TIDMHOC
RNS Number : 3741M
Hochschild Mining PLC
20 January 2016
20 January 2016
Production Report for the 12 months ended 31 December 2015
Strong 2015 operational delivery
-- Full year production of 24.7 million attributable silver
equivalent ounces exceeding 24.0 million target(1)
o 14.8 million ounces of silver
o 166.0 thousand ounces of gold
o 27.0 million silver equivalent ounces using 2015 average
gold/silver ratio
-- Inmaculada mine produced 7.1 million silver equivalent ounces
exceeding 6-7 million ounce forecast1
o 84.6 thousand ounces of gold
o 2.1 million ounces of silver
o 8.3 million silver equivalent ounces using 2015 average
gold/silver ratio
-- 2015 all-in sustaining costs per silver equivalent ounce on
track to meet $13-14 guidance
Improved financial position
-- $100 million equity rights issue completed
-- $105 million of debt repaid in Q4
-- Total cash of approximately $83 million as at 31 December
2015
-- Net debt of approximately $366 million as at 31 December
2015
-- Argentina macroeconomic & tax reforms expected to
significantly improve San Jose cash flows
-- Cashflow further strengthened by 2016 precious metal
hedges:
o 71,000 ounces of gold at $1,154 per ounce
o 29,000 ounces of gold at $1,145 per ounce
o 6.0 million ounces of silver at $15.93 per ounce
2016 guidance
-- Attributable production target of 32.0 million silver
equivalent ounces
-- All-in sustaining costs expected to be $12-13 per silver
equivalent ounce
o Inmaculada costs expected to be $9-10 per silver equivalent
ounce
-- Total sustaining and development capital expenditure expected
to be approximately $100 million including $10 million to develop
Pablo vein
-- Pablo vein preliminary economics indicate:
o NAV of $25-50 million
o All in sustaining costs to average $10-11 per silver
equivalent ounce
_____________________
(1) Calculated using the previous Company gold/silver ratio of
60x. All other equivalent figures assume the average gold/silver
ratio for 2015 of 74x.
Ignacio Bustamante, Chief Executive Officer commented:
"The operational performance during 2015 exceeded expectations
as we once again beat our annual production target and are
maintaining our guidance on full year costs. The mines delivered a
very solid fourth quarter with our new low cost Inmaculada mine
performing particularly strongly. We are building on this positive
momentum by focusing on delivering low cost production from Pablo
which we expect will further demonstrate our brownfield potential
and ability to deliver strong cash flow generation from our
existing assets. In addition, the recent regulatory and economic
policy changes in Argentina offer a promising future for our high
grade San Jose mine which, supported by the solid operational
performance, is now in a good position to improve its cashflow
contribution.
We have also made substantial progress in strengthening our
balance sheet through our own cash generation and the rights issue
completed in the fourth quarter of last year. Following large debt
repayments in the period, we have ended the year with net debt
reduced by approximately 20% versus the half year position. The
maturities of the bulk of the remaining debt are also adequately
profiled.
We enter 2016 with a renewed sense of excitement: a fourth
consecutive year of production increases and reduced costs; a low
risk organic project; a stronger balance sheet; and several
brownfield exploration targets with the potential to continue
improving the quality and quantity of our existing resources."
__________________________________________________________________________________
A conference call will be held at 2.30pm (London time) on
Wednesday 20 January 2016 for analysts and investors.
Dial in details as follows:
International Dial in: +44 (0) 20 3139 4830
UK Toll-Free Number: +44(0) 808 237 0030
Pin: 47755168#
A recording of the conference call will be available for one
week following its conclusion, accessible from the following
telephone number:
International: +44 (0) 20 3426 2807
UK Toll Free: +44(0) 808 237 0026
Pin: 666619#
__________________________________________________________________________________
Note: silver/gold equivalent production figures assume the
average gold/silver ratio for 2015 of 74:1.
Overview
In Q4 2015, the Company delivered attributable production of 9.4
million silver equivalent ounces, comprised of 4.3 million ounces
of silver and 68.4 thousand ounces of gold. This has brought the
total for 2015 to 27.0 million silver equivalent ounces (24.7
million ounces using the Company's previous gold/silver ratio of
60:1), comprising 14.8 million ounces of silver and 166 thousand
ounces of gold.
The Company reiterates that its all-in sustaining costs per
silver equivalent ounce for 2015 is expected to be between $13 and
$14.
Production
Inmaculada
Following a successful ramp-up in the third quarter, total
silver equivalent production in Q4 at Inmaculada reached 4.4
million silver equivalent ounces consisting of 45.1 thousand ounces
of gold and 1.1 million ounces of silver, driven by consistent gold
and silver grades and increased tonnage as the processing plant
operated at closer to 3,850 tonnes per day in the period.
Production therefore in 2015 slightly improved on the targeted
range, coming in at 8.3 million silver equivalent ounces consisting
of 84.6 thousand ounces of gold and 2.1 million ounces of
silver.
Arcata
At Arcata, total silver equivalent production in Q4 was 1.8
million ounces (Q4 2014: 1.9 million ounces) which brought the
year-to-date total to 6.8 million ounces (2014: 7.1 million
ounces). Despite introducing an adjusted mine plan at the start of
2015 to ensure the extraction of profitable ounces, Arcata has
delivered a much stronger year than expected. A successful
brownfield exploration programme has ensured considerable tonnage
at higher silver grades than expected.
Pallancata
At Pallancata, tonnage in the fourth quarter was lower due to
ongoing effects of the above-mentioned adjusted mine plans
resulting in production of 1.1 million silver equivalent ounces (Q4
2014: 2.0 million ounces), although grades continued to be
consistent. The total for the year, at 4.9 million silver
equivalent ounces (2014: 8.3 million ounces), reflects the adjusted
mining plan with the Selene plant expected to transition to the new
Pablo vein later in 2016. See further details of the Pablo vein
below.
San Jose
The San Jose operation once again delivered a strong fourth
quarter, as expected, with rising tonnage and strong grades,
delivering 4.2 million silver equivalent ounces (Q4 2014: 4.0
million ounces). For the whole of 2015, the operation produced a
record 13.9 million silver equivalent ounces (2014: 13.4 million
ounces) driven by better than projected silver and gold grades.
On 17 December 2015, the Argentinean peso fell by approximately
40% against the dollar following the decision by the government to
lift capital controls. With approximately 70% of operating costs at
San Jose incurred in pesos, the effect of this significant
devaluation is already having a material impact on the mine's cost
position.
The Argentinean government published a decree on 2 November 2015
restoring the right to receive a rebate from goods exported through
Patagonian ports (previously cancelled in 2009). This benefit is
applicable to Hochschild at a rate of approximately 9% of the FOB
value of its exports which amounts to approximately $15 million per
annum. The current estimate for collection is approximately two
years.
In late December 2015, following an announcement by the new
government that they would remove export taxes on agricultural and
industrial products, it was subsequently confirmed that the decree
included removal of the 5% export tax on finished mining products
such as dore (approximately 50% of the mine's output). Along with
the above-mentioned recent elimination of exchange controls and
import restrictions within the country as well as the resulting
devaluation of the peso, the Company expects overall economic and
operating environment in Argentina to improve significantly.
Average realisable prices and sales
Average realisable precious metal prices in Q4 2015 (which are
reported before the deduction of commercial discounts and include
the effects of the existing hedging agreements) were $1,116/ounce
for gold and $15.0/ounce for silver (Q4 2014: $1,222/ounce for gold
and $17.1/ounce for silver).
For 2015 as a whole, average realisable precious metal prices
were $1,159/ounce for gold and 16.0/ounce for silver (2014:
$1,279/ounce for gold and $18.9/ounce for silver).
Brownfield exploration(2)
Arcata
In Q4 2015, 5,956 metres were drilled in the Stephani, Macarena,
Tunel 3 & Tunel 4 veins. Some highlights are presented
below:
Vein Results
-------- ------------------------
Tunel 3 DDH871-GE15:1.2m @1.04
g/t Au & 1,135 g/t Ag
DDH872-GE15:1.3m @2.09
g/t Au & 1,196 g/t Ag
-------- ------------------------
Tunel 4 DDH878-GE15:1.0m @ 2.4
g/t Au & 3,479 g/t Ag
DDH883-GE15:1.7m @ 1.6
g/t Au & 1,729 g/t Ag
-------- ------------------------
Pallancata
(MORE TO FOLLOW) Dow Jones Newswires
January 20, 2016 02:00 ET (07:00 GMT)
Following the initial discovery of the Pablo vein during the
third quarter, drilling has continued and an initial inferred
resource has been achieved. The Company's preliminary economics for
a two year mine life for the Pablo vein are detailed below.
Resources (unaudited) are estimates based on a cut-off grade of
103g/t silver equivalent.
Pablo
------------------------- ------
Inferred resources (kt)
(unaudited) 1,251
Ag grade (g/t) 344
Au grade (g/t) 1.3
LOM production (M oz Ag
Eq) 12.6
LOM AISC ($/oz Ag Eq) 10.6
------------------------- ------
LOM Cashflows ($m)
----------------------------- --------
Revenue 161.4
Costs (108.5)
Selling expenses (3.0)
Capital expenditure (19.7)
Taxes (SMT & Royalties) (2.4)
Pre-tax total 27.9
----------------------------- --------
NAV @5% (spot metal prices) 24.3
NAV @5% (analyst consensus
prices) 51.8
----------------------------- --------
Spot metal prices: $14/oz Ag; $1,100/oz Au
Analyst Consensus: $17/oz Ag; $1,196/oz Au
Work has started on mine development to access the vein and the
Company currently expects to have initial production from Pablo
towards the end of 2016.
Drilling has continued at the deposit and 7,242 metres were
drilled at Pablo and Yurika veins during the quarter. Preliminary
results are below:
Vein Results
--------------- -----------------------
Pablo DLEP-A21: 9.0m @0.68
g/t Au & 225 g/t Ag
DLEP-A23: 7.1m @1.09
g/t Au & 389 g/t Ag
DLEP-A24: 2.9m @1.34
g/t Au & 334 g/t Ag
DLEP-A25: 9.0m @1.20
g/t Au & 324 g/t Ag
DLEP-A26: 4.7m @0.73
g/t Au & 290 g/t Ag
--------------- -----------------------
Yurika DLYU-A97: 2.8m @1.66
g/t Au & 438 g/t Ag
--------------- -----------------------
Yurika ceiling DLYU-A97: 1.5m @ 3.94
g/t Au & 748 g/t Ag
DLYU-A99: 1.0m @ 0.89
g/t Au & 231 g/t Ag
--------------- -----------------------
Financial position
During the period the Company repaid $105 million of debt
financed from the proceeds of the rights issue completed on 4
November 2015 and existing cash resources. $50 million of the $100
million Scotiabank medium term loan was repaid with the remaining
balance to now amortise on a quarterly basis in 2018 and 2019,
representing a maturity extension from the original terms at the
same interest rate. In addition, $55 million of the $350 million
Senior Notes due 2021 have been repurchased at a discount to par
and have been subsequently cancelled.
Furthermore, the terms of $25 million of short term debt due
December 2015 have been renegotiated such that this tranche of debt
has been rolled over for a further year at an interest rate of
1.35% per annum.
Following this debt repayment programme, total cash was
approximately $83 million as at 31 December 2015, resulting in net
debt of approximately $366 million.
On 6 October 2015, the Company signed agreements to hedge the
sale of 29,000 ounces of gold at $1,145 per ounce and 6.0 million
ounces of silver at $15.93 per ounce for 2016. This is in addition
to a previous agreement for 2016 to hedge the sale of 71,000 ounces
of gold at a price of $1,154 per ounce.
____________________
(2) Please note that in line with industry-wide standards, all
mineralised intersections in this release are quoted as calculated
true widths.
Outlook
The overall production target for 2016 is 32.0 million silver
equivalent ounces, assuming the average silver-to-gold ratio for
2015, which consists of just over 14 million ounces from
Inmaculada, approximately 7 million attributable ounces from the
51% owned San Jose and the balance from the remaining two Peruvian
operations.
The all-in sustaining cost per silver equivalent ounces in 2016
is expected to be between $12 and $13 (projected assuming the
average silver-to-gold ratio for 2015) with Inmaculada costs
forecast to be between $9 and $10 per ounce and San Jose at
approximately $13 per ounce with the remaining Peruvian mines at
approximately $14.5 per ounce.
The overall capital expenditure budget for 2016 is approximately
$100 million allocated to sustaining and development expenditure.
This consists of: approximately $35 million at Inmaculada; $10
million to develop the Pablo vein structure; $23 million at Arcata;
and the balance of $30 million at the San Jose operation.
__________________________________________________________________________________
Enquiries:
Hochschild Mining plc
Charles Gordon +44 (0)20 3714 9040
Head of Investor Relations
Hudson Sandler
Charlie Jack +44 (0)207 796 4133
Public Relations
__________________________________________________________________________________
About Hochschild Mining plc
Hochschild Mining plc is a leading precious metals company
listed on the London Stock Exchange (HOCM.L / HOC LN) with a
primary focus on the exploration, mining, processing and sale of
silver and gold. Hochschild has over fifty years' experience in the
mining of precious metal epithermal vein deposits and currently
operates four underground epithermal vein mines, three located in
southern Peru and one in southern Argentina. Hochschild also has
numerous long-term projects throughout the Americas.
PRODUCTION & SALES INFORMATION*
TOTAL GROUP PRODUCTION
Q4 Q3 Q4 2014 12 mths 12 mths
2014
2015 2015 2015
----------------------- ------- ------- ---------- -------- --------
Silver production
(koz) 5,322 5,014 5,075 18,037 19,357
Gold production
(koz) 82.87 69.18 37.72 213.37 147.03
Total silver
equivalent (koz) 11,454 10,133 7,866 33,827 30,237
Total silver
equivalent (koz)
(60:1) 10,294 9,165 7,338 30,840 28,179
Total gold equivalent
(koz) 154.78 136.93 106.30 457.12 408.61
Total gold equivalent
(koz) (60:1) 171.57 152.74 122.31 513.99 469.65
Silver sold
(koz) 5,866 3,612 5,236 17,263 18,981
Gold sold (koz) 96.61 32.78 40.00 187.39 142.77
----------------------- ------- ------- ---------- -------- --------
Total production includes 100% of all production, including
production attributable to Hochschild's joint venture partner at
San Jose.
ATTRIBUTABLE GROUP PRODUCTION
Q4 Q3 Q4 2014 12 mths 12 mths
2014
2015 2015 2015
------------------- ------- ------- ---------- -------- --------
Silver production
(koz) 4,345 4,142 4,115 14,752 16,187
Gold production
(koz) 68.44 56.97 24.38 166.02 100.89
Silver equivalent
(koz) 9,410 8,358 5,919 27,037 23,653
Silver equivalent
(koz) (60:1) 8,452 7,560 5,578 24,713 22,241
Gold equivalent
(koz) 127.16 112.94 79.99 365.37 319.64
Gold equivalent
(koz) (60:1) 140.86 126.00 92.96 411.88 370.68
------------------- ------- ------- ---------- -------- --------
Attributable production includes 100% of all production from
Arcata, Pallancata and Ares and 51% from San Jose.
QUARTERLY PRODUCTION BY MINE
ARCATA
Product Q4 Q3 Q4 2014 12 mths 12 mths
2014
2015 2015 2015
------------------- ------------ ------------ ------------ -------- ------------------
Ore production
(tonnes treated) 184,994 162,133 186,486 648,051 701,947
Average grade
silver (g/t) 288 331 307 323 286
Average grade
gold (g/t) 1.03 0.99 0.90 0.99 0.85
Silver produced
(koz) 1,453 1,434 1,579 5,613 5,827
Gold produced
(koz) 4.58 3.92 4.40 15.67 16.89
Silver equivalent
(koz) 1,792 1,725 1,904 6,772 7,077
Silver equivalent
(koz) (60:1) 1,728 1,670 1,843 6,553 6,841
Silver sold
(koz) 1,798 1,172 1,550 5,653 5,621
Gold sold (koz) 5.30 3.07 4.06 15.29 15.66
------------------- ------------ ------------ ------------ -------- ------------------
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