TIDMHOC
RNS Number : 0954O
Hochschild Mining PLC
16 August 2017
________________________________________________________________________________
16 August 2017
Hochschild Mining plc
Interim Results for the six months ended 30 June 2017
2017 Interim Results Highlights
-- Revenue of $340.8 million (H1 2016: $339.3 million)(1)
-- Adjusted EBITDA of $136.0 million (H1 2016: $170.3
million)(2)
-- Profit before income tax of $39.9 million (H1 2016: $60.3
million)
-- Adjusted basic earnings per share of $0.03 (H1 2016:
$0.05)(3)
-- Cash and cash equivalent balance of $144.5 million as at 30
June 2017 (31 December 2016: $140.0 million)
-- Net debt of $164.7 million as at 30 June 2017 (31 December
2016: $187.4 million)
-- $18.5 million of debt repaid in H1 2017(4)
-- Net debt/annual Adjusted EBITDA of 0.56x as at 30 June 2017
(31 December 2016: 0.57x)
-- Interim dividend of 1.38 cents per share ($7.0 million)
-- Brownfield drilling programme ramping up in H2 - starting to
deliver positive results
H1 2017 operational delivery in line with guidance
-- H1 2017 AISC per silver equivalent ounce from operations of
$12.0 (H1 2016: $10.9) ahead of guidance of $12.2-12.7(5)
-- Half year production of 17.9 million attributable silver
equivalent ounces (H1 2016: 17.0 million ounces)(6)
H2 2017 Outlook
-- On track to deliver record attributable production target of
37.0 million silver equivalent ounces for 2017
-- AISC expected to be in line with $12.2-12.7 per silver
equivalent ounce guidance
$000 unless stated Six months to 30 June 2017 Six months to % change
30 June 2016
------------------------------------------------------ --------------------------- -------------- ---------
Attributable silver production (koz) 8,938 8,210 9
Attributable gold production (koz) 121 118 3
Revenue 340,796 339,277 -
Adjusted EBITDA 135,996 170,285 (20)
Profit from continuing operations (pre-exceptional) 18,246 35,994 (49)
Profit from continuing operations (post-exceptional) 27,543 37,744 (27)
Basic earnings per share (pre-exceptional) $ 0.03 0.05 (40)
Basic earnings per share (post-exceptional) $ 0.05 0.06 (17)
------------------------------------------------------ --------------------------- -------------- ---------
Ignacio Bustamante, Chief Executive Officer said:
"Hochschild Mining continues to deliver a robust operational
performance with both production and cost targets for 2017 on
track. Towards the end of the year, once permits are in place, we
can expect further progress with the development of the Pablo vein
at the Pallancata deposit as well as several brownfield drilling
campaigns across the Company's portfolio. I am confident that our
Company has the financial and operational flexibility to meet our
upcoming debt commitment, fund an extensive brownfield programme
and assess value accretive opportunities as they arise.
Operations
In the first half of the year, Hochschild's mines proved to be
strong despite the effects of stoppages at two operations. Solid
production from Inmaculada and San Jose and a better than expected
result from Pallancata contributed to overall output of 17.9
million silver equivalent ounces (242,208 gold equivalent ounces),
a 6% improvement on the first half of last year and on track to
meet our overall annual target of 37 million silver equivalent
ounces. At Inmaculada, tonnage lost in the first half was
supplemented by the deposit's high grade stockpile and consequently
production reached 8.6 million silver equivalent ounces, just over
half the target for the year with the all-in sustaining cost figure
at a very competitive $8.8 per silver equivalent ounce. The
Pallancata mine enjoyed a strong period with better than expected
silver grades and consequently all-in sustaining costs were reduced
by over 30% versus the first half of 2016 to $10.9 per silver
equivalent ounce. San Jose was once again a consistent contributor
although costs rose due lower-than-expected local currency
devaluation not fully offsetting ongoing high inflation in
Argentina. Finally, Arcata has been mining narrower veins with a
reduced number of stopes and consequently the operational focus has
been on controlling costs and driving further efficiencies.
Accordingly results in the first half reflecting this transitional
phase as well as emphasising the need for our brownfield programme
to continue to deliver higher quality resources.
Exploration
Over the last two years, the key discovery by our brownfield
exploration team has been the Pablo vein at the Pallancata deposit
in mid-2015 and since then, the quality and quantity of this
resource has increased significantly whilst providing the team with
the possibility for an ongoing reinterpretation of the surrounding
district. Throughput at Pallancata is expected to rise towards the
end of the year once the necessary permits are received from the
Peruvian government in the fourth quarter. In addition, the
Company's annual brownfield programme, which has already started to
deliver positive results, is due to ramp up in the second half with
drilling campaigns to be carried out at Inmaculada, San Jose and
Arcata as well further initiatives at other prospects, again
subject to permitting.
Financial results
Production and prices achieved in the first half were broadly
similar to H1 2016 and therefore revenue was also in line at $341
million (H1 2016: $339 million). The Company's increased investment
in exploration-led growth as well as the cancellation of the
Patagonian port benefit in late 2016 and a fully-implemented
backfill process at Inmaculada led to an increase in overall costs
with Adjusted EBITDA at the half year of $136 million (H1 2016:
$170 million). Pre-exceptional earnings per share was $0.03 whilst
an impairment of $26 million at Arcata was offset by a reversal of
$32 million at Pallancata and therefore post-exceptional earnings
per share was $0.05.
Financial position
Financial discipline and an efficient use of capital remain
cornerstones of our Company's strategy and in the first half
continued strong cashflow from operations has ensured further
progress in reducing our short term debt by almost $19 million. The
Company is in a strong position to address the upcoming option to
redeem early our remaining Senior Notes in January of next year
thus substantially reducing our finance costs going forward. Cash
and cash equivalents were approximately $145 million at the end of
June (31 December 2016: $140.0 million) leading to a net debt
position of $165 million (31 December 2016: $187.4 million) and a
ratio of net debt to annual Adjusted EBITDA currently standing at a
comfortable 0.56x.
Safety
Hochschild deeply regrets to report that four fatalities have
occurred in the first seven months of the year: two previously
reported at Inmaculada and another two most recently at the Arcata
mine. Safety continues to be the Company's highest priority and
therefore the incidents represent a significant setback for our
safety programmes. The management recognises that despite the
significant progress made over the last decade in our practices and
systems, we still must endeavour to strengthen the culture of
safety throughout our Company.
Outlook
Although precious metal prices have once again proved to be
volatile so far this year, Hochschild's operational strength
combined with a stringent cost discipline leads us to reiterate our
2017 production target of 37 million silver equivalent ounces at an
all-in sustaining cost of between $12.2 and $12.7 per ounce. The
Board is today declaring an interim dividend of 1.38 cents per
share reflecting the success of our long term growth strategy as
well as the progress made in the year-to-date."
________________________________________________________________________________
A live conference call & audio webcast will be held at
2.30pm (London time) on Wednesday 16 August 2017 for analysts and
investors. For a live webcast of the presentation please click on
the link below:
https://edge.media-server.com/m6/p/3tntxcih
Conference call dial in details:
UK: +44(0)20 3427 1906 (Please use the following confirmation
code: 3657973).
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 (Passcode: 3657973)
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 3709 3264
Head of Investor Relations
Hudson Sandler
Charlie Jack +44 (0)207 796 4133
Public Relations
________________________________________________________________________________
OPERATING REVIEW
OPERATIONS
Note: silver/gold equivalent production figures assume a
gold/silver ratio of 74:1.
Production
In H1 2017, the Company delivered attributable production of
242,208 gold equivalent ounces or 17.9 million silver equivalent
ounces. Pallancata is delivering grades above expectations and was
significantly ahead of the H1 2016 result despite a
community-related stoppage in the first quarter. At Inmaculada,
mining operations were boosted by a contribution from existing high
grade stockpiles whilst there was also another solid performance
from the 51% owned San Jose operation.
TOTAL GROUP PRODUCTION
Six months Six months % change
to to
30 June 2017 30 June 2016
----------------------- -------------- --------------- ---------
Silver production
(koz) 10,429 9,744 7
Gold production
(koz) 144.27 139.43 3
Total silver
equivalent (koz) 21,105 20,062 5
Total gold equivalent
(koz) 285.21 271.11 5
Silver sold
(koz) 10,508 10,085 4
Gold sold (koz) 143.42 146.10 (2)
----------------------- -------------- --------------- ---------
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 % change
to to
30 June 2017 30 June 2016
------------------- -------------- --------------- ---------
Silver production
(koz) 8,938 8,210 9
Gold production
(koz) 121.43 118.12 3
Silver equivalent
(koz) 17,923 16,951 6
Gold equivalent
(koz) 242.21 229.06 6
------------------- -------------- --------------- ---------
Attributable production includes 100% of all production from
Arcata, Inmaculada, Pallancata and 51% from San Jose.
Costs
The Company's all-in sustaining cost increased in H1 2017 to
$12.0 per silver equivalent ounce (H1 2016: $10.9 per ounce),
slightly better than the Company's 2017 guidance of between $12.2
and $12.7 per silver equivalent ounce. This result versus H1 2016
reflects the elimination of the Patagonian port rebate in
Argentina, higher backfill and detoxification costs at Inmaculada,
net inflation in Argentina and reduced tonnage and grades at
Arcata. These effects were partially offset by stronger grades and
tonnage at Pallancata. Please see page 9 of the Financial Review
for further details on costs.
Inmaculada (Peru)
The 100% owned Inmaculada gold/silver underground operation is
located in the Department of Ayacucho in southern Peru. It started
operations in September 2015.
Inmaculada summary Six months Six months % change
to to
30 June 30 June
2017 2016
-------------------------- ----------- ------------------ ---------
Ore production (tonnes) 614,352 619,161 (1)
Average silver grade
(g/t) 142 132 8
Average gold grade
(g/t) 4.04 4.25 (5)
Silver produced (koz) 2,644 2,370 12
Gold produced (koz) 79.82 79.20 1
Silver equivalent
produced (koz) 8,550 8,231 4
Gold equivalent produced
(koz) 115.55 111.23 4
Silver sold (koz) 2,642 2,468 7
Gold sold (koz) 78.32 82.17 (5)
Unit cost ($/t) 84.8 64.6 31
Total cash cost ($/oz
Ag co-product) 6.6 4.9 35
All-in sustaining
cost ($/oz) 8.8 8.2 7
-------------------------- ----------- ------------------ ---------
Production
Inmaculada recovered well following the stoppage at the
operation in Q1 2017 with mining operations steadily ramped up back
to full production in the second quarter and throughput and grades
reverting to the forecasted level. In the first half, the operation
was ahead of the same period of 2016, with gold equivalent
production of 115,547 ounces (H1 2016: 111,233 ounces), consisting
of 79,820 ounces of gold and 2.6 million ounces of silver.
Inmaculada remains on track to meet its full year forecast of
approximately 230,000 gold equivalent ounces (17 million silver
equivalent ounces).
Costs
All-in sustaining costs were better than expected at $8.8 per
silver equivalent ounce (H1 2016: $8.2 per ounce). Reduced mined
tonnage resulting from the stoppage in the first quarter and
budgeted lower mined gold grades were largely offset by the
processing of the high grade stockpile as well as operational
efficiencies versus plan. AISC for 2017 is still expected to be
between $9.5 and $10.0 per silver equivalent ounce reflecting the
above-mentioned lower gold grades and the previously disclosed
investment in the expansion of the tailings dam and other
infrastructure.
Arcata (Peru)
The 100% owned Arcata underground operation is located in the
Department of Arequipa in southern Peru. It commenced production in
1964.
Arcata summary Six months Six months % change
to to
30 June 30 June
2017 2016
-------------------------- ----------- ------------ ---------
Ore production (tonnes) 261,643 333,397 (22)
Average silver grade
(g/t) 309 327 (6)
Average gold grade
(g/t) 1.09 1.22 (11)
Silver produced (koz) 2,303 2,970 (22)
Gold produced (koz) 8.04 10.36 (22)
Silver equivalent
produced (koz) 2,898 3,736 (22)
Gold equivalent produced
(koz) 39.16 50.49 (22)
Silver sold (koz) 2,261 2,922 (23)
Gold sold (koz) 7.94 10.14 (22)
Unit cost ($/t) 119.7 106.0 13
Total cash cost ($/oz
Ag co-product) 14.1 11.1 27
All-in sustaining
cost ($/oz) 17.6 13.0 35
-------------------------- ----------- ------------ ---------
Production
At Arcata, first half, production was 2.9 million silver
equivalent ounces (H1 2016: 3.7 million ounces) with tonnage and
silver grades adjusted following a revision of the mine plan to
accommodate a reduced number of stopes and narrower veins. The
focus at Arcata is to improve its cost position by increasing the
quality of resources through the brownfield exploration programme
as well as other efficiency and productivity measures in order to
ensure the long term sustainability of the mine. The forecasts for
Arcata's output for the year have been revised to 5.5 million
silver equivalent ounces in 2017.
Costs
In H1 2017, as expected, Arcata's all-in sustaining cost rose
substantially versus H1 2016 to $17.6 per silver equivalent ounce
(H1 2016: $13.0 per ounce) reflecting the reduced tonnage and
grades resulting from the revised mine plan as well as the
previously-announced increased investment in the mine's brownfield
exploration programme. In line with the lower production levels,
the Company now expects Arcata's all-in sustaining cost for 2017 to
be approximately $17.0 per silver equivalent ounce.
Pallancata (Peru)
The 100% owned Pallancata silver/gold property is located in the
Department of Ayacucho in southern Peru. Pallancata commenced
production in 2007. Ore from Pallancata is transported 22
kilometres to the Selene plant for processing.
Pallancata summary Six months Six months % change
to to
30 June 30 June
2017 2016
-------------------------- ----------- ------------ ---------
Ore production (tonnes) 192,744 135,736 42
Average silver grade
(g/t) 440 341 29
Average gold grade
(g/t) 1.82 1.77 3
Silver produced (koz) 2,439 1,273 92
Gold produced (koz) 9.79 6.37 54
Silver equivalent
produced (koz) 3,163 1,745 81
Gold equivalent produced
(koz) 42.75 23.58 81
Silver sold (koz) 2,437 1,315 85
Gold sold (koz) 9.72 6.50 50
Unit cost ($/t) 106.3 141.2 (25)
Total cash cost ($/oz
Ag co-product) 8.4 12.3 (32)
All-in sustaining
cost ($/oz) 10.9 15.9 (31)
-------------------------- ----------- ------------ ---------
Production
The first half of the year's performance was a
better-than-expected 3.2 million silver equivalent ounces (H1 2016:
1.7 million ounces) consisting of 2.4 million ounces of silver and
9,790 ounces of gold, a significant improvement versus the same
period of 2016. The forecast for the full year has now been
upgraded to approximately 7.5 million silver equivalent ounces.
Costs
All-in sustaining costs at Pallancata in the first half fell by
31% versus the same period of 2016 to $10.9 per silver equivalent
ounce (H1 2016: $15.9 per ounce). The reduction was due to better
than expected tonnage and silver grades which offset the loss of
January's production due to the stoppage. AISC for full year 2017
is now expected to be approximately $12.0 per silver equivalent
ounce.
San Jose (Argentina)
The San Jose silver/gold mine is located in Argentina, in the
province of Santa Cruz, 1,750 kilometres south-southwest of Buenos
Aires. San Jose commenced production in 2007 and is a joint venture
with McEwen Mining Inc. Hochschild holds a controlling interest of
51% in the mine and is the mine operator.
San Jose summary(*) Six months Six months % change
to to
30 June 30 June
2017 2016
-------------------------- ----------- ------------ ---------
Ore production (tonnes) 250,396 248,766 1
Average silver grade
(g/t) 436 446 (2)
Average gold grade
(g/t) 6.60 6.16 7
Silver produced (koz) 3,044 3,132 (3)
Gold produced (koz) 46.62 43.49 7
Silver equivalent
produced (koz) 6,494 6,350 2
Gold equivalent produced
(koz) 87.75 85.81 2
Silver sold (koz) 3,168 3,380 (6)
Gold sold (koz) 47.43 47.29 -
Unit cost ($/t) 251.6 201.7 25
Total cash cost ($/oz
Ag co-product) 11.0 9.1 21
All-in sustaining
cost ($/oz) 14.4 11.7 23
-------------------------- ----------- ------------ ---------
(*) The Company has a 51% interest in San Jose
Production
The San Jose mine in Argentina has continued to be a solid
performer in the first half with production of 3.0 million ounces
of silver and 46,618 ounces of gold which is 6.5 million silver
equivalent ounces, a 2% improvement compared to the same period of
2016 (H1 2016 6.4 million ounces) and principally driven by better
gold grades.
Costs
At San Jose, all-in sustaining costs increased to $14.4 per
silver equivalent ounce (H1 2016: $11.7 per ounce) mainly due to
the elimination of the Patagonian port rebate in the fourth quarter
of 2016. In addition, lower than expected currency devaluation in
Argentina only partially offset ongoing unit cost inflation.
Overall 2017 all-in sustaining costs are now expected to be between
$13.5 to $14.0 per silver equivalent ounce.
EXPLORATION
Brownfield exploration
At Arcata, over 15,000m of resource drilling has been carried
out at the Tunel 4, Paralela 3, Ramal Marion and Paralela Sur veins
although there were a few delays in surface drilling due to the
heavy rain in Peru in the first quarter. The outcome of drilling
year-to-date is promising with selected results below:
Vein Results
------------- -------------------------------
Ramal Marion DDH-018-GE-17: 1.0m @ 1.0g/t
Au & 326g/t Ag
DDH-023-GE-17: 0.8m @ 0.6g/t
Au & 154g/t Ag
DDH-049-EX-17: 0.8m @ 0.6g/t
Au & 146g/t Ag
DDH-054-EX-17: 0.8m @ 0.4g/t
Au & 201g/t Ag
DDH-023-GE-17: 0.8m @ 0.9g/t
Au & 246g/t Ag
DDH-043-EX-17: 1.2m @ 0.3g/t
Au & 159g/t Ag
DDH-058-EX-17: 1.0m @ 2.1g/t
Au & 712g/t Ag
DDH-066-EX-17: 1.3m @ 0.4g/t
Au & 167g/t Ag
DDH-018-GE-17: 1.2m @ 2.6g/t
Au & 1,229g/t Ag
DDH-023-GE-17: 0.8m @ 1.0g/t
Au & 227g/t Ag
DDH-043-EX-17: 0.8m @ 0.2g/t
Au & 477g/t Ag
DDH-058-EX-17: 0.9m @ 0.5g/t
Au & 309/t Ag
DDH-043-EX-17: 0.8m @ 0.2g/t
Au & 132g/t Ag
DDH-052-EX-17: 0.8m @ 0.4g/t
Au & 106g/t Ag
DDH-066-EX-17: 1.2m @ 1.1g/t
Au & 408g/t Ag
DDH-018-GE-17: 0.8m @ 0.9g/t
Au & 303g/t Ag
DDH-023-GE-17: 1.1m @ 3.8g/t
Au & 1,025g/t Ag
------------- -------------------------------
Paralela DDH-036-GE-17: 0.8m @ 4.9g/t
Au & 605g/t Ag
DDH-038-GE-17: 0.8m @ 1.5g/t
Au & 198g/t Ag
DDH-048-DI-17: 0.4m @ 3.9g/t
Au & 389g/t Ag
DDH-074-DI-17: 1.2m @ 1.8g/t
Au & 176g/t Ag
DDH-056-DI-17: 0.8m @ 1.5g/t
Au & 177g/t Ag
------------- -------------------------------
Paralela 1 DDH-036-GE-17: 0.8m @ 5.2g/t
Au & 692g/t Ag
DDH-038-GE-17: 0.8m @ 1.4g/t
Au & 240g/t Ag
DDH-048-DI-17: 0.8m @ 6.6g/t
Au & 765g/t Ag
------------- -------------------------------
Paralela 2 DDH-057-DI-17: 1.1m @ 3.0g/t
Au & 244g/t Ag
DDH-028-GE-17: 0.9m @ 2.6g/t
Au & 226g/t Ag
------------- -------------------------------
Paralela 3 DDH-056-DI-17: 1.1m @ 2.1g/t
Au & 331g/t Ag
DDH-074-DI-17: 1.8m @ 12.2g/t
Au & 1,339g/t Ag
DDH-041-DI-17: 1.3m @ 1.4g/t
Au & 173g/t Ag
DDH-038-GE-17: 0.8m @ 1.7g/t
Au & 117g/t Ag
------------- -------------------------------
Socorro+800 DDH-074-DI-17: 2.5m @ 12.2g/t
Au & 399g/t Ag
------------- -------------------------------
In addition, long horizontal drilling for potential resources
also started in the Pamela and Paralelas vein systems in the second
quarter with results pending.
At Pallancata, during the quarter, 1,000m of resource drilling
was carried out in the Marco vein, a structure identified close to
the Pablo vein with just over 1 million ounces of silver equivalent
resources already expected to have been identified year-to-date.
Selected results are below:
Vein Results
------ -------------------------------
Marco DLYU-A92A: 1.4m @ 0.7g/t Au &
235g/t Ag
DLYU-A88: 1.1m @ 2.2g/t Au &
1,108g/t Ag
DLNE-A05: 0.6m @ 1.1g/t Au &
470g/t Ag
DLYU-A92A: 2.0m @ 0.7g/t Au &
169g/t Ag
DLNE-A07: 0.6m @ 1.1g/t Au &
152g/t Ag
------ -------------------------------
At Inmaculada, although the main drilling programmes have not
begun yet, mine development during the period has allowed a
reinterpretation of the geological model at the deposit and has so
far identified a further 9.7 million silver equivalent ounces of
resources.
At San Jose, 4,837m of drilling for potential resources was
carried out in the first quarter at the Aguas Vivas zone as well as
the Juanita structure with preliminary results from Aguas Vivas
below.
Vein Results
--------------- -----------------------------------
Aguas Vivas NW SJD-1627: 2.6m @ 0.1g/t Au, 43g/t
Ag, 8.2% Pb & 5.5% Zn
SJD-1616: 2.8m @ 0.3g/t Au, 40g/t
Ag, 7.0% Pb & 6.0% Zn
--------------- -----------------------------------
During the second half of 2017, approximately 40,000 metres of
drilling will be executed with targets including: 3,100 metres of
long horizontal drilling for potential resources at Arcata as well
as a further 10,000 metres of resource drilling; 1,000 metres of
potential resource drilling to test the Millet structure at
Inmaculada; 2,500 metres of potential resource drilling to the
north east of Inmaculada at the Puquiopata area; and 5,500 metres
at the Aguas Vivas zone to the north west of San Jose. Further
drilling campaigns are subject to the receipt of the requisite
permits.
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 increased by 2% to
$359.5 million in H1 2017 (H1 2016: $353.3 million) due to a slight
increase in sales of silver as well as a small rise in the average
gold price received.(7)
Silver
Gross revenue from silver increased by 4% in H1 2017 to $180.1
million (H1 2016: $172.7 million) as a result of the
above-mentioned increase in the total amount of silver ounces sold
to 10,508 koz (H1 2016:10,085 koz), which was driven by increases
at Pallancata and Inmaculada offsetting a decline at Arcata.
Gold
Gross revenue from gold in H1 2017 was similar to the same
period of 2016 at $179.4 million (H1 2016: $180.5 million) the
total amount of gold ounces sold falling slightly in H1 2017 (143.4
koz) but offset by a 1% increase in the average gold price
received.
Gross average realised sales prices
The following table provides figures for average realised prices
(which are reported before the deduction of commercial discounts
and include the effects of the hedging agreements in place during
2016) and ounces sold for H1 2017 and H1 2016:
Average realised prices Six months Six months
to 30 June to 30 June
2017 2016
---------------------------- ------------ ------------
Silver ounces sold (koz) 10,508 10,085
Avg. realised silver price
($/oz) 17.1 17.1
Gold ounces sold (koz) 143.42 146.10
Avg. realised gold price
($/oz) 1,251 1,236
---------------------------- ------------ ------------
Commercial discounts
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 2017, the Group recorded
commercial discounts of $18.9 million (H1 2016: $14.1 million) with
the increase explained by the higher production from the
concentrate-only Pallancata mine. The ratio of commercial discounts
to gross revenue in H1 2017 was 5% (H1 2016: 4%).
Net revenue
Net revenue was $340.8 million (H1 2016 $339.3 million),
comprising net gold revenue of $174.6 million (H1 2016: $176.0
million) and net silver revenue of $166.0 million (H1 2016: $163.1
million). In H1 2017, gold accounted for 51% and silver 49% of the
Company's consolidated net revenue (H1 2016: gold 52% and silver
48%) with the minor increase in the silver contribution due to an
increase in sales from the predominantly-silver Pallancata
mine.
Revenue by mine(8)
$000 Six months to 30 June 2017 Six months to 30 June 2016 % change
---------------------- --------------------------- --------------------------- ---------
Silver revenue
Arcata 39,146 51,204 (24)
Inmaculada 44,880 40,813 10
Pallancata 40,928 23,123 77
San Jose 55,134 57,594 (4)
Commercial discounts (14,078) (9,650) 46
Net silver revenue 166,010 163,084 2
Gold revenue
Arcata 10,088 12,283 (18)
Inmaculada 97,016 98,724 (2)
Pallancata 12,179 8,362 46
San Jose 60,091 61,156 (2)
Commercial discounts (4,784) (4,497) 6
Net gold revenue 174,590 176,028 (1)
---------------------- --------------------------- --------------------------- ---------
Other revenue 196 165 19
---------------------- --------------------------- --------------------------- ---------
Net revenue 340,796 339,277 -
---------------------- --------------------------- --------------------------- ---------
Costs
Total cost of sales was $261.2 million in H1 2017 (H1 2016:
$238.7 million). The direct production cost excluding depreciation
was higher at $157.2 million (H1 2016: $139.0 million) due to an
increase in costs of Inmaculada mine resulting from two new
processes (the paste backfill plant and the tailings
detoxification). Costs were also negatively impacted by lower than
expected currency devaluation in Argentina only partially
offsetting high ongoing unit cost inflation. Depreciation was lower
at $83.8 million (H1 2016: $88.6 million) driven by lower extracted
tonnage in Pallancata as a result of the community-related stoppage
and in Inmaculada as a result of the fatalities in January. Other
items, which principally includes stoppage costs and personnel
related provisions, was $2.6 million in H1 2017 (H1 2016: ($0.1
million)). Change in inventories was higher at $17.6 million in H1
2017 (H1 2016: $11.3 million) due an important decrease in products
in process and finished goods.
$000 Six months Six months % Change
to 30 to 30
June 2017 June 2016
---------------------------- ----------- ----------- ---------
Direct production cost
excluding depreciation 157,237 139,037 13
Depreciation in production
cost 83,803 88,516 (5)
Other items 2,557 (78) 3,378
Change in inventories 17,601 11,273 56
---------------------------- ----------- ----------- ---------
Pre-exceptional cost of
sales 261,198 238,748 9
---------------------------- ----------- ----------- ---------
Unit cost per tonne
The Company reported unit cost per tonne at its operations of
$127.8 per tonne in H1 2017, a 18% increase versus H1 2016 ($108.7
per tonne) mostly due to reduced mined tonnage at Inmaculada and
significant cost inflation in Argentina.
Unit cost per tonne by operation (including royalties)(9) :
Operating unit ($/tonne) Six months Six months % change
to 30 to 30 June
June 2017 2016
-------------------------- ----------- ------------ ---------
Peru 98.1 87.2 13
Arcata 119.7 106.0 13
Inmaculada 84.8 64.6 31
Pallancata 106.3 141.2 (25)
-------------------------- ----------- ------------ ---------
Argentina
San Jose 251.6 201.7 25
-------------------------- ----------- ------------ ---------
Total 127.8 108.7 18
-------------------------- ----------- ------------ ---------
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(10) :
$000 unless otherwise indicated Six months Six months % change
to 30 to 30 June
June 2017 2016
----------------------------------- ----------- ------------ ---------
Group cash cost 196,415 168,128 17
----------------------------------- ----------- ------------ ---------
(+) Cost of sales 261,198 238,748 9
(-) Depreciation and amortisation
in cost of sales (90,184) (93,527) (4)
(+) Selling expenses 5,194 7,077 (27)
(+) Commercial deductions(11) 20,207 15,830 28
Gold 4,943 5,934 (17)
Silver 15,264 9,896 54
----------------------------------- ----------- ------------ ---------
Revenue 340,796 339,277 -
----------------------------------- ----------- ------------ ---------
Gold 174,590 176,028 (1)
Silver 166,010 163,084 2
Others 196 165 19
----------------------------------- ----------- ------------ ---------
Ounces sold
----------------------------------- ----------- ------------ ---------
Gold 143.4 146.1 (2)
Silver 10,508 10,085 4
----------------------------------- ----------- ------------ ---------
Group cash cost ($/oz)
----------------------------------- ----------- ------------ ---------
Co product Au 702 597 18
Co product Ag 9.1 8.0 14
By product Au 106 (33) (421)
By product Ag 1.6 (1.4) (214)
----------------------------------- ----------- ------------ ---------
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
Six months to 30 June 2017
$000 unless otherwise Arcata Inmaculada Pallancata San Main Corporate Total
indicated José operations & others
------------------------- ------------ ------------- ------------- -------------- ----------- --------- -------
(+) Production cost
excluding
depreciation 30,557 47,753 18,519 60,408 157,237 - 157,237
(+) Other items in cost
of
sales - - 1,461 1,096 2,557 - 2,557
(+) Operating and
exploration
capex for units 9,346 22,246 8,412 16,333 56,337 30 56,367
(+) Brownfield
exploration
expenses 1,156 145 414 2,044 3,759 2,118 5,877
(+) Administrative
expenses
(excl depreciation and
before
exceptional items) 469 1,639 565 4,387 7,060 18,139 25,199
(+) Royalties and
special mining
tax(12) - 1,444 498 - 1,941 969 2,910
------------------------- ------------ ------------- ------------- -------------- ----------- --------- -------
Sub-total 41,528 73,227 29,868 84,268 228,891 21,256 250,147
------------------------- ------------ ------------- ------------- -------------- ----------- --------- -------
Au ounces produced 8,042 79,820 9,794 46,618 144,273 - 144,273
Ag ounces produced
(000s) 2,303 2,644 2,439 3,044 10,429 - 10,429
Ounces produced (Ag Eq
000s
oz) 2,898 8,550 3,163 6,494 21,105 - 21,105
------------------------- ------------ ------------- ------------- -------------- ----------- --------- -------
Sub-total ($/oz Ag Eq) 14.3 8.6 9.4 13.0 10.8 - 11.9
------------------------- ------------ ------------- ------------- -------------- ----------- --------- -------
(+) Commercial
deductions 8,604 1,078 4,211 6,314 20,207 - 20,207
(+) Selling expenses 850 522 507 3,315 5,194 - 5,194
------------------------- ------------ ------------- ------------- -------------- ----------- --------- -------
(-) Export credits - - - - - - -
------------------------- ------------ ------------- ------------- -------------- ----------- --------- -------
Sub-total 9,454 1,600 4,718 9,629 25,401 - 25,401
------------------------- ------------ ------------- ------------- -------------- ----------- --------- -------
Au ounces sold 7,944 78,323 9,718 47,433 143,418 - 143,418
Ag ounces sold (000s) 2,261 2,642 2,437 3,168 10,508 - 10,508
Ounces sold (Ag Eq 000s
oz) 2,849 8,438 3,156 6,678 21,121 - 21,121
------------------------- ------------ ------------- ------------- -------------- ----------- --------- -------
Sub-total ($/oz Ag Eq) 3.3 0.2 1.5 1.4 1.2 - 1.2
------------------------- ------------ ------------- ------------- -------------- ----------- --------- -------
All-in sustaining costs
($/oz
Ag Eq) 17.6 8.8 10.9 14.4 12.0 - 13.1
------------------------- ------------ ------------- ------------- -------------- ----------- --------- -------
Six months to 30 June 2016
$000 unless otherwise indicated Arcata Inmaculada Pallancata San Main Corporate Total
José operations & others
----------------------------------- ------ ---------- ---------- ---------- ----------- --------- -------
(+) Production cost excluding
depreciation 34,119 37,580 18,790 48,548 139,037 - 139,037
(+) Other items in cost of
sales (151) 44 (150) 179 (78) - (78)
(+) Operating and exploration
capex for units 8,851 25,693 5,049 15,712 55,305 24 55,329
(+) Brownfield exploration
expenses 313 1 531 619 1,464 1,294 2,758
(+) Administrative expenses
(excl depreciation and before
exceptional items) 750 1,743 361 3,880 6,734 14,749 21,483
(+) Royalties and special mining
tax(10) - 1,373 284 - 1,657 1,369 3,026
----------------------------------- ------ ---------- ---------- ---------- ----------- --------- -------
Sub-total 43,882 66,434 24,866 68,938 204,119 17,436 221,555
----------------------------------- ------ ---------- ---------- ---------- ----------- --------- -------
Au ounces produced 10,362 79,204 6,372 43,493 139,430 - 139,430
Ag ounces produced (000s) 2,970 2,370 1,273 3,132 9,744 - 9,744
Ounces produced (Ag Eq 000s
oz) 3,736 8,231 1,745 6,350 20,062 - 20,062
----------------------------------- ------ ---------- ---------- ---------- ----------- --------- -------
Sub-total ($/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
----------------------------------- ------ ---------- ---------- ---------- ----------- --------- -------
(-) Export credits - - - (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
----------------------------------- ------ ---------- ---------- ---------- ----------- --------- -------
Administrative expenses
Administrative expenses before exceptional items increased by
17% to $26.0 million (H1 2016: $22.2 million) primarily due to
increased personnel expenses.
Exploration expenses
In H1 2017, exploration expenses increased to $7.1 million (H1
2016: $4.0 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 2017, the Company capitalised $1.9
million relating to brownfield exploration compared to $0.3 million
in H1 2016, bringing the total investment in exploration for H1
2017 to $9.0 million (H1 2016: $4.3 million).
Selling expenses
Selling expenses decreased by 27% versus H1 2016 to $5.2 million
(H1 2016: $7.1 million) mainly due to the elimination of export
duties at San Jose. Selling expenses consisted mainly of logistic
costs for the sale of concentrate whilst H1 2016 expenses also
included approximately 1.5 months of export duties on concentrate
until their elimination on 12 February 2016. Previously, export
duties in Argentina were levied at 10% of revenue for
concentrate.
Other income/expenses
Other income before exceptional items was $5.2 million (H1 2016:
$12.9 million). The reduction is mainly due to the elimination of
the Patagonian port rebate in the fourth quarter of 2016, partially
offset by the sale of land concessions and properties in Peru.
Other expenses before exceptional items were $6.2 million (H1
2016: $6.2 million).
Adjusted EBITDA
Adjusted EBITDA decreased by 19% versus the same period of 2016
to $136.0 million (H1 2016: $170.3 million) primarily due the
cancellation of the Patagonian port benefit in Q4 2016 in addition
to increases in costs at Inmaculada and San Jose.
Adjusted EBITDA is calculated as profit from continuing
operations before exceptional items, net finance costs and income
tax plus non-cash items (depreciation and changes in mine closure
provisions) and exploration expenses other than personnel and other
exploration related fixed expenses.
$000 unless otherwise indicated Six months to 30 June 2017 Six months to 30 June 2016 % change
------------------------------------------------- --------------------------- --------------------------- ---------
Profit from continuing operations before
exceptional items, net finance cost, foreign
exchange
(loss)/gain and income tax 40,055 73,923 (46)
Depreciation and amortisation in cost of sales 90,184 93,527 (4)
Depreciation and amortisation in administrative
expenses 806 689 17
Exploration expenses 7,122 4,043 76
Personnel and other exploration related fixed
expenses (2,567) (1,897) 35
Other non-cash income, net (13) 396 - -
------------------------------------------------- --------------------------- --------------------------- ---------
Adjusted EBITDA 135,996 170,285 (19)
------------------------------------------------- --------------------------- --------------------------- ---------
Adjusted EBITDA margin 40% 50%
------------------------------------------------- --------------------------- --------------------------- ---------
Finance income
Finance income before exceptional items of $2.7 million
increased from H1 2016 ($0.5 million) primarily due the impact of a
higher net present value of the Patagonian port rebate ($1.8
million). Collection dates have been updated and are shorter than
the originally expected 2 year period. The remainder consists of
interest received on deposits.
Finance costs
Finance costs before exceptional items decreased from $17.4
million in H1 2016 to $13.3 million in H1 2017, principally due to
the reduction of interest resulting from the repayment of
Scotiabank medium term loan in H1 2016 and the short-term
borrowings.
Foreign exchange (losses)/gains
The Group recognised a foreign exchange loss of $0.5 million (H1
2016: $0.4 million gain) as a result of exposures in currencies
other than the functional currency specifically the Peruvian Nuevo
Sol and Argentinean Peso.
Income tax
The Company's pre-exceptional income tax charge was $10.7
million (H1 2016: $21.4 million). The substantial decrease in the
charge is explained by the Company's decrease in profitability in
the period. The effective tax rate for the period was 23.6% (H1
2016: 32.4%), compared to the weighted average statutory tax rate
of 32.1%, and 30.9% if the mining royalty and the special mining
tax are included (H1 2016: 37.4%) with the primary reason for the
reduction being the impairment reversal at San Felipe.
Exceptional items
Exceptional items in H1 2017 totalled a $9.3 million gain after
tax (H1 2016: $1.8 million). Exceptional items principally included
impairment reversals of $31.9 million for Pallancata and $5.3
million at San Felipe partially offset by a $26.3 million
impairment of Arcata.
These items excluded the exceptional tax effect that amounted to
a $1.7 million tax charge (H1 2016: $1.1 million tax charge).
Cash flow and balance sheet review
Cash flow:
$000 Six months Six months Change
to 30 June to 30 June
2017 2016
------------------------------ ------------ ------------ ---------
Net cash generated from
operating activities 80,495 144,596 (64,101)
Net cash used in investing
activities (45,427) (54,840) 9,413
Cash flows used in financing
activities (30,617) (70,775) 40,158
------------------------------ ------------ ------------ ---------
Net increase in cash
and cash equivalents
during the period 4,451 18,981 (14,530)
------------------------------ ------------ ------------ ---------
Operating cash flow reduced from $144.6 million in H1 2016 to
$80.5 million in H1 2017, mainly due to higher backfill and
detoxification costs at Inmaculada, the impact of the net inflation
in Argentina and reduced tonnage and grades at Arcata. This was
partially offset by lower costs at Pallancata due to stronger
grades and tonnage. Net cash used in investing activities decreased
to $47.4 million in H1 2017 from $54.8 million in H1 2016 mainly
due to lower capex at Inmaculada and at the Company's projects.
Finally, cash used in financing activities reduced to $30.6 million
from $70.8 million in H1 2016, primarily due to the lower amount of
debt repaid. As a result, total cash flows resulted in a net
increase of $4.5 million from $19.0 million in H1 2016 ($(14.5)
million difference).
Working capital
$000 Six months to As at 31 Dec
30 June 2017 2016
----------------------------------------- -------------- -------------
Trade and other receivables 106,704 93,837
Inventories 42,920 57,056
Other financial (liability)/assets (2,772) (1,726)
Income tax (payable)/receivable 12,112 (9,025)
Trade and other payables and provisions (113,567) (108,848)
Mine closure provisions (101,816) (102,429)
----------------------------------------- -------------- -------------
Working capital (56,419) (71,135)
----------------------------------------- -------------- -------------
The Group's working capital position moved by $14.7 million from
$(71.1) million reduction to a $(56.4) million reduction in H1
2017. Key drivers were: lower inventories ($14.1 million), higher
income tax receivable resulting from $21.2 million of tax payments
in Argentina; and higher trade and other payables and provisions
$(4.7) million in line with higher costs. These were partially
offset by: an increase in trade and other receivables $(12.9)
million mainly due to Pallancata's trade receivables in line with
its higher production.
Net debt
$000 unless otherwise indicated As at 30 As at 31
June 2017 Dec 2016
--------------------------------- ----------- ----------
Cash and cash equivalents 144,497 139,979
Long term borrowings (291,395) (291,073)
Short term borrowings(14) (17,800) (36,312)
--------------------------------- ----------- ----------
Net debt 164,698 (187,406)
--------------------------------- ----------- ----------
The Group reported net debt position was $164.7 million as at 30
June 2017 (2016: $187.4 million). The reduction in H1 2017 includes
the net effect of: the repayment of short-term loans ($18.5
million) and; the operating cash generated during the period.
Capital expenditure(15)
$000 Six months to 30 Six months to
June 2017 30 June 2016
------------ ----------------- --------------
Arcata 9,346 8,851
Selene 33 13
Pallancata 8,379 5,036
San Jose 17,493 15,712
Inmaculada 22,246 25,693
Operations 57,497 55,305
------------ ----------------- --------------
Other 1,265 3,888
Total 58,762 59,193
------------ ----------------- --------------
H1 2017 capital expenditure of $58.8 million (H1 2016: $59.2
million) mainly comprised of operational capex of $57.5 million (H1
2016: $55.3 million) with the small decrease versus H1 2016
comprising decreases at Inmaculada and projects partially offset by
increases in capital expenditure at Pallancata.
Non-IFRS Financial Performance Measures
The Company has included certain non-IFRS measures in this news
release. The Company believes that these measures, in addition to
conventional measures prepared in accordance with IFRS, provide
investors an improved ability to evaluate the underlying
performance of the Company. The non-IFRS measures are intended to
provide additional information and should not be considered in
isolation or as a substitute for measures of performance prepared
in accordance with IFRS. These measures do not have any
standardised meaning prescribed under IFRS, and therefore may not
be comparable to other issuers.
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 occurring after
the date of this announcement. Nothing in this announcement should
be construed as a profit forecast.
RISKS
The principal risks and uncertainties facing the Company in
respect of the year ended 31 December 2016 are set out in detail in
the Risk Management & Viability section of the 2016 Annual
Report and in Note 36 to the 2016 Consolidated Financial
Statements.
The key risks disclosed in the 2016 Annual Report (available at
www.hochschildmining.com) are categorised as:
o Financial risks comprising commodity price risk;
o Operational risks including the risks associated with
operational performance, 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 19 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 3 to 7. The financial
position of the Company, its cash flow and liquidity position are
described in the Financial Review on pages 8 to 12.
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 Guidance and Transparency Rules 4.2.7R and 4.2.8R.
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 2017
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 2017 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 20. 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 2017 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 2017
Interim condensed consolidated income statement
Six-months ended Six-months ended
30 June 2017 30 June 2016
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 4 340,796 - 340,796 339,277 - 339,277
Cost of sales 5 (261,198) - (261,198) (238,748) - (238,748)
------------ ----------- --------- ------------ ----------- ---------
Gross profit 79,598 - 79,598 100,529 - 100,529
Administrative
expenses (26,004) - (26,004) (22,172) - (22,172)
Exploration expenses (7,122) - (7,122) (4,043) - (4,043)
Selling expenses (5,194) - (5,194) (7,077) - (7,077)
Other income 6 5,186 - 5,186 12,900 3,418 16,318
Other expenses (6,188) - (6,188) (6,214) (1,000) (7,214)
(Impairment)/impairment
reversal and
write-off of
non-financial
assets, net (221) 10,952 10,731 - (498) (498)
Profit from continuing
operations before
net finance income/(cost),
foreign exchange
(loss)/gain and
income tax 40,055 10,952 51,007 73,923 1,920 75,843
Finance income 8 2,700 - 2,700 483 959 1,442
Finance costs 8 (13,288) - (13,288) (17,430) - (17,430)
Foreign exchange
(loss)/gain (547) - (547) 442 - 442
------------ ----------- --------- ------------ ----------- ---------
Profit from continuing
operations before
income tax 28,920 10,952 39,872 57,418 2,879 60,297
Income tax expense 9 (10,674) (1,655) (12,329) (21,424) (1,129) (22,553)
------------ ----------- --------- ------------ ----------- ---------
Profit for the
period from continuing
operations 18,246 9,297 27,543 35,994 1,750 37,744
Attributable
to:
Equity shareholders
of the Company 14,064 9,297 23,361 27,220 596 27,816
Non-controlling
interests 4,182 - 4,182 8,774 1,154 9,928
------------ ----------- --------- ------------ ----------- ---------
18,246 9,297 27,543 35,994 1,750 37,744
============ =========== ========= ============ =========== =========
Basic earnings
per ordinary
share from continuing
operations and
for the period
(expressed in
U.S. dollars
per share) 0.03 0.02 0.05 0.05 0.01 0.06
============ =========== ========= ============ =========== =========
Diluted earnings
per ordinary
share from continuing
operations and
for the period
(expressed in
U.S. dollars
per share) 0.03 0.02 0.05 0.05 - 0.05
============ =========== ========= ============ =========== =========
Interim condensed consolidated statement of comprehensive
income
Six-months ended
Note 30 June
---- --------------------------
2017 2016
(Unaudited) (Unaudited)
US$000 US$000
------------ ------------
Profit for the period 27,543 37,744
Other comprehensive income to
be reclassified to profit or
loss in subsequent periods:
Exchange differences on translating
foreign operations 90 2
Change in fair value of available-for-sale
financial assets (415) 502
Recycling of the loss on available-for-sale
financial assets - (38)
Change in fair value of cash
flow hedges - (43,382)
Recycling of the loss on cash
flow hedges - 3,116
Deferred income tax relating
to components of other comprehensive
income 9 - 11,274
------------ ------------
Other comprehensive loss for
the period, net of tax (325) (28,526)
------------ ------------
Total comprehensive income for
the period 27,218 9,218
------------ ------------
Total comprehensive income/(expense)
attributable to:
Equity shareholders of the Company 23,036 (710)
Non-controlling interests 4,182 9,928
------------ ------------
27,218 9,218
============ ============
Interim condensed consolidated statement of financial
position
As at As at
30 31
June December
2017 2016
(Unaudited)
Notes US$000 US$000
----- ------------- ----------
ASSETS
Non-current assets
Property, plant and equipment 10 953,101 975,483
Evaluation and exploration
assets 11 145,824 138,985
Intangible assets 25,499 26,379
Available-for-sale financial
assets 16 3,356 991
Trade and other receivables 8.356 25,717
Deferred income tax assets 1,392 1,027
1,137,528 1,168,582
------------- ----------
Current assets
Inventories 42,920 57,056
Trade and other receivables 98,348 68,120
Income tax receivable 18,539 20,988
Cash and cash equivalents 14 144,497 139,979
------------- ----------
304,304 286,143
------------- ----------
Total assets 1,441,832 1,454,725
============= ==========
EQUITY AND LIABILITIES
Capital and reserves attributable
to shareholders of the Parent
Equity share capital 17 224,315 224,315
Share premium 17 438,041 438,041
Treasury shares (140) (426)
Other reserves (217,120) (217,288)
Retained earnings 275,155 258,269
------------- ----------
720,251 702,911
Non-controlling interests 86,558 90,442
Total equity 806,809 793,353
------------- ----------
Non-current liabilities
Trade and other payables 1,194 1,266
Borrowings 15 291,395 291,073
Provisions 104,951 106,121
Deferred income 16 30,593 25,000
Deferred income tax liabilities 70,253 65,971
------------- ----------
498,386 489,431
------------- ----------
Current liabilities
Trade and other payables 99,108 98,484
Other financial liabilities 12 2,772 1,726
Borrowings 15 17,800 36,312
Provisions 10,130 5,406
Deferred income 400 -
Income tax payable 6,427 30,013
------------- ----------
136,637 171,941
------------- ----------
Total liabilities 635,023 661,372
------------- ----------
Total equity and liabilities 1,441,832 1,454,725
============= ==========
Interim condensed consolidated statement of cash flows
Six-months ended
30 June
----------------------------------
2017 (Unaudited) 2016 (Unaudited)
Notes US$000 US$000
----- ---------------- ----------------
Cash flows from operating
activities
Cash generated from operations 20 110,153 158,827
Interest received 451 431
Interest paid 15 (11,992) (14,341)
Payment of mine closure
costs (1,899) (1,427)
Income tax (paid)/received,
net (16,218) 1,106
---------------- ----------------
Net cash generated from
operating activities 80,495 144,596
---------------- ----------------
Cash flows from investing
activities
Purchase of property, plant
and equipment (49,019) (53,982)
Purchase of evaluation and
exploration assets (2,552) (2,050)
Purchase of intangibles (8) -
Proceeds from sale of subsidiary - 1,100
Proceeds from sale of other
assets 1,556 -
Proceeds from deferred income 16 4,000 -
Proceeds from sale of available-for-sale
financial assets - 54
Proceeds from sale of property,
plant and equipment 10 596 38
Net cash used in investing
activities (45,427) (54,840)
---------------- ----------------
Cash flows from financing
activities
Proceeds from borrowings 15 10,500 12,497
Repayment of borrowings 15 (29,000) (77,928)
Dividends paid 18 (6,997) -
Dividends paid to non-controlling
interests 18 (5,120) (5,344)
Cash flows used in financing
activities (30,617) (70,775)
---------------- ----------------
Net increase in cash and
cash equivalents during
the period 4,451 18,981
Impact of foreign exchange 67 (152)
Cash and cash equivalents
at beginning of period 139,979 84,017
---------------- ----------------
Cash and cash equivalents
at end of period 14 144,497 102,846
================ ================
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
Notes 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 2017 224,315 438,041 (426) 740 - (13,851) (210,046) 5,869 (217,288) 258,269 702,911 90,442 793,353
------- ------- ----- ----- -------- -------- --------- ----- --------- ------- -------- ------- --------
Other
comprehensive
gain/(loss) - - - (415) 90 - - (325) - (325) - (325)
Profit for the
period - - - - - - - - - 23,361 23,361 4,182 27,543
----- ----- -------- -------- -----
Total
comprehensive
(loss)/income
for the period - - - (415) - 90 - - (325) 23,361 23,036 4,182 27,218
Dividends 18 - - - - - - - - - (6,997) (6,997) - (6,997)
Dividends
declared
to
non-controlling
interests 18 - - - - - - - - - - - (8,066) (8,066)
Share-based
payments 541 541 760 1,301 - 1,301
Exercise of share
options 17 - - 286 - - - - (48) (48) (238) - - -
Balance at 30
June 2017
(unaudited) 224,315 438,041 (140) 325 - (13,761) (210,046) 6,362 (217,120) 275,155 720,251 86,558 806,809
======= ======= ===== ===== ======== ======== ========= ===== ========= ======= ======== ======= ========
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 18 - - - - - - - - - - - (5,244) (5,244)
Share-based
payments 1,529 1,529 383 1,912 - 1,912
Exercise of share
options 17 - - 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
======= ======= ===== ===== ======== ======== ========= ===== ========= ======= ======== ======= ========
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 17
Cavendish Square, London W1G 0PH, 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
2017.
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 2017 and 31
December 2016 and its financial performance and cash flows for the
six months ended 30 June 2017 and 30 June 2016.
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 2016 annual consolidated financial
statements as published in the 2016 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 2016. 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
2016, except for the adoption of new standards and interpretations
effective for the Group from 1 January 2017, 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.
Except as set out below, the Group's assessment of new standards
issued but not yet effective is consistent with that disclosed in
the Annual Report 2016.
The Group is continuing to evaluate in detail the potential
impact of IFRS 9 Financial Instruments and IFRS 15 Revenue from
Contracts with Customers but does not currently expect these to
have a material impact on the financial statements. In respect of
IFRS 16 Leases, the Group is yet to estimate the impact of the new
rules on the Group's financial statements.
(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 2017 and 2016 and asset information as at 30 June
2017 and 31 December 2016 respectively:
Six months Adjustments
ended 30 San and
June 2017 Arcata Pallancata Jose Inmaculada Exploration Other eliminations Total
(unaudited) US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000
--------------- ------- ---------- ------- ---------- ----------- ------- ------------ ---------
Revenue
from external
customers 40,630 48,896 109,178 141,896 - 196 - 340,796
Inter segment
revenue - - - - - 862 (862) -
Total revenue 40,630 48,896 109,178 141,896 - 1,058 (862) 340,796
------- ---------- ------- ---------- ----------- ------- ------------ ---------
Segment
profit/(loss) (1,132) 20,329 18,355 37,715 (7,122) (937) 74 67,282
Others(1) (27,410)
---------
Profit from
continuing
operations
before income
tax 39,872
---------
As at 30 June
2017
(unaudited)
Assets
Capital
expenditure 9,346 8,379 17,493 22,246 1,101 197 - 58,762
Current
assets 8,133 18,932 49,983 13,275 30 3,379 - 93,732
Other
non-current
assets 21,871 91,357 190,892 567,133 191,302 61,869 - 1,124,424
------- ---------- ------- ---------- ----------- ------- ------------ ---------
Total segment
assets 30,004 110,289 240,875 580,408 191,332 65,248 - 1,218,156
Not reportable
assets(2) - - - - - 223,676 - 223,676
------- ---------- ------- ---------- ----------- ------- ------------ ---------
Total assets 30,004 110,289 240,875 580,408 191,332 288,924 - 1,441,832
------- ---------- ------- ---------- ----------- ------- ------------ ---------
1 Comprised of administrative expenses of US$26,004,000, other
income of US$5,186,000, other expenses of US$6,188,000, write off
of assets of US$221,000, impairment of assets of US$26,281,000,
reversal of impairment of assets of US$37,233,000, finance income
of US$2,700,000, finance costs of US$13,288,000 and foreign
exchange loss of US$547,000.
2 Not reportable assets are comprised of available-for-sale
financial assets of US$3,356,000, other receivables of
US$55,892,000, income tax receivable of US$18,539,000, deferred
income tax assets of US$1,392,000, and cash and cash equivalents of
US$144,497,000.
Six months Adjustments
ended 30 San and
June 2016 Arcata Pallancata Jose Inmaculada Exploration 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 31
December
2016
Assets
Capital
expenditure 20,819 16,105 35,311 54,199 4,910 301 - 131,645
Current
assets 6,721 7,017 53,299 22,899 30 3,911 - 93,877
Other
non-current
assets 48,843 55,380 196,056 589,666 185,825 65,077 - 1,140,847
------ ---------- ------- ---------- ----------- ------- ------------ ---------
Total segment
assets 55,564 62,397 249,355 612,565 185,855 68,988 - 1,234,724
Not reportable
assets(2) - - - - - 220,001 - 220,001
------ ---------- ------- ---------- ----------- ------- ------------ ---------
Total assets 55,564 62,397 249,355 612,565 185,855 288,989 - 1,454,725
------ ---------- ------- ---------- ----------- ------- ------------ ---------
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$991,000, other receivables of US$57,016,000,
income tax receivable of US$20,988,000, deferred income tax assets
of US$1,027,000 and cash and cash equivalents of
US$139,979,000.
4 Revenue
Six-months ended
30 June
----------------------------------
2017 (Unaudited) 2016 (Unaudited)
US$000 US$000
---------------- ----------------
Gold (from dore bars) 124,230 128,144
Silver (from dore bars) 69,824 94,373
Gold (from concentrate) 50,360 47,884
Silver (from concentrate) 96,186 68,711
Services 196 165
340,796 339,277
================ ================
In 2016, the realised loss on gold and silver swaps and zero
cost collar 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). There were no forward contracts in the 2017
period.
5 Cost of sales before exceptional items
Included in cost of sales are:
Six-months ended
30 June
----------------------------------
2017 (Unaudited) 2016 (Unaudited)
US$000 US$000
---------------- ----------------
Depreciation and amortisation in cost
of sales1 90,184 93,527
Personnel expenses 61,615 49,241
Mining royalty 3,113 3,024
Change in products in process and
finished goods 17,601 11,273
---------------- ----------------
1 The depreciation and amortisation in production cost is
US$83,803,000 (2016: US$88,516,000).
6 Other income before exceptional items
Included in other income are:
Six-months ended
30 June
----------------------------------
2017 (Unaudited) 2016 (Unaudited)
US$000 US$000
---------------- ----------------
Export credit 587 8,360
Logistic services 1,808 2,566
Gain on sale of other assets 1,556 1,550
Others 1,235 424
---------------- ----------------
5,186 12,900
---------------- ----------------
7 Exceptional items
Exceptional items relate to:
Six-months ended
30 June
----------------------------------
2017 (Unaudited) 2016 (Unaudited)
US$000 US$000
---------------- ----------------
Other income
Gain on sale of subsidiaries(3) - 751
Reversal of reserves tax(4) - 2,667
---------------- ----------------
Total - 3,418
Other expenses
Donations (note 19) - (1,000)
Total - (1,000)
(Impairment)/impairment reversal and
write-off of non-financial assets,
net
Impairment of assets(1) (26,281) -
Reversal of impairment of assets(1) 37,233
Write-off of non-current asset(5) - (498)
Total 10,952 (498)
Finance income
Reversal of interests on reserves
tax(4) - 959
Total - 959
---------------- ----------------
Income tax expense
Income tax charge(2 and 6) (1,655) (1,129)
---------------- ----------------
Total (1,655) (1,129)
---------------- ----------------
The exceptional items for the period ended 30 June 2017 are as
follows:
1.Corresponds to the impairment of the Arcata mine unit of
US$26,281,000, and the reversal of impairment related to the
Pallancata mine unit of US$31,892,000 and the San Felipe project of
US$5,341,000 (notes 10, 11 and 16).
2.Corresponds to the deferred tax charge generated by the
reversal on impairment of the Pallancata mine unit, net by the
impairment of the Arcata mine unit.
For the six months period ended 30 June 2016, the exceptional
items are as follows:
3.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
4.Corresponded to the reversal of the reserves tax liability and
their associated interests due to an agreement reached with the
Fiscal Authority in Argentina.
5.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.
6.Corresponded 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).
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
2017 (Unaudited) (Unaudited)
US$000 US$000
---------------- ------------
Finance income:
Interest on deposits and liquidity
funds 420 328
Interest on loans 74 103
Gain on discount of other receivables(1) 1,940 -
Gain on discount of deferred income 203 -
Others 63 52
---------------- ------------
Total 2,700 483
---------------- ------------
Finance cost:
Interest on bank loans (70) (2,258)
Interest on bond (12,132) (11,662)
Other interest (537) (700)
---------------- ------------
Total interest expense (12,739) (14,620)
---------------- ------------
Unwind of discount rate (184) (1,722)
Loss from changes in the fair value
of financial instruments - (829)
Others (365) (259)
---------------- ------------
Total (13,288) (17,430)
---------------- ------------
1 Mainly corresponds to the gain on the unwinding of the
discount of tax credits in Argentina.
Finance costs above are presented net of borrowing costs
capitalised in property, plant and equipment amounting to
US$100,000 (2016: US$674,000).
9 Income tax expense
Six-months ended
30 June
----------------------------------
2017 (Unaudited) 2016 (Unaudited)
US$000 US$000
---------------- ----------------
Current tax
Current income tax expense 5,501 14,072
Current mining royalty charge 1,941 1,657
Current special mining tax charge 969 1,369
Withholding taxes - 552
---------------- ----------------
Total 8,411 17,650
---------------- ----------------
Deferred tax
Origination and reversal of temporary
differences 3,918 4,903
---------------- ----------------
Total 3,918 4,903
---------------- ----------------
Total taxation charge in the income
statement 12,329 22,553
================ ================
The pre-exceptional tax charge for the period was US$10,674,000
(2016: US$21,424,000).
The effective tax rate for corporate income tax for the six
months ended 30 June 2017 is 23.6% (30 June 2016: 32.4%), compared
to the weighted average statutory tax rate of 32.1%, and 30.9%
including the mining royalty and the special mining tax (30 June
2016: 37.4%). The main factor that reduced the effective tax rate
for corporate income tax is the reversal of San Felipe impairment,
which does not attract deferred tax liability, on the basis that no
deferred tax asset arose when the impairment was originally
recognised.
The tax related to items charged or credited to equity is as
follows:
Six-months ended
30 June
----------------------------------
2017 (Unaudited) 2016 (Unaudited)
US$000 US$000
---------------- ----------------
Deferred income tax relating to fair
value gains on cash flow hedges - (11,274)
Total taxation (credit)/charge in
the statement of comprehensive income - (11,274)
================ ================
10 Property, plant and equipment
During the six months ended 30 June 2017, the Group acquired and
developed assets with a cost of US$56,202,000 (30 June 2016:
US$57,143,000). The additions for the six months ended 30 June 2017
relate to:
Other
Mining property
properties plant
and development and equipment
US$000 US$000 Total US$000
---------------- --------------- ------------
San Jose 11,777 4,554 16,331
Pallancata 6,118 2,261 8,379
Inmaculada 11,814 10,424 22,238
Arcata 7,448 1,187 8,635
Crespo 422 - 422
Others - 197 197
---------------- --------------- ------------
37,579 18,623 56,202
================ =============== ============
Assets with a net book value of US$674,000 were disposed of by
the Group during the six month period ended 30 June 2017 (30 June
2016: US$5,000) resulting in a net loss on disposal of US$78,000
(30 June 2016: gain of US$33,000).
For the six months ended 30 June 2017, the depreciation charge
on property, plant and equipment was US$85,293,000 (30 June 2016:
US$90,605,000).
Management determined there were triggers of impairment in the
Arcata mine unit as it has experienced difficulties to replace
production with incremental resources and to convert resources into
reserves. An impairment test was carried out resulting in an
impairment charge of US$26,281,000 (US$25,344,000 in property,
plant and equipment and US$937,000 and evaluation and exploration
assets).
In the case of the Pallancata mine unit, there was an
improvement in terms of tonnage and grades of its resources and
reserves due to the Pablo vein. An impairment test was carried out
resulting in an impairment reversal of US$31,892,000 (US$31,509,000
in property, plant and equipment and US$383,000 and evaluation and
exploration assets).
In addition, as a result of the proceeds received in the period,
management evaluated the value of the San Felipe Project,
recognising an impairment reversal of US$5,341,000 (all in
evaluation and exploration assets) (refer to notes 7, 11 and
16).
The recoverable values of these CGUs were determined using a
fair value less costs of disposal (FVLCD) methodology. FVLCD was
determined using a combination of level 2 and level 3 inputs to
construct a discounted cash flow model to estimate the amount that
would be paid by a willing third party in an arm's length
transaction. With respect to the San Felipe CGU, given the early
stage of the project, to determine the FVLCD, the Group applied a
value in-situ methodology which applies a realisable 'enterprise
value' to unprocessed mineral resources. The enterprise value used
is based on observable external market information.
The key assumptions on which management has based its
determination of FVLCD and the associated recoverable values
calculated are gold and silver prices, production costs, the
discount rate and the value per in-situ regarding the San Felipe
project. Gold and silver prices used, discount rate applied and
value per in-situ per zinc equivalent tonne are presented
below.
Gold and silver prices
US$ per oz. 2017 2018 2019 2020 Long-term
------------ ----- ----- ----- ----- ---------
Gold 1,250 1,295 1,300 1,300 1,300
------------- ----- ----- ----- ----- ---------
Silver 18 19 19 19 20
------------- ----- ----- ----- ----- ---------
Other key assumptions
Arcata Pallancata San Felipe
-------------------------------------- ------ ---------- ----------
Discount rate (post tax) 5.4% 5.4% n/a
--------------------------------------- ------ ---------- ----------
Value per in-situ per zinc equivalent
tonne (US$) n/a n/a 17.92
--------------------------------------- ------ ---------- ----------
Current carrying value of CGU, Arcata Pallancata San Felipe
net of deferred tax (US$000)
------------------------------- ------ ---------- ----------
30 June 2017 21,871 91,357 4,662
-------------------------------- ------ ---------- ----------
Sensitivity analysis
Other than as disclosed below, management believes that no
reasonably possible change in any of the key assumptions above
would cause the carrying value of any of its cash generating units
to exceed its recoverable amount.
The estimated recoverable amounts of the following of the
Group's CGUs are equal to, or not materially greater than, their
carrying values; consequently, any adverse change in the following
key assumptions would, in isolation, cause the following additional
(impairment loss)/reversal of impairment to be recognised:
Approximate impact resulting from the following Arcata Pallancata San Felipe
changes (US$000)
------------------------------------------------ -------- ---------- ----------
Prices (10% decrease) (19,068) - n/a
------------------------------------------------- -------- ---------- ----------
Post tax discount rate (3% increase) (889) - n/a
------------------------------------------------- -------- ---------- ----------
Production costs (10% increase) (12,480) - n/a
------------------------------------------------- -------- ---------- ----------
Value per in-situ tonne (10% decrease) n/a n/a (1,145)
------------------------------------------------- -------- ---------- ----------
11 Evaluation and exploration assets
During the six months ended 30 June 2017, the Group capitalised
evaluation and exploration costs of US$2,552,000 (30 June 2016:
US$2,050,000). The additions correspond to the following
properties:
US$000
------
San Jose 1,154
Arcata 711
Volcan 445
Others 242
2,552
======
There were no transfers from evaluation and exploration assets
to property, plant and equipment during the period (2016:
US$nil).
At 30 June 2017, the Group has recorded an impairment charge
with respect to evaluation and exploration assets of the Arcata
mine unit of US$937,000, and reversals of impairment with respect
to the Pallancata mine unit of US$383,000 and the San Felipe
project of US$5,341,000. The FVLCD calculation is detailed in note
10.
12 Other financial liabilities
As at
30 June As at
31 December
2017 2016
(unaudited)
US$000 US$000
------------- -------------
Other financial liabilities
Embedded derivatives(1) 2,772 1,726
Other financial liabilities 2,772 1,726
============= =============
1 Sales of concentrate and certain gold and silver volumes are
provisionally priced at the time the sale is recorded (note
13).
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 2017 and 31 December 2016, the Group held the
following financial instruments measured at fair value:
As at
30 June
2017 Level Level Level
(unaudited) 1 2 3
US$000 US$000 US$000 US$000
------------- -------- -------- --------
Assets measured
at fair value
Equity shares 3,356 3,356 - -
3,356 3,356 - -
------------- -------- -------- --------
Liabilities measured
at fair value
Embedded derivatives
(note 12) (2,772) - - (2,772)
(2,772) - - (2,772)
------------- -------- -------- --------
As at
31 December
2016 Level Level
US$000 Level 1 US$000 2 US$000 3 US$000
Assets measured
at fair value
Equity shares 991 991 - -
991 991 - -
Liabilities measured
at fair value
Embedded derivatives
(note 12) (1,726) - - (1,726)
--------------- ---------- ----------
(1,726) - - (1,726)
------------- --------------- ---------- ----------
During the six months ended 30 June 2017 and the year ended 31
December 2016, there were no transfers between these levels.
The reconciliation of the financial instruments categorised as
Level 3 is as follows:
Embedded
derivatives
liabilities
US$000
-------------
Balance at 1 January
2016 (1,141)
Changes in fair value (10,328)
Realised embedded derivatives
during the period 9,743
Balance 31 December 2016 (1,726)
Changes in fair value (623)
Realised embedded derivatives
during the period (423)
Balance 30 June 2017
(unaudited) (2,772)
-------------
The movement of the period has been recognised in revenue.
Valuation techniques:
Level 3: Embedded derivatives and equity shares
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 2017 and 31 December 2016, based on
available observable market data of similar peers.
14 Cash and cash equivalents
As at
30 June As at
31 December
2017 2016
(unaudited)
US$000 US$000
------------- -------------
Cash at bank 306 353
Liquidity funds(1) 1,270 203
Current demand deposit accounts(2) 52,627 68,643
Time deposits(3) 90,294 70,780
------------- -------------
Cash and cash equivalents 144,497 139,979
============= =============
1 The liquidity funds are mainly invested in certificate of
deposits, commercial papers and floating rate notes with a weighted
average maturity of 3 days as at 30 June 2017 (as at 31 December
2016: 16 days).
2 Relates to bank accounts which are readily accessible to the
Group and bear interest.
3 These deposits have an average maturity of 65 days (as at 31
December 2016: 3 days).
15 Borrowings
The movement in borrowings during the six month period to 30
June 2017 is as follows:
As at
30 June
As at 2017
1 January Additions Repayments Reclassifications (Unaudited)
2017 US$000 US$000 US$000 US$000 US$000
------------- ---------- ----------- ------------------ -------------
Current
Bank loans(1) 27,534 10,570 (29,083) - 9,021
Bond payable(2) 8,778 12,232 (11,909) (322) 8,779
36,312 22,802 (40,992) (322) 17,800
Non-current
Bond payable(2) 291,073 - - 322 291,395
291,073 - - 322 291,395
------------- ---------- ----------- ------------------ -------------
Accrued interest: (8,812) (12,302) 11,992 322 (8,800)
------------- ---------- ----------- ------------------ -------------
Before accrued
interest 318,573 10,500 (29,000) 322 300,395
------------- ---------- ----------- ------------------ -------------
1 Relates to pre-shipment loans for a total amount of
US$9,021,000 (2016: US$2,524,000) which are credit lines given by
banks to meet payment obligations arising from the exports of the
Group. In addition the balance at 1 January 2017 includes
US$25,010,000 short-term credit lines with the BBVA Bank that were
repaid on February 2017.
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
2017 of US$300,174,000 (2016: US$299,851,000) was determined in
accordance with the effective interest method.
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 2017
As at
30 June
2017
(Unaudited) (Unaudited)
As at
31 December As at 31
2016 December
US$000 US$000 US$000 2016 US$000
------------ ------------ ------------ ------------
Bond payable 291,395 291,073 313,935 318,062
------------------ ------------ ------------ ------------ ------------
Total 291,395 291,073 313,935 318,062
------------------ ------------ ------------ ------------ ------------
The fair value was determined using a level 1 valuation
technique.
16 Deferred income
As at
As at 30 31 December
June 2017 2016
(unaudited)
US$000 US$000
------------- -------------
San Felipe contract(1) 29,396 25,000
El Mosquito contract 1,597 -
------------- -------------
30,993 25,000
Less current balance (400) -
------------- -------------
Non-current balance 30,593 25,000
============= =============
1 On 3 August 2011, the Group entered into an agreement with
Impulsora Minera Santa Cruz ("IMSC") whereby IMSC acquired the
right to explore the San Felipe properties and an option to
purchase the related concessions. Under the terms of this agreement
the Group has received US$29,396,000 as non-refundable payments to
date (2016: US25,000,000).
These payments reduce the total consideration IMSC will be
required to pay upon exercise of the option.
On 28 February 2017, the Group signed a new option agreement
with IMSC for the San Felipe properties amounting to US$10,000,000
exercisable by 15 December 2017. An initial payment of US$2,000,000
was received on 7 March 2017.
In March 2017, IMSC entered into an agreement with Americas
Silver Corporation ('ASC') to assign 100% of its interest in the
San Felipe Project.
On 9 March 2017, the Group received in payment 13,415,000
ordinary shares of Santa Cruz Silver Mining ("SCSM") quoted in the
Toronto Stock Exchange, at the market price of CAD 0.28 amounting
to CAD 3,756,000 equivalent to US$2,780,000. The amount represents
a deferred income payment of US$2,396,000 with the corresponding
value added taxes of US$384,000.
At 30 June 2017 the SCSM shares, which have been classified as
available for sale financial assets, have a fair value of
US$1,914,000. The loss in fair value of US$866,000 has been
recognised in equity accordingly.
17 Equity
Share capital and share premium
The movement in share capital of the Company from 31 December
2016 to 30 June 2017 is as follows:
Number Share
of ordinary Share capital premium
shares US$000 US$000
--------------------------------- ------------ ------------- --------
Shares issued as at 1 January
2017 507,232,310 224,315 438,041
Shares issued as at 30 June 2017 507,232,310 224,315 438,041
---------------------------------- ------------ ------------- --------
At 30 June 2017 and 31 December 2016 all issued shares with a
par value of 25 pence each were fully paid (30 June 2017: weighted
average of US$0.442 per share, 31 December 2016: weighted average
of US$0.442 per share).
On 20 March 2017, 40,383 Treasury shares (31 December 2016:
66,727) with a value of US$286,000 (31 December 2016: US$472,000)
(being the cost incurred to acquire the shares) were transferred to
the CEO of the Group with respect to the Deferred Bonus Plan
benefit. Treasury shares at 30 June 2017 is 19,659 (31 December
2016: 60,042) ordinary shares with a value of US$140,000 (31
December 2016: US$426,000).
18 Dividends paid and declared
Dividends declared and paid to non-controlling interests in the
six months ended 30 June 2017 were US$8,066,000 (30 June 2016:
US$5,244,000) and US$5,120,000 (30 June 2016: US$5,344,000)
respectively.
A final dividend for 2016 of US$6,997,000 was recommended and
paid in the six month period ended 30 June 2017 (30 June 2016:
US$nil). The Directors of the Company declared an interim dividend
in respect of the six months ended 30 June 2017 of US$1.38 cents
per share (totalling US$7,000,000) (30 June 2016: US$6,998,000)
which will be paid to shareholders on 21 September 2017 to those
shareholders appearing on the register on 1 September 2017. These
financial statements do not reflect this dividend payable.
19 Related party transactions
There were no significant related parties transactions during
the six months period ended 30 June 2017.
On 17 May 2016 Asociación Sumac Tarpuy was sold to Inversiones
ASPI S.A. generating a gain on disposal of US$811,000. 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.
20 Notes to the statement of cash flows
Six- months
ended 30 June
--------------------------------
2017 2016
(Unaudited) (Unaudited)
US$000 US$000
------------- -------------
Reconciliation of gain/(loss) for the
period to net cash generated from operating
activities
Profit for the period 27,543 37,744
Adjustments to reconcile Group loss
to net cash inflows from operating activities
Depreciation 83,721 88,420
Amortisation of intangibles 888 785
Write-off of assets, net 221 498
Impairment of assets 26,281 -
Reversal of impairment of assets (37,233) -
Gain on sale of available-for-sale financial
assets - (38)
Loss/(gain) on sale of property, plant
and equipment 78 (33)
(Reversal of)/provision for obsolescence
of supplies 289 267
Gain on sale of subsidiary - (751)
Finance income (2,700) (1,404)
Finance costs 13,288 17,430
Income tax expense 12,329 22,553
Other (75) 2,063
(Decrease)increase of cash flows from
operations due to changes in assets
and liabilities
Trade and other receivables (31,917) 2,587
Income tax receivable (750) (754)
Other financial assets and liabilities 1,046 (6,490)
Inventories 13,847 10,845
Trade and other payables (870) (18,483)
Provisions 4,167 3,588
------------- -------------
Cash generated from operations 110,153 158,827
------------- -------------
Profit by operation(1)
(Segment report reconciliation) as at 30 June 2017
Consolidation
San adjustment
Company (US$000) Arcata Pallancata Jose Inmaculada and others Total/HOC
----------------------------- -------- ---------- -------- ---------- ------------- ---------
Revenue 40,630 48,896 109,178 141,896 196 340,796
Cost of sales (Pre
consolidation) (40,912) (28,060) (87,508) (103,659) (1,059) (261,198)
----------------------------- -------- ---------- -------- ---------- ------------- ---------
Consolidation adjustment 74 (297) - (836) 1,059 -
Cost of sales (Post
consolidation) (40,838) (28,357) (87,508) (104,495) - (261,198)
Production cost
excluding depreciation (30,557) (18,519) (60,408) (47,753) - (157,237)
Depreciation in production
cost (9,966) (5,633) (21,798) (46,406) - (83,803)
Other items - (1,461) (1,096) - - (2,557)
Change in inventories (315) (2,744) (4,206) (10,336) - (17,601)
----------------------------- -------- ---------- -------- ---------- ------------- ---------
Gross profit (282) 20,836 21,670 38,237 (863) 79,598
----------------------------- -------- ---------- -------- ---------- ------------- ---------
Administrative expenses - - - - (26,004) (26,004)
Exploration expenses - - - - (7,122) (7,122)
Selling expenses (850) (507) (3,315) (522) - (5,194)
Other income/expenses - - - - (1,002) (1,002)
----------------------------- -------- ---------- -------- ---------- ------------- ---------
Operating profit
before impairment (1,132) 20,329 18,355 37,715 (34,991) 40,276
----------------------------- -------- ---------- -------- ---------- ------------- ---------
Impairment of assets - - - - 10,731 10,731
Finance income - - - - 2,700 2,700
Finance costs - - - - (13,288) (13,288)
FX loss - - - - (547) (547)
----------------------------- -------- ---------- -------- ---------- ------------- ---------
Profit/(loss) from
continuing operations
before income tax (1,132) 20,329 18,355 37,715 (35,395) 39,872
----------------------------- -------- ---------- -------- ---------- ------------- ---------
Income tax - - - - (12,329) (12,329)
----------------------------- -------- ---------- -------- ---------- ------------- ---------
Profit/(loss) for
the year from continuing
operations (1,132) 20,329 18,355 37,715 (47,724) 27,543
----------------------------- -------- ---------- -------- ---------- ------------- ---------
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 2017 in respect of the 2017 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 2017 interim dividend,
a dividend mandate form, also available from the Company's
registrars, should be completed and returned to the registrars by 5
September 2017. 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 2017
----------------------------------------------- -------------
Ex-dividend date 31 August
Record date 1 September
Deadline for return of currency election forms 5 September
Payment date 21 September
----------------------------------------------- -------------
17 Cavendish Square
London
W1G 0PH
Registered in England and Wales with Company Number 5777693
(1) Revenue presented in the financial statements is disclosed
as net revenue and is calculated as gross revenue less commercial
discounts plus services revenue
(2) Adjusted EBITDA is calculated as profit from continuing
operations before exceptional items, net finance costs, foreign
exchange loss/(gain) and income tax plus depreciation, and
exploration expenses other than personnel and other exploration
related fixed expenses and other non-cash (income)/expenses
(3) On a pre-exceptional basis
(4) Includes gross debt repayments of $25.0 million offset by
$6.5 million of refinanced short-term borrowings
(5) All-in sustaining cost per (AISC) silver equivalent ounce:
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
(6) All equivalent figures assume the average gold/silver ratio
of 74:1
(7) Includes revenue from services
(8) Reconciliation of gross revenue by mine to Group net
revenue
(9) Unit cost per tonne is calculated by dividing mine and
treatment production costs (excluding depreciation) by extracted
and treated tonnage respectively
(10) Cash costs are calculated to include cost of sales,
treatment charges, and selling expenses before exceptional items
less depreciation included in cost of sales
(11) Includes commercial discounts (from the sales of
concentrate) and commercial discounts from the sale of dore
(12) Royalties arising from revised royalty tax schemes
introduced in 2011 and included in income tax line
(13) Adjusted EBITDA has been presented before the effect of
significant non-cash (income)/expenses related to changes in mine
closure provisions and the write-off of property, plant and
equipment
(14) Includes pre-shipment loans and short term interest
payables
(15) 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 asset
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR VELFFDVFXBBB
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