June 2016 and 2015 and asset information as at 30 June
2016 and 31 December 2015 respectively:
Six months Exploration
ended and Adjustments
30 June San advanced and
2016 Arcata Pallancata Jose Inmaculada projects Other eliminations Total
(unaudited) US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000
-------------- ------- ---------- ------- ---------- ----------- ------- ------------ ---------
Revenue
from
external
customers 60,009 28,915 110,651 139,537 - 165 - 339,277
Inter
segment
revenue - - - - - 1,363 (1,363) -
Total
revenue 60,009 28,915 110,651 139,537 - 1,528 (1,363) 339,277
------- ---------- ------- ---------- ----------- ------- ------------ ---------
Segment
profit/(loss) 12,810 99 30,681 50,135 (3,855) (320) (141) 89,409
Others(1) (29,112)
---------
Profit
from
continuing
operations
before
income
tax 60,297
---------
As at
30 June
2016
(unaudited)
Assets
Capital
expenditure 8,851 5,036 15,712 25,693 3,845 56 - 59,193
Current
assets 16,721 13,103 62,149 25,395 30 4,074 - 121,472
Other
non-current
assets 51,819 46,529 212,800 614,128 183,816 70,864 - 1,179,956
------- ---------- ------- ---------- ----------- ------- ------------ ---------
Total
segment
assets 68,540 59,632 274,949 639,523 183,846 74,938 - 1,301,428
Not reportable
assets(2) - - - - - 195,652 - 195,652
------- ---------- ------- ---------- ----------- ------- ------------ ---------
Total
assets 68,540 59,632 274,949 639,523 183,846 270,590 - 1,497,080
------- ---------- ------- ---------- ----------- ------- ------------ ---------
(1) Comprised of administrative expenses of US$22,172,000, other
income of US$16,318,000, other expenses of US$7,214,000, write off
of assets of US$498,000, finance income of US$1,442,000, finance
costs of US$17,430,000 and foreign exchange gain of US$442,000.
(2) Not reportable assets are comprised of available-for-sale
financial assets of US$814,000, other receivables of US$66,046,000,
income tax receivable of US$18,608,000, deferred income tax assets
of US$1,199,000, other financial assets of US$6,139,000 and cash
and cash equivalents of US$102,846,000.
Six months Exploration
ended and Adjustments
30 June San advanced and
2015 Arcata Pallancata Jose Inmaculada projects Other eliminations Total
(unaudited) US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000
-------------- ------ ---------- ------- ---------- ----------- ------- ------------ ---------
Revenue
from
external
customers 52,945 41,440 95,749 - - 125 - 190,259
Inter
segment
revenue - - - - - 900 (900) -
Total
revenue 52,945 41,440 95,749 - - 1,025 (900) 190,259
------ ---------- ------- ---------- ----------- ------- ------------ ---------
Segment
profit/(loss) 2,007 (8,332) 10,245 - (6,297) 336 2,115 74
Others(1) (43,450)
---------
Profit
from
continuing
operations
before
income
tax (43,376)
---------
As at
31 December
2015
Assets
Capital
expenditure 14,600 10,683 38,451 166,336 4,011 4,078 - 238,159
Current
assets 17,456 13,818 63,941 31,958 30 5,435 - 132,638
Other
non-current
assets 53,458 50,591 220,307 633,169 181,662 72,481 - 1,211,668
------ ---------- ------- ---------- ----------- ------- ------------ ---------
Total
segment
assets 70,914 64,409 284,248 665,127 181,692 77,916 - 1,344,306
Not reportable
assets(2) - - - - - 198,743 - 198,743
------ ---------- ------- ---------- ----------- ------- ------------ ---------
Total
assets 70,914 64,409 284,248 665,127 181,692 276,659 - 1,543,049
------ ---------- ------- ---------- ----------- ------- ------------ ---------
(1) Comprised of administrative expenses of US$18,779,000, other
income of US$2,602,000, other expenses of US$4,604,000, impairment
of the Crespo unit of US$5,917,000, finance income of US$581,000,
finance costs of US$16,122,000 and foreign exchange loss of
US$1,211,000.
(2) Not reportable assets are comprised of available-for-sale
financial assets of US$366,000, other receivables of US$72,662,000,
income tax receivable of US$20,431,000, other financial assets of
US$21,267,000 and cash and cash equivalents of US$84,017,000.
4 Revenue
Six-months ended
30 June
----------------------------------
2016 (Unaudited) 2015 (Unaudited)
US$000 US$000
---------------- ----------------
Gold (from dore bars) 128,144 30,664
Silver (from dore bars) 94,373 58,796
Gold (from concentrate) 47,884 37,012
Silver (from concentrate) 68,711 63,662
Services 165 125
339,277 190,259
================ ================
The realised loss on gold and silver forward sales contracts in
the period recognised within revenue was US$3,116,000 (loss on
gold: US$3,501,000, gain on silver: US$385,000) (2015: gain of
US$4,991,000 (gain on gold: US$1,793,000 and silver:
US$3,198,000)).
5 Cost of sales before exceptional items
Included in cost of sales are:
Six-months ended
30 June
----------------------------------
2016 (Unaudited) 2015 (Unaudited)
US$000 US$000
---------------- ----------------
Depreciation and amortisation
in production cost 88,516 56,962
Personnel expenses 49,241 52,977
Mining royalty 3,024 2,613
Change in products in process
and finished goods 11,273 953
---------------- ----------------
6 Other income before exceptional items
Included in other income are:
Six-months ended
30 June
----------------------------------
2016 (Unaudited) 2015 (Unaudited)
US$000 US$000
---------------- ----------------
Export credits 8,360 840
Logistic services 2,566 1,325
Gain on sale of other assets 1,550 -
Others 424 437
---------------- ----------------
12,900 2,602
---------------- ----------------
7 Exceptional items
Six-months ended
30 June
------------------------------------
2016 (Unaudited) 2015 (Unaudited)
US$000 US$000
---------------- ----------------
Other income
Gain on sale of subsidiaries(1) 751 -
Reversal of reserves tax(2) 2,667 -
---------------- -----------------
Total 3,418 -
Other expenses
Donations (note 18) (1,000) -
Total (1,000) -
Impairment and write-off of
assets (net)
Impairment of assets(3) - (5,917)
Write-off of non-current assets(4) (498) -
Total (498) (5,917)
Finance income
Reversal of interests on reserves
tax(2) 959 -
Total 959 -
---------------- -----------------
Finance costs
Interest on disputed tax charges(5) - (1,486)
Total - (1,486)
---------------- -----------------
Income tax (expense)/benefit
Income tax (charge)/credit(6) (1,129) 1,268
---------------- -----------------
Total (1,129) 1,268
---------------- -----------------
1. Gain generated by the sale of the Group's subsidiary
Asociación Sumac Tarpuy to Inversiones ASPI S.A. of US$811,000 net
of the loss generated by the sale of HMX S.A. de C.V. to Sergio
Salinas Salinas and Servicios de Integración Fiscal S.A. de C.V. of
US$60,000.
2. Corresponds to the reversal of the reserves tax liability and
their associated interests due to an agreement reached with the
Fiscal Authority in Argentina.
3. Corresponds to the impairment of the Crespo project of US$5,917,000 (note 10).
4. Write-off of non-current assets in CompañÃa Minera Ares
S.A.C. ("CMA") of US$495,000 and Minera Santa Cruz S.A. ("MSC") of
US$3,000.
5. Interest on overdue tax charges owed by the Group following a
change in circumstances surrounding a tax dispute with the local
tax authority, resulting in the exposure now being assessed as
'probable', rather than 'possible'.
6. Corresponds to the current tax charge generated by the
reversal of the tax over reserves and its interests (US$1,269,000)
net of the deferred tax credit generated by the write-off of
non-current assets (US$140,000). For the six months period ended
June 2015, primarily related to the deferred tax benefit arising
from the impairment of the Crespo project of US$1,539,000, net of
the associated underlying tax charge of item 5 above, disclosed as
exceptional current income tax of US$271,000.
8 Finance income and finance cost before exceptional items
The Group recognised the following finance income and finance
costs before exceptional items:
Six-months ended
30 June
------------------------------------
2016 (Unaudited) 2015 (Unaudited)
US$000 US$000
---------------- ----------------
Finance income:
Interest on deposits and liquidity
funds 328 262
Interest on loans 103 31
Unwind of discount rate - 274
Others 52 14
---------------- -----------------
Total 483 581
---------------- -----------------
Finance cost:
Interest on bank loans (2,258) (4,125)
Interest on bond (11,662) (9,188)
Other interest (700) (781)
---------------- -----------------
Total interest expense (14,620) (14,094)
---------------- -----------------
Unwind of discount rate (1,722) (11)
Loss from changes in the fair
value of financial instruments (829) -
Others (259) (531)
---------------- -----------------
Total (17,430) (14,636)
---------------- -----------------
Finance costs above are presented net of borrowing costs
capitalised in property, plant and equipment amounting to
US$674,000 (2015: US$6,165,000).
9 Income tax expense
Six-months ended
30 June
----------------------------------
2016 (Unaudited) 2015 (Unaudited)
US$000 US$000
---------------- ----------------
Current tax
Current income tax expense 14,072 280
Current mining royalty charge 1,657 373
Current special mining tax
charge 1,369 -
Withholding taxes 552 -
---------------- ----------------
Total 17,650 653
---------------- ----------------
Deferred tax
Origination and reversal of
temporary differences(1) 4,903 (144)
---------------- ----------------
Total 4,903 (144)
---------------- ----------------
Total taxation charge in the
income statement 22,553 509
================ ================
The pre-exceptional tax charge for the period was US$21,424,000
(2015: US$1,777,000).
1. In 2016 mainly due to the decrease on capitalisation of tax
losses in Peru. In 2015, the charge primarily originated as result
of a decrease in the US dollar value of the Group's Peruvian Nuevo
Sol and Argentine Peso-denominated tax bases, due to the
devaluation of these currencies relative to the US dollar in the
period.
The tax related to items charged or credited to equity is as
follows:
Six-months ended
30 June
-----------------------------------
2016 (Unaudited) 2015 (Unaudited)
US$000 US$000
---------------- ----------------
Deferred income tax relating
to fair value gains on cash
flow hedges (11,274) 1,266
Total taxation (credit)/charge
in the statement of comprehensive
income (11,274) 1,266
================ ================
10 Property, plant and equipment
During the six months ended 30 June 2016, the Group acquired and
developed assets with a cost of US$57,143,000 (30 June 2015:
US$128,827,000). The additions for the six months ended 30 June
2016 relate to:
Other
property
Mining properties plant
and development and equipment
US$000 US$000
----------------- --------------
San Jose 11,037 4,494
Pallancata 4,256 763
Inmaculada 12,300 13,280
Arcata 6,115 2,718
Crespo 1,302 822
Others - 56
----------------- --------------
35,010 22,133
================= ==============
Assets with a net book value of US$5,000 were disposed of by the
Group during the six month period ended 30 June 2016 (30 June 2015:
US$53,000) resulting in a net gain on disposal of US$33,000 (30
June 2015: US$68,000).
For the six months ended 30 June 2016, the depreciation charge
on property, plant and equipment was US$90,605,000 (30 June 2015:
US$63,056,000).
At 30 June 2016, the Group has not recorded any impairment
charge with respect to property, plant and equipment (30 June 2015:
Crespo project of US$3,899,000).
11 Evaluation, exploration and intangible assets
During the six months ended 30 June 2016, the Group capitalised
evaluation and exploration costs of US$2,050,000 (30 June 2015:
US$2,732,000). The additions correspond to the following
properties:
US$000
------
Azuca 1,175
San Jose 181
Pallancata 17
Inmaculada 113
Arcata 18
Crespo 136
El Dorado 410
2,050
======
There were no transfers from evaluation and exploration assets
to property, plant and equipment during the period (2015:
US$nil).
At 30 June 2016, the Group has not recorded any impairment
charge with respect to evaluation and exploration assets (30 June
2015: Crespo project of US$1,736,000).
12 Other financial assets and liabilities
As at As at
30 June 31 December
2016 (unaudited) 2015
US$000 US$000
----------------- ------------
Other financial assets
Embedded derivatives(1) 6,139 -
Commodity swaps(2) - 21,267
----------------- ------------
Other financial assets 6,139 21,267
================= ============
Other financial liabilities
Commodity swaps(2) 17,301 -
Zero cost collars(3) 2,527 -
Embedded derivatives(2) - 1,141
Other financial liabilities 19,828 1,141
================= ============
1 Sales of concentrate and certain gold and silver volumes are
provisionally priced at the time the sale is recorded (note
13).
2 Corresponds to the fair value of the following unsettled commodity swap contracts:
a. signed in August 2015 with Citibank N.A. to hedge the sale of
71,000 ounces of gold at US$1,153.65 per ounce, during the period
from January to December 2016;
b. signed in October 2015 with Bank of America Merrill Lynch to
hedge the sale of 6,000,000 ounces of silver at US$15.9352 per
ounce, during the period from January to December 2016;
c. signed in October 2015 with Bank of America Merrill Lynch to
hedge the sale of 29,000 ounces of gold at US$1,144.50 per ounce,
during the period from January to December 2016; and
d. signed in February 2016 with Citibank N.A. to hedge the sale
of 15,000 ounces of gold at US$1,244.25 per ounce, during the
period from February to December 2016.
3 Corresponds to the fair value of the zero cost collar contract
signed in February 2016 with JPMorgan Chase Bank to hedge the sale
of 2,999,997 ounces of silver at a call/put price of US$17.6 and
US$14.0 per ounce respectively, during the period February to
December 2016.
13 Financial instruments
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.
At 30 June 2016 and 31 December 2015, the Group held the
following financial instruments measured at fair value:
As at 30
June 2016 Level
(unaudited) Level 1 Level 2 3
US$000 US$000 US$000 US$000
------------- -------- --------- --------
Assets measured
at fair value
Equity shares 814 814 - -
Embedded derivatives
(note 12) 6,139 - - 6,139
6,953 814 - 6,139
------------- -------- --------- --------
Liabilities measured
at fair value
Zero cost collars
(note 12) (2,527) - (2,527) -
Commodity swaps
(note 12) (17,301) - (17,301) -
-------- --------- --------
(19,828) - (19,828) -
------------- -------- --------- --------
As at 31
December Level 1 Level 2 Level
2015 US$000 US$000 US$000 3 US$000
Assets measured
at fair value
Equity shares 366 366 - -
Commodity swaps
(note 12) 21,267 - 21,267 -
21,633 366 21,267 -
Liabilities measured
at fair value
Embedded derivatives
(note 12) (1,141) - - (1,141)
-------- -------- ----------
(1,141) - - (1,141)
------------- -------- -------- ----------
During the six months ended 30 June 2016 and the year ended 31
December 2015, there were no transfers between these levels.
The reconciliation of the financial instruments categorised as
Level 3 is as follows:
Embedded
derivatives
(liabilities)/assets
US$000
----------------------
Balance at 1 January
2015 (1,533)
Gain from the period
recognised in revenue 392
Balance 31 December
2015 (1,141)
Gain from the period
recognised in revenue 7,280
Balance 30 June 2016
(unaudited) 6,139
----------------------
Valuation techniques:
Level 2: Commodity swap and zero cost collars contracts
Commodity swap and zero cost collars contracts: Contracts
entered into to hedge against the risk of commodity price
fluctuations. These contracts are valued using a commonly accepted
methodology which makes maximum use of market inputs such as quoted
market prices and discount rates.
Level 3: Embedded derivatives and equity shares of Pembrook
Mining Corp.
Embedded derivatives: Sales of concentrate and certain gold and
silver volumes are provisionally priced at the time the sale is
recorded. The price is then adjusted after an agreed period of time
(usually linked to the length of time it takes for the smelter to
refine and sell the concentrate or for the refiner to process the
dore into gold and silver), with the Group either paying or
receiving the difference between the provisional price and the
final price. This price exposure is considered to be an embedded
derivative in accordance with IAS 39 'Financial Instruments:
Recognition and Measurement'. The gain or loss that arises on the
fair value of the embedded derivative is recorded in 'Revenue'
(note 4). The selling price of metals can be reliably measured as
these are actively traded on international exchanges but the
estimated metal content is a non-observable input to this
valuation.
Equity shares: The investments in unlisted shares (Pembrook
Mining Corp. and ECI Exploration and Mining Inc.) were recognised
at cost less any recognised impairment losses given that there is
not an active market for these investments. The investments in ECI
Exploration and Mining Inc. and Pembrook Mining Corp. are fully
impaired as at 30 June 2016 and 31 December 2015, based on
available observable market data of similar peers.
14 Cash and cash equivalents
As at
30 June
As at
31 December
2016 2015
(unaudited)
US$000 US$000
------------- ------------
Cash at bank 335 368
Liquidity funds(1) 17 337
Current demand deposit accounts(2) 49,222 47,717
Time deposits(3) 53,272 35,595
------------- ------------
Cash and cash equivalents 102,846 84,017
============= ============
1 The liquidity funds are mainly invested in certificate of
deposits, commercial papers and floating rate notes with a weighted
average maturity of 12 days as at 30 June 2016 (as at 31 December
2015: 14 days).
2 Relates to bank accounts which are readily accessible to the Group and bear interest.
3 These deposits have an average maturity of 3 days (as at 31 December 2015: 2 days).
15 Borrowings
The movement in borrowings during the six month period to 30
June 2016 is as follows:
As at
30 June
As at 2016
1 January Additions Repayments Reclassifications (Unaudited)
2016 US$000 US$000 US$000 US$000 US$000
------------- ---------- ----------- ------------------ -------------
Current
Bank loans(1) 85,983 14,835 (30,341) (452) 70,025
Bond payable(2) 8,777 12,256 (11,928) (327) 8,778
94,760 27,091 (42,269) (779) 78,803
Non-current
Bank loan(3) 49,548 - (50,000) 452 -
Bond payable(2) 290,230 - - 327 290,557
339,778 - (50,000) 779 290,557
------------- ---------- ----------- ------------------ -------------
Accrued
interest: (9,829) (14,594) 14,341 779 (9,303)
------------- ---------- ----------- ------------------ -------------
Before accrued
interest 424,709 12,497 (77,928) 779 360,057
------------- ---------- ----------- ------------------ -------------
1 Relates to the US$60,447,000 short-term credit lines with the
BBVA Bank (2015: US$75,200,000), pre-shipment loans for a total
amount of US$9,578,000 (2015: US$10,554,000) which are credit lines
given by banks to meet payment obligations arising from the exports
of the Group, and the current portion of the medium-term loan
totalling US$nil, as the loan was repaid on 7 June 2016 (2015:
US$229,000).
2 Relates to the issuance of US$350,000,000 7.75% Senior
Unsecured Notes on 23 January 2014.The carrying value at 30 June
2016 of US$299,335,000 (2015: US$299,007,000) was determined in
accordance with the effective interest method.
3 Medium-term loan of US$100,000,000 with Scotiabank Peru S.A.A.
acting as Lead Arranger and The Bank of Nova Scotia and Corpbanca
as lenders. The loan was fully repaid on 7 June 2016 (non-current
and current balance at 31 December 2015: US$49,777,000).
The carrying amount of current borrowings approximates their
fair value. The carrying amount and fair value of the non--current
borrowings are as follows:
Carrying amount Fair value
------------------------------ ------------------------------
As at
30 June
2016
As at
30 June
2016
(Unaudited) (Unaudited)
As at As at
31 December 31 December
2015 2015
US$000 US$000 US$000 US$000
------------ ------------ ------------ ------------
Bank loan - 49,548 - 48,223
Bond payable 290,557 290,230 306,198 274,878
------------------ ------------ ------------ ------------ ------------
Total 290,557 339,778 306,198 323,101
------------------ ------------ ------------ ------------ ------------
16 Equity
Share capital and share premium
The movement in share capital of the Company from 31 December
2015 to 30 June 2016 is as follows:
Number Share Share
of ordinary capital premium
shares US$000 US$000
------------------------------ ------------ -------- --------
Shares issued as at 1 January
2016 505,571,505 223,805 438,041
Shares issued as at 30 June
2016 505,571,505 223,805 438,041
------------------------------- ------------ -------- --------
At 30 June 2016 and 31 December 2015 all issued shares with a
par value of 25 pence each were fully paid (30 June 2016: weighted
average of US$0.443 per share, 31 December 2015: weighted average
of US$0.443 per share).
On 20 March 2015, the Group issued 587,015 ordinary shares under
the Deferred Bonus Plan, to certain employees of the Group.
17 Dividends paid and declared
Dividends declared and paid to non-controlling interests in the
six months ended 30 June 2016 were US$5,244,000 (30 June 2015:
US$nil) and US$5,344,000 (30 June 2015: US$645,000)
respectively.
There were no dividends declared in the six months ended 30 June
2015 or 2016. The Directors of the Company declared an interim
dividend in respect of the six months ended 30 June 2016 of 1.38 US
cents per share (totalling US$7,000,000) (30 June 2015: US$nil)
which will be paid to shareholders on 22 September 2016 to those
shareholders appearing on the register on 2 September 2016. These
financial statements do not reflect this dividend payable.
18 Related party transactions
On 17 May 2016, Asociación Sumac Tarpuy was sold to Inversiones
ASPI S.A. generating a gain on disposal of US$811,000 (note 7). The
Group made a donation of US$1,000,000 to the Universidad de
Ingenieria y TecnologÃa ("UTEC") with the proceeds from the sale of
this entity.
There were no other significant transactions with related
parties during the six months period ended 30 June 2016.
19 Notes to the statement of cash flows
Six- months ended
30 June
--------------------------------
2016 2015
(Unaudited) (Unaudited)
US$000 US$000
------------- -------------
Reconciliation of gain/(loss)
for the period to net cash generated
from operating activities
Profit/(loss) for the period 37,744 (43,885)
Adjustments to reconcile Group
loss to net cash inflows from
operating activities
Depreciation 88,420 57,095
Amortisation of intangibles 785 684
Write-off of assets (net) 498 -
Impairment of assets - 5,917
Gain on sale of available-for-sale
financial assets (38) -
Gain on sale of property, plant
and equipment (33) (68)
Provision for obsolescence of
supplies 267 -
Gain on sale of subsidiary (751) -
Finance income (1,404) (581)
Finance costs 17,430 16,122
Income tax expense 22,553 509
Other 2,063 3,808
Increase/(decrease) of cash flows
from operations due to changes
in assets and liabilities
Trade and other receivables 2,587 2,867
Income tax receivable (754) 13,098
Other financial assets and liabilities (6,490) (184)
Inventories 10,845 (1,153)
Trade and other payables (18,483) (12,649)
Provisions 3,588 2,923
------------- -------------
Cash generated from operations 158,827 44,503
------------- -------------
20 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 the option the Group
must satisfy certain financial and other obligations over the
agreement term. The option lapses in the event that the Group does
not meet the financial requirements. At any point in time, the
Group may cancel the agreements without penalty, except in certain
specific circumstances.
The Group continually reviews its requirements under the
agreements and determines on an annual basis whether to proceed
with the financial commitment. Based on management's current
intention regarding these projects, the commitments at the balance
sheet date are as follows:
As at As at
30 June 2016 US$000 31 December 2015 US$000
-------------------- ------------------------
Less than one year 750 550
More than one year 5,850 6,450
-------------------- ------------------------
6,600 7,000
-------------------- ------------------------
b) Capital commitments
The future capital commitments of the Group are as follows:
As at As at
30 June 2016 US$000 31 December 2015 US$000
-------------------- ------------------------
Peru 16,820 7,684
Argentina 3,498 4,509
20,318 12,193
-------------------- ------------------------
21 Subsequent events
a) On 4 July 2016 the Group repaid US$35,000,000 of short-term
credit lines with BBVA Bank and obtained two short-term loans with
Interbank amounting to US$30,000,000 at an annual interest rate of
1.5%.
Profit by operation(1)
(Segment report reconciliation) as at 30 June 2016
Consolidation
San adjustment
Company (US$000) Arcata Pallancata Jose Inmaculada and others Total/HOC
-------------------------------------- -------- ---------- -------- ---------- ------------- ---------
Revenue 60,009 28,915 110,651 139,537 165 339,277
Cost of sales (pre-consolidation) (46,506) (28,451) (74,461) (88,892) (438) (238,748)
--------------------------------------- -------- ---------- -------- ---------- ------------- ---------
Consolidation adjustment 47 (91) - (394) 438 -
Cost of sales (post-consolidation) (46,459) (28,542) (74,461) (89,286) - (238,748)
Production cost excluding
Depreciation (34,119) (18,790) (48,548) (37,580) - (139,037)
Depreciation in
production
cost (10,779) (9,085) (22,362) (46,290) - (88,516)
Other items 151 150 (179) (44) - 78
Change in inventories (1,712) (817) (3,372) (5,372) - (11,273)
--------------------------------------- -------- ---------- -------- ---------- ------------- ---------
Gross profit 13,503 464 36,190 50,645 (273) 100,529
--------------------------------------- -------- ---------- -------- ---------- ------------- ---------
Administrative expenses - - - - (22,172) (22,172)
Exploration expenses - - - - (4,043) (4,043)
Selling expenses (693) (365) (5,509) (510) - (7,077)
Other income/expenses - - - - 9,104 9,104
--------------------------------------- -------- ---------- -------- ---------- ------------- ---------
Operating profit before
impairment 12,810 99 30,681 50,135 (17,384) 76,341
--------------------------------------- -------- ---------- -------- ---------- ------------- ---------
Impairment and write-off
of assets - - - - (498) (498)
Finance income - - - - 1,442 1,442
Finance costs - - - - (17,430) (17,430)
Foreign exchange - - - - 442 442
--------------------------------------- -------- ---------- -------- ---------- ------------- ---------
Profit/(loss) from
continuing operations
before income tax 12,810 99 30,681 50,135 (33,428) 60,297
--------------------------------------- -------- ---------- -------- ---------- ------------- ---------
Income tax - - - - (22,553) (22,553)
--------------------------------------- -------- ---------- -------- ---------- ------------- ---------
Profit/(loss) for the
year from continuing
operations 12,810 99 30,681 50,135 (55,981) 37,744
--------------------------------------- -------- ---------- -------- ---------- ------------- ---------
(1) On a post-exceptional basis.
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
Capita Asset Services, The Registry, 34 Beckenham Road,
Beckenham, Kent BR3 4TU.
BY TELEPHONE
If calling from the UK: 0371 664 0300 (Calls charged at the
standard geographic rate and will vary by provider. Lines are open
8.30am-5.30pm Mon to Fri).
If calling from overseas: +44 371 664 0300 (Calls charged at the
applicable international rate).
Currency option and dividend mandate
Shareholders wishing to receive their dividend in US dollars
should contact the Company's registrars to request a currency
election form. This form should be completed and returned to the
registrars by 5 September 2016 in respect of the 2016 interim
dividend.
The Company's registrars can also arrange for the dividend to be
paid directly into a shareholder's UK bank account. To take
advantage of this facility in respect of the 2016 interim dividend,
a dividend mandate form, also available from the Company's
registrars, should be completed and returned to the registrars by 5
September 2016. This arrangement is only available in respect of
dividends paid in UK pounds sterling. Shareholders who have already
completed one or both of these forms need take no further
action.
Financial Calendar
Dividend dates 2016
----------------------------------------------- -------------
Ex-dividend date 1 September
Record date 2 September
Deadline for return of currency election forms 5 September
Payment date 22 September
----------------------------------------------- -------------
23 Hanover Square
London
W1S 1JB
United Kingdom
(1) Revenue presented in the financial statements is disclosed
as net revenue (in the Financial Review it is calculated as gross
revenue less commercial discounts)
(2) Adjusted EBITDA is 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 expenses
(3) On a pre-exceptional basis
(4) All-in sustaining cost per silver equivalent ounce ("AISC"):
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
74:1
(5) All equivalent figures assume the average gold/silver ratio
for 2015 of 74:1 unless otherwise stated
(6) All-in sustaining cash cost per silver equivalent ounce:
Calculated before exceptional items 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 ratio of 74:1 (Au/Ag).
Also includes commercial discounts and selling expenses divided by
silver equivalent ounces sold using a ratio of 74:1 (Au/Ag).
(7) Commercial discounts do not include those associated with
dore sales which have already been considered in the gross revenue
figures.
(8) Unit cost per tonne is calculated by dividing mine and
geology costs by extracted tonnage and plant and other costs by
treated tonnage.
(9) Cash costs are calculated to include cost of sales,
treatment charges, and selling expenses before exceptional items
less depreciation included in cost of sales.
(10) All-in sustaining cash cost per silver equivalent ounce:
Calculated before exceptional items 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 ratio of 74:1 (Au/Ag).
Also includes commercial discounts and selling expenses divided by
silver equivalent ounces sold using a ratio of 74:1 (Au/Ag).
(11) AISC for Pallancata includes capex for developing the Pablo
vein. Excluding this capex, AISC for the operation was $13.5 per
silver equivalent ounce. The total operational AISC excluding the
Pablo capex was $10.6 per ounce.
(12) New royalties included in income tax line
(13) Includes pre-shipment loans and short term interest
payables.
(14) Includes additions in property, plant and equipment and
evaluation and exploration assets (confirmation of resources) and
excludes increases in the expected closure costs of mine assets
(15) Inmaculada was accounted for as a project in H1 2015 and
therefore is not included in the calculation of operations capital
expenditure for H1 2015
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR FELLFQVFBBBK
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