TIDMHOC
RNS Number : 2262F
Hochschild Mining PLC
20 April 2011
Production Report and Interim Management Statement
for the 3 months ended 31 March 2011
Highlights
-- Q1 2011 production of 5.6 million attributable silver
equivalent ounces, on track to deliver 2011 production target of
22.5 million attributable silver equivalent ounces
-- Ongoing delivery of organic growth strategy:
- In January, the Company announced a positive scoping study at
100% owned Crespo property with initial projected production of 2.3
million silver equivalent ounces per annum from the end of 2013
- In February, Hochschild announced a significant increase in
grades & resources at the Inmaculada project - Measured &
Indicated resources, up 59% to 76.0 million silver equivalent
ounces
- Feasibility studies on track at all three advanced projects,
Inmaculada, Azuca and Crespo
-- Cesar Aguirre appointed Vice President of Exploration &
Geology and David Hopper appointed Exploration Manager for
Chile
-- In January 2011, the Company repaid its entire existing
syndicated loan facility of US$114.3 million
-- In February 2011, Hochschild disposed of its remaining 6%
stake in Lake Shore Gold with total net proceeds of C$79.7
million
-- Solid financial position with total cash of approximately
US$540 million as at 31 March 2011 and minority investments of over
US$450 million
Ignacio Bustamante, Chief Executive, commented:
"I am pleased to announce a solid set of production results,
which place us firmly on track to achieve our full year production
target of 22.5 million attributable silver equivalent ounces. We
are progressing well with our advanced projects at Inmaculada,
Azuca, and Crespo, which have the potential to significantly
increase our production profile. Our exploration programme is also
moving forward with active drilling at each of our three core
operations as well as across our greenfield targets in Peru, Chile,
Mexico and Argentina.
I am also pleased to welcome Cesar Aguirre as our new Vice
President of Exploration & Geology and David Hopper as
Exploration Manager for Chile, both of whom bring extensive
experience and expertise to the Company."
Overview
Hochschild delivered attributable production of 5.6 million
silver equivalent ounces in Q1 2011, comprised of 3.7 million
ounces of silver and 31.3 thousand ounces of gold, placing it
firmly on track to achieve its full year production target of 22.5
million attributable silver equivalent ounces in 2011.
Compared to Q1 2010, attributable silver equivalent production
decreased 8% due to the expected decline in production from the
Company's two ageing mines, Ares and Moris, which are scheduled for
closure this year, and lower production from the Arcata operationas
the Company moves towards its previously mentioned long term goal
of mining close to the average reserve grade at each of its core
operations. Compared to the previous quarter, production at all
operations has been impacted by the seasonal effect of fewer
production days in the first quarter relative to the fourth quarter
of the year.
Production
Main operations
San Jose delivered a solid performance in Q1 with silver
equivalent production of 2.8 million ounces, up 55% compared to Q1
2010. This is due to the anticipated increase in volume and grades
from new mining areas, including the high grade Kospi vein, which
has resulted in silver grades and production rising 57% and 85%
year-on-year respectively.
As mentioned, Arcata's production decreased in Q1 as the Company
reduces the extraction grade towards the average reserve grade
level in order to ensure a consistent and sustainable level of
production. Silver equivalent production of 1.8 million ounces was
19% lower than Q1 2010, comprised of 1.6 million ounces of silver
and 4.3 thousand ounces of gold.
At Pallancata, the Company's other main Peruvian operation,
silver equivalent production decreased 12% year-on-year to 2.5
million silver equivalent ounces, mainly driven by lower grades
which decreased 11% and 6% year-on-year for silver and gold
respectively. The first quarter 2011 mine plan focused on deeper
and narrower veins compared to Q1 2010 with mined grades in line
with the reserve grade.
Other operations
The Company's ageing Ares mine produced 0.5 million silver
equivalent ounces in Q1 2011 (Q1 2010: 0.8 million silver
equivalent ounces), while Moris, the Company's operation in Mexico,
produced 0.3 million silver equivalent ounces (Q1 2010: 0.4 million
silver equivalent ounces).As previously reported, both operations
are scheduled to cease production in 2011. Management is monitoring
the grade and cost profile of each mine to ensure that they are in
line with the Company's policy of producing profitable ounces.
Average realisable prices and sales
Average realisable precious metal prices (which are reported
before the deduction of commercial discounts) in Q1 2011 were
US$1,391.4/ounce for gold and US$36.2/ounce for silver.
Exploration appointments
Hochschild is pleased to announce the appointment of Cesar
Aguirre as Vice President of Exploration and Geology. Cesar has
over 20 years' experience in exploration and project management in
South America, principally in Peru, Argentina and Chile. Prior to
joining Hochschild, he worked for Newcrest Mining, Yanacocha,
Noranda Inc. and Barrick Gold Corp. Cesar holds a BSc in Geological
Engineering from the Universidad Nacional de Ingenieria and an MSc
in Economic Geology from the University of Tasmania.
The Company is also pleased to announce the appointment of David
Hopper to the role of Exploration Manager for Chile. David is a
geologist with over 20 years of global experience within major
diversified mining companies. Between 1990 and 2009, David held
various positions at Rio Tinto plc, primarily in South America, and
was most recently Exploration Manager for Kinross Gold Corp in
Chile.
Advanced projects
Crespo
During the quarter, Hochschild reported 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 initial production of 2.3
million silver equivalent ounces per annum starting from 2013.
Hochschild already has 5.0 million ounces of Measured &
Indicated resources that will be added for the feasibility study.
For further details of the scoping study, please see the press
release published on 19 January 2011.
Inmaculada
On 25 February 2011, the Company announced an increase in both
the total Mineral Resource estimate and Measured and Indicated
Resources for the Inmaculada gold-silver project located in
Hochschild's existing southern Peru cluster, following the
announcement of a positive scoping study published by International
Minerals Inc ("IMZ") in September 2010. The project, in which
Hochschild now owns a controlling 60% stake (IMZ holds the
remaining 40%), is currently at feasibility stage with completion
expected in Q4 2011. The Company expects to commence production in
December 2013 at a processing capacity of 3,000 tonnes per day. The
highlights of the announcement were:
-- 59% increase in Measured & Indicated Resources to 76.0
million silver equivalent ounces
-- 29% increase in silver equivalent grades to 498 g/t
-- Total resources of 128.3 million silver equivalent ounces
Hochschild expects the results to significantly improve the
economics of the project detailed in the 2010 scoping study. A
14,360 metre campaign commenced at the property in March 2011 with
800 metres of discontinuous quartz outcrops recognised to the
northeast of the property. Brownfield drilling commenced at the
Jimena vein and mapping and sampling were completed at the Angela
vein with geophysical magnetometry testing scheduled for March. A
total drill programme of 36,000 metres is planned for the full year
2011.
Azuca
Intensive drilling continues at the 100% owned Azuca property
with the aim of expanding the scale of the project. The Company
expects to complete feasibility in Q1 2012 with production targeted
for Q4 2013 at an initial estimate of 3.5 million silver equivalent
ounces per year.
Year to date, 40,116 metres of infill drilling has been
completed at the Yanamayo, Vivian and Azuca veins which aims to
transform Inferred Resources to the Indicated category and advance
the project to feasibility study. Assays are pending from drilling
at the Karina, Milagros and Yola veins where magnetometry
geophysical anomalies have been identified. The Environmental
Impact Study is also underway and is expected to be submitted in Q3
2011.
Core operations
Arcata
The 2011 drill programme is underway at Arcata and aims to
incorporate new resources at the Blanca, Amparo and Baja veins. A
magnetometry geophysical survey started in March to test northern
and western targets. Positive results from the drill programme have
been reported in Q1 with intercepts including:
Amparo DDH-935: 3.0 metres at 3.3 g/t Au and 1,736 g/t
Ag
DDH-951: 0.7 metres at 0.4 g/t Au and 641g/t Ag
------- -------------------------------------------------
Blanca DDH-948: 0.4 metres at 2.3 g/t Au and 924 g/t Ag
DDH-914: 0.9 metres at 4.3 g/t Au and 2,579 g/t
Ag
DDH-971: 0.8 metres at 6.0 g/t Au and 1,450 g/t
Ag
------- -------------------------------------------------
Baja DDH-185: 0.8 metres at 7.1 g/t Au and 360 g/t Ag
------- -------------------------------------------------
Pallancata
Underground development continues at the Pallancata, San Javier
and Virgen del Carmen veins. Drill results in Q1 2011 include:
Thalia DLPL-A713 triple intersected:
0.9 metres at 2.84 g/t Au and 837 g/t Ag;
1.4 metres width at 0.65 g/t Au and 245 g/t Ag;
0.8 metres at 5.0 g/t Au and 3,069 g/t Ag
---------------- -------------------------------------------------
Pallancata West DLPL-A708 double intersect:
0.4 metres at 1.7 g/t Au and 461 g/t Ag;
3.1 metres at 1.3 g/t Au and 332 g/t
DLPL-A710: 1.8 metres at 0.9 g/t Au and 294 g/t
Ag
---------------- -------------------------------------------------
San Jose
During the quarter, diamond drilling was carried out at the
Antonella and Sanson veins.
Greenfield pipeline
Victoria
The Victoria project in Chile is 60% owned by Hochschild, with
the remaining 40% held by Iron Creek Capital. Eight drill holes
were completed at the Cenizas, Incahausi and Vida targets in Q1
2011 totaling 2,327 metres.
Valeriano
At the Valeriano property which is located 27 kilometres north
of Barrick Gold Corporation's Pascua Lama project, preliminary
results received to date have confirmed the anomalies identified in
past drill reports. Results of the geophysical survey have been
very good with the definition of a porphyry-like anomaly at depth
which corresponds with the surface geochemistry studies as well as
the historic magnetic survey. Preliminary drill targets have been
selected and the Company is planning to commence a 2,500 metre
drill campaign in H2 2011.
Mercurio
At the 100% owned Mercurio project in Mexico, surface mapping
and sampling have taken place at the southern end of the property
identifying a number of new vein sets which tend to be associated
with local zones of silicification in this region. Soil sampling
lines are also planned to help locate traces of veins on surface.
The drilling campaign in 2011 will be focused on deeper areas of
the project to evaluate potential areas similar to comparable
mineralised mines in the vicinity.
Mosquito
At the 100% owned Mosquito project in Argentina, strong
anomalous mineralisation results have been reported for a number of
the drill holes completed in Q1 2011 with results due to be
assessed at the end of the drill programme and new targets
identified.
Drill programmes are also scheduled to commence at the Company's
other key targets including Company Makers, Sabina, Parihuana and
Apacheta and at its medium scale projects Encrucijada, Cricket and
La Flora.
Financial position
In the period from 1 January 2011, Hochschild's operating and
financial performance continues to be strong. The Company's
financial position remains robust with total cash of approximately
US$540 million as at 31 March 2011 and minority investments of over
US$450 million.
Other than as described in this announcement, there have been no
material events or transactions in the period from 1 January 2011
to 20 April 2011 which have affected Hochschild's financial
position.
Outlook
The Company is well positioned to achieve its full year
production target of 22.5 million attributable silver equivalent
ounces in 2011 with broadly stable production at San Jose and
Pallancata, offset by lower production at Arcata. Key stage
development at all three advanced projects remains on track and we
will provide further updates on progress over the course of the
year.
__________________________________________________________________
A conference call will be held at 2pm (London time) on Wednesday
20 April 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 5322353#
__________________________________________________________________
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 PRODUCTION(1)
Q1 Q4 Q1
2011 2010 2010
-------------------------- ------- ------- -------
Silver production (koz)(
) 5,240 6,780 5,290
Gold production (koz)(
) 44.92 54.27 46.29
Total silver equivalent
(koz) 7,935 10,037 8,068
Total gold equivalent
(koz) 132.24 167.28 134.46
Silver sold (koz) 5,100 6,826 5,031
Gold sold (koz) 39.12 56.18 37.14
-------------------------- ------- ------- -------
1Total production includes 100% of all production, including
production attributable to joint venture partners at San Jose and
Pallancata.
ATTRIBUTABLE GROUP PRODUCTION(1)
Q1 Q4 Q1
2011 2010 2010
--------------------------- ------ ------- -------
Silver production (koz)(
) 3,687 4,758 3,953
Gold production (koz)(
) 31.31 37.44 34.95
Attrib. silver equivalent
(koz) 5,565 7,005 6,051
Attrib. gold equivalent
(koz) 92.76 116.75 100.84
--------------------------- ------ ------- -------
1Attributable production includes 100% of all production from
Arcata, Ares and Moris, 60% from Pallancata and 51% from San
Jose.
QUARTERLY PRODUCTION BY MINE
ARCATA
Q1 Q4 Q1
Product 2011 2010 2010
---------------------------- -------- -------- --------
Ore production (tonnes) 156,976 171,270 142,680
Average head grade
silver (g/t) 349 404 458
Average head grade
gold (g/t) 0.95 1.20 1.53
Silver produced (koz) 1,550 1,945 1,867
Gold produced (koz) 4.34 5.81 6.14
Silver equivalent produced
(koz) 1,810 2,294 2,236
Silver sold (koz) 1,316 2,077 1,815
Gold sold (koz) 3.69 5.77 5.24
---------------------------- -------- -------- --------
ARES
Q1 Q4 Q1
Product 2011 2010 2010
---------------------------- ------- ------- -------
Ore production (tonnes) 73,502 76,596 78,641
Average head grade
silver (g/t) 64 82 112
Average head grade
gold (g/t) 3.03 3.35 3.94
Silver produced (koz) 134 182 242
Gold produced (koz) 6.69 7.72 9.34
Silver equivalent produced
(koz) 535 646 802
Silver sold (koz) 102 214 238
Gold sold (koz)( ) 5.57 8.75 4.21
---------------------------- ------- ------- -------
PALLANCATA(1)
Q1 Q4 Q1
Product 2011 2010 2010
---------------------------- -------- -------- --------
Ore production (tonnes) 242,061 281,035 248,032
Average head grade
silver (g/t) 303 358 339
Average head grade
gold (g/t) 1.31 1.51 1.39
Silver produced (koz) 2,018 2,763 2,334
Gold produced (koz) 7.78 10.04 8.22
Silver equivalent produced
(koz) 2,485 3,365 2,827
Silver sold (koz) 2,327 2,549 2,204
Gold sold (koz) 8.63 8.33 7.20
---------------------------- -------- -------- --------
(1) The Company holds a 60% interest in Pallancata.
SAN JOSE(1)
Q1 Q4 Q1
Product 2011 2010 2010
---------------------------- -------- -------- -------
Ore production (tonnes)(
) 113,696 135,710 96,484
Average head grade
silver (g/t) 459 475 293
Average head grade
gold (g/t) 6.08 6.34 5.92
Silver produced (koz)(
) 1,522 1,871 823
Gold produced (koz) 21.41 26.14 16.43
Silver equivalent produced
(koz) 2,807 3,440 1,809
Silver sold (koz)(
) 1,342 1,962 749
Gold sold (koz)( ) 17.63 27.45 14.58
---------------------------- -------- -------- -------
(1) The Company holds a 51% interest in San Jose.
MORIS
Q1 Q4 Q1
Product 2011 2010 2010
---------------------------- -------- -------- --------
Ore production (tonnes) 305,411 249,150 302,321
Average head grade
silver (g/t) 4.12 4.30 3.86
Average head grade
gold (g/t) 0.76 0.83 1.23
Silver produced (koz) 16 19 24
Gold produced (koz) 4.69 4.55 6.16
Silver equivalent produced
(koz) 298 292 394
Silver sold (koz)(
) 12.8 24.8 23.9
Gold sold (koz)( ) 3.59 5.87 5.90
---------------------------- -------- -------- --------
* Q1 2010 ounces sold have been restated to include gross
revenue divided by gross ounces sold (previously included net
revenue divided by net ounces sold)
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 -
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The company news service from the London Stock Exchange
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