Final Results -3-
March 25 2009 - 3:01AM
UK Regulatory
but this was partially offset by an increase in production at our other
operations.
For further information on production, see tables on pages 47 to 49.
As a result of the expansions completed in 2008, the Group's plant capacity has
increased by 29%, with full benefits to accrue in 2009. Capacity at San José
doubled to 530 ktpa while Arcata's capacity has been expanded by over 46% from
424 to 618 ktpa. Throughput at the Selene plant, which also processes ore from
Pallancata, has increased by 50% from 706 to 1,059 ktpa. Hochschild has more
than doubled plant capacity since its IPO in November 2006 demonstrating once
again its ability to deliver projects on schedule. Including Moris, our only
open pit mine, production capacity increased by 263%.
Hochschild's attributable production target for 2009 is 28 million attributable
silver equivalent ounces (at the Company's current conversion ratio of 60:1),
comprising approximately 19.1 million ounces of silver and 148.2 thousand ounces
of gold. This represents a year-on-year increase of 7%. The 2009 production
target of 28 million silver equivalent ounces only forecasts Selene's production
through to June. See page 8 for further detail on Selene.
In addition to the Group's production of 28 million attributable silver
equivalent ounces, Lake Shore Gold, in which we have a 40% investment, is
expected to produce up to 30,000 ounces of gold in 2009 (which would equate to
0.72 million attributable silver equivalent ounces). We remain optimistic about
Lake Shore Gold's growth profile.
To ensure that we are mining profitable ounces, we have increased cut-off grades
in our underground mines by an average of 18%. This has impacted our reserve
base as marginally economic ore is excluded from reserves. The combined effect
of the change in cut-off grades and the increase in capacity implemented last
year, resulted in a decrease in average mine life from 4.6 to 3.2 years* based
on reserves as at 31 December 2008. However, we remain committed to replenishing
and expanding our resource base and we have an extremely successful record of
converting resources to reserves.
*Reserve life of mine relates to our underground operations. Moris, our only
open pit mine, has a different operational profile and is therefore not included
Peru
Arcata
Production and sales
+--------------------------+---------------+---------------+---------------+
| | Year ended 31 | Year ended 31 | % change |
| | December 2008 | December 2007 | |
+--------------------------+---------------+---------------+---------------+
| Ore production (tonnes) | 557,870 | 415,400 | 34% |
+--------------------------+---------------+---------------+---------------+
| Average head grade | 571.37 | 560.04 | 2% |
| silver (g/t) | | | |
+--------------------------+---------------+---------------+---------------+
| Average head grade gold | 1.53 | 1.43 | 7% |
| (g/t) | | | |
+--------------------------+---------------+---------------+---------------+
| Concentrate produced | 20,639 | 16,665 | 24% |
| (tonnes) | | | |
+--------------------------+---------------+---------------+---------------+
| Silver grade in | 13.94 | 12.12 | 15% |
| concentrate (kg/t) | | | |
+--------------------------+---------------+---------------+---------------+
| Gold grade in | 0.04 | 0.03 | 33% |
| concentrate (kg/t) | | | |
+--------------------------+---------------+---------------+---------------+
| Silver produced (koz) | 9,032 | 6,553 | 38% |
+--------------------------+---------------+---------------+---------------+
| Gold produced (koz) | 24.04 | 16.48 | 46% |
+--------------------------+---------------+---------------+---------------+
| Silver sold (koz) | 8,564 | 6,544 | 31% |
+--------------------------+---------------+---------------+---------------+
| Gold sold (koz) | 22.36 | 15.50 | 44% |
+--------------------------+---------------+---------------+---------------+
Arcata enjoyed another successful year with silver production up 38% and gold
production up 46% year on year. These increases were a result of the plant
expansion completed during the year as well as consistent grades and recoveries.
In 2008, we sold Arcata's concentrate production to Peñoles, Traxys, Cormin,
Louis Dreyfus and a small fraction to Doe Run.
Exploration
+---------------------------+-------------------+--------------------+----------+
| Stated on an attributable | As at | As at | % change |
| basis | 31 December 2008* | 31 December 2007 | |
+---------------------------+-------------------+--------------------+----------+
| Resources | 3.94 mt @ 583 g/t | 3.58 mt @ 526 g/t | |
| | Ag & 1.75 g/t Au | Ag & 1.41 g/t Au | |
+---------------------------+-------------------+--------------------+----------+
| Resource (moz Ag eq) | 87.2 | 70.3 | 24% |
+---------------------------+-------------------+--------------------+----------+
| Reserves | 1.61 mt @ 541 g/t | 1.84 mt @ 476 g/t | |
| | Ag & 1.62 g/t Au | Ag & 1.19 g/t Au | |
+---------------------------+-------------------+--------------------+----------+
| Reserve (moz Ag eq) | 33.1 | 32.4 | 2% |
+---------------------------+-------------------+--------------------+----------+
*2008 reserve and resource figures are not comparable to 2007 due to the
increase in cut-off grades
During 2008, we incorporated 1,112,254 metric tonnes with 1.4 g/t Au and 525 g/t
Ag (21.7 million ounces of silver equivalent) into indicated resources and
1,032,896 metric tonnes with 1.4 g/t Au and 517 g/t Ag (19.8 million ounces of
silver equivalent) into reserves. We continue to increase reserves and resources
in the Mariana, Julia, Michelle, Soledad, Ramal Marion, Nicole and Soledad Norte
veins. We are also exploring two new veins, Rosita and Luz and secondary
structures mainly between Marion and Macarena (35,251 metres drilled in 132
holes; 4,478 metres of underground workings). Exploration potential is open at
depth and along strike for these veins.
The 2009 exploration programme focuses on adding new reserves and resources
primarily in the Rosita, Luz, Mariana and Nicole veins, as well as exploring new
targets north of the Mariana structure through underground workings and
drilling.
Ares
Production and sales
+-----------------------------------+--------------------+--------------------+--------------------+
| | Year ended 31 | Year ended 31 | % change |
| | December 2008 | December 2007 | |
+-----------------------------------+--------------------+--------------------+--------------------+
| Ore production (tonnes) | 347,910 | 333,800 | 4% |
+-----------------------------------+--------------------+--------------------+--------------------+
| Average head grade silver (g/t) | 156.95 | 279.25 | (44%) |
+-----------------------------------+--------------------+--------------------+--------------------+
| Average head grade gold (g/t) | 6.06 | 14.57 | (58%) |
+-----------------------------------+--------------------+--------------------+--------------------+
| Doré total (koz) | 1,608 | 2,593 | (38%) |
+-----------------------------------+--------------------+--------------------+--------------------+
| Silver produced (koz) | 1,538 | 2,701 | (43%) |
+-----------------------------------+--------------------+--------------------+--------------------+
| Gold produced (koz) | 64.16 | 149.98 | (57%) |
+-----------------------------------+--------------------+--------------------+--------------------+
| Silver sold (koz) | 2,398 | 2,880 | (17%) |
+-----------------------------------+--------------------+--------------------+--------------------+
| Gold sold (koz) | 77.44 | 157.77 | (51%) |
+-----------------------------------+--------------------+--------------------+--------------------+
As anticipated and previously disclosed, the average reserve grade at Ares is
declining due to the ageing and geological nature of the deposit. As a
consequence, gold and silver production decreased 57% and 43% respectively. Ares
produces 100% doré, all of which was sold to Johnson Matthey in 2008.
Exploration
+----------------------------+------------------+------------------+-------------+
| Stated on an attributable | As at | As at | % change |
| basis | 31 December | 31 December 2007 | |
| | 2008* | | |
+----------------------------+------------------+------------------+-------------+
| Resources | 1.02 mt @ 183 | 0.96 mt @ 191 | |
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