TIDMHOC
RNS Number : 6997Z
Hochschild Mining PLC
19 January 2011
19 January 2011
Production Report for the 12 months ended 31 December 2010
Highlights
-- Full year production of 26.4 million attributable silver
equivalent ounces achieved in 2010 in line with expectations
-- Ongoing delivery of organic growth strategy:
- Positive scoping study at 100% owned Crespo property announced
with projected annual silver equivalent production of 2.3 million
ounces from 2014
- Pre-feasibility and feasibility studies on track at advanced
projects, Azuca & Inmaculada, with the potential to add over 10
million attributable silver equivalent ounces of production from
2014
- Signing of definitive joint venture agreement with IMZ for the
Inmaculada property in southern Peru
- New discovery at San Jose, resource life significantly
increased
- Signing of option agreement for Valeriano property in northern
Chile
- Exercise of option to increase holding in Victoria project in
Chile to controlling 60%
- Divestment of stake in Lake Shore Gold Corp, generating net
proceeds of US$454 million
-- Continued focus on exploration: 2011 budget up 40% to US$70
million
-- 2011 production target of 22.5 million silver equivalent
ounces, in line with guidance
-- Solid financial position with total cash of approximately
US$530 million
Ignacio Bustamante, Chief Executive Officer commented:
"I am pleased that we have once again met our full year
production target, delivering 26.4 million attributable silver
equivalent ounces in 2010. I am also delighted to report positive
scoping results at our 100% owned advanced project, Crespo, where
annual production has the potential to be 2.3 million silver
equivalent ounces from 2014.
In line with our commitment to deliver value to shareholders
through organic growth, we are further increasing our exploration
budget by 40% to US$70 million in 2011. This will be invested in
our long term pipeline which currently includes 28 different drill
targets at our mines and exploration sites throughout the Americas,
including seven potential 'company makers'. Also, we will be
progressing feasibility studies at our advanced projects,
Inmaculada, Azuca and Crespo, which together have the potential to
add over 12 million attributable silver equivalent ounces per year
to our production profile from 2014."
2010 Overview
The Company delivered another solid performance in Q4 2010 with
attributable production of 7.0 million silver equivalent ounces
comprised of 4.8 million ounces of silver and 37.4 thousand ounces
of gold. As a result, Hochschild has successfully achieved its full
year production target, producing 26.4 million attributable silver
equivalent ounces in 2010, containing 17.8 million ounces of silver
and 144.4 thousand ounces of gold.
The Company expects its overall 2010 unit cost per tonne
increase to be slightly higher than expected as a result of
substantially higher metal prices which have increased royalties
(particularly in the fourth quarter), the effect of the longer than
anticipated mine life at the high cost Ares operation and local
price inflation in Argentina. Excluding these effects, the cost
increases achieved by the Company are within previous guidance.
Main operations
Pallancata continues to deliver strong results with Q4
production up 10% and 22% on the previous quarter, for silver and
gold respectively. For the full year, treated tonnage is up 16% on
2009, due to the Selene plant exclusively processing Pallancata's
ore. As a result of this, as well as higher extracted silver
grades, year-on-year silver equivalent production increased 19%
withtotal 2010 production of 12.3 million ounces.
In order to ensure a consistent and sustainable level of
production and, in light of ongoing changing geotechnical
conditions at the mine, Arcata grades were reduced during 2010 as
they moved towards reserve grade level and consequently, 2010
equivalent silver production fell by 14% to 9.6 million ounces.
Production performance at San Jose in Q4 was stronger than that
of Q3 due to higher volumes from new mining areas. Compared to the
previous quarter, silver and gold production increased 33% and 19%
respectively with full year silver equivalent production up 8% to
10.4 million silver equivalent ounces. This strong result was also
helped by one-off contributions from a tailings recovery project.
Despite the continuing challenging economic and operating
environment in Argentina, the Company remains positive about the
high grade potential of the San Jose mine and surrounding
property.
Other operations
As a result of the significant increase in prices in the second
half of 2010, the Company's Ares mine continued to operate for the
full year, albeit at a lower level, producing 2.7 million silver
equivalent ounces (2009: 3.5 million silver equivalent ounces).
Moris, the Company's open pit operation, produced 1.4 million
silver equivalent ounces in 2010 (2009: 1.8 million silver
equivalent ounces).
Average realisable prices and sales
Average realisable precious metal prices1 (including commercial
discounts) in Q410 were US$1,414.4/ounce for gold and US$31.2/ounce
for silver (excluding forward sales contracts). Average realisable
precious metals prices for the full year 2010 were US$1,266.2/ounce
for gold and US$22.6/ounce for silver.
Project pipeline & exploration
Exploration is a key part of Hochschild's growth strategy as
demonstrated by a further increase in budget to US$70 million in
2011 which represents a 40% increase on 2010. Since 2008, the
Company has more than doubled investment in this area with positive
results, particularly with regards to its key objective of
increasing the resource life of its main operations and on
expanding its project pipeline which now includes three advanced
projects and seven potential 'company makers' (projects with the
potential to achieve 20-30 million silver equivalent ounces per
year).
The significant investment in 2011 will support the delivery of
an extensive and targeted drill programme covering 335,000 metres
at 28 targets across four countries - Peru, Argentina, Chile and
Mexico. The budget will be split between exploration work at the
Company's existing operations and on identifying and developing
high-quality, early stage projects which have the potential to move
through the pipeline to production. The approximate split is
expected to be as follows:
Brownfield
-- 33% - current operations mainly focused on extending life of
mine. Following success in this regard during 2010 at the San Jose
mine in Argentina, Hochschild is looking to further capitalise on
the opportunities that this discovery presented.
-- 14% - increasing resources at the three advanced projects -
Azuca, Inmaculada and Crespo. This expenditure represents
brownfield investment with the aim of adding to the reserves and
resources of our advanced projects rather than infill drilling
which falls under the capital expenditure budget.
Greenfield
-- 15% - developing the "company maintainers" pipeline, with
targets concentrated in Peru.
-- 18% - drilling at our seven "company makers" with Victoria
(Chile), Mercurio (Mexico) and Sabina (Peru) continuing programmes
begun in 2010 and new programmes commencing in 2011 at Corazon de
Tinieblas (Mexico), Josnitoro and Apacheta (Peru) and Valeriano
(Chile).
-- 4% - continuing work at its copper projects in Peru (started
in 2010). These projects, located in the southern Andes, were
acquired as part of the Southwestern transaction and are within a
highly prospective area for copper deposits.
-- 6% - progressing the Company's "Generative" initiative which
aims to further expand its land package of premium properties in
the four key countries
Other
-- 10% - corporate and support activities. The Company currently
employs 75 geologists and has exploration support offices in Peru,
Argentina, Chile and Mexico.
1 Figures restated to include gross revenue divided by gross
ounces (previously included net revenue divided by net ounces)
Advanced projects
The Company continues to progress its advanced projects,
Inmaculada, Azuca and Crespo, which have the combined potential to
add approximately 12 million attributable silver equivalent ounces
per annum to the Company's production profile from 20142.
Crespo
As announced today in a separate release, Hochschild reports
positive results from a scoping study completed by an independent
company, Ausenco, at the Company's 100% owned Crespo project,
located in the Company's existing operating cluster in southern
Peru. The scoping study is based on resources of 31.3 million
silver equivalent ounces (measured and indicated) and estimates
annual silver equivalent production of 2.3 million ounces starting
from 2014. For further details of the scoping study, please see the
press release published today.
Inmaculada
As announced in October 2010, Inmaculada, a 20,000 hectare
gold-silver project located in the Company's existing operational
cluster in southern Peru, is now 60% owned and controlled by
Hochschild. The independent Preliminary Economic Assessment
(scoping study), published by IMZ in September 2010, estimated
average annual total silver equivalent production of 11 million
ounces from the project's Angela vein and total resources of 115
million silver equivalent ounces (1.9 million gold equivalent
ounces). Hochschild is now progressing the project with the aim of
completing feasibility by the end of 2011, moving to production by
December 2013.
The Company is also moving forward with the exploration
programme at the property which consists of 40 mining concessions.
The joint venture will undertake a 20,000 metre drilling programme
annually for the first three years to further develop resources
which are currently estimated at a total of 115 million silver
equivalent ounces (1.9 million gold equivalent ounces).
Azuca
Intensive drilling continues at the 100% owned Azuca property
with the aim of expanding the scale and profitability of the
project. The Company expects to complete feasibility in Q4 2011
with production targeted for Q4 2013 at an initial estimate of 3.5
million silver equivalent ounces per year, representing more than
16% of Hochschild's expected 2011 attributable production. 30,181
metres of drilling was undertaken in Q410 with positive results at
the Karla, Vivian and a new vein, Prometida, including:
Vein Results
---------------------- ---------------------------------------
Karla DAKA-A1007 0.9m at 1.3 g/t Au & 1,318
g/t Ag
DAKA-A1008 1.0m 2.3 g/t Au & 946 g/t
---------------------- ---------------------------------------
Vivian DAVI-A1026 0.8m at 11.3 g/t Au & 2,567
g/t Ag; 0.5m at 1.2 g/t Au & 651 g/t
Ag; 0.6m at 0.7 g/t Au & 632 g/t Ag
---------------------- ---------------------------------------
Prometida DAAW-A1007 2.1m at 2.6 g/t Au & 686
g/t Ag
---------------------- ---------------------------------------
Prometida Ramal Techo DAAW-A1007 1.1m at 2.0 g/t Au & 1,050
g/t Ag
---------------------- ---------------------------------------
Mine-site exploration
San Jose
As previously announced, the Company has materially increased
the resource life of the San Jose property following the discovery
of nine new high-grade gold/silver veins and two extensions. To
date, a significant portion of the San Jose property continues to
be open at depth and laterally. During the quarter, 8,386 metres of
diamond drilling was completed focused on the Kospi, Micaela,
Ayelen and Ramal Kospi veins with significant intercepts
including:
Vein Results
------------ ---------------------------------------
Ayelen SJD-816 1.9m at 2.3 g/t Au & 251 g/t
Ag
SJD-799 3.50 m at 2.98 g/t Au & 268.53
g/t Ag
------------ ---------------------------------------
Micaela SJD-806 0.7m at 12.3 g/t Au & 2,389
g/t Ag
SJD-797 0.3m at 8.4 g/t Au & 485 g/t
Ag
------------ ---------------------------------------
Kospi SJD 594 0.8m at 4.8 g/t Au & 296 g/t
Ag
------------ ---------------------------------------
Ramal Kospi SJD 582 1.5m at 60.9 g/t Au & 1,376
g/t Ag
------------ ---------------------------------------
2 Results of scoping study can vary by +/- 40%
Arcata
Exploration work is focused on increasing resources at the
Socorro, Sorpresa, Rita and Barbara veins through diamond drilling
with significant intercepts including:
Vein Results
--------- --------------------------------------
Sorpresa DDH-831 0.9m at 5.3 g/t Au & 733 g/t
Ag
DDH 823 0.9m at 1.9 g/t Au & 1,201
g/t Ag
--------- --------------------------------------
Socorro DDH-169 0.8m at 13.5 g/t Au & 130 g/t
Ag
--------- --------------------------------------
Pallancata
The Company continued to advance underground development at the
Mariana and Virgen del Carmen veins. Diamond drilling was executed
at the Cimoide and Pallancata Oeste veins with intercepts
including:
Vein Results
----------------- -----------------------------------
Cimoide DLPL-A605 1.3m at 1.5 g/t Au & 404
g/t Ag
----------------- -----------------------------------
Pallancata Oeste DLPL-A606 7.0m at 1.3 g/t Au & 446
g/t Ag
----------------- -----------------------------------
Hochschild takes a very conservative approach to resource
delineation and is one of the few companies that apply the same cut
off grades to reserves and resources. As a result, the Company has
a high rate of conversion from resources to reserves. Hochschild
will publish audited reserves and resources tables as at 31
December 2010 on 29 March 2011.
Company makers
As mentioned above, the Company is also continuing to focus on
'company makers' which, as mentioned above, are projects with the
potential to achieve 20-30 million silver equivalent ounces per
year.
Victoria (Chile)
Exploration work is delivering positive results at the Victoria
project in northern Chile, a property which covers 37 kilometres of
continuous strike length at the highly productive Domeyko Fault
Zone. A total of 18 core holes (over 3,904 metres) were completed
in the last drill campaign at the Vaquillas deposit. Drilling
indicates mineralisation of up to 30 metres wide with recent
results including 8 metres at 10.5 g/t Au and 29 g/t Ag. During Q4,
the Company exercised its option to increase its holding in the
project to 60% with Iron Creek Capital holding the remaining
40%.
Valeriano (Chile)
In November 2010, Hochschild entered into an option agreement
with Sociedad Contractual Minera Valleno for the Valeriano property
which is located 27 kilometres north of Barrick Gold Corporation's
Pascua Lama project. Valeriano covers an area of 3,750 hectares in
close proximity to the Argentinian border and hosts both
high-sulphidation as well as porphyry style disseminated gold
mineralisation.
The property has been explored by a number of mining companies
in the past including Phelps Dodge (1989-1991) and Barrick
(1995-1997), both of which completed drill campaigns totalling
12,575 metres. No significant exploration has been undertaken at
the property since 1997. A number of highly mineralised intercepts
have been reported from this drilling including:
-- 100 metres at 1.37 g/t Au in typical shallow high
sulphidation style mineralisation starting at 19 metres depth
-- 41 metres at 0.61 g/t Au, 12 g/t Ag and 0.30% Cu, porphyry
type mineralisation starting at 70 metres depth
Other projects
During the quarter, 2,022 metres of drilling was undertaken at
the Company's 100% owned Mercurio project in Mexico and results are
currently under evaluation. At the 100% owned Sabina project in
Peru, 1 022 metres of drilling was completed in Q4. To date,
drilling has not reported significant mineralisation, however,
avertical anomalous feeder system has been identified at the
Chaquella target. The intensity of the alteration system indicates
a powerful hydrothermal system and the Company therefore plans to
complete the current drill programme.
2011 Overview
Hochschild's production target for 2011 is 22.5 million silver
equivalent ounces. The Company expects stable production at San
Jose and Pallancata, offset by lower production at Arcata as the
Company moves towards its previously mentioned long term goal of
mining close to the average reserve grade at each of its core
operations.
As anticipated, production at the ageing Ares mine will continue
to decline, with closure expected in the second half of 2011.
Management is monitoring the grade and cost profile of the
operation to ensure that it is in line with the Company's policy of
producing profitable ounces. Moris, the Company's Mexican operation
is also scheduled for closure in 2011.
The Company expects overall 2011 unit cost per tonne performance
in Peru to be broadly in line with industry cost inflation of
around 10% whilst in Argentina, the rate is expected to continue to
be higher as a result of expected ongoing local price inflation of
around 25-30%.
Hochschild is in a strong financial position, with total cash of
approximately US$530 million on the balance sheet as at 31 December
2010. This, in conjunction with cash generated from the business
will enable the Company to deliver its organic growth strategy. Key
to this is the significant increase in exploration budget from
US$50 million in 2010 to US$70 million in 2011 which will be
invested in extending the resource life of existing operations,
further developing our three advanced projects and on identifying
high-quality, early stage projects.
__________________________________________________________________
A conference call will be held at 2pm (London time) on Wednesday
19 January 2011 for analysts and investors.
Dial in details as follows:
UK +44 (0) 20 3003 2666
A recording of the conference call will be available for one
week following its conclusion, accessible from the following
telephone number:
UK +44 (0) 20 8196 1998
Access code 9816575#
__________________________________________________________________
Enquiries:
Hochschild Mining plc
Charles Gordon +44 (0)20 7907 2934
Head of Investor Relations
Finsbury
Faeth Birch +44 (0)20 7251 3801
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 forty years' experience in the
mining of precious metal epithermal vein deposits and currently
operates four underground epithermal vein mines, three located in
southern Peru, one in southern Argentina and one open pit mine in
northern Mexico. Hochschild also has numerous long-term projects
throughout the Americas.
PRODUCTION & SALES INFORMATION*
TOTAL GROUP PRODUCTION1
Q4 Q3 Q4 12 mths 12 mths
2010 2010 2009 2010 2009
------------------------- ------- ------- ------- -------- --------
Silver production (koz) 6,780 6,227 6,125 24,430 24,585
Gold production (koz) 54.27 48.53 51.11 200.05 211.64
Total silver equivalent
(koz) 10,037 9,139 9,191 36,434 37,283
Total gold equivalent
(koz) 167.28 152.31 153.19 607.23 621.38
Silver sold (koz) 6,826 5,882 6,120 24,283 24,330
Gold sold (koz) 56.2 44.8 48.5 199.9 207.8
------------------------- ------- ------- ------- -------- --------
1 Total production includes 100% of all production, including
production attributable to joint venture partners at San Jose and
Pallancata.
ATTRIBUTABLE GROUP PRODUCTION1
Q4 Q3 Q4 12 mths 12 mths
2010 2010 2009 2010 2009
--------------------------- ------ ------- ------- -------- --------
Silver production (koz) 4,758 4,532 4,526 17,768 18,754
Gold production (koz) 37.44 34.44 37.23 144.40 156.77
Attrib. silver equivalent
(koz) 7,005 6,598 6,760 26,432 28,160
Attrib. gold equivalent
(koz) 116.7 109.97 112.67 440.53 469.34
--------------------------- ------ ------- ------- -------- --------
1 Attributable production includes 100% of all production from
Arcata, Ares and Moris, 60% from Pallancata and 51% from San
Jose.
QUARTERLY PRODUCTION BY MINE
ARCATA
Q4 Q3 Q4 12 mths 12 mths
Product 2010 2010 2009 2010 2009
---------------------------- -------- -------- -------- -------- --------
Ore production (tonnes) 171,270 179,270 162,835 645,974 643,059
Average head grade
silver (g/t) 404 418 442 439 503
Average head grade
gold (g/t) 1.20 1.27 1.33 1.40 1.56
Concentrate produced
(tonnes) 5,926 5,533 5,509 21,443 22,352
Silver produced (koz) 1,945 2,130 2,097 8,099 9,542
Gold produced (koz) 5.81 6.66 6.25 25.83 28.64
Silver equivalent produced
(koz) 2,294 2,529 2,472 9,649 11,261
Silver sold (koz) 2,077 1,965 2,150 8,095 9,138
Gold sold (koz) 5.77 6.13 6.25 24.94 27.17
---------------------------- -------- -------- -------- -------- --------
ARES
Q4 Q3 Q4 12 mths 12 mths
Product 2010 2010 2009 2010 2009
---------------------------- ------- ------- ------- -------- --------
Ore production (tonnes) 76,596 68,524 90,376 301,726 341,273
Average head grade
silver (g/t) 82 81 96 92 96
Average head grade
gold (g/t) 3.35 3.35 3.06 3.58 4.17
Dore total (koz) 191 165 248 822 947
Silver produced (koz) 182 158 239 786 900
Gold produced (koz) 7.72 6.91 8.13 32.53 42.59
Silver equivalent produced
(koz) 646 572 726 2,738 3,455
Silver sold (koz) 214 171 232 810.31 873
Gold sold (koz) 8.8 7.1 7.8 32.70 42
---------------------------- ------- ------- ------- -------- --------
PALLANCATA1
Q4 Q3 Q4 12 mths 12 mths
Product 2010 2010 2009 2010 2009
-------------------------- -------- -------- -------- ---------- --------
Ore production (tonnes) 281,035 273,239 277,552 1,071,617 922,521
Average head grade
silver (g/t) 358 337 354 344 327
Average head grade
gold (g/t) 1.51 1.32 1.49 1.41 1.43
Concentrate produced
(tonnes) 2,283 2,360 2,520 9,541 7,684
Silver produced (koz) 2,763 2,511 2,731 10,135 8,420
Gold produced (koz) 10.04 8.27 10.24 35.85 31.97
Silver equivalent
produced (koz) 3,365 3,007 3,346 12,286 10,339
Silver sold (koz) 2,549 2,490 2,679 9,998 8,405
Gold sold (koz) 8.3 7.9 9.8 33.7 30.7
-------------------------- -------- -------- -------- ---------- --------
1 The Company has a 60% interest in Pallancata.
SAN JOSE1
Q4 Q3 Q4 12 mths 12 mths
Product 2010 2010 2009 2010 2009
---------------------------- -------- -------- -------- -------- --------
Ore production (tonnes) 135,710 112,681 100,460 461,134 460,971
Average head grade
silver (g/t) 475 423 351 397 398
Average head grade
gold (g/t) 6.34 6.42 7.34 6.14 6.19
Silver produced (koz) 1,871 1,409 1,032 5,324 4,998
Gold produced (koz) 26.14 22.02 19.96 84.30 77.08
Silver equivalent produced
(koz) 3,440 2,730 2,230 10,382 9,622
Silver sold (koz) 1,962 1,243 1,011 5,284 5,174
Gold sold (koz) 27.5 20.2 19.5 85.0 78.8
---------------------------- -------- -------- -------- -------- --------
1 The Company has a 51% interest in San Jose.
MORIS
Q4 Q3 Q4 12 mths 12 mths
Product 2010 2010 2009 2010 2009
------------------------ -------- -------- -------- ---------- ----------
Ore production (tonnes) 249,150 251,260 333,240 1,148,826 1,282,461
Average head grade
silver (g/t) 4.30 4.67 5.01 4.44 5.02
Average head grade
gold (g/t) 0.83 1.16 1.34 1.14 1.38
Silver produced (koz) 19 20 25 86 97
Gold produced (koz) 4.55 4.67 6.52 21.532 28
Silver equivalent
produced (koz) 292 300 417 1,378 1,797
Silver sold (koz) 24.8 13.4 21.2 95.1 86.7
Gold sold (koz) 5.9 3.4 5.1 23.5 26.3
------------------------ -------- -------- -------- ---------- ----------
* Ounces sold figures for all operations have been restated to
include gross revenue divided by gross ounces (previously included
net revenue divided by net ounces)
Forward looking statements
This announcement may contain forward looking statements. 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, for
various reasons, be materially different from any future results,
performance or achievements expressed or implied by such forward
looking statements.
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, the Board of
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.
- ends -
This information is provided by RNS
The company news service from the London Stock Exchange
END
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