Q4 Production Results
January 08 2008 - 2:01AM
UK Regulatory
RNS Number:2725L
Hochschild Mining PLC
08 January 2008
________________________________________________________________________
8 January 2008
Hochschild Mining plc 2007 production report
and outlook for 2008
2007 Highlights:
* 2007 full year attributable production of 25.667 million silver equivalent
ounces, in-line with original guidance of 26 million silver equivalent
ounces and a 10% increase year-on-year
* 2007 full year attributable silver production of 13.587 million ounces; a
17% increase year-on-year
* 2007 full year attributable gold production of 201 thousand ounces; a 3%
increase year-on-year
* New operations, San Jose, Pallancata and Moris in commercial production
and operating at full capacity
* Expansions of Arcata, Ares and Selene completed on time
* Average cash cost per tonne (excluding the mines opened in 2007) expected
to increase by only 5% despite industry inflationary pressures and
appreciation of local currencies
* Gross margin in-line with expectations due to higher commodity prices
* Average reserve life of mine increased to an expected 4.1 years from 2.8
years at IPO, while resource life increased from 1.7 to 1.9 years over the
same period
Outlook for 2008:
* Further expansions of Arcata, Selene and San Jose plants will increase
throughput by 27%, providing a strong platform for future growth
* 2008 attributable production target to exceed 26 million silver equivalent
ounces, comprising 16.9 million silver ounces and 153 thousand gold ounces
* At current consensus prices, higher depreciation and lower grades at Ares
and Selene will materially impact gross margin and attributable profit
relative to market expectations
* Attributable profit will also be affected as we shift production to
projects where we have minority partners
* EBITDA growth trend expected to remain positive
* San Felipe on track to complete feasibility study in Q3 2008 and begin
construction immediately thereafter
* Remain confident in reaching 50 million silver equivalent ounces by 2011
through additional growth in 2009 and a major production increase in 2010
from San Felipe
Eduardo Hochschild, Executive Chairman of Hochschild Mining plc, commented;
"We are very pleased with a strong set of production results for 2007,
substantially increased reserves and our overall performance for the year. Our
2007 full year production of 25.667 million silver equivalent ounces is in-line
with original guidance and represents a 10% increase over 2006. In our first
year since IPO, we have grown from three mines in one country to six mines in
three countries, while also expanding the capacity at Ares, Arcata and Selene.
In 2008, we plan to further increase the plant capacity of Arcata, Selene and
San Jose to create a strong platform for future growth. We thus remain confident
of meeting our 2011 target of 50 million silver equivalent ounces, while
preserving the long term value proposition of the company."
Overview of 2007:
Our 2007 full year attributable production of 25.667 million silver equivalent
ounces is in-line with our target and represents a 10% increase over 2006.
Production volumes for the three months to 31 December 2007 were significantly
higher compared with the prior period. The increase in production was primarily
a result of increased capacity at Arcata where we have already begun a further
expansion. In addition, relatively high grades at Ares and the production
contribution from the new projects, San Jose, Pallancata and Moris also
contributed favourably to production in Q4. This increase was offset by lower
production at Selene as a result of lower grades mined and a reduction in
throughput with the ramp up of Pallancata.
Outlook for 2008:
Our 2008 attributable production target aims to exceed 26 million silver
equivalent ounces (at a conversion ratio of 60:1), which would be comprised of
approximately 16.9 million ounces of silver and 153 thousand ounces of gold.
Attributable silver production is expected to increase despite lower grades at
Ares (from 279.3 g/t to 165.2 g/t) and Selene (from 295.8 g/t to 230 g/t). This
decrease will be fully offset by higher production from Arcata, Pallancata and
San Jose. Attributable gold production for 2008 is projected to decrease from
2007 levels as we mine anticipated lower grades at Ares (from 14.6 g/t to 6.4 g/
t) and Selene (from 2.0 g/t to 1.6 g/t). This decrease will be partially offset
by higher production at Pallancata, San Jose and Moris.
The projected production considers a further expansion of plant capacity at San
Jose from 265 ktpa to 530 ktpa by Q3 2008, at Arcata from 420 ktpa to 618 ktpa
by Q4 2008, and Selene from 706 ktpa to 1,059 ktpa by Q3 2008 to accommodate the
ore from Pallancata.
While we expect industry cost inflation to continue in general and foreign
exchange to be a potentially negative factor in a weak U.S. dollar environment,
we anticipate that our average cash cost per tonne in 2008 for our six
operations will be at or below 2007 levels. This is primarily a result of an
increase in tonnage treated at Arcata, San Jose and Pallancata and cost
reduction efforts.
At current consensus for commodity prices, due to lower grades at Ares and
Selene and significantly higher depreciation, gross margins for 2008 will be
impacted and as a result will be materially lower than current market
expectations. The increase in depreciation will primarily result from CAPEX
related to plant expansions in 2007 and 2008 and continued investment to
increase average life of mine. Additionally, as we shift production towards our
newer mines (Pallancata and San Jose) and scale back both Ares and Selene,
incremental profit will come from mines where we have minority partners
(International Minerals Corporation and Minera Andes Incorporated), in turn
further affecting attributable profit. Notwithstanding these factors, we remain
committed to developing our resource base in a manner consistent with our
strategy of enhancing the long term value of the business.
We remain positive on the fundamentals for silver and gold given continued U.S.
dollar weakness, heightened geopolitical tensions, depleted above ground stocks
and increasing investment demand. In addition to macroeconomic drivers, we
believe strong industrial demand for silver will continue in 2008 and will
reflect positively on its price.
Finally, we remain confident in reaching 50 million silver equivalent ounces by
2011 through additional growth in 2009 and a major production increase in 2010
from San Felipe. Management continues to focus on operational efficiency, which
is fundamental to our overall profitability, and to preserving the long-term
value proposition of the company.
TOTAL PRODUCTION(1)
-----------------------------------------------------------------------------------
Q4 Q3 Q4 Full year Full year
2007 2007 2006 2007 2006
-----------------------------------------------------------------------------------
Silver production (Koz) 5,155 3,555 3,430 14,343 11,604
Gold production (Koz) 70.09 50.66 54.25 211.46 195.73
Total silver equivalent (Koz) 9,360 6,595 6,685 27,031 23,348
Total gold equivalent (Koz) 156.00 109.91 111.42 450.51 389.13
Silver sold (Koz) 5,549 2,544 2,146 13,794 10,650
Gold sold (Koz) 61.51 46.87 45.06 203.24 200.26
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ARCATA
------------------------------------------------------------------------------------
Q4 Q3 Q4 Full year Full year
Product 2007 2007 2006 2007 2006
------------------------------------------------------------------------------------
Ore production (tonnes) 132,231 106,656 91,190 415,400 313,688
Average head grade silver (g/t) 581.06 578.97 548.28 560.04 536.62
Average head grade gold (g/t) 1.48 1.48 1.46 1.43 1.39
Concentrate produced (tonnes) 4,761 4,457 3,857 16,665 12,407
Silver grade in concentrate (kg/t) 14.04 11.94 11.34 12.12 11.90
Gold grade in concentrate (kg/t) 0.03 0.03 0.03 0.03 0.03
Silver produced (Koz) 2,211 1,711 1,406 6,553 4,754
Gold produced (Koz) 5.50 4.23 3.73 16.47 11.89
Silver sold (Koz) 3,211 896 783 6,594 4,094
Gold sold (Koz) 7.23 2.24 2.12 15.66 9.90
------------------------------------------------------------------------------------
ARES
------------------------------------------------------------------------------------
Q4 Q3 Q4 Full year Full year
Product 2007 2007 2006 2007 2006
------------------------------------------------------------------------------------
Ore production (tonnes) 92,401 84,995 75,688 333,800 289,138
Average head grade silver (g/t) 337.29 255.93 335.42 279.25 310.61
Average head grade gold (g/t) 14.67 13.98 18.24 14.57 17.37
Dore total (Koz) 674.19 664.57 799.88 2,593 2,850
Silver produced (Koz) 889 633 755 2,701 2,688
Gold produced (Koz) 41.81 36.57 42.79 149.98 155.50
Silver sold (Koz) 883 646 681 2,847 2,836
Gold sold (Koz) 42.09 38.56 36.66 157.66 163.32
------------------------------------------------------------------------------------
SELENE
------------------------------------------------------------------------------------
Q4 Q3 Q4 Full year Full year
Product 2007 2007 2006 2007 2006
------------------------------------------------------------------------------------
Ore production (tonnes) 97,590 125,451 93,915 413,622 359,686
Average head grade silver (g/t) 238.95 275.31 465.10 295.78 397.76
Average head grade gold (g/t) 1.41 1.84 2.98 2.01 2.85
Concentrate produced (tonnes) 1,112 1,090 969 4,010 3,842
Silver grade in concentrate (kg/t) 18.96 26.69 40.75 26.83 33.70
Gold grade in concentrate (kg/t) 0.10 0.16 0.25 0.17 0.23
Silver produced (Koz) 669 923 1,269 3,414 4,162
Gold produced (Koz) 3.61 5.66 7.74 21.62 28.34
Silver sold (Koz) 786 1,002 682 3,685 3,721
Gold sold (Koz) 4.53 6.07 6.28 22.26 27.04
------------------------------------------------------------------------------------
PALLANCATA(2)
------------------------------------------------------------------------------
Product Q4 Q3 Full year
2007 2007 2007
------------------------------------------------------------------------------
Ore production (tonnes) 63,612 14,723 78,335
Average head grade silver (g/t) 322.64 255.45 310.02
Average head grade gold (g/t) 1.54 1.29 1.50
Concentrate produced (tonnes) 560 79 638
Silver grade in concentrate (kg/t) 33.25 41.60 34.28
Gold grade in concentrate (kg/t) 0.13 0.17 0.13
Silver produced (Koz) 599 105 704
Gold produced (Koz) 2.33 0.43 2.76
Silver sold (Koz) 561 0 561
Gold sold (Koz) 2.08 0.00 2.08
------------------------------------------------------------------------------
SAN JOSE(3)
-------------------------------------------------------------------------------
Product Q4 Q3 Full year
2007 2007 2007
-------------------------------------------------------------------------------
Ore produciton (tonnes) 65,480 27,494 92,974
Average head grade silver (g/t) 536.12 543.80 538.39
Average head grade gold (g/t) 7.03 7.20 7.08
Silver produced (Koz) 776 182 958
Gold produced (Koz) 11.66 3.29 14.95
Silver sold (Koz) 100 0 100
Gold sold (Koz) 1.66 0.00 1.66
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MORIS(4)
------------------------------------------------------------------------------
Product Q4 Q3 Full year
2007 2007 2007
------------------------------------------------------------------------------
Ore produciton (tonnes) 253,766 84,538 338,304
Average head grade silver (g/t) 4.62 4.90 4.70
Average head grade gold (g/t) 1.62 1.80 1.65
Silver produced (Koz) 11 1 13
Gold produced (Koz) 5.18 0.50 5.68
Silver sold (Koz) 8 0 8
Gold sold (Koz) 3.92 0.00 3.92
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(1) Total production includes 100% of all production, including production
attributable to joint venture partners at Moris, San Jose and Pallancata.
(2) The Company has a 60% interest in Pallancata.
(3) The Company has a 51% interest in San Jose.
(4) The Company has a 70% interest in Moris.
Hochschild Mining's Preliminary results will be announced on 12 March 2008.
Enquiries:
Hochschild Mining plc
Wray Barber +44 (0)20 7152 6014
Head of Investor Relations
Finsbury
Robin Walker +44 (0)20 7251 3801
Public Relations
Certain statements in this presentation are or may be forward looking statements
regarding Hochschild Mining plc's financial position and results, business
strategy, plans and objectives. By their nature, all forward-looking statements
involve risk and uncertainty because they relate to future events and
circumstances which are beyond the Group's control. As a result, the Group's
actual future financial condition, performance and results may differ materially
from the plans, goals and expectations set forth in the Group's forward-looking
statements. The Group undertakes no obligation to update the forward-looking
statements contained in this presentation or any other forward-looking statement
it may make.
This presentation does not constitute or form part of any offer, invitation to
underwrite, subscribe for or otherwise acquire or dispose of any Hochschild
Mining plc shares.
Past performance of the Company or its shares cannot be relied upon as a guide
to future performance and persons needing advice should consult an independent
financial adviser.
- ends -
--------------------------
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